<PAGE>
As filed with the Securities and Exchange Commission on April 2, 1998
REGISTRATION NO. 333-29067
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
--------------------------------------
AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SENTINEL FINANCING LTD., L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 6153 65-0776789
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
601 Gateway Blvd., Suite 260, South San Francisco, CA 94080; (650) 869-3600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------------------------
JONATHON W. HOLLANDSWORTH
Sentinel Acceptance Corporation
President
601 Gateway Blvd., Suite 260
South San Francisco, CA 94080
(650) 869-3600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------------------
Copies to:
MARK A. BONENFANT
Buchalter, Nemer, Fields & Younger
a Professional Corporation
601 South Figueroa Street, Suite 2400
Los Angeles, CA 90017-5704
(213) 891-0700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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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. /X/
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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SENTINEL FINANCING LTD., L.P.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item No. and Caption Location or Caption in Prospectus
-------------------- ---------------------------------
<S> <C> <C>
1. Forepart of the Registration
Statement and Outside Front Cover of
the Prospectus . . . . . . . . . . . Cover Page of the Registration
Statement; Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . Inside Front Cover Page; Outside
Back Cover Page; Available
Information
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges . . . . . . . . . . . . . . Prospectus Summary; Risk Factors;
The Company
4. Use of Proceeds . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . Not Applicable
6. Dilution . . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders . . . . . . Not Applicable
8. Plan of Distribution . . . . . . . . Outside Front Cover Page; Plan of
Distribution
9. Legal Proceedings . . . . . . . . . Litigation
10. Directors, Executive Officers,
Promoters and Control Persons . . . Management
11. Security Ownership of Certain
Beneficial Owners . . . . . . . . . Principal Security Holders
12. Descriptions of Securities . . . . . Summary of Offering; Description of
Notes
13. Interest of Named Experts and
Counsel . . . . . . . . . . . . . . Not Applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . Not Applicable
15. Organization Within Last Five Years Business
<PAGE>
<CAPTION>
16. Description of Business . . . . . . Business
17. Management's Discussion and Analysis
or Plan of Operation . . . . . . . . Management's Discussion and
Analysis of Financial Condition and
Results of Operation
18. Description of Property . . . . . . Business
19. Certain Relationships and Related
Transactions . . . . . . . . . . . . Risk Factors; Management; Certain
Transactions
20. Market For Common Equity and Related
Stockholder Matters . . . . . . . . Not Applicable
21. Executive Compensation . . . . . . . Management
22. Financial Statements . . . . . . . . Financial Statements
23. Changes In and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . Not Applicable
</TABLE>
3
<PAGE>
Subject to Completion, Dated ___________, 1998
PROSPECTUS
$15,000,000
Sentinel Financing Ltd., L.P.
12% Secured Notes
Due 2003
Minimum Offering: $1,000,000
Sentinel Financing Ltd., L.P., a Florida limited partnership (the
"Company"), which is a newly organized, single purpose entity, is hereby
offering $15,000,000 aggregate principal amount of 12% Secured Notes due 2002
(the "Notes"). The general partner of the Company is Sentinel Acceptance
Corporation.
The Notes will bear interest at the rate of 12% per annum, payable monthly
on the 15th day of each month commencing ______________, 1998. The Notes will
mature on _____________, 2003, and are subject to redemption at the option of
the Company, in whole or part, at any time at a redemption price equal to the
outstanding principal amount plus accrued interest thereon, without premium or
penalty. The Company will not be required to make any mandatory redemption or
sinking fund payment with respect to the Notes prior to maturity. Notes may be
purchased in multiples of $1,000, subject to a minimum purchase requirement of
$2,000.
The Notes are backed by: (i) retail installment sales contracts secured by
new and used automobiles and light trucks ("Installment Contracts"); and
(ii) certain other collateral described herein. The Installment Contracts will
be purchased with the net proceeds from the sale of the Notes. Purchasers of
Notes must look to the Installment Contracts and related motor vehicle
collateral as the primary source of payment on the Notes.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING
DEFAULT ON THE INSTALLMENT CONTRACTS. SEE "RISK FACTORS" COMMENCING ON PAGE 7
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PURCHASERS OF
THE NOTES.
DEBT SECURITIES OFFERED WITH A HIGH INTEREST RATE OR YIELD GENERALLY
INVOLVE MORE RISK THAN MANY OTHER MEDIUM TERM DEBT INSTRUMENTS WITH LOWER
INTEREST OR YIELD. NO PROVISION HAS BEEN MADE BY THE COMPANY TO ESTABLISH A
SINKING FUND TO PAY THE INTEREST ON THE NOTES OR TO REPAY THE PRINCIPAL.
THESE ARE SPECULATIVE SECURITIES. NO PUBLIC MARKET IS EXPECTED TO DEVELOP
FOR THESE SECURITIES. INVESTORS SHOULD EXPECT TO RETAIN OWNERSHIP OF THE NOTES
AND BEAR THE ECONOMIC RISK OF THEIR INVESTMENT FOR THE ENTIRE TERM OF THE NOTES.
1
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY NOR HAS THE COMMISSION OR
ANY STATE SECURITIES AGENCY PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Underwriting Discounts Proceeds to
Price to Public and Commissions(1) Company(2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 100% 7.5% 92.5%
- --------------------------------------------------------------------------------
Total Minimum $ 1,000,000 $ 75,000 $ 925,000
- --------------------------------------------------------------------------------
Total Maximum $ 15,000,000 $ 1,125,000 $13,875,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) The Notes are being offered on a "best-efforts" basis by Attkisson,
Carter & Akers as placement agent. The Company has agreed to indemnify
Attkisson, Carter & Akers against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. The Company
may also reimburse participating dealers for actual due diligence
expenses in an amount up to .5% of the principal aggregate amount of
Notes sold and may pay participating dealers a non-accountable expense
allowance not to exceed .5% of the principal aggregate amount of Notes
sold. See "Plan of Distribution."
(2) Before deduction of a 4% investment banking and marketing fee payable
to Banc Services Corporation and before deducting expenses of
approximately $200,000 to $300,000 payable by the Company. See "Use of
Proceeds," and "Plan of Distribution."
The Notes are being offered on a "best efforts" basis on behalf of the
Company by Attkisson, Carter & Akers. All proceeds from the sale of Notes will
be deposited in an escrow account at Greater Bay Trust Company (the "Escrow
Account"), and no funds will be released to the Company therefrom unless and
until the Company has sold $1,000,000 in aggregate principal amount of the Notes
(the "Minimum Offering"). Upon sale of the Minimum Offering, the Notes shall be
released to purchasers of the Notes (the "Noteholders") bearing an issue date
equal to the date the purchase price therefor was deposited into the Escrow
Account. If the Minimum Offering is not sold by [120 days after the effective
date], 1998, all monies received will be refunded to investors, together with
any net investment earnings thereon from the investment of such monies by the
Escrow Account. In such event no expenses will be deducted from the escrowed
funds. In the event of any such return of funds, the investors shall not be
entitled to receive the stated interest rate on the Notes. Subscribers for the
Notes shall have no right to withdraw any funds from the Escrow Account. Any
subsequent sales proceeds from the Notes will be immediately available for use
by the Company. The Company reserves the right to reject any subscription in
whole or in part.
The offering will terminate on [24 months after the effective date], unless
sooner terminated by the Company in its sole discretion.
The date of this Prospectus is ___________________________________, 1998
2
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SUITABILITY STANDARDS
Notes will only be sold to a person who makes the required minimum purchase
and represents in writing that such person: (i) has annual gross income of at
least $30,000 and a net worth of at least $30,000 (exclusive of home, home
furnishings and automobiles); or (ii) has a net worth of at least $75,000
(exclusive of home, home furnishings and automobiles); or (iii) is purchasing in
a fiduciary capacity for a person who (or an entity which) satisfies either of
the foregoing clauses (i) or (ii). In the case of sales to fiduciary accounts,
the suitability standards must be satisfied by the beneficiary; however, where
the fiduciary is the donor of funds used for the investment, the fiduciary and
not the beneficiary must meet the foregoing standards.
All participating dealers will make reasonable inquiry to assure compliance
with these suitability standards, and the Company will not accept subscriptions
from any person who does not represent in the Subscription Agreement filed as an
exhibit to the Registration Statement of which this Prospectus is a part
("Subscription Agreement") that he or she meets such standards. These
suitability standards are established due to the illiquidity of the Notes and
other risk factors associated with an investment in the Notes. See "Risk
Factors."
No transfers will be permitted of less than the minimum permitted purchase,
nor may an investor transfer, fractionalize or subdivide notes so as to retain
less than such minimum purchase.
[END INSIDE FRONT COVER]
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Sentinel Financing, Ltd., L.P., a Florida limited partnership (the
"Company"), is a newly formed single purpose company organized to specialize and
engage in the purchase, collection and servicing of retail installment contracts
("Installment Contracts") originated by independent automobile dealers
("Dealers"). The Company will acquire directly and through intermediaries
Installment Contracts originated by Dealers in connection with their sale of new
and used automobiles and light duty trucks ("Financed Vehicles") to borrowers
with limited credit histories or past credit problems ("Non-prime Consumers").
The Company's general partner is Sentinel Acceptance Corporation, a Florida
corporation ("SAC"), and its sole limited partner is Four Star Financial
Services, LLC, a California limited liability company ("Four Star"). Management
services will be provided to the Company by SAC.
The automobile finance industry is the second largest consumer finance
market in the United States and is estimated by analysts to have been a
$400 billion market in terms of outstanding credit at the end of 1996. The vast
majority of automobile financing is provided by captive finance subsidiaries of
major auto manufacturers, banks and credit unions for new cars purchased by "A"
credit consumers ("Prime Consumers"). These lenders tend to avoid or do not
consistently serve the Non-prime Consumer market, where primarily used
automobiles are purchased and financed by borrowers with "B," "C" or "D" credit.
The Non-prime Consumer market is estimated to constitute 20% of the auto finance
market and expected to grow annually between $60 and $75 billion and is serviced
primarily by independent finance companies such as the Company. The Company
believes that the Non-prime Consumer market for used cars is growing due, in
part, to (i) demographic and economic trends, (ii) the extension of the average
useful life of automobiles and (iii) the increasing number of late-model used
automobiles being offered for sale, including former rental cars and vehicles
coming off-lease.
The Company intends to supply additional capital to the Non-prime Consumer
market. Utilizing state of the art technology to approve, process, service and
collect automobile loans of a "B" and "C" nature, the Company will leverage
long-term relationships established by its sales force. The Company will employ
sophisticated behavioral models developed by Fair-Issac of San Rafael, CA to
support credit decisions, as well as other tools such as an internally
developed, windows based, loan processing and control systems. The acquisition
and portfolio management systems will support the Company's commitment to manage
the portfolio utilizing the debt policies and practices applied by commercial
banks. See "Risk Factors - Availability of Installment Contracts."
4
<PAGE>
THE OFFERING
SECURITIES OFFERED $15,000,000 aggregate principal amount of 12% Secured Notes
due 2003 (the "Notes").
MATURITY _________________, 2003
INTEREST RATE
AND DATES The Notes will bear interest at the rate of 12% per annum
(the "Note Rate"). Interest will accrue from the date of
issuance, payable monthly on the 15th day of each month.
OPTIONAL
REDEMPTION The Notes will be redeemable at the option of the Company,
in whole or in part, at any time at a redemption price equal
to the outstanding principal amount plus accrued interest
thereon, without premium or penalty.
COLLATERAL The Notes will be secured by a security interest in (i) all
Installment Contracts, acquired with the net proceeds of
this offering, and (ii) certain other collateral described
herein.
SINKING FUND None
USE OF PROCEEDS Net proceeds from the offering will be used for
reimbursement of the expenses associated with this offering,
initial operating expenses and for the purchase of
Installment Contracts. See "Use of Proceeds."
MINIMUM OFFERING The minimum aggregate principal amount of Notes to be sold
pursuant to this Offering is $1,000,000 (the "Minimum
Offering"). All monies received from investors prior to the
date on which the Minimum Offering has been sold (the
"Release Date"), will immediately be deposited in an escrow
account (the "Escrow Account") at Greater Bay Trust Company
(the "Escrow Agent"). On the Release Date all monies in the
Escrow Account shall be released to the Company and the
Notes shall be released to purchasers of the Notes
("Noteholders") bearing an issue date as of the date the
purchase price of each Note was deposited into the Escrow
Account. If the Release Date does not occur on or prior to
[120 days from the effective date], 1998, all monies in the
Escrow Account shall be returned to investors, together with
any net investment earnings thereon and the investors will
not be entitled to the Note Rate. The monies held in the
Escrow Account will be invested by the Escrow Agent in U.S.
government securities, the yield on which is expected to be
substantially lower than the Note Rate.
INDENTURE AND
TRUSTEE The Notes will be issued pursuant to an Indenture of Trust
entered into between the Company and Sterling National Bank,
a national banking association, as trustee (the "Trustee").
5
<PAGE>
The Notes will be offered and sold on a "best efforts" basis on
behalf of the Company by Attkisson, Carter & Akers, a member of
the National Association of Securities Dealers, Inc. Investor
funds will be held in a subscription escrow account until the
minimum of $1,000,000 in principal amount of the Notes (the
"Minimum Subscription Amount") are sold. If the Minimum
Subscription Amount is not reached on or before [120 days after
effective date], the offering will be terminated, and the
escrowed funds, will be promptly returned to the subscribing
investors by the escrow agent. Upon receipt of the Minimum
Subscription Amount, the escrowed funds will be released to the
Company. See "Plan of Distribution."
6
<PAGE>
RISK FACTORS
A PURCHASE OF THE NOTES INVOLVES VARIOUS RISK FACTORS, INCLUDING, BUT NOT
LIMITED TO, THE RISKS SET FORTH BELOW. PROSPECTIVE INVESTORS SHOULD CONSIDER
THESE RISK FACTORS IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS BEFORE MAKING A DECISION TO PURCHASE THE NOTES.
LIMITED ASSETS AND OPERATING HISTORY. The Company has no prior operating
history and does not have, and is not expected to have any significant assets
other than the Installment Contracts that secure the Notes. While the Notes
remain outstanding, the Company will not engage in any business other than the
purchase, collection and servicing of the Installment Contracts. The Company's
general partner began operations in 1995 and has limited capital, liquidity and
experience.
CREDITWORTHINESS OF CONTRACT OBLIGORS. Substantially all of the
Installment Contracts to be purchased by the Company will be Non-prime Consumer
credits. The Non-prime Consumer finance market is comprised of borrowers who
are unable to obtain traditional financing through a bank or a captive finance
company due to either incomplete or imperfect credit histories. Consequently,
the incidence of delinquency or default is expected to be significantly higher
for Non-prime Consumer credits than in the case of Prime Consumer credits. For
these reasons, such Installment Contracts bear interest at rates significantly
higher than in the case of Prime Consumer credits, but also involve a higher
probability of default and greater servicing costs. The Company's profitability
depends, in part, upon its ability to properly evaluate the creditworthiness of
Non-prime Consumers and efficiently service its Installment Contracts. There
can be no assurance that the discounts negotiated by the Company for Installment
Contracts will accurately reflect the underlying credit risks. Furthermore, as
competition within the industry increases, the Company's ability to negotiate
discounts will be limited even if delinquency rates increase. If the discounts
are inadequate, loan losses may exceed the proceeds of the performing loans,
thus impairing the Company's ability to service the Notes.
ECONOMIC FACTORS AFFECTING DELINQUENCIES. A purchasers' ability to remit
payments as required by the terms of the Installment Contracts is in most cases
dependent on their continued employment, and a job loss will usually result in
defaults on their consumer debts. A prolonged economic recession resulting in
widespread unemployment could cause a significant rise in delinquencies and
charge-offs, which could adversely affect the Company and affect the Company's
ability to pay Noteholders.
AVAILABILITY OF INSTALLMENT CONTRACTS. The Company's ability to implement
its growth strategy depends on its ability to purchase Installment Contracts
meeting its underwriting standards. While management has numerous relationships
with Installment Contract originators, the Company does not have formalized
arrangements with a network of automobile dealers, financial intermediary or any
other originator from which Installment Contracts will be purchased or through
which Installment Contracts will be originated by the Company. There is no
assurance that the Company will be able to find Installment Contracts to
purchase at prices or on terms acceptable to the Company, or at all.
Unfavorable changes in the economic or competitive environment, or other
occurrences resulting in the erosion of the Company's present and prospective
originator base could adversely affect the Company's operations and impair its
ability to achieve continual expansion. If the Company is unable to purchase
suitable Installment Contracts or experiences delays in purchasing such
Installment Contracts, the Company's expected net interest margin may be
reduced, perhaps significantly, which could materially adversely affect the
Company's income and ability to service the Notes.
7
<PAGE>
COMPETITION AND MARKET CONDITIONS. The Non-prime Consumer automobile
finance market is very fragmented and highly competitive. The Company believes
that there are numerous non-traditional consumer finance sources serving this
market. Furthermore, during the past several years, a number of companies have
completed initial public offerings of common stock, the proceeds from which were
to be used (at least in part) to fund expansion and to support increased
purchases of Installment Contracts. Traditional automobile financing sources
include commercial banks, savings and loans, credit unions, captive finance
companies of automobile manufacturers and other consumer lenders, many of which
have significantly greater resources than the Company and may be able to offer
more attractive Installment Contract purchase terms to Dealers. To the extent
that traditional and non-traditional lenders significantly expand their
activities in this market, the Company's ability to execute its business and
growth strategy may be adversely affected. The Company's business is also
affected by certain demographic, economic and industry trends. For example,
these trends include increased sales of used vehicles, the rising price of new
vehicles compared to U.S. median family income and the overall level of interest
rates in general. The Company believes that recent trends favor increased
growth in the portion of the automobile finance industry which serves Non-prime
Consumers. However, a reversal of any of these trends could have a material
adverse affect on the Company's operations, profitability and growth.
Recently, some companies in the auto finance industry have experienced
higher than expected default rates on automobile finance paper from borrowers
who are categorized as "C" or below Non-prime Consumers. These developments
have resulted in the deterioration of the financial condition of some companies
operating in the subprime automobile finance industry.
CONFLICTS OF INTEREST. SAC is the general partner of the Company. SAC is
also the general partner of Sentinel Acceptance Ltd., LP ("Sentinel Acceptance")
and provides management services to Sentinel Acceptance. Consequently, there
will be conflicts of interest with respect to the allocation of SAC's management
time between Sentinel Acceptance and the Company. SAC will also provide
management, marketing servicing and administrative services to the Company.
There may therefore be conflicts of interest with respect to the allocation of
services, overhead expenses and functions between the activities of SAC,
Sentinel Acceptance and the Company. There can be no assurance that any
particular conflict may be resolved in a manner that does not adversely affect
Noteholders. A significant part of Sentinel Acceptance business is automobile
financing. A potential conflict of interest exists with respect to determining
whether Installment Contracts will be purchased by Sentinel Acceptance or the
Company. To lessen this conflict of interest, Sentinel Acceptance has agreed
that it will not purchase any Installment Contract until the Company has
expended all of its available net proceeds from this offering for the purchase
of Installment Contracts.
The Company will pay SAC for administration, marketing and servicing
provided to the Company, which fees shall consist of the following: (a) one
time boarding fee of $10.00 per Installment Contract; (b) one time
administrative fee of $100.00 per Installment Contract; (c) one time marketing
fee of $150.00 per Installment Contract; and (d) monthly service fee of $15.00
per Installment Contract. Assuming the Company receives the minimum proceeds
from the sale of the Notes, SAC will receive an aggregate of approximately
$90,000, $80,000, and $80,000 in the first three years, respectively, for
administrative, marketing and servicing fees provided to the Company. If the
Company receives the maximum proceeds from the sale of the Notes, SAC will
receive an aggregate of approximately $485,500, $342,000 and $415,000 in the
first three years respectively for administrative, marketing and servicing fees
provided to the Company. Management believes that the terms of the services
provided by SAC are similar to the terms that would be available from a third
8
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party in an arms-length transaction. See "Business - Operating Expenses,"
"- Servicing" and "Certain Transactions - Payments to SAC."
SECURITY FOR NOTES. The Notes are secured by the Installment Contracts
acquired with the net proceeds of this Offering. Although the Noteholders have
been granted a security interest in the Installment Contracts as security for
the Notes, their security position may become unperfected under certain limited
circumstances. If such security interest were not perfected, the Noteholders
would not have a priority claim on the collateral and would, in effect, be
treated as unsecured creditors of the Company. Upon an event of default under
the Notes, if the Noteholders did not have a priority claim on the collateral
through perfection of their security interest, or if they lose a priority
position on the collateral, their ability to sell the collateral and use the
proceeds to pay the Notes would be adversely affected as other creditors would
have an equal, or in some cases, superior, claim to the collateral, and the
Noteholders could suffer a partial or total loss of principal and unpaid
interest on the Notes. See "Certain Legal Aspects of the Installment Contracts
- - Security Interests in Financed Vehicles" and "Description of the Notes -
Security."
Statutory liens for repairs or unpaid taxes may have priority over even a
perfected security interest in the Financed Vehicles, and certain state and
federal laws permit the confiscation of motor vehicles used in unlawful activity
which may result in the loss of a secured party's perfected security interest in
a confiscated motor vehicle. Liens for repairs or taxes, or the confiscation of
a Financed Vehicle, could arise or occur at any time during the term of an
Installment Contract. No notice may necessarily be given to the Company in the
event such a lien arises or confiscation occurs.
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may limit or delay the ability of the Company to enforce its
rights under the Installment Contracts or to repossess and to resell Financed
Vehicles or enforce a deficiency judgment. In addition, the Company may
determine in its discretion that a deficiency judgment is not an appropriate or
economically viable remedy, or may settle at a significant discount any
deficiency judgment that it does obtain. In the event that deficiency judgments
are not obtained, are not satisfied, are satisfied at a discount or are
discharged in whole or in part in bankruptcy proceedings, the loss will reduce
the collateral securing the Notes, and if other collateral or dealer recourse
agreements are insufficient may adversely affect the ability of the Company to
repay the Notes. In the event of a bankruptcy by the Company, the Trustee is
empowered to file such proofs of claim and other papers or documents to have the
claims of the Trustee and the Noteholders allowed in any judicial proceedings
relative to the Company, its creditors or its property.
PARTNERSHIP DISTRIBUTIONS. Under the terms of the Company's Partnership
Agreement, the partners of the Company are entitled to quarterly distributions
from Cash Available for Distribution. Cash Available for Distribution means the
remaining cash and other assets available for distribution to the partners after
payment or satisfaction of the following: (a) all partnership liabilities for
ordinary and necessary expenses then due and owing to the persons other than the
partners, (b) all payments currently due towards interest on the Notes, (c) the
current cost of acquiring and servicing assets (including administrative,
marketing and servicing fees payable to SAC), and (d) such reserves as may be
determined by SAC to be reasonably necessary for the operation of the Company's
business. The Partnership Agreement provides that distributions of Cash
Available For Distribution cannot be made unless at the fiscal quarter or fiscal
year end, as applicable, the Company's net receivables as reflected on the
Company's balance sheet for such fiscal quarter or fiscal year end immediately
preceding the fiscal quarter in which the distribution is to be made exceeds
110% of the principal amount of Notes issued and outstanding. These
distributions to partners will reduce the amount of future Installment Contracts
that may be acquired and will reduce cash reserves available for future payments
with respect
9
<PAGE>
to the Notes in the event that future cash flow from the Installment Contracts
is insufficient to make Note payments.
EXTENSIVE REGULATORY REQUIREMENTS. The Company's business is subject to
extensive supervision and regulation under federal, state and local laws and
regulations which, among other things, require the Company to obtain and
maintain certain licenses and qualifications, limit interest rates, fees and
other charges associated with the Installment Contracts purchased by the
Company, require specified disclosures by Dealers to consumers and limit its
right to repossess and sell collateral. An adverse change in, modification to
or clarification of any of these laws or regulations, or judicial
interpretations as to whether and in what manner such laws or regulations apply
to Installment Contracts purchased or originated by the Company, could result in
potential liability related to Installment Contracts previously purchased and
could have a material adverse effect on the Company's financial condition and
results of operations. In addition, due to the consumer-oriented nature of the
industry in which the Company operates and uncertainties with respect to the
application of various laws and regulations in certain circumstances, industry
participants frequently are named as defendants in litigation involving alleged
violations of federal and state consumer lending or other similar laws and
regulations.
The Company is subject to numerous federal laws, including the Truth in
Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act
and the rules and regulations promulgated thereunder, and certain rules of the
Federal Trade Commission ("FTC"). These laws require the Company to provide
certain disclosures to loan applicants, prohibit misleading advertising and
protect against discriminatory financing or unfair credit practices. The Truth
in Lending Act and Regulation Z promulgated thereunder require disclosure of,
among other things, the terms of repayment, the final maturity, the amount
financed, the total finance charge and the annual percentage rate charged on
each retail installment contract. The Equal Credit Opportunity Act prohibits
creditors from discriminating against loan applicants (including retail
installment contract obligors) on the basis of race, color, sex, age or marital
status. Under the Equal Credit Opportunity Act, creditors are required to make
certain disclosures regarding consumer rights and must advise consumers whose
credit applications are not approved of the reasons for the objection. The Fair
Credit Reporting Act requires the Company to provide certain information to
consumers whose credit applications are not approved on the basis of a report
obtained from a consumer reporting agency. The rules of the FTC limit the types
of property a creditor may accept as collateral to secure a consumer loan and
its holder in due course rules provide for the preservation of the consumer's
claim and defenses when a consumer obligation is assigned to a subject holder.
With respect to used vehicles specifically, the FTC's Rules on Sale of Used
Vehicles requires that all sellers of used vehicles prepare, complete and
display a Buyer's Guide which explains any applicable warranty coverage for such
vehicles. The Credit Practices Rules of the FTC impose additional restrictions
on loan provisions and credit practices.
Several states and the federal government have enacted "lemon laws" and
similar statutes concerning protections for purchasers of automobiles. The
application of these statutes may give rise to a claim or defense by an obligor
against a Dealer from or through whom such obligor purchased such vehicle.
These statutes apply to Installment Contracts purchased by the Company. The
Company may be required to cancel Installment Contracts with an obligor who
successfully asserts such a claim or defense, and while the Company would have a
claim against the Dealer if the subject Installment Contracts had been purchased
by the Company, there can be no assurance that the Company will be made whole in
every case in which the obligor successfully asserts such rights. The number
and amounts of Installment Contracts with respect to which obligors have
asserted such claims or defenses have been immaterial. Any adverse change in
these laws or regulations, or in the judicial or
10
<PAGE>
administrative interpretations thereof, could have a material adverse effect on
the business of the Company.
ABSENCE OF PUBLIC MARKET FOR THE NOTES AND LIMITED TRANSFERABILITY OF THE
NOTES. There is no established trading market for the Notes. The Company does
not intend to list the Notes on any national securities exchange or to seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. Noteholders have no right to cause the Company to
redeem, repurchase or prepay their Notes. No transfers will be permitted of
less than the Minimum Purchase, nor may an investor transfer, fractionalize or
subdivide Notes so as to retain less than such Minimum Purchase. Accordingly,
Noteholders will not be able to liquidate their investment in the Notes in the
event of an emergency or for any other reason and the Notes will not be readily
accepted as collateral for loans. The Notes should be purchased only by persons
who have no need for liquidity in their investment. See "Transferability of
Notes."
LIMITED SOURCES FOR REPAYMENT OF THE NOTES. There is no sinking fund for
repayment of the Notes. Generally, the Company expects to use proceeds of the
Installment Contracts not used for operating expenses for the purchase of
additional Installment Contracts, to the extent Installment Contracts are
available on terms acceptable to the Company. As a result, in order to repay
the Notes at maturity, the Company will be obligated to refinance the Notes,
sell the Installment Contracts, incur additional debt, obtain additional equity
investments or engage in some combination of the foregoing. The Company has no
commitments from any source to fund the repayment of the Notes, and there is no
assurance that the Company will be successful in obtaining the funds necessary
for repayment of the Notes on terms acceptable to the Company or at all. If
sufficient funds are not available from any of such sources, the Company may be
unable to repay all or part of the interest or principal on the Notes.
PREPAYMENT. The Notes may be prepaid, at the option of the Company, in
whole or in part, at any time without any prepayment premium or penalty. A
Noteholder whose Note is prepaid may not have the ability to locate a suitable
replacement investment in anticipation of prepayment. In addition, if the Notes
are prepaid, by refinancing or otherwise, because of a decrease in interest
rates generally, a Noteholder may not be able to reinvest the proceeds of the
Note at the same effective yield.
NO RATING. The Notes will not be rated by any rating agency.
NO AMORTIZATION. The Notes do not provide for the amortization of any of
the principal amount prior to maturity. Accordingly, the Notes involve greater
risk than similar, fully amortizing debt instruments.
NO INTEREST IN THE COMPANY. A Noteholder will not acquire or obtain any
partnership or other equity interest in the Company by a purchase of Notes.
Noteholders have no ability to vote on Company matters or to otherwise influence
management of the Company.
SIZE OF OFFERING. In the event the Company sells less than the $15,000,000
aggregate principal amount of Notes offered hereby, there will be a smaller
portfolio of Installment Contracts as collateral, Noteholders will bear a higher
proportionate share of organizational and issuance costs thereby reducing the
net proceeds available for purchase of Installment Contracts, and Noteholders
may have an increased risk of loss. In addition, the performance of individual
Installment Contracts securing the Notes will have a greater effect on the
ability of the Company to pay the Notes than if a large portion of the offered
Notes are sold. See "Use of Proceeds."
11
<PAGE>
USE OF PROCEEDS
The following table sets forth the estimated application by the Company of
the anticipated proceeds of the sale of Notes.
<TABLE>
<CAPTION>
MINIMUM MIDPOINT MAXIMUM
------- -------- -------
<S> <C> <C>
($1,000,000) ($7,500,000) ($15,000,000)
</TABLE>
<TABLE>
<CAPTION>
USE OF PROCEEDS
---------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Purchase of Installment $ 660,000 66% $6,175,000 82.3% $12,550,000 83.6%
Contracts from
Unaffiliated Third
Parties
Estimated Initial 15,000 1.5 112,500 1.5 225,000 1.5
Expenses Related to
Purchase of
Installment Contracts(1)
Sales Commissions and 75,000 7.5 562,500 7.5 1,125,000 7.5
Concession(2)
Due Diligence 10,000 1.0 75,000 1.0 150,000 1.0
Reimbursement and
Non-Accountable
Expense Allowance(3)
Investment Banking and 40,000 4.0 300,000 4.0 600,000 4.0
Marketing Fee(4)
Other Offering 200,000 20.0 275,000 3.66 350,000 2.3
Expenses(5)
Total Use of Proceeds $1,000,000 100% 7,500,000 100% $15,000,000 100%
---------- ---- --------- ---- ----------- ----
---------- ---- --------- ---- ----------- ----
</TABLE>
(1) Assuming the respective minimum amount, midpoint amount or maximum amount,
whichever is the case, is sold within six months after the offering
commences. Approximate amounts to be paid to SAC for administrative,
marketing and servicing fees for the first three months following the
release of proceeds to the Company after which time the Company expects
such fees to be paid from operations.
(2) The Company will pay the participating dealers a selling commission of up
to 7.5% of the sale price for each Note sold. See "Plan of Distribution."
(3) Includes reimbursement for actual due diligence expenses which may be paid
to the participating dealers in an amount of up to .5% of the principal
amount of each Note and payments which may be made to participating dealers
by the Company as a non-accountable expense allowance not to exceed .5% of
the principal amount of each Note. See "Plan of Distribution."
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<PAGE>
(4) An investment banking and marketing fee will be paid to Banc Services
Corporation for services including advising the Company with respect to
this offering, the preparation of this prospectus, and assistance with the
selling efforts for the Notes.
(5) Includes legal, accounting, printing, registration and qualification fees,
and trustee and escrow fees and other offering costs. These costs have or
will be incurred by SAC and Four Star and will be reimbursed by the Company
following the offering.
The Company does not intend to use any proceeds of the offering to service
obligations to Noteholders.
Prior to the purchase of Installment Contracts net proceeds not otherwise
expended as described above will be invested in short term, interest-bearing
securities.
To the extent the maximum amount of proceeds is not raised the Company
intends to prioritize the use of proceeds first through the payment of all
expenses, reimbursements and commissions related to this offering, and then to
apply the balance of the proceeds toward the purchase of Installment Contracts.
See "Business--Business Strategy and Purchase of Installment Contracts."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
As of the date of this Prospectus, the Company has had no operating
history. The net proceeds of the sale of the Notes will be employed for
reimbursement of the expenses associated with this offering, initial operating
expenses and for purchase the Installment Contracts. See "Business - Business
Strategy and Purchase of Installment Contracts." While the Notes remain
outstanding, the Company will not engage in any business other than the
purchase, collection and servicing of the Installment Contracts (including
repossession and resale of the vehicle collateral).
The Company's use of the net collection proceeds from the Installment
Contracts will be restricted to payments on the Notes and to payments of
expenses and purchases of additional Installment Contracts. At such time as the
Company's net receivables exceed 110% of the principal amount of the Notes then
outstanding the Company's partnership agreement permits distributions to the
Company's partners. See "Certain Transactions - Partnership Distributions."
CAPITAL RESOURCES AND LIQUIDITY.
The Company's primary sources of funds for repayment of the Notes will be
proceeds from the Installment Contracts and any income on the reinvestment of
such proceeds. The Company does not have, nor is it expected to have in the
future, any significant source of capital for repayment of the Notes and the
expenses incurred by it other than proceeds from the Installment Contracts and
any income from reinvestment of such proceeds. Payment of the principal or
interest on the Notes is not guaranteed by any other person or entity.
Nevertheless, management of the Company believes that the Company will realize
sufficient proceeds from the foregoing sources to pay all installments of
interest when due on the Notes. In order to repay the Notes at maturity, the
Company will be obligated to refinance the Notes, sell the Installment
Contracts, incur additional debt, obtain additional equity investments or engage
in some combination of the foregoing. The Company has no commitments from any
source to fund the repayment of the Notes and there is no assurance that the
Company will be
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<PAGE>
successful in offering the funds necessary for repayment of the Notes on terms
acceptable to the Company or at all. If sufficient funds are not available from
any of such sources, the Company may be unable to repay all or part of the
principal on the Notes.
14
<PAGE>
BUSINESS
INTRODUCTION
The Company is a Florida limited partnership formed in August 1997 as a
single purpose entity organized to engage in the purchase, collection and
service of Installment Contracts originated principally by independent Dealers
who sell new and used automobiles and light duty trucks to Non-prime Consumers.
THE AUTOMOTIVE FINANCE INDUSTRY
INDUSTRY CHARACTERISTICS AND TRENDS. The automobile financing industry
estimated by analysts at $400 billion in 1996 is the second largest consumer
debt market nationwide. The industry originated in the early part of this
century when automobile manufacturers created financing subsidiaries in response
to the hesitancy of banks to enter the new and potentially risky market of
providing credit to consumers to purchase mass produced automobiles. Banks
eventually competed with these captive subsidiaries, and in the deregulated
environment of the early 1980s, savings and loans also entered the market.
Financing subsidiaries and banks did not completely service the market, however,
as the captive subsidiaries focused on stimulating demand for the manufacturers'
new vehicles, and depositary institutions were generally positioned to serve
low-risk borrowers without the necessary collection efforts and charge-offs
associated with higher risk, Non-prime Consumers. Financing sources for
Non-prime Consumers were further restricted during the tightening credit
standards imposed by the late 1980s de-regulation of the banking industry and
the almost simultaneous decline in the earnings of automobile manufacturers
resulting in lower credit ratings and higher cost of capital for their captive
subsidiaries.
THE NON-PRIME MARKET. The Non-prime Consumer credit segment of the
automotive finance market is comprised of individuals who are unable to obtain
traditional financing through traditional sources such as a bank or a captive
finance company due to either incomplete or imperfect credit histories. The
Company believes that the Non-prime Consumer portion of the automotive finance
market is between $60 billion and $75 billion.
Despite the opportunities perceived by the Company in the Non-prime
Consumer market, many traditional financing sources, such as banks, savings and
loans, credit unions, captive finance companies and leasing companies do not
consistently provide financing to, or have from time to time withdrawn from,
this market. The Company believes that market conditions, increased regulatory
oversight and capital requirements imposed by governmental agencies have limited
the activities of many banks and savings and loans in this market. In addition,
the Company believes that captive finance arms of major automotive manufacturers
focus their marketing efforts on this segment when inventory control and/or
production scheduling requirements of their parent organizations dictate a need
to focus on this market, and then exit the market once these sale volumes are
satisfied. Moreover, the focus of these captive finance companies remains on
new car financing. Further, many financial organizations electing to remain in
the automotive finance business have migrated toward higher credit quality
customers to reduce their processing and collection costs. As a result of these
conditions, management believes that the Non-prime Consumer automotive finance
market is highly fragmented, and primarily serviced by smaller finance
organizations that solicit business when and as their capital resources permit.
Due to such a lack of a major, consistent financing source, a number of
competitors, including well capitalized public companies, have entered this
market in recent years. See "- Competition."
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<PAGE>
While financing sources for the Non-prime Consumer market were eroding in
the 1980s, the demand for non-prime used automobile financing increased.
Dealers shifting to the used car market found themselves lacking the means as
well as the training, time and financial skills to operate a financing
operation. Furthermore, the Dealers' incentive to sell a vehicle at the highest
price is directly at odds with a financing entity's desire to maximize the
potential for loan repayment. Growth, if any, could be the result of several
primary market stimuli, including aggressive marketing by non-prime lenders,
larger numbers of automobiles subject to expiring leases, longer vehicle life,
growing inability of consumers to afford new vehicles, and Dealers' preference
for the relatively high margins realized on used vehicles. Because the
automobile finance industry is heavily dependent on the sale of used
automobiles, management believes its business is seasonal. Sales are strongest
in the second quarter when consumers receive tax refunds, and weakest during the
winter holidays as consumers are spending their disposable income on gifts. New
vehicle sales are strong during the end of the model year when dealers offer
close-out prices.
Industry analysts report that most Non-prime Consumer lenders purchase
Installment Contracts through agreements with Dealers or other lenders without
direct contact with the borrower. The terms of Installment Contracts purchased
range from one to five years and average up to approximately 36 months. Annual
interest rates on the Installment Contracts average approximately 19.5%. Most
Non-prime Consumer lenders service the Installment Contracts they purchase.
As competition among Non-prime Consumer lenders increases, Dealers are
gaining bargaining power within the industry. Most Dealers have relationships
with at least five Non-prime Consumer lenders, permitting them to offer credit
applications to various companies to find the most rapid and profitable
acceptance. Therefore, successful lenders or their originators must have close
relationships with Dealers and provide prompt and consistent approval of
applications. The larger publicly held lenders have relationships with more
than half of these 10,000 Dealers. In this environment, skilled personnel with
experience in the industry are critical to maintain relationships that
discourage adverse credit selection, to evaluate Dealer integrity, to properly
price loans based on risks assumed and to ensure adequacy of loss reserves. See
"Risk Factors - Limited Assets and Operating History."
CONSUMER CREDIT CHARACTERISTICS. The Company believes that gradations
exist with respect to the credit profiles of customers of automobile financing
according to the following generalized criteria:
- An "A" credit consumer is a Prime Consumer who has a long credit
history with no defaults, has been employed in the same job for a
period of at least 18 months, and can easily finance a new car
purchase through a bank, a captive finance subsidiary of an automobile
manufacturer or an independent finance company that focuses on Prime
Consumer credit.
- A "B" credit consumer is a Non-prime Consumer who may have had some
slight credit problems in his or her past or may not have been
employed at his or her current job for 18 months. To finance a new or
late-model used car, the "B" credit borrower may not qualify for a
loan from a captive finance subsidiary, but may have success borrowing
from a bank and can access credit through an independent finance
company.
- A "C" credit consumer is a Non-prime Consumer who may have an
inconsistent employment record or more significant or unresolved
problems with credit in the past. To finance a late-model or older
used car purchase, this borrower will generally not be
16
<PAGE>
able to obtain a loan from a captive finance subsidiary or a bank, and
will have to access an independent finance company that lends into
this market category.
- A "D" credit consumer is a Non-prime Consumer who has an unfavorable
employment history and serious credit problems, such as a personal
bankruptcy. This borrower's only choice is to finance his or her used
car purchase through an independent finance company that is active in
this market segment.
While such gradations are by nature inexact, the Company will primarily
target Non-prime Consumers who fall into the "B" and "C" categories. The
default rates during the life of non-prime credits range from 5% to 40%.
Finance companies that acquire non-prime credits require higher yields to
compensate for the risks of default and collection expenses assumed. The
Company believes, based on prior experience of its management, that low-grade
finance paper can be re-sold to other finance organizations at a higher grade
after the consumer has made regular payments for at least six months.
BUSINESS STRATEGY AND PURCHASE OF INSTALLMENT CONTRACTS
The Company intends to supply additional capital to the Non-prime Consumer
market. Utilizing state of the art technology to approve, process, service and
collect automobile loans of an "B" and "C" nature, the Company will leverage
long-term relationships established by its sales force. The Company will employ
sophisticated behavioral models developed by Fair-Issac of San Rafael, CA to
support credit decisions, as well as other tools such as an internally
developed, windows based, loan processing and control systems. The acquisition
and portfolio management systems will support the Company's commitment to manage
the portfolio utilizing the debt policies and practices applied by commercial
banks. In addition, from time to time, the Company intends to negotiate
non-exclusive purchase arrangements with intermediaries and originators,
including independent financing companies and, to a lesser extent, individual
Dealers. See "Risk Factors - Availability of Installment Contracts."
RISK MANAGEMENT. The Company intends to manage the default risks posed by
its Non-prime Consumer financing through the structure of the purchase
transaction and the subsequent servicing, portfolio management and collection
procedures, for example the Company intends to:
- - establish an allowance for losses on the date of purchase of 5% to 10% on
all Installment Contracts, in addition to the purchase discount
- - select dealers based on management's prior experience with the dealership,
which have been in operation for a number of years and are in good standing
with management
- - require quarterly reporting by dealers based on their portfolio's
performance
- - enter into agreements with qualified third parties to handle all
repossessions and remarketing
- - utilize "behavioral" scoring analysis models to manage risk, determine loan
loss reserves, stratify collection activities and reduce expenses
- - implement a "commercial banking" quality control review process to identify
and correct systemic deficiencies as well as underwriter credit authority
delegation
- - utilize an automobile credit application scoring model to classify loan
grades of A, B, C and D.
DEALER APPROVAL CRITERIA. No credit applications will be accepted from any
Dealer that has not been approved by the Company. Approval will generally be
granted to automobile dealers who meet the following criteria:
17
<PAGE>
- A tangible net worth of $100,000 (exclusive of goodwill or other
intangible assets), or a parent or affiliate which meets the net worth
criterion and guarantees the performance of the obligation of the
automobile dealer under the purchase agreements, replacement
guarantees or other forms of dealer recourse.
- A minimum of three years of successful operation as an automobile
dealer, as evidenced by financial statements or prior tax returns.
(Unless the owner of the Dealer has substantial personal net worth,
and provides a personal guarantee).
- Possess acceptable accounts payable history.
- Experienced contract loss rates during the immediately preceding year
acceptable to the Company.
- Possess acceptable personal credit history (owner and spouse).
- Possess acceptable floor plan references (if applicable).
- Verifiable banking references.
- Possess acceptable mortgage or landlord references.
- Satisfactory onsite premises inspection.
- Possess a current DMV automobile dealer license.
- Is able to obtain signed inter-creditor agreements from various
lenders in order to provide the Company UCC security interest in
financed collateral.
CERTAIN CONTRACT PURCHASE CRITERIA. The Company will endeavor to purchase
Installment Contracts from intermediaries or originators at discounts to their
aggregate remaining unpaid principal balances and at prices which are below the
average wholesale value of the Financed Vehicles. In addition, the Company will
seek to obtain Installment Contracts whose maturities are less than the
remaining useful lives of the Financed Vehicles and which require substantial
down payments. The Company anticipates purchasing Installment Contracts on a
"package" basis involving several Installment Contacts at one time.
With respect to the credit information to be supplied by borrowers on the
Installment Contracts, the Company has established certain credit criteria to be
satisfied by each borrower. The Company's review will generally take into
account such matters as the individual's stability of residence, employment
history, bank information, credit history, income, discretionary income, ability
to pay, and debt ratio. In order to satisfy these criteria, a borrower, among
other things, must be able to provide verifiable personal references, must have
a valid driver's license issued by his state of residence, must have been a
resident of such state for a minimum of six months, and must be at least 18
years of age and have no co-signors on the Installment Contract except immediate
family members. In order to verify the foregoing information, the Company will
be required to obtain from the Dealer a copy of the credit application executed
by the borrower which contains the necessary information, to verify by telephone
or otherwise the borrower's addresses, employment and personal references and to
obtain a credit report from a credit reporting agency or from the Dealer.
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<PAGE>
Although borrowers under the Installment Contracts are anticipated to be
somewhat less creditworthy than typical purchasers of automobiles from new car
dealers, the Company has established certain general criteria to be used as a
guide to purchasing Installment Contracts. These criteria are as indicated
below; however, at the discretion of the Company actual purchase of packages and
individual Installment Contracts may vary substantially from this guide: (i)
the Company expects the purchase discount from the face amount of the loan will
generally range between par and 25% depending on the creditworthiness of each
individual buyer and the Dealer, and the overall credit quality of the package
of Installment Contracts purchased; (ii) Installment Contracts will usually have
an original term of 48 months or less; (iii) at least one payment will have been
made by the borrower on the Installment Contract; (iv) the age of each Financed
Vehicle may not exceed those listed in the appropriate National Auto Research
Market Guides, which are modified periodically; (v) the borrowers on the
Installment Contracts are required to make a down payment in cash plus net
trade-in allowance of 10-25% of the purchase price of the Financed Vehicles;
(vi) the interest rate on the Installment Contracts will not violate any
applicable usury laws; and (vii) no Installment Contract may be more than one
installment in arrears at the time of the purchase.
THIRD PARTY PORTFOLIO ACQUISITIONS. The Company may also acquire existing
Installment Contract portfolios for investment. These portfolio acquisitions
would normally be in the range of $50,000 to $5 million. Portfolio acquisitions
by the Company will involve a financial and documentary review including the
following:
- All Installment Contracts contained in each portfolio under
consideration for acquisition will be reviewed for completeness and
accuracy of documentation.
- All payment histories will be reviewed and verified.
- Underlying vehicles will be evaluated and the purchase prices will be
verified.
- Uniform Commercial Code lien searches will be performed on all
Installment Contracts acquired. All third party liens will be
required to be removed prior to or upon the Company's acquisition of
the portfolio.
Upon satisfactory completion of the above procedures, the portfolio may be
purchased. The Company may require additional personal and/or corporate
guarantees from the vendor of the portfolio. In some cases, the Company may
require that the Installment Contracts and underlying vehicles be purchased with
full recourse to the sellers of the portfolio should any underlying Installment
Contract obligor default.
OPERATING EXPENSES
In addition to interest on the Notes, the Company believes that its
expenses will include, but are not limited to, expenses and fees for Installment
Contract servicing, custodian fees, purchase and administration fees, trustees'
fees, bank fees and charges, legal fees, title and transfer fees, account fees,
Installment Contract purchase fees, insurance, repossession, repair and
liquidation expenses, enforcement of Dealer Installment Contract replacement
guarantees and/or other Dealer recourse arrangements, federal, state and local
taxes, out-of-pocket expenses incurred in connection with any resale of
Installment Contracts and other general and administrative expenses. SAC will
provide management, marketing and administrative services to the Company. The
fees for such services consist of the following:
19
<PAGE>
<TABLE>
<S> <C> <C> <C>
- One time boarding fee $10.00 per Installment Contract
- Monthly service fee $15.00 per Installment Contract
- One time administrative fee $100.00 per Installment Contract
- One time marketing fee $150.00 per Installment Contract
</TABLE>
SERVICING
SAC, (the "Servicer") will undertake the collection process for all
accounts contractually delinquent, and subsequently undertake all repossession
functions. The Servicer will service all Installment Contracts purchased with
the proceeds of this offering. The Company's servicing activities include
(i) monitoring Installment Contracts and collateral, (ii) accounting for and
posting all payments received, (iii) responding to customer inquiries,
(iv) taking all action to maintain the security interest granted in the Financed
Vehicle, (v) investigating delinquencies and communicating with the borrowers to
obtain timely payment, and (vi) pursuing deficiencies in Installment Contracts.
At the time of a purchase of a Financed Vehicle, the automobile dealer or
intermediary which is selling the Installment Contract to the Company notifies
the purchaser that the Installment Contract will be acquired by the Company and
directs the purchaser to make payments to the Company. The Servicer mails to
the Financed Vehicle owner a welcome letter and coupon book advising the owner
of the purchase of the Installment Contract and where and how to make payments.
The Servicer will also undertake the collection process for all accounts
contractually delinquent, and subsequently all repossession functions. The
Servicer will receive copies of all Installment Contracts purchased with the
proceeds of this offering.
The servicing and collection activities incorporate numerous pro-active
procedures and systems to minimize Installment Contract losses. For example,
the customer will be informed of their responsibilities and obligations with
respect to the Installment Contract upon the purchase of the Installment
Contract by the Company, the necessity of paying on time and of maintaining
insurance coverage, and the related benefits of building a stronger credit
background for future purchases. The customer will also be informed of the
Company's delinquency and repossession policies. The Servicer will utilize
monthly billing statements to bill customers for their monthly payment
obligations. If an account becomes delinquent by more than 5 days the Servicer
will mail a past due notice. A second notice will be mailed if payment has not
been received within 10 days of the due date. When an account becomes 15 days
past due the Servicer will make customary efforts to contact the borrower by
telephone and in writing. The Servicer will continue its efforts to obtain
payment from a borrower whose payment has not been made until 30 days have
elapsed from the due date at which time the account is turned over to a
repossession firm.
The Company's repossession policy will be administered on a case-by-case
basis. For example if a customer's payment is delinquent, the Company's policy
is to work with the customer to permit the customer to keep the Financed
Vehicle, while a suitable solution to the delinquency problem can be arranged
between the customer and the Servicer. However, should a customer become
seriously delinquent or be dealing in bad faith, the Company will repossess the
customer's Financed Vehicle. Repossessions will be handled by independent
repossession firms engaged by the Servicer. It is presently anticipated that
repossessed vehicles will generally be resold by the Servicer through wholesale
automobile networks or auctions which are attended principally by Dealers or
through an established network of Dealers who will sell repossessed vehicles for
the Servicer on a retail basis.
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<PAGE>
COMPETITION
The Non-prime Consumer credit market consists of many national, regional
and local competitors with various strategies to approach industry risks.
Although fragmented, the market is becoming increasingly competitive due to its
profitability and relative ease of entry. In the past years, a number of
companies have completed initial public offerings of common stock, the proceeds
from which were used, at least in part, to fund expansion and support increased
purchases of Installment Contracts. Existing and potential competitors include
well-established financial institutions, such as banks, savings and loans, small
loan companies, leasing companies and captive finance companies owned by
automobile manufacturers and others. The Company believes that many of these
financial organizations do not consistently solicit business in the Non-prime
Consumer credit market. The Company believes that captive finance companies
generally focus on new car financing, and direct their marketing efforts to the
Non-prime Consumer market only when inventory control and/or production
scheduling requirements of their parent organizations dictate a need to enhance
sales volumes and then exit the market once such sales volumes are satisfied.
Increased regulatory oversight and capital requirements imposed by market
conditions and governmental agencies have limited the activities of many banks
and savings and loans in the Non-prime Consumer credit market. In many cases,
those organizations electing to remain in the automobile finance business have
migrated toward higher credit quality customers to allow reductions in their
overhead cost structures. As a result, the Non-prime Consumer credit market is
primarily serviced by smaller finance organizations that solicit business when
and as their capital resources permit. Like the Company, several of its
competitors specifically target "B" and "C" credit borrowers. Industry sources
indicate that no one competitor or group of competitors has a dominant presence
in the Non-prime Consumer market segment of "B" and "C" credit consumers to be
targeted by the Company. The Company's strategy is designed to leverage
management's relationships with originators to capitalize on the fragmentation
in this market. Some industry analysts expect competition to continue to
increase in the industry as Non-prime Consumer borrowers become more conscious
of financing alternatives such as direct Non-prime Consumer lenders and seek
more favorable loan terms or leases.
REGULATION
The Company's business is subject to regulation and licensing under various
federal, state and local statutes and regulations. The states in which the
Company does business govern the Company's operations. Most states in which the
Company purchases Installment Contracts limit the interest rate, fees and other
charges that may be imposed by, or prescribe certain other terms of, the
Installment Contracts that the Company purchases. In addition, the Company is
not currently required to be licensed or registered to conduct its finance
operations in the majority of the states in which the Company currently
purchases Installment Contracts. Several of these state's laws subject the
Company to periodic examination by state regulatory authorities. The state
licenses are revocable for cause. The Company believes that it substantially
complies with applicable regulations. In order for the Company to expand its
operations into other states, it will be required to comply with the laws of
such states. The Company has no current plans to expand its business into any
jurisdiction where it is not now licensed, or would be required to be licensed
to do business. There can be no assurance that the Company can comply with the
laws of these additional states or obtain appropriate licenses or permits.
Numerous federal and state consumer protection laws and related regulations
impose substantive disclosure requirements upon lenders and servicers involved
in automobile financing. Some of the federal laws and regulations include the
Truth-in-Lending Act and Regulation Z promulgated thereunder, the Equal Credit
Opportunity Act, the FTC, the Fair Credit Reporting Act, the Fair Debt
Collection
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Practices Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulation B and Z and the Soldiers' and Sailors' Civil Relief Act.
In addition, the FTC has adopted a holder-in-due-course rule which has the
effect of subjecting persons that finance consumer credit transactions (and
certain related lenders and their assignees) to all claims and defenses which
the purchaser could assert against the seller of the goods and services. With
respect to used automobiles specifically, the FTC's Rules on Sale of Used
Vehicles requires that all sellers of used automobiles prepare, complete and
display a Buyer's Guide which explains the warranty coverage for such
automobiles. The Credit Practices Rules of the FTC impose additional
restrictions on sales contract provisions and credit practices.
Certain states in which the Company operates have adopted motor vehicle
retail installment sales acts or variations thereof. Oklahoma has adopted the
Uniform Consumer Credit Code, subject to certain variations, and Texas has
adopted the Texas Credit Code. These laws and similar laws in the other states
in which the company purchases Installment Contracts regulate, among other
things, the interest rate, fees and other charges and terms and conditions of
motor vehicle retail installment loans. These laws also impose restrictions on
consumer transactions and require disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities
upon creditors who fail to comply. The laws of certain states grant to the
purchasers of vehicles certain rights of rescission under so-called "lemon
laws." Under such statutes, purchasers of motor vehicles may be able to seek
recoveries from, or assert defenses against, the Company.
In the event of default by a borrower, the Company has all the remedies of
a secured party under the Uniform Commercial Code ("UCC"), except where
specifically limited by other state laws. See "Risk Factors - Security for
Notes," and "Certain Legal Aspects of the Installment Contracts."
The Company believes that it is in substantial compliance with all
applicable material laws and regulations. Adverse changes in the laws or
regulations could have a material adverse effect on the Company's business.
Because the Company generally charges the highest finance charges permitted by
law, reductions in statutory maximum rates could directly impair the Company's
profitability.
FACILITIES
The Company's executive offices are located at 601 Gateway Blvd., Suite
260,, South San Francisco, CA 94080. This space is shared with an affiliated
company under a five-year lease for 11,081 square feet that expires in 2000.
The Company has no obligations under the lease and pays no rent. Administrative
fees paid to SAC include the use of the premises.
EMPLOYEES
The Company will not employ any full time employees. Services will be
provided to the Company by four full time employees of SAC.
LITIGATION
The Company is not a party to any legal proceedings.
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CERTAIN LEGAL ASPECTS OF THE INSTALLMENT CONTRACTS
GENERAL
The Installment Contracts are "chattel paper" as defined in the UCC.
Pursuant to the UCC, a security interest in chattel paper may be perfected by
taking possession of the chattel paper or by the filing of a UCC financing
statement with the Secretary of State of the state in which a corporate debtor's
principal place of business is located, which in the case of the Company is the
Secretary of State of California.
Upon any purchase of Installment Contracts by the Company, the Installment
Contracts and related title documents for the Financed Vehicles will be
delivered to the Custodian (as defined) and will be physically marked to
indicate the security interest therein of the Company. In addition, a UCC
financing statement will be filed in the appropriate public office to perfect by
filing the Company's security interest in the Installment Contracts and all
proceeds therefrom.
SECURITY INTERESTS IN FINANCED VEHICLES
Under the UCC as adopted in most states, retail installment sale contracts
such as the Installment Contracts constitute security agreements for personal
property and contain grants of security interests in the Financed Vehicles.
Perfection of security interests in the Financed Vehicles is generally governed
by the motor vehicle registration laws of the state in which such vehicle is
located. In many states, a security interest in a Financed Vehicle is perfected
by notation of the secured party's lien on the vehicle's certificate of title
and registration of such lien with the appropriate state agency such as the
department of motor vehicles. In other states, a security interest in a
Financed Vehicle is perfected by filing a financing statement with the Secretary
of State or other designated filing agency.
Upon the purchase of the Installment Contracts, the originating Dealers
will be required to assign the Installment Contracts (and the security interests
arising thereunder in the Financed Vehicles) to the Company. The originating
Dealers will also provide evidence that proper applications for certifications
of title have been made to ensure that the Company will be named as the
lienholder on the certificates of title relating to the Financed Vehicles or, in
states where a filing is required, that proper financing statements have been
filed to perfect the security interest of the Company in the Financed Vehicles.
Under the laws of many states, liens for repairs performed on a Financed
Vehicle and liens for certain unpaid taxes take priority over even a perfected
security interest in a Financed Vehicle. The Internal Revenue Code of 1986, as
amended, also grants priority to certain federal tax liens over the lien of a
secured party. Certain state and federal laws permit the confiscation of
Financed Vehicles under certain circumstances if used in unlawful activities,
which may result in the loss of a secured party's perfected security interest in
the confiscated Financed Vehicle. However, liens for repairs or taxes, or the
confiscation of a Financed Vehicle, could arise or occur at any time during the
term of an Installment Contract. No notice will be given to the Company in the
event such a lien arises or confiscation occurs.
If the owner of a Financed Vehicle relocates to another state, under the
laws of most states, the perfected security interest in the Financed Vehicle
would continue for four months after such relocation and thereafter, in most
instances, until the owner re-registers the Financed Vehicle in such state.
Almost all states generally require surrender of a certificate of title to
re-register a titled Financed Vehicle in
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another state. Therefore, the Company must surrender possession if it holds the
certificate of title to such Financed Vehicle, before the Financed Vehicle owner
may effect the re-registration. In addition, the Company should receive, absent
clerical error or fraud, notice of surrender of the certificate of title because
the Company will be listed as a lienholder on its face. Accordingly, the
Company will have notice and the opportunity to re-perfect its security interest
in the Financed Vehicle in the state of relocation. If the Financed Vehicle
owner moves to one of the few states which does not require surrender of a
certificate of title for registration of a Financed Vehicle, re-registration
could defeat perfection. In the ordinary course of servicing the Installment
Contracts, the Company will take steps to effect such re-perfection upon receipt
of notice of re-registration or other information from the borrower as to
relocation. Similarly, when an borrower under an Installment Contract sells a
Financed Vehicle, the Company must surrender possession of the certificate of
title, or the Company will receive notice as a result of its lien noted thereon.
Accordingly, the Company will have an opportunity to require satisfaction of the
related Installment Contract before release of the lien.
REPOSSESSION
In the event of default by a borrower under an Installment Contract, the
holder of the Installment Contract has all the remedies of a secured party under
the UCC. The UCC remedies of a secured party include the right to repossession
by self-help means, unless such means would constitute a breach of the peace.
Unless the borrower under an Installment Contract voluntarily surrenders a
Financed Vehicle, self-help repossession, by an individual independent
repossession specialist engaged by a subcontract servicer or the Company, is the
method presently anticipated to be employed when a borrower defaults. Self-help
repossession would not be used where the Company has other recourse rights,
under a dealer agreement or otherwise, against the originating Dealer or some
other party, in which case, the Company likely would exercise such right prior
to effecting a repossession. Self-help repossession is accomplished by retaking
possession of the Financed Vehicle. If the borrower objects or raises a defense
to repossession, or if the applicable state law so requires, a court order must
be obtained from the appropriate state court and the Financed Vehicle may only
be repossessed in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the borrower under an Installment Contract, some
jurisdictions require that the borrower be notified of the default and be given
a time period within which the borrower may cure the default prior to
repossession. Generally, this right of reinstatement may be exercised on a
limited number of occasions in any one-year period.
In most jurisdictions, the UCC and other state laws require the secured
party to provide the borrower with reasonable notice of the date, time and place
of any public sale or the date after which any private sale of the collateral
may be held. Unless the borrower waives his rights after default, the borrower
has the right to redeem the collateral prior to actual sale by paying the
secured party the unpaid installments due on the Installment Contract (less any
required discount for prepayment), plus reasonable expenses for repossessing,
holding and preparing the collateral for disposition and arranging for this
sale, plus in some jurisdictions, reasonable attorneys' fees or, in some states,
by payment of delinquent installments.
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<PAGE>
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The Company will apply the proceeds of resale of the repossessed Financed
Vehicles first to reimburse itself for its expenses of resale and repossession
and then to the satisfaction of the obligations of the borrower on the
Installment Contract. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the Installment Contract obligations, some states allow a deficiency
judgment to be sought, subject to satisfaction of statutory procedural
requirements by the secured party and certain limitations as to the initial sale
price of the Financed Vehicle. Virtually all states limit or eliminate
deficiency rights if the resale of the repossessed Financed Vehicle is not done
in a commercially reasonable manner. A deficiency judgment is a personal
judgment against the borrower for the difference between the amount of the
obligations of the borrower and the net proceeds from resale. A defaulting
borrower on an Installment Contract typically lacks capital or income following
the repossession of the borrower's Financed Vehicle. Therefore, the Company may
determine in its discretion that pursuit of a deficiency judgment is not an
appropriate or economically viable remedy or may settle a judgment that it
obtained.
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may limit or delay the ability of the Company to repossess and
resell the Financed Vehicle or enforce a deficiency judgment. In addition,
courts have applied general equitable principles to secured parties seeking
repossession or liquidation involving deficiency judgments. In the event that
deficiency judgements are not obtained, are not satisfied, are satisfied at a
discount or are discharged, in whole or in part, in bankruptcy proceedings,
including bankruptcy proceedings under Chapter 13 of the Bankruptcy Reform Act
of 1978, as amended, the loss will be borne by the Company and may adversely
affect the ability of the Company to repay the Notes.
Occasionally, after resale of a Financed Vehicle and payment of all
expenses and obligations, there is a surplus of funds. In that case, certain
state laws require the secured party to remit the surplus to any holder of a
lien with respect to a Financed Vehicle, or, if no such lienholder exists, the
UCC requires the secured party to remit the surplus to the former owner of the
Financed Vehicle.
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<PAGE>
MANAGEMENT
SAC is the general partner of the Company. SAC was incorporated under the
laws of Florida in 1995. The balance sheet of SAC as for the year ended 1996
and for the eleven months ended November 30, 1997 is included elsewhere in this
prospectus. SAC provides management and administrative services to the Company.
The Company's management therefore consists of the officers and directors of SAC
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jonathon W. Hollandsworth 41 President of SAC
Dorothy Kulpinski 51 Secretary, Treasurer and Director of SAC
Dean Kayes 44 Director of SAC
Suzanne Tikkannen 42 Director of SAC
</TABLE>
JONATHON W. HOLLANDSWORTH has spent more than 12 years in the commercial
banking and financial services industries in progressively responsible positions
in consumer and business lending. He joined SAC in November 1997 and has been
with the Company since its inception. Prior to joining SAC, Mr. Hollandsworth
was the Chief Credit Officer for CFC Investments (October 1996 to November
1997). Previously he was the Manager of the Consumer Lending Division of
Sumitomo Bank (November 1994 to October 1998). In the years preceding that
position, Mr. Hollandsworth worked for Bank of America (March 1989 to November
1994) and Security Pacific Bank (March 1987 to March 1989). He held management
assignments at these banks in Portfolio Credit Risk, Credit Policy Compliance,
Credit Operations, Bank Operations and Sales & Marketing.
DEAN KAYES became a Director of SAC in August 1997. Mr. Kayes is also the
Vice President and Senior Staff Counsel for Starlink, a telecommunications
servicing company. Prior to joining Starlink in January 1997, he had been in
the private practice of law since 1989.
DOROTHY H. KULPINSKI has been a Director and the Secretary and Treasurer of
SAC since October 1997. Prior to joining SAC she was Corporate Controller for
Condor Investment Corporation from April 1996 to October 1996. From July 1995
to April 1996, Ms. Kulpinski worked as an independent financial consultant.
From 1991 to June 1995, she worked as a financial manager for Crum & Forster.
SUZANNE TIKKANNEN became a Director of SAC in August 1997. Ms. Tikkannen
is the Senior Vice President and Director of Finance for Condor Investment
Corporation, a California corporation, which provides management services. She
is also Senior Vice President of Four Star.
EXECUTIVE COMPENSATION
The Company does not pay salaries to any individual. SAC has contracted to
manage the Company and to service the Company's Installment Contracts. The
Company will pay SAC for administration, marketing and general services provided
to the Company, which fees shall consist of the following: (a) one time
boarding fee of $10.00 per Installment Contract; (b) one time administrative fee
of $100.00 per Installment Contract; (c) one time marketing fee of $150.00 per
Installment Contract;
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<PAGE>
and (d) monthly service fee of $15.00 per Installment Contract. Assuming the
Company receives the minimum proceeds from the sale of the Notes, SAC will
receive an aggregate of approximately $90,000, $80,000, and $80,000 in the first
three years respectively for administrative, marketing and servicing fees
provided to the Company. If the Company receives the maximum proceeds from the
sale of the Notes, SAC will receive an aggregate of approximately $485,500,
$342,000 and $415,000 in the first three years respectively for administrative,
marketing and servicing fees provided to the Company. Management believes that
the terms of the services provided by SAC are similar to the terms that would be
available from a third party in an arms-length transaction. See "Risk Factors -
Conflict of Interests," "Business - Operating Expenses" and "- Servicing."
CERTAIN TRANSACTIONS
PARTNERSHIP DISTRIBUTIONS.
Under the terms of the Company's Partnership Agreement, the partners of
the Company are entitled to quarterly distributions from Cash Available for
Distribution. Cash Available for Distribution means the remaining cash and
other assets available for distribution to the partners after payment or
satisfaction of the following: (a) all partnership liabilities for ordinary and
necessary expenses then due and owing to the persons other than the partners,
(b) all payments currently due towards interest on the Notes, (c) the current
cost of acquiring and servicing assets (including administrative, marketing and
servicing fees payable to SAC), and (d) such reserves as may be determined by
the general partner to be reasonably necessary for the operation of the
Company's business. The Partnership Agreement provides that distributions of
Cash Available for Distribution cannot be made unless at the fiscal quarter or
fiscal year end, as applicable, the Company's net receivables as reflected on
the Company's balance sheet for such fiscal quarter or fiscal year end
immediately preceding the fiscal quarter in which the distribution is to be made
exceeds 110% of the principal amount of Notes issued and outstanding. These
distributions to partners will reduce the amount of future Installment Contracts
that may be acquired and will reduce cash reserves available for future payments
with respect to the Notes in the event that future cash flow from the
Installment Contracts is insufficient to make Note payments.
PAYMENTS TO SAC
SAC has contracted to manage the Company and to service the Company's
Installment Contracts. The Company will pay SAC for administration, marketing
and general services provided to the Company, which fees shall consist of the
following: (a) one time boarding fee of $10.00 per Installment Contract;
(b) one time administrative fee of $100.00 per Installment Contract; (c) one
time marketing fee of $150.00 per Installment Contract; and (d) monthly service
fee of $15.00 per Installment Contract. Assuming the Company receives the
minimum proceeds from the sale of the Notes, SAC will receive an aggregate of
approximately $90,000, $80,000, and $80,000 in the first three years
respectively for administrative, marketing and servicing fees provided to the
Company. If the Company receives the maximum proceeds from the sale of the
Notes, SAC will receive an aggregate of approximately $485,500, $342,000 and
$415,000 in the first three years respectively for administrative, marketing and
servicing fees provided to the Company. Management believes that the terms of
the services provided by SAC are similar to the terms that would be available
from a third party in an arms-length transaction. See "Risk Factors - Conflict
of Interests," "Business - Operating Expenses" and "- Servicing."
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of the date of this Prospectus
with respect to the beneficial ownership of the outstanding shares of the common
stock of SAC, the general partner of the Company by (i) each beneficial owner of
more than 5% of the common stock, (ii) each of SAC's directors and executive
officers, and (iii) all directors and executives of the SAC as a group. Because
the Notes do not constitute and are not convertible into equity of SAC the
percentage of ownership set forth below will not vary as a result of this
offering.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
--------- ----------
NAME OF BENEFICIAL OWNER(1) SHARES (1) OUTSTANDING SHARES
--------------------------- ---------- ------------------
<S> <C> <C>
Four Star Financial Services, LLC(2) 10,000 100%
601 Gateway Boulevard
Suite 260
South San Francisco, California 94080
Jonathon W. Hollandsworth --- ---
Dorothy Kulpinski --- ---
Dean Kayes --- ---
Suzanne Tikkannen --- ---
All directors and executive officers as a --- ---
group (4 persons)
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Subject to community
property laws where applicable, the persons or entities named in the
table above have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them. Unless
otherwise indicated the address for the shareholder is the same as the
Company's principal executive offices.
(2) The sole limited partner of the Company. The managing members of Four
Star are Ronald Anson, Mark Cohn and Jack Garrett.
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<PAGE>
DESCRIPTION OF THE NOTES
The Notes are general obligations of the Company and will be issued
pursuant to an Indenture of Trust, dated as of _________________, 1998 (the
"Indenture") by and between the Company and Trustee. Set forth below is a
summary of certain provisions of the Notes, Security Agreement, Custodian
Agreement and Trust Indenture. A form of the Notes is attached hereto as
Exhibit A, and a form of the Security Agreement is attached hereto as Exhibit B.
Copies of the Indenture and the Custodian Agreement are available upon request
to the Company. This summary is qualified in its entirety by the terms and
conditions of such documents. Prospective Noteholders are encouraged to read
these documents in their entirety. The Indenture is subject to the provisions
of the Trust Indenture Act of 1939 ("TIA") which imposes certain duties on
various persons and, in the event of a disagreement between the TIA and the
Indenture, the TIA provisions control. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Indenture
wherever particular provisions of the Indenture are referred to in this summary,
such provisions are incorporated by reference as a part of the statements made
and such statements are qualified in their entirety by such reference.
GENERAL
The Notes are secured general obligations of the Company, limited in
aggregate principal amount to $15,000,000. The Notes are issuable only in fully
registered form, without coupons, in denominations of $1,000 subject to a
minimum purchase requirement of $2,000.
The Notes will mature on _______, 2003. The Notes will bear interest at
12% per annum from the date of issuance, payable monthly on the 15th day of each
month to the persons in whose names such Notes are registered at the close of
business on the record date next preceding the interest payment date. Interest
on the Notes will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. To the extent lawful, any installment of interest on the
Notes which is not paid when due will accrue interest at the lesser of 18%,
compounded quarterly, or the highest lawful rate of interest from the due date
until paid.
Principal of, and interest on the Notes will be payable, at the Company's
office. At the option of the Company, payment of principal and interest may be
made by check mailed to the Noteholders at the addresses set forth upon the
registry books of the Company.
There is no public market for the Notes and no market is expected to
develop in the future. The Notes should be purchased only by persons who have
no need for liquidity and can bear the economic risk of ownership for the entire
term of the Notes.
REDEMPTION
The Notes will be redeemable for cash at any time at the option of the
Company, in whole or in part, upon not less than 30 days nor more than 60 days
notice to each Noteholder at the redemption price of 100% of the principal
amount thereof plus accrued and unpaid interest to the date of redemption,
without prepayment premium or penalty. Notice will be mailed to all Noteholders
setting forth (i) the redemption date, (ii) the redemption price including the
amount of accrued and unpaid interest to be paid upon such redemption, (iii) the
name and address of the paying agent, (iv) a statement that the Notes must be
delivered to the paying agent, and (v) a statement that interest on the Notes,
or portion thereof being redeemed, ceases to accrue on and after the redemption
date. In the
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<PAGE>
case of notice to the holder of any Note to be redeemed in part, a new Note or
Notes in principal amount equal to the unredeemed portion of such Note will be
issued. In the event of partial redemption of the Notes, the Notes to be
redeemed in whole or in part will be selected on a pro rata basis, or in such
other manner as the Company deems appropriate and fair. The Notes may be
redeemed in multiples of $1,000 only.
SECURITY
The Notes are secured by a security interest granted to the Trustee (the
"Security Interest") pursuant to the Security Agreement in and to all of the
following (i) all Installment Contracts acquired with the proceeds of this
offering; (ii) all Installment Contracts acquired with net collection proceeds
of Installment Contracts described in the foregoing clause (i) ("Replacement
Contracts"); (iii) Financed Vehicles; and (iv) the funds held from time to time
in the Master Account described below.
The Company has established a "Master Account" at a financial institution
into which all payments made on or with respect to the Installment Contracts
will be deposited. The Servicer will be required under its Service Agreement to
promptly remit payments collected by it to the Master Account, including any
proceeds from resales of returned or repossessed Financed Vehicles, net of
liquidation expenses, and any recoveries from insurance claims on Financed
Vehicles. Although the funds in the Master Account will not be restricted in
any way, the Company intends to cause the funds contained in the Master Account
to be withdrawn or applied only for the following purposes: FIRST, to the
payment of all Permitted Expenses (as defined herein) of the Company, including
any amounts due to the Trustee for its fees and expenses; SECOND, to the payment
of interest due on the outstanding Notes; THIRD, to the purchase of Replacement
Contracts; and FOURTH, to the payment of Partnership Distributions (as defined
herein). "Permitted Expenses" means operating expenses including servicing
fees, custodian fees, trustee fees, bank fees and charges, legal fees, title and
transfer fees, account fees, Installment Contract purchase fees, insurance,
repossession, repair and liquidation expenses, enforcement of dealer recourse
arrangements, federal, state and local taxes, out of pocket expenses incurred in
connection with the resale of Installment Contracts and other general and
administrative expenses. "Partnership Distributions" means distributions to the
Company's partners in accordance with the Partnership Agreement. Under the
terms of the Partnership Agreement, distributions of Cash Available for
Distribution (as defined in the Partnership Agreement) may be made at the end of
any fiscal quarter or fiscal year end provided however, that no Event of Default
(as defined in the Indenture) is in effect and the Company's net receivables as
set forth on the Company's balance sheet for such fiscal quarter or fiscal year
end exceeds 110% of the principal amount of the Notes outstanding. See "Risk
Factors - Partnership Distributions."
The sole sources of payment of interest on the Notes will be cash flow
generated by the Installment Contracts which are security for the Notes, capital
contributions or loans from the Company's partners, or operational borrowings
obtained from third party lenders. The sole sources of repayment of principal
and accrued interest on the Notes at the end of their term will be a refinancing
of the Notes, a sale of the Installment Contracts which are pledged as security
for the Notes, any funds in the Master Account or loans or capital contributions
from the Company's partners. The Company's partners and affiliates are under no
obligation to make capital contributions or loans to the Company and there is no
present intention or potential for any such loan or capital contribution. The
Company has no commitment to obtain loans from third party lenders and there is
no assurance that such loans could be obtained. If sufficient funds are not
available from any of such sources, the Company may be unable to repay all or
part of the interest or principal on the Notes.
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<PAGE>
CUSTODIAN AGREEMENT
The Company has entered into a Custodian Agreement Sterling Financial
Services Company (the "Custodian"), an affiliate of the Trustee pursuant to
which the Custodian agrees to hold all original Installment Contracts and
certain additional documents relating to the Installment Contracts for the
benefit of the Trustee. Under the Custodian Agreement, the Custodian's duties
are limited solely to receiving the Installment Contracts and related documents
from the Company, keeping them as specified in the Custodian Agreement and
releasing them to the Company upon receipt of an affidavit signed and sworn to
by a duly authorized officer of the Company that (a) the Company has received or
anticipates receiving within five (5) business days payment in full from the
obligor under the Installment Contract, (b) the Company needs the Financed
Vehicle title to repossess a Financed Vehicle after default on an Installment
Contract, or any administrative event for which release for mailing to any state
is required under statute, rule, regulation or practice such as change in the
name of a Financed Vehicle owner due to marriage or divorce, change of address
of a Financed Vehicle owner, or notation of a subordinate lien on the title.
Upon a release of a Financed Vehicle title pursuant to the above, the Company or
its agent shall promptly return the Financed Vehicle title to the Custodian upon
receipt of the reissued Financed Vehicle title after the changes have been made
by the appropriate state agency. Upon an Event of Default under the Notes or
Security Agreement, the Custodian shall, upon request of the Trustee, promptly
deliver to the Trustee all Collateral held by the Custodian.
The Custodian Agreement provides that the Custodian may without
investigation act in reliance upon any writing or instrument or signature which
it, in good faith, believes to be genuine, may assume without investigation the
validity and accuracy of any statement or assertion contained in such a writing
or instrument, and may assume without investigation that any person purporting
to give any writing, notice, advice or instructions in connection with the
provisions hereof has been duly authorized to do so. The Custodian shall not be
liable in any manner for the sufficiency or correctness as to form, manner and
execution, or validity of any instrument deposited under the Custodian
Agreement, nor as to the identity, authority or right of any person executing
the same; and the Custodian's duties under the Custodian Agreement shall be
limited to the safekeeping of such agreements, monies, instruments or other
documents received by it thereunder, and for the disposition of the same in
accordance therewith.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) failure by the Company to
pay any installment of interest on the Notes when the same becomes due and
payable; (ii) the failure by the Company to pay all or any part of the principal
on the Notes when and as the same becomes due and payable at maturity, upon
redemption, by acceleration or otherwise; (iii) the failure of the Company to
observe or perform any other covenant or agreement contained in the Notes, the
Indenture, the Security Agreement or the Custodian Agreement and, subject to
certain exceptions, the continuance of such failure for a period of 90 days
after written notice is given to the Company by the Trustee or by the holders of
at least a majority in aggregate principal amount of the Notes outstanding; and
(iv) certain events of bankruptcy, insolvency or reorganization in respect of
the Company.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal and interest on the Notes
or to enforce the performance of any provision of the Notes, the Security
Agreement, the Custodian Agreement or the Indenture. If an Event of Default
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least a majority in principal amount of the then outstanding Notes by
notice to the Company and Trustee,
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<PAGE>
may declare the unpaid principal of and any accrued interest on all outstanding
Notes to be due and payable immediately, except that in the case of an Event of
Default arising from an insolvency the Notes become due and payable immediately
without any further action.
The holders of a majority in principal amount of the outstanding Notes by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences except a continuing Default or Event of Default in the payment of
the principal of or interest on any Note. The holders of not less than 75% of
the principal amount of the then outstanding Notes may consent on behalf of the
holders of all Notes to the postponement of any interest payment for a period
not exceeding three years from its due date.
The holders of a majority in aggregate principal amount of the Notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred upon the
Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with any law or the Indenture, that is unduly prejudicial to the
rights of other Noteholders, or that would involve the Trustee in personal
liability. The Trustee may take any other action deemed proper which is not
inconsistent with such direction.
A Noteholder may not use the Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
If required under the provisions of TIA Section 313(a), within 60 days
after each December 31st beginning with the December 31st following the date of
the Indenture, the Trustee shall provide to the Noteholders specified in TIA
Section 313 a brief report dated as of such December 31st that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy
of each report at the time of its mailing to Noteholders shall be filed with the
Commission.
The Company is obligated to indemnify the Trustee against any loss or
liability incurred by it, except to the extent arising from the Trustee's
negligence or bad faith.
The Trustee may resign by so notifying the Company. The holders of a
majority in aggregate principal amount of the then outstanding Notes may remove
the Trustee by so notifying the Trustee and the Company. The Company may remove
the Trustee under certain circumstances involving the Trustee's inability or
failure to perform, whereupon the Company must promptly appoint a successor
Trustee.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes. The
following summary is intended as an explanatory discussion of the possible
effects of certain federal income tax consequences to Noteholders generally, but
does not purport to furnish information in the level of detail or with the
attention to a Noteholder's specific tax circumstances that would be provided by
a Noteholder's own tax advisor. For example, it does not discuss the tax
treatment of Noteholders who are insurance companies, regulated investment
companies or dealers in securities. In addition, the discussion regarding the
Notes is limited to the federal income tax consequences of the initial
Noteholders and not a purchaser in the secondary market. This summary is also
generally limited to investors who will hold the Notes as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Prospective
investors should note that no rulings have been
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<PAGE>
or will be sought from the Internal Revenue Service ("IRS") with respect to any
of the federal income tax consequences discussed below. Thus, the IRS may
disagree with all or a part of the discussion below. Prospective investors are
urged to consult their own tax advisors in determining the federal, state,
local, foreign and any other tax consequences to them of the purchase, ownership
and disposition of the Notes.
The following summary is based upon current provisions of the Code, the
Treasury regulations promulgated thereunder and judicial or ruling authority,
all of which are subject to change, which change may be retroactive. There is a
risk to Noteholders that the IRS may determine that the Notes are not debt, but
equity for Federal income tax purposes. In that event, Noteholders would be
deemed to be partners in the Company. The federal income tax consequences to
Noteholders will vary significantly depending on whether they are treated as
creditors of or deemed to be partners in the Company.
TAX CHARACTERIZATION OF THE COMPANY AS A PARTNERSHIP
The Company's Partnership Agreement specifies that the Company will elect
partnership classification in accordance with the Check-the-Box federal income
tax regulations. As a result, the Company is intended to be treated as a
partnership for federal income tax purposes. This treatment assumes that the
terms of the Partnership Agreement, the Notes and related documents will be
complied with, and that the Company and the Notes will not have certain
characteristics necessary for a partnership to be classified as a publicly
traded partnership, taxable as a corporation.
If the Company were taxable as a corporation for federal income tax
purposes, the Company would be subject to corporate income tax on its taxable
income. The Company's taxable income would include all its income on the
Installment Contracts, and would not be reduced by its interest expense on the
Notes in the event that the Notes are not respected as debt for federal income
tax purposes (see discussion in the following paragraph). Any such corporate
income tax could materially reduce cash available to make payments on the Notes
and lead to other potentially significant negative tax consequences for the
Noteholders.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Company will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal, state and local income and franchise tax purposes. The discussion
below assumes that the Notes will be classified as debt for federal income tax
purposes.
The discussion below assumes further that all payments on the Notes are
denominated in U.S. dollars. Moreover, the discussion assumes that the interest
formula for the Notes meets the requirements for "qualified stated interest"
under Treasury regulations (the "OID regulations") relating to original issue
discount ("OID"), and that any OID on the Notes (I.E., any excess of the
principal amount of the Notes over their issue price) does not exceed a DE
MINIMIS amount (I.E., 1/4% of their principal amount multiplied by the number of
full years included in their term), all within the meaning of the OID
regulations.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with
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<PAGE>
such Noteholder's method of tax accounting. Under the OID regulations, a
Noteholder issued with a DE MINIMIS amount of OID must include such OID in
income, on a pro rata basis, as principal payments are made on the Note. A
purchaser who buys a Note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, OID and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of bond premium (if any) previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be a capital gain or loss if the Note was held
as a capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income. Capital losses generally may
be used by a corporate taxpayer only to offset capital gains, and by an
individual taxpayer only to the extent of capital gains plus $3,000 of other
income.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who
is a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of or a "controlled foreign corporation" related to the Company within the
meaning of the Code and (ii) fulfills certain certification requirements. Under
such requirements, the beneficial owner of the Notes must certify, under penalty
of perjury, on Form W-8 or a similar form, that it is not a "United States
person" and must provide its name and address. For this purpose, "United States
person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust the
income of which is includable in gross income for United States federal income
tax purposes, regardless of its source. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide the relevant signed statement to the withholding
agent; in that case, however, the signed statement must be accompanied by a Form
W-8 or substitute form provided by the foreign person that owns the Note. If
such interest is not portfolio interest, then it will be subject to United
States federal income and withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 or more
aggregate days in the taxable year or in the year being tested plus 1/3rd of the
number of such days in the prior year and 1/6th of the number of days in the
year prior to that.
BACKUP WITHHOLDING. Each Noteholder (other than an exempt holder such as a
corporation, tax exempt organization, qualified pension and profit sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Company will be required to
34
<PAGE>
withhold 31 percent of the amount otherwise payable to the holder, and remit the
withheld amount to the IRS as a credit against the holder's federal income tax
liability. Noteholders should consult with their tax advisors as to their
eligibility for exemption from backup withholding and the procedure for
obtaining the exemption.
POSSIBLE ALTERNATIVE TREATMENT OF THE NOTES. If the IRS successfully
asserts that the Notes did not represent debt for federal income tax purposes,
the Notes might be treated as equity interests in the Partnership. If so
treated, the Company might be taxable as a publicly traded partnership that
would be taxable as a corporation for federal income tax purposes. Treatment of
the Notes as equity interests in such a publicly traded partnership could have
adverse tax consequences to the Company and the Noteholders. For example,
interest paid with respect to the Notes would be treated as dividends and would
not be deductible by the Company. The resulting increase in the Company's
taxable income could increase the Company's tax burden and correspondingly
reduce the cash available to the Company for payments of interest and principal
on the Notes.
The determination whether the Notes will be treated as debt or equity would
be based upon all the facts and circumstances. Courts and commentators have
offered a number of criteria by which to judge the true nature of an investment
which is in form a debt: (1) whether there is an unconditional promise on the
part of the issuer to pay a sum certain on demand or at a fixed maturity date
that is in the reasonably foreseeable future; (2) whether holders of the
instruments possess the right to enforce the payment of principal and interest;
(3) whether the rights of the holders of the instruments are subordinate to
rights of general creditors; (4) whether the instruments give the holders the
right to participate in the management of the issuer; (5) whether the issuer is
thinly capitalized; (6) whether there is identity between holders of the
instrument and stockholders of the issuer; (7) the label placed upon the
instruments by the parties; and (8) whether the instruments are intended to be
treated as debt or equity for non-tax purposes.
Based on the foregoing factors, the Notes should be treated as debt for
Federal income tax purposes. However, given the Partnership's limited initial
equity capital, there can be no assurances given that the IRS will not attempt
to treat the Notes as equity for Federal income tax purposes.
PARTNERSHIP TAXATION AND TERMINATION. As a partnership, the Company will
not be subject to Federal income tax. The Partnership will keep complete and
accurate books for financial reporting and tax purposes. Such books will be
maintained on an accrual basis, and the Partnership's fiscal year will be the
calendar year. The Company will file a partnership information return (IRS Form
1065) with the IRS for each taxable year.
Under Section 708 of the Code, the Company will be deemed to terminate for
federal income tax purposes if 50% or more of the capital and profit interests
in the Company are sold or exchanged within a 12-month period. If such a
termination occurs, under current Treasury regulations the Partnership will be
considered to distribute its assets to the partners, who would then be treated
as recontributing those assets to the Company, as a new partnership. Proposed
Treasury regulations would modify this treatment. Under the proposed
regulations, the Company would be deemed to transfer all of its assets and
liabilities to a new partnership in exchange for an interest in the new
partnership. Immediately thereafter, the Company would be deemed to have
distributed interests in the new partnership to the partners in liquidation of
the Company, either for the continuation of the business or for its dissolution
and winding up.
35
<PAGE>
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of the Company,
Notes, or Noteholders under any state or local tax laws. Prospective investors
are urged to consult with their own tax advisors regarding the state and local
tax treatment of the Company as well as any state and local tax consequences to
them of purchasing, holding and disposing of Notes issued by the Partnership.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan subject to ERISA, as well as
individual retirement accounts, certain types of Keogh Plans and other plans
subject to Section 4975 of the Code (each a "Benefit Plan"), from engaging in
certain transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons.
A fiduciary of a Benefit Plan considering the purchase of Notes should
carefully review with its legal and other advisors whether the assets of the
Partnership would be considered plan assets, and whether the purchase or holding
of the Notes could give rise to a transaction prohibited or otherwise
impermissible under ERISA or the Code.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined Section 3(33) of
ERISA) are not subject to the fiduciary and prohibited transaction provisions
under ERISA or the Code discussed herein, but governmental plans may be subject
to comparable restrictions under applicable state law.
PLAN OF DISTRIBUTION
The Company is offering up to $15,000,000 in aggregate principal amount of
the Notes. The Notes are being offered on a "best-efforts" basis on behalf of
the Company by Attkisson, Carter & Akers ("Attkisson") a member of the National
Association of Securities Dealers Inc. (the "NASD"). The Company has agreed to
indemnify Attkisson against certain liabilities, including liabilities under the
Securities Act of 1933. Investor funds will be held in escrow at Greater Bay
Trust Company until a minimum of $1,000,000 of Notes are sold (the "Minimum
Offering"). In the event the Minimum Offering is not subscribed on or before
__________________, the offering will be terminated and the escrowed funds, plus
any net interest earned thereon, will be promptly returned to the Investors by
the Escrow Agent. Upon the subscription by investors for the Minimum Offering,
the escrowed funds,
36
<PAGE>
including interest thereon, will be released to the Company. Any subsequent
sales proceeds from Notes will be immediately available for use by the Company.
The Company will pay Attkisson a selling commission of up to 7.5% of the sales
price of all Notes sold. In addition, an investment banking and marketing fee
of 4% of the sale price of each Note sold will be paid to Banc Services
Corporation. The Company will also reimburse Attkisson for due diligence
expenses an amount up to .5% of the sale price of each Note sold and pay
Attkisson an amount up to .5% of the sale price of each Note sold as a
non-accountable expense allowance. Attkisson is not affiliated with the
Company.
However, Attkisson will be under no obligation to sell any or all of the
Notes offered hereby. The staff of the Securities and Exchange Commission has
taken the position that any broker/dealer that sells Notes in the offering may
be deemed an underwriter as defined in Section 2(11) of the Securities Act of
1933, as amended.
The Notes are being offered subject to prior sale, withdrawal, cancellation
or modification of the offer, including its structure, terms and conditions,
without notice. The Company reserves the right, in its sole discretion, to
reject, in whole or in part, any offer to purchase the Notes.
The Company intends to sell the Notes in this offering only in the states
in which the offering is qualified. An offer to purchase may only be made and
the purchase of the Notes may only be negotiated and consummated in such states.
The Subscription Agreement for the Notes must be executed, and the Notes may
only be delivered in such states. Resale or transfer of the Notes may be
restricted under state law. See "Risk Factors - Absence of Public Market For
the Notes and Limited Transferability of the Notes," and "Transferability of
Notes."
If the Company does not terminate the offering earlier, which it may in its
sole discretion, the offering of Notes will continue until the Company sells
$15,000,000 in aggregate principal amount of the Notes, provided that the
offering period for the Notes will expire no later than 24 months after the date
of this Prospectus.
Attkisson has agreed in accordance with the provisions of SEC Rule 15c2-4
to cause all funds received for the sale of a Note to be promptly deposited with
the Escrow Agent upon the receipt of the executed Subscription Agreement and
related funds by the Attkisson by or before noon of the next business day
following the sale of said Notes.
The Notes purchased from the Company will be issued as soon as practicable
after the sale thereof (or, if later, upon sale of the Minimum Offering).
TRANSFERABILITY OF NOTES
The Notes will be registered with the Commission and the states of Florida
and Georgia. The Notes may be registered or exempt form registration in other
states. No public or other market for the Notes exists and no market is
expected to develop in the future. No transfers will be permitted of less than
the Minimum Purchase, nor may an investor transfer, fractionalize or subdivide
Notes so as to retain less than such Minimum Purchase. Accordingly, the Notes
should be purchased only as an investment to be held to the end of the term of
the Notes because Noteholders may not be able to liquidate their investment in
the event of an emergency or for any other reason.
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LEGAL MATTERS
The validity of the Notes offered here will be passed upon by Buchalter,
Nemer, Fields & Younger, Los Angeles, California.
EXPERTS
The balance sheet of SAC as of December 31, 1996 and the eleven months
ended November 30, 1997 and the balance sheet of the Company as of December 31,
1997 appearing in this Prospectus and Registration Statement have been audited
by Millward & Co. CPAs, independent auditors, as stated in their reports
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission in
Washington, D.C. a Registration Statement on Form SB-2. File No. 333-29067,
under the Securities Act of 1933 with respect to the Notes offered hereby. As
used herein, the term "Registration Statement" means the initial Registration
Statement and any and all amendment thereto. This Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company and
the Notes, reference is hereby made to such Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily completed and
in each instance, reference is made to the copy of such contract or documents
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington D.C. 20549 and at certain regional offices of the
Commission located at 75 Park Place, 14th Floor, New York, New York 1007 and
Northwest Atrium Center, 500 Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1025, Washington D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that filed electronically with the
Commission.
Upon completion of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934 and, in
accordance therewith, will file reports with the Commission. The Company
intends to furnish to Noteholders annual reports containing audited financial
statements of the Company audited by its independent accountants and quarterly
reports containing unaudited condensed financial statements for each of the
first three quarters of the fiscal year.
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FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . 43
SENTINEL ACCEPTANCE CORPORATION
BALANCE SHEET, December 31, 1996 and November 30, 1997 . . . . . . . . . . . 44
NOTES TO BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45-47
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . 48
SENTINEL FINANCING LTD., L.P.
BALANCE SHEET, December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . 49
NOTES TO BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50-51
</TABLE>
39
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
Sentinel Acceptance Corporation
South San Francisco, California
We have audited the accompanying balance sheet of Sentinel Acceptance
Corporation as of December 31, 1996. This balance sheet is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet presents fairly, in all material
respects, the financial position of Sentinel Acceptance Corporation at
December 31, 1996, in conformity with generally accepted accounting principles.
Millward & Co. CPAs
Fort Lauderdale, Florida
May 28, 1997
40
<PAGE>
SENTINEL ACCEPTANCE CORPORATION
BALANCE SHEETS
DECEMBER 31, 1996 AND NOVEMBER 30, 1997
<TABLE>
<CAPTION>
December 31, November 30, 1997
------------ -----------------
1996 (Unaudited)
------------ -----------------
<S> <C> <C>
ASSETS
Current asset:
Cash $ 481 $ 0
Investment in Partnership 205,124 $192,162
-------- --------
Total assets $205,605 $192,162
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liability: $10,276 $ 0
--------
Commitments
Shareholders' equity:
Preferred stock, $1 par value; 110,000 shares
authorized, issued and outstanding 110,000 110,000
Common stock, $1 par value; 10,000 shares
authorized, issued and outstanding 10,000 10,000
Additional paid-in capital 93,400 93,400
Accumulated deficit (18,071) (21,238)
-------- --------
Total shareholders' equity 195,329 192,162
-------- --------
Total liabilities and shareholders' equity $205,605 $192,162
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS BALANCE SHEET.
INVESTORS IN THE NOTES ARE NOT ACQUIRING ANY FINANCIAL INTERESTS OR LIABILITY OF
THE CORPORATION WHOSE BALANCE SHEET APPEARS ABOVE.
41
<PAGE>
SENTINEL ACCEPTANCE CORPORATION
NOTES TO BALANCE SHEET
DECEMBER 31, 1996
(INFORMATION PERTAINING TO NOVEMBER 30, 1997 IS UNAUDITED)
NOTE 1. - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Sentinel Acceptance Corporation (the "Company") was organized pursuant to
the laws of the State of Florida on September 5, 1995. The Company's principal
asset is an investment in a limited partnership whose primary business is to
engage in the purchase, collection and securing of retail installment contracts
in the non-prime consumer market originated by independent automobile dealers.
INVESTMENT IN PARTNERSHIP
Investment in partnership is accounted for using the equity method, under
which the Company's share of earnings or loss of this partnership is reflected
as income or (loss) with an adjustment to the Company's investment in the
partnership.
INCOME TAXES
Income taxes are accounted for under the asset and liability method of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on deferred tax
assets and liabilities or a change in tax rate is recognized in income in the
period that includes the enactment date. Deferred tax assets are reduced to
estimated amounts to be realized by the use of a valuation allowance.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. As of December 31,
1996, the Company did not have any cash equivalents.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTORS IN THE NOTES ARE NOT ACQUIRING ANY FINANCIAL INTEREST OR LIABILITY OF
THE CORPORATION WHOSE NOTES TO THE BALANCE SHEET APPEAR ABOVE.
42
<PAGE>
SENTINEL ACCEPTANCE CORPORATION
NOTES TO BALANCE SHEET
DECEMBER 31, 1996
(INFORMATION PERTAINING TO NOVEMBER 30, 1997 IS UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
RECENT PRONOUNCEMENTS
In June 1996, the FASB issued Statement of Financial Accounting Standards
No. 125 ("SFAS 125"), Accounting for Transfers of Servicing of Financial Assets
and Extinguishment of Liabilities. SFAS 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on a financial-components approach that focuses on control.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996 and is to be
prospectively applied. The Company believes that the adoption of SFAS 125 will
have no impact on its financial statements.
NOTE 2. - RELATED PARTY TRANSACTIONS
MANAGEMENT FEES
The Company charges the Partnership a management fee on a monthly basis for
reimbursement of certain operating expenses as incurred. At December 31, 1996
and November 30, 1997, there were no receivables for management.
INVESTMENT IN PARTNERSHIP
The Company has an investment in a partnership that is accounted for using
the equity method. During 1995 the Company invested $213,400 in a Partnership
in exchange for a 1% interest in the Partnership. The principal business
activity of the Company is investing in a limited partnership whose primary
business is described in Note 1 - "Organization". The following represents the
Company's investment activity:
<TABLE>
<S> <C>
1995 Investment $ 213,400
1995 Company share of partnership loss 471
1996 Company share of partnership loss 7,805
-------
Balance - December 31, 1996 205,124
Company share of loss for the eleven months ended
November 30, 1997 17,687
---------
Balance - November 30, 1997 (unaudited) $ 187,437
---------
---------
</TABLE>
INVESTORS IN THE NOTES ARE NOT ACQUIRING ANY FINANCIAL INTEREST OR LIABILITY OF
THE CORPORATION WHOSE NOTES TO THE BALANCE SHEET APPEAR ABOVE.
43
<PAGE>
SENTINEL ACCEPTANCE CORPORATION
NOTES TO BALANCE SHEET
DECEMBER 31, 1996
(INFORMATION PERTAINING TO NOVEMBER 30, 1997 IS UNAUDITED)
NOTE 3. - SHAREHOLDERS' EQUITY
In 1995, the Company issued 10,000 common shares of its $1.00 par value
stock and 110,000 shares of its $1.00 preferred stock in exchange for the
shareholders providing cash of $213,400 to a limited partnership which
represents the Company's investment in the limited partnership. The
distribution to the Company's equity accounts was as follows:
<TABLE>
<S> <C>
Preferred stock $ 110,000
Common stock 10,000
Additional paid-in capital 93,400
---------
$ 213,400
---------
---------
</TABLE>
NOTE 4. - INCOME TAXES
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $18,071 that expire through 2011. Such net operating losses are
available to offset future taxable income, if any. As the utilization of such
operating losses for tax purposes is not assured, the deferred tax asset has
been fully reserved through the recording of a 100% valuation allowance. Should
a cumulative change in the ownership of more than 50% occur within a three-year
period, there could be an annual limitation on the use of the net operating loss
carryforward.
INVESTORS IN THE NOTES ARE NOT ACQUIRING ANY FINANCIAL INTEREST OR LIABILITY OF
THE CORPORATION WHOSE NOTES TO THE BALANCE SHEET APPEAR ABOVE.
44
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners
Sentinel Financing Ltd., L.P.
South San Francisco, California
We have audited the balance sheet of Sentinel Financing LTD., L.P. as of
December 31, 1997. This balance sheet is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Sentinel Financing LTD., L.P. as of
December 31, 1997, in conformity with generally accepted accounting principles.
Millward & Co. CPAs
Fort Lauderdale, Florida
December 31, 1997
45
<PAGE>
SENTINEL FINANCING LTD., L.P.
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash $ 100
Debt Issuance Costs 4,900
-------
-------
5,000
EQUITY
Partnership Equity $ 5,000
-------
-------
</TABLE>
46
<PAGE>
SENTINEL FINANCING LTD., L.P.
NOTES TO BALANCE SHEET
DECEMBER 31, 1997
NOTE 1. - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Sentinel Financing Ltd., L. P. a Florida limited partnership (the
"Company"), is a newly formed single purpose company organized to specialize and
engage in the purchase, collection and servicing of retail installment contracts
("Installment Contract") originated by independent automobile dealers
("Dealers"). The Company intends to acquire directly and through intermediaries
Installment Contracts originated by Dealers in connection with their sale of new
and used automobiles and light duty trucks ("Financed Vehicles") to borrowers
with limited credit histories or past credit problems ("Non-prime Consumers").
The Company's general partner is Sentinel Acceptance Corporation ("SAC"), and
its sole limited partner is Four Star Financial Services, LLC ("Four Star").
Management services will be provided to the Company by SAC.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. As of December 31,
1997, the Company did not have any cash equivalents.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets or liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses in the future.
Actual amounts could differ from those estimates.
DEBT ISSUANCE COSTS
The costs related to the issuance of debt are capitalized and amortized to
interest expense using the effective interest method over the lives of the
related debt. If the debt offering is unsuccessful, the costs will be charged
to operations.
NOTE 2. - DEBT OFFERING
The Company is offering $15,000,000 aggregate principal amount of 12%
secured Notes due 2003. The Notes will bear interest at the rate of 12% per
annum, payable monthly on the 15th day of each month. The Notes will mature in
five years, and are subject to redemption at the option of the Company, in whole
or part, at any time at a redemption price equal to the outstanding principal
amount plus accrued interest thereon without premium or penalty. The Company
will not be required to move any outstanding redemption as sinking fund payment
with respect to the Notes prior to maturity. Notes
47
<PAGE>
SENTINEL FINANCING LTD., L.P.
NOTES TO BALANCE SHEET
DECEMBER 31, 1997
may be purchased in multiples of $1,000, subject to a minimum requirement of
$2,000. The Notes will be secured by retail installment sales contracts renewed
by used automobiles and light trucks. The Notes are being offered on a best
efforts, $1,000,000 minimum offering basis.
NOTE 3. - DEBT ISSUANCE COSTS
A related entity (Four Star, the limited partner) has incurred $162,362 for
costs of the debt offering on behalf of the affiliate as of December 31, 1997.
If the offering is successful, the advances will be reimbursed and deferred
issuance costs will be charged (Note 1). If the offering is unsuccessful, these
advances will be charged to the operations of the affiliate.
NOTE 4. - EQUITY CONTRIBUTION
On December 31, 1997, the Company received equity contributions from its
partners as follows:
<TABLE>
<S> <C>
Four Star Financial Services, LLC $4,950.
Sentinel Acceptance Corporation 50.
-------
$5,000
------
------
</TABLE>
48
<PAGE>
EXHIBIT A
FORM OF SECURED NOTE
(FACE OF SECURITY)
No. $
SENTINEL FINANCING, LTD., L.P.
promises to pay to
or registered assigns,
the principal sum of Dollars on __________
12% SECURED FIXED RATE NOTES
DUE ___________, 2003
Interest payment Dates:
Record Dates:
Dated:
-------------------------------------------------------
By
----------------------------------------------------
By
----------------------------------------------------
(SEAL)
Authenticated to be one of the
Notes described in the Indenture
referred to herein:
By
----------------------------------
Authorized Signature
A-1
<PAGE>
(Back of Security)
12% Secured Fixed Rate Notes due _____________, 2003
1. INTEREST. SENTINEL FINANCING, LTD., L.P., a Florida limited
partnership (the Company"), promises to pay interest on the principal amount of
this Security at a rate of 12% per annum from the date of issuance, payable
monthly on the 15th day of each month commencing on ____________, 1998, to the
Persons in whose names such Notes are registered at the close of business on the
Record Date next preceding the Interest Payment Date. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months. To the
extent lawful, any installment of interest on the Notes which is not paid when
due shall accrue interest at the lesser of 18% compounded quarterly, or the
highest lawful rate of interest from the due date until paid.
2. METHOD OF PAYMENT. Principal of, and interest on the Securities
will be payable, at the Company's office. The Company will pay principal and
interest in money of the United States that is legal tender for payment of
public and private debts. At the option of the Company, payment of principal
and interest may be made by check mailed to the Holder at the address set forth
in the registry books of the Company.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without notice to any Securityholder. The Company or any
Subsidiaries of the Company may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an Indenture
dated as of , 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture.
The Securities are subject to, and qualified by, all such terms, certain of
which are summarized herein, and Securityholders are referred to the Indenture
and such Act for a statement of such terms. The Securities are secured
obligations of the Company limited to $15,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION. All or any part of the Securities may be
redeemed by the Company, in whole or part, at any time or some of them from time
to time, upon not less than 30 or more than 60 days' notice at a redemption
price equal to 100% of the principal amount plus accrued interest to the
Redemption Date.
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. On and after the Redemption Date interest ceases to accrue
on Securities or portions of them called for redemption. In the event of a
partial redemption of the Notes, the Notes will be redeemed in whole or part
will be selected on a pro rata basis or in such other manner as the Company
deems appropriate and fair.
If this Security is redeemed subsequent to a record date with
respect to any interest payment date specified above and on or prior to such
interest payment date, then any accrued
A-2
<PAGE>
interest will be paid to the Person in whose name this Security is registered at
the close of business on such record date.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption. Also, it need not
exchange or register the transfer of any Securities for a period of 15 days
before a selection of Securities to be redeemed.
8. PERSONS DEEMED OWNERS. The registered holder of a Security may
be treated as its owner for all purposes.
9. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the holders of at
least a majority in principal amount of the then outstanding Securities.
Without the consent of any Securityholder, the Indenture or the securities may
be amended to cure any ambiguity, defect or inconsistency, to comply with the
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, to add covenants of the Company for the benefit of the Holders,
to provide guarantors of the Securities, to evidence succession of another
Person to the Company, to provide for uncertificated Securities in addition to
certificated Securities or to make any change that does not adversely affect the
rights of any Securityholder.
10. DEFAULTS AND REMEDIES. An Event of Default occurs if: the
Company fails to pay any payment of interest on any Security when the same
becomes due and payable; the Company receives written notice from payment of the
principal of any Security when the same becomes due and payable at maturity,
upon redemption or otherwise; and certain events of bankruptcy or insolvency. If
an Event of Default occurs and is continuing, the Trustee or the holders of at
least a majority in principal amount of the then outstanding Securities may
declare all the Securities to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency all outstanding securities become due and payable immediately without
further action or notice. Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, holders of a majority in principal amount of the
then outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Securityholders notice of any
continuing default (except a default in payment of principal or interest) if it
determines that withholding notice is in their interests. The Trustee is only
deemed to have knowledge of a default or Event of Default under certain
circumstances set forth in the Indenture. The Company must furnish an annual
compliance certificate to the Trustee.
11. SECURITY. The due and punctual payment of interest and principal
of the Securities when and as the same shall be due and payable, whether at
maturity, by acceleration, or otherwise, and the interest on the overdue
principal of the Securities and payment and performance of all other obligations
of the Company to Holders or the Trustee under the Indenture and the Securities
shall be secured as provided in the Security Documents.
A-3
<PAGE>
12. NO RECOURSE AGAINST OTHERS. No partner, officer, employee or
affiliate of the Company shall have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the
Securities.
13. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
14. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
15. INDENTURE CONTROLS. Nothing contained herein shall in any way be
construed to impose any duties upon the Trustee beyond those contained in the
Indenture. All immunities, indemnities, exceptions from liability and other
provisions of the Indenture insofar as they relate to the Trustee shall apply to
this Security and are incorporated herein.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture, which has in it the text of this
Security in larger type. Request may be made to:
SENTINEL FINANCING LTD., L.P.
601 Gateway Blvd., Suite 260
South San Francisco, California 94080
A-4
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________
______________________________________agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
---------------- ----------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee.
A-5
<PAGE>
EXHIBIT B
SECURITY AGREEMENT
This SECURITY AGREEMENT (hereinafter called this "Agreement") is made as of
___________, 1998, by and between Sentinel Financing Ltd., L.P., a Florida
limited partnership (hereinafter called ("Debtor") and Sterling National Bank &
Trust Company (the "Trustee"), as Trustee (the "Secured Party").
W I T N E S S E T H:
In consideration of the covenants and conditions stated in this Agreement,
the parties agree as follows:
1. INDEBTEDNESS SECURED.
This Agreement and the Security Interest (as defined below) secure the
payment of certain Notes issued and executed by Debtor, pursuant to the
Indenture of Trust (the "Indenture") dated ___________, 1998, by and between
Debtor and Trustee, and made payable to the holders of such notes in the
aggregate principal sum of up to $15,000,000 (hereinafter collectively called
the "Notes"), together with all other indebtedness of every kind or nature owed
by Debtor to Secured Party pursuant to the Indenture or this Agreement, whether
now existing or hereafter incurred, direct or indirect, absolute or contingent,
and whether the indebtedness is from time to time reduced and thereafter
increased or entirely extinguished and thereafter reincurred, and including any
sums advanced and any costs and expenses incurred by Secured Party pursuant to
this Agreement, the Notes or any other note or evidence of indebtedness (all of
such is herein sometimes referred to as the "Indebtedness").
2. SECURITY INTEREST.
For value received, Debtor hereby grants to Secured Party a security
interest (the "Security Interest") in and to all of the following: (i) any and
all retail motor vehicle installment sale contracts (the "Contracts") acquired
with the funds constituting the Indebtedness or with funds received from the
repayment of said Contracts (the "Replacement Contracts") or the Replacement
Contracts, which Contracts or Replacement Contracts are originated in connection
with the financing of new and used automobiles and light-duty trucks (the
"Vehicles"), including all rights to receive payments thereunder and security
interests in and instruments of title to the Vehicles, whether now owned or
hereafter acquired; (ii) all funds in the following bank account of the Company
_____________________________________ (the "Master Account"); (iii) all net
proceeds of the issuance and sale of the Notes; and (iv) all products thereof
and all cash and non-cash proceeds of any of the foregoing, in any form,
including, without limitation, proceeds of insurance policies from the loss
thereof, all titles to the Vehicles and all assignments of liens, all Contracts,
Vehicle titles, assignments or other documents and instruments deposited with
and in the possession, custody and control of the Secured Party as described in
paragraph 4.5 hereof (all of the foregoing hereinafter called the "Collateral").
B-1
<PAGE>
3. REPRESENTATION AND WARRANTIES OF DEBTOR.
Debtor represents and warrants and, so long as any portion of the
Indebtedness remains unpaid, shall be deemed continuously to represent and
warrant that:
3.1 Debtor is the owner of the Collateral free and clear of all
security interests or other encumbrances and claims of any kind or nature in
favor of any third persons other than the rights of the purchasers of the
Vehicles under the Contracts and Replacement Contracts, ("Vehicle Purchasers"),
and Secured Party has and at all times maintain a first, perfected security
interest in all of the Collateral;
3.2 Debtor is authorized to enter into this Agreement and into the
transactions contemplated hereby and evidenced by the Notes and this Agreement
is a valid and binding obligation of Debtor enforceable in accordance with its
terms;
3.3 The Collateral is used or bought for use solely in business
operations, and all of the relevant Collateral will remain personal property
regardless of the manner in which any of it may be affixed to real property.
3.4 Debtor has established the Master Account.
4. COVENANTS OF DEBTOR.
Debtor covenants that so long as any Indebtedness remains unpaid,
Debtor:
4.1 Will defend the Collateral against the claims and demands of all
other parties, except the rights of Vehicle Purchasers.
4.2 Will keep the Collateral free and clear from all security
interests, liens and other encumbrances and claims of any kind or nature in
favor of any third persons other than Vehicle Purchasers, and other than the
Security Interest; and Debtor will not pledge the Collateral as security for any
debts or obligations other than the Notes;
4.3 Will not pledge, transfer, assign, deliver, or otherwise dispose
of any Collateral or any interest therein, except that until the occurrence of
an Event of Default (as defined in paragraph 7.1 of this Agreement), it may so
dispose of the Collateral so long as the proceeds thereof are applied to:
a. Make payments of principal and/or interest on the Notes; or
b. Pay operating expenses, including servicing fees, custodian
fees, trustee's fees, bank fees and charges, legal fees, title and transfer
fees, account fees, contract purchase fees, insurance, repossession, repair and
liquidation expenses, enforcement dealer recourse arrangements, federal, state
and local taxes, out-of-pocket expenses incurred in connection with any resale
of Contracts, and other general and administrative expenses incurred in the
ordinary course of business ("Permitted Expenses");
c. Distributions to the Debtor's partners in accordance with
the Limited Partnership Agreement among Sentinel Acceptance Corporation, as
general partner, and the persons
B-2
<PAGE>
named as limited partners therein, dated ___________________, 1997; provided,
however, that no distribution may be made pursuant to this subsection if at the
time of such distribution the "Net Receivables" as reflected on the Debtor's
balance sheet for the most recent completed fiscal quarter or year end, as
applicable, do not exceed 110% of the principal amount of Notes then outstanding
("Partner Distributions").
4.4 Will keep in accordance with generally accepted accounting
principles, consistently applied, accurate and complete records concerning the
Collateral; will mark such records and, upon request of the Secured Party made
from time to time, the Collateral to give notice of the Security Interest; and
will, upon request made from time to time, permit the Secured Party or its
agents to inspect the Collateral and the Debtor's records concerning the
Collateral and to audit and make abstracts of such records or any of the
Debtor's books, ledgers, reports, correspondence and other records;
4.5 Upon demand will deliver to the Custodian for the Secured Party
any instruments, documents of title and chattel paper representing or relating
to the Collateral or any part thereof, and all schedules, invoices, shipping, or
delivery receipts, together with any endorsements or assignments thereof and all
other documents representing or relating to purchases or other acquisitions,
sales or other dispositions of the Collateral and the proceeds thereof and any
and all other schedules, documents, and statements in accordance with the terms
of the Custodian Agreement;
4.6 Will notify the Secured Party in writing at least thirty (30)
days in advance of any change in the Debtor's address specified on the first
page of this Agreement, of any change (other than change in the location of
Vehicles in the ordinary course of the use thereof by the purchasers thereof) in
the location or of any additional locations at which the Collateral is kept, of
any change in the address at which records concerning the Collateral are kept
and of any change in the location of the Debtor's residence, chief executive
office or principal place of business;
4.7 Will execute and deliver to the Secured Party such financing
statements and other documents requested by the Secured Party, subject to the
limitations set forth herein, to perfect, protect or continue the perfection of
the Security Interest and to effect the purposes of this Agreement;
4.8 Will pay or cause to be paid when due all taxes, assessments and
other charges of every kind and nature which may be levied or assessed upon or
against the transaction contemplated hereby or the Collateral;
4.9 Will deliver the Contracts and Replacement Contracts to the
Custodian pursuant to that certain Custodian Agreement between the Company,
Custodian and Trustee on behalf of the Secured Party of even date herewith,
within five (5) business days of the acquisition of the Contract or Replacement
Contract, as applicable, by delivery to custodian of original executed Contracts
and Replacement Contracts and related assignments, contracts and other documents
evidencing any rights of Debtor with respect thereto;
4.10 Will not make any distributions to partners or payments to
affiliates except as herein provided;
4.11 Will deposit and retain all funds which constitute the Collateral
in the Master Account, will withdraw funds therefrom only for the conduct of
Debtor's business as permitted hereby and the Indenture with respect to the
servicing of Contracts and Replacement Contracts and the
B-3
<PAGE>
requisition of Replacement Contracts, and for the payment of Permitted Expenses
and Partner Distributions, and will not commingle any other funds with funds in
said account;
4.12 Will execute and deliver to the Custodian the Collateral
Assignments attached hereto as Exhibits 1 and 2 as required by the Secured
Party.
5. VERIFICATION OF COLLATERAL.
Secured Party shall have the right to verify the existence of the
Collateral in any manner and through any medium which Secured Party may consider
appropriate and which will not interfere with the conduct of Debtor's business,
and Debtor shall furnish such assistance and information and perform such acts
as Secured Party may require in connection therewith.
6. FUTURE ADVANCES.
It is agreed that any additional loans or advances by the Secured
Party secured hereby to or for the benefit of Debtor, whether such loans or
advances are obligatory or are made at the option of Secured Party or otherwise,
at any time within twenty (20) years from the date of this Agreement, with
interest thereon at the rate agreed upon at the time of each such loan or
advance, shall be equally secured with and have the same priority as the
original indebtedness and be subject to all of the terms and provisions of this
Agreement, whether or not such additional loan or advance is evidenced by the
Notes or any other promissory note of Debtor and whether or not identified by a
recital that it is secured by this Agreement; provided, however, that Debtor
hereby understands and agrees that this future advance provision does not in any
way obligate Secured Party or any other person to make any additional loans or
advances to Debtor.
7. DEFAULT.
7.1 EVENTS OF DEFAULT. An Event of Default shall occur under this
Agreement upon any Event of Default as defined by Section 6.1 of the Indenture.
7.2 RIGHTS AND REMEDIES UPON DEFAULT. If an Event of Default occurs
and is continuing Secured Party, by written notice to the Debtor, may declare
the principal of and accrued interest on all the Notes to be due and payable
immediately. After a declaration such principal and interest shall be due and
payable immediately.
If an Event of Default occurs and is continuing, Secured Party may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal and interest on the Notes or to enforce the performance of
any provision of the Notes or this Agreement.
7.3 NOTICE. Debtor agrees that any notice by Secured Party of the
sale, lease or other disposition of the Collateral or any other intended action
hereunder, whether required by the Uniform Commercial Code or otherwise, shall
constitute reasonable notice to Debtor if the notice is mailed by regular or
certified mail, postage prepaid, at least ten (10) days before the date of any
public sale, lease or other disposition of the Collateral, or the time on or
after which any private sale, lease or other disposition of the Collateral is to
take place, to Debtor's address as specified in this Agreement or to any other
address which Debtor has notified Secured Party in writing as the address to
which notices shall be given to Debtor.
B-4
<PAGE>
7.4 COSTS. Debtor shall pay all costs and expenses incurred by
Secured Party in enforcing this Agreement, realizing upon any Collateral and
collecting any Indebtedness. Costs and expenses will include but not be limited
to all reasonable attorneys' fees and expenses.
7.5 DEFICIENCY. In the event that the proceeds of the Collateral are
insufficient to satisfy the entire unpaid Indebtedness, Debtor will be
responsible for the deficiency and shall pay the same upon demand. Secured
Party will account to Debtor for any proceeds of the Collateral in excess of the
Indebtedness and the costs and expenses referred to in Section 7.4.
8. MISCELLANEOUS.
8.1 PERFECTION OF SECURITY INTEREST. Debtor authorizes Secured Party
at Debtor's expense to file any financing statement or statements relating to
the Collateral (with or without Debtor's signature thereon), and to take any
other action deemed necessary or appropriate by Secured Party to perfect and to
continue perfection of the Security Interest. Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact to execute financing statements
in Debtor's name and to perform all other acts which Secured Party deems
necessary or appropriate to perfect and protect the Security Interest. Such
appointment is binding and coupled with an interest. Upon request of Secured
Party before or after the occurrence of an Event of Default but subject to the
rights of Vehicle Purchasers, Debtor agrees to give Secured Party possession of
any Collateral, possession of which is, in Secured Party's opinion, necessary or
desirable to perfect or continue perfection or priority of the Security
Interest. A photocopy of this Agreement is sufficient as a financing statement
and may be filed as such if Secured Party so elects.
8.2 CONTINUING AGREEMENT. This Agreement is a continuing agreement
with respect to the subject matter hereof and shall remain in full force and
effect until all of the Indebtedness now or hereafter contracted for or created
or existing and any extensions or renewals of the Indebtedness together with all
interest thereon has been paid in full.
8.3 RIGHT TO PROCEEDS. Upon the occurrence of an Event of Default
and in the course of the exercise of remedies as permitted hereby, Secured Party
may demand, collect, and sue for all proceeds of the Collateral (either in
Debtor's or Secured Party's name at the latter's option) with the right to
enforce, compromise, settle, or satisfy any claim. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact to endorse, by writing or
stamp, Debtor's name on all checks, commercial paper, and other instruments
pertaining to the proceeds. Such appointment is binding and coupled with an
interest. Debtor also authorizes Secured Party to collect and apply against the
Indebtedness any refund of insurance premiums or any insurance proceeds payable
on account of the loss of or damage to any of the Collateral and hereby
irrevocably appoints Secured Party as Debtor's attorney-in-fact to endorse, by
writing or stamp, any check or draft representing such proceeds or refund. Such
appointment is binding and coupled with an interest. Upon the occurrence of an
Event of Default and in the course of the exercise of remedies as permitted
hereby, Secured Party may notify any party obligated to pay proceeds of the
Collateral of the existence of the Security Interest and may also direct them to
pay all such proceeds to Secured Party.
8.4 PROPERTY IN SECURED PARTY'S POSSESSION. As further security for
the repayment of the Indebtedness, Debtor grants to Secured Party a security
interest in all property of Debtor which is or may hereafter be in Secured
Party's possession in any capacity, including all monies owed or to be owed by
Secured Party to Debtor; and with respect to all of such property, Secured Party
shall have the same rights as it has with respect to the Collateral.
B-5
<PAGE>
8.5 SET-OFF. Without limiting any other right of Secured Party,
whenever Secured Party has the right to declare any Indebtedness to be
immediately due and payable, Secured Party may set off against the Indebtedness
all monies then owed to Debtor by Secured Party in any capacity whether due or
not.
8.6 FAILURE TO PERFORM; REIMBURSEMENT. Upon Debtor's failure to
perform any of its duties hereunder, Secured Party may, but it shall not be
obligated to, perform any of such duties and Debtor shall forthwith upon demand
reimburse Secured Party for any expense incurred by Secured Party in doing so
with interest thereof at a rate equal to the lesser of the per annum rate of
interest specified in the Notes plus two percentage points or the maximum rate
permitted by applicable law.
8.7 NON-WAIVER. No delay or omission by Secured Party in exercising
any right or remedy hereunder or with respect to any Indebtedness shall operate
as a waiver of that or any other right or remedy, and no single or partial
exercise of any right or remedy shall preclude Secured Party from any other or
future exercise of the right or remedy or the exercise of any other right or
remedy. Secured Party may agree to a cure of any default by Debtor in any
reasonable manner without waiving any other prior or subsequent default by
Debtor.
8.8 THIRD PARTIES. Secured Party shall have no obligation to take,
and Debtor shall have the sole responsibility for taking, any steps to preserve
rights against all prior parties to any document of title, general intangible,
instrument or chattel paper in Secured Party's possession as Collateral or
proceeds of the Collateral.
8.9 WAIVER OF NOTICE OF DISHONOR AND PROTEST, ETC. Debtor waives
dishonor, protest, presentment, demand for payment, notice of dishonor and
notice of protest of any instrument at any time held by Secured Party with
respect of which Debtor is in any way liable and waives notice of any other
action by Secured Party.
8.10 ASSIGNMENTS. Debtor's rights and obligations under this
Agreement are not assignable in whole or in part by operation of law or
otherwise. Secured Party may assign its rights and obligations under this
Agreement, in whole or in part, without notice to or consent of Debtor and all
of such rights shall be enforceable by Secured Party's successors and assigns.
8.11 DEFINITIONS, MULTIPLE PARTIES; SECTION HEADINGS. The term
"person" when referred to herein shall mean an individual, partnership,
corporation or any other legal entity. If more than one Debtor executes this
Agreement, the term "Debtor" includes each of the Debtors as well as all of
them, and their obligations under this Agreement shall be joint and several.
Whenever the context so requires, the neuter gender includes the feminine and
masculine and the singular number includes the plural. Unless otherwise defined
herein or the context requires otherwise, terms used herein shall have the same
meaning as defined in the Uniform Commercial Code as enacted by the State of
New York. Section headings are used herein for convenience only and do not
alter or limit the meaning of the language contained in each section.
8.12 AMENDMENT; WAIVER. This Agreement may not be modified or amended
nor shall any provision of it be waived except by a written instrument signed by
Debtor and by Secured Party.
8.13 CHOICE OF LAW; WAIVER OF JURY TRIAL. This Agreement has been
delivered in the State of New York and shall be interpreted, and the rights and
liabilities of the parties hereto
B-6
<PAGE>
determined, in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of New York. Debtor and Secured Party hereby waive
any right to a trial by jury in any action to enforce or defend any matter
arising from or related to (i) this Agreement; (ii) any Note; or (iii) any
documents or agreements evidencing or relating to this Agreement or any Note.
Debtor agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the judgment
or in any other manner provided by law. Nothing in this paragraph shall affect
or impair Secured Party's right to serve legal process in any manner permitted
by law, or Secured Party's right to bring any action or proceeding against
Debtor, or the property of Debtor, in the courts of any other jurisdiction.
Any legal action or proceeding with respect to this Agreement may
be brought in the courts of the State of New York or of the United States for
the Sourthern District of New York, and, by execution and delivery of this
Agreement, Debtor hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Debtor hereby further irrevocably waives any claim that any such courts
lack jurisdiction over Debtor, and agrees not to plead or claim, in any legal
action or proceeding with respect to this Agreement brought in any of the
aforesaid courts, that any such court lacks jurisdiction over Debtor. Debtor
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to Debtor, at its address for notices pursuant to Section 8.15, such
service to become effective 10 days after such mailing. Debtor hereby
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other document that service of process was in
any way invalid or ineffective. Nothing herein shall affect the right of the
Secured Party to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against Debtor in any other
jurisdiction. Debtor hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising our of or in connection with this Agreement brought in the
courts referred to above.
8.14 EXPENSES. Debtor shall pay all costs and expenses relating to
this Agreement and the Indebtedness, including but no limited to, filing and
recording fees, documentary stamps including, without limitation, Florida
documentary stamps (if any), intangible tax (if any), and Secured Party's
attorney's fees and expenses.
8.15 NOTICE. Except as otherwise provided herein, any notice required
hereunder shall be in writing and shall be deemed to have been validly served,
given or delivered by hand, by overnight courier or upon deposit in the United
States certified or registered mails, with proper postage prepaid, addressed to
the party to be notified as follows:
a. If to Secured Party at:
Sterling National Bank & Trust Company
430 Park Avenue
New York, New York 10022
Attention: Jerrald Gilbert, General Counsel
B-7
<PAGE>
b. If to Debtor at:
Sentinel Financing Ltd., L.P.
601 Gateway Blvd., Suite 260
South San Francisco, CA 94080
or to such other address as each party may designate for itself by like notice.
8.16 SEVERABILITY. If any provision of this Agreement is prohibited
by, or is unlawful or unenforceable under, any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent of such prohibition without invalidating the remaining provisions
hereof; provided, however, that any such prohibition in any jurisdiction shall
not invalidate such provision in any other jurisdiction.
8.17 RELIANCE BY SECURED PARTY. All covenants, agreements,
representations and warranties made herein by Debtor shall, notwithstanding any
investigation by Secured Party, be deemed to be material to and to have been
relied upon by Secured Party.
8.18 ENTIRE AGREEMENT. This Agreement, the Notes and the other
instruments, agreements and documents contemplated hereby contain the entire
agreement between Secured Party and Debtor with respect to the subject matter
hereof and supersedes and cancels any prior understanding and agreement between
Secured Party and Debtor with respect thereto.
8.19 BINDING EFFECT. Subject to the provisions of paragraph 8.10,
this Agreement shall be binding upon their heirs, personal representatives,
successors and assigns of Debtor and shall inure to the benefit of the
successors and assigns of Secured Party.
8.20 TIME. Time is of the essence in this Agreement.
8.21 ATTORNEYS' FEES. The parties hereby agree that in the event any
of the terms and conditions contained in this Agreement, including the
indemnification provisions contained herein, must be enforced by reason of any
past, existing or future delinquency of payment, of failure of observance or of
performance by any of the parties hereto, in each such instance, the defaulting
party shall be liable for reasonable collection and/or legal fees (including
fees and expenses of in-house counsel and paralegal and support personnel),
trial and appellate levels, any expenses and legal fees incurred, including time
spent in supervision of paralegal work and paralegal time, and any other
expenses and costs incurred in connection with the enforcement of any available
remedy.
8.22 CAPACITY. The Secured Party is entering into this Agreement
solely in its capacity as Trustee under the Indenture and shall be entitled to
the privileges, immunities and protections afforded it thereunder or under any
other agreement or instrument providing indemnity for
B-8
<PAGE>
it in any actions taken by it as Secured Party hereunder. The Secured Party
assumes no duties or obligations except for those expressly set forth herein.
In addition to, and not in limitation of the foregoing, Debtor
agrees (i) to indemnify and hold harmless the Secured Party and the successors,
assigns, employees and agents (hereunder referred to individually as, an
"Indemnitee" and, collectively, as "Indemnitees") from and against any and all
claims, demands, losses, judgments and liabilities of whatsoever kind or nature,
and (ii) to reimburse each Indemnitee for all costs and expenses, including
reasonable attorneys' fees, growing out of or resulting from this Agreement or
the exercise by any Indemnitee of any right or remedy granted to it hereunder or
under any other agreement related to any Indebtedness except, with respect to
clauses (i) and (ii) above, for those arising from such Indemnitee's gross
negligence or willful misconduct. In no event shall Indemnitee hereunder be
liable, in the absence of gross negligence or willful misconduct on its part,
for any matter or thing in connection with this Agreement other than to account
for moneys actually received by it in accordance with the terms hereof. The
indemnity obligations of Debtor contained in this Section 8.22 shall continue in
full force and effect notwithstanding the full payment of all the Notes issued
under the Indenture and the payment of all other Indebtedness.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
SENTINEL FINANCING LTD., L.P.,
a Florida limited partnership
By: Sentinel Acceptance Corporation,
a Florida corporation,
its General Partner
By:
--------------------------------------------
Jonathon W. Hollandsworth, President
STERLING NATIONAL BANK & TRUST COMPANY
By:
-------------------------------------------------
Its:
------------------------------------------------
B-9
<PAGE>
EXHIBIT 1
COLLATERAL ASSIGNMENT
SENTINEL FINANCING LTD., L.P., a Florida limited partnership ("Assignor")
hereby collaterally assigns to Sterling National Bank & Company, as Trustee
("Assignee") the Contract attached hereto (the "Contract"). This Collateral
Assignment shall become absolute upon the occurrence of an Event of Default as
defined in the Security Agreement and the exercise of Secured Party's rights and
remedies thereunder with respect to the Contract, in which event Assignee shall
become the owner of the Contract and shall be entitled to exercise all of the
remedies provided in the Security Agreement with respect to such Contract.
This Collateral Assignment shall be governed and construed in accordance
with the laws of the State of New York and the provisions of the Security
Agreement, which is incorporated herein.
As used herein, all capitalized terms shall have the same meaning as in the
Assignor's Prospectus dated ___________, 1998.
IN WITNESS WHEREOF, the Assignor has placed its hand and seal as of this
____ day of ________, 1998.
SENTINEL FINANCING LTD., L.P.,
a Florida limited partnership
By: Sentinel Acceptance Corporation,
a Florida corporation,
its General Partner
By:
--------------------------------------------
Jonathon W. Hollandsworth, President
B-10
<PAGE>
EXHIBIT 2
COLLATERAL ASSIGNMENT
SENTINEL FINANCING LTD., L.P., a Florida limited partnership ("Assignor")
hereby collaterally assigns to Sterling National Bank & Trust Company, as
Trustee ("Assignee") the collateral as set forth in the Security Agreement
between Assignor and Assignee of even date herewith (the "Collateral"). This
Collateral Assignment shall become absolute upon the occurrence of an Event of
Default as defined in the Security Agreement and the exercise of Secured Party's
rights and remedies thereunder with respect to the Collateral, in which event
Assignee shall become the owner of the Collateral and shall be entitled to
exercise all of the remedies provided in the Security Agreement with respect to
such Collateral.
This Collateral Assignment shall be governed and construed in accordance
with the laws of the State of New York and the provisions of the Security
Agreement, which is incorporated herein.
As used herein, all capitalized terms shall have the same meaning as in the
Assignor's Prospectus dated ___________, 1998.
IN WITNESS WHEREOF, the Assignor has placed its hand and seal as of the
____ day of ________, 1998.
SENTINEL FINANCING LTD., L.P.,
a Florida limited partnership
By: Sentinel Acceptance Corporation,
a Florida corporation,
its General Partner
By:
--------------------------------------------
Jonathon W. Hollandsworth, President
B-11
<PAGE>
EXHIBIT C
SENTINEL FINANCING LTD., L.P.
SUBSCRIPTION AGREEMENT - SECURED NOTES
The Investor named below, by payment of the purchase price for such Secured
Notes, by the delivery of a check payable to SENTINEL FINANCING LTD., L.P. -
Escrow Account/_______________ hereby subscribes for the amount of Secured Notes
indicated below (minimum purchase of $2,000) of Sentinel Financing Ltd., L.P.
The Secured Notes may be purchased in increments of $1,000. By such payment,
the named Investor further acknowledges receipt of the Prospectus and any
Supplement and the Subscription Agreement, the terms of which govern the
investment in the Secured Notes being subscribed for hereby.
<TABLE>
<S><C>
A. INVESTMENT: 1. Amount of Secured Notes Purchased $__________
2. Initial Purchase [ ] Additional Purchase [ ] Date of Investor's check __________
B. REGISTRATION: Mr. Mr.
Mrs. Mrs.
1. Registered Owner: Ms. _______________________________ Co-Owner: Ms.________________________________
2. Mailing Address: _____________________________________ City, State & Zip: _______________________________
3. Residence Address (if different from above):_______________________________________________________________________
4. Birth Date: _____/_____/_____ 5. Birth Date Co-Owner: ___/_____/_____
6. Please indicate Citizenship Status: 7. Social Security #: ___/_____/_____
U.S. Citizen [ ] Other [ ] Co-Owner SS#: ___/_____/_____
8. Telephone #: (H) (_____) _______________ Corporate or Custodial:
(O) (_____) _______________ Taxpayer ID#: _________-_____-_________
C. OWNERSHIP: [ ] Individual Ownership [ ] IRA or Keogh [ ] Joint Tenants With Rights of Survivorship
[ ] Trust/Date of Trust Established Pension Trust ___/___/___ (S.E.P.) [ ] Tenants in Common
[ ] Tenants by the Entirety [ ] Corporate Ownership [ ] Partnership [ ] Other______________________________
D. SIGNATURES: By signing below, I/we represent that I/we meet the suitability standards set forth in the Prospectus under
"Suitability Standards."
Signatures - Registered Owner: ____________________________ Co-Owner: ________________________________________
E. Print Names of Custodian or Trustee: ________________________ Authorized Signature: ____________________________
Date:_______________________________________ Witness Signature: ___________________________________________________
F. PAYMENT SHOULD BE SENT TO (IF DIFFERENT THAN REGISTERED OWNER):
Name: _______________________________________________________ c/o _________________________________________
Address: ____________________________________________________ Account Number: _____________________________
City, State & Zip: __________________________________________ Telephone Number: ___________________________
G. BENEFICIAL OWNER(S): All reports and financial statements will normally be sent to the registered owner at the address in
Section B. If reports and financial statements are to be sent to the Beneficial Owner of an IRA or Keogh, insert name of the
Beneficial Owner.
Name of Beneficial Owner Only: ______________________________ Telephone Number: ___________________________
Address: ____________________________________________________ City, State & Zip: __________________________
H. BROKER-DEALER/REGISTERED REPRESENTATIVE DATE: ALL LINES MUST BE COMPLETED. ANY MISSING SIGNATURES MAY DELAY PROCESSING OF
THIS ORDER.
Broker-Dealer NASD Firm Name: _______________________________ Date: _______________________________________
Main Office Address: ______________________________________________________________________________________________
City, State & Zip: __________________________________________ Telephone Number: ___________________________
Print or Type Name of Broker-Dealer, Principal or other Authorized Signator: ______________________________________
Authorized Signature: _____________________________________________________________________________________________
Print or Type Name of Registered Representative: __________________________________________________________________
Signature: ________________________________________________________________________________________________________
Branch Office Address: ____________________________________________________________________________________________
City, State & Zip: __________________________________________ Telephone Number: ___________________________
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
MAIL TO: Sentinel Financing Ltd., L.P., 601 Gateway Blvd., Suite 260, South San Francisco, CA 94080,
Attention: Jonathon W. Hollandsworth, President
Telephone: (650) 869-3900 FAX: (650) 869-3738
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
ALL CHECKS FROM INVESTORS MUST BE TRANSMITTED TO THE ESCROW AGENT
BY NOON OF THE NEXT BUSINESS DAY FOLLOWING RECEIPT
C-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER AT ANY TIME IMPLIES THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
____________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUITABILITY STANDARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . 13
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . 28
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . . . . . . 32
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TRANSFERABILITY OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
EXHIBIT A - Form of Secured Note
(Face of Security) . . . . . . . . . . . . . . . . . . . . . . . . . A-1
(Back of Security) . . . . . . . . . . . . . . . . . . . . . . . . . A-2
ASSIGNMENT FORM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
EXHIBIT B - SECURITY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C - SENTINEL FINANCING LTD., L.P.
SUBSCRIPTION AGREEMENT - SECURED NOTES . . . . . . . . . . . . . . . C-1
</TABLE>
__________________________
UNTIL THE TERMINATION OF THIS OFFERING, AND IN ANY EVENT UNTIL 90 DAYS AFTER THE
DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES TO WHICH THIS PROSPECTUS RELATES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$15,000,000 (MAXIMUM)
$ 1,000,000 (MINIMUM)
SENTINEL FINANCING LTD., L.P.
12% SECURED NOTES DUE 2003
_____________
PROSPECTUS
_____________
______________, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's general partner, its affiliates, shareholders, employees and
agents are indemnified by the Company from and against any and all losses,
liabilities, costs and damages by reason of the management of the Company's
affairs except for conduct that arises from (i) fraud, gross negligence,
gross misconduct or criminal acts; (ii) breach of the Company's Partnership
Agreement; or (iii) a matter unrelated to such partner's management of the
Company's affairs.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses (other than
underwriting discounts) to be borne by the Registrant in connection with the
issuance and distribution of the securities offered hereby:
TOTAL
<TABLE>
<S> <C>
SEC filing fee. . . . . . . . . . . . . . . . . . . . $4,546
Blue Sky fees and expenses, including legal fees. . . 5,000
Printing and engraving. . . . . . . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . . . *
Accounting fees and expenses. . . . . . . . . . . . . *
Trustee and Custodian's fees. . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . *
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $
-----
-----
</TABLE>
_____________________
*To be completed by Amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In August, 1997, the Company issued limited partnership interests to
Sentinel Acceptance in connection with the formation of the Company. This
sale was made to a sophisticated investor and without a general
solicitation. The Company believes this transaction was exempt from the
registration provisions of the Securities Act of 1933, as amended pursuant
to Section 4(2) thereof. Sentinel Acceptance transferred its limited
partnership interest to Four Star Financial Services, LLC in December 1997.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
See Exhibit Index following the Signatures page which is incorporated
herein by reference.
II-1
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES.
Schedules have been omitted because they are not applicable or are not
required or the information required to be set forth herein is included in the
Financial Statements or notes thereto.
ITEM 27. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
South San Francisco, California on this 24th day of March, 1998
Sentinel Financing Ltd., L.P.
By Sentinel Acceptance Corporation
General Partner
By /s/ Jonathon W. Hollandsworth
--------------------------------------------
Jonathon W. Hollandsworth
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registration Statement has been signed by the following persons in
the capacities indicated on the dates indicated.
/s/ Jonathon W. Hollandsworth
------------------------------
Jonathon W. Hollandsworth President and Director of March 24, 1998
Sentinel Acceptance Corporation
/s/ Dean Kayes
------------------------------
Dean Kayes Director of Sentinel Acceptance March 24, 1998
Corporation
/s/ Dorothy H. Kulpinsky
------------------------------
Dorothy H. Kulpinsky Director, Secretary and March 24, 1998
Treasurer of Sentinel
Acceptance Corporation
/s/ Suzanne Tikkannen
------------------------------
Suzanne Tikkannen Director of Sentinel Acceptance March 24, 1998
Corporation
i
<PAGE>
EXHIBIT INDEX
TO
SENTINEL FINANCING LTD., L.P.
REGISTRATION STATEMENT ON FORM SB-2
<TABLE>
<CAPTION>
Exhibit Seq.
No. Description Page No.
- ------- ----------- --------
<S> <C> <C>
1.1 Form of Placement Agent Agreement
3.1* Limited Partnership Agreement of Registrant
3.2 Amendment to Limited Partnership Agreement
4.1 Security Agreement (included as Exhibit B to Prospectus)
4.3 Indenture of Trust between the Company and Trustee
4.4* Subscription Agreement (included as Exhibit C to Prospectus)
4.5 Escrow Agreement
5.1** Opinion re: Legality
10.1* Portfolio Service Agreement between Sentinel Acceptance Corporation
and Registrant
10.2 Custodian Agreement
23.1(a) Consent of Independent Accountants
23.1(b) Consent of Independent Accountants
23.2** Consent of Legal Counsel (included in Exhibit 5.1)
25.1 Form T-1 Statement of Eligibility of Trustee
</TABLE>
__________
* Previously Filed.
** To be filed by amendment.
ii
<PAGE>
SENTINEL FINANCING LTD., L.P.
1,500,000 of 12% Secured Notes Due 2003
(Par Value $1,000 Per Note)
Agency Agreement
March 19, 1998
ATTKISSON, CARTER & AKERS
3060 Peachtree Road, NW
Suite 1475
Atlanta, Georgia 30305
Dear Sirs:
Sentinel Acceptance Corporation, a Florida corporation (the "Company"), the
general partner of Sentinel Financing Ltd., L.P. ("SFL") hereby confirms its
agreement with ATTKISSON, CARTER & AKERS (the "Agent"), as follows:
1. GENERAL. SFL proposes to offer, through the Agent on a exclusive,
"best-efforts" basis, up to $15,000,000 aggregate principal amount of 12%
Secured Notes due 2003 (the "Notes"), to be offered to the public in
multiples of $1,000, subject to a minimum purchase requirement of $2,000
(the "Offering").
SFL has filed a Registration Statement on Form SB-2 (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC")
pursuant to which SFL will register the Notes for sale to the public.
On terms and conditions specified in this Agency Agreement (the
"Agreement"), the Agent, for the compensation specified below, will provide
the services specified in this Agreement to assist the Company in the
Offering.
2. The Offering.
2.1 SERVICES TO BE RENDERED. Subject to the terms and conditions hereof
and upon the basis of the representations, warranties and agreements
herein set forth, the Company hereby appoints the Agent as its agent
to sell the Notes on a exclusive, best efforts basis. The Agent
hereby accepts such appointment and agrees to use its best efforts to
find purchasers for the Notes. The Company and the Agent agree that
the Notes shall be offered to the investing public in Georgia, Florida
and any other state or states where the Company deems it appropriate
to offer the Notes, all in compliance with the Securities Act of 1933
(the "Securities Act"), the Securities Exchange Act of 1934 (the
"Exchange Act"), and the securities or "blue sky" laws of any
applicable jurisdiction.
2.2 EXCLUSIVE ENGAGEMENT. The Company shall not engage any other person
other than the
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Agent to solicit offers or sales of notes during the offering period
(as such term is herein defined). However, the Agent may hire such
other broker-dealers to assist in the sale of the Notes as the Agent
deems necessary or advisable.
2.3 COMPENSATION. The Company agrees to pay to the Agent for the Agent's
services in connection with the Offering a commission on all Notes
sold by the Agent in the Offering as follows: solely in the event
that a minimum of $1,000,000 of Notes (the "Minimum Offering") are
sold on or before the date which is 120 days from and after the
Effective Date (herein defined), (a) a commission equal to 7.5% of the
sale price for each Note sold by the Agent, PLUS (b) an investment
banking and marketing fee equal to 4% of the sale price for each Note
sold, payable to Banc Services Corporation, the Agent's affiliate.
2.4 PAYMENT OF EXPENSES. The Company will pay all expenses in connection
with the Offering including, but not limited to, attorneys' fees,
expenses for auditing and accounting services, advertising fees, all
securities registration and NASD filing fees, postage, and document
reproduction expenses, and the engraving, issuance, transfer and
delivery of the Notes. The Company shall reimburse Agent for its
reasonable attorneys' fees incurred in the negotiation and execution
of this Agreement and in connection with filings made with the NASD in
connection with the Offering. Solely in the event the Minimum
Offering is achieved, in addition to the foregoing expenses, the
Company (a) shall reimburse the Agent for its expenses incurred in
connection with its due diligence review of the Offering an amount up
to 0.5% of the sale price of each Note sold by the Agent, and (b)
shall pay the Agent, as a non-accountable expense allowance, an amount
equal to 0.5% of the sale price of each Note sold by the Agent.
2.5 BLUE SKY. The Company contemplates that the Offering will be made in
those states listed in Exhibit A attached hereto. The Company shall,
at its sole expense, take or cause to be taken all necessary action
and shall furnish to whomever the Agent may direct such information as
may be required to qualify the Notes for sale under the laws of such
jurisdictions and any other jurisdictions where the Company may
hereafter elect that Notes shall be offered and shall continue such
qualifications in effect for as long as may be necessary for the
distribution of the Notes. At the request of the Agent the Company
shall cause its counsel to prepare and furnish to the Agent "Blue Sky"
memoranda concerning the requirements for qualification of the Notes
for sale under the law of such jurisdictions, and the Agent shall be
entitled to rely on such memoranda in carrying out its obligations
under this Agreement.
2.6 SALE AND DELIVERY OF THE NOTES. The Notes will be offered on a best
efforts, $1,000,000 minimum offering basis. All proceeds from the sale
of Notes will be immediately deposited in an escrow account at Greater
Bay Trust Company (the "Escrow Account"), and no funds will be
released to the Company therefrom unless and until the Company has
achieved the Minimum Offering. Upon sale of the Minimum Offering, the
Notes shall be released to purchasers of the Notes (the "Noteholders")
bearing an issue date equal to the date the purchase price therefor
was deposited into the Escrow Account. If the Minimum Offering is not
sold by 120 days after the effective date, all monies received will be
refunded to investors, together with any net investment earnings
thereon from the investment of such monies by the Escrow Account. In
the event of any such return of funds, the investors shall not be
entitled to receive the stated interest rate on the Notes. Subscribers
for the Notes shall have no right to withdraw any funds from the
Escrow Account. Throughout the Offering Period, the Company will
review the offers to purchase received and will have the right to
reject any such offers. Investors must satisfy certain suitability
standards prior to purchasing any Notes.
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2.7 OFFERING PERIOD. The Notes will be offered for sale during the period
(the "Offering Period") commencing with the date that the Registration
Statement is declared effective by the SEC (the "Effective Date" of
the Offering) until the earlier to occur of (a) the date that all
Notes have been sold, (b) 24 months from and after the Effective Date,
or (c) the termination of the Offering by the Company. The Company
may, upon written notice to the Agent, elect to extend the Offering
Period, and as used herein, the term "Offering Period" shall include
any such extension.
2.8 CLOSING. Provided that the Escrow Agent is authorized and empowered
in accordance with the terms of the Escrow Agreement to release the
proceeds of the Offering from escrow as described in the Escrow
Agreement, and provided further that this Agreement shall not have
been terminated pursuant to the terms hereof, payment for the Notes
shall be made at a closing (the "Closing") to be held at the offices
of the Company's counsel (or such other place as the parties hereto
may agree), at 10:00 a.m., Atlanta time on the fifth (5th) business
day after the date on which the Minimum Offering is achieved, as
determined by the Escrow Agent, or on such other date and time as
agreed to in writing by the parties hereto.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company,
for itself and on behalf of SFL, hereby represents and warrants to, and
agrees with, the Agent that:
(a) The prospectus, including any amendments or supplements thereto (the
"Prospectus") when made available to prospective purchasers throughout
the Offering Period, will comply in all material respects with federal
statutes, regulations and policy statements applicable thereto,
including, without limitation, the applicable rules, regulations and
policy statements of the SEC. At all times during the Offering
Period, the Prospectus will contain all information including
financial statements that are required to be included therein in
accordance with applicable regulations (including interpretations
thereof), and policy statements of the SEC and the Prospectus will not
include any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading; provided, however, that no representations or
warranties are made to the Agent with respect to statements or
omissions made in reliance upon, or in conformity with, written
information furnished to the Company with respect to the Agent, by the
Agent, or on its behalf expressly for use in the Prospectus.
(b) The Company is, and at all times during the Offering Period will be, a
corporation duly incorporated and organized and is, and will be,
validly existing and in good standing under the laws of the State of
Florida. The Company has, and at all times during the Offering Period
will have, full power and authority to own or lease all of its
properties and conduct all of its business as described in the
Prospectus.
(c) SFL is, and at all times during the Offering Period will be, a limited
partnership duly incorporated and organized and is, and will be,
validly existing and in good standing under the laws of the State of
Florida. SFL has, and at all times during the Offering Period will
have, full power and authority to own or lease all of its properties
and conduct all of its business as described in the Prospectus.
(d) The Company is, and at all times during the Offering Period will be,
duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction where the ownership or leasing of its
properties or the conduct of its business requires such qualification.
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<PAGE>
(e) SFL is, and at all times during the Offering Period will be, duly
qualified to do business and in good standing in each jurisdiction
where the ownership or leasing of its properties or the conduct of its
business requires such qualification.
(f) The financial statements contained in the Prospectus present fairly
and accurately the financial position of the Company and SFL as the
respective dates thereof in conformity with generally accepted
accounting principles applied on a consistent basis throughout the
entire periods involved.
(g) At all times during the Offering Period except as set forth in or
contemplated by the Prospectus: (i) the Company and SFL will not have
incurred and will not incur any material liabilities or obligations,
direct or contingent, except for liabilities or obligations entered
into in the ordinary course of business, and will not have entered
into and will not enter into any material transactions; and (ii) there
will have been no, and there will be no, material adverse change, or
any development relating to the Company or SFL which the Company has
cause to believe would involve a prospective material adverse change
in or affecting the business, business prospects, general affairs,
management, financial position, net worth, results of operations, or
properties of the Company, or the value of the assets of the Company
or SFL.
(h) Except as set forth in or contemplated by the Prospectus, to the best
of its knowledge, neither the Company nor SFL have or will not have
during the Offering Period any material contingent liabilities or
obligations.
(i) There are no actions, suits or proceedings pending or, to the best of
its knowledge, threatened against the Company or SFL or their
respective or business, business prospects, financial condition,
results of operations or properties, or against any of their
respective principal officers, before or by any federal or state
court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling
or decision or finding would materially and adversely affect the
business, business prospects, financial condition, results of
operations, or properties of the Company or SFL.
(j) At all times during the offering Period, the Company and SFL each will
have title to all properties and assets described in the Prospectus as
being owned by it, free and clear of all liens, charges, encumbrances
or restrictions, except such as are described in the Prospectus or
which are not material to its business. At all times during the
Offering Period, the Company and SFL each will have valid, existing
and enforceable leases to the properties and equipment described in
the Prospectus as being leased by it, with such exceptions as are not
material and do not materially interfere with the uses made, and
proposed to be made, of such properties by the Company or SFL.
(k) The Company and SFL have each filed all federal and state income tax
returns which are required to be filed by it and has paid all taxes
shown on such returns and on all assessments received by it to the
extent such taxes have become due. To the best of its knowledge, all
taxes with respect to which the Company or SFL is obligated have been
paid or adequate accruals have been established to cover any such
unpaid taxes.
(l) Each of the Company and SFL is not, and at all times during the
Offering Period will not be, in violation of its articles of
incorporation, bylaws or agreement of limited partnership or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any bond, debenture, note or other
evidence of
4
<PAGE>
indebtedness or in any contract, indenture, mortgage, loan agreement
or other agreement or instrument to which it is a party or by which it
or any of its properties is bound, and each of the Company and SFL is
not, and at all times during the Offering Period will not be, in
violation of any law, order, rule, regulation, writ, injunction or
decree of any government, governmental instrumentality or court,
domestic or foreign, of which it has knowledge. Neither the Company
nor SFL, nor any employee or agent thereof, has made any payment of
funds of the Company or SFL or received or retained any funds in
violation of any law, rule or regulation which payment, receipt or
retention of funds is not fully disclosed in the Prospectus.
(m) At all times during the Offering Period, there will be no document or
contract of the character required to be described in the Prospectus
which is not described as required, and the descriptions in the
Prospectus are accurate and complete and fairly present the
information required to be shown.
(n) No statement, representation, warranty or covenant made by the Company
or SFL in this Agreement or made in any certificate or document
required by this Agreement to be delivered to the Agent was or will
be, when made, inaccurate, untrue or incorrect in any material
respect.
(o) The Company has full right, power and authority, for itself and on
behalf of SFL, to enter into this Agreement and this Agreement has
been duly authorized, executed and delivered by the Company and will
be, upon acceptance by the Agent, a valid and binding agreement of the
Company and SFL enforceable in accordance with its terms. The
performance of this Agreement and the consummation of the transactions
contemplated herein will not result in a breach or violation of any of
the terms or provision of, or constitute a default under the articles
of incorporation or the bylaws of the Company, the limited partnership
agreement of SFL, or any obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence or
indebtedness or in any contract, indenture, mortgage, loan agreement
or other agreement or instrument to which the Company or SFL or any of
their respective subsidiaries is a party or by which the Company or
SFL or any of their respective subsidiaries or any of their respective
properties is bound, or any law, order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality
or court, domestic or foreign, and will not result in the creation or
imposition of any lien, charge claim or encumbrance upon any property
or asset of the Company or SFL. No consent, approval, authorization
or order of any government, governmental instrumentality or court is
required in connection with the execution of this Agreement or the
consummation of the transactions contemplated by this Agreement except
such as may be required by the NASD or by state regulatory authorities
under state securities or blue sky laws in connection with the
distribution of the Shares or in connection with the Agent's services
hereunder.
(p) For purposes of the Agent's obligation to file certain documents and
make certain representations to the NASD in connection with the
Offering: (i) neither the Company nor SFL have placed any securities
within the last eighteen months; (ii) there have been no material
dealings within the last twelve months between the Company or SFL and
any NASD member or any person related to or associated with any such
member; (iii) except as contemplated by this Agreement, no financial
or management consulting contracts are outstanding with any other
person; (iv) there has been no intermediary between the Agent and the
Company in connection with the Offering and (other than BSC) no person
is being compensated in any manner for providing such service.
5
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4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE AGENT. The Agent
represents and warrants to, and agrees with the Company that:
(a) The Agent and all of its agents and representative have or will have
all required licenses and registrations to perform the Agent's
obligations under this Agreement, and such licenses and registrations
will remain in effect during the term of this Agreement.
(b) Any and all information furnished to the Company by the Agent in
writing expressly for use in the Prospectus will not contain any
untrue statement of material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) All checks and funds received by the Agent with respect to the
subscription price from prospective purchasers in the Offering shall
be made payable to the escrow agent and transmitted directly to the
escrow agent by noon of the next business day after receipt by the
Agent until the minimum offering of $1,000,000 has been obtained. If
the Offering is terminated prior to the end of the Offering Period by
the Company, then subscription funds received after any such
termination shall be promptly returned to the prospective purchasers.
(d) The Agent will deliver to the Company the original copies of all
subscription documents of prospective purchasers received by the Agent
in the Offering, and the Agent will promptly inform the Company of any
facts which come to the Agent's attention which would cause a
reasonable person to believe that such subscription documents contain
any material misstatement or omission.
5. COVENANTS OF THE COMPANY. The Company further agrees with and covenants to
the Agent as follows:
(a) To comply with the "Blue Sky" and other securities laws and
regulations of each state in which subscriptions are solicited in the
Offering and to assist the Agent in any necessary registration or
filings that may be required of the Agent with respect to the
Offering, in the states mutually agreed upon by the Agent and the
Company, with any costs of such registrations or filings incurred by
the Agent to be borne by the Company at its sole expense. The Company
will advise the Agent promptly of the issuance by any state regulatory
authority of any stop order or other order suspending the
registrations or exemptions therefrom of the Prospectus or of the
institution of any proceedings for that purpose, will use its best
efforts to prevent the issuance of any stop order or other such order,
and should a stop order or other such order be issued, to obtain as
soon as possible the lifting thereof.
(b) To furnish the Agent with such numbers of printed copies of the
Prospectus, with all amendments, supplements and exhibits thereto,
together with subscription materials, as the Agent may reasonable
request, and similarly, to furnish the Agent and others designated by
the Agent with as many copies of additional sales literature or other
materials approved by the Company for use in connection with the
Offering as the Agent may reasonably request.
(c) Promptly to furnish such information and execute and file such
documents as may be necessary for SFL to offer and sell the Notes in
full compliance with applicable state and federal statutes,
regulations and policy statements.
6
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(d) To advise the Agent promptly if any event known to the Company shall
have occurred as a result of which the Prospectus in its then current
form (including any amendments or supplements thereto) would include
an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, no misleading.
(e) To utilize or furnish no sales literature in connection with the
Offering, other than the Prospectus, unless such other sales
literature has been approved by the SEC and the NASD, if necessary,
and furnished to the Agent at least ten (10) days prior to its first
use and the Agent has failed to object to the contents of, or the
proposed use of, such other sales literature.
6. CONDITIONS OF THE AGENT'S OBLIGATIONS. The Agent's obligation to effect
the transactions contemplated by this Agreement shall be subject to the
continuing accuracy throughout the Offering Period of the representations,
warranties and agreements of the Company, the performance by the Company of
all of its obligations under this Agreement, and the following further
terms and conditions:
(a) At the Effective Date, the Agent shall have received the opinion of
Buchalter, Nemer, Fields & Younger, counsel for the Company, dated as
of the Effective Date, to the effect that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida.
(ii) SFL is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Florida.
(iii) the Notes to be sold by SFL have been duly authorized by all
requisite action of the Company and SFL and will be, upon
issuance and delivery against payment therefor in accordance
with the terms of this Agreement, validly issued in due and
proper form (such opinion may be given in reliance on the
opinion of Stump, Storey & Callahan, special counsel to the
Company and SFL).
(iv) the amounts, terms and designations of the Notes conform as to
legal matters in all material respects to the description
thereof contained in the Registration Statement under the
caption "Description of the Notes".
(v) this Agreement has been duly authorized, executed and
delivered by the Company on behalf of itself and SFL and, when
so executed and delivered, constitutes the legal, valid and
binding obligation of the Company and SFL, enforceable against
the Company and SFL (such opinion may be based on an
assumption that the governing law applicable to the Agreement
is substantially similar to California law).
(vi) the execution and delivery by the Company of this Agreement
does not, and if the Company and SFL were now to perform their
obligations under this Agreement such performance would not,
result in any: (1) violation of the Company's articles or
incorporation or bylaws; (2) violation of SFL's agreement of
limited partnership; (3) violation of any existing federal or
state constitution, statute, regulation, rule, order, or law
to which either the Company or SFL or their respective assets
are subject; (3) breach of or default under any Material
7
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Agreements; (4) creation or imposition of a contractual lien
or security interest in, on or against the assets of the
Company or SFL under any Material Agreements; or (5) violation
of any judicial or administrative decree, writ, judgment or
order to which, to our knowledge, the Company or SFL or their
respective assets are subject.
(vi) to the knowledge of such counsel, each of the Company and SFL
has all necessary consents, authorizations, approvals, orders,
certificates and permits of and from, and has made all
declarations and filings with, all federal, state, local and
other governmental authorities, all self-regulatory
organizations, all courts and other tribunals, to own, lease,
license and use its properties and assets and to conduct its
business in the manner described in the Registration
Statement, except to the extent that the failure to obtain or
file would not have a material adverse effect on the Company
or SFL.
(vii) to the knowledge of such counsel, no authorization, consent,
approval of or qualification with any federal or state
governmental authority is required for the execution, delivery
or performance by the Company or SFL of this Agreement, except
such as have been previously made or obtained, in connection
with the distribution of the Notes by the Agent, and except
those which, if not made or obtained, will not, individually
or in the aggregate, have a material adverse effect on the
Company or SFL.
(viii) to such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened to which either
the Company or SFL is a party or to which any of the
properties of the Company or SFL is subject that are not
fairly summarized in all material respects in the Registration
Statement.
(ix) to such counsel's knowledge, after due inquiry, all contracts,
indentures, mortgages, loan agreements, leases or other
documents to which either the Company or SFL is a party or to
which its business or properties are subject are fairly
summarized in all material respects in the Registration
Statement; and
(x) after due inquiry, such counsel does not know of any pending
or threatened proceeding relating to the revocation or
modification of any consent, authorization, approval, order,
certificate or permit necessary to the conduct of the business
of the Company or SFL.
As to questions of fact material to such opinion, counsel may rely on
(without independent verification of the accuracy or completeness
thereof), the representations and warranties of the Company or SFL
contained in this Agreement as well as the Material Agreements. The
term "Material Agreement," for purposes of such opinion, shall mean
each of the agreements which has been filed with the Securities and
Exchange Commission as an exhibit to the Registration Statement of
which the Prospectus is filed as part thereof. Counsel shall also
provide a letter to the effect that nothing has come to the attention
of such counsel to cause such counsel to believe that (except for
financial statements, projections, schedules and other financial and
statistical information included or incorporated by reference in the
Registration Statement as to which such counsel need not express any
opinion) the Registration Statement contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, or
that the Registration Statement as of the Closing Date,
8
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contained any untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) At the Effective Date, the Agent shall receive the opinion of Stump,
Storey & Callahan, P.A., special counsel to the Company and SFL, dated
as of the Effective Date, to the effect that:
(i) The Notes are enforceable obligations of SFL.
(ii) The Notes to be delivered have been duly authorized by all
requisite action of the Company and SFL and will be, upon
issuance and delivery against payment therefor in accordance
with the terms of this Agreement, validly issued in due and
proper form.
As to questions of fact material to such opinion, counsel may rely on
(without independent verification of the accuracy or completeness
thereof), the representations and warranties of the Company contained
in this Agreement as well as the Material Agreements. The term
"Material Agreement", as used herein, shall mean each of the
agreements which has been filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement of which the
Prospectus is filed as part thereof.
(c) On the Effective Date, the Agent shall have received from the
President of the Company a letter dated as of the Effective Date, in
form and substance satisfactory to the Agent in all respects,
concerning the accuracy, to his best knowledge and belief, of the
financial information included in the Prospectus.
(d) At the Effective Date, there shall be furnished to the Agent a
certificate, dated as of the Effective Date, signed by the President
and Secretary of the Company (collectively the "Officers") in form and
substance satisfactory to the Agent (the "Certificate") to the effect
that, to their best knowledge and belief:
(i) The Officers of the Company have carefully examined the
Prospectus, and as of the date of such Certificate, the
statements in the Prospectus are true and correct, and the
Prospectus does not misstate or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not untrue or misleading.
(ii) The conditions to the performance of the Agent's obligations
under this Agreement have been complied with.
(iii) Each of the representations and warranties of the Company
contained in this Agreement was when originally made and is as
of the date of such Certificate true and correct.
(iv) No order from any regulatory body has been issued and no
proceedings have been instituted, or to the knowledge of such
Officers contemplated, to prevent the consummation of the
Offering.
7. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless the Agent, its officers,
directors,
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counsel, representatives and persons who control the Agent within the
meaning of the Securities Exchange Act of 1934, from and against all
losses, claims, damages and liabilities, joint and several, to which
any of the aforesaid parties, including the Agent (collectively, the
"Agent Parties"), may become subject, under federal or state
securities laws or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon: (I) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus, or in any Blue Sky
application or other document executed by the Company or on its behalf
for the purpose of qualifying any or all of the Notes for sale under
the securities laws of any jurisdiction, or based upon written
information furnished by the Company under the securities laws thereof
(any such application, document, or omission to state in the
Prospectus, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The Company will further reimburse the Agent Parties, and each and
every one of them, for any legal or other expenses reasonably incurred
by any one or more of the Agent Parties in connection with
investigating and defending such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any
case to the extent that the subject 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 reliance upon and
unconformity with written information furnished to the Company by the
Agent specifically for use in the preparation of the subject
Prospectus, Blue Sky Application, or any amendment or supplement
thereto. The indemnity provided for in this Section 7(a) will be in
addition to any liability which the Company may otherwise have.
(b) The Agent will indemnify and hold harmless the Company, its officers,
directors, counsel, representatives and persons who control the
Company which the meaning of the Securities Exchange Act of 1934, from
and against all losses, claims, damages and liabilities, joint and
several, to which any of the aforesaid parties, including the Company
(collectively, the "Company Parties"), may become subject, under
federal or state securities laws or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon: (I) any untrue statement of material fact
contained in the Prospects, any Blue Sky Application, or any amendment
or supplement thereto; (ii) the omission to state in the Prospectus,
any Blue Sky Application, or any amendment or supplement to any of the
foregoing, a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, in the case
of Sections (7)(b)(i) and (7)(b)(ii) to the extent, but only to the
extent, that such untrue statement or omission was made in reliance
upon or in conformity with written information furnished to the
Company by the Agent specifically for use with reference to the Agent
in preparation of the Prospectus, any Blue Sky Application, or any
supplement or amendment thereto; or (iii) arising out of any
misrepresentation by the Agent in this Agreement or any breach of
warranty by the Agent with respect to this Agreement. The Agent will
further reimburse the Company Parties for legal or other reasonably
incurred by the Company Parties in connection with investigating or
defending any loss, claim, damage, liability or action under this
Section (7)(b). The indemnification provided for in this Section
(7)(b) shall be in addition to any liability which the Agent may
otherwise have.
(c) Promptly after receipt by an indemnified party under Section (7)(a) or
&7)(b) above notice of commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such Section, notify the indemnifying party
in writing of the commencement of the action; but the omission so
10
<PAGE>
to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise and
under such Section. In case any such action shall be brought against
any indemnified person, then it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein, and, to extent it shall wish, jointly with any
other indemnifying party similarly notified, the indemnified party may
assume the defense thereof, with counsel satisfactory to such
indemnified party ( who may also be counsel to the indemnifying party
only if the representation of both parties does not constitute a
conflict ) and after notice from the indemnifying party shall not be
liable to such indemnified party under such Section for any legal
expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable cost of investigation.
8. SURVIVAL CLAUSE. The respective indemnities, agreements ( including,
without limitation, the agreements set forth in Section 7 hereof ),
representations, warranties and other statements of the Company and the
Agent as set forth in this Agreement, shall remain in full force and
effect, regardless of any investigation ( or any statement as to the
results thereof ) made by or on behalf of the Agent, any officer or
director of the Agent, or counsel therefor. Or the Company or any officer
or director of the Company, or counsel therefor, and shall survive any
termination of this Agreement and the receipt of any payment of the Notes.
9. NOTICES. All notices under this Agreement shall be in writing and if sent
to the Agent shall be mailed, delivered or telegraphed to the Agent at the
address first provided above, and if sent to the Company shall be mailed or
delivered to the Company at its present headquarters address, 601 Gateway
Blvd., Suite 260, South San Francisco, California 94080, Attention:
President. Any notice shall be deemed to have been given when it is
received by the party to whom it is addressed.
10. GOVERNING LAW. Except to the extent governed by preemptive federal law,
this Agreement shall be governed by and construed in accordance with the
substantive laws of the State of Georgia.
11. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
SENTINEL ACCEPTANCE CORPORATION
Jonathon W. Hollandsworth
President
ACCEPTED AND AGREED TO this _________ day of March, 1998
ATTKISSON, CARTER & AKERS, INC.
- -------------------------------
Ronald L. Attkisson, President
11
<PAGE>
EXHIBIT 3.2
AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT
THIS AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT is entered into by and
among Sentinel Acceptance Corporation, a Florida Corporation (the "General
Partner"); and Four Star Financial Services, LLC, a California limited liability
company (the "Limited Partner").
RECITALS
A. This Amendment is effective with respect to the Sentinel Financing
Ltd., LP Limited Partnership Agreement entered into by and between Sentinel
Acceptance Corporation and Sentinel Acceptance Ltd., LP; a copy of which is
attached hereto as Exhibit "A."
B. The Limited Partner, Sentinel Acceptance Ltd., LP, hereby assigns,
hypothecates, and transfers its limited partnership interest to Four Star
Financial Services, LLC hereby. Such Assignment is approved by the General
Partner by its execution hereof.
C. The Assignee, Four Star Financial Services, LLC intended by execution
of this Agreement to become a limited partner and to be bound by the provisions
of the Sentinel Financing Ltd., LP Limited Partnership Agreement and separately
deliver to the General Partner opinion of legal counsel that such transfer does
not violate applicable state or federal securities laws or any other applicable
laws. It is intended that the release of Sentinel Acceptance Ltd., LP, as a
limited partner, and the transferring of its interest under this Agreement shall
be subject to the provisions of Section 620.117 and Section 620.136 of the
Florida Act.
D. Sentinel Acceptance Ltd., LP hereby agrees to the Amendment of the
Limited Partnership Agreement and the assignment of its interest hereunder by
its execution of this Amendment.
Now, therefore, it is hereby agreed as follows:
1. AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT.
Pursuant to Paragraph 14 of the Sentinel Financing Ltd., LP Limited
Partnership Agreement, the Agreement is hereby amended as follows:
a) All reference to "Limited Partner" shall refer to Four Star
Financial Services, LLC.
<PAGE>
b) Paragraph 2 of the Agreement "Place of Business" is hereby
amended to delete "210 North University Drive, Suite 800, Coral
Springs, Florida 33071", and insert "601 Gateway Boulevard,
Suite 260, South San Francisco, CA 94080.
c) Paragraph 8.2 of the Agreement shall be amended and modified to
delete reference to Sentinel Acceptance Ltd., LP in
subparagraph (b) thereof.
d) Paragraph 10.1(a) of the Agreement is hereby amended to read in
its entirety as follows:
"10.1 CONTROL AND LIMITED LIABILITY
(a) The Limited Partner shall not take part in the management or
control of the Partnership business or transact any business
on behalf of the Partnership and shall have no power to sign
for or bind the Partnership."
e) Paragraph 12.6 of the Agreement shall be modified to add the
following language: "Except as provided for in the Portfolio
Servicing Agreement."
In Witness Whereas, the undersigned have executed this Agreement as of this
20th day of March, 1998.
"General Partner" "Assignor"
Sentinel Acceptance Corporation Sentinel Acceptance Ltd., LP
By: Sentinel Acceptance Corporation,
General Partner
By: Jonathon W. Hollandsworth
---------------------------
Title: President By: Jonathon W. Hollandsworth
--------------------------------
Title: President
"Limited Partner"
Four Star Financial Services, LLC
By: Mark F. Cohn
-------------------------------
Title: Executive Vice President &
General Counsel
<PAGE>
- --------------------------------------------------------------------------------
SENTINEL FINANCING, LTD., L.P.
AND
STERLING NATIONAL BANK
----------------------------------
INDENTURE
DATED AS OF ____________, 1998
----------------------------------
$15,000,000
12% SECURED FIXED RATE NOTES DUE 200
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION
BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . 3
Section 1.2 Other Definitions. . . . . . . . . . . . . . . . . . . 3
Section 1.3 Incorporation by Reference of Trust Indenture Act. . . 3
Section 1.4 Rules of Construction. . . . . . . . . . . . . . . . . 4
ARTICLE 2 THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1 Form and Dating. . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Execution and Authentication.. . . . . . . . . . . . . 5
Section 2.3 Registrar and Paying Agent.. . . . . . . . . . . . . . 6
Section 2.4 Paying Agent to Hold Money in Trust. . . . . . . . . . 6
Section 2.5 Securityholder Lists.. . . . . . . . . . . . . . . . . 7
Section 2.6 Transfer and Exchange. . . . . . . . . . . . . . . . . 7
Section 2.7 Replacement Securities.. . . . . . . . . . . . . . . . 7
Section 2.8 Outstanding Securities.. . . . . . . . . . . . . . . . 8
Section 2.9 Treasury Securities. . . . . . . . . . . . . . . . . . 8
Section 2.10 Temporary Securities . . . . . . . . . . . . . . . . . 8
Section 2.11 Cancellation. . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3 REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 Optional Redemption. . . . . . . . . . . . . . . . . . 9
Section 3.2 Notices to Trustee.. . . . . . . . . . . . . . . . . . 9
Section 3.3 Selection of Securities to Be Redeemed.. . . . . . . . 9
Section 3.4 Notice of Redemption.. . . . . . . . . . . . . . . . . 10
Section 3.5 Effect of Notice of Redemption.. . . . . . . . . . . . 10
Section 3.6 Deposit of Redemption Price. . . . . . . . . . . . . . 11
Section 3.7 Securities Redeemed in Part. . . . . . . . . . . . . . 11
ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Payment of Principal and Interest. . . . . . . . . . . 11
Section 4.2 SEC Reports, Financial Reports . . . . . . . . . . . . 12
Section 4.3 Compliance Certificate . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5 SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.1 Security Agreement.. . . . . . . . . . . . . . . . . . 13
Section 5.2 Certificate and Opinions . . . . . . . . . . . . . . . 13
Section 5.3 Authorization of Actions to be Taken by the Trustee
Under the Security Documents.. . . . . . . . . . . . . 13
Section 5.4 Authorization of Receipt of Funds by the Trustee
Under the Security Documents.. . . . . . . . . . . . . 13
Section 5.5 Termination of Security Interests. . . . . . . . . . . 13
ARTICLE 6 DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . 14
Section 6.1 Events of Default. . . . . . . . . . . . . . . . . . . 14
Section 6.2 Acceleration.. . . . . . . . . . . . . . . . . . . . . 15
Section 6.3 Other Remedies.. . . . . . . . . . . . . . . . . . . . 15
Section 6.4 Waiver of Past Defaults: Postponement of Interest
Payment. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.5 Control by Majority. . . . . . . . . . . . . . . . . . .16
Section 6.6 Limitation on Suits. . . . . . . . . . . . . . . . . . 16
Section 6.7 Rights of Holders to Receive Payment.. . . . . . . . . 17
Section 6.8 Collection Suit by Trustee.. . . . . . . . . . . . . . 17
Section 6.9 Trustee May File Proofs of Claim.. . . . . . . . . . . 17
Section 6.10 Priorities.. . . . . . . . . . . . . . . . . . . . . . 18
Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . . 18
ARTICLE 7 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.1 Duties of Trustee. . . . . . . . . . . . . . . . . . . 19
Section 7.2 Rights of Trustee. . . . . . . . . . . . . . . . . . . 20
Section 7.3 Individual Rights of Trustee.. . . . . . . . . . . . . 21
Section 7.4 Trustee's Disclaimer.. . . . . . . . . . . . . . . . . 21
Section 7.5 Notice of Defaults.. . . . . . . . . . . . . . . . . . 21
Section 7.6 Reports by Trustee to Holders. . . . . . . . . . . . . 21
Section 7.7 Compensation and Indemnity.. . . . . . . . . . . . . . 22
Section 7.8 Replacement of Trustee.. . . . . . . . . . . . . . . . 22
Section 7.9 Successor Trustee by Merger, etc.. . . . . . . . . . . 24
Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . . 24
Section 7.11 Preferential Collection of Claims Against Company. . . 24
ARTICLE 8 DISCHARGE OF INDENTURE. . . . . . . . . . . . . . . . . . . . . 24
Section 8.1 Termination of Company's Obligations.. . . . . . . . . 24
Section 8.2 Application of Trust Money.. . . . . . . . . . . . . . 25
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 8.3 Repayment to Company.. . . . . . . . . . . . . . . . . 25
Section 8.4 Reinstatement. . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 9 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.1 Without Consent of Holders.. . . . . . . . . . . . . . 26
Section 9.2 With Consent of Holders. . . . . . . . . . . . . . . . 27
Section 9.3 Compliance with Trust Indenture Act. . . . . . . . . . 28
Section 9.4 Revocation and Effect of Consents. . . . . . . . . . . 28
Section 9.5 Notation on or Exchange of Securities. . . . . . . . . 29
Section 9.6 Trustee Protected. . . . . . . . . . . . . . . . . . . 29
ARTICLE 10 INTENTIONALLY LEFT BLANK. . . . . . . . . . . . . . . . . . . . 29
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 11.1 Trust Indenture Act Controls.. . . . . . . . . . . . . 29
Section 11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . 30
Section 11.3 Communication by Holders with Other Holders. . . . . . 31
Section 11.4 Certificate and Opinion as to Conditions Precedent.. . 31
Section 11.5 Statements Required in Certificate or Opinion. . . . . 31
Section 11.6 Rules by Trustee and Agents. . . . . . . . . . . . . . 32
Section 11.7 No Recourse Against Others.. . . . . . . . . . . . . . 32
Section 11.8 Counterparts.. . . . . . . . . . . . . . . . . . . . . 32
Section 11.9 Governing Law. . . . . . . . . . . . . . . . . . . . . 32
Section 11.10 No Adverse Interpretation of Other Agreements. . . . . 33
Section 11.11 Successors.. . . . . . . . . . . . . . . . . . . . . . 33
Section 11.12 Benefits of Indenture. . . . . . . . . . . . . . . . . 33
Section 11.13 Severability.. . . . . . . . . . . . . . . . . . . . . 33
Section 11.14 Table of Contents, Headings, Etc.. . . . . . . . . . . 33
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
EXHIBIT A (Face of Security). . . . . . . . . . . . . . . . . . . . . . . A-1
(Back of Security) . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
ASSIGNMENT FORM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
-iii-
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
- --------------------------- -----------------
<S> <C>
Section 310(a)(1) 7.10
(a)(2) 7.10
11.10
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 7.10
(c) Not Applicable
Section 311(a) 7.11
(b) 7.11
(c) Not Applicable
Section 312(a) 2.5
(b) 11.3
(c) 11.3
Section 313(a) 7.6
11.10
(b)(1) Not Applicable
(b)(2) 7.6
(c) 7.6
(d) 7.6
Section 314(a) 4.2
(b) 5.2
(c)(1) 11.4
(c)(2) 11.4
(c)(3) Not Applicable
(d) 5.2
(e) 11.5
Section 315(a) 7.1
(b) 7.5
(c) 7.1
(d)(1) 7.1
(d)(2) 7.1
(d)(3) 7.1
6.5
(e) 6.11
Section 316(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(b) 6.7
Section 317(a)(1) 6.8
(a)(2) 6.9
(b) 2.4
Section 318(a) 11.1
</TABLE>
<PAGE>
INDENTURE dated as of ___________, 1998 between Sentinel Financing,
Ltd., L.P., a Florida limited partnership (the "Company") and Sterling National
Bank a national banking association as Trustee ("Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 12% Secured
Fixed Rate Notes due ____________, 2003 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1 DEFINITIONS.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by agreement or otherwise.
"AGENT" means any Registrar, Paying Agent, or co-registrar.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"COLLATERAL" has the meaning assigned to it in the Security Agreement.
"COMPANY" means the party named as such above.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.2 or such other address as the Trustee may
specify by notice to the Company.
"CUSTODIAN AGREEMENT" means the Custodian Agreement among the Company,
as debtor, the Trustee, as secured party and Loan Servicing Enterprise, as
custodian to hold certain of the Collateral to perfect secured party's interest
therein.
"DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" or "SECURITYHOLDER" means a Person in whose name a Security
is registered.
"INDENTURE" means this Indenture as amended from time to time.
"INTEREST PAYMENT DATE" means the stated due date of an installment of
interest on the Securities.
"LEGAL HOLIDAY" means a Saturday, Sunday or a day on which banking
institutions in the State of New York or Florida are not required to be open.
If a payment date occurs on a Legal Holiday, such payment date shall occur the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"LIEN" means any mortgage, pledge, lien, encumbrance, charge or
adverse claim affecting title or resulting in a charge against real or personal
property or a security interest of any kind (including any conditional sale or
other title retention agreements, any lease in the nature thereof, any option or
other agreement to sell and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"OFFICER" means Ivan Hoser or Melvin Gilbert or such other persons as
the Company may designate from time to time by sending notice to the Trustee in
accordance with Section 10.2 herein.
"OFFICERS' CERTIFICATE" means a certificate signed by any two
Officers.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"RECORD DATES" means the 5th day of each month.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Securities described above issued under this
Indenture.
2
<PAGE>
"SECURITY AGREEMENT" means the Security Agreement, of even date
hereof, between the Company, as debtor, and the Trustee, as secured party.
"SECURITY DOCUMENTS" means the Security Agreement and the Custodian
Agreement.
"SECURITYHOLDER" or "HOLDER" means a Person in whose name a Security
is registered.
"SUBSIDIARY" of any specified Person means (i) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person
or by such Person and a Subsidiary or Subsidiaries of such Person or by a
Subsidiary or Subsidiaries of such Person or (ii) any other Person (other than a
corporation) in which such Person or Person and a Subsidiary or Subsidiaries of
such Person or a Subsidiary or Subsidiaries of such Person directly or
indirectly, at the date of determination thereof has at least majority ownership
interest.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"TRUST OFFICER" means the any officer of the Trustee assigned by the
Trustee from time to time to administer its corporate trust matters.
Section 1.2 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
TERM Defined in
---- Section
----------
<S> <C>
"AFFILIATE TRANSACTION". . . . . . . . . . . . . . . . . . . . . . . . . .4.14
"BANKRUPTCY LAW" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"CUSTODIAN". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"EVENT OF DEFAULT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"OPTIONAL REDEMPTION". . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
"PAYING AGENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"REDEMPTION DATE". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
"REDEMPTION PRICE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
"REGISTRAR". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"TRANSFER DATE". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"U.S. GOVERNMENT OBLIGATIONS". . . . . . . . . . . . . . . . . . . . . . . 8.1
</TABLE>
3
<PAGE>
Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"COMMISSION" means the SEC;
"INDENTURE SECURITIES" means the Securities;
"INDENTURE SECURITY HOLDER" means a Securityholder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the Securities means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles;
(3) references to "generally accepted accounting principles" shall
mean generally accepted accounting principles in effect as of the time when and
for the period as to which such accounting principles are to be applied;
(4) "or" is not exclusive;
(5) words in the singular include the plural, and in the plural
include the singular;
4
<PAGE>
(6) provisions apply to successive events and transactions; and
(7) "herein", "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
Subdivision.
ARTICLE 2
THE SECURITIES
Section 2.1 FORM AND DATING.
The Securities, and the Trustee's certificate of authentication, shall
be substantially in the form of Exhibit A, which is part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company shall approve the form of the Securities
and any notation, legend or endorsement on them. Each Security shall be dated
the date of its authentication.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture.
Section 2.2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to the Security for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate or cause to be authenticated Securities
for original issue in the aggregate principal amount of up to $15,000,000. The
Company shall deliver to the Trustee prior to the issuance of the Securities a
written order of the Company signed by two Officers specifying the amount of
Securities to be authenticated and the date on which the
5
<PAGE>
original issue of Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $15,000,000 except
as provided in Section 2.7.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such authenticating agent. An authenticating
agent has the same rights as an Agent to deal with the Company or an Affiliate.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, City of New
York, State of New York and in such other locations as it shall determine, (i)
an office or agency where Securities may be presented for registration of
transfer or for exchange ("Registrar") and (ii) an office or agency where
Securities may be presented for payment ("Paying Agent"). The Registrar shall
keep a register of the Securities and of their transfer and exchange. The
Company may appoint one or more co-registrar, which shall include any
authenticating agent appointed pursuant to Section 2.2 and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent. The Company may change any Registrar or Paying Agent without
prior notice of any Securityholder. The Company shall give the Trustee 15 days
notice if it decides to appoint or change a Registrar or Paying Agent. The
Company shall notify the Trustee of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The Company
may act as Registrar or Paying Agent.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such agent, and shall furnish a
copy of each such agreement to the Trustee.
Section 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent will hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities (whether such money has
been paid to it by the Company or any other obligor on the securities), and such
Paying Agent will notify the Trustee in writing of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying
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Agent to pay all money held by it to the Trustee. Upon payment over to the
Trustee, the Paying Agent (if other than the Company) shall have no further
liability for the money. If the Company acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the
Securityholders and Trustee all money held by it as Paying Agent.
Section 2.5 SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders and otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least five
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing a list of the names and addresses of
Securityholders in such form and as of such date as the Trustee may reasonably
require, and shall otherwise comply with TIA Section 312.
Section 2.6 TRANSFER AND EXCHANGE.
Where Securities are presented to the Registrar or a co-registrar with
a request to register the transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met. To permit registrations of transfer and exchanges, the
Company shall issue and the Trustee shall authenticate Securities at the
Registrar's or co-registrar's request. Every security presented or surrendered
for registration of transfer or for exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Registrar, duly exercised by the Securityholder thereof or his attorney duly
authorized in writing. No service charge shall be made for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of any selection of Securities for redemption under
Section 3.3 and ending at the close of business on the day of selection, or (ii)
to register the transfer or exchange of any Security so selected for redemption
in whole or in part, except the unredeemed portion of any Security being
redeemed in part.
Section 2.7 REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee to the effect that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee
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shall authenticate a replacement Security if the Trustee's requirements are met,
unless either the Company or the Trustee has received actual notice that the
Security to be replaced is held by a bona fide purchaser. Either the Trustee or
the Company may require that an indemnity bond be provided before the issuance
of a replacement of a lost Security; such bond must be sufficient in the
judgment of both the Company and the Trustee to protect the Company, the
Trustee, any Agent or any authenticating agent from any loss which any of them
may suffer if such Security is replaced. The Trustee shall not be required to
bear the cost of any indemnity bond. The Company or Trustee may charge the
Holder for any tax or governmental charge which may be imposed in relation
thereto and for any other expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.8 OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser. A Security does not cease
to be outstanding because the Company or an Affiliate of the Company holds the
Security.
If Securities are considered paid under Section 4.1, they cease to be
outstanding and interest on them ceases to accrue.
Section 2.9 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement waiver or
consent, Securities owned by the Company or an Affiliate of the Company shall be
disregarded, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement
waiver or consent, only Securities which the Trustee actually knows are so owned
shall be so disregarded.
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Section 2.10 TEMPORARY SECURITIES
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare, and the Trustee shall
authenticate and deliver definitive Securities upon surrender of temporary
Securities for cancellation.
Section 2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee or, at the direction of the Trustee, the Registrar or the
Paying Agent (other than the Company or an Affiliate of the Company), and no one
else shall cancel all Securities surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall dispose of cancelled
Securities at the written direction of the Company. The Company may not issue
new Securities that it has paid or that have been delivered to the Trustee for
cancellation except as expressly permitted in this Indenture.
ARTICLE 3
REDEMPTION
Section 3.1 OPTIONAL REDEMPTION.
The Company shall have the right to redeem ("Optional Redemption") all
or part of the Securities at any time at 100% of the principal amount
outstanding ("Redemption Price") plus accrued and unpaid interest to the date of
redemption (a "Redemption Date") (subject to the right of Holders of record on a
Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date and subject to the provisions set forth in Section
3.5).
Section 3.2 NOTICES TO TRUSTEE.
If the Company elects to redeem securities pursuant to an Optional
Redemption, it shall notify the Trustee in writing of the Redemption Date and
the principal amount of Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders. In the case of any such
redemption, the Company shall deliver to the Trustee an Officer's Certificate
stating that such redemption will comply with the conditions for such
redemption.
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The Company shall give each notice provided for in this Section 3.2 at
least 45 days before the Redemption Date (unless a shorter notice period shall
be satisfactory to the Trustee). Any such notice may be cancelled at any time
prior to notice of such redemption being mailed to any Holder and shall thereby
be void and of no effect.
Section 3.3 SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed pursuant to an
Optional Redemption, the Trustee shall select Securities to be redeemed on a pro
rata basis or in such manner as it deems appropriate and fair. The Trustee
shall make the selection from outstanding Securities not previously called for
redemption within 10 days of receiving notice of redemtion from the Company.
The Trustee shall promptly notify the Company of the Securities or portions of
Securities to be called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations higher than
$1,000. Securities and portions of them it selects shall be in amounts of
$1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
Section 3.4 NOTICE OF REDEMPTION. At least 30 days but not more than 60
days before a Redemption Date, the Company shall mail a notice of redemption by
first class mail, postage prepaid, to the Trustee and each Holder whose
Securities are to be redeemed to such Holder's last address as then shown on the
registry books of the Registrar.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the redemption price, including the amount of accrued and unpaid
interest to be paid upon such redemption;
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the Redemption
Date, upon surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect the redemption
price;
(6) that interest on Securities called for redemption ceases to
accrue on and after the Redemption Date; and
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(7) that notice is being sent pursuant to this Section 3.4.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
Section 3.5 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the price set forth in the
Security plus accrued and unpaid interest to the Redemption Date. Upon
surrender to the Trustee or, if the Trustee is not the paying agent, to the
Paying Agent, such Securities called for redemption shall be paid at the
Redemption Price, including interest, if any, accrued and unpaid to the
Redemption Date, provided that if the Redemption Date is on or after a regular
Record Date on or prior to the Interest Payment Date to which such Record Date
relates, the accrued interest shall be payable to the Holder of the redeemed
Securities registered on the relevant Record Date and no additional interest
will be payable to Holders of the redeemed Securities on the Redemption Date;
and provided further, that if a Redemption Date is a Legal Holiday, payment
shall be made on the next succeeding Business Day and no interest shall accrue
for the period from such Redemption Date to such succeeding Business Day.
Section 3.6 DEPOSIT OF REDEMPTION PRICE.
At least one Business Day prior to the Redemption Date, the Company
shall deposit with the Trustee or with the Paying Agent (other than the Company)
money sufficient to pay the Redemption Price of and accrued interest on, all
Securities to be redeemed on such Redemption Date. The Trustee or the Paying
Agent shall promptly return to the Company any money so deposited which is not
required for that purpose.
Section 3.7 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Trustee
shall cancel the Security and the Company shall issue and the Trustee shall
authenticate for the Holder at the expense of the Company, a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
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ARTICLE 4
COVENANTS
Section 4.1 PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities and this Indenture.
Principal and interest shall be considered paid on the date due if the Paying
Agent (other than the Company) holds on that date money designated for and
sufficient to pay all principal and interest then due pursuant to the terms of
Section 2.4 hereof.
To the extent lawful, any installment of interest on the Notes which
is not paid when due will accrue interest at the lesser of 18%, compounded
quarterly, or the highest lawful rate of interest from the due date until paid.
Section 4.2 SEC REPORTS, FINANCIAL REPORTS.
The Company shall deliver to the Trustee within 15 days after it files
them with the SEC copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
If the Company is not subject to, or for any reason is not complying
with, the requirements of such Sections 13 or 15(d) of the Exchange Act, the
Company shall file with the Trustee, within 15 days after it would have been
required to file such with SEC, quarterly and annual reports and information,
documents or other reports comparable to that which the Company would have been
required to file with the SEC if it were subject to the requirements of Section
13 or 15(d) of the Exchange Act. Annual financial statements shall be certified
(without qualification with respect to the Company as a going concern,
qualifications resulting from the scope of the audit, or qualifications with
respect to departures from generally accepted accounting principles other than
departures which are not material and which do not cause the financial
statements to fail to accurately reflect the financial condition of the Company)
by the Company's independent public accountants. All such financial statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied (except for departures with which the accountants concur
and normal year-end adjustments, which in the opinion of the Company are
necessary for fair presentation).
The Company also shall comply with the provisions of TIA Section
314(a).
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Section 4.3 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal quarter of the Company, an Officers' Certificate stating that a
review of the activities of the Company during the preceding fiscal quarter has
been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge the Company has
kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions hereof (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he may have knowledge) and that to the best of his knowledge no event
has occurred and remains in existence by reason of which payments on account of
the principal of or interest, if any, on the Securities are prohibited or if
such event has occurred, a description of the event.
ARTICLE 5
SECURITY
Section 5.1 SECURITY AGREEMENT.
Each Securityholder, by accepting a Security, agrees to all of the
terms and provisions of the Security Documents, as the same may be in effect or
may be amended from time to time. The due and punctual payment of interest and
the principal of the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration, or otherwise, and interest on the overdue
principal of the Securities and payment and performance of all other obligations
of the Company to the Holders or the Trustee under this Indenture and the
Securities, according to the terms hereunder or thereunder, shall be secured as
provided in the Security Documents.
Section 5.2 CERTIFICATE AND OPINIONS.
The Company shall cause (a) TIA Section 314(b), relating to Opinions
of Counsel regarding the Lien of the Security Documents and (b) TIA Section
314(d), relating to the release of Collateral from the Lien of the Security
Documents and Officers' Certificates or other documents regarding fair value of
the Collateral, to be complied with to the extent applicable. Any certificate
or opinion required by TIA Section 314(d) may be made by an Officer to the
extent permitted by TIA Section 314(d).
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Section 5.3 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER
THE SECURITY DOCUMENTS.
The Trustee may, in its sole discretion and without the consent of the
Securityholders, take all actions it deems necessary or appropriate in order to
(i) enforce or effect the Security Documents and (ii) collect and receive any
and all amounts payable in respect of the obligations of the Company hereunder.
Notwithstanding the foregoing, the Trustee shall not be required to take any
action in such circumstances, except those required the the TIA.
Section 5.4 AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
SECURITY DOCUMENTS.
The Trustee is authorized to receive any funds for the benefit of
Securityholders distributed under the Security Documents and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture.
Section 5.5 TERMINATION OF SECURITY INTERESTS.
This Article 5 shall terminate upon delivery of a certificate from the
Trustee to the Custodian under the Security Documents stating that obligations
of the Securities have been paid in full.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 EVENTS OF DEFAULT.
An "Event of Default' occurs if:
(1) the Company fails to pay any installment of interest on the
Securities when the same becomes due and payable;
(2) the Company fails to pay all or any part of the principal of any
Security when the same becomes due and payable at maturity, upon redemption, by
acceleration or otherwise;
(3) the Company fails to observe or perform any covenant, condition
or agreement on the part of the Company to be observed or performed pursuant to
the Securities, the Security Documents, or this Indenture;
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(4) the Company or any Subsidiary of the Company pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(C) consents to the filing of a petition seeking reorganization
or relief under any applicable Bankruptcy Law, or to the appointment of a
receiver of it or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) admits in writing its inability to pay its debts generally
as they become due;
(5) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary in an
involuntary case,
(B) appoints a Receiver 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.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Receiver' means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
An event described in clause (3) is not an Event of Default until the
Trustee or the Holders of at least majority in principal amount of the then
outstanding Securities notify the Company and Trustee of such Default and the
Company does not cure the Default within 90 days after receipt of the notice.
The notice in either instance must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default." The Trustee shall
not be charged with knowledge of any Default unless actual notice thereof or
written notice thereof shall have been given to the Trustee by the Company, by
the Holder, by the Trustee then acting under any indenture or other instrument
under which a default shall have occurred, by the Paying Agent, or
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by the Holders of at least 50% in the aggregate amount of the Securities at the
time outstanding, provided that failure by any such party to notify the Trustee
shall not affect whether there is a Default or Event of Default and provided,
further, that the Company shall immediately notify the Trustee if it receives a
notice of default hereunder.
Section 6.2 ACCELERATION.
If an Event of Default occurs and is continuing, the Trustee by notice
to the Company, or the Holders of at least a majority in principal amount of the
then outstanding Securities by notice to the Company and the Trustee, may
declare the unpaid principal of and any accrued interest on all the outstanding
Securities to be due and payable immediately. Upon such declaration such
principal and interest shall be due and payable immediately. If an Event of
Default specified in clause (4) or (5) of Section 6.1 occurs, the unpaid
principal of and any accrued interest on the outstanding Securities shall IPSO
FACTO become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder. The Holders of a majority in
principal amount of the then outstanding Securities by notice to the Trustee may
rescind an acceleration and its consequences if (i) the rescission would not
conflict with any judgment or decree.
Section 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest on
the Securities or to enforce the performance of any provision of the Securities,
the Security Documents, or this Indenture. Notwithstanding the foregoing, the
Trustee shall not be required to take any actions after Default other than as
required by the TIA.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.4 WAIVER OF PAST DEFAULTS: POSTPONEMENT OF INTEREST PAYMENT.
The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences except a continuing Default or Event of Default in
the payment of the principal of or interest on any Security. The Holders of not
less than 75% in principal amount of the then outstanding Securities may consent
on behalf of the Holders of all such Securities to the postponement of any
interest payment for a period not exceeding three (3) years from its due date.
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Section 6.5 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that is unduly prejudicial
to the rights of other Securityholders, or would involve the Trustee in personal
liability or, in the good faith determination of the Trustee, would be unduly
prejudicial to the interests of Holders of the Securities not joining in the
giving of said direction. The Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with, or in the absence of, such
direction.
Section 6.6 LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or Trustee, or for any other remedy hereunder, unless
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of not less than a majority in principal amount of
the then outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Securities do not give the Trustee a
direction inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over another
Securityholder.
Section 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of and interest on the
Security, on or after the respective
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due dates expressed in the Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
Section 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Securities for
the whole amount of principal and interest remaining unpaid on the Securities
and interest on overdue principal and, to the extent that payment of such
interest is lawful, overdue interest, in each case at the rate per annum borne
by the Securities and such further amount as shall be sufficient to cover the
cost and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
However, the Trustee shall not be required to instutue any such suit, except as
required by the TIA.
Section 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Securityholders allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Securities), its creditors or its
property and, unless prohibited by law, or by applicable regulations, may vote
on behalf of the Holders in the election of a trustee in bankruptcy or other
Person performing similar functions and shall be entitled and empowered to
collect, receive and distribute any monies or other property payable or
deliverable on any claims and any custodian in any judicial proceeding is hereby
authorized by each Securityholder to make any and all payments to the Trustee
or, in the event that the Trustee shall consent, directly to the
Securityholders. To the extent that the payment of any compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7, shall be denied for any reason,
payment shall be secured by a senior claim (to which the Securities shall be
subordinated), and shall be paid out of, any and all distributions, dividends,
monies, securities and other properties that the Holders of the Securities may
be entitled to receive in any proceeding whether in liquidation or under any
plan of reorganization, arrangement or otherwise. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Securityholder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
Section 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
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First: to the Trustee for amounts due under Sections 6.8 or 7.7;
Second: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and
interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders.
Section 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
ARTICLE 7
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed, subject to
the terms hereof.
Section 7.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, of
which the Trustee has notice pursuant to Section 6.1 hereof, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are
adverse to the Trustee.
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(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture, but need not verify the accuracy of the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this section.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(d) Whether or not therein expressly provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability except as otherwise provided
in this Indenture. The Trustee may refuse to perform any duty or exercise any
right or power unless it receives, prior to takeing such action, an amount
sufficient, in its sole judgement, to cover the estimated costs and expenses of
such action or indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person and the
Trustee need not investigate any fact or matter stated in such document.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to Section 11.5. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel. 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, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
reasonable care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture, nor for any action
permitted to be taken or omitted hereunder by any Agent.
(e) Unless otherwise specifically provided in the Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.
(g) Any director, officer, employee or Affiliate (or director,
officer or employee of such Affiliate) of the Trustee shall be protected by the
provisions hereof, including, without limitation, the immunities and indemnities
afforded herein, to the same extent as the Trustee and shall not have any
liability hereunder.
Section 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
Section 7.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds
21
<PAGE>
from the Securities or any money paid to the Company or upon the Company's
direction under any provision hereof, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement of the Company in the
Indenture or any statement in the Securities other than its certificate of
authentication.
Section 7.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Securityholders a notice of the
Default or Event of Default within 90 days after such Default or Event of
Default. Except in the case of a default in payment of principal or interest
due on any Security, the Trustee may withhold the notice required by this
Section if and so long as the board of directors, executive committee or a trust
committee of directors and/or reasonable offices, of the Trustee determines in
good faith that withholding the notice is in the interest of the Securityholder.
Section 7.6 REPORTS BY TRUSTEE TO HOLDERS.
If required under the provisions of TIA Section 313(a), within 60
days after each December 31st commencing with the December 31st following the
date of this Indenture, the Trustee shall mail to Securityholders a brief report
dated as of such reporting date that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall notify the Trustee when the Securities are listed on
any stock exchange.
Section 7.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services as separately agreed upon. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable disbursements, advances and expenses incurred by it. Such expenses
may include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss, liability or
expense incurred by it except as set forth in the next paragraph. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
The Company shall defend the claim with counsel approved by the Trustee (which
approval shall not be unreasonably withheld) and
22
<PAGE>
the Trustee shall cooperate in such defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel.
The Company need not reimburse any expense or indemnify against any
expense or indemnity against any loss or liability incurred by the Trustee
through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee. except that held in trust to pay principal and
interest on particular Securities. Such obligation shall survive the
satisfaction and discharge of the Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Indenture and any rejection or termination of this Indenture under any
Bankruptcy Law,
Section 7.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a custodian or Receiver takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then
23
<PAGE>
outstanding Securities may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7. Notwithstanding replacement of the Trustee pursuant
to this Section 7.8, the Company's obligations under Section 7.7 hereof shall
continue for the benefit of the retiring Trustee with respect to expenses and
liabilities incurred by it prior to such replacement.
Section 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation, without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any securities
shall have been authenticated, but not delivered, by the Trustee then in office,
any such successor may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
Section 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall always have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee is subject to
TIA Section 310(b).
24
<PAGE>
Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1 TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 7.7 and 8.3 and the Trustee's and Paying
Agent's obligations under Section 8.3 shall survive) when all outstanding
Securities theretofore authenticated and issued have been delivered (other than
destroyed, lost or stolen Securities which have not been replaced or paid) to
the Trustee for cancellation and the Company has paid all sums payable
hereunder. In addition, the Company may terminate all of its obligations under
this Indenture, (except the Company's obligations under Sections 7.7, 8.3 and as
noted below) if:
(1) the Securities mature within one year or all of them are to
be called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption; and
(2) the Company irrevocably deposits in trust with the Trustee,
or, at the option of the Trustee, with a trustee satisfactory to the
Trustee and the Company under the terms of an irrevocable trust agreement
in form and substance satisfactory to the Trustee, who otherwise would be
qualified to act as Trustee under this Indenture ("Other Trustee") money
sufficient to pay principal and interest on the Securities to maturity or
redemption, as the case may be, and to pay all other sums payable by it
hereunder, and delivers to the Trustee an Officers' Certificate stating
that all conditions precedent to satisfaction and discharge of this
Indenture have been complied with, and an Opinion of Counsel to the same
effect. The Company may make the deposit only during the one-year period.
PROVIDED, HOWEVER, that the Company's obligations in Sections 2.3, 2.4, 2.5,
2.6, 2.7, 4.1, 7.7, 7.8, 8.3 and 8.4 shall survive until the Securities are no
longer outstanding. Thereafter, only the Company's obligations in Sections 7.7
and 8.3 and the Trustee's and Paying Agent's obligations under Section 8.3 shall
survive.
25
<PAGE>
After cancellation and full payment of all the Securities or
satisfaction of either (1) or (2) above, and at the Company's expense, the
Trustee upon request shall acknowledge in writing the discharge of the Company's
obligations under this Indenture except for those surviving obligations
specified above. If the Trustee shall require, the Company shall deliver to the
Trustee an Officer's Certificate and an Opinion of Counsel, each stating that
(i) all conditions precedent herein provided for relating to the discharge of
this Indenture have been complied with and (ii) such discharge will not result
in a breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company is a party or by
which it is bound.
Section 8.2 APPLICATION OF TRUST MONEY.
The Trustee or Other Trustee shall hold in trust money deposited with
it pursuant to Section 8.1. It shall apply the deposited money through the
Paying Agent and in accordance with this Indenture to the payment of principal
of and interest on the Securities.
Section 8.3 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years and six months after the date upon
which such payment shall have become due; provided, however, that the Company
shall have first caused notice of such payment to be mailed to each
Securityholder entitled thereto no less than 30 days prior to such payment.
After payment to the Company, Securityholders entitled to the money must look to
the Company for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
Section 8.4 REINSTATEMENT.
If the Trustee, Paying Agent or Other Trustee is unable to apply any
money in accordance with Section 8.2 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.1 until such time as the Trustee, Paying Agent, or Other
Trustee is permitted to apply all such money in accordance with Section 8.2;
PROVIDED, HOWEVER, that if the Company makes any payment of interest on or
principal of any security following the reinstatement of its obligations, the
Company shall be subrogated to the rights of
26
<PAGE>
the Holders of such securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.1 WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend this Indenture or the Securities
without the consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency or make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause shall not adversely
affect the interests of any Holder in any respect;
(2) to comply with any requirements of the SEC in connection
with the qualification of this Indenture under the TIA;
(3) 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;
(4) to provide for guarantors of the Securities;
(5) to evidence the succession of another Person to the Company,
and the assumption by any such successor of the obligations of the Company,
herein and the Securities or in accordance with Article 5;
(6) to provide for uncertificated Securities in addition to
certificated Securities; or
(7) to make any change that does not adversely affect the legal
rights hereunder of any Securityholder.
The Trustee is hereby authorized, upon receipt by the Trustee of the
documentation described in Section 9.6, to join with the Company in the
execution of any Supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into such supplemental indenture which in its reasonable opinion affects its own
rights, duties or immunities under this Indenture or otherwise.
27
<PAGE>
Section 9.2 WITH CONSENT OF HOLDERS.
Subject to Section 6.7, the Company and the Trustee may amend this
Indenture or the Securities with the written consent of the Holders of at least
a majority in principal amount of the then outstanding Securities. Subject to
Sections 6.4 and 6.7, the Holders of a majority in principal amount of the then
outstanding Securities may also waive compliance in a particular instance by the
Company with any provision of this Indenture or the securities.
However, without the consent of each Securityholder affected, an
amendment or waiver under this Section may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment or waiver;
(2) reduce the rate of or change the time for payment of
interest, including default interest, on any Security;
(3) reduce the principal of or change the fixed maturity of any
Security or alter the redemption provisions with respect thereto;
(4) make any Security payable in money other than that stated in
the Security;
(5) make any change in Section 6.4, 6.7 or 9.2 (this sentence);
(6) waive a default in the payment of the principal of, or
interest on any Security; or
(7) release any Collateral except by sales and as otherwise
permitted in the Security Documents.
To secure a consent of the Holders under this Section it shall not be
necessary for the Holders to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to Securityholders a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity or any such supplemental indenture or waiver.
28
<PAGE>
After an amendment, supplement or waiver under this Section 9.2 or
Section 9.4 becomes effective, it shall bind each Holder.
Section 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment, waiver or supplement to this Indenture or the
Securities shall comply with the TIA as then in effect.
Section 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security by written notice to the
Company or Person designated by the Company as the Person to whom contents
should be sent if such revocation is received by the Company or such person
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented to the amendment supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver which record date shall be the date so fixed by the Company
notwithstanding the provisions of the TIA. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies)
and only those Persons, shall be entitled.to consent to such amendment or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be Holders after such record date. No consent shall be valid or effective
for more than 90 days after such record date.
Section 9.5 NOTATION ON OR EXCHANGE OF SECURITIES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Security thereafter authenticated. The Company in
exchange for all Securities may issue and the Trustee shall authenticate new
Securities that reflect the amendment or waiver.
Section 9.6 TRUSTEE PROTECTED.
The Trustee shall execute any amendment, waiver or supplement
authorized pursuant to this Article; PROVIDED, HOWEVER, that the Trustee may,
but shall not be obligated to execute any such amendment, waiver or supplement
which affects the Trustee's own rights, duties, liabilities or immunities under
this Indenture, the Trustee shall be entitled to receive and shall be fully
protected in relying upon, an officers' Certificate and an Opinion of Counsel as
29
<PAGE>
conclusive evidence that such amendment, waiver or supplement is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company in accordance with its terms.
ARTICLE 10
MISCELLANEOUS
Section 10.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control. If any provision of this Indenture
modifies or excludes any provision of the TIA which may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.
Section 10.2 NOTICES.
Any notice or other communication to the Company or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if, made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested addressed as follows;
if to the Company:
Sentinel Financing, Ltd., L.P.
-----------------------------
-----------------------------
-----------------------------
Telephone:
-------------------
Telecopy:
--------------------
Attention:
-------------------
30
<PAGE>
if to the Trustee:
Sterling National Bank
430 Park Avenue
New York, NY 10022
Telephone: (212) 826-8044
Telecopy: (212) 486-1296
Attention: Jerrold Gilbert
Any party by notice to each other party may designate additional or
different addresses as shall be provided in writing by such party. Any notice
or communication to any party, shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him or her by first-class mail or other equivalent means at his or her
address as it appears on the registration books of the Registrar and shall be
sufficient given to him or her if so mailed within the time prescribed for the
giving of such notice. Any notice or communication shall also be mailed to any
Person described in TIA Section 313(c) to the extent required by the TIA.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice to any Securityholder in any
manner, such notice may be waived in writing by the person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Securityholders shall be filed
with the Trustee.
In case it shall be impracticable to give notice to any party by mail,
whether due to the suspension of regular mail service or any other reason, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notice for every purpose hereunder.
Section 10.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders wishing to communicate with other Securityholders with
respect to their rights under this Indenture or the Securities shall have the
rights and benefits granted by TIA Section 312(b). The Company, the Trustee,
the Registrar and anyone other party who provides
31
<PAGE>
information to Securityholders un TIA Section 312(b) shall have all the
protection afforded by TIA Section 312(c).
Section 10.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements
set forth in Section 11.5) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture or required by the
TIA relating to the proposed action have been met; and
(b) an Opinion of Counsel (which shall include the statements
set forth in Section 11.5) stating that, in the opinion of such counsel, all
such conditions precedent have been met.
Section 10.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION;
CONSOLIDATION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been met; and
(4) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been met; PROVIDED, HOWEVER,
that with respect to matters of fact an opinion of counsel may rely on an
Officers' Certificate.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated in one
instrument.
32
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Section 10.6 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 10.7 NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder, limited partner, as such,
of the Company shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. Each Securityholder by
accepting a Security waives and releases all such liability.
Section 10.8 COUNTERPARTS.
This Indenture may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Section 10.9 GOVERNING LAW.
The internal laws of the State of New York shall govern and be used to
construe this Indenture and the Securities, without regard to the conflicts of
laws provisions thereof.
Section 10.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
Section 10.11 SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 10.12 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Securityholders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 10.13 SEVERABILITY.
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<PAGE>
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way he affected or impaired thereby.
Section 10.14 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
34
<PAGE>
SIGNATURES
Dated: as of , 1998 SENTINEL FINANCING, LTD., L.P.
------------
(SEAL) By:
----------------------------------
Name:
Title:
Attest:
- -----------------------------------
Dated: as of
---------------------
STERLING NATIONAL BANK as Trustee
(SEAL)
By:
----------------------------------
Name:
Vice President
Attest:
- -----------------------------------
Trust Officer
35
<PAGE>
EXHIBIT A
(Face of Security)
No. $
SENTINEL FINANCING, LTD., L.P.
promises to pay to
or registered assigns,
the principal sum of Dollars on
-------------
12% SECURED FIXED RATE NOTES
DUE , 2003
-----------
Interest payment Dates:
Record Dates:
Dated:
-----------------------------------
By:
--------------------------------
By:
--------------------------------
(SEAL)
Authenticated to be one of the
Notes described in the Indenture
referred to herein:
By:
--------------------------------
Authorized Signature
A-1
<PAGE>
(Back of Security)
12% Secured Fixed Rate Notes due ______________, 2003
1. INTEREST. SENTINEL FINANCING, LTD., L.P., a Florida limited
partnership (the "Company"), promises to pay interest on the principal amount of
this Security at a rate of 12% per annum from the date of issuance, payable
monthly on the 15th day of each month commencing on _____________, 1998, to the
Persons in whose names such Notes are registered at the close of business on the
Record Date next preceding the Interest Payment Date. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months. To the
extent lawful, any installment of interest on the Notes which is not paid when
due shall accrue interest at the lesser of 18% compounded quarterly, or the
highest lawful rate of interest from the due date until paid.
2. METHOD OF PAYMENT. Principal of, and interest on the Securities
will be payable, at the Company's office. The Company will pay principal and
interest in money of the United States that is legal tender for payment of
public and private debts. At the option of the Company, payment of principal
and interest may be made by check mailed to the Holder at the address set forth
in the registry books of the Company.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without notice to any Securityholder. The Company or any
Subsidiaries of the Company may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an Indenture
dated as of _____________, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture.
The Securities are subject to, and qualified by, all such terms, certain of
which are summarized herein, and Securityholders are referred to the Indenture
and such Act for a statement of such terms. The Securities are secured
obligations of the Company limited to $15,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION. All or any part of the Securities may be
redeemed by the Company, in whole or part, at any time, upon not less than 30 or
more than 60 days' notice at a redemption price equal to 100% of the principal
amount plus accrued interest to the Redemption Date.
B-1
<PAGE>
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. On and after the Redemption Date interest ceases to accrue
on Securities or portions of them called for redemption. In the event of a
partial redemption of the Notes, the Notes will be redeemed in whole or part
will be selected on a pro rata basis or in such other manner as the Company
deems appropriate and fair.
If this Security is redeemed subsequent to a record date with respect
to any interest payment date specified above and on or prior to such interest
payment date, then any accrued interest will be paid to the Person in whose name
this Security is registered at the close of business on such record date.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption. Also, it need not
exchange or register the transfer of any Securities for a period of 15 days
before a selection of Securities to be redeemed.
8. PERSONS DEEMED OWNERS. The registered holder of a Security may
be treated as its owner for all purposes.
9. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the holders of at
least a majority in principal amount of the then outstanding Securities.
Without.the consent of any Securityholder, the Indenture or the securities may
be amended to cure any ambiguity, defect or inconsistency, to comply with the
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, to add covenants of the Company for the benefit of the Holders,
to provide guarantors of the Securities, to evidence succession of another
Person to the Company, to provide for uncertificated Securities in addition to
certificated Securities or to make any change that does not adversely affect the
rights of any Securityholder.
10. DEFAULTS AND REMEDIES . An Event of Default occurs if: (I) the
Company fails to pay any installment of interest on the Securities when the same
becomes due and payable; (ii) the Company fails to pay all or any part of the
principal of any Security when the same becomes due and payable at maturity,
upon redemption, by acceleration or otherwise; (iii) the Company fails to
observe or perform any covenant, condition or agreement on the part of the
Company to be observed or performed pursuant to the Securities, the Security
Documents, or the Indenture (iv) the Company or any Subsidiary of the Company
pursuant to or within the meaning
B-2
<PAGE>
of any Bankruptcy Law: (a) commences a voluntary case or proceeding, (b)
consents to the entry of an order for relief against it in an involuntary case
or proceeding, (c) consents to the filing of a petition seeking reorganization
or relief under any applicable Bankruptcy Law, or to the appointment of a
receiver of it or for all or substantially all of its property, (d) makes a
general assignment for the benefit of its creditors, or (e) admits in writing
its inability to pay its debts generally as they become due; or (v) a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(a) is for relief against the Company or any Subsidiary in an involuntary case,
(b) appoints a Receiver of the Company for all or substantially all of its
property, or (c) orders the liquidation of the Company, and any such order or
decree under (v) herein remains unstayed and in effect for 90 days.the Company
fails to pay any payment of interest on any Security when the same becomes due
and payable; the Company receives written notice from payment of the principal
of any Security when the same becomes due and payable at maturity, upon
redemption or otherwise; and certain events of bankruptcy or insolvency. If an
Event of Default occurs and is continuing, the Trustee or the holders of at
least a majority in principal amount of the then outstanding Securities may
declare all the Securities to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency all outstanding securities become due and payable immediately without
further action or notice. Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, holders of a majority in principal amount of the
then outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Securityholders notice of any
continuing default (except a default in payment of principal or interest) if it
determines that withholding notice is in their interests. The Trustee is only
deemed to have knowledge of a default or Event of Default under certain
circumstances set forth in the Indenture. The Company must furnish an annual
compliance certificate to the Trustee.
11. SECURITY. The due and punctual payment of interest and principal
of the Securities when and as the same shall be due and payable, whether at
maturity, by acceleration, or otherwise, and the interest on the overdue
principal of the Securities and payment and performance of all other obligations
of the Company to Holders or the Trustee under the Indenture and the Securities
shall be secured as provided in the Security Documents.
12. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
13. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
B-3
<PAGE>
14. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
15. INDENTURE CONTROLS. Nothing contained herein shall in any way be
construed to impose any duties upon the Trustee beyond those contained in the
Indenture. All immunities, indemnities, exceptions from liability and other
provisions of the Indenture insofar as they relate to the Trustee shall apply to
this Security and are incorporated herein.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture, which has in it the text of this
Security in larger type. Request may be made to:
SENTINEL FINANCING, LTD., L.P.
210 North University Drive, Suite 800
Coral Springs, Florida 33071
B-4
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________________
_____________________________________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
------------------ -----------------------------------
(Sign exacting as your name appears on the other side of this Security)
Signature Guarantee.
C-1
<PAGE>
EXHIBIT 4.5
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of ____________, 1997 by and between
SENTINEL FINANCING, LTD., L.P., a Florida limited partnership (the "Company")
and [ ] (the "Selling Agent") and GREATER BAY TRUST COMPANY (the
"Escrow Agent").
WHEREAS, the Company proposes to sell a minimum of $1,000,000 and a
maximum of $15,000,000 principal amount of 12% Secured Fixed Rate Notes due 2002
(the "Notes"), as described in the Company's Registration Statement on Form SB-2
as declared effective by the Securities and Exchange Commission on __________,
1997 ("Registration Statement") in denominations of $1,000;
WHEREAS, the Notes are being offered and sold to investors by the
Selling Agent, pursuant to the Securities Act of 1933, and pursuant to
registration or exemptions from registration under state securities laws;
WHEREAS, the offering of the Notes will terminate on ____________
subject to extension to ________________ in the discretion of the Company (the
"Termination Date") and if acceptable subscriptions to purchase a minimum of
$1,000,000 principal amount of Notes have not been received by the Company on or
before the Termination Date, no Notes will be sold and all payments made by
subscribers will be refunded by the Escrow Agent as provided for herein; and
WHEREAS, with respect to all subscription payments received by
subscribers, the Company proposes to establish an escrow account with the Escrow
Agent at its offices at 400 Emerson Street, Palo Alto, California 94301.
NOW, THEREFORE, it is agreed as follows:
1. ESTABLISHMENT OF ESCROW. The Escrow Agent hereby agrees to
receive and disburse the proceeds from the offering of the Notes and any
interest earned thereon in accordance herewith.
2. DEPOSIT OF ESCROWED PROPERTY. The Selling Agent, on behalf of
the subscribers of the Notes, shall from time to time, cause to be wired to or
deposited with the Escrow Agent funds or checks of the subscribers delivered in
payment for the Notes (the "Escrowed Property"). Any checks delivered to the
Escrow Agent pursuant to the terms hereof shall be made payable to or endorsed
to the order of Greater Bay Trust/Sentinel Escrow. Subject to Section 3, the
Escrow Agent upon receipt of such checks shall present such checks for payment
to the drawee-bank under such checks. Any checks not honored by the drawee-bank
thereunder after the first presentment for payment shall be returned to the
Company in the same manner notices are delivered pursuant to Section 5. Upon
receipt of funds or checks from the Selling Agent, the Escrow Agent shall credit
such funds and the amount of such checks to an interest-bearing account (the
"Escrow Account) held by the
<PAGE>
Escrow Agent. If following the credit of the amount of any check to the Escrow
Account such check is dishonored, the Escrow Agent shall debit the Escrow
Account for the amount of such dishonored check.
3. LIST OF SUBSCRIBERS. The Selling Agent shall furnish or cause to
be furnished to the Escrow Agent, at the time of each deposit of funds or checks
pursuant to Section 2, a list, substantially in the form of EXHIBIT A hereto,
containing the name of, the address of, number of Notes subscribed for by, the
subscription amount delivered to the Escrow Agent on behalf of and the social
security number, if applicable, of, each subscriber whose funds are being
deposited, and to which is attached a completed W-9 form (or, in the case of any
subscriber who is not a United States citizen or resident, a W-8 form) for each
listed subscriber. The Escrow Agent shall notify the Selling Agent and the
Company of any discrepancy between the subscription amounts set forth on any
list delivered pursuant to this Section 3 and the subscription amounts received
by the Escrow Agent. The Escrow Agent is authorized to revise such list to
reflect the actual subscription amounts received and the release of any
subscription amounts pursuant to Section 4. Any provision of this Agreement to
the contrary notwithstanding, if any funds delivered to the Escrow Agent for
deposit are not accompanied by such list with respect to such funds, the Escrow
Agent shall not have any obligation to deposit such funds or invest such funds
until the applicable list has been furnished to the Escrow Agent.
4. WITHDRAWAL OF SUBSCRIPTION AMOUNTS.
(a) If the Escrow Agent shall receive a notice, substantially in
the form of EXHIBIT B hereto (an "Offering Termination Notice"), from the
Company, the Escrow Agent shall, promptly after receipt of such Offering
Termination Notice and the clearance of all checks received by the Escrow Agent
as Escrowed Property, send to each subscriber listed on the list held by the
Escrow Agent pursuant to Section 3 whose total subscription amount shall not
have been released pursuant to paragraph (b) or (c) of this Section 4 in the
manner set forth in paragraph (d) of this Section 4, a check to the order of
such subscriber in the amount of the remaining subscription amount plus any
accrued interest thereon held by the Escrow Agent as set forth on such list held
by the Escrow Agent. The Escrow Agent shall notify the Company and the Selling
Agent in writing promptly after the distribution of such funds to the
subscribers.
(b) In the event that (i) a minimum of $1,000,000 principal
amount of Notes have been subscribed for and funds in respect thereof shall have
been deposited with the Escrow Agent on or before the Termination Date and (ii)
no Offering Termination Notice shall have been delivered to the Escrow Agent,
the Company and the Selling Agent from time to time may deliver to the Escrow
Agent a joint notice, substantially in the form of EXHIBIT C hereto (a "Closing
Notice"), designating the date on which Notes are to be sold and delivered to
the subscribers thereof (a "Closing Date"), which date shall not be earlier than
the clearance of any checks received by the Escrow Agent as Escrowed Property,
the proceeds of which are to be distributed on such Closing Date, and
identifying the subscribers and the number of Notes to be sold to each
subscriber on such Closing Date not
<PAGE>
more than seven (7) business days prior to such Closing Date. The Escrow Agent
after receipt of such Closing Notice and the clearance of such checks shall, pay
to the Company on such Closing Date, in federal or other immediately available
funds and otherwise in the manner specified by the Company in such Closing
Notice, an amount equal to the aggregate of the purchase price for the Notes
purchased by each subscriber identified in such Closing Notice for the Notes to
be sold on such Closing Date as set forth on the list held by the Escrow Agent
pursuant to Section 3 together with any and all interest on the Escrowed
Property, and shall return to each subscriber a check in the amount of funds
delivered by each subscriber in excess of the purchase price per share (the
"Excess Funds"), as more fully set forth on the Closing Date.
(c) If at any time and from time to time prior to the release of
any subscriber's total subscription amount pursuant to paragraph (a) or (b) of
this Section 4 from escrow, the Company or the Selling Agent shall deliver to
the Escrow Agent a notice, substantially in the form of EXHIBIT D hereto (a
"Subscription Termination Notice"), to the effect that any or all of the
subscriptions of such subscriber have been rejected by the Company (a "Rejected
Subscription"), the Escrow Agent shall, promptly after receipt of such
Subscription Termination Notice and, if such subscriber delivered a check in
payment of its Rejected Subscription, after the clearance of such check, send to
such subscriber, in the manner set forth in paragraph (d) of this Section 4, a
check to the order of such subscriber in the amount of such Rejected
Subscription amount, together with interest earned on such amount, if any.
(d) For the purposes of this Section 4, any check that the
Escrow Agent shall be required to send to any subscriber shall be sent to such
subscriber by first class mail, postage prepaid, at such subscriber's address
furnished to the Escrow Agent pursuant to Section 3.
5. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be (a) delivered by hand or
(b) sent by mail, registered or certified, with proper postage prepaid, and
addressed as follows:
If to the Company, to:
Sentinel Financing, Ltd., L.P.
601 Gateway Boulevard
Suite 260
South San Francisco, CA 94080
Attention: Jonathon W. Hollandsworth
Phone: (650) 869-____
Fax: (650) 869-3700
3
<PAGE>
If to the Selling Agent, to:
Banc Services Corporation
600 Peachtree Parkway, Suite 114
Cumming, GA 30131
Attention: Tim Moody
Phone: (770) 889-2230
Fax: (770) 889-2257
If to the Escrow Agent, to:
Greater Bay Trust Company
400 Emerson Street
Palo Alto, CA 94301
Attention: Anna Paiva
Phone: (650) 614-5720
Fax: (650) 473-1326
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. All such
notices and communications, if mailed, shall be effective when deposited in the
mails, except that notices and communications to the Escrow Agent and notices of
changes of address shall not be effective until received.
6. CONCERNING THE ESCROW AGENT. To induce the Escrow Agent to act
hereunder, it is further agreed by the Company and Selling Agent that:
(a) The Escrow Agent shall not be under any duty to give the
Escrowed Property held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed by the Company in writing. The parties acknowledge
that the Escrow Agent shall not be responsible for any diminution in escrowed
funds due to losses resulting from investments. Uninvested funds held hereunder
shall not earn or accrue interest.
(b) This Escrow Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Escrow Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement.
(c) The Escrow Agent shall not be liable, except for its own
gross negligence or willful misconduct, and, except with respect to claims based
upon such gross
4
<PAGE>
negligence or willful misconduct that are successfully asserted against the
Escrow Agent, the other parties hereto shall jointly and severally indemnify and
hold harmless the Escrow Agent (and any successor Escrow Agent) from and against
any and all losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys' fees and disbursements, arising out of and in
connection with this Escrow Agreement. The costs and expenses of enforcing this
right of indemnification shall also be paid by the other parties hereto.
Without limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including without limitation
any liability for any delays (not resulting from gross negligence or willful
misconduct) in the investment or reinvestment of the Escrowed Property, or any
loss of interest incident to any such delays.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Escrow Agreement and shall not be
liable for any action taken or omitted in good faith and in accordance with such
advice.
(f) The Escrow Agent does not have any interest in the Escrowed
Property deposited hereunder but is serving as escrow holder only. Any payments
of income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The parties hereto will
provide the Escrow Agent with appropriate W-9 forms for tax I.D., number
certification, or non-resident alien certifications.
This paragraph (f) and paragraph (c) of this Section 6 shall
survive notwithstanding any termination of this Escrow Agreement or the
resignation of the Escrow Agent.
(g) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectibility of any security or other documents or
instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any
party as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
5
<PAGE>
(i) The Escrow Agent (and any successor escrow agent) at any
time may be discharged from its duties and obligations hereunder by the delivery
to it of notice of termination signed by both the Company and the Selling Agent
or at any time may resign by giving written notice to such effect to the Company
and the Selling Agent. Upon any such termination or resignation, the Escrow
Agent shall deliver the Escrowed Property to any successor escrow agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction if no such successor escrow agent is agreed upon, whereupon the
Escrow Agent shall be discharged of and from any and all further obligations
arising in connection with this Escrow Agreement. The termination or
resignation of the Escrow Agent shall take effect on the earlier of (i) the
appointment of a successor (including a court of competent jurisdiction) or (ii)
the day that is 30 days after the date of delivery: (A) to the Escrow Agent of
the other parties' notice of termination or (B) to the other parties hereto of
the Escrow Agent's written notice of resignation. If at that time the Escrow
Agent has not received a designation of a successor escrow agent, the Escrow
Agent's sole responsibility after that time shall be to keep the Escrowed
Property safe until receipt of a designation of successor escrow agent or a
joint written disposition instruction by the other parties hereto or an
enforceable order of a court of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the contents thereof.
(k) In the event of any disagreement among or between the other
parties hereto and/or the subscribers of the Notes resulting in adverse claims
or demands being made in connection with the Escrowed Property, or in the event
that the Escrow Agent in good faith is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the Escrowed Property
until the Escrow Agent shall have received (i) a final and non-appealable order
of a court of competent jurisdiction directing delivery of the Escrowed Property
or (ii) a written agreement executed by the other parties hereto and consented
to by the subscribers directing delivery of the Escrowed Property, in which
event the Escrow Agent shall disburse the Escrowed Property in accordance with
such order or agreement. Any court order referred to in (i) above shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to the Escrow Agent to the effect that said court order is final and
non-appealable. The Escrow Agent shall act on such court order and legal
opinions without further question.
(l) As consideration for its agreement to act as Escrow Agent as
herein described, the other parties hereto, jointly and severally, agree to pay
the Escrow Agent fees determined in accordance with the terms set forth on
EXHIBIT E hereto (and made a part of this Escrow Agreement as if herein set
forth). In addition, the other parties hereto, jointly and severally, agree to
reimburse the Escrow Agent for all reasonable expenses, disbursements and
advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and disbursements of its
counsel).
6
<PAGE>
(m) The other parties hereto irrevocably (i) submit to the
jurisdiction of any Florida state or federal court in any action or proceeding
arising out of or relating to this Escrow Agreement, (ii) agree that all claims
with respect to such action or proceeding shall be heard and determined in such
Florida state or federal court and (iii) waive, to the fullest extent possible,
the defense of any inconvenient forum. The other parties hereby consent to and
grant any such court jurisdiction over the persons of such parties and over the
subject matter of any such dispute and agree that delivery or mailing of process
or other papers in connection with any such action or proceeding in the manner
provided hereinabove, or in such other manner as may be permitted by law, shall
be valid and sufficient service thereof.
(n) No printed or other matter in any language (including,
without limitation, the Registration Statement, notices, reports and promotional
material) which mentions the Escrow Agent's name or the rights, powers, or
duties of the Escrow Agent shall be issued by the other parties hereto or on
such parties' behalf unless the Escrow Agent shall first have given its specific
written consent thereto. The Escrow Agent hereby consents to the use of its
name and the reference to the escrow arrangement in the Registration Statement.
7. MISCELLANEOUS. (a) This Escrow Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their respective
successors and assigns, heirs, administrators and representatives, and the
subscribers of the Notes and shall not be enforceable by or inure to the benefit
of any other third party except as provided in paragraph (i) of Section 6 with
respect to the termination of, or resignation by, the Escrow Agent. No party
may assign any of its rights or obligations under this Escrow Agreement without
the written consent of the other parties.
(b) This Escrow Agreement shall be construed in accordance with
and governed by the internal law of the State of California (without reference
to its rules as to conflicts of law).
(c) This Escrow Agreement may only be modified by a writing
signed by all of the parties hereto and consented to by the subscribers of the
Notes adversely affected by such modifications. No waiver hereunder shall be
effective unless in a writing signed by the party to be charged.
(d) This Escrow Agreement shall terminate upon the payment
pursuant to Section 4 of all amounts held in the Escrow Account.
(e) The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections are to Sections contained herein.
(f) This Escrow Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and the
same
7
<PAGE>
instrument: provided that, although executed in counterparts, the executed
signature pages of each such counterpart may be affixed to a single copy of this
Agreement which shall constitute an original.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
SENTINEL FINANCING LTD., L.P.
By: Sentinel Acceptance Corporation
General Partner
By:
---------------------------------------
Jonathon W. Hollandsworth
President
By: BANC SERVICES CORPORATION
By:
----------------------------------------
Timothy C. Moody
Partner
By: GREATER BAY TRUST COMPANY
By:
----------------------------------------
Hall Palmer
Executive Vice President
& Senior Trust Officer
8
<PAGE>
EXHIBIT B
[Form of Offering Termination Notice]
Greater Bay Trust Company
400 Emerson Street
Palo Alto, CA 94301
Attention: Anna Paiva
Dear ________________:
Pursuant to Section 4(a) of the Escrow Agreement dated as of ________,
____ (the "Escrow Agreement") among Sentinel Financing, Ltd., L.P. (the
"Company"), [_______________________] and you, the Company hereby notifies you
of the termination of the offering of the Notes (as that term is defined in the
Escrow Agreement) and directs you to make payments to subscribers provided for
in Section 4(a) of the Escrow Agreement.
Very truly yours,
SENTINEL FINANCING, LTD., L.P.
By: Sentinel Acceptance Corporation
General Partner
By:
------------------------------
Jonathon W. Hollandsworth
President
B-1
<PAGE>
EXHIBIT C
[Form of Closing Notice]
Greater Bay Trust Company
400 Emerson Street
Palo Alto, CA 94301
Attention: ______________________
Dear ________________:
Pursuant to Section 4(b) of the Escrow Agreement dated as of ________,
____ (the "Escrow Agreement") among Sentinel Financing, Ltd., L.P. (the
"Company"), [___________________] and you, the Company hereby certifies that it
has received subscriptions for the minimum of $1,000,000 principal amount of
Notes (as that term is defined in the Escrow Agreement) and the Company will
sell and deliver [$________ principal amount] Notes to the subscribers thereof
at a closing to be held on [_______________, ____] (the "Closing Date"). The
names of the subscribers concerned, the number of Notes subscribed for by each
of such subscribers, the related subscription amounts [and the Excess Funds] are
set forth on the schedule annexed hereto.
C-1
<PAGE>
We hereby request that the aggregate subscription amount, other than
the Excess Funds, be paid to us as follows:
[To be inserted].
Very truly yours,
SENTINEL FINANCING, LTD., L.P.
By: Sentinel Acceptance Corporation
General Partner
By:
---------------------------------
Jonathon W. Hollandsworth
President
UNDERWRITER
By:
---------------------------------------
Name:
Title:
C-2
<PAGE>
EXHIBIT D
[Form of Subscription Termination Notice]
Greater Bay Trust Company
400 Emerson Street
Palo Alto, CA 94301
Attention: Anna Paiva
Dear ________________:
Pursuant to Section 4(c) of the Escrow Agreement dated as of ________,
____ (the "Escrow Agreement") among Sentinel Financing, Ltd., L.P. (the
"Company"), [_______________________] (the "Selling Agent") and you, the
undersigned hereby notifies you that the following subscription(s) have been
rejected.
NUMBER OF SUBSCRIBED AMOUNT OF
NAME OF SUBSCRIBER(S) NOTES REJECTED REJECTED SUBSCRIPTION
Very truly yours,
D-1
<PAGE>
EXHIBIT E
Fee Schedule
Escrow Fee: $1,000.00
E-1
<PAGE>
EXHIBIT A
SUMMARY OF CASH RECEIVED
NEW PARTICIPANT DEPOSIT
<TABLE>
<CAPTION>
Deposit Date: Date
------------------------------
Investment Date: List Number
----------------------
Batch Number: Page of
---------------- ------------
Approved By
----------------------
For Bank use only
JOB#:
------------------------
TITLE:
---------------------------------------------------------------
ORIGINATING BANK AND
NAME DEPOSIT NOTES ADDRESS TAX ID NUMBER FOR BANK USE ONLY FED. REFERENCE #
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TAX CODE
EXEMPT (Y/N)
W-9 (YR) MRA
W-8 (YR)
1000(87)
- -----------------------------------------------------------------------------------------------------------------------------------
Broker Misc. Misc. II Misc. III TAX CODE
EXEMPT (Y/N)
W-9 (YR) MRA
W-8 (YR)
1000(87)
- -----------------------------------------------------------------------------------------------------------------------------------
Broker Misc. Misc. II Misc. III TAX CODE
EXEMPT (Y/N)
W-9 (YR) MRA
W-8 (YR)
1000(87)
- -----------------------------------------------------------------------------------------------------------------------------------
Broker Misc. Misc. II Misc. III TAX CODE
EXEMPT (Y/N)
W-9 (YR) MRA
W-8 (YR)
1000(87)
- -----------------------------------------------------------------------------------------------------------------------------------
Broker Misc. Misc. II Misc. III TAX CODE
EXEMPT (Y/N)
W-9 (YR) MRA
W-8 (YR)
1000(87)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT is made and entered into as of this ___ day of
________, 1998, between SENTINEL FINANCING LTD., L.P., a Florida limited
partnership (the "Debtor"), STERLING NATIONAL BANK AND TRUST COMPANY, as Trustee
(the "Secured Party") and STERLING [FINANCIAL SERVICES COMPANY] (the
"Custodian").
R E C I T A L S:
A. The debtor has duly authorized the offer and sale of secured Notes
(the "Notes") in the aggregate principal amount of up to $15,000,000 due on
________, 2003, which Notes are secured by certain Collateral as set forth in a
Security Agreement between the Debtor and the Secured Party dated ________,
1998.
B. In order to perfect the Secured Party's security interest in the
Collateral as granted under the Security Agreement, Debtor has agreed to deposit
certain of the Collateral with the Custodian subject to the terms and conditions
of this Agreement.
AGREEMENT
In consideration of the premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Security Agreement.
2. Debtor or its Agent will deposit with Custodian all original, executed
Contracts and related assignments, contracts and other documents evidencing any
rights of the Debtor in respect thereof (the "DEPOSITED COLLATERAL") within five
(5) business days of the acquisitions of the Contract or Replacement Contract by
delivery to Custodian of all such items, organized by obligor and by Vehicle,
together with a listing thereof and Custodian shall execute and deliver to
Debtor a receipt therefor. As and when a Replacement Contract is created,
Debtor shall deliver to Custodian the Replacement Contract and all of the
related documents, including the related Vehicle certificate of title, within
five (5) business days of the acquisition of the Replacement Contract together
with a listing thereof, and Custodian shall execute and deliver to Debtor a
receipt therefor. The Custodian will have sole possession, custody and control
of the Deposited Collateral on behalf of the Secured Party and shall maintain in
its sole possession the Deposited Collateral to which Custodian and its agents
will have sole access. Custodian shall keep, maintain and safeguard the
Deposited Collateral using reasonable care. The Custodian will have no
responsibility for Deposited Collateral it does not receive.
<PAGE>
3. The Custodian will release to the Debtor each Contract and related
documents including any Vehicle certificates of title constituting the Deposited
Collateral upon receipt of an affidavit signed and sworn to by a duly authorized
officer of Debtor that (a) Debtor has received or anticipates receiving within
five (5) business days payment in full from the obligor under the Contract; (b)
Debtor has sold or within two (2) business days will sell the Contract and
related documents at a price which Debtor believes in good faith is not less
than the fair value thereof, (c) Debtor requires possession of the Contract and
related documents to effect a Contract exchange pursuant to any dealer or other
recourse agreements, (d) Debtor requires possession of the Vehicle certificate
of title to repossess a Vehicle after default on a Contract, or (e) any
administrative event for which release for mailing to any state is required
under statute, rule, regulation or practice such as change in name of Vehicle
owner due to a marriage or divorce, change of address Vehicle owner, or notation
of a subordinate lien on the certificate of title. Upon a release of a Vehicle
certificate of title pursuant to clauses (b) or (d) of the preceding sentence,
the Debtor or its agent shall promptly return the Vehicle certificate of title
or new exchanged certificate of title to the Custodian upon receipt of the
reissued or exchanged Vehicle certificate of title. Upon or after any Event of
Default under the Notes or Security Agreement, the Custodian shall, upon request
of the Secured Party, promptly deliver to the Secured Party all Deposited
Collateral.
4. The Custodian undertakes to perform only such duties as are expressly
set forth herein, and no implied duties or obligations shall be read into this
Agreement against the Custodian.
5. The Custodian may without investigation act in reliance upon any
writing or instrument or signature which it, in good faith, believes to be
genuine, may assume without investigation the validity and accuracy of any
statement or assertion contained in such a writing or instrument, and may assume
without investigation that any person purporting to give any writing, notice,
advice or actions in connection with the provisions hereof has been duly
authorized to do so. The Custodian shall not be liable in any manner for the
sufficiency or correctness as to form, manner and execution, or validity of any
instrument deposited hereunder, nor as to the identity, authority or right of
any person executing the same; and the Custodian's duties hereunder shall be
limited to the safekeeping of such agreements, monies, instruments or other
documents received by it hereunder, and for the disposition of the same in
accordance herewith.
6. The Debtor hereby agrees to indemnify the Custodian and hold it
harmless from and against any and all claims, liabilities, losses, actions,
suits or proceedings at law or in equity, or any other expenses, fees or charges
of any character or nature, which it may incur or with which it may be
threatened by reason of its acting as Custodian, against any and all expenses,
including attorneys' fees and the cost of defending any action, suit or
proceeding or resisting any claim. The Custodian shall be vested with a lien on
all property deposited hereunder for indemnification, for attorneys' fees or
charges of any character or nature, which may be incurred by said Custodian by
reason of any dispute as to the correct interpretation of this Agreement or any
instructions given to the Custodian hereunder, and the Custodian shall have the
right to hold such property until and unless such additional expenses, fees and
charges shall be fully paid.
7. In the event of a disagreement by the parties as to the interpretation
of this Agreement or as to the rights and obligations or the propriety of any
action contemplated by the Custodian hereunder, the Custodian may, in its sole
discretion, file an action in interpleader to resolve such disagreement The
-2-
<PAGE>
Custodian shall be indemnified by Debtor for all costs, including reasonable
attorneys' fees, in connection with any such interpleader action, and shall be
fully protected in suspending all or a part of its activities under this
Agreement until a final judgment in the interpleader action is received.
8. The Custodian may consult with counsel of its own choice and shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. The Custodian shall otherwise not be liable for any mistakes of
fact or error of judgment or for any acts or omissions of any kind unless caused
by its willful misconduct or gross negligence.
9. The Custodian may resign upon thirty days' written notice to the
parties to this Agreement. If a successor Custodian is not appointed within
such thirty-day period, the Custodian may petition a court of competent
jurisdiction to name a successor Custodian.
[10. The Debtor shall pay the Custodian such fees and compensation, if any,
as shall be mutually agreed.]
11. The warranties, representations, covenants and agreements set forth
herein shall be continuous and shall survive the termination of this Agreement
or any part hereof.
12. This Agreement contains the entire understanding between the parties
hereto with respect to the transactions contemplated hereby, and this Agreement
supersedes in all respects all written or oral understandings and agreements
heretofore existing between the parties hereto.
13. This Agreement may not be modified or amended except by an instrument
in writing duly executed by the parties hereto. No waiver of compliance with
any provision or condition hereof and no consent provided for herein shall be
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent.
14. Notices and requests required or permitted hereunder shall be deemed
to be delivered hereunder if mailed with postage prepaid or delivered, in
writing, addressed to the addresses set forth below the signatures of the
parties hereto, to such other address as to which a party provides notice
pursuant hereto.
15. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
16. Captions used herein are for convenience only and are not a part of
this Agreement and shall not be used in construing it.
17. The parties to this Agreement acknowledge that the performance of
their respective obligations hereunder is essential to the consummation of the
transactions contemplated by this Agreement. Each of them further acknowledges
that no party will have an adequate remedy at law if any other party
-3-
<PAGE>
will have an adequate remedy at law if any other party fails to perform its or
their obligations hereunder. In such event, each party shall have the right, in
addition to any other rights or remedies it may have, to compel specific
performance of this Agreement
18. The Debtor shall pay all expenses in connection with this Agreement
and the transactions contemplated hereby, including the fees and expenses of
counsel, certified public accountants and other experts.
19. This Agreement shall not be assignable by any of the parties to this
Agreement without the prior written consent of all other parties to this
Agreement
20. This Agreement shall be governed in accordance with the laws of the
State of New York applicable to contracts entered into and to be performed
actually within such state, without regard to conflicts of laws principles.
21. The invalidity or unenforceability of any particular provision hereof
shall not affect the remaining provisions of this Agreement, and this Agreement
shall be construed in all respects as if such invalid or unenforceable provision
were omitted.
22. The rights and obligations of the parties hereunder shall inure to the
benefit of, and be binding and unenforceable upon the respective successors,
assigns and transferees of any party.
23. This Agreement shall terminate and the Custodian shall be discharged
of all responsibility hereunder at such time as the Custodian shall receive
notice from the Secured Party that the Notes have been repaid in full or the
Custodian has delivered all Deposited Collateral to the Secured Party as
provided in paragraph 3 and the Secured Party has notified the Custodian that no
further Collateral is to be delivered to or accepted by the Custodian hereunder.
24. The Secured Party is not liable for any acts or omissions of the
Custodian in acting hereunder.
25. The Secured Party is entering into this Agreement solely in its
capacity as Trustee under the Indenture and shall be entitled to the privileges,
immunities and protections afforded it thereunder in any actions taken by it
hereunder. In addition to, and not in limitation of the foregoing, Debtor
agrees (i) to indemnify and hold harmless the Secured Party and its successors,
assigns, employees and agents (hereunder referred to individually as, an
"INDEMNITEE" and, collectively, as "INDEMNITEES") from and against any and all
claims, demands, losses, judgments and liabilities of whatsoever kind or nature,
and (ii) to reimburse each Indemnitee for all costs and expenses, including
reasonable attorneys' fees, growing out of or resulting from this Agreement or
the exercise by any Indemnitee of any right or remedy granted to it hereunder or
under any other agreement related to any Indebtedness including, but not limited
to the Indemnification Agreement, dated ________, 1998, by and among the Secured
Party, Custodian, Debtor and 900 Capital Services, Inc. Notwithstanding the
foregoing, with respect to clauses (i) and (ii) above, Debtor shall not be
obligated to any Indemnitee for losses arising from such Indemnitee's gross
negligence or
-4-
<PAGE>
willful misconduct. In no event shall any Indemnitee hereunder be liable, in
the absence of gross negligence or willful misconduct on its part, for any
matter or thing in connection with this Agreement other than to account for
moneys actually received by it in accordance with the terms hereof. The
indemnity obligations of Debtor contained in this paragraph 25 shall continue in
full force and effect notwithstanding the full payment of all the Notes issued
under the Indenture and the payment of all other obligations of the Debtor.
WITNESS WHEREOF, the parties hereto have executed this Custodian Agreement
on the day and year first above written.
DEBTOR:
SENTINEL FINANCING LTD., L.P.,
a Florida limited partnership
By: Sentinel Acceptance Corporation,
Florida corporation,
General Partner
By:
-----------------------------------------------
Jonathon W. Hollandsworth, President
TRUSTEE:
STERLING NATIONAL BANK AND TRUST
COMPANY
By:
----------------------------------------------------
Jerrold Gilbert, Executive Vice President
CUSTODIAN:
SENTINEL FINANCIAL SERVICES COMPANY
By:
----------------------------------------------------
John P. Murphy, President
-5-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 of
our report dated May 28, 1997 on our audit of the financial statements of
Sentinel Acceptance Corporation. We also consent to the reference to our firm
under the caption "Experts."
Millward & Co. CPAs
Fort Lauderdale, Florida
March 23, 1998
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 of
our report dated December 31, 1997, on our audit of the financial statements of
Sentinel Financing LTD., L.P. We also consent to the reference to our firm
under the caption "Experts."
Millward & Co. CPAs
Fort Lauderdale, Florida
March 23, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC, 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
------
STERLING NATIONAL BANK
----------------------
(Exact name of trustee as specified in its charter)
----------------------
(Jurisdiction of incorporation or
organization if not a U.S. national bank)
13-2565216
----------------------
(I.R.S. Employer Identification Number)
430 Park Avenue, New York, New York
-------------------------------------
(Address of principal executive offices)
10022
----------
(Zip code)
SENTINEL FINANCING, LTD., L.P.
-------------------------------------
(Exact name of obligor as specified in its charter)
Florida
----------------------
(Jurisdiction of incorporation or
organization if not a U.S. national bank)
65-0776789
-------------------------------------
(I.R.S. Employer Identification Number)
210 North University Drive, Suite 800
Coral Springs, Florida
--------------------------------------
(Address of principal executive offices)
45242
----------
(Zip code)
12% Secured Fixed Rate Notes due 2003
-------------------------------------
(Title of the indenture securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York (Board of
Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
Office of the Comptroller of the Currency, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each affiliation.
None.
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, and 15.
Sentinel Financing, Ltd., L.P. is currently not in default under any of its
outstanding securities for which Sterling National Bank is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14,
and 15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 - Articles of Association and Amendment thereto filed November
21, 1996.
T-1.2 - Certificate of Authority.
-2-
<PAGE>
16 List of Exhibits (Continued)
T-1.3 - The authorization of the trustee to exercise corporate
powers is contained in the Certificate of Authority (Exhibit
T-1.2)
T-1.4 - The By-laws of Sterling National Bank, as amended to date.
T-1.6 - The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the trustee to
law published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
---------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
Sterling National Bank, a corporation organized and existing under the laws of
the State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York, and State of New York, on the 19th day of March, 1998.
STERLING NATIONAL BANK, Trustee
By: /s/ Kenneth J. Marte
-----------------------------
Name: Kenneth J. Marte
Title: Vice President and Senior
Trust Officer
<PAGE>
ARTICLES OF ASSOCIATION
OF
STERLING NATIONAL BANK AND TRUST COMPANY OF NEW YORK
WITH AMENDMENTS UP TO AND INCLUDING MARCH 19, 1987
<PAGE>
ARTICLES OF ASSOCIATION
FIRST: The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Sterling
National Bank & Trust Company of New York".
SECOND: The place where the main banking house or office of this Association
shall be located, its operations of discount and deposit carried on,
and its general business conducted, shall be New York, County of New
York, State of New York.
THIRD: The Board of Directors of this Association shall consist of such
number of its shareholders, not less than five nor more than
twenty-five, as from time to time shall be determined by a majority of
the votes to which all of its shareholders are at the time entitled.
A majority of the Board of Directors shall be necessary to constitute
a quorum for the transaction of business.
9/23/69 A majority of the full Board of Directors may, between meetings of
the shareholders, increase the number of directors by not more than
four directors in any one year and appoint persons to fill the
vacancies created by any such increase.
FOURTH: The regular annual meeting of the shareholders of this Association
1/8/52 shall be held at its main banking house, or other convenient place
1/21/64 duly authorized by the board of directors, on such day of each year as
is specified therefor in the by-laws.
FIFTH: The amount of capital stock of this Association shall be Seventeen
11/23/56 Million Nine Hundred Twenty Six Thousand Three Hundred Dollars
2/16/60 ($17,926,300.), divided into 358,526 shares of common stock of the
1/17/61 par value of Fifty Dollars ($50.) each; but said capital stock may
1/16/62 be increased or decreased from time to time, in accordance with the
1/15/63 provisions of the laws of the United States.
1/21/64
1/12/65 If the capital stock is increased by the sale of additional shares
1/18/66 thereof, each shareholder shall be entitled to subscribe for such
1/17/67 additional shares in proportion to the number of shares of said
1/23/68 capital stock owned by him at the time the increase is authorized
6/11/70 by the shareholders, unless another time subsequent to the date of
5/4/72 the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized. The Board of
Directors shall have the power to prescribe a reasonable period of
time within which the pre-emptive rights to subscribe to the new
shares of capital stock must be exercised.
If the capital stock is increased by a stock dividend, each
shareholder shall be entitled to his proportionate amount of such
increase in accordance with the number of shares of capital stock
owned by him at the time the increase is authorized by the
shareholders, unless another time subsequent to the date of the
shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized.
The Association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated and whether or not
convertible without the approval of the shareholders.
<PAGE>
SIXTH: The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board; but the Board of
Directors may appoint a Director, in lieu of the President, to be
Chairman of the Board, who shall perform such duties as may be
designated by the Board of Directors. The Board of Directors shall
have the power to appoint one or more Vice Presidents, at least one of
whom shall also be a member of the Board of Directors, and who shall
be authorized, in the absence of the President, to perform all acts
and duties pertinent to the office of President, except such as the
President only is authorized by law to perform; to appoint a Cashier
and such other officers as may be required to transact the business of
this Association; to fix the salaries to be paid to all officers of
this Association; and to dismiss such officers, or any of them.
The Board of Directors shall have the power to define the duties of
officers and employees of this Association, to require bonds for them,
and to fix the penalty thereof; to regulate the manner in which
Directors shall be elected or appointed, and to appoint judges of the
election; to make all by-laws that it may be lawful for them to make
for the general regulation of the business of this Association and the
management of its affairs; and generally to do and perform all acts
that it may be lawful for a Board of Directors to do and perform.
The Board of Directors shall have the power to change the location of
the main office of this Association to any other place within the
limits of New York, New York, without the approval of the shareholders
of this Association and with the approval of the shareholders of this
Association and with the approval of the Comptroller of the Currency;
and shall have the power to change the location of any branch or
branches of this Association to any other place or places within the
limits of the municipality in which said branch or branches is or are
located, without the approval of the shareholders of this Association
but subject to the approval of the Comptroller of the Currency.
SEVENTH: This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act
of its shareholders in accordance with the provisions of the banking
laws of the United States, or until its franchise becomes forfeited by
reason of violation of law, or until terminated by either a general or
a special act of Congress, or until its affairs be placed in the hands
of a receiver and finally wound up by him.
<PAGE>
EIGHTH: Any person, his heirs, executors, or administrators, may be in-
Amended demnified or reimbursed by the Association for reasonable expenses
1/17/67 actually incurred in connection with any action, suit, or proceeding,
civil or criminal, to which he or they shall be made a party by reason
of his being or having been a director, officer or employee of the
Association or of any firm, corporation, or organization which he
served in any such capacity at the request of the Association:
Provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or
proceeding as to which he shall finally be adjudged to have been
guilty of or liable for negligence or willful misconduct in the
performance of his duties to the Association: And provided further,
that no person shall be so indemnified or reimbursed in relation to
any matter in such action, suit or proceeding which has been made the
subject of a compromise settlement except with the approval of a court
of competent jurisdiction, or the holders of record of a majority of
the outstanding shares of the Association, or the Board of Directors,
acting by vote of directors not parties to the same or substantially
the same action, suit or proceeding, constituting a majority of the
whole number of the directors. The foregoing right of indemnification
or reimbursement shall not be exclusive of other rights to which such
person, his heirs, executors or administrators, may be entitled as a
matter of law.
NINTH: The Board of Directors of this Association, or any three or more
Amended shareholders owning, in the aggregate, not less than twenty-five
1/17/67 per centum of the stock of this Association, may call a special
meeting of shareholders at any time: Provided, however, that, unless
otherwise provided by law, not less than ten days prior to the date
fixed for any such meeting, a notice of the time, place, and purpose
of the meeting shall be given by first-class mail, postage prepaid,
to all shareholders of record of this Association at their respective
addresses as shown upon the books of the Association. These Articles
of Association may be amended at any regular or special meeting of the
shareholders by the affirmative vote of the shareholders owning a
majority of the stock of this Association in any manner not
inconsistent with law: Provided, however, that notice of any such
meeting shall be given as hereinabove set forth.
<PAGE>
BANK INDEMNIFICATION
EIGHTH
INDEMNIFICATION
SECTION 1. OBLIGATION TO INDEMNIFY. The Association shall indemnify
all Eligible Persons for their Indemnifiable Expenses to the maximum extent
permitted by law.
SECTION 2. PERSONS ENTITLED TO INDEMNIFICATION. As used in this
Article the term "Eligible Person" means any person made, or threatened to be
made, a party to an action or proceeding, whether civil or criminal,
including an action by or in the right of the Association to procure a
judgment in its favor or an action by or in the right of any other
association or corporation of any type or kind, domestic or foreign,
including, but not limited to, any subsidiary of the Association, or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
which any director or officer of the Association served in any capacity at
the request of the Association, by reason of the fact that he, his testator
or intestate, was a director or officer of the Association, or served such
other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity; provided that no indemnification may be
made to or on behalf of any director or officer if a judgment or other final
adjudication adverse to the director or officer establishes that his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or that
he personally gained in fact a financial profit or other advantage to which
he was not legally entitled; and provided, further, that no indemnification
may be made
<PAGE>
to or on behalf of any director or officer for expenses, penalties, or other
payments incurred in an administrative proceeding or action instituted by an
appropriate bank regulatory agency which proceeding or action resulted in a
final order assessing civil money penalties or requires affirmative action by an
individual or individuals in the form of payment to the Association.
SECTION 3. INDEMNIFIABLE EXPENSES. As used in this Article,
"Indemnifiable Expenses" means judgments, fines (including any excise tax deemed
a fine pursuant to Section 722 of the Business Corporate Law or any successor
provision), amounts paid in settlement (but only if such settlement was made
with the prior written consent of the Association or if such consent was
unreasonably refused or withheld for an unreasonably long period after written
request therefor) and reasonable expenses, including attorney's fees incurred as
a result of such pending or threatened action or proceeding (including any
appeal therein).
SECTION 4. PROCEDURE.
(a) In the event that an action or proceeding of the type described in
Section 2 shall be commenced or threatened against any person who may be an
Eligible Person, such person may require the Association to pay on such person's
behalf all expenses reasonably incurred in connection with the investigation and
defense thereof, provided that where more than one potentially Eligible Person
is involved such person shall cooperate with the Association in the selection of
counsel so as to minimize the number of separate counsel involved (but nothing
shall require any such person to accept counsel
<PAGE>
not reasonably satisfactory to him or to interfere with his right to separate
counsel where conflict of interest considerations so dictate) and provided that
the Association's obligations to pay such expenses shall be subject to the
receipt of an undertaking by or on behalf of such person to repay to the
Association the amount paid to any extent it exceeds the indemnification to
which such person is ultimately found to be entitled under this Article of
Association or otherwise.
(b) Promptly after the disposition of any such action or proceeding or
threat thereof (whether such disposition is by final judgment, settlement,
abandonment or otherwise) and unless the matter of indemnification has been
determined as provided in paragraph (a) of Section 723 of the Business
Corporation Law (or any successor section), the Association shall take as
expeditiously as possible appropriate action under paragraph (b) of Section 723
(or any successor section) to authorize indemnification to the extent permitted,
as though such Sections were applicable to the Association.
SECTION 5. GENERAL. The rights to indemnification and advancement of
expenses granted under this Article of Association are supplementary to and not
in derogation of the rights to indemnification that any person described in
Section 2 may have under Sections 722, 723 and 724 of the Business Corporation
Law or any successor provisions or other application law, as though such
Sections were applicable to the Association.
SECTION 6. EFFECT OF REPEAL OR AMENDMENT. Notwithstanding the repeal
or amendment of this Article of Association, the foregoing
<PAGE>
provisions shall continue to be applicable to and require indemnification of any
present or former director or officer, or his legal representative, unless the
action or proceeding with respect to which the foregoing provisions are
applicable is based on an alleged act or omission occurring after the expiration
of thirty days from the receipt by such director or officer of notice of such
repeal or amendment.
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Northeastern District
1114 Avenue of the Americas, Suite 3900
New York, New York 10036
December 6, 1996
Jerrold Gilbert, Esq.
Executive Vice President and General Counsel
Sterling National Bank
540 Madison Avenue at 55th Street
New York, New York 10022-3299
Re: Change in Corporate Title - Sterling National Bank & Trust Company of New
York (Bank).
Dear Mr. Gilbert:
The Office of the Comptroller of the Currency (OCC) has received your letter
dated November 21, 1996, concerning the change and amendment to Article First of
the above-referenced Bank's Articles of Association. The OCC has amended its
records to reflect that effective November 21, 1996, the corporate title of
"STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK," Charter Number 13295 was
changed to "STERLING NATIONAL BANK."
You are reminded that the OCC does not approve national bank name changes nor
does it maintain official titles or the retention of alternate titles. The use
of other titles or the retention of the rights to any previously used title is
the responsibility of the Bank's board of directors. Legal counsel should be
consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal or state law.
A copy of the amended Article as accepted for filing is enclosed for the Bank's
records.
Very truly yours,
/s/ Michael G. Tiscia
Michael G. Tiscia
Licensing Manager
Charter No.: 13295
Control No.: 96 NE 04 008
Enclosure
<PAGE>
[STAMP]
ACTION TAKEN WITHOUT A MEETING UPON CONSENT
OF SOLE SHAREHOLDER OF
STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK
WHEREAS, Sterling National Bank & Trust Company of New York ("Bank") is a
national banking association, organized and operating the laws of the United
States of America; and
WHEREAS, Sterling Bancorp is the sole shareholder and the owner of all of
the 358,526 issued and outstanding shares of Common Stock of Bank; and
WHEREAS, the Articles of Association of Bank provide that the title of Bank
and the name under which it shall carry on the business of banking, under the
laws of the United States, shall be "Sterling National Bank & Trust Company of
New York"; and
WHEREAS, it is deemed to be in the best interests of the Bank that its name
be changed from "Sterling National Bank & trust Company of New York" to
"Sterling National Bank";
NOW, THEREFORE, be it
RESOLVED, that the Articles of Association of Sterling National Bank &
Trust Company of New York be amended, effective close of business November
21, 1996, to delete Paragraph First thereof and insert in lieu thereof the
following Paragraph First:
"FIRST: The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be Sterling National
Bank."
IN WITNESS WHEREOF, the undersigned has caused this Consent to be
executed in its corporate name by its Chairman and its seal affixed hereunto
as of the 21st day of November, 1996.
STERLING BANCORP
By /s/ [illegible]
-----------------------------------
Chairman
ATTEST:
/s/ [illegible]
- ------------------------------------
Secretary
<PAGE>
PREAMBLES AND RESOLUTIONS
WHEREAS, Sterling Bancorp, the sole shareholder and owner of all of the
358,526 issued and outstanding shares of Common Stock of Sterling National Bank
& Trust Company of New York ("Bank"), a national banking association, consented
to amend the Articles of Association of Bank to change the name of Bank from
"Sterling National Bank & Trust Company of New York" to "Sterling National
Bank"; and
WHEREAS, it is deemed to be in the best interests of the Bank that the
title of the Bank under which it shall carry on the business of banking under
the laws of the United States, shall be Sterling National Bank;
NOW, THERFORE, be it
RESOLVED, that the Articles of Association of Sterling National Bank &
Trust Company of New York be amended, effective close of business November
21, 1996, to delete Paragraph First thereof and insert in lieu thereof the
following Paragraph First:
"FIRST: The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be 'Sterling National
Bank'"; and it is further
RESOLVED, that the officers of the Association are authorized and directed
to do all other acts and execute all other documents as may be necessary or
appropriate to effectuate the purposes and intent of the foregoing
Resolution.
<PAGE>
EXHIBIT T-1.2
ORGANIZATION DIVISION NO. 13295
FORM 1998
TREASURY DEPARTMENT
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., March 13, 1929
WHEREAS, by satisfactory evidence presented to the undersigned, it has
been made to appear that "Sterling National Bank & Trust Company of New York"
in the City of New York in the County of New York and State of New York has
complied with all the provisions of the Statutes of the United States,
required to be complied with before an association shall be authorized to
commence the business of Banking:
NOW, THEREFORE, I, J.W. Pole, Comptroller of the Currency, do hereby
certify that "Sterling National Bank & Trust Company of New York" in the City of
New York in the County of New York and State of New York is authorized to
commence the business of Banking as provided in Section Fifty-one hundred and
sixty-nine of the Revised Statutes of the United States.
IN TESTIMONY WHEREOF, witness my hand and seal of office this
Thirteenth day of March, 1929,
[SEAL]
/s/ J. W. Pole
-----------------------------------
COMPTROLLER OF THE CURRENCY
<PAGE>
TREASURY DEPARTMENT,
COMPTROLLER OF THE CURRENCY,
1903.-Ed. 1,000.-F.C., Mar. 5-19.
CHARTER NO. 13295
ORGANIZATION CERTIFICATE.
(Executed In Duplicate.)
-------------------
WE, THE UNDERSIGNED, WHOSE NAMES ARE SPECIFIED IN ARTICLE FOURTH OF THIS
CERTIFICATE, HAVING ASSOCIATED OURSELVES FOR THE PURPOSE OF ORGANIZING AN
ASSOCIATION FOR CARRYING ON THE BUSINESS OF BANKING, UNDER THE LAWS OF THE
UNITED STATES, DO MAKE AND EXECUTE THE FOLLOWING ORGANIZATION CERTIFICATE:
FIRST. THE TITLE OF THE ASSOCIATION SHALL BE THE "STERLING NATIONAL BANK &
TRUST COMPANY OF NEW YORK".
SECOND. THE SAID ASSOCIATION SHALL BE LOCATED IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK, AND STATE OF NEW YORK, WHERE ITS OPERATIONS OF DISCOUNT AND
DEPOSIT ARE TO BE CARRIED ON.
THIRD. THE CAPITAL STOCK OF THIS ASSOCIATION SHALL BE $ ONE MILLION FIVE
HUNDRED THOUSAND ($1,500,000) DOLLARS, AND SHALL BE DIVIDED INTO SIXTY THOUSAND
SHARES OF TWENTY-FIVE DOLLARS EACH.
FOURTH. THE NAME, FINANCIAL WORTH, NET, AND THE RESIDENCE OF EACH
SHAREHOLDER OF THIS ASSOCIATION, WITH THE NUMBER OF SHARES HELD, ARE AS FOLLOWS:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
FINANCIAL WORTH- RESIDENCE. NO OF SHARES
NAME. NET. (Town or City and State.)
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. SEE APPENDED LIST
2
3
4
5
6
7
8
9
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
FEDERAL RESERVE BOARD
Form No. 61
(Revised Oct. 1, 1921)
NOTE.--This application, when executed, should be MAILED TO THE CHAIRMAN OF THE
BOARD OF DIRECTORS OF THE FEDERAL RESERVE BANK OF YOUR DISTRICT
and will be transmitted to the Federal Reserve Board by him.
DISTRICT NO. 2 STATE OF NEW YORK
APPLICATION OF NATIONAL BANK
For permission to act as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver, committee of estates of
lunatics, or any other fiduciary capacity, under authority of Section 11(k)
of the Federal Reserve Act, as amended by the Act of September 26, 1918.
--------------------
UNDER AUTHORITY OF A RESOLUTION of the Organization Committee of this
proposed BANK, DULY ADOPTED AND SPREAD ON THE MINUTES OF A MEETING HELD ON THE
9th DAY OF November, 1928, APPLICATION IS HEREBY MADE FOR A PERMIT TO ACT AS
Trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics and in any other
fiduciary capacity in which State banks, trust companies or other corporations
which come into competition with nation banks are permitted to act under the
laws of the State of New York.
(Specify the powers to be exercised.)
OR TO EXERCISE AS MANY OF THESE POWERS AS THE FEDERAL RESERVE BOARD MAY ALLOW,
UNDER SUCH RULES AND REGULATIONS AS THE FEDERAL RESERVE BOARD MAY PRESCRIBE.
THE STERLING NATIONAL BANK OF NEW YORK
(Name of bank.) (City or Town.)
/s/ Samuel H. Golding
-----------------------------------
/s/ Arthur M. Lamport
-----------------------------------
/s/ Samuel Raisler
-----------------------------------
ATTEST: /s/ Julius R. Klorfein
-----------------------------------
/s/ Morris Eder /s/ Michael Hollander
----------------------------------- -----------------------------------
SECRETARY Organization Committee
of Organization Committee
To the FEDERAL RESERVE BOARD,
WASHINGTON, D.C.
<PAGE>
[SEAL]
[LETTERHEAD] November 9, 1928
Mr. Samuel H. Golding,
135 Broadway,
New York, N.Y. (Confirmation of wire)
Sir:
The application for authority to organize "The Sterling National Bank of
New York" to be located at New York, N.Y., with capital stock of $2,000,000 is
approved, subject to revocation in case all requirements are not satisfied, or
it develops that, in the opinion of the Comptroller, conditions are not such as
to warrant the establishment of the bank.
The title selected will be reserved for a period of sixty days from this
date to enable the persons interested to effect the organization of the bank,
the required blanks for which purpose are inclosed.
By carefully observing the following instructions and the explanatory notes
on the blanks, in executing the latter, delay in establishing the bank will be
avoided.
ARTICLES OF ASSOCIATION:
Sec. 1. Insert the title of the bank AS APPROVED. (Do not include name of
state).
Sec. 2. Insert name of the village, town, or city, and that of the State.
Sec. 3. Instead of specifying that the board of directors shall consist of
a definite number of shareholders, this section may provide: "The board of
directors shall consist of not less than (here insert minimum number of
directors) nor more than (here insert maximum number of directors)
shareholders." If directors are appointed, the last four lines of this section
with regard to holding a meeting of shareholders for the election of directors
should be crossed off and the names of the directors inserted, adding the
following clause: "are hereby appointed directors of this association to hold
their offices as such until the regular annual election takes place, pursuant to
the 4th article of these articles of association."
Sec. 5. Insert amount of authorized capital stock.
There should appear on page 2 of the articles the signatures of at least
five persons, a majority of whom signed the application for authority to
organize the bank.
ORGANIZATION CERTIFICATE:
Sec. 1. Insert the title of the bank AS APPROVED. (Do not include name of
state).
Sec. 2. In specifying the name of the place in which the bank is to be
located the official designation should be correctly stated--as city, town,
borough or village as shown by the records at the State Capitol and also the
correct name of the county and State.
Sec. 3. In addition to entering amount of capital, give the number of
shares into which it is divided.
Sec. 4. Insert names of shareholders, residence (town or city and State),
and number of shares held by each for which certificates are to be issued to
said shareholders when the bank is chartered and the stock has been paid for, as
required by section 5140 of the United States Revised Statutes, transfers to be
made in the regular manner in the case of any stock which changes ownership.
<PAGE>
FORM 1955--ORGANIZATION
TREASURY DEPARTMENT
OFFICE OF COMPTROLLER OF THE CURRENCY
FEB. 4, 1928
APPLICATION TO ORGANIZE A NATIONAL BANK
-----------------
TO THE COMPTROLLER OF THE CURRENCY,
WASHINGTON,
SIR:
WE, THE UNDERSIGNED, PROSPECTIVE SHAREHOLDERS, BEING NATURAL PERSONS AND
OF LAWFUL AGE, INTEND, WITH OTHERS, TO ORGANIZE A NATIONAL BANKING
ASSOCIATION, UNDER THE TITLE "THE STERLING NATIONAL BANK OF NEW YORK," TO BE
LOCATED AT 609-611 EIGHTH AVENUE, COUNTY OF NEW YORK, STATE OF NEW YORK WITH
CAPITAL OF $2,000,000 AND SURPLUS OF $1,000,000, TO SUCCEED THE
________________________ BANK OF _______________ POPULATION _________________
WE REQUEST THAT THE TITLE BE RESERVED AND THAT THE NECESSARY INSTRUCTIONS
BE SENT TO SAMUEL H. GOLDING, WHO IS A RESIDENT OF THE PLACE WHERE THE PROPOSED
BANK IS TO BE LOCATED.
WE HEREBY FURTHER CERTIFY THAT NO FEE OR COMMISSION HAS BEEN PAID OR HAS
BEEN CONTRACTED TO BE PAID, DIRECTLY OR INDIRECTLY, BY THE BANK OR BY ANYONE IN
ITS BEHALF, TO ANY PERSON, ASSOCIATION, OR CORPORATION FOR SECURING
SUBSCRIPTIONS FOR OR SELLING STOCK IN SAID PROPOSED BANK.
(THE TYPEWRITTEN NAMES OF APPLICANTS AS WELL AS THEIR SIGNATURES SHOULD BE GIVEN
IF POSSIBLE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
FINANCIAL STRENGTH SHARES TO BE
SIGNATURES OF APPLICANTS RESIDENCES BUSINESS IN FIGURES SUBSCRIBED FOR
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
over
Samuel H. Golding 255 W. 88 St. Financier Rltorl 1,000,000 1,000
- --------------------------------------------------------------------------------------------------------
Fur & Skin over
Michael Hollander Long Branch, N.J. Dresser 1,000,000 200
- --------------------------------------------------------------------------------------------------------
over
Arthur M. Lamport 690 W. End Ave Investment Bnkg 1,000,000 200
- --------------------------------------------------------------------------------------------------------
over
Julius Klorfein 239 Central PkW. Cigar Mfr. 1,000,000 200
- --------------------------------------------------------------------------------------------------------
Heating and over
Sprinkler Instal- 1,000,000
Samuel Raisler 173 Riverside Dr. lation 200
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
READ THESE INSTRUCTIONS CAREFULLY
The name of the place should form a part of the title, thus "The First
National Bank of A------," but the name of the State should not be included.
The application must be signed by at least five prospective shareholders,
preferably the proposed officers or directors.
The correspondent should be a resident of the place where the bank is to be
located, a prospective shareholder, and if possible an officer or director of
the proposed bank.
It is not necessary for the applicants to subscribe for the entire issue of
stock. Only the actual number of shares to be held by each should be stated,
and each applicant should be worth financially twice the value of the stock for
which he subscribed.
(OVER)
<PAGE>
Statement of condition at close of business on _____ as it will appear on
date of opening of bank in accordance with report of examination dated if
charter is granted.
Name of bank THE STERLING NATIONAL BANK OF NEW YORK
------------------------------------------------------------------
Location 609-11 Eighth Avenue New York City, New York
-----------------------------------------------------------------------
(No.) (Street.) (City or town.) (State.)
Population of city or town (census of 1920)
-------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Loans:
On real estate $
------------------------ ----------------------------------
On other collateral
------------------- ----------------------------------
Unsecured--
Customers' paper
----------------- ----------------------------------
Purchased paper
----------------- ----------------------------------
Acceptances (drafts accepted
for customers per contra)
-------- ----------------------------------
Investments:
United States bonds
------------------- ----------------------------------
Other bonds and warrants
-------------- ----------------------------------
Stocks
-------------------------------- ----------------------------------
Real estate owned
--------------------------- ----------------------------------
Cash due from banks and trust
-------------- ----------------------------------
companies
----------------------------- ----------------------------------
All other assets
--------------------------- ----------------------------------
----------------------------------
Total
----------------------- ----------------------------------
<CAPTION>
LIABILITIES
<S> <C>
Capital stock $2,000,000
------------------------------ ----------------------------------
Surplus 1,000,000
------------------------------------- ----------------------------------
Undivided profits
-------------------------- ----------------------------------
Deposits:
Due to banks and trust com-
panies
--------------------------- ----------------------------------
Demand (individual)
------------------- ----------------------------------
Savings
------------------------------- ----------------------------------
Other time
---------------------------- ----------------------------------
Liability on drafts, accepted
payable at a future date (per
contra)
-------------------------------- ----------------------------------
All other liabilities
---------------------- ----------------------------------
----------------------------------
Total
----------------------- ----------------------------------
</TABLE>
RESOLUTION OF BOARD OF DIRECTORS
At a meeting of the ORGANIZATION COMMITTEE of the proposed
The Sterling National Bank of New York of New York, N.Y., duly called
- -------------------------------------- -------------------------
(Name of bank.) (City or town and State.)
and held on the 9th day of November, 1928 the following resolution was offered,
---- -------- --
seconded, and adopted:
"BE IT RESOLVED, That the president or vice president and the cashier or
secretary of this Association be and they are hereby authorized, empowered,
and directed to make application to the Federal Reserve Board for a permit
giving to this Association, the right to act as Trustee, executor,
-------------------------------
administrator, registrar of stocks and bonds, guardian of estates, assignee,
- -------------------------------------------------------------------------------
(Specify powers applied for)
receiver, committee of estates of lunatics and in any other fiduciary
- --------------------------------------------------------------------------------
capacity in which State banks trust companies or other corporations which
- --------------------------------------------------------------------------------
come into competition with national banks are permitted to act under the laws
- --------------------------------------------------------------------------------
of the State of New York
- --------------------------------------------------------------------------------
or to exercise as many of these powers as the Federal Reserve Board may allow,
under such rules and regulations as the Federal Reserve Board may prescribe."
I hereby certify that the foregoing is a true and correct copy of a
resolution passed by the Organization Committee of this proposed bank on the
date specified, and that the foregoing statement correctly shows the condition
of this bank as shown by its books on the date indicated.
/s/ Morris Eder
------------------------------------------
(SECRETARY OR CASHIER)
Organization Committee of
The Sterling National Bank of New York
-------------------------- --------
(Name of bank.) (City or town.)
NOTE.--The specific powers that may be applied for under the statute are
trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, and committee of estates of lunatics. If any other
powers are desired, application should be made also for the general power to
act "in an other fiduciary capacity in which State banks, trust companies, or
other corporations which come into competition with national banks are permitted
to act under the laws of the State" in which the national bank is located.
<PAGE>
THE FOLLOWING SHOWS THE NATIONAL, STATE, OR PRIVATE BANKING INSTITUTIONS
WITH WHICH THE APPLICANTS ARE, OR HAVE BEEN, CONNECTED EITHER AS OFFICERS OR
DIRECTORS:
- -------------------------------------------------------------------------------
APPLICANT INSTITUTION POSITION PERIOD
- --------------------------------------------------------------------------------
Central N. B.
Arthur M. Lamport Guardian Tr. Co. of N.J. Director
- --------------------------------------------------------------------------------
Public National
Michael Hollander Guardian Trust "
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(DATE) (SIGNED)
------------------------ ------------------------------
*CORRESPONDENT.
*N. B.--The correspondent is requested to furnish, as early as possible, a
list of the prospective officers and directors of the proposed organization, and
a statement showing their previous connection, if any, with other banking
institutions.
FORM 1955
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPLICATION
TO ORGANIZE
"THE NATIONAL
------------------------------------- -------------------------
BANK OF ,"
---------------------------------------------- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CAPITAL, $
-----------------------------------------------------------------
FILED,
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POPULATION,
----------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TREASURY DEPARTMENT
OFFICE OF COMPTROLLER OF THE CURRENCY
WASHINGTON, ,192
---------------------------------------
THE APPROVAL OF THIS APPLICATION IS RECOMMENDED.
--------------------------------------------
COMPTROLLER.
APPROVED:
--------------------------------------------
SECRETARY OF THE TREASURY.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT T-1.4
BY-LAWS
OF
STERLING NATIONAL BANK & TRUST COMPANY
OF NEW YORK
AMENDED UP TO AND INCLUDING NOVEMBER 18, 1993
<PAGE>
STERLING NATIONAL BANK & TRUST COMPANY
OF NEW YORK
ARTICLE I
SHAREHOLDERS
SECTION I.1 ANNUAL MEETINGS. The annual meeting of the
shareholders of STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK (hereinafter
called the "Bank"), for the purpose of electing directors for the ensuing year
and for the transaction of such other business as may properly come before the
meeting shall be held at the main banking office of the Bank or at any other
convenient place duly authorized by the Board of Directors, on the third
Thursday of March of each year.
SECTION 1.2 POSTPONED ELECTION OF DIRECTORS. If, for any reason,
the election of directors shall not be held on the day designated herein for the
annual meeting, the Board of Directors shall order an election to be held on any
subsequent day (as soon as practicable), according to the provisions of law; and
notice thereof shall be given in the manner herein provided for the annual
meeting.
<PAGE>
SECTION 1.3 SPECIAL MEETINGS. Special meetings of the shareholders
shall be held at the main banking office of the Bank or at any other convenient
place duly authorized by the Board of Directors. Such meetings may be called for
any purpose or purposes by the Board of Directors shareholders owning,
in the aggregate, not less than twenty-five per centum (25%) of the stock of the
Bank.
SECTION 1.4 NOTICE OF MEETINGS. Notice of each annual or special
meeting of the shareholders shall be in writing and shall state the time when
and the place where it is to be held. Notice of a special meeting shall state
the purpose or purposes for which the meeting is called. A copy of the notice
shall be delivered personally or mailed first-class in a postage prepaid
envelope to each shareholder of record entitled to vote at such meeting, at
least ten (10) days prior to the date on which such meeting is to be held. If
mailed to any shareholder, the notice shall be directed to such shareholder at
his address as the same appears on the records of the Bank.
SECTION 1.5 NOMINATIONS FOR ELECTION TO THE BOARD OF DIRECTORS.
Nominations for election to the Board of Directors may be made by the Board of
Directors or by any shareholder of the Bank entitled to vote for the election of
directors. Nominations, other than those made by or on behalf of the existing
management of the Bank, shall be made in writing and shall be delivered or
mailed to the Chairman of the Board of the
<PAGE>
Bank and to the Comptroller of the Currency, Washington, D.C., not less than
twenty (20) days nor more than fifty (50) days prior to any meeting of
shareholders called for the election of directors, providing, however, that if
less than twenty (20) days' notice of the meeting is given to shareholders, such
nominations shall be mailed or delivered to the Chairman of the Board of the
Bank and to the Comptroller of the Currency not later than the close of business
on the fifth (5) day following the day on which the notice of meeting was
mailed. Notification of such nomination by any shareholder shall contain the
following information: 1) the name and address of each proposed nominee; 2) the
principal occupation of each proposed nominee; 3) the total number of shares
that to the knowledge of the notifying shareholders will be voted for each
proposed nominee; 4) the names and residence addresses of the notifying
shareholders; and 5) the number of shares owned by each notifying shareholder.
SECTION 1.6 QUORUMS. At all meetings of the shareholders,
except as otherwise provided by law, the holders of a majority of the
outstanding shares of stock of the Bank entitled to vote thereat, present in
person or by proxy, shall constitute a quorum for the transaction of
business. In the absence of a quorum, a majority in voting power of the
shareholders present in person or by proxy and entitled to vote may, without
further notice, adjourn the meeting from time to time and from place to place
until a quorum is obtained. At any such adjourned meeting
3
<PAGE>
at which a quorum is present, any business may be transacted which might have
been transacted at the meeting as originally called.
SECTION 1.7 PROXIES. Shareholders entitled to vote may vote either
in person or by proxy duly authorized in writing, but no officer or employee of
the Bank shall act as proxy. Directors may act as a proxy. Proxies shall be
valid only for one meeting, to be specified therein, and any adjournments of
such meeting. Proxies shall be dated and shall be filed with the records of the
meeting.
SECTION 1.8 VOTING RIGHTS. At each meeting of the shareholders,
every shareholder of record of stock entitled to vote thereat shall be entitled
to one vote for each such share of stock held by him. A quorum being present,
all matters, unless otherwise required by law or the Articles of Association,
shall be decided by a majority in voting power of the shareholder of the Bank
present in person or by proxy and entitled to vote.
In all elections of directors, each shareholder of record of stock
entitled to vote shall have the right to vote the number of such shares held by
him for as many persons as there are directors to be elected, or to cumulate
such shares and give one candidate as many votes as the number of directors to
be elected times the number of such shares shall equal, or to distribute such
votes on the same principle among as many candidates as he shall think fit.
4
<PAGE>
In voting on any question on which a vote by ballot is required by law
or is demanded by any shareholder entitled to vote, the voting shall be by
ballot. Each ballot shall be signed by the shareholder voting or by his proxy,
and shall state the number of shares voted. On all other questions, the voting
may be VIVA VOCE.
SECTION 1.9 JUDGES OF ELECTION. Prior to the date of any meeting
of shareholders at which directors are to be elected, the Board of Directors
shall appoint one or more judges to act at the meeting or any adjournment
thereof. In case any person appointed fails to appear or act, the vacancy may be
filled by appointment made by the Board of Directors in advance of the meeting
or at the meeting by the person presiding thereat. Each judge, before entering
upon the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of judge at such meeting with strict impartiality and
according to the best of his ability. No director or officer of the Bank shall
be eligible to act as a judge of an election of directors of such Bank. The
judges shall conduct the election and certify to the Secretary of the Bank the
results thereof; the Secretary, upon receiving the return of the judges, shall
cause the same to be recorded in the minute book of the Bank.
SECTION 1.10 RECORD DATE. The Board of Directors may fix in advance
a date as the record date for the determination of shareholders entitled to
receive notice of, or to
5
<PAGE>
vote at, any meeting of shareholders, or to express consent to or dissent from
any proposal without a meeting or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment of any rights, or
for the purpose of any other action. Such date shall not be more than fifty nor
less than ten days before the date of such meeting, nor more than fifty days
prior to any other action.
SECTION 1.11 WAIVERS OF NOTICE. Notice of meeting need not be given
to any shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting, the lack of notice of such meeting, shall constitute a waiver of
notice by him.
SECTION 1.12 ACTION BY WRITTEN CONSENT OF SHAREHOLDERS. Whenever
shareholders are required or permitted to take any action by vote, such action
may be taken without meeting on written consent, setting forth the action so
taken signed by the holders of all outstanding shares entitled to vote
hereon.
ARTICLE II
DIRECTORS
SECTION 2.1 GENERAL POWERS. The business of the
6
<PAGE>
Bank shall be managed by the Board of Directors. The Board of Directors may
adopt such rules, regulations, policies or procedures not inconsistent with the
Articles of Association or these By-Laws or the laws of the United States, as it
may deem proper for the conduct of its meetings and the management of the Bank.
In addition to the powers expressly conferred by by the Articles of Association
these By-Laws and the laws of the United States, unless prohibited by the same,
the Board of Directors may exercise all powers and perform all acts that may
lawfully be exercised and performed by a Board of Directors.
SECTION 2.2 RESIGNATIONS. Any director may resign at any time
orally or in writing by notifying the Board of Directors or the Chairman of the
Board. Such resignation shall take effect at the date of receipt of such notice
or at such later time as is therein specified, and, unless otherwise specified,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 2.3 REMOVAL OF DIRECTORS. Any one or more or all of the
directors may be removed either with or without cause at any time by vote of the
shareholders holding a majority in interest of the outstanding shares of the
Bank entitled to vote thereon and thereupon the term of office of such director
or directors who shall have been so removed shall forthwith terminate and there
shall be a vacancy or vacancies in the Board of Directors to be filled as
provided in these By-Laws except as
7
<PAGE>
may otherwise be prescribed by law.
SECTION 2.4 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such places and times as may be fixed
from time to time by resolution of the Board and the annual organizational
meeting of the Board of Directors shall be held each year after the adjournment
of the annual meeting of the shareholders on the same day and at the same place.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time upon the call of the Chairman of the Board,
the Vice Chairman, or the President, and shall be called by any one of the
foregoing on the written request of one third of the total number of directors
then in office, by oral, telegraphic or written notice, given to each director
not less than twenty-four hours before such meeting. Notice of a special meeting
need not be given to any director who submits a signed waiver of notice whether
before or after the meeting, or who attends the meeting without protesting prior
thereto, the lack of notice to him.
SECTION 2.6 PLACE OF MEETING. The directors may hold their
meetings, have one or more offices, and keep the books of the Bank, except as
otherwise may be required by law, at any place, either within or without the
State of New York, as they may from time to time determine.
8
<PAGE>
SECTION 2.7 QUORUM, MANNER OF ACTION AND ORGANIZATION. Except when
otherwise required by law, a majority of the directors in office at the time of
any meeting of the Board of Directors shall constitute a quorum for the
transaction of business. In the absence of a quorum, a majority of the directors
present may, without notice, adjourn any meeting from time to time until a
quorum is obtained. Except as otherwise required by law, the act of a majority
of the directors present at any duly constituted meeting of directors shall be
the act of the Board. Any one or more members of the Board of Directors may
participate in a meeting of such Board or any committee thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
SECTION 2.8 ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board or of such committee
consent, in writing, to the adoption of a resolution authorizing the action. The
resolution and the written consents thereto by the members of the Board or the
committee shall be filed with the minutes of the proceedings of the Board or
committee.
SECTION 2.9 COMPENSATION. Each director, excepting salaried
officers of the Bank, in consideration of his or her
9
<PAGE>
serving as a director or as a member of a duly constituted committee, shall be
entitled to receive from the Bank such amount per annum or such fees for
attendance at directors' meetings, or committee meetings, or both, as the Board
of Directors shall from time to time determine, together with reimbursement for
the reasonable expenses incurred by him in connection with the the performance
of his duties.
SECTION 2.10 HONORARY DIRECTORS. The Board of Directors, by vote of
the majority of the directors then in office, may elect honorary directors to
serve at the pleasure of the Board. Such honorary directors may be present at
any meeting of the Board of Directors at the invitation of the Board of
Directors or Chairman of the Board and, if present, shall be entitled to
participate in the discussion of all matters presented to the meeting, but shall
not be counted for the purpose of constituting a quorum, nor shall such honorary
director be entitled to vote at such meeting.
ARTICLE III
OFFICERS AND EMPLOYEES
SECTION 3.1 CHAIRMAN OF THE BOARD AND VICE CHAIRMEN. The Board
shall appoint one of its members to be Chairman of the Board to serve at the
pleasure of the Board. The Board may appoint one or more of its members Vice
Chairman. The Chairman, and in his absence, the President, in order of seniority
10
<PAGE>
of those present, shall preside at all meetings of Board and shareholders and
the Chairman and the President shall be a member of the Executive Committee and
may exercise such further powers and duties as from time to time may be
conferred upon or assigned by the Board.
SECTION 3.2 PRESIDENT. The President shall be the Chief Executive
Officer of the Bank and shall have general supervision over the business of the
Bank subject, however, to the control of the Board of Directors and of any duly
authorized committee of directors. The President shall, if present, in the
absence of the Chairman and of a Vice Chairman, preside at all meetings of the
Board and shareholders. He shall be a member of the Executive Committee. He
shall, in general, perform all duties incident to the office of President and
such other duties as may be assigned to him by these By-laws, the laws in the
United States, or from time to time by the Board of Directors or by any duly
authorized committee of directors.
SECTION 3.3 SECRETARY. The Secretary shall attend all meetings of
the shareholders and act as Secretary thereof, and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for any committee of the Board when required. He shall cause
notice which is required to be given of all meetings of shareholders and
directors and shall perform such other duties as
11
<PAGE>
pertain to his office. The Secretary shall have and may exercise any and all
powers and duties pertaining by law, regulation or practice to the office of
Cashier that relate to the corporate records of the Bank and the duties of the
Secretary above described or incidental thereto. He shall maintain, have charge
and be the custodian of the corporate books and records and shall keep in safe
custody the seal of the Bank and affix it, when required, to any instrument.
SECTION 3.4 COMPTROLLER. The Comptroller shall be responsible for,
and have custody of, all assets, documents, records, papers, funds and
securities of the Bank, except the Bank's corporate records and shall keep full
and accurate records and accounts of all transactions of the Bank in books
belonging to the Bank. In addition, the Comptroller shall have and may exercise
any and all powers and duties pertaining by law, regulation or practice, or
imposed by these by-laws, to the office of Cashier that relate to the assets and
acts of the Bank, except those powers and duties undertaken by the Secretary;
and shall also perform such other duties as may be assigned from time to time by
the Board.
SECTION 3.5 VICE PRESIDENTS. One or more Vice Presidents,
including a Vice President - Finance, shall be designated by the Board of
Directors with one or more titles denoting seniority or in any other order
determined by the Board. In the absence or disability of the President, they
shall perform
12
<PAGE>
the duties and exercise the powers of the President. The Vice President -
Finance shall be the chief financial officer of the Bank, responsible for all
personnel charged with the custody of all assets and the keeping of full and
accurate records. In the event the office of Comptroller is vacant or in the
absence or disability of the Comptroller, he shall perform the duties and
exercise the powers of the Comptroller. All of the Vice Presidents shall perform
such duties as may be prescribed by the Board of Directors, and subject thereto,
by the President.
SECTION 3.6 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 Bank. 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, and unless otherwise directed by the Board of Directors, the Chairman
of the Board, or the President.
SECTION 3.7 TERM OF OFFICE. All officers shall be elected or
appointed or employed by the Board of Directors and shall have such functions or
duties as are provided in these by-laws or as the Board of Directors, and unless
13
<PAGE>
otherwise directed by the Board of Directors, the Chairman of the Board or the
President, may from time to time determine. The Chairman of the Board, any Vice
Chairman, the President, and any other officer who is required by the Articles
of Association or these by-laws to be a member of the Board of Directors shall
hold office for the current year for which the Board of which he is a member was
elected unless he shall sooner resign, die, be disqualified or be removed from
office. Every other officer shall hold office at the pleasure of the Board. The
Board hereby delegates to the Chairman of the Board the power to (a) remove any
officer of the Bank, with or without cause, who is not a director of the Bank
and (b) designate any other officer or officers of the Bank to remove officers
junior in rank to the removing officer or officers.
SECTION 3.8 RESIGNATIONS. Any officer may resign at any time
orally or in writing by notifying the Board of Directors or the President. Such
resignation shall take effect at the date of receipt of such notice or at such
later time as is therein specified, and, unless otherwise specified, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.9 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-laws for
the regular appointment or election to said office.
14
<PAGE>
SECTION 3.10 COMPENSATION. Salaries or other compensation of
officers shall be fixed from time to time by the Board of Directors. No officer
shall be prevented from receiving a salary or other compensation by reason of
the fact that he is also a director of the Bank.
ARTICLE IV
COMMITTEES
SECTION 4.1 GENERAL. Each committee shall determine its own time
and place of meetings, unless otherwise directed by the Board of Directors. A
majority of each committee shall constitute a quorum of that committee for the
transaction of business, and the act of a majority of those present at any
committee meeting at which a quorum is present shall be the act of that
committee. In the absence of a quorum at any committee meeting, a majority of
those members present may without notice adjourn the meeting from time to time.
Each committee chairman shall be chosen by the Board of Directors and shall
choose its own secretary and shall keep a book in which there shall be recorded
all of its acts and proceedings, which shall be reported from time to time to
the Board of Directors. Committees may take such action without a meeting and
members of any committee of the Board may participate in a meeting in accordance
with the provisions of Sections 2.7 and 2.8 of these by-laws.
15
<PAGE>
SECTION 4.2 EXECUTIVE COMMITTEE. There shall be an Executive
Committee of the Board of Directors of five (5) or more directors, consisting of
the Chairman of the Board, the Vice Chairmen of the Board, the President, at
least one Vice President, who is a director, and such other directors as may be
designated from time to time by and shall serve at the pleasure of the Board of
Directors. The Executive Committee shall possess and exercise all the powers of
the Board of Directors, excepting the election of directors to fill vacancies,
the amendment of the by-laws, the declaration of dividends and such powers as
the Board, only by law, is authorized to perform, provided that all action of
the Executive Committee shall be reported to the Board for ratification and
approval at its meeting next succeeding such action and shall be subject to
revision or alteration thereby; provided, however, no rights or acts of third
parties shall be affected by such revision. The Chairman of the Board shall
preside at all meetings of the Committee and in his absence from any meeting of
the Executive Committee, any Vice Chairman, in order of seniority of those
present, shall preside, and in the absence of the Chairman, and all Vice
Chairmen, the President, shall preside. The presiding officer shall have such
powers and perform such acts as the Committee may lawfully delegate to him.
SECTION 4.3 TRUST MANAGEMENT, POLICY AND INVESTMENT COMMITTEE.
The Trust Management, Policy and Investment Committee shall
16
<PAGE>
consist of three (3) or more members, comprised of the senior trust officer of
the Bank and such other officers or directors as may be designated from time to
time by and shall serve at the pleasure of the Board of Directors. This
Committee shall (a) accept or reject all agencies, executorships, trusteeships,
or other fiduciary or custodial relationships of the Bank; (b) exercise all
power and authority with respect to the making, retention, investment or
disposition of all funds held in or for each fiduciary account of the Bank; and
(c) at least once during each period of twelve months, review all the assets
held in or for each fiduciary account to determine their safety and current
value and the advisability of retaining or disposing of them; and a report of
all such reviews, together with the action taken as a result thereof, shall be
recorded in the minutes of the Committee's proceedings. This Committee shall
have additional duties relating to the Trust Department as may be prescribed
from time to time by the Board of Directors.
Amendment
11/18/93
SECTION 4.4 EXAMINING AND AUDIT COMMITTEE. The Examining and
Audit Committee of the Board of Directors shall consist of three (3) or more
directors, none of whom shall be active officers of the Bank, as may be
designated from time to time by and shall serve at the pleasure of the Board
of Directors. It shall be the duty of the Committee to monitor and supervise
the internal audit staff and to make or cause to be made at least once during
each period of twelve months, a
17
<PAGE>
suitable examination of the affairs of the Bank. The results of such
examination shall be reported to the Board of Directors at its next regular
meeting thereafter, and such report shall state whether the Bank is in a sound
and solvent condition, whether adequate internal audit controls and procedures
are being maintained, and shall recommend to the Board such changes in the
manner of doing business as shall seem to the Examining and Auditing Committee
to be desirable. The Examining and Audit Committee, upon its own recommendation
and with the approval of the Board of Directors, may employ a qualified firm of
independent public accountants to make an examination and audit of the Bank at
least once a year. If such a procedure is followed, such annual examination and
audit of such firm of independent public accountants and the presentation to the
Board of Directors of the report of such examination and audit will be deemed
sufficient to comply with the requirements of this section of these by-laws.
SECTION 4.5 CREDIT PROCEDURE AND LOAN AUTHORITY COMMITTEE.
The Credit Procedure and Loan Authority Committee shall consist of three (3) or
more directors, as may be designated from time to time by and shall serve at
the pleasure of the Board of Directors. This Committee shall exercise authority
regarding loan policies and procedures and other matters relating to loans,
discounts and extensions of credit by the Bank, including fixing credit
authorities of all credit
18
<PAGE>
officers. This Committee shall have such additional duties relating to
extension of credit as may be prescribed from time to time by the Board of
Directors.
SECTION 4.6 LOAN COMMITTEE. The Loan Committee shall consist of
three (3) or more directors, as may be designated from time to time by and shall
serve at the pleasure of the Board of Directors. This Committee shall examine,
ratify and exercise authority regarding specific loans and extensions of credit
by the Bank, including but not limited to examination and ratification of all
authorizations for extensions of credit in excess of $250,000. This Committee
shall have such additional duties relating to specific extensions of credit as
may be prescribed from time to time by the Board of Directors.
SECTION 4.7 ASSET AND LIABILITY MANAGEMENT COMMITTEE. The Asset
and Liability Management Committee shall consist of such directors or officers
of the Bank as may be designated from time to time by and shall serve at the
pleasure of the Board of Directors. This Committee shall have all power and
authority to determine the allocation of the Bank's asset dollars among the loan
portfolio, investment portfolio, liquidity account and cash account and to
determine all changes in the Bank's portfolio, all subject to such limitations
as may be imposed by the Board of Directors from time to time; and, provided,
further, that there shall be submitted to the Board of Directors at each meeting
a
19
<PAGE>
report of all transactions authorized by this Committee since the last Board
meeting.
SECTION 4.8 PERSONNEL POLICY COMMITTEE. The Personnel Policy
Committee shall consist of such directors or officers of the Bank as may be
designated from time to time by and shall serve at the pleasure of the Board of
Directors. This Committee shall appoint and fix the compensation of such
officers and members as the Board by resolution shall determine from time to
time.
SECTION 4.9 OTHER COMMITTEES. The Board of Directors may appoint,
from time to time, directors or officers of the Bank to such committees of one
or more persons, for such purposes and with such powers as the Board of
Directors may determine.
ARTICLE V
STOCK
SECTION 5.1 CERTIFICATES FOR SHARES. Certificates for stock of the
Bank shall be in such form as shall be approved by the Board of Directors. They
shall state upon their face that the stock of the Bank is transferable only upon
the books of the Bank, and shall meet the requirements of the laws of the United
States. They shall be numbered in the order of their issue. The seal of the Bank
shall be affixed thereto, which seal may be facsimile, engraved or printed. They
shall be signed by
20
<PAGE>
any two of the following officers: the Chairman of the Board, the President or
any Vice President; or by any one of such officers and any one of the following
officers: the Secretary, any Assistant Secretary or Assistant Cashier or any
Assistant Vice President. If any such certificate is countersigned by a
registrar and one of the foregoing officers, the signature of the Chairman of
the Board or the President may be facsimile, engraved or printed. In case any
officer or officers who shall have signed or whose signature or facsimile
signature shall be used on any such certificate or certificates shall cease to
be such officer or officers, for whatever cause, before such certificate or
certificates shall have been delivered by the Bank, such certificate or
certificates may nevertheless, unless otherwise ordered by the Board of
Directors, be issued and delivered as though the person or persons who
signed such certificate or certificates had not ceased to be such officer or
officers of the Bank.
SECTION 5.2 TRANSFERS OF STOCK. A transfer book shall be
maintained by the Bank in which all assignments and transfers of stock of the
Bank shall be made; transfers and assignments of stock of the Bank shall be made
only on the books of the Bank, subject to the restrictions and provisions of the
laws of the United States. A person in whose name stock of the Bank shall stand
on the books of the Bank shall be deemed the owner thereof entitled to receive
dividends, to vote as such owner and for all other purposes as respects the
Bank. No transfer of stock of the Bank shall be valid as
21
<PAGE>
against the Bank, its shareholders and creditors, except to the extent provided
by law, until it shall have been entered in the stock records of the Bank by an
entry showing from and to whom transferred. When stock of the Bank is
transferred, the certificate or certificates thereof shall be returned to the
Bank and shall be canceled by the Bank, and a new certificate or certificates
shall be issued.
SECTION 5.3 TRANSFER AND REGISTRY AGENTS. The Bank may from time
to time maintain one or more transfer offices or agencies and registry offices
or agencies at such place or places as may be determined from time to time by
the Board of Directors.
SECTION 5.4 REGULATIONS. The Board of Directors may make such
rules and regulations as it may deem expedient, not inconsistent with these
by-laws, the Articles of Association and the laws of the United States
concerning the issue, loss, destruction, transfer and regulation of certificates
for stock of the Bank.
ARTICLE VI
SEAL
SECTION 6.1 FORM. The seal of the Bank shall be circular in
form and shall bear the words "Sterling National Bank & Trust Company of New
York - Seal".
SECTION 6.2 AUTHORITY TO THE SEAL. The Chairman of
22
<PAGE>
the Board, any Vice Chairman of the Board, President, Executive Vice President,
Secretary, Trust Officer and such other officers as are authorized by the Board
of Directors shall have authority to affix the seal of the Bank and to a attest
the same.
ARTICLE VIII
CONTRACTS, CHECKS, DRAFTS, REAL ESTATE, ETC.
SECTION 7.1 CONTRACTS, CHECKS, DRAFTS, ETC. All contracts, checks,
drafts, invoices, advices for payment or transfer of funds, orders for the
delivery of securities, letters of credit, acceptances, certificates of deposit,
bills of exchange, money orders, certifications, endorsements of bills of
lading, warehouse receipts or insurance policies, or certificates, guaranties of
signatures on assignments of stock, or transfers and conveyances of real estate
title which is vested in the Bank, and all other documents or instruments signed
or executed for or in behalf of the Bank, except as otherwise required by these
by-laws.
ARTICLE VIII
AMENDMENTS
These by-laws may be altered, amended, supplemented or repealed, or
new by-laws may be adopted, by the affirmative vote of a majority of the whole
Board of Directors at any regular or special meeting of the Board. No change in
these by-laws may be made unless the same is consistent with the requirement of
the laws of the United States and of the Articles of Association.
23
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321 (b)
of the Act.
Sterling National Bank
430 Park Avenue
New York, NY 10022
March 19, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, Sterling National Bank ("Sterling") hereby
consents that reports of examinations of Sterling by Federal, State, Territorial
or District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
Very truly yours,
STERLING NATIONAL BANK
By: /s/ Kenneth J. Marte
------------------
Name: Kenneth J. Marte
Title: Vice President & Senior Trust Officer
<PAGE>
[LETTERHEAD]
December 6, 1996
Jerrold Gilbert, Esq.
Executive Vice President and General Counsel
Sterling National Bank
540 Madison Avenue at 55th Street
New York, New York 10022-3299
Re: Change in Corporate Title - Sterling National Bank & Trust Company of New
York (Bank).
Dear Mr. Gilbert:
The Office of the Comptroller of the Currency (OCC) has received your letter
dated November 21, 1996, concerning the change and amendment to Article First
of the above-referenced Bank's Articles of Association. The OCC has amended
its records to reflect that effective November 21, 1996, the corporate title of
"STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK," Charter Number 13295 was
changed to "STERLING NATIONAL BANK."
You are reminded that the OCC does not approve national bank name changes nor
does it maintain official titles or the retention of alternate titles. The
use of other titles or the retention of the rights to any previously used title
is the responsibility of the Bank's board of directors. Legal counsel should
be consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal or state law.
A copy of the amended Article as accepted for filing is enclosed for the Bank's
records.
Very truly yours,
/s/ Michael G. Tiscia
- --------------------
Michael G. Tiscia
Licensing Manager
Charter No.: 13295
Control No.: 96 NE 04 008
Enclosure
<PAGE>
[STAMP]
ACTION TAKEN WITHOUT A MEETING UPON CONSENT
OF SOLE SHAREHOLDER OF
STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK
WHEREAS, Sterling National Bank & Trust Company of New York ("Bank") is a
national banking association, organized and operating the laws of the United
States of America; and
WHEREAS, Sterling Bancorp is the sole shareholder and the owner of all of
the 358,526 issued and outstanding shares of Common Stock of Bank; and
WHEREAS, the Articles of Association of Bank provide that the title of
Bank and the name under which it shall carry on the business of banking,
under the laws of the United States, shall be "Sterling National Bank & Trust
Company of New York"; and
WHEREAS, it is deemed to be in the best interests of the Bank that its
name be changed from "Sterling National Bank & trust Company of New York" to
"Sterling National Bank";
NOW, THEREFORE, be it
RESOLVED, that the Articles of Association of Sterling National Bank &
Trust Company of New York be amended, effective close of business
November 21, 1996, to delete Paragraph First thereof and insert in
lieu thereof the following Paragraph First:
"FIRST: The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall be
Sterling National Bank."
IN WITNESS WHEREOF, the undersigned has caused this Consent to be
executed in its corporate name by its Chairman and its seal affixed hereunto as
of the 21st day of November, 1996.
STERLING BANCORP
By /s/ [ILLEGIBLE]
--------------------------------
Chairman
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------------
Secretary
<PAGE>
PREAMBLES AND RESOLUTIONS
WHEREAS, Sterling Bancorp, the sole shareholder and owner of all of the
358,526 issued and outstanding shares of Common Stock of Sterling National Bank
& Trust Company of New York ("Bank"), a national banking association, consented
to amend the Articles of Association of Bank to change the name of Bank from
"Sterling National Bank & Trust Company of New York" to "Sterling National
Bank"; and
WHEREAS, it is deemed to be in the best interests of Bank that the title
of the Bank under which it shall carry on the business of banking under the
laws of the United States, shall be Sterling National Bank;
NOW, THEREFORE, be it
RESOLVED, that the Articles of Association of Sterling National Bank &
Trust Company of New York be amended, effective close of business
November 21, 1996, to delete Paragraph First thereof and insert in
lieu thereof the following Paragraph First:
"FIRST: The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Sterling National
Bank"; and it is further
RESOLVED, that the officers of the Association are authorized and directed
to do all other acts and execute all other documents as may be necessary
or appropriate to effectuate the purposes and intent of the foregoing
Resolution.
<PAGE>
[LETTERHEAD]
December 6, 1996
Jerrold Gilbert, Esq.
Executive Vice President and General Counsel
Sterling National Bank
540 Madison Avenue at 55th Street
New York, New York 10022-3299
Re: Change in Corporate Title - Sterling National Bank & Trust Company of New
York (Bank).
Dear Mr. Gilbert:
The Office of the Comptroller of the Currency (OCC) has received your letter
dated November 21, 1996, concerning the change and amendment to Article First of
the above-referenced Bank's Articles of Association. The OCC has amended its
records to reflect that effective November 21, 1996, the corporate title of
"STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK," Charter Number 13295 was
changed to "STERLING NATIONAL BANK."
You are reminded that the OCC does not approve national bank name changes nor
does it maintain official titles or the retention of alternate titles. The
use of other titles or the retention of the rights to any previously used
title is the responsibility of the Bank's board of directors. Legal counsel
should be consulted to determine whether or not the new title, or any
previously used title, could be challenged by competing institutions under
the provisions of federal or state law.
A copy of the amended Article as accepted for filing is enclosed for the Bank's
records.
Very truly yours,
/s/ Michael G. Tiscia
Michael G. Tiscia
Licensing Manager
Charter No.: 13295
Control No.: 96 NE 04 008
Enclosure
<PAGE>
ACTION TAKEN WITHOUT A MEETING UPON CONSENT
OF SOLE SHAREHOLDER OF
STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK
WHEREAS, Sterling National Bank & Trust Company of New York ("Bank") is a
national banking association, organized and operating the laws of the United
States of America; and
WHEREAS, Sterling Bancorp is the sole shareholder and the owner of all of
the 358,526 issued and outstanding shares of Common Stock of Bank; and
WHEREAS, the Articles of Association of Bank provide that the title of
Bank and the name under which it shall carry on the business of banking,
under the laws of the United States, shall be "Sterling National Bank & Trust
Company of New York"; and
WHEREAS, it is deemed to be in the best interests of the Bank that its
name be changed from "Sterling National Bank & trust Company of New York" to
"Sterling National Bank";
NOW, THEREFORE, be it
RESOLVED, that the Articles of Association of Sterling National Bank &
Trust Company of New York be amended, effective close of business November
21, 1996, to delete Paragraph First thereof and insert in lieu thereof
the following Paragraph First:
"FIRST: The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be Sterling National
Bank."
IN WITNESS WHEREOF, the undersigned has Caused this Consent to be
executed in its corporate name by its Chairman and its seal affixed hereunto
as of the 21st day of November, 1996.
STERLING BANCORP
By:/s/ Louis Rappelli
------------------
Chairman
ATTEST:
/s/ [ILLEGIBLE]
- --------------------
Secretary
<PAGE>
PREAMBLES AND RESOLUTIONS
WHEREAS, Sterling Bancorp, the sole shareholder and owner
of all of the 358,526 issued and outstanding shares of Common
Stock of Sterling National Bank & Trust Company of New York
("Bank"), a national banking association, consented to amend
the Articles of Association of Bank to change the name of Bank
from "Sterling National Bank & Trust Company of New York" to
"Sterling National Bank"; and
WHEREAS, it is deemed to be in the best interests of Bank
that the title of the Bank under which it shall carry on the
business of banking under the laws of the United States, shall
be Sterling National Bank;
NOW, THEREFORE, be it
RESOLVED, that the Articles of Association of Sterling
National Bank & Trust Company of New York be amended,
effective close of business November 21, 1996, to delete
Paragraph First thereof and insert in lieu thereof the
following Paragraph First:
"FIRST: The title of this Association, which shall carry on the business
of banking under the laws of the United States, shall be 'Sterling
National Bank'"; and it is further
RESOLVED, that the officers of the Association are
authorized and directed to do all other acts and execute
all other documents as may be necessary or appropriate to
effectuate the purposes and intent of the foregoing
Resolution.
<PAGE>
EXHIBIT T-1.7
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
[LOGO] Expires March 31, 2000
Please refer to page i, Table of Contents, ---
for the required disclosure of estimated |1|
burden. ---
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(970930)
REPORT AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1997 ------------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, John W. Tietjen, Sr. Vice President and Controller
------------------------------------------------------
NAME AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT
of the named bank do hereby declare that the Reports of Condition and Income
(including the supporting schedules) for this report date have been prepared in
conformance with the instructions issued by the appropriate Federal regulatory
authority and are true to the best of my knowledge and belief.
/s/ John W. Tietjen
- ------------------------------------------------------
SIGNATURE OF OFFICER AUTHORIZED TO SIGN REPORT
10/28/97
- ------------------------------------------------------
DATE OF SIGNATURE
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
We, the undersigned directors (trustees), attest to the correctness of the
Report of Condition (including the supporting schedules) for this report date
and declare that it has been examined by us and to the best of our knowledge
and belief has been prepared in conformance with the instructions issued by
the appropriate Federal regulatory authority and is true and correct.
/s/ Louis Rappelli
- ------------------------------------------------------
DIRECTOR (TRUSTEE)
/s/ [ILLEGIBLE]
- ------------------------------------------------------
DIRECTOR (TRUSTEE)
/s/[ILLEGIBLE]
- ------------------------------------------------------
DIRECTOR (TRUSTEE)
- --------------------------------------------------------------------------------
SUBMISSION OF REPORTS
Each bank that had $50 MILLION OR MORE IN TOTAL ASSETS as of June 30, 1996,
must prepare its Reports of Condition and Income either:
(a) in automated form and then file the computer data file directly with the
banking agencies' collection agent, Electronic Data Systems Corporation
(EDS), by modem or on computer diskette; or
(b) in hard-copy (paper) form and arrange for another party to convert the
paper report to automated form. That party (if other than EDS) must
transmit the bank's computer data file to EDS.
For this report date only, ALL OTHER BANKS (i.e., banks not required to file
reports in automated form) are permitted to submit hard-copy forms directly to
the appropriate banking agency. State member banks should return the original
and one copy to the appropriate Federal Reserve District Bank. National and
state nonmember banks should return the original only in the SPECIAL RETURN
ADDRESS ENVELOPE PROVIDED. If an overnight delivery system is used in lieu of
the special return address envelope, return the original only to the FDIC, c/o
Quality Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
To fulfill the signature and attestation requirement for the Reports of
Condition and Income for this report date, banks whose reports are filed in
automated form with EDS should attach this signature page to the hard-copy
record of the completed report that the bank places in its files.
- --------------------------------------------------------------------------------
FDIC Certificate Number |0|7|2|2|0|
-------------
(RCRI 9050)
CALL NO. 201 31 09-30-97
STBK: 36-5460 00372 STCERT: 36-07220
STERLING NATIONAL BANK
430 PARK AVENUE
MANHATTAN
NEW YORK CITY, NY 10022
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-1
FDIC Certificate No.: |0|7|2|2|0|
-----------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR SEPTEMBER 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION> ----------
| C400 |(--
----------|---------|
Dollar Amounts in Thousands |RCFD Bil Mil Thou|
- -----------------------------------------------------------------------------------------------------------------------------
<S><C>
ASSETS |///////////////////|
1. Cash and balances due from depository institutions (from Schedule RC-A): |///////////////////|
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . . . . . . . . |0081 31,480| 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |0071 3,010| 1.b.
2. Securities: |////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . . . . . . . . |1754 249,066| 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . . . . . . |1773 54,280| 2.b.
3. Federal funds sold and securities purchased under agreements to resell. . . . . . . . . . . . . . . |1350 8,000| 3.
4. Loans and lease financing receivables: |///////////////////|
a. Loans and leases, net of unearned income (from schedule RC-C). . . . | RCFD 2122 | 446,232|///////////////////| 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . | RCFD 3123 | 6,935|///////////////////| 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . | RCFD 3128 | 0|///////////////////| 4.c.
d. Loans and leases, net of unearned income, |///////////////////|
allowance, and reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . . . . . . . . . |2125 439,297| 4.d.
5. Trading assets (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |3545 0| 5.
6. Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . . . . . . . . . |2145 7,110| 6.
7. Other real estate owned (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . . . . . . |2150 758| 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M). . . . . . |2130 0| 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . . . . . . |2155 1,421| 9.
10. Intangible assets (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |2143 0| 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |2160 12,013| 11.
12. Total assets (sum of items 1 through 11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |2170 806,435| 12.
- ---------------------------- ---------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
3
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-2
FDIC Certificate No: |0|7|2|2|0|
-----------
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands |//////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------|
<S><C>
LIABILITIES |/////////////////////////|
13. Deposits: |/////////////////////////|
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, |/////////////////////////|
part I). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|RCON 2200 616,646|13.a.
-------------------------|/////////////////////////|
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . . |RCON 6631 102,238 |/////////////////////////|13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . |RCON 6636 514,408 |/////////////////////////|13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, |/////////////////////////|
part II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |RCFN 2200 2,710|13.b.
-------------------------|/////////////////////////|
(1) Noninterest-bearing. . . . . . . . . . . . . . . . . . . . |RCFN 6631 0|/////////////////////////|13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . . |RCFN 6636 2,710|/////////////////////////|13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase . . . . . . . . |RCFD 2800 64,923|14.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . |RCON 2840 4,126|15.a.
b. Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . |RCFD 3548 0|15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under |/////////////////////////|
capitalized leases): |/////////////////////////|
a. With a remaining maturity of one year or less. . . . . . . . . . . . . . . . . . . . . |RCFD 2332 3,500|16.a.
b. With a remaining maturity of more than one year through three years . . . . . . . . . . |RCFD A547 13,200|16.b.
c. With a remaining maturity of more than three years. . . . . . . . . . . . . . . . . . . |RCFD A548 1,050|16.c.
17. Not applicable |/////////////////////////|
18. Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . |RCFD 2920 1,421|18.
19. Subordinated notes and debentures(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . |RCFD 3200 0|19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . |RCFD 2930 46,108|20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . . . |RCFD 2948 753,684|21.
22. Not applicable |/////////////////////////|
EQUITY CAPITAL |/////////////////////////|
23. Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . . . |RCFD 3838 0|23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |RCFD 3230 17,926|24.
25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . |RCFD 3839 19,763|25.
26. a. Undivided profits and capital reserves. . . . . . . . . . . . . . . . . . . . . . . . . |RCFD 3632 14,929|26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities. . . . . . . . . |RCFD 8434 133|26.b.
27. Cumulative foreign currency translation adjustments. . . . . . . . . . . . . . . . . . . . |RCFD 3284 0|27.
28. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . . . |RCFD 3210 52,751|28.
29. Total liabilities and equity capital (sum of items 21 and 28). . . . . . . . . . . . . . . |RCFD 3300 806,435|29.
---------------------------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most Number
comprehensive level of auditing work performed for the bank by independent external auditors -----------------
as of any date during 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|RCFD 6724 N/A|M.1.
-----------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
4
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-3
FDIC Certificate No: 07220
SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held for trading.
<TABLE>
<CAPTION>
---------
| C405 | (--
|---------------------------------|---------|
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
|---------------------|---------------------|
Dollar Amounts in Thousands| RCFD Bil Mil Thou | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------|---------------------|---------------------|
<S><C>
1. Cash items in process of collection, unposted debits, and currency and | /////////////////// | /////////////////// |
coin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0022 26,613 | /////////////////// | 1.
a. Cash items in process of collection and unposted debits. . . . . . . | /////////////////// | 0200 24,722 | 1.a.
b. Currency and coin. . . . . . . . . . . . . . . . . . . . . . . . . . | /////////////////// | 0080 1,841 | 1.b.
2. Balances due from depository institutions in the U.S.. . . . . . . . . . | /////////////////// | 0082 2,672 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) . | 0083 0 | /////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | /////////////////// | /////////////////// |
in the U.S. (including their IBFs) . . . . . . . . . . . . . . . . . | 0085 5,382 | /////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks . | /////////////////// | 0070 1,103 | 3.
a. Foreign branches of other U.S. banks . . . . . . . . . . . . . . . . | 0073 0 | /////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks . . . . . | 0074 1,103 | /////////////////// | 3.b.
4. Balances due from Federal Reserve Banks. . . . . . . . . . . . . . . . . | 0090 1,392 | 0090 1,392 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | /////////////////// | /////////////////// |
Schedule RC, sum of items 1.a and 1.b) . . . . . . . . . . . . . . . . . | 0010 34,490 | 0010 31,780 | 5.
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------|
<S><C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | /////////////////// |
Column B above). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0500 2,372 | M.1.
-----------------------
</TABLE>
SCHEDULE RC-B--SECURITIES
Exclude assets held for trading.
<TABLE>
<CAPTION>
---------- (--
| C410 |
|--------------------------------------------------------------------------|--------|
| Held-to-maturity | Available-for-sale |
|-----------------------------------------|-----------------------------------------|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value |
|--------------------|--------------------|--------------------|--------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -----------------------------------------|--------------------|--------------------|--------------------|--------------------|
<S><C>
1. U.S. Treasury securities . . . . . | 0211 0 | 0213 0 | 1286 19,916 | 1287 20,076 | 1.
2. U.S. Government agency obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) . . . . . . . | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3). . . . . . . . . . | 1294 0 | 1295 0 | 1297 0 | 1298 0 | 2.b.
------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.b, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
5
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-4
FDIC Certificate No.: |0|7|2|2|0|
----------
SCHEDULE RC-B--CONTINUED
<TABLE>
<CAPTION>
|-----------------------------------------------------------------------------|
| Held-to-maturity | Available-for-sale |
|-----------------------------------------------------------------------------|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
|------------------|------------------|-------------------|-------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou| RCFD Bil Mil Thou| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------
<S><C>
3. Securities issued by states | //////////////// | //////////////// | ///////////////// | ///////////////// |
and political subdivisions | //////////////// | //////////////// | ///////////////// | ///////////////// |
in the U.S.: | //////////////// | //////////////// | ///////////////// | ///////////////// |
a. General obligations . . . . . | 1676 0 | 1677 0 | 1678 1,019 | 1679 1,035 | 3.a.
b. Revenue obligations . . . . . | 1681 0 | 1686 0 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | //////////////// | //////////////// | ///////////////// | ///////////////// |
and similar obligations . . . | 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities (MBS): | //////////////// | //////////////// | ///////////////// | ///////////////// |
a. Pass-through securities: | //////////////// | //////////////// | ///////////////// | ///////////////// |
(1) Guaranteed by | //////////////// | //////////////// | ///////////////// | ///////////////// |
GNMA . . . . . . . . . . | 1698 54,012 | 1699 54,211 | 1701 13,342 | 1702 13,503 | 4.a.(1)
(2) Issued by FNMA | //////////////// | //////////////// | ///////////////// | ///////////////// |
and FHLMC . . . . . . . . | 1703 192,304 | 1705 191,392 | 1706 13,713 | 1707 13,621 | 4.a.(2)
(3) Other pass-through | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities . . . . . . . | 1709 0 | 1710 0 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities (include CMOs, | //////////////// | //////////////// | ///////////////// | ///////////////// |
REMICs, and stripped | //////////////// | //////////////// | ///////////////// | ///////////////// |
MBS): | //////////////// | //////////////// | ///////////////// | ///////////////// |
(1) Issued or guaranteed | //////////////// | //////////////// | ///////////////// | ///////////////// |
by FNMA, FHLMC, | //////////////// | //////////////// | ///////////////// | ///////////////// |
or GNMA . . . . . . . . . | 1714 o | 1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | //////////////// | //////////////// | ///////////////// | ///////////////// |
by MBS issued or | //////////////// | //////////////// | ///////////////// | ///////////////// |
guaranteed by FNMA, | //////////////// | //////////////// | ///////////////// | ///////////////// |
FHLMC, or GNMA . . . . . | 1718 0 | 1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage-backed | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities . . . . . . . | 1733 0 | 1734 0 | 1735 0 | 1736 0 | 4.b.(3)
5. Other debt securities: | //////////////// | //////////////// | ///////////////// | ///////////////// |
a. Other domestic debt | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities . . . . . . . . . | 1737 0 | 1738 0 | 1739 0 | 1741 0 | 5.a.
b. Foreign debt | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities . . . . . . . . . | 1742 2,750 | 1743 2,750 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | //////////////// | //////////////// | ///////////////// | ///////////////// |
a. Investments in mutual | //////////////// | //////////////// | ///////////////// | ///////////////// |
funds and other equity | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities with readily | //////////////// | //////////////// | ///////////////// | ///////////////// |
determinable fair values . . | //////////////// | //////////////// | A510 10 | A511 10 | 6.a.
b. All other equity | //////////////// | //////////////// | ///////////////// | ///////////////// |
securities (1) . . . . . . . | //////////////// | //////////////// | 1752 6,035 | 1753 6,035 | 6.b.
7. Total (sum of items 1 | //////////////// | //////////////// | ///////////////// | ///////////////// |
through 6) (total of | //////////////// | //////////////// | ///////////////// | ///////////////// |
column A must equal | //////////////// | //////////////// | ///////////////// | ///////////////// |
Schedule RC, item 2.a.) | //////////////// | //////////////// | ///////////////// | ///////////////// |
(total of column D must | //////////////// | //////////////// | ///////////////// | ///////////////// |
equal Schedule RC, | //////////////// | //////////////// | ///////////////// | ///////////////// |
item 2.b) . . . . . . . . . . . . | 1754 249,066 | 1771 248,353 | 1772 54,035 | 1773 54,280 | 7.
-------------------------------------------------------------------------------
- -------------
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.b, column D.
</TABLE>
6
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460
City, State Zip: NEW YORK CITY, NY 10022 FFIEC 031
FDIC Certificate No.: |0|7|2|2|0| Page RC-5
-----------
SCHEDULE RC-B--CONTINUED
<TABLE>
<CAPTION>
----------
Memoranda | C412 | (--
--------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Pledged securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0416 113,593 | M.1
2. Maturity and repricing data for debt securities (1), (2) (excluding those in | ///////////////// |
nonaccrual status): | ///////////////// |
a. Securities issued by the U.S. Treasury, U.S. Government agencies, and states and political | ///////////////// |
subdivisions in the U.S.; other non-mortgage debt securities; and mortgage pass-through | ///////////////// |
securities other than those backed by closed-end first lien 1-4 family residential | ///////////////// |
mortgages with a remaining maturity or repricing frequency of:(3)(4) | ///////////////// |
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | A549 0 | M.2.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . . . . . . | A550 12,274 | M.2.a.(2)
(3) Over one year through three years . . . . . . . . . . . . . . . . . . . . . . . . . . | A551 21,505 | M.2.a.(3)
(4) Over three years through five years . . . . . . . . . . . . . . . . . . . . . . . . . | A552 368 | M.2.a.(4)
(5) Over five years through 15 years . . . . . . . . . . . . . . . . . . . . . . . . . . . | A553 1,167 | M.2.a.(5)
(6) Over 15 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | A554 0 | M.2.a.(6)
b. Mortgage pass-through securities backed by closed-end first lien 1-4 family residential | ///////////////// |
mortgages with a remaining maturity or repricing frequency of:(3)(5) | ///////////////// |
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | A555 4,785 | M.2.b.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . . . . . . | A556 0 | M.2.b.(2)
(3) Over one year through three years . . . . . . . . . . . . . . . . . . . . . . . . . . | A557 0 | M.2.b.(3)
(4) Over three years through five years . . . . . . . . . . . . . . . . . . . . . . . . . | A558 6,978 | M.2.b.(4)
(5) Over five years through 15 years . . . . . . . . . . . . . . . . . . . . . . . . . . . | A559 130,551 | M.2.b.(5)
(6) Over 15 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | A560 119,673 | M.2.b.(6)
c. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS; exclude mortgage | ///////////////// |
pass-through securities) with an expected average life of:(6) | ///////////////// |
(1) Three years or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | A561 0 | M.2.c.(1)
(2) Over three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | A562 0 | M.2.c.(2)
d. Fixed rate AND floating rate debt securities with a REMAINING MATURITY of one year or less | ///////////////// |
(included in Memorandum items 2.a through 2.c above) . . . . . . . . . . . . . . . . . . . | A248 11,023 | M.2.d.
3.-6. Not applicable | ///////////////// |
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ///////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ///////////////// |
or transfer) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1778 0 | M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ///////////////// |
accounts in Schedule RC-B, item 4.b): | ///////////////// |
a. Amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8780 0 | M.8.a.
b. Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-cost accounts in | ///////////////// |
Schedule RC-B, items 2, 3, and 5): | ///////////////// |
a. Amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8782 0 | M.9.a.
b. Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8783 0 | M.9.b.
---------------------
</TABLE>
- --------------
(1) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(2) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(3) Report fixed rate debt securities by remaining maturity and floating rate
debt securities by repricing frequency.
(4) Sum of Memorandum items 2.a.(1) through 2.a.(6) plus any nonaccrual debt
securities in the categories of debt securities reported in Memorandum item
2.a. that are included in Schedule RC-N, item 9, column C, must equal
Schedule RC-B, sum of items 1, 2, 3, and 5, columns A and D, plus mortgage
pass-through securities other than those backed by closed-end first lien
1-4 family residential mortgages included in Schedule RC-B, item 4.a.,
columns A and D.
(5) Sum of Memorandum items 2.b.(1) through 2.b.(6) plus any nonaccrual
mortgage pass-through securities backed by closed-end first lien 1-4 family
residential mortgages included in Schedule RC-N, item 9, column C, must
equal Schedule RC-B, item 4.a, sum of columns A and D, less the amount of
mortgage pass-through securities other than those backed by closed-end
first lien 1-4 family residential mortgages included in Schedule RC-B, item
4.a, columns A and D.
(6) Sum of Memorandum items 2.c.(1) and 2.c.(2) plus any nonaccrual "Other
mortgage-backed securities" included in Schedule RC-N, item 9, column C,
must equal Schedule RC-B, item 4.b, sum of columns A and D.
7
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-6
FDIC Certificate No.: |0|7|2|2|0|
----------
SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease
losses from amounts reported in this schedule.
Report total loans and leases, net of unearned
income. Exclude assets held for trading and
commercial paper.
<TABLE>
<CAPTION>
-----------
| C415 | ( --
------------------------------------------|
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
|------------------- |--------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------- ---------------------|
<S><C> | | |
1. Loans secured by real estate.......................... | 1410 72,161 | ////////////////// | 1.
a. Construction and land development................. | ////////////////// | 1415 1,117 | 1.a.
b. Secured by farmland (including farm residential | ////////////////// | ////////////////// |
and other improvements)........................... | ////////////////// | 1420 0 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 | ////////////////// | ////////////////// |
family residential properties and extended | ////////////////// | ////////////////// |
under lines of credit........................ | ////////////////// | 1797 0 | 1.c.(1)
(2) All other loans secured by 1-4 family | ////////////////// | ////////////////// |
residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens.................. | ////////////////// | 5367 43,954 | 1.c.(2)(a)
(b) Secured by junior liens................. | ////////////////// | 5368 6,110 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential | ////////////////// | ////////////////// |
properties........................................ | ////////////////// | 1460 2,561 | 1.d.
e. Secured by nonfarm nonresidential properties...... | ////////////////// | 1480 18,419 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. .................. | ////////////////// | 1505 0 | 2.a.
(1) To U.S. branches and agencies of foreign | ////////////////// | ////////////////// |
banks........................................ | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ....... | 1507 0 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ..... | 1517 0 | 1517 0 | 2.b.
c. To banks in foreign countries..................... | ////////////////// | 1510 0 | 2.c.
(1) To foreign branches of other U.S. banks...... | 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries.......... | 1516 0 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other | ////////////////// | ////////////////// |
loans to farmers...................................... | 1590 0 | 1590 0 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile)..................... | 1763 315,606 | 1763 315,606 | 4.a.
b. To non-U.S. addressees (domicile)................. | 1764 0 | 1764 0 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks..................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks.................................. | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other | ////////////////// | ////////////////// |
personal expenditures (i.e., consumer loans) | ////////////////// | ////////////////// |
(includes purchased paper)............................ | ////////////////// | 1975 16,157 | 6.
a. Credit cards and related plans (includes check | ////////////////// | ////////////////// |
credit and other revolving credit plans).......... | 2008 4,838 | ////////////////// | 6.a.
b. Other (includes single payment, installment, | ////////////////// | ////////////////// |
and all student loans)............................ | 2011 11,319 | ////////////////// | 6.b.
7. Loans to foreign governments and official | ////////////////// | ////////////////// |
institutions (including foreign central banks)........ | 2081 789 | 2081 0 | 7.
8. Obligations (other than securities and leases) | ////////////////// | ////////////////// |
of states and political subdivisions in the U.S. | ////////////////// | ////////////////// |
(includes nonrated industrial development | ////////////////// | ////////////////// |
obligations).......................................... | 2107 0 | 2107 0 | 8.
9. Other loans........................................... | 1563 0 | ////////////////// | 9.
a. Loans for purchasing or carrying securities | ////////////////// | ////////////////// |
(secured and unsecured)........................... | ////////////////// | 1545 0 | 9.a.
b. All other loans (exclude consumer loans).......... | ////////////////// | 1564 0 | 9.b.
10. Lease financing receivables (net of unearned income).. | ////////////////// | 2165 41,519 | 10.
a. Of U.S. addressees (domicile)..................... | 2182 41,519 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile)................. | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in | ////////////////// | ////////////////// |
items 1-9 above....................................... | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income | ////////////////// | ////////////////// |
(sum of items 1 through 10 minus item 11) (total of | ////////////////// | ////////////////// |
column A must equal Schedule RC, item 4.a)............ | 2122 446,232 | 2122 445,443 | 12.
-------------------------------------------
</TABLE>
8
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-7
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
<TABLE>
<CAPTION>
Memoranda ----------------------
Dollar Amounts in Thousands | ///// Bil Mil Thou |
- ----------------------------------------------------------------------------------
<S><C> | |
1. Not applicable | ////////////////// |
2. Loans and leases restructured and in compliance with | ////////////////// |
modified terms (included in Schedule RC-C, part I, | ////////////////// |
above and not reported as past due or nonaccrual | ////////////////// |
in Schedule RC-N, Memorandum item 1): | ////////////////// |
a. Loans secured by real estate: | ////////////////// |
(1) To U.S. addressees (domicile)................ | RCFD 1687 0 | M.2.a.(1)
(2) To non-U.S. addressees (domicile)............ | RCFD 1689 0 | M.2.a.(2)
b. All other loans and all lease financing | ////////////////// |
receivables (exclude loans to individuals for | ////////////////// |
household, family, and other personal | ////////////////// |
expenditures)..................................... | RCFD 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease | ////////////////// |
financing receivables of non-U.S. addresses | ////////////////// |
(domicile) included in Memorandum item 2.b above.. | RCFD 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases | ////////////////// |
(excluding those in nonaccrual status): | ////////////////// |
a. Closed-end loans secured by first liens on 1-4 | ////////////////// |
family residential properties in domestic | ////////////////// |
offices with a remaining maturity or repricing | ////////////////// |
frequency of: (1) (2) | ////////////////// |
(1) Three months or less......................... | RCON A564 2,468 | M.3.a.(1)
(2) Over three months through 12 months.......... | RCON A565 7,547 | M.3.a.(2)
(3) Over one year through three years............ | RCON A566 182 | M.3.a.(3)
(4) Over three years through five years.......... | RCON A567 680 | M.3.a.(4)
(5) Over five years through 15 years............. | RCON A568 32,107 | M.3.a.(5)
(6) Over 15 years................................ | RCON A569 72 | M.3.a.(6)
b. All loans and leases other than closed-end loans | ////////////////// |
secured by first liens on 1-4 family residential | ////////////////// |
properties in domestic offices with a remaining | ////////////////// |
maturity or repricing frequency of: (1) (3) | ////////////////// |
(1) Three months or less......................... | RCFD A570 260,452 | M.3.b.(1)
(2) Over three months through 12 months.......... | RCFD A571 37,745 | M.3.b.(2)
(3) Over one year through three years............ | RCFD A572 45,208 | M.3.b.(3)
(4) Over three years through five years.......... | RCFD A573 49,723 | M.3.b.(4)
(5) Over five years through 15 years............. | RCFD A574 8,658 | M.3.b.(5)
(6) Over 15 years................................ | RCFD A575 172 | M.3.b.(6)
c. Fixed rate AND floating rate loans and leases | ////////////////// |
with a REMAINING MATURITY of one year or less | ////////////////// |
(included in Memorandum items 3.a and 3.b above).. | RCFD A247 308,212 | M.3.c.
d. Fixed rate AND floating rate loans secured by | ////////////////// |
nonfarm nonresidential properties in domestic | ////////////////// |
offices (4) with a REMAINING MATURITY of over | ////////////////// |
five years (included in Memorandum item 3.b | ////////////////// |
above)............................................ | RCON A577 1,528 | M.3.d.
e. Fixed rate AND floating rate commercial and | ////////////////// |
industrial loans (5) with a REMAINING MATURITY | ////////////////// |
of over three years (included in Memorandum | ////////////////// |
item 3.b above)................................... | RCFD A578 21,579 | M.3.e.
----------------------
</TABLE>
- -------------------
(1) Report fixed rate loans and leases by remaining maturity and floating
rate loans by repricing frequency.
(2) Sum of Memorandum items 3.a.(1) through 3.a.(6) plus total nonaccrual
closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices included in Schedule RC-N, Memorandum item
3.c.(2), column C, must equal total closed-end loans secured by first
liens on 1-4 family residential properties from Schedule RC-C, part I,
item 1.c.(2)(a), column B.
(3) Sum of Memorandum items 3.b.(1) through 3.b.(6), plus total nonaccrual
loans and leases from Schedule RC-N, sum of items 1 through 8, column C,
minus nonaccrual closed-end loans secured by first liens on 1-4 family
residential properties in domestic offices included in Schedule RC-N,
Memorandum item 3.c.(2), column C, must equal total loans and leases from
Schedule RC-C, part I, sum of items 1 through 10, column A, minus total
closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices from Schedule RC-C, part I, item
1.c.(2)(a), column B.
(4) As defined for Schedule RC-C, part I, item 1.e, column B.
(5) As defined for Schedule RC-C, part I, item 4, column A.
9
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-8
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
<TABLE>
<CAPTION>
Memoranda (continued) -----------------------
Dollar Amounts in Thousands | /////// Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------------
<S><C>
4. Loans to finance commercial real estate, construction, and land development activities | //////////////////// |
(not secured by real estate) included in Schedule RC-C, part I, items 4 and 9, column A, | //////////////////// |
page RC-6(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 2746 20,252 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, page RC-6. . . . . . . . | RCFD 5369 10,997 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family residential properties | //////////////////// |
in domestic offices (included in Schedule RC-C, part I, item 1.c.(2)(a), column B, page RC-6) | RCON 5370 356 | M.6.
-----------------------
</TABLE>
- --------------------
(1) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
--------
| C420 | (--
----------------------
Dollar Amounts in Thousands | /////// Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------- ----------------------
<S><C>
ASSETS | //////////////////// |
1. U.S. Treasury securities in domestic offices. . . . . . . . . . . . . . . . . . . . . . . . | RCON 3531 N/A | 1.
2. U.S. Government agency obligations in domestic offices (exclude mortgage-backed securities) | RCON 3532 N/A | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices. . . | RCON 3533 N/A | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | //////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA. . . . . . . . . . | RCON 3534 N/A | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | //////////////////// |
(include CMOs, REMICs, and stripped MBS). . . . . . . . . . . . . . . . . . . . . . . . | RCON 3535 N/A | 4.b.
c. All other mortgage-backed securities. . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3536 N/A | 4.c.
5. Other debt securities in domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3537 N/A | 5.
6. Certificates of deposit in domestic offices . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3538 N/A | 6.
7. Commercial paper in domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3539 N/A | 7.
8. Bankers acceptances in domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3540 N/A | 8.
9. Other trading assets in domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3541 N/A | 9.
10. Trading assets in foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 3542 N/A | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | //////////////////// |
contracts: | //////////////////// |
a. In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3543 N/A | 11.a.
b. In foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 3543 N/A | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) . . . . . | RCFD 3545 N/A | 12.
----------------------
----------------------
LIABILITIES | /////// Bil Mil Thou |
----------------------
13. Liability for short positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3546 N/A | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | //////////////////// |
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3547 N/A | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b). . . | RCFD 3548 N/A | 15.
----------------------
</TABLE>
10
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-9
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-E--DEPOSIT LIABILITIES
PART I. DEPOSITS IN DOMESTIC OFFICES
<TABLE>
<CAPTION>
--------
| C425 | (--
----------------------------------------------------- --------
| | Nontransaction |
| Transaction Accounts | Accounts |
-------------------- -------------------- --------------------
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
-------------------- -------------------- --------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
- ------------------------------------------------------ -------------------- -------------------- --------------------
<S><C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations . . | 2201 100,499 | 2240 92,053 | 2346 505,003 | 1.
2. U.S. Government . . . . . . . . . . . . . . . . | 2202 614 | 2280 614 | 2520 0 | 2.
3. States and political subdivisions in the U.S. . | 2203 3,313 | 2290 3,313 | 2530 959 | 3.
4. Commercial banks in the U.S.. . . . . . . . . . | 2206 247 | 2310 247 | 2550 0 | 4.
5. Other depository institutions in the U.S. . . . | 2207 0 | 2312 0 | 2349 0 | 5.
6. Banks in foreign countries. . . . . . . . . . . | 2213 932 | 2320 932 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) . . . . . . . | 2216 0 | 2300 0 | 2377 0 | 7.
8. Certified and official checks . . . . . . . . . | 2330 5,079 | 2330 5,079 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a). . . . . . . . . . . . . . . . . . . | 2215 110,684 | 2210 102,238 | 2385 505,962 | 9.
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- --------------------------------------------------------------------------------------------------- ---------------------
<S><C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | /////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts . . . . . . . . . | 6835 9,139 | M.1.a.
b. Total brokered deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2365 0 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | /////////////////// |
(1) Issued in denominations of less than $100,000. . . . . . . . . . . . . . . . . . | 2343 0 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than | /////////////////// |
$100,000 and participated out by the broker in shares of $100,000 or less. . . . | 2344 0 | M.1.c.(2)
d. Maturity data for brokered deposits: | /////////////////// |
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining | /////////////////// |
maturity of one year or less (included in Memorandum item 1.c. (1) above). . . . | A243 0 | M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining | /////////////////// |
maturity of one year or less (included in Memorandum item 1.b above) . . . . . . | A244 0 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | /////////////////// |
reported in item 3 above which are secured or collateralized as required under state law)| 5590 4,262 | M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d | /////////////////// |
must equal item 9, column C above): | /////////////////// |
a. Savings deposits: | /////////////////// |
(1) Money market deposit accounts (MMDAs). . . . . . . . . . . . . . . . . . . . . . | 6810 133,555 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs). . . . . . . . . . . . . . . . . . . . . | 0352 154,382 | M.2.a.(2)
b. Total time deposits of less than $100,000 . . . . . . . . . . . . . . . . . . . . . . | 6648 85,024 | M.2.b.
c. Total time deposits of $100,000 or more . . . . . . . . . . . . . . . . . . . . . . . | 2604 133,001 | M.2.c.
3. All NOW accounts (included in column A above). . . . . . . . . . . . . . . . . . . . . . . | 2398 8,446 | M.3.
4. Not applicable ---------------------
</TABLE>
11
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 09/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-10
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-E--CONTINUED
PART I. CONTINUED
Memoranda (continued)
<TABLE>
<CAPTION>
------------------
Dollar Amounts in Thousands |RCON Bil Mil Thou|
- -------------------------------------------------------------------------------------------------------|-----------------|
<S><C>
5. Maturity and repricing data for time deposits of less than $100,000: | /////////////// |
a. Time deposits of less than $100,000 with a remaining maturity or repricing frequency | /////////////// |
of: (1)(2) | /////////////// |
(1) Three months or less .................................................................... | A579 16,120 |M.5.a.(1)
(2) Over three months through 12 months ..................................................... | A580 54,334 |M.5.a.(2)
(3) Over one year through three years ....................................................... | A581 14,564 |M.5.a.(3)
(4) Over three years ........................................................................ | A582 6 |M.5.a.(4)
b. Fixed rate AND floating rate time deposits of less than $100,000 with a REMAINING MATURITY | /////////////// |
of one year or less (including in Memorandum items 5.a.(1) through 5.a.(4) above)............. | A241 70,454 |M.5.b.
6. Maturity and repricing data for time deposits of $100,000 or more: | /////////////// |
a. Time deposits of $100,000 or more with a remaining maturity or repricing frequency of:(1)(3) | /////////////// |
(1) Three months or less .................................................................... | A584 101,473 |M.6.a.(1)
(2) Over three months through 12 months ..................................................... | A585 29,924 |M.6.a.(2)
(3) Over one year through three years ....................................................... | A586 1,604 |M.6.a.(3)
(4) Over three years......................................................................... | A587 0 |M.6.a.(4)
b. Fixed rate AND floating rate time deposits of $100,000 or more with a REMAINING MATURITY of | /////////////// |
one year or less (included in Memorandum items 6.a.(1) through 6.a.(4) above).................. | A242 131,397 |M.6.b.
-------------------
</TABLE>
- ---------------
(1) Report fixed rate time deposits by remaining maturity and floating rate
time deposits by repricing frequency.
(2) Sum of Memorandum items 5.a.(1) through 5.a.(4) must equal Schedule RC-E,
Memorandum item 2.b above.
(3) Sum of Memorandum items 6.a.(1) through 6.a.(4) must equal Schedule RC-E,
Memorandum item 2.c above.
12
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 09/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-11
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-E--CONTINUED
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND AGREEMENT SUBSIDIARIES
AND IBFS)
<TABLE>
<CAPTION>
---------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------|-------------------|
<S><C>
Deposits of: | ///////////////// |
1. Individuals, partnerships, and corporations .................................................... | 2621 2,710 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................. | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs)..... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks)................. | 2650 0 | 4.
5. Certified and official checks .................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................. | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) ........................... | 2200 2,710 | 7.
---------------------
</TABLE>
Memorandum
<TABLE>
<CAPTION>
---------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------|-------------------|
<S><C>
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) | A245 2,710 | M.1.
---------------------
</TABLE>
SCHEDULE RC-F--OTHER ASSETS
<TABLE>
<CAPTION>
--------
| C430 |(--
---------------|------|
Dollar Amounts in Thousands | ////// Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------|---------------------|
<S><C>
1. Income earned, not collected on loans ........................................................... | RCFD 2164 1,552 | 1.
2. Net deferred tax assets(1) ..................................................................... | RCFD 2148 1,400 | 2.
3. Interest-only strips receivable (not in the form of a security)(2) on: | /////////////////// |
a. Mortgage loans .............................................................................. | RCFD A519 0 | 3.a.
b. Other financial assets ...................................................................... | RCFD A520 0 | 3.b.
4. Other (itemize and describe amounts that exceed 25% of this item) ............................... | RCFD 2168 9,061 | 4.
------------- --------------------------------
a. | TEXT 3549 | Income Earned, Not Collected on Investments | RCFD 3549 | 2,282 | /////////////////// | 4.a.
--------------------------------------------------------------| |
b. | TEXT 3550 | | RCFD 3550 | | /////////////////// | 4.b.
--------------------------------------------------------------| |
c. | TEXT 3551 | | RCFD 3551 | | /////////////////// | 4.c.
----------------------------------------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) .............................. | RCFD 2160 12,013 | 5.
-----------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------
Memorandum Dollar Amounts in Thousands | ////// Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------|---------------------|
<S><C>
1. Deferred tax assets disallowed for regulatory capital purposes .................................. | RCFD 5610 0 | M.1.
-----------------------
</TABLE>
SCHEDULE RC-G--OTHER LIABILITIES
<TABLE>
<CAPTION>
--------
| C435 | (--
---------------|------|
Dollar Amounts in Thousands | ////// Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------|---------------------|
<S><C>
1. a. Interest accrued and unpaid on deposits in domestic offices(3) .............................. | RCON 3645 2,706 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................... | RCFD 3646 5,240 | 1.b.
2. Net deferred tax liabilities(1) ................................................................. | RCFD 3049 0 | 2.
3. Minority interest in consolidated subsidiaries .................................................. | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item) ............................... | RCFD 2938 38,162 | 4.
------------- --------------------------------| |
a. | TEXT 3552 | Due To Factored Clients | RCFD 3552 | 36,916 | /////////////////// | 4.a.
------------|-------------------------------------------------| | | |
b. | TEXT 3553 | | RCFD 3553 | | /////////////////// | 4.b.
------------|-------------------------------------------------| | | |
c. | TEXT 3554 | | RCFD 3554 | | /////////////////// | 4.c.
------------|-------------------------------------------------|-----------|-------------------| |
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20)............................... | RCFD 2930 46,108 | 5.
-----------------------
</TABLE>
- ---------------
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) Report interest-only strips receivable in the form of a security as
available-for-sale securities in Schedule RC, item 2.b, or as trading
assets in Schedule RC, item 5, as appropriate.
(3) For savings banks, include "dividends" accrued and unpaid on deposits.
13
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-12
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
<TABLE>
<CAPTION>
----------
| C440 | (-
----------------------
| Domestic Offices |
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Customers' liability to this bank on acceptances outstanding ................................ | 2155 1,421 | 1.
2. Bank's liability on acceptances executed and outstanding .................................... | 2920 1,421 | 2.
3. Federal funds sold and securities purchased under agreements to resell ...................... | 1350 8,000 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase .................. | 2800 64,923 | 4.
5. Other borrowed money ........................................................................ | 3190 17,750 | 5.
EITHER | ///////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ................. | 2163 791 | 6.
OR | ///////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ................... | 2941 N/A | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and | ///////////////// |
IBFs) ....................................................................................... | 2192 802,909 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and | ///////////////// |
IBFs) ....................................................................................... | 3129 750,949 | 9.
----------------------
----------------------
ITEMS 10-17 INCLUDE HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES IN DOMESTIC OFFICES. | RCON Bil Mil Thou |
----------------------
10. U.S. Treasury Securities .................................................................... | 1779 20,076 | 10.
11. U.S. Government agency obligations (exclude mortgage-backed securities) ..................... | 1785 0 | 11.
12. Securities issued by states and political subdivisions in the U.S. .......................... | 1786 1,035 | 12.
13. Mortgage-backed securities (MBS): | ///////////////// |
a. Pass-through securities: | ///////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ......................................... | 1787 273,440 | 13.a.(1)
(2) Other pass-through securities ........................................................ | 1869 0 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ///////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ......................................... | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities ................................................. | 2253 0 | 13.b.(2)
14. Other domestic debt securities .............................................................. | 3159 0 | 14.
15. Foreign debt securities ..................................................................... | 3160 2,750 | 15.
16. Equity securities: | ///////////////// |
a. Investments in mutual funds and other equity securities with readily | ///////////////// |
determinable fair values ................................................................. | A513 10 | 16.a.
b. All other equity securities .............................................................. | 3169 6,035 | 16.b.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) ....... | 3170 303,346 | 17.
----------------------
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
EITHER | ///////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .......................... | 3051 791 | M.1.
OR | ///////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ............................ | 3059 N/A | M.2.
----------------------
</TABLE>
14
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-13
FDIC Certificate No.: |0|7|2|2|0|
---------
SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFS
TO BE COMPLETED ONLY BY BANKS WITH IBFS AND OTHER "FOREIGN" OFFICES.
<TABLE>
<CAPTION>
----------
| C445 | (--
----------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)................ | 2133 3,526 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, | ///////////////// |
item 12, column A)........................................................................... | 2076 789 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, | ///////////////// |
column A).................................................................................... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21).................................... | 2898 2,735 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ///////////////// |
part II, items 2 and 3)...................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6).... | 2381 2,710 | 6.
----------------------
SCHEDULE RC-K--QUARTERLY AVERAGES(1)
----------
| C445 | (--
---------------------------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
ASSETS | ////////////////////// |
1. Interest-bearing balances due from depository institutions............................... | RCFD 3381 3,010 | 1.
2. U.S. Treasury securities and U.S. Government agency obligations(2)....................... | RCFD 3382 285,384 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2).................... | RCFD 3383 698 | 3.
4. a. Other debt securities(2).............................................................. | RCFD 3647 6,554 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 6,046 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell................... | RCFD 3365 7,478 | 5.
6. Loans: | ////////////////////// |
a. Loans in domestic offices: | ////////////////////// |
(1) Total loans....................................................................... | RCON 3360 418,631 | 6.a.(1)
(2) Loans secured by real estate...................................................... | RCON 3385 73,746 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers............... | RCON 3386 0 | 6.a.(3)
(4) Commercial and industrial loans................................................... | RCON 3387 289,185 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures....... | RCON 3388 16,269 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs............. | RCFN 3360 789 | 6.b.
7. Trading assets........................................................................... | RCFD 3401 0 | 7.
8. Lease financing receivables (net of unearned income)..................................... | RCFD 3484 39,431 | 8.
9. Total assets(4).......................................................................... | RCFD 3368 784,321 | 9.
LIABILITIES | ////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | ////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits)............. | RCON 3485 21,777 | 10.
11. Nontransaction accounts in domestic offices: | ////////////////////// |
a. Money market deposit accounts (MMDAs)................................................. | RCON 3486 132,057 | 11.a.
b. Other savings deposits................................................................ | RCON 3487 93,423 | 11.b.
c. Time deposits of $100,000 or more..................................................... | RCON A514 103,939 | 11.c.
d. Time deposits of less than $100,000................................................... | RCON A529 102,399 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 2,710 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase............... | RCFD 3353 85,133 | 13.
14. Other borrowed money (includes mortgage indebtedness and obligations under capitalized | ////////////////////// |
leases).................................................................................. | RCFD 3355 17,751 | 14.
---------------------------
</TABLE>
- -----------------------------
(1) For all items, banks have the option of reporting either (1) an average
of daily figures for the quarter, or (2) an average of weekly figures
(i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on
historical cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
15
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-14
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume
indicators and not necessarily as measures of risk.
<TABLE>
<CAPTION>
--------
| C460 | (--
-------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C>
1. Unused commitments: | ///////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ///////////////////// |
equity lines............................................................................ | 3814 0 | 1.a.
b. Credit card lines....................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ///////////////////// |
(1) Commitments to fund loans secured by real estate.................................... | 3816 1,024 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate................................ | 6550 269 | 1.c.(2)
d. Securities underwriting................................................................. | 3817 0 | 1.d.
e. Other unused commitments................................................................ | 3818 14,253 | 1.e.
2. Financial standby letters of credit and foreign office guarantees.......................... | 3819 23,216 | 2.
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 0 | ///////////////////// | 2.a.
3. Performance standby letters of credit and foreign office guarantees........................ | 3821 0 | 3.
a. Amount of performance standby letters of credit conveyed to others | RCFD 3822 | 0 | ///////////////////// | 3.a.
4. Commercial and similar letters of credit................................................... | 3411 8,715 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the | ///////////////////// |
reporting bank............................................................................. | 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ///////////////////// |
(nonaccepting) bank........................................................................ | 3429 0 | 6.
7. Securities borrowed........................................................................ | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ///////////////////// |
against loss by the reporting bank)........................................................ | 3433 0 | 8.
9. Financial assets transferred with recourse that have been treated as sold for | ///////////////////// |
Call Report purposes: | ///////////////////// |
a. First lien 1-to-4 family residential mortgage loans: | ///////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date........ | A521 0 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date................ | A522 0 | 9.a.(2)
b. Other financial assets (excluding small business obligations reported in item 9.c): | ///////////////////// |
(1) Outstanding principal balance of assets transferred as of the report date........... | A523 0 | 9.b.(1)
(2) Amount of recourse exposure on these assets as of the report date................... | A524 0 | 9.b.(2)
c. Small business obligations transferred with recourse under Section 208 of the | ///////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ///////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ///////////////////// |
as of the report date............................................................... | A249 0 | 9.c.(1)
(2) Amount of retained recourse on these obligations as of the report date.............. | A250 0 | 9.c.(2)
10. Notional amount of credit derivatives: | ///////////////////// |
a. Credit derivatives on which the reporting bank is the guarantor......................... | A534 0 | 10.a.
b. Credit derivatives on which the reporting bank is the beneficiary....................... | A535 0 | 10.b.
11. Spot foreign exchange contracts............................................................ | 8765 110 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize | ///////////////////// |
and describe each component of this item over 25% of Schedule RC, item 28, "Total equity | ///////////////////// |
capital").................................................................................. | 3430 0 | 12.
------------- ---------------------| ///////////////////// |
a. | TEXT 3555 | | RCFD 3555 | | ///////////////////// | 12.a.
b. | TEXT 3556 | | RCFD 3556 | | ///////////////////// | 12.b.
c. | TEXT 3557 | | RCFD 3557 | | ///////////////////// | 12.c.
d. | TEXT 3558 | | RCFD 3558 | | ///////////////////// | 12.d.
------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-15
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-L--CONTINUED
<TABLE>
<CAPTION>
-------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ///////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity | ///////////////////// |
capital")...................................................................................| 5591 0 | 13.
------------- ----------------------| ///////////////////// |
a. | TEXT 5592 | | RCFD 5592 | | ///////////////////// | 13.a.
b. | TEXT 5593 | | RCFD 5593 | | ///////////////////// | 13.b.
c. | TEXT 5594 | | RCFD 5594 | | ///////////////////// | 13.c.
d. | TEXT 5595 | | RCFD 5595 | | ///////////////////// | 13.d.
------------------------------------------------------------------------------------------------------------------
--------
| C461 | (-
-----------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange |Equity Derivative | Commodity and |
- --------------------------------------------| Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |---------------------------------------------------------------------------
| Position Indicators |Tril Bil Mil Thou |Tril Bil Mil Thou |Tril Bil Mil Thou |Tril Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
14. Gross amounts (e.g., notional | //////////////// | //////////////// | //////////////// | //////////////// |
amounts) (for each column, sum of | //////////////// | //////////////// | //////////////// | //////////////// |
items 14.a through 14.e must equal | //////////////// | //////////////// | //////////////// | //////////////// |
sum of items 15, 16.a, and 16.b): | //////////////// | //////////////// | //////////////// | //////////////// |
---------------------------------------------------------------------------
a. Futures contracts................... | 0 | 0 | 0 | 0 | 14.a.
---------------------------------------------------------------------------
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
---------------------------------------------------------------------------
b. Forward contracts................... | 0 | 417 | 0 | 0 | 14.b.
---------------------------------------------------------------------------
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
---------------------------------------------------------------------------
c. Exchange-traded option contracts: | //////////////// | //////////////// | //////////////// | //////////////// |
---------------------------------------------------------------------------
(1) Written options................. | 0 | 0 | 0 | 0 | 14.c.(1)
---------------------------------------------------------------------------
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
---------------------------------------------------------------------------
(2) Purchased options............... | 0 | 0 | 0 | 0 | 14.c.(2)
---------------------------------------------------------------------------
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
---------------------------------------------------------------------------
d. Over-the-counter option contracts: | //////////////// | //////////////// | //////////////// | //////////////// |
---------------------------------------------------------------------------
(1) Written options................. | 0 | 0 | 0 | 0 | 14.d.(1)
---------------------------------------------------------------------------
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
---------------------------------------------------------------------------
(2) Purchased options............... | 0 | 0 | 0 | 0 | 14.d.(2)
---------------------------------------------------------------------------
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
---------------------------------------------------------------------------
e. Swaps............................... | 125,000 | 0 | 0 | 0 | 14.e.
---------------------------------------------------------------------------
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
---------------------------------------------------------------------------
15. Total gross notional amount of | //////////////// | //////////////// | //////////////// | //////////////// |
derivative contracts held for trading.. | 0 | 0 | 0 | 0 | 15.
---------------------------------------------------------------------------
| RCFD A126 | RCFD A127 | RCFD 8723 | RCFD 8724 |
---------------------------------------------------------------------------
16. Gross notional amount of | //////////////// | //////////////// | //////////////// | //////////////// |
derivative contracts held for | //////////////// | //////////////// | //////////////// | //////////////// |
purposes other than trading: | //////////////// | //////////////// | //////////////// | //////////////// |
---------------------------------------------------------------------------
a. Contracts marked to market.......... | 0 | 0 | 0 | 0 | 16.a.
---------------------------------------------------------------------------
| RCFD 8725 | RCFD 8726 | RCFD 8727 | RCFD 8728 |
---------------------------------------------------------------------------
b. Contracts not marked to market...... | 125,000 | 417 | 0 | 0 | 16.b.
---------------------------------------------------------------------------
| RCFD 8729 | RCFD 8730 | RCFD 8731 | RCFD 8732 |
---------------------------------------------------------------------------
c. Interest rate swaps where the bank | //////////////// | //////////////// | //////////////// | //////////////// |
has agreed to pay a fixed rate...... | 0 | //////////////// | //////////////// | //////////////// | 16.c.
---------------------------------------------------------------------------
| RCFD A589 | //////////////// | //////////////// | //////////////// |
---------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-16
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-L--CONTINUED
<TABLE>
<CAPTION>
----------
| C462 | (--
-------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exhange | Equity Derivative | Commodity and |
- --------------------------------------| Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |--------------------|--------------------|--------------------|--------------------|
| Position Indicators | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------|
<S><C>
17. Gross fair values of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ............... | 8733 0 | 8734 0 | 8735 0 | 8736 0 |17.a.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ............... | 8737 0 | 8738 0 | 8739 0 | 8740 0 |17.a.(2)
b. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ............... | 8741 0 | 8742 0 | 8743 0 | 8744 0 |17.b.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ............... | 8745 0 | 8746 0 | 8747 0 | 8748 0 |17.b.(2)
c. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ............... | 8749 713 | 8750 417 | 8751 0 | 8752 0 |17.c.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ............... | 8753 0 | 8754 0 | 8755 0 | 8756 0 |17.c.(2)
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
1.-2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding)................................................. | 3833 269 | M.3.
a. Participations in commitments with an original maturity ----------------------------| ////////////////// |
exceeding one year conveyed to others ........................... | RCFD 3834 | 0 | ////////////////// | M.3.a.
----------------------------
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 N/A | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold (with servicing retained), amounts outstanding by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only) ...................................................................... | 2741 0 | M.5.a.
b. Credit cards and related plans (to be completed quarterly)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only) ...................................................................... | 2743 0 | M.5.c.
----------------------
</TABLE>
18
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-17
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-M--MEMORANDA
<TABLE>
<CAPTION>
----------
| C465 | (--
----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, prinicipal | ////////////////// |
shareholders, and their related interests ................................................... | 6164 50 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of | ////////////////// |
all extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
-----------------------
of total capital as defined for this purpose in agency regulations....|RCFD 6165 | 0 | ////////////////// | 1.b.
-----------------------
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, item 3).............................. | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract..................................................... | 5500 0 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer....................................................... | 5501 0 | 4.b.(1)
(2) Serviced without recourse to servicer.................................................... | 5502 0 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract................................................. | 5503 0 | 4.c.(1)
(2) Serviced under a special option contract................................................. | 5504 0 | 4.c.(2)
d. Mortgages serviced under other servicing contracts........................................... | 5505 0 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a. and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile)................................................................... | 2103 N/A | 5.a.
b. Non-U.S. addressees (domicile)............................................................... | 2104 N/A | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing assets.................................................................... | 3164 0 | 6.a.
-----------------------
(1) Estimated fair value of mortgage servicing assets................ |RCFD A590 | 0 | ////////////////// | 6.a.(1)
-----------------------
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships...................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets................................................. | 5507 0 | 6.b.(2)
c. Goodwill..................................................................................... | 3163 0 | 6.c.
d. Total (sum of items 6.a., 6.b.(1), 6.b.(2), and 6.c) (must equal Schedule RC, item 10)....... | 2143 0 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes..................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt................................................................................. | 3295 0 | 7.
--------------------
</TABLE>
- -----------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
19
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-18
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-M--CONTINUED
<TABLE>
<CAPTION>
----------------------
Dollar Amounts in Thousands | Bil Mil Thou | < --
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
8. a. Other real estate owned: | ////////////////// |
(1) Direct and indirect investments in real estate ventures ...............................| RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | ////////////////// |
(a) Construction and land development in domestic offices .............................| RCON 5508 0 | 8.a.(2)(a)
(b) Farmland in domestic offices ......................................................| RCON 5509 0 | 8.a.(2)(b)
(c) l-4 family residential properties in domestic offices .............................| RCON 5510 758 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices ................| RCON 5511 0 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices .............................| RCON 5512 0 | 8.a.(2)(e)
(f) In foreign offices ................................................................| RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) .............| RCFD 2150 758 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | ////////////////// |
(1) Direct and indirect investments in real estate ventures ...............................| RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies .........| RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) .............| RCFD 2130 0 | 8.b.(3)
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | ////////////////// |
item 23, "Perpetual preferred stock and related surplus" .....................................| RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | ////////////////// |
proprietary, private label, and third party products): | ////////////////// |
a. Money market funds ........................................................................| RCON 6441 0 | 10.a.
b. Equity securities funds ...................................................................| RCON 8427 0 | 10.b.
c. Debt securities funds .....................................................................| RCON 8428 0 | 10.c.
d. Other mutual funds ........................................................................| RCON 8429 0 | 10.d.
e. Annuities .................................................................................| RCON 8430 0 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | ////////////////// |
10.e above) ...............................................................................| RCON 8784 0 | 10.f.
11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative | ////////////////// |
contracts included in assets and liabilities reported in Schedule RC .........................| RCFD A525 0 | 11.
12. Amount of assets netted against nondeposit liabilities and deposits in foreign offices | ////////////////// |
(other than insured branches in Puerto Rico and U.S. territories and possessions) on | ////////////////// |
the balance sheet (Schedule RC) in accordance with generally accepted accounting | ////////////////// |
principles(1) ................................................................................| RCFD A526 0 | 12.
13. Outstanding principal balance of loans other than 1-4 family residential mortgage | ////////////////// |
loans that are serviced for others (to be completed if this balance is more than | ////////////////// |
$10 million and exceeds ten percent of total assets) .........................................| RCFD A591 0 | 13.
|--------------------|
- -----------------------------------------------------------------------------------------------------------------------------------
| ---------------------- |
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
|-------------------------------------------------------------------------------------------------------|--------------------| |
|1. Reciprocal holdings of banking organizations' capital instruments | ////////////////// | |
| (to be completed for the December report only) ................................................. |3836 N/A |M.1.|
| ---------------------- |
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) Exclude netted on-balance sheet amounts associated with off-balance sheet
derivative contracts, deferred tax assets netted against deferred tax
liabilities, and assets netted in accounting for pensions.
20
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-19
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES,
AND OTHER ASSETS
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
<TABLE>
----------
| C470 | < --
|--------------------------------------------------------------|
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
|--------------------|--------------------|--------------------|
Dollars Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------|--------------------|--------------------|
<S><C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addresses (domicile) .................... | 1245 1,020 | 1246 0 | 1247 898 | 1.a.
b. To non-U.S. addressees (domicile) ............... | 1248 0 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and acceptances | ////////////////// | ////////////////// | ////////////////// |
of other banks: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ////////////////// | ////////////////// | ////////////////// |
institutions .................................... | 5377 0 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ................................ | 5380 0 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ////////////////// | ////////////////// | ////////////////// |
other loans to farmers ............................. | 1594 0 | 1597 0 | 1583 0 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................... | 1251 2,039 | 1252 214 | 1253 51 | 4.a.
b. To non-U.S. addressees (domicile) ............... | 1254 0 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ////////////////// | ////////////////// | ////////////////// |
other personal expenditures: | ////////////////// | ////////////////// | ////////////////// |
a. Credit cards and related plans .................. | 5383 152 | 5384 18 | 5385 19 | 5.a.
b. Other (includes single payment, installment, | ////////////////// | ////////////////// | ////////////////// |
and all student loans) .......................... | 5386 118 | 5387 3 | 5388 102 | 5.b.
6. Loans to foreign governments and official | ////////////////// | ////////////////// | ////////////////// |
institutions ....................................... | 5389 0 | 5390 0 | 5391 0 | 6.
7. All other loans .................................... | 5459 0 | 5460 0 | 5461 0 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................... | 1257 897 | 1258 0 | 1259 148 | 8.a.
b. Of non-U.S. addressees (domicile) ............... | 1271 0 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ////////////////// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) .... | 3505 0 | 3506 0 | 3507 0 | 9.
----------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
--------------------------------------------------------------
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
| -------------------|--------------------|--------------------|
<S> <C> | | | |
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ////////////////// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ................ | 5612 0 | 5613 0 | 5614 0 | 10.
a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// |
included in item 10 above ..................... | 5615 0 | 5616 0 | 5617 0 | 10.a.
--------------------------------------------------------------|
</TABLE>
21
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-20
FDIC Certificate No.: |0|7|2|2|0|
----------
SCHEDULE RC-N--CONTINUED
<TABLE>
<CAPTION>
----
|C473|(--
---------------------------------------------------------|
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
|------------------|------------------|------------------|
Dollar Amounts in Thousands |RCFD Bil Mil Thou|RCFD Bil Mil Thou|RCFD Bil Mil Thou|
- --------------------------------------------------------------------------------------------------------------------|
<S><C>
1. Restructured loans and leases included in |//////////////////|//////////////////|//////////////////|
Schedule RC-N, items 1 through 8, above (and |//////////////////|//////////////////|//////////////////|
not reported in Schedule RC-C, part I, Memorandum |//////////////////|//////////////////|//////////////////|
item 2) ..............................................|1658 0|1659 0|1661 0| M.1.
2. Loans to finance commercial real estate, |//////////////////|//////////////////|//////////////////|
construction, and land development activities |//////////////////|//////////////////|//////////////////|
(Not Secured by Real Estate) included in |//////////////////|//////////////////|//////////////////|
Schedule RC-N, items 4 and 7, above...................|6558 0|6559 0|6560 0| M.2.
--------------------------------------------------------
3. Loans secured by real estate in domestic offices |RCON Bil Mil Thou|RCON Bil Mil Thou|RCON Bil Mil Thou|
(included in Schedule RC-N, item 1, above): --------------------------------------------------------
|//////////////////|//////////////////|//////////////////|
a. Construction and land development..................|2759 0|2769 0|3492 0| M.3.a.
b. Secured by farmland................................|3493 0|3494 0|3495 0| M.3.b.
c. Secured by 1-4 family residential properties: |//////////////////|//////////////////|//////////////////|
(1) Revolving, open-end loans secured by |//////////////////|//////////////////|//////////////////|
1-4 family residential properties and |//////////////////|//////////////////|//////////////////|
extended under lines of credit.................|5398 0|5399 0|5400 0| M.3.c.(1)
(2) All other loans secured by 1-4 family |//////////////////|//////////////////|//////////////////|
residential properties.........................|5401 1,020|5402 0|5403 898| M.3.c.(2)
d. Secured by multifamily (5 or more) residential |//////////////////|//////////////////|//////////////////|
properties.........................................|3499 0|3500 0|3501 0| M.3.d.
e. Secured by nonfarm nonresidential properties.......|3502 0|3503 0|3504 0| M.3.e.
--------------------------------------------------------
---------------------------------------
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
|------------------|------------------|
|RCFD Bil Mil Thou|RCFD Bil Mil Thou|
|------------------|------------------|
4. Interest rate, foreign exchange rate, and other |//////////////////|//////////////////|
commodity and equity contracts: |//////////////////|//////////////////|
a. Book value of amounts carried as assets ...........|3522 0|3528 0| M.4.a.
b. Replacement cost of contracts with a |//////////////////|//////////////////|
positive replacement cost .........................|3529 0|3530 0| M.4.b.
|------------------|------------------|
- ---------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: |C477| (--
----
John W. Tietjen, Senior Vice-Pres.-Controller (212) 826-8555
- -------------------------------------------------------- --------------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
</TABLE>
22
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-21
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE AND FICO ASSESSMENTS
<TABLE>
<CAPTION>
----
|C475|(--
|------------------|
Dollar Amounts in Thousands |RCON Bil Mil Thou|
- --------------------------------------------------------------------------------------------------------|------------------|
<S><C>
1. Unposted debits (see instructions): |\\\\\\\\\\\\\\\\\\|
a. Actual amount of all unposted debits ...........................................................|0030 N/A| 1.a.
OR |\\\\\\\\\\\\\\\\\\|
b. Separate amount of unposted debits: |\\\\\\\\\\\\\\\\\\|
(1) Actual amount of unposted debits to demand deposits.........................................|0031 240| 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1)............................|0032 0| 1.b.(2)
2. Unposted credits (see instructions): |\\\\\\\\\\\\\\\\\\|
a. Actual amount of all unposted credits ..........................................................|3510 N/A| 2.a.
OR |\\\\\\\\\\\\\\\\\\|
b. Separate amount of unposted credits: |\\\\\\\\\\\\\\\\\\|
(1) Actual amount of unposted credits to demand deposits........................................|3512 207| 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)...........................|3514 0| 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total |\\\\\\\\\\\\\\\\\\|
deposits in domestic offices) .....................................................................|3520 0| 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto |\\\\\\\\\\\\\\\\\\|
Rico and U.S. territories and possessions (not included in total deposits): |\\\\\\\\\\\\\\\\\\|
a. Demand deposits of consolidated subsidiaries ...................................................|2211 0| 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ......................................|2351 0| 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...........................|5514 0| 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: |\\\\\\\\\\\\\\\\\\|
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .......................|2229 0| 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..........|2383 0| 5.b.
c. Interest accrued and unpaid on deposits in insured branches (included in |\\\\\\\\\\\\\\\\\\|
Schedule RC-G, item 1.b) .......................................................................|5515 0| 5.c.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on |\\\\\\\\\\\\\\\\\\|
behalf of its respondent depository institutions that are also reflected as deposit liabilities |\\\\\\\\\\\\\\\\\\|
of the reporting bank: |\\\\\\\\\\\\\\\\\\|
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, |\\\\\\\\\\\\\\\\\\|
column B) ......................................................................................|2314 0| 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, |\\\\\\\\\\\\\\\\\\|
item 4 or 5, column A or C, but not column B) ..................................................|2315 0| 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1),(2) |\\\\\\\\\\\\\\\\\\|
a. Unamortized premiums ...........................................................................|5516 0| 7.a.
b. Unamortized discounts ..........................................................................|5517 0| 7.b.
8. To be completed by banks with "Oakar deposits." |\\\\\\\\\\\\\\\\\\|
a. Deposits purchased or acquired from other FDIC-insured institutions during the quarter |\\\\\\\\\\\\\\\\\\|
(exclude deposits purchased or acquired from foreign offices other than insured branches |\\\\\\\\\\\\\\\\\\|
in Puerto Rico and U.S. territories and possessions): |\\\\\\\\\\\\\\\\\\|
(1) Total deposits purchased or acquired from other FDIC-insured institutions during |\\\\\\\\\\\\\\\\\\|
the quarter ................................................................................|A531 N/A| 8.a.(1)
(2) Amount of purchased or acquired deposits reported in item 8.a.(1) above attributable |\\\\\\\\\\\\\\\\\\|
to a secondary fund (i.e., BIF members report deposits attributable to SAIF; SAIF |\\\\\\\\\\\\\\\\\\|
members report deposits attributable to BIF) ...............................................|A532 N/A| 8.a.(2)
b. Total deposits sold or transferred to other FIDC-insured institutions during the quarter |\\\\\\\\\\\\\\\\\\|
(exclude sales or transfers by the reporting bank of deposits in foreign offices other than |\\\\\\\\\\\\\\\\\\|
insured branches in Puerto Rico and U.S. territories and possessions) ..........................|A533 N/A| 8.b.
|------------------|
</TABLE>
- ---------------
(1) For FDIC insurance and FICO assessment purposes, "time and savings
deposits" consists of nontransaction accounts and all transaction
accounts other than demand deposits.
(2) Exclude core deposit intangibles.
23
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-22
FDIC Certificate No.: |0|7|2|2|0|
----------
SCHEDULE RC-O--CONTINUED
<TABLE>
<CAPTION>
---------------------
Dollars in Thousands | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices)................................................................. | 8432 0 | 10.
11. Adjustments to demand deposits in domestic offices and in insured branches in Puerto Rico | ////////////////// |
and U.S. territories and possessions reported in Schedule RC-E for certain reciprocal | ////////////////// |
demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if the reporting bank's reciprocal | ////////////////// |
demand balances with the domestic offices of U.S. banks and savings associations | ////////////////// |
and insured branches in Puerto Rico and U.S. territories and possessions that were | ////////////////// |
reported on a gross basis in Schedule RC-E had been reported on a net basis................ | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if the reporting bank's reciprocal | ////////////////// |
demand balances with foreign banks and foreign offices of other U.S. banks (other than | ////////////////// |
insured branches in Puerto Rico and U.S. territories and possessions) that were reported | ////////////////// |
on a net basis in Schedule RC-E had been reported on a gross basis......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of collection | ////////////////// |
were included in the calculation of the reporting bank's net reciprocal demand balances | ////////////////// |
with the domestic offices of U.S. banks and savings associations and insured branches | ////////////////// |
in Puerto Rico and U.S. territories and possessions in Schedule RC-E....................... | A182 0 | 11.c.
12. Amount of assets netted against deposit liabilities in domestic offices and in insured | ////////////////// |
branches in Puerto Rico and U.S. territories and possessions on the balance sheet | ////////////////// |
(Schedule RC) in accordance with generally accepted accounting principles (exclude amounts | ////////////////// |
related to reciprocal demand balances): | ////////////////// |
a. Amount of assets netted against demand deposits............................................ | A527 0 | 12.a.
b. Amount of assets netted against the time and savings deposits.............................. | A528 0 | 12.b.
</TABLE>
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
---------------------
Dollars in Thousands | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposit accounts of $100,000 or less: | ////////////////// |
(1) Amount of deposit accounts of $100,000 or less......................................... | 2702 235,280 | M.1.a.(1)
Number | ////////////////// |
(2) Number of deposit accounts of $100,000 or less (to be -----------------------| ////////////////// |
completed for the June report only)..............................| RCON 3779 | N/A | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000 -----------------------| ////////////////// |
(1) Amount of deposit accounts of more than $100,000....................................... | 2710 381,366 | M.1.b.(1)
Number | ////////////////// |
-----------------------| ////////////////// |
(2) Number of deposit accounts of more than $100,000................ | RCON 2722 | 1,082 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank: --------------------------------------------
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or YES NO
procedure for determining a better estimate of uninsured deposits than the ---------------------
estimate described above .................................................................. | 6861 | |///| X | M.2.a.
---------------------
b. If the box marked YES has been checked, report the estimate of uninsured deposits | RCON Bil Mil Thou |
----------------------
determined by using your bank's method or procedure ....................................... | 5597 N/A | M.2.b.
3. Has the reporting institution been consolidated with a parent bank or ---------------------
savings association in that parent bank's or parent savings association's
Call Report or Thrift Financial Report?
If so, report the legal title and FDIC Certificate Number of the parent bank or parent
savings association: FDIC Cert No.
------------- --------------------------
| TEXT A545 | N/A | RCON A545 | N/A | M.3.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-24
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RC-R--CONTINUED
<TABLE>
<CAPTION>
------------------------------------------
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
|--------------------|--------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------------
<S><C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet ..................................... | 5165 251,238 | ////////////////// | 5.a.
b. Credit equivalent amount of off-balance sheet items ...................... | ////////////////// | 3801 4,163 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet ..................................... | 3802 45,723 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ...................... | ////////////////// | 3803 1,634 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet ..................................... | 3804 416,881 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ...................... | ////////////////// | 3805 20,931 | 7.b.
8. On-balance sheet asset values excluded from and deducted in | ////////////////// | ////////////////// |
the calculation of the risk-based capital ratio(2) .......................... | 3806 719 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a., 5.a., 6.a., 7.a., and 8, column A) (must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b. and 4.c) ............................................ | 3807 813,370 | ////////////////// | 9.
------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda ---------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Current credit exposure across all off-balance sheet derivative contracts covered by the ////////////////// |
risk-based capital standards ..................................................................... | 8764 1,130 | M.1.
---------------------
------------------------------------------------------------------------------
| With a remaining maturity of |
------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| One year or less | Over one year | Over five years |
| | through five years | |
2. Notional principal amounts of --------------------------|-------------------------|-------------------------|
off-balance sheet derivative contracts(3):| RCFD Tril Bil Mil Thou | RCFD Tril Bil Mil Thou | RCFD Tril Bil Mil Thou |
--------------------------|-------------------------|-------------------------|
a. Interest rate contracts .............. | 3809 25,000 | 8766 100,000 | 8767 0 | M.2.a
b. Foreign exchange contracts............ | 3812 417 | 8769 0 | 8770 0 | M.2.b.
c. Gold contracts........................ | 8771 0 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts....... | 8774 0 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts............. | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts........... | A000 0 | A001 0 | A002 0 | M.2.f.
------------------------------------------------------------------------------
</TABLE>
- --------------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost
of available-for-sale debt securities in item 8 and report the amortized
cost of these debt securities in items 4 through 7 above. For
available-for-sale equity securities, if fair value exceeds cost, include
the difference between the fair value and the cost in item 8 and report
the cost of these equity securities in items 5 through 7 above; if cost
exceeds fair value, report the fair value of these equity securities in
items 5 through 7 above and include no amount in item 8. Item 8 also
includes on-balance sheet asset values (or portions thereof) of
off-balance sheet interest rate, foreign exchange rate, and commodity
contracts and those contracts (e.g., futures contracts) not subject to
risk-based capital. Exclude from item 8 margin accounts and accrued
accrued receivables not included in the calculation of credit equivalent
amounts of off-balance sheet derivatives as well as any portion of the
allowance for loan and lease losses in excess of the amount that may be
included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
26
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-25
FDIC Certificate No.: |0|7|2|2|0|
-----------
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on SEPTEMBER 30, 1997
STERLING NATIONAL BANK
- ------------------------------------------------------------------------------
Legal Title of Bank
NEW YORK CITY , NEW YORK
- --------------------------------------------- -------------------------------
City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters
with no notice to the submitting bank and the truncated statement will appear
as the bank's statement both on agency computerized records and in
computer-filed releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- -------------------------------------------------------------------------------
No comment /X/ (RCON 6979) C471 C472 (--
-------------------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/ JOHN W. TIETJEN 10/28/97
--------------------------------------- -------------------------
Signature of Executive Officer of Bank Date of Signature
27
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RC-26
FDIC Certificate No.: |0|7|2|2|0|
-----------
<TABLE>
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- --------------------------------------------------------------------------------------------------------------------------
<S><C>
NAME AND ADDRESS OF BANK OMB No. For OCC: 1557-0081
OMB No. For FDIC: 3064-0052
OMB No. For Federal Reserve: 7100-0036
Expiration Date: 3/31/2000
SPECIAL REPORT
(Dollar Amount in Thousands)
----------------------------------------------------------
CLOSE OF BUSINESS FDIC CERTIFICATE NUMBER
DATE C-700 (--
9/30/97 |0|7|2|2|0|
- --------------------------------------------------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following information is required by Public Laws 90-44 and 102-242, but
does not constitute a part of the Report of Condition. With each Report of
Condition, these Laws require all banks to furnish a report of all loans or
other extensions of credit to their executive officers made since the date of
the previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions
of credit were made during the period, insert "none" against subitem (a).
(Exclude the first $15,000 of indebtedness of each executive officer under
bank credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code
of Federal Regulations (Federal Reserve Board Regulation O) for the
definitions of "executive officer" and "extension of credit," respectively.
Exclude loans and other extensions of credit to directors and principal
shareholders who are not executive officers.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<S><C>
------------------------------
a. Number of loans made to executive officers since the previous Call Report date.... RCFD 3561 0 a.
------------------------------
b. Total dollar amount of above loans (in thousands of dollars)...................... RCFD 3562 0 b.
------------------------------
c. Range of interest charged on above loans
-------------------------------------------------------------
(example: 9 3/4% = 9.75) .......................... RCFD 7701 0.00 % to RCFD 7702 0.00 % c.
-------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
/s/ JOHN W. TIETJEN 10/28/97
- --------------------------------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER/EXTENSION
(TEXT 8904)
JOHN W. TIETJEN, SENIOR VICE-PRES.--CONTROLLER (212) 826-8555
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
FDIC 8040/53 (6-95)
28
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State, Zip: NEW YORK CITY, NY 10022 Page RI-1
FDIC Certificate No.: |0|7|2|2|0|
-----------
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1997-SEPTEMBER 30, 1997
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI--INCOME STATEMENT
<TABLE>
<CAPTION>
----------
| I480 | (--
---------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------
<S> |<C> <C> |<C>
1. Interest income: |////////////////////|
a. Interest and fee income on loans: |////////////////////|
(1) In domestic offices: |////////////////////|
(a) Loans secured by real estate................................................... |4011 4,698|1.a.(1)(a)
(b) Loans to depository institutions............................................... |4019 0|1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers............ |4024 0|1.a.(1)(c)
(d) Commercial and industrial loans................................................ |4012 21,318|1.a.(1)(d)
(e) Acceptances of other banks..................................................... |4026 0|1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: |////////////////////|
(1) Credit cards and related plans............................................. |4054 67|1.a.(1)(f)(1)
(2) Other...................................................................... |4055 828|1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions......................... |4056 0|1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political |////////////////////|
subdivisions in the U.S.: |////////////////////|
(1) Taxable obligations........................................................ |4503 0|1.a.(1)(h)(1)
(2) Tax-exempt obligations..................................................... |4504 0|1.a.(1)(h)(2)
(i) All other loans in domestic offices............................................ |4058 0|1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs...................... |4059 41|1.a.(2)
b. Income from lease financing receivables: |////////////////////|
(1) Taxable leases..................................................................... |4505 2,922|1.b.(1)
(2) Tax-exempt leases.................................................................. |4307 0|1.b.(2)
c. Interest income on balances due from depository institutions:(1) |////////////////////|
(1) In domestic offices................................................................ |4105 29|1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs...................... |4106 130|1.c.(2)
d. Interest and dividend income on securities: |////////////////////|
(1) U.S. Treasury securities and U.S. Government agency obligations.................... |4027 14,689|1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: |////////////////////|
(a) Taxable securities............................................................. |4506 0|1.d.(2)(a)
(b) Tax-exempt securities.......................................................... |4507 11|1.d.(2)(b)
(3) Other domestic debt securities..................................................... |3657 137|1.d.(3)
(4) Foreign debt securities............................................................ |3658 154|1.d.(4)
(5) Equity securities (including investments in mutual funds).......................... |3659 288|1.d.(5)
e. Interest income from trading assets.................................................... |4069 0|1.e.
---------------------
</TABLE>
- --------------------
(1) Includes interest income on time certificates of deposit not held for
trading.
30
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State, Zip: NEW YORK CITY, NY 10022 Page RI-2
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
---------------
Dollar Amounts in Thousands |Year-to-date |
- --------------------------------------------------------------------------------------------------------
<S> |<C> <C> |<C>
1. Interest income (continued) |RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased under |////////////////////|
agreements to resell.......................................................... |4020 193|1.f.
g. Total interest income (sum of items 1.a through 1.f).......................... |4107 45,505|1.g.
2. Interest expense: |////////////////////|
a. Interest on deposits: |////////////////////|
(1) Interest on deposits in domestic offices: |////////////////////|
(a) Transaction accounts (NOW accounts, ATS accounts, and |////////////////////|
telephone and preauthorized transfer accounts)........................ |4508 127|2.a.(1)(a)
(b) Nontransaction accounts: |////////////////////|
(1) Money market deposit accounts (MMDAs)............................. |4509 3,257|2.a.(1)(b)(1)
(2) Other savings deposits............................................ |4511 608|2.a.(1)(b)(2)
(3) Time deposits of $100,000 or more................................. |A517 3,409|2.a.(1)(b)(3)
(4) Time deposits of less than $100,000............................... |A518 3,457|2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement |////////////////////|
subsidiaries, and IBFs.................................................... |4172 121|2.a.(2)
b. Expense of federal funds purchased and securities sold under |////////////////////|
agreements to repurchase...................................................... |4180 3,519|2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading |////////////////////|
liabilities, and other borrowed money......................................... |4185 825|2.c.
d. Not applicable |////////////////////|
e. Interest on subordinated notes and debentures................................. |4200 0|2.e.
f. Total interest expense (sum of items 2.a through 2.e)......................... |4073 15,323|2.f.
| |------------------
3. Net interest income (item 1.g minus 2.f)......................................... |////////////////////|RIAD 4074 30,182 3.
| |------------------
4. Provisions: |////////////////////|
| |------------------
a. Provisions for loan and lease losses.......................................... |////////////////////|RIAD 4230 1,782 4.a.
b. Provision for allocated transfer risk......................................... |////////////////////|RIAD 4243 0 4.b.
| |------------------
5. Noninterest income: |////////////////////|
a. Income from fiduciary activities.............................................. |4070 450|5.a.
b. Service charges on deposit accounts in domestic offices....................... |4080 1,490|5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum |////////////////////|
items 8.a through 8.d)........................................................ |A220 0|5.c.
d. -e. Not applicable |////////////////////|
f. Other noninterest income: |////////////////////|
(1) Other fee income.......................................................... |5407 7,393|5.f.(1)
(2) All other noninterest income*............................................. |5408 0|5.f.(2)
| |------------------
g. Total noninterest income (sum of items 5.a though 5.f)........................ |////////////////////|RIAD 4079 9,333 5.g.
6. a. Realized gains (losses) on held-to-maturity securities........................ |////////////////////|RIAD 3521 0 6.a.
b. Realized gains (losses) on available-for-sale securities...................... |////////////////////|RIAD 3196 0 6.b.
| |------------------
7. Noninterest expense: |////////////////////|
a. Salaries and employee benefits................................................ |4135 13,363|7.a.
b. Expenses of premises and fixed assets (net of rental income) |////////////////////|
(excluding salaries and employee benefits and mortgage interest).............. |4217 3,786|7.b.
c. Other noninterest expense*.................................................... |4092 7,740|7.c.
| |------------------
d. Total noninterest expense (sum of items 7.a though 7.c)....................... |////////////////////|RIAD 4093 24,889 7.d.
| |------------------
8. Income (loss) before income taxes and extraordinary items and other |////////////////////|
| |------------------
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) |////////////////////|RIAD 4301 12,844 8.
9. Applicable income taxes (on item 8).............................................. |////////////////////|RIAD 4302 5,754 9.
| |------------------
10. Income (loss), before extraordinary items and other adjustments (item 8 |////////////////////|
| |------------------
minus 9)......................................................................... |////////////////////|RIAD 4300 7,090 10.
11. Extraordinary items and other adjustments, net of income taxes*.................. |////////////////////|RIAD 4320 0 11.
12. Net income (loss) (sum of items 10 and 11)....................................... |////////////////////|RIAD 4340 7,090 12.
---------------------------------------
</TABLE>
- ------------------------
*Describe on Schedule RI-E--Explanations.
31
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State, Zip: NEW YORK CITY, NY 10022 Page RI-3
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
--------
| I481 | (--
------------------
| Year-to-date |
Memoranda -------------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ///////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes..................... | 4513 9 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ///////////////////// |
(included in Schedule RI, item 8).......................................................... | 8431 0 | M.2.
3.-4. Not applicable | ///////////////////// |
5. Number of full-time equivalent employees at end of current period (round to | //// Number |
nearest whole number)...................................................................... | 4150 295 | M.5.
6. Not applicable --------| ///////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push | RIAD CC YY MM DD |
down accounting this calendar year, report the date of the bank's acquisition(1)... | 9106 00 00 00 00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments)--------| ///////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures................................................................. | 8757 0 | M.8.a.
b. Foreign exchange exposures.............................................................. | 8758 0 | M.8.b.
c. Equity security and index exposures..................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures........................................................... | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ///////////////////// |
a. Net increase (decrease) to interest income.............................................. | 8761 54 | M.9.a.
b. Net (increase) decrease to interest expense............................................. | 8762 0 | M.9.b.
c. Other (noninterest) allocations......................................................... | 8763 0 | M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).......................... | A251 0 | M.10.
YES NO
11. Does the reporting bank have a Subchapter S election in effect for federal income tax -------------------------
purposes for the current tax year?......................................................... | A530 | |///| X | M.11.
-------------------------
| //// Bil Mil Thou |
12. Deferred portion of total applicable income taxes included in Schedule RI, -------------------------
items 9 and 11 (to be reported with the December Report of Income)..........................| 4772 N/A | M.12.
-------------------------
</TABLE>
- --------------
(1) For example, a bank acquired on June 1, 1997, would report 19970601.
32
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State, Zip: NEW YORK CITY, NY 10022 Page RI-4
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
--------
| I483 | (--
-------------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Total equity capital originally reported in the December 31, 1996, Reports of Condition | ///////////////////// |
and Income................................................................................. | 3215 46,503 | 1.
2. Equity capital adjustments from amended Reports of Income, net*............................ | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)....................... | 3217 46,503 | 3.
4. Net income (loss) (must equal Schedule RI, item 12)........................................ | 4340 7,090 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net......................... | 4346 0 | 5.
6. Changes incident to business combinations, net............................................. | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock........................................... | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock.............................................. | 4460 1,972 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ///////////////////// |
for this schedule)......................................................................... | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this | ///////////////////// |
schedule).................................................................................. | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities........... | 8433 44 | 11.
12. Foreign currency translation adjustments................................................... | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above)... | 4415 1,086 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal | ///////////////////// |
Schedule RC, item 28)...................................................................... | 3210 52,751 | 14.
-------------------------
</TABLE>
- --------------
* Describe on Schedule RI-E--Explanations.
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES
IN ALLOWANCE FOR LOAN AND LEASE LOSSES
PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES
PART I EXCLUDES CHARGE-OFFS AND RECOVERIES THROUGH
THE ALLOCATED TRANSFER RISK RESERVE.
<TABLE>
<CAPTION>
--------
| I486 | (--
-------------------------------------------------
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
-------------------------------------------------
| Calendar year-to-date |
-------------------------------------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
1. Loans secured by real estate: | ///////////////////// | ///////////////////// |
a. To U.S. addressees (domicile)................................... | 4651 56 | 4661 1 | 1.a.
b. To non-U.S. addressees (domicile)............................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ///////////////////// | ///////////////////// |
a. To U.S. banks and other U.S. depository institutions............ | 4653 0 | 4663 0 | 2.a.
b. To foreign banks................................................ | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers | 4655 0 | 4665 0 | 3.
4. Commercial and industrial loans: | ///////////////////// | ///////////////////// |
a. To U.S. addressees (domicile)................................... | 4645 1,170 | 4617 189 | 4.a.
b. To non-U.S. addressees (domicile)............................... | 4646 0 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | ///////////////////// | ///////////////////// |
expenditures: | ///////////////////// | ///////////////////// |
a. Credit cards and related plans.................................. | 4656 0 | 4666 0 | 5.a.
b. Other (includes single payment, installment, and all student | ///////////////////// | ///////////////////// |
loans).......................................................... | 4657 109 | 4667 14 | 5.b.
6. Loans to foreign government and official institutions.............. | 4643 0 | 4627 0 | 6.
7. All other loans.................................................... | 4644 0 | 4628 0 | 7.
8. Lease financing receivables: | ///////////////////// | ///////////////////// |
a. Of U.S. addressees (domicile)................................... | 4658 31 | 4668 31 | 8.a.
b. Of non-U.S. addressees (domicile)............................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8)................................... | 4635 1,366 | 4605 235 | 9.
-------------------------------------------------
</TABLE>
33
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RI-5
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RI-B--CONTINUED
PART I. CONTINUED
<TABLE>
<CAPTION>
------------------------------------------
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
|-----------------------------------------|
| Calendar year-to-date |
|-----------------------------------------|
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------|--------------------|--------------------|
<S><C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above.............................. | 5409 0 | 5410 0 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development .................................... | 3582 0 | 3583 0 | M.5.a.
b. Secured by farmland .................................................. | 3584 0 | 3585 0 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit .................... | 5411 0 | 5412 0 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties...... | 5413 56 | 5414 1 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............ | 3588 0 | 3589 0 | M.5.d.
e. Secured by nonfarm nonresidential properties ......................... | 3590 0 | 3591 0 | M.5.e.
-----------------------------------------
</TABLE>
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
<TABLE>
<CAPTION>
--------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------|--------------------|
<S><C>
1. Balance originally reported in the December 31, 1996, Reports of Condition and Income.......... | 3124 5,014 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 235 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 1,366 | 3.
4. Provisions for loan and lease losses (must equal Schedule RI, item 4.a) ....................... | 4230 1,782 | 4.
5. Adjustments* (see instructions for this schedule) ............................................. | 4815 1,270 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, ...... | ////////////////// |
item 4.b) ..................................................................................... | 3123 6,935 | 6.
--------------------
</TABLE>
- ----------------------
*Describe on Schedule RI-E--Explanations.
34
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RI-6
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
<TABLE>
<CAPTION>
--------
| I492 | (-
----------------
| Year-to-date |
--------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------|--------------------|
<S><C>
1. Interest income and expense booked at foreign offices, Edge and | ////////////////// |
Agreement subsidiaries, and IBFs: | ////////////////// |
a. Interest income booked .................................................................... | 4837 287 | 1.a
b. Interest expense booked ................................................................... | 4838 121 | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs (item 1.a minus 1.b) ............................................... | 4839 166 | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked | ////////////////// |
at domestic offices ....................................................................... | 4840 0 | 2.a.
b. Net interest income attributable to domestic business booked at foreign | ////////////////// |
offices ................................................................................... | 4841 0 | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ...................................... | 4842 0 | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations ............................... | 4097 990 | 3.a.
b. Provision for loan and lease losses attributable to international operations .............. | 4235 0 | 3.b.
c. Other noninterest expense attributable to international operations ........................ | 4239 518 | 3.c.
d. Net noninterest income (expense) attributable to international operations | ////////////////// |
(item 3.a minus 3.b and 3.c)............................................................... | 4843 472 | 3.d.
4. Estimated pretax income attributable to international operations before | ////////////////// |
capital allocation adjustment (sum of items 1.c, 2.c, and 3.d). .............................. | 4844 638 | 4.
5. Adjustment to pretax income for internal allocations to international operations | ////////////////// |
to reflect the effects of equity capital on overall bank funding costs ....................... | 4845 0 | 5.
6. Estimated pretax income attributable to international operations after | ////////////////// |
capital allocation adjustment (sum of items 4 and 5) ......................................... | 4846 638 | 6.
7. Income taxes attributable to income from international operations as | ////////////////// |
estimated in item 6 .......................................................................... | 4797 286 | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) ............... | 4341 352 | 8.
--------------------
<CAPTION>
--------------------
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------|--------------------|
<S><C>
1. Intracompany interest income included in item 1.a above ...................................... | 4847 0 | M.1.
2. Intracompany interest expense included in item 1.b above ..................................... | 4848 0 | M.2.
--------------------
</TABLE>
PART II. SUPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED
BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S.
INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
<TABLE>
<CAPTION>
----------------
| Year-to-date |
--------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------|--------------------|
<S><C>
1. Interest income booked at IBFs ............................................................... | 4849 171 | 1.
2. Interest expense booked at IBFs .............................................................. | 4850 121 | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items .................................................... | 5491 0 | 3.a.
b. Fees and other noninterest income ......................................................... | 5492 990 | 3.b.
4. Provision for loan and lease losses attributable to international operations | ////////////////// |
booked at domestic offices (excluding IBFs) .................................................. | 4852 0 | 4.
5. Other noninterest expense attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ............................................................ | 4853 518 | 5.
--------------------
</TABLE>
35
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RI-7
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RI-E--EXPLANATIONS
SCHEDULE RI-E IS TO BE COMPLETED EACH QUARTER ON A CALENDAR YEAR-TO-DATE
BASIS.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items
and other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
<TABLE>
<CAPTION>
---------
| I495 | (--
--------------
| Year-to-date|
--------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains (losses) on other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . | 5415 0 | 1.a.
b. Net gains (losses) on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5416 0 | 1.b.
c. Net gains (losses) on sales of premises and fixed assets . . . . . . . . . . . . . . . . . . . | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 5.f.(2): | ////////////////// |
-------------
d. | TEXT 4461 | | 4461 0 | 1.d.
----------------------------------------------------------------------------------------------
e. | TEXT 4462 | | 4462 0 | 1.e.
----------------------------------------------------------------------------------------------
f. | TEXT 4463 | | 4463 0 | 1.f.
----------------------------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . | 4531 0 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net gains (losses) on other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . | 5418 0 | 2.b.
c. Net gains (losses) on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5419 0 | 2.c.
c. Net gains (losses) on sales of premises and fixed assets . . . . . . . . . . . . . . . . . . . | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 7.c: | ////////////////// |
-------------
e. | TEXT 4464 | INTERCOMPANY MANAGEMENT AND SERVICING FEES | 4464 1,011 | 2.e.
----------------------------------------------------------------------------------------------
f. | TEXT 4467 | | 4467 | 2.f.
----------------------------------------------------------------------------------------------
g. | TEXT 4468 | | 4468 | 2.g.
----------------------------------------------------------------------------------------------
3. Extraordinary items and other adjustments and applicable income tax effect | ////////////////// |
(from Schedule RI, item 11) (itemize and describe all extraordinary items and | ////////////////// |
other adjustments): | ////////////////// |
-------------
a. (1) | TEXT 4469 | | 4469 | 3.a.(1)
------------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
------------- ----------------------------
b. (1) | TEXT 4487 | | 4487 | 3.b.(1)
------------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
------------- ----------------------------
c. (1) | TEXT 4489 | | 4489 | 3.c.(1)
------------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
----------------------------
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
-------------
a. | TEXT 4492 | | 4492 0 | 4.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4493 | | 4493 0 | 4.b.
----------------------------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years | ////////////////// |
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
-------------
a. | TEXT A546 | Effect of change to GAAP from previous non-GAAP instructions | A546 0 | 5.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4495 | | 4495 0 | 5.b.
----------------------------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) | ////////////////// |
(itemize and describe all corrections): | ////////////////// |
-------------
a. | TEXT 4496 | | 4496 0 | 6.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4497 | | 4497 0 | 6.b.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
Legal Title of Bank: STERLING NATIONAL BANK Call Date: 9/30/97
Address: 430 PARK AVENUE ST-BK: 36-5460 FFIEC 031
City, State Zip: NEW YORK CITY, NY 10022 Page RI-8
FDIC Certificate No.: |0|7|2|2|0|
-----------
SCHEDULE RI-E--CONTINUED
<TABLE>
<CAPTION>
--------------
| Year-to-date|
--------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
-------------
a. | TEXT 4498 | SUBSIDIARY CAPITAL CONTRIBUTED BY PARENT COMPANY | 4498 1,086 | 7.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4499 | | 4499 | 7.b.
----------------------------------------------------------------------------------------------
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
-------------
a. | TEXT 4521 | SUBSIDIARY RESERVES CONTRIBUTED BY PARENT COMPANY | 4521 1,270 | 8.a.
----------------------------------------------------------------------------------------------
b. | TEXT 4522 | | 4522 | 8.b.
---------------------------------------------------------------------------------------------------------------------
9. Other explanations (the space below is provided for the bank to briefly describe, at its | I498 | I499 | (--
option, any other significant items affecting the Report of Income): ----------------------
No comment | X | (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
37
