SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995 Commission file number 2-99779
National Consumer Cooperative Bank
(Exact name of registrant as specified in its charter)
United States of America
(12 U.S.C. Section 3001 et. seq.) 52-1157795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1401 Eye Street N.W., Suite 700 Washington, D.C. 20005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (202) 336-7700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements of the past 90 days. Yes X No_____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: the registrant's voting stock is not traded on any market.
Subsidiaries of the registrant hold 2.6% of its Class B stock. All registrant's
Class C and Class D stock is held by non-affiliates.
( Cover Continued on Next Page )<PAGE>
( Cover Continued )
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Outstanding at December 31, 1995
Class C
(Common stock, $100.00 par value) 217,312
Class B
(Common stock, $100.00 par value) 723,498
Class D
(Common stock, $100.00 par value) 3
<PAGE>
INDEX
PART I
Item 1 Business.................................................. 1
Item 2 Properties................................................ 7
Item 3 Legal Proceedings......................................... 8
Item 4 Submission of Matters to a Vote
of Security Holders..................................... 8
PART II
Item 5 Market for the Registrant's Common Stock and Related
Stockholder Matters..................................... 9
Item 6 Selected Financial Data................................... 11
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 12
Item 8 Financial Statements and Supplementary Data............... 22
Item 9 Changes in and Disagreements with Accountants,
on Accounting and Financial Disclosure.................. 49
PART III
Item 10 Directors and Executive Officers of the Registrant........ 49
Item 11 Executive Compensation.................................... 58
Item 12 Security Ownership of Certain
Beneficial Owners and Management........................ 60
Item 13 Certain Relationships and Related Transactions............ 61
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K................................. 65
PART I
ITEM 1. BUSINESS
General
The National Consumer Cooperative Bank, which does business as the National
Cooperative Bank ("NCB"), is a financial institution organized under the laws of
the United States. NCB provides financial and technical assistance to eligible
cooperative enterprises or enterprises controlled by eligible cooperatives. A
cooperative enterprise is an organization which is owned by its members and
which is engaged in producing or furnishing goods, services, or facilities for
the benefit of its members or voting stockholders who are the ultimate consumers
or primary producers of such goods, services, or facilities. NCB is structured
as a cooperative institution whose voting stock can only be owned by its patrons
or those eligible to become its patrons.
In the legislation chartering NCB (the National Consumer Cooperative Bank
Act or the "Act"), Congress stated its finding that cooperatives have proven to
be an effective means of minimizing the impact of inflation and economic
hardship on members/owners by narrowing producer-to-consumer margins and price
spreads, broadening ownership and control of economic organizations to a larger
base of consumers, raising the quality of goods and services available in the
marketplace and strengthening the nation's economy as a whole. To further the
development of cooperative businesses, the Congress specifically directed NCB
(1) to encourage the development of new and existing cooperatives eligible for
its assistance by providing specialized credit and technical assistance; (2) to
maintain broad-based control of NCB by its voting shareholders; (3) to encourage
a broad-based ownership, control and active participation by members in eligible
cooperatives; (4) to assist in improving the quality and availability of goods
and services to consumers; and (5) to encourage ownership of its equity
securities by cooperatives and others.
NCB has attempted to fulfill its statutory obligations in two fashions.
First, NCB makes loans and offers other financing arrangements which afford
cooperative businesses substantially the same financing opportunities currently
available for traditional enterprises. Second, NCB provides financial and other
assistance to the NCB Development Corporation ("NCB Development") a non-profit
corporation without capital stock organized in 1982 which makes loans and
provides assistance to developmental cooperatives.
The Act was passed on August 20, 1978, and NCB commenced lending operations
on March 21, 1980. In 1981, Congress amended the Act (the "Act Amendments") to
convert the Class A Preferred Stock of NCB previously held by the United States
to Class A Notes as of December 31, 1981 (the "Final Government Equity
Redemption Date"). Since the Final Government Equity Redemption Date, NCB's
capital stock, except for three shares of non-voting Class D stock, has been
owned exclusively by cooperatives. NCB maintains its executive offices at 1401
Eye Street, N.W., Washington, D.C. 20005. The telephone number of its executive
offices is (202) 336-7700. NCB also maintains regional offices in Minneapolis,
New York, Wilmington, Delaware, Anchorage, and San Franciso as well as a
federally chartered thrift in Ohio.
LOAN REQUIREMENTS, RESTRICTIONS AND POLICIES
Eligibility Requirements. Cooperatives and legally chartered entities
primarily owned and controlled by cooperatives are eligible to borrow from NCB
if they are operated on a cooperative basis and are engaged in producing or
furnishing goods, services or facilities primarily for the benefit of their
members or voting stockholders who are the ultimate consumers of such goods,
services or facilities. In addition, to be eligible to borrow from NCB, the
borrower must, among other things, (1) be controlled by its members or voting
stockholders on a democratic basis; (2) agree not to pay dividends on voting
stock or membership capital in excess of such percentage per annum as may be
approved by NCB; (3) provide that its net savings shall be allocated or
distributed to all members or patrons, in proportion to their patronage, or
retain such savings for the actual or potential expansion of its services or the
reduction of its charges to the patrons, and (4) make membership available on a
voluntary basis, without any social, political, racial or religious
discrimination and without any discrimination on the basis of age, sex, or
marital status to all persons who can make use of its services and are willing
to accept the responsibilities of membership. NCB may also purchase obligations
issued by members of eligible cooperatives. In addition, organizations applying
for loans must comply with other technical requirements imposed by NCB.
Lending Authorities. The Board of Directors of NCB establishes its
policies governing its lending operations in compliance with the Act. The
policies adopted by the Board are carried out by the management of NCB pursuant
to written loan policies adopted by the Board. The management in turn adopts
and implements guidelines and procedures consistent with stated Board
directives. Lending policies and guidelines are reviewed regularly by the Board
of Directors and management to make needed changes and amendments.
The management of NCB may approve individual loan amounts of up to 75% of
the single borrower lending limit which is equal to 15% of NCB's capital (using
the definition of capital for national banks as set forth by the Office of the
Comptroller of the Currency) without prior approval of the Board. The President
of NCB may delegate authorities up to this limit to such committees and
individual officers as he may deem appropriate.
A loan committee has been established which consists of the President of
NCB and such other officers as the President may from time to time designate.
The loan committee makes loans and loan commitments, establishes the terms and
conditions for loans and commitments, approves waivers and modifications to loan
agreements and enters into loan participations and guarantees.
LENDING LIMITS
Single Borrower
The total amount of loans, letters of credit, leases and other financing
that may be made available to any one borrower may not exceed 15% of NCB's
capital. The approval of any loan to a single borrower which has a combined
total of financing from NCB in excess of 75% of the 15% limit is subject to the
prior approval of the Loan and Business Development Committee of the Board.
Cooperatives of Primary Producers
The total dollar value of loans to cooperatives that produce, market and
furnish goods, services and facilities on behalf of their members as primary
producers may not exceed 10% of the gross assets of NCB. The total dollar
volume of loans NCB will allow to be outstanding to any producer cooperative may
not exceed 20% of the amount available for loans to all producer cooperatives.
INTEREST RATES
Generally
NCB charges interest rates approximately equal to the market rates charged
by other lending institutions for comparable types of loans. NCB seeks to price
its loans to yield a reasonable return on its portfolio in order to build and
maintain the financial viability of NCB and to encourage the development of new
and existing cooperatives. In addition, to ensure that NCB will have access to
additional sources of capital in order to sustain its growth, NCB seeks to
maintain a portfolio that is competitively priced and of sound quality.
Interest Rates for Real Estate Loans
Real estate loans are priced under rate guidelines issued by NCB's Real
Estate Lending Group for specific types of loans with specific maturities. NCB
takes the following factors into consideration in pricing its real estate loans:
loan-to-value ratios, lien position, cooperative payment history, reserves,
occupancy level and cash flow. NCB fixes rates based on a basis point spread
over U.S. Treasury securities with yields adjusted to constant maturity of one,
three, five or ten years. Interest rate may be fixed at the time of commitment
for a period generally not exceeding 30 days.
Interest Rates on Commercial Loans
NCB makes commercial loans at fixed and variable interest rates. Loan
pricing is based on prevailing market conditions, income and portfolio
diversification objectives and the overall assesment of risk. Typically,
commercial loan repayment schedules are structured by NCB with flat monthly
principal reduction plus interest on the outstanding balance.
Fees
NCB typically assesses fees to cover the costs to NCB of its consideration
of and handling of loan transactions, and to compensate NCB for setting aside
funds for future draws under a commitment. The legal fees paid to outside legal
counsel retained by NCB for loan transactions are charged to the borrower.
Underwriting
When evaluating credit requests, NCB determines whether a prospective
borrower has and/or will have sound management, sufficient cash flow to service
debt, assets in excess of liabilities and a continuing demand for its products,
services or use of its facilities, so that the request will be repaid in
accordance with its terms.
NCB evaluates repayment ability based upon an analysis of a borrower's
historical cash flow and conservative projections of future cash flows from
operations. This analysis focuses on determining the predictability of future
cash flows as a primary source of repayment.
Security
Loans made by NCB are generally secured by specific collateral. If
collateral security is required, the value of the collateral must be reasonably
sufficient to protect NCB from loss, in the event that the primary sources of
repayment of financing from the normal operation of the cooperative, or
refinancing, prove to be inadequate for debt repayment. Collateral security
alone is not a sufficient basis for NCB to extend credit. Unsecured loans
normally are made only to borrowers with strong financial conditions, operating
results and demonstrated repayment ability.
Loans Benefiting Low-Income Persons
Under the Act, the Board of Directors must use its best efforts to insure
that at the end of each NCB fiscal year at least 35% of its outstanding loans
are to (1) cooperatives whose members are predominantly low-income persons, as
defined by NCB, and (2) other cooperatives that propose to undertake to provide
specialized goods, services, or facilities to serve the needs of predominantly
low-income persons. NCB defines a "low-income person," for these purposes, as
an individual whose family's income does not exceed 80% of the median family
income, adjusted for family size for the area where the cooperative is located,
as determined by the Department of Housing and Urban Development.
Loans for Residential Purposes
Commencing on October 1, 1985, the Act prohibited NCB from making loans for
financing, construction, ownership, acquisition or improvement of any structure
used primarily for residential purposes if, after giving effect to such loan,
the aggregate amount of all loans outstanding for such purposes will exceed 30
percent of the gross assets of NCB.
To date, the 30% cap on residential real estate loans has not restricted
NCB's ability to provide financial services to residential borrowers. NCB has
been able to maintain its position in the residential real estate market without
increased real estate portfolio exposure by selling real estate loans to
secondary market purchasers of such loans. Since October 1, 1985, the
preponderance of NCB real estate volume has been predicated upon sale to
secondary market purchasers. There can, however, be no assurance that NCB's
future lending for residential purposes will not be impaired by the statutory
limit. As of December 31, 1995, approximately 21.6% of NCB's total assets
consisted of loans made for residential purposes.
Operations of Subsidiaries
NCB also attempts to fulfill its statutory mission by providing financing
opportunities to cooperatives through several subsidiaries.
Cooperative Funding Corporation ("CFC") is a wholly-owned subsidiary of
NCB. CFC provides fee compensated corporate financial services to customers of
NCB and to other corporations which may be members of cooperatives, or which
sponsor employee stock ownership plans. CFC is registered as a broker-dealer
with the Securities and Exchange Commission and is a member of the National
Association of Securities Dealers.
NCB Investment Advisers, Inc. ("NCBIA") has been organized to provide
investment advisory services to cooperatives. It is registered as an investment
adviser with the Securities and Exchange Commission.
NCB Financial Corporation ("NCBFC") is a Delaware chartered, wholly-owned,
S&L holding company whose sole subsidiary is NCB Savings Bank, FSB.
NCB Savings Bank, FSB ("NCBSB") is a federally chartered, federally insured
savings bank located in Hillsboro, Ohio.
NCB Mortgage Corporation ("NCBMC") is a wholly-owned subsidiary of NCB that
originates and services loans to cooperatives.
NCB Insurance Brokers, Inc. ( "NCBIB") is engaged in the business of
brokering housing-related insurance to cooperatives.
NCB I, Inc. ("NCB I") is a wholly-owned, special purpose corporation that
holds credit enhancement certificates related to the securitization and sale of
cooperative real estate loans. NCB and NCB I are parties to an agreement under
which each agrees not to commingle the assets of NCB I with those of NCB.
NCB Retail Finance Corporation ( "NCBRFC") is a wholly-owned special
purpose corporation that participates in the securitization and sale of loans to
customers involved in the grocery business. NCBRFC is required by its
certificate of incorporation to have at least two directors independent of NCB
and to avoid commingling its assets with those of NCB.
COMPETITION
The Congress created and capitalized NCB because it found that existing
financial institutions were not making adequate financial services available to
cooperative, not-for-profit business enterprises. NCB's experience confirms
that far more cooperatives desire to utilize financial services than are being
provided to them by traditional commercial lending institutions. However, NCB
experiences considerable competition in lending to the most credit worthy
cooperative enterprises.
REGULATION
NCB is organized under the laws of the United States. NCB is examined
annually by the Farm Credit Administration and the General Accounting Office is
authorized to audit NCB. Reports of such examinations and audits are to be
forwarded to the Congress, which has the sole authority to amend or revoke NCB's
charter. NCB Savings Bank, FSB is regulated by the Federal Office of Thrift
Supervision.
TAXES
The Act provides that NCB shall be treated as a cooperative within the
meaning of Section 1381 (a)(2) of the Internal Revenue Code. As such and
pursuant to the provisions of the Act NCB, in determining its taxable income for
federal income tax purposes, is allowed a deduction for an amount equal to any
patronage refunds in the form of cash, of Class B or Class C stock, or allocated
surplus that are distributed or set aside by NCB during the applicable tax
period. To date, NCB has followed the policy of distributing or setting aside
such patronage refunds during the applicable tax period, and this has effect-
ively reduced NCB's federal income tax liability to insignificant amounts.
Section 109 of the Act, as amended, provides that NCB, including its
franchise, capital, reserves, surplus, mortgages or other security holding and
income, is exempt from taxation by any state, county, municipality or local
taxing authority, except that any real property held by NCB is subject to any
state, county, municipal or local taxation to the same extent according to its
value as other real property is taxed.
In 1995, it was determined that all income generated by NCB and its
subsidiaries, with the exception of NCB Savings Bank, qualifies as patronage
income under the Internal Revenue Code, with the consequence that NCB is able to
issue tax deductible patronage refunds with respect to all such income.
NCB's subsidiaries are subject to state income taxes.
AGREEMENT CONCERNING CLASS A NOTES
The Act, as amended, provided that the interest rate payable to the United
States on NCB's Class A notes was limited until October 1, 1990 to 25% of NCB's
net income. Following a passage of a technical amendment to the Act, NCB
entered into as of December 21, 1989, a Financing Agreement with the U.S.
Treasury to govern the interest rates payable on the Class A notes until their
final redemption on October 31, 2020. Pursuant to the Financing Agreement, NCB
has issued to the U.S Treasury four replacement Class A notes. As of December
31, 1995 the face amounts and current maturities of the outstanding replacement
notes were as follows:
Current
Replacement Maturity
Note Date Amount Maturity
1 1/1/96 $53,553,328 3 months
2 10/1/96 $36,854,000 36 months
3 10/1/00 $55,281,000 60 months
4 10/1/00 $36,854,000 120 months
When each note matures NCB has the right to borrow again from the Treasury
the maturing amount under the same terms and conditions. NCB intends generally
to avail itself of this right. Thus, until the final redemption of the Class A
notes, NCB would have outstanding to the U.S. Treasury four tranches of Class A
notes in the maturities stated above. In November 1994, however, NCB adopted a
Capitalization and Patronage Refund Policy that contemplates the probable
retirement of $25 million of Class A notes in 2010 and $25 million in 2015. At
each maturity date, the interest rate to be paid upon the note for the
succeeding period will be calculated by the U.S. Treasury based upon the
prevailing interest rates for Treasury obligations of comparable maturities.
FURTHER INFORMATION
For further information concerning the development of NCB's business in
1995, please see the response to Item 7.
ITEM 2. PROPERTIES
NCB leases space for its Washington, D.C. headquarters and for three
regional offices located in Minneapolis, New York City, and Anchorage. NCB
Financial Corporation and NCB I,Inc. maintain offices in Wilmington, Delaware.
NCB's headquarters is 34,464 square feet in size and regional offices average
1500 square feet. The rental expense for the fiscal year ended December 31,
1995 was $1,290,000 for NCB's headquarters and regional offices. NCB considers
the regional offices suitable for its needs and the facilities are fully
utilized in its operations.
Minimum future rental payments, assuming present office space and space
leased for the headquarters are retained without subtracting payments made to
NCB under subleases of such space, for the following fiscal years ended December
31 are as follows:
Other
Year Headquarters Offices
1996 1,280,000 234,700
1997 1,300,000 227,250
1998 1,320,000 231,960
1999 1,340,000 21,609
2000 1,360,000
After 2000 1,769,000
ITEM 3. LEGAL PROCEEDINGS
NCB is not involved in any pending legal proceeding, other than ordinary
routine litigation incidental to its business.
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
NCB did not submit any matters to a vote of its security holders during the
fourth quarter of 1995<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
NCB currently has three classes of stock outstanding whose rights are
summarized as follows:
Class B Stock - The Act permits Class B stock to be held only by borrowers
from NCB and requires each borrower to hold Class B stock whose par value is
equal to 1% of its loan amount. The Act prohibits NCB from paying dividends on
Class B stock. There are two series of Class B stock. Class B-1 stock is
Class B stock purchased for cash at par value on or after June 29, 1984, while
Class B-2 stock is all other Class B stock. Class B stock is transferrable to
another eligible holder only with the approval of NCB. NCB does not permit any
transfers of Class B-2 stock and permits only such transfers, at the stock's
$100 par value, of Class B-1 stock as are required to permit new borrowers to
obtain their required holdings of Class B stock. In each instance, NCB
specifies which holder(s) are permitted to transfer their stock to the new
borrower, based upon which Class B stockholders with holdings of such stock
beyond that required to support their loans have held such stock for the longest
time. NCB also repurchases at par value any shares of Class B stock that it is
required to repurchase from holders by the terms of the contracts under which
such stock was originally sold by NCB. Class B stock has voting rights, but
such voting rights are limited in accordance with the weighted voting system
described in Item 10.
Class C Stock - The Act permits Class C stock to be held only by
cooperatives eligible to borrow from NCB. The Act allows NCB to pay dividends
on Class C stock, but so long as any Class A notes are outstanding, limits
dividends on Class C stock(or any other NCB stock) to the interest rate payable
on such notes, which was a blended rate of 6.7% during 1995. In 1994, NCB
adopted a policy under which annual cash dividends on Class C stock of up to 2
percent of NCB's net income may be declared. The policy does not provide any
specific method to determine the amount, if any, of such dividend. Whether any
such dividends will be declared and if so, in what amount accordingly rests
within the discretion of the NCB's Board of Directors. Class C stock is
transferrable to another eligible holder only with the approval of NCB. No
requests for approval of transfers have been made to NCB in recent years. Class
C stock has voting rights, but such voting rights are limited in accordance with
the weighted voting system described in Item 10.
Class D Stock - Class D stock is non-voting stock that may be held by any
person. Only three shares are outstanding and NCB has no present intention to
issue any additional shares of such stock. The Act permits NCB to pay dividends
on Class D stock but NCB has no present intention to declare any such
dividends. Class D stock is transferrable only with the approval of NCB. No
requests for approval of such transfers have been made to NCB.
There is no established public trading market for any class of NCB's common
equity, and it is unlikely that any such market will develop in view of the
restrictions on transfer of NCB's stock discussed above. Holders of Class B
stock may use such stock to meet the Class B stock ownership requirements
established in the Bank Act for borrowers from NCB and permitted to NCB,within
the limits set forth above, to transfer Class B stock to another borrower from
NCB.
As of December 31, 1995 there were 971 holders of Class B stock, 353
holders of Class C stock, and 3 holders of Class D stock.
Under the Act, NCB must make annual patronage refunds to its patrons, which
are those cooperatives from whose loans or other business NCB derived interest
or other income during the year with respect to which a patronage refund is
declared. NCB allocates its patronage refunds among its patrons generally in
proportion to the amount of income derived during the year from each patron.
NCB stockholders, as such, are not entitled to any patronage refunds. They are
entitled to patronage refunds only in the years when they have patronized NCB,
and the amount of their patronage does not depend on the amount of their
stockholding. Under the Act, patronage refunds may be paid only from taxable
income and only in the form of cash, Class B or Class C stock, or allocated
surplus.
In years prior to 1995, NCB's patronage refund policy called for patronage
refunds to be paid partly in cash and partly in allocated surplus, with the same
percentage of each paid to each patron. Under NCB's new patronage refund policy
that became effective in 1995 with respect to payment of the refund for
patronage during the calendar year 1994, NCB will no longer issue allocated
surplus as part of the patronage refund, but will instead make the non-cash
portion of the refund in the form of Class B stock until a patron has holdings
of Class B or Class C stock of 16% of its loan amount and thereafter in Class C
stock. Under the new patronage refund policy NCB intends to pay a higher
percentage of the patronage refund in cash to those patrons who have greater
holdings of Class B and Class C stock in proportion to their loan amount. NCB
generally intends to pay a minimum 35% of the patronage refund in cash to those
patrons with stock holdings of 1.0% or more of their loan amount and up to 55%
to those patrons with stock holding of 12.5% or more of their loan amount.
There can, however, be no assurance that a cash patronage refund of any amount
will be declared for any year. Pursuant to the policy, all of NCB's allocated
surplus at December 31, 1993 was converted in 1994 to Class B or Class C stock.
The 1994 allocated surplus was converted in 1995.
NCB has declared a patronage refund for the year ended December 31, 1995,
of approximately $11.3 million of which $5.09 million will be distributed in
cash and $6.21 million in Class B or Class C stock.
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
At December 31, 1995 1994 1993 1992 1991
Loans and leases outstanging $597,190 $501,090 $457,713 $457,551 $447,484
Total assets 684,532 567,321 535,767 527,861 517,175
Total capital* 300,995 295,749 292,581 287,521 287,407
Subordinated Class A notes ** 182,542 182,542 182,542 182,857 184,270
Long-term borrowings, including
Subordinated Class A notes 337,230 287,899 312,897 330,380 281,433
Members'equity 118,453 113,207 110,039 104,664 103,137
Other borrowed funds
including deposits 365,288 256,315 230,868 228,512 217,929
For the Years Ended December 31, 1995 1994 1993 1992 1991
Total interest income $52,498 $41,123 $38,997 $44,063 $45,997
Net interest income 21,745 20,514 18,334 20,145 19,178
Net income 9,083 8,877 8,616 6,060 5,864
Ratios
Capital to assets 44.0% 52.3% 54.6% 54.5% 55.6%
Return on average assets 1.5% 1.7% 1.6% 1.2% 1.2%
Return on average members' equity 7.8% 7.9% 8.0% 5.8% 5.8%
Net yield on int. earning assets 3.7% 4.1% 3.7% 3.9% 4.0%
Average members'equity as a percent of
Average total assets 18.9% 21.5% 20.4% 19.8% 20.7%
Average total loans and lease
financing 21.9% 25.0% 24.3% 22.6% 23.9%
Net average loans and lease financing
to average total assets 86.2% 83.4% 81.9% 85.7% 84.8%
Net average earning assets to
average total assets 94.9% 93.3% 93.2% 96.5% 96.4%
Allowance for loan losses
to loans outstanding 2.5% 2.6% 2.7% 2.3% 1.9%
Provision for loan losses
to average loans outstanding 0.4% 0.2% 0.3% 0.5% 0.6%
* - Capital includes members'equity and subordinated Class A notes
** - Net of deferred hedge gains
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial summary
Net income of $9.1 million in 1995 increased from $8.9 million in
1994. The growth in net income was due to increased volume of commercial and
mortgage lending activities and gains from loan sales. The impact of increases
in net interest income and non-interest income was offset by increases in the
provision for loan losses and non-interest expenses in 1995.
Credit quality in NCB's lending portfolio remained strong during 1995.
The provision for loan losses as a percentage of average loans and leases
increased from .2% and .3% in 1994 and 1993, respectively, to .4% in 1995. In
this same period, the allowance for loan losses as a percentage of loans and
leases has decreased to 2.5% in 1995 from 2.6% and 2.7% in 1994 and 1993,
respectively.
The return on average assets decreased to 1.5% in 1995 from 1.7% in
1994. The return on average equity decreased slightly to 7.8% in 1995 from 7.9%
in 1994.
Total assets increased $117.2 million to $684.5 million as of December
31, 1995 from $567.3 million at year end 1994 due to growth in NCB's loan
portfolio. Loan originations of commercial and residential real estate loans
were ahead of last year.
Net interest income
Net interest income increased $1.2 million or 6.0% in 1995 primarily as
a result of increases in the average volume on the lending portfolio. The net
spread on interest earning assets decreased to 3.7% in 1995 from 4.1% in 1994.
Total interest income increased in 1995 due to increasing loan volume
and market interest rates. The average rate on earning assets increased 80
basis points from 8.2% to 9.0%. As shown in Table 1, increasing volume and
spread accounted for increases of $7.2 million and $4.1 million,respectively,
in total interest income in 1995 compared with 1994.
The average yield on the real estate loan portfolio was 9.2% in 1995
compared with 9.0% in 1994 due to higher interest rates on new originations.
The average yield for commercial loans and leases was 9.1% compared with 8.1% in
1994 due to repricing of variable rate commercial assets that are tied to short
term interest rates.
Total interest expense increased to $30.8 million in 1995 from $20.6
million in 1994. Average cost of funds increased to 6.4% in 1995 from 5.2% in
1994. Nearly 57.3% of NCB's interest bearing liabilities, including deposits
held by NCB Savings Bank, reprice within one year.
See Table 1 & Table 2
Credit quality
Credit quality remained strong in 1995 despite an increase in non-
performing loans and a slight increase in classified loans over 1994 levels.
An inevitable aspect of the lending or risk assumption process is the fact
that losses will be incurred. The extent to which losses occur depends on the
risk characteristics of the loan portfolio. NCB emphasizes continuous credit
risk management. Specific procedures have been established to eliminate undue
credit risk on the balance sheet. They include multilevel approval processes
and an ongoing assessment of the credit condition of the portfolio. In
addition, a risk rating system is designed to classify each loan according to
the risks unique to each credit facility. In turn, NCB's risk rating system and
historical analysis allow management to determine a risk-weighted allowance for
loan losses.
To manage credit risk over a wide geographic area and lending in multiple
industries, NCB uses a team-based approval process relying upon the expertise of
lending teams familiar with particular segments of the industry. Those credit
facilities exceeding delegated lending authority for lending teams are approved
by a senior management team to ensure the quality of lending decisions.
Financial analysis of the industries and regions serviced are regularly
performed by the various lending teams that keep abreast of economic events and
market conditions throughout the United States.
Loans classified by NCB as unacceptable are assigned to the Special Assets
Division for servicing. The Division determines, on a case-by-case basis, the
best course of action necessary to restore a credit to an acceptable risk rating
or to minimize potential losses to NCB.
The allowance for loan losses seeks to protect NCB's capital against the
risk of losses inherent in the credit extension process. The allowance is
increased by the provision for possible credit losses and decreased by the
amount of charge-offs, net of recoveries. The adequacy of the allowance for
loan losses is determined based on risk ratings, current and projected economic
conditions, concentrations, diversification, and portfolio size, among other
relevant factors.
The provision for loan losses increased 116.9% to $1.9 million in 1995.
The provision as a percentage of average loans and leases outstanding increased
to .4% in 1995 from .2% in 1994.
The allowance for loan losses increased 11.7% to $14.6 million in 1995.
The allowance as a percentage of loans and leases outstanding decreased to 2.4%
at December 31, 1995 from 2.6% at December 31, 1994. The allowance as a
percentage of nonperforming loans ( renegotiated and non-accruing loans )
decreased to 252% in 1995 compared with 412% in the prior year.
Total nonperforming assets ( nonaccruing and restructured loans and real
estate owned) increased to $7.2 million at December 31, 1995 from $3.2 million
at December 31, 1994. Nonperforming assets as a percentage of loans and leases
outstanding plus REO increased to 1.2% in 1995 from .6% in 1994. Nonperforming
assets as a percentage of total capital increased to 6.1% in 1995 from 2.8% in
1994.
It is anticipated that in 1996 there may be an increase in the level of
critized loans (special mention, substandard and doubtful) due to the softening
economy and a more strenuous loan review program which may result in an increase
in loans requiring risk rating adjustments. <PAGE>
Table 1
CHANGES IN NET INTEREST INCOME
(dollars in thousands)
1995 Compared to 1994 1994 Compared to 1993
Increase (decrease) due to Increase (decrease) due to
change in: change in:
Average Average Average Average
For the years ended Dec. 31, Volume* Rate Net** Volume* Rate Net**
Interest Income
Cash equivalents and
investment securities $ 15 $ 1,195 $ 1,210 $ (360)$ 575 $ 215
Commercial loans and leases 4,081 2,518 6,599 1,413 665 2,078
Real estate loans 3,143 424 3,567 (773) 606 (167)
Total interest income 7,239 4,137 11,376 280 1,846 2,126
Interest Expense
Deposits 589 789 1,378 51 64 115
Notes payable 5,462 2,124 7,586 (304) 239 (65)
Subordinated Class A notes (17) 1,196 1,179 (6) (98) (104)
Total interest expense 6,034 4,109 10,143 (259) 205 (54)
Net interest income $ 1,205 $ 28 $ 1,233 $ 539 $ 1,641 $2,180
* Average monthly balances
** Changes in interest income and interest expense due to changes in rate
and volume have been allocated to "change in average volume" and
"change in average rate" in proportion to the absolute dollar amounts
in each.
Table 2
RATE RELATED ASSETS AND LIABILITIES
(dollars in thousands)
For the years ended December 31,
<TABLE>
<CAPTION>
1995 1994 1993
Average Average Average
Average Income/ Rate/ Average Income/ Rate/ Average Income/ Rate/
Balance Expense Yield Balance Expense Yield Balance Expense Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Real estate loans $ 256,564 $ 23,524 9.17% $ 220,870 $ 19,967 9.04% $ 229,541 $ 20,134 8.77%
Commercial loans
and leases 275,352 25,039 9.09% 228,466 18,431 8.07% 210,732 16,353 7.76%
Total loans and leases 531,916 48,563 9.13% 449,336 38,398 8.55% 440,273 36,487 8.29%
Investment securities and
cash equivalents 53,962 3,935 7.29% 51,609 2,725 5.28% 59,465 2,510 4.22%
Total interest earning
assets 585,878 52,498 8.96% 500,945 41,123 8.21% 499,738 38,997 7.80%
Allowance for loan losses(13,309) (12,968) (11,217)
Non-interest earning assets
Cash 5,023 6,806 5,380
Other assets 39,446 28,205 29,985
Total non interest
earning assets 44,469 35,011 35,365
Total assets $ 617,038 $ 522,988 $ 523,886
Liabilities and members' equity
Interest bearing liabilities
Subordinated Class
A notes $ 182,915 10,897 5.96% $ 182,961 9,718 5.31% $ 183,073 9,822 5.37%
Notes payable 229,963 16,398 7.13% 156,801 8,811 5.62% 162,062 8,876 5.48%
Deposits 70,596 3,458 4.90% 56,572 2,080 3.68% 55,163 1,965 3.56%
Total interest
bearing liablities 483,474 30,753 6.36% 396,334 20,609 5.20% 400,298 20,663 5.16%
Other liabilities 17,178 14,362 16,514
Members' equity 116,386 112,292 107,074
Total liabilities and
members' equity $ 617,038 $ 522,988 $ 523,886
Net int earning assets $ 98,786 $ 104,611 $ 99,440
Net interest revenues
and spread $ 21,745 2.60% $ 20,514 3.01% $ 18,334 2.64%
Net yield on interest
earning assets 3.71% 4.10% 3.67%
</TABLE>
* Based on monthly balances. Average loan balanoes include nonaccrual loans.
<PAGE>
See Table 3
Non-accruing loans, as a percentage of loans and leases, increased to
.3% at year-end 1995 from .1% at year-end 1994. Despite an increase in non-
accrual and restructured loans in 1995, interest lost on non-accrual and
restructured loans declined to $47 thousand in 1995 from $.2 million in 1994.
Renegotiated loans increased to $4.0 million compared with $2.1 million
in 1994 due to one real estate loan in the amount of $2.0 million which was
restructured in September 1995. As of year end, all renegotiated loans were
current.
The majority of NCB's loans are to cooperatives in basic industries
such as owner-occupied and multifamily residential housing, food distribution,
health care, and financial services. NCB bases credit decisions on the cash
flows of its customers and views collateral as a secondary source of repayment.
The real estate portfolio contains a concentration of loans in the New
York City area. However, property value deterioration has not adversely
affected NCB's portfolio because the majority of loans are to seasoned housing
cooperatives with low loan-to-value ratios. All real estate loans in the New
York City area are contractually current at December 31, 1995. NCB also has
minimal credit exposure to highly leveraged transactions, commercial real estate
and construction loans. NCB has no foreign loan exposure.
See Table 4 & Table 5
Non-interest income
Non-interest income increased 49.7% to $12.6 million in 1995. Non-
interest income is composed of gains from sales of blanket mortgages and share
loans to secondary market investors, servicing fees, origination fees, and
advisory fees. Gains on sales of loans were $6.0 million in 1995 which repre-
sented 47.6% of non-interest income. The $2.8 million increase in the gains
from sale of loans in 1995 over 1994 is due primarily to higher volume of loans
sold in 1995. Real estate loan sales increased by $131.8 million to $252.7
million in 1995 from $120.9 million in 1994. NCB maintains a conservative
interest rate risk policy; accordingly, warehoused loans were fully hedged in
1995.
Servicing income remained a stable source of non-interest income for
NCB in 1995. NCB earned servicing fee income of $1.7 million in 1995 compared
with $1.5 million in 1994. As of December 31, 1995, NCB serviced $1.1 billion
in single and multifamily real estate and commercial loans for outside investors
compared with $854.9 million one year earlier.
Non-interest expenses
Non-interest expenses increased 21.5% from $18.6 million to $22.6
million due primarily to an increase in contractual services. Contractual
service expense for the year ended December 31, 1995 was $2.5 million higher
than 1994 due to higher fees paid to NCBDC for management of loan portfolios and
higher expenditures for strategic planning, process redesign and the development
of a commercial loan securitization program. Non-interest expenses as a per-
centage of average assets were 3.7% for 1995 compared with 3.6% in 1994.
Salaries and benefits, the single largest component of non-interest expenses,
increased 9.5% as a result of additional employee hiring and incentive bonuses
offered to NCB's personnel. Employees are eligible to receive bonuses based on
performance objectives which are tied to market compensation for comparable
positions. Salaries and employee benefits accounted for 46.1% of non-interest
expenses in 1995 and 51.1% of non-interest expenses in 1994 compared with 43.5%
in 1993. As of December 31, 1995, NCB and its consolidated subsidiaries
employed 144 employees compared with 139 employees one year earlier.
Under the provisions of the National Consumer Cooperative Bank Act,
NCB makes tax deductible, voluntary contributions to the NCB Development
Corporation. These contributions are normally calculated based on NCB's net
income. In 1995, NCB agreed to make a contribution to NCBDC to fund certain
business activities. The contribution to NCB Development Corporation was $.5
million each in 1995 and 1994. Non-interest expenses as a percentage of ave-
rage assets, adjusted for the contribution to NCBDC, increased slightly to 3.6%
in 1995 compared with 3.5% in 1994.
Income taxes
Under the terms of the Act, NCB is exempt from most state and local
taxes. In addition, under provisions of the Act and Subchapter T of the Internal
Revenue Code, NCB substantially reduces its Federal tax liability through the
issuance of annual patronage dividends. The federal income tax provision is
determined on non-member income generated by NCB Savings Bank, FSB and reserves
set aside for the retirement of Class A notes and dividends on Class C stock.
NCB's subsidiaries are also subject to varying levels of state taxation.
Note 19 to the consolidated financial statements contains additional
discussions of NCB's tax status.
1994 vs 1993
Net income of $8.9 million in 1994 increased from $8.6 million in 1993.
The 1994 results reflected substantial decrease in non-interest income which was
offset by an increase in net interest income and decrease in non-interest
expenses.
Net interest income increased $2.2 million from 1993 due to increasing
spreads between interest earning assets and interest bearing liabilities. Net
interest margins increased by 43 basis points from 1993 due to the repricing of
NCB's prime based and other short term variable rate assets and originations or
real estate loans.
Credit quality remained strong in 1994. The provision for loan losses
decreased 48.4% to $.9 million in 1994 while the allowance for loan losses as a
percentage of loans and leases decreased from 2.7% in 1993 to 2.6% in 1994.
The provision as a percentage of average loans and leases outstanding decreased
to .2% in 1994 from .3% in 1993.
Non-interest income decreased 30.5% to $8.4 million in 1994. Gains on
asset sales, net of hedging expenses, were $3.2 million in 1994 which repre-
sented 38.1% of non-interest income. NCB earned servicing income of $1.5
million on a servicing portfolio of $854.9 million.
Non-interest expenses decreased from $19.3 million to $18.6 million.
Salaries and benefits increased 13.1% as a result of incentive bonuses offered
to NCB personnel. Contractual services decreased 13.9% from the prior year to
$3.4 million. The decrease was due primarily to the acceleration of certain
expenses related to former consulting commitments which were paid in 1993. The
contribution to NCB Development Corporation was $2.0 million in 1993 compared
with $.5 million in 1994. The decrease in the NCBDC contribution also reflected
the acceleration of the 1994 contribution to 1993.
Fourth quarter results
Net income for the fourth quarter of 1995 was $3.0 million compared
with $1.3 million in the fourth quarter of 1994. The increase was due primarily
to an increase in non-interest income which was partially offset by an increase
in fourth quarter provision for loan losses and increase in non-interest
expenses.
Net interest income increased from $5.0 million in 1994 to $6.0 million
in 1995. The increase was due primarily to increasing short term interest rates
and loan volume from the prior year.
The provision for loan losses increased from $58 thousand in 1994 to
$1.0 million in 1995.
Non-interest income for the quarter increased from $1.5 million in 1994
to $6.0 million in 1995 due primarily to a $3.8 million gain in blanket loan
sales which were securitized by Fannie Mae and collections from the commercial
securitization program.
See Table 6<PAGE>
Table 3
SUMMARY OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
For the years ended December 31, 1995 1994 1993 1992 1991
Balance at beginning of year $13,031 $12,309 $10,419 $ 8,706 $8,272
Charge-offs
Commercial 131 320 159 416 2,095
Real estate - construction 0 0 0 0 0
Real estate - residential 568 0 93 0 9
Total charge-offs 699 320 252 416 2,104
Recoveries
Commercial 125 164 356 30 152
Real estate - construction 0 0 0 0 0
Real estate - residential 192 0 82 0 23
Total recoveries 317 164 438 30 175
Net charge-offs 382 156 (186) 386 1,929
Provision for loan losses 1,905 878 1,704 2,099 2,363
Balance at end of year $14,554 $13,031 $12,309 $10,419 $8,706
<PAGE>
Table 4
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
<TABLE>
<CAPTION>
At December 3l, 1995 1994 1993 1992 1991
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans and lease
financing
Commercial $327,215 54.8% $ 246,797 49.3% $223,682 48.8% $199,442 43.5% $222,788 49.8%
Real estate
- construction 428 0.1% 999 0.2% 5,779 1.3% 5,080 1.1% 5,101 1.1%
Real estate
- residential * 247,096 41.4% 233,527 46.5% 210,846 46.1% 236,379 51.5% 200,103 44.7%
Real estate
- commercial 9,361 1.6% 10,301 2.1% 10,577 2.3% 10,933 2.4% 11,436 2.6%
Lease financing 13,090 2.1% 9,466 1.9% 6,829 1.5% 6,722 1.5% 8,056 1.8%
Total loans and
lease financing $597,190 100.0% $ 501,090 100.0% $457,713 100.0% $458,556 100.0% $447,484 100.0%
Allocation of
allowance for loan losses
Commercial $ 0 0.0 $ 0 0.0 $ 0 0.0 $ 0 0.0 $ 0 0.0
Real estate-construction 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Real estate-residential 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Lease financing 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Unallocated 14,554 100.0% 13,031 100.0% 12,309 100.0% 10,419 100.0% 8,706 100.0%
Total allowance
for loan losses $ 14,554 100.0% $ 13,031 100.0% $12,309 100.0% $ 10,419 100.0% $ 8,706 100.0%
</TABLE>
* Includes loans held for sale
<PAGE>
Table 5
NONPERFORMING ASSETS
(dollars in thousands)
At December 31, 1995 1994 1993 1992 1991
Real estate owned $ 1,397 $ 300 $ 172 $ 2,360 $ 4,297
Non-accruing $ 1,741 $ 723 $ 886 $ 4,207 $ 4,888
Restructured $ 4,041 $ 2,143 $2,283 $ 3,428 $ 2,491
<PAGE>
Table 6
CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
For the Three Months Ended Dec. 31 Sept.30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 14,976 $ 13,021 $ 12,733 $ 11,768 $ 11,053 $ 10,572 $ 9,684 $ 9,814
Interest expense 8,936 7,716 7,411 6,690 6,021 5,054 4,814 4,720
Net interest income 6,040 5,305 5,322 5,078 5,032 5,518 4,870 5,094
Provision for loan losses 996 320 370 219 58 281 50 489
Income after provision for
loan losses 5,044 4,985 4,952 4,859 4,974 5,237 4,820 4,605
Non-interest income 6,013 1,865 2,131 2,604 1,496 1,515 1,463 3,951
Net revenue 11,057 6,850 7,083 7,463 6,470 6,752 6,283 8,556
Non-interest expenses 7,856 4,899 4,952 4,885 5,477 4,572 4,163 4,388
Income before income taxes 3,201 1,951 2,131 2,578 993 2,180 2,120 4,168
Provision for income taxes 154 247 252 125 (260) 164 178 503
Net income $ 3,047 $ 1,704 $ 1,879 $ 2,453 $ 1,253 $ 2,016 $1,942 $3,665
</TABLE>
<PAGE>
Sources of Funds
Capital Markets Access
NCB maintains line of credit facilities provided by a consortium of
banks. At year-end, total borrowing capacity under these facilities was $256.0
million, and the outstanding balance at December 31, 1995 was $132.5 million
compared with an outstanding balance of $91.0 million at December 31, 1994.
Usage, as measured by average outstanding balances during the year, increased
from $37.7 million in 1994 to $77.7 million in 1995 due to growth in commercial
loan volume and additional activity to fund warehoused real estate loans.
For 1996, steps will be taken to move into the medium term note
market. Depending on our success with the rating agencies in obtaining favorable
long-term debt ratings, this could result in a further reduction in our cost of
funds. As an initial step toward this goal, NCB recently received an "A-"
(single A minus) rating from Duff & Phelps on all senior debt. Ratings from
Moody's and Standard & Poors will also be pursued.
NCB's loan sale activity is another source of funding. NCB originates
most of its real estate loans, including share loans originated by NCB Savings
Bank, FSB, for sale into the secondary market. In 1995, NCB sold $267.8
million compared to $142.8 million of cooperative real estate and share loans in
the prior year.
In 1996, NCB expects to sell $193 million of cooperative real estate
and share loans.
Deposits
At NCB's wholly-owned subsidiary, NCB Savings Bank, FSB, ( NCBSB )
deposits increased in 1995 from $58.9 million to $78.1 million. The growth was
generated by an aggressive campaign in the local community and with NCB's
members. The weighted average rate on deposits increased from 4.2% in 1994 to
5.2% in 1995. Although NCB relies heavily on funds raised through the capital
markets, deposits are a major portion of interest bearing liabilities -- 14.2%
in 1995 compared with 13.5% in 1994. Management anticipates that deposits will
represent an increasing portion of its capital structure.
Uses of funds
Loans and leases
Loans and leases outstanding increased 19.2% from $501.1 million at
year-end 1994 to $597.2 million in 1995.
NCB's commercial loan portfolio expanded with new business opportu-
nities. The commercial loan and lease portfolio increased from $256.3 million to
$340.3 million in 1995. The commercial loan portfolio reflects a decrease in
food processing and distribution as a result of our securitization program while
growth is shown in the areas of financial services and other which includes
native Alaskan and hardware activities.
NCB's real estate portfolio increased from $244.8 million at the end of
1994 to $256.9 million. NCB's residential loan portfolio increased from
$233.5 million in 1994 to $247.1 million. The real estate portfolio was subs-
tantially composed of multifamily blanket mortgages and single family share
loans. NCB does not invest in speculative commercial real estate transactions.
For 1996, NCB expects continued strength in its origination and secon-
dary marketing activities. Net loan volume is expected to increase approxi-
mately $92 million based on new loan originations (net of scheduled amortiza-
tion) of $310 million and sales of $218 million.
Cash, Cash Equivalents, and Investment Securities
Cash, cash equivalents, and investments increased $8.7 million to
$61.9 million in 1995. The increase was due to a sale of loans to FNMA in
December. Cash, cash equivalents, and investment securities, represent 9.4% of
interest earning assets in 1995 compared with 9.3% in 1994.
Asset and Liability Management
Asset and liability management is the structuring of interest rate
sensitivities of the balance sheet to maximize net interest income under the
constraints of liquidity and interest-rate risk ("IRR"). NCB's liquidity and
IRR are managed by the Risk Management Committee which meets quarterly. The
purpose of the committee is to develop and implement strategies, including the
buying and selling of off-balance sheet instruments such as interest rate swaps
and financial futures contracts, to ensure sufficient reward for known and
controlled risk.
Overall, NCB's Risk Management Committee adheres to the philosophy that
a consistently balanced position results in the safest and most predictable net
interest earnings stream over various interest rate cycles.
Liquidity
Liquidity is the ability to meet financial obligations either through
the sale or maturity of existing assets or through the raising of additional
funds. Maintaining adequate liquidity therefore requires careful coordination of
the maturity of assets and liabilities.
NCB's asset liquidity is generally provided by maintaining near-cash
and short term investments which can be converted to cash at little or no cost.
These investments include: fed funds, eurodollar investments, commercial paper,
certificates of deposit, and other short term obligations. These securities
normally have a maturity of less than ninety days and are not subject to price
variations. At December 31, 1995, NCB held $21.3 million in cash and cash
equivalents compared with $12.5 million in cash and cash equivalents for 1994.
These funds are normally used to fund business operations.
NCB's $32.2 million investment portfolio is a second source of asset
liquidity. The portfolio consists of high-grade corporate and government
obligations. The weighted average period to maturity increased to 3.9 years at
year end 1995 from 2.1 years at year-end 1994.
Aside from its principal amortization (scheduled and non-scheduled) and
maturities, the loan portfolio is an excellent source of liquidity as
demonstrated by NCB's success in asset securitization. In fact, NCB has been
instrumental in developing the secondary market for loans made to cooperatives.
NCB also has $256 million of revolving lines of credit, $120 million of
which is committed until May 30, 1998 and $80 million committed until May 30,
1996. Average outstanding balances were $77.7 million in 1995 compared with
$37.7 million in 1994.
Finally, NCB's wholly-owned subsidiary, NCB Savings Bank, FSB raises
both local and national deposits from NCB members, which also serve as a source
of liquidity. NCB Savings Bank, FSB, uses cooperative deposits to fund co-
originations of blanket mortgages with NCB and to originate single family share
loans.
See Table 7
Interest Sensitivity
Interest Rate Risk (IRR) is the sensitivity of earnings and capital to
changes in market rates of interest. It arises through differences in the
repricing characteristics of both assets and liabilities.
To measure its risk, NCB utilizes a computer simulation model to
forecast its earnings and the market value of its portfolio equity under diffe-
rent rate scenarios. The model incorporates the dynamics of balance sheet and
interest rate changes as well as embedded options. NCB's Risk Management
Committee reviews the simulation output and makes decisions accordingly.
Table 8 represents NCB's static interest-rate gap position at December
31, 1995. The gap, adjusted for off-balance sheet activity, represents a one
day snapshot of the amount of assets and liabilities contractually scheduled to
reprice or mature within a designated time horizon. Interest rate sensitive
assets exceeding interest rate sensitive liabilities, within a designated time
frame is referred to as a positive gap. Conversely, interest rate sensitive
liabilities exceeding interest rate sensitive assets, in a designated time
frame, is referred to as a negative gap. Consequently, a static gap analysis,
considered alone, is not a complete indication of IRR.
NCB is exposed to a tightening of the Prime/LIBOR (London Interbank
Offered Rate) spread relationship because much of its floating-rate assets
adjusts to Prime, while much of its floating rate obligations adjusts to one,
three and six month LIBOR.
It is clear from Table 8 that NCB had a negative gap (as a percentage
of total assets) of 7.88% and 7.11% at the one year and 180 day time horizons,
respectively. At December 31, 1995, NCB's static gap position was in
compliance with existing Board policies.
See Table 8<PAGE>
Table 7
MATURITY SCHEDULE OF LOANS
(dollar in thousands)
One Year
One Year Through Over
At December 31, 1995 or Less Five Years Five Years Total
Commercial $ 52,163 $ 89,112 $ 185,940 $ 327,215
Real estate-construction 428 0 0 428
Real estate-residential 39,569 56,359 151,168 247,096
Real estate- commercial 318 5,079 3,964 9,361
Leases 833 6,888 5,369 13,090
Total loans and leases $ 93,311 $ 157,438 $ 346,441 $ 597,190
Fixed interest rate loans $ 62,772 $ 145,096
Variable interest rate loans 94,666 201,345
$ 157,438 $ 346,441
<PAGE>
Table 8
Interest Rate Sensitivity
(dollars in thousands)
<TABLE>
<CAPTION>
Over 12
December 31, 1995 Interest Interest Interest Interest Interest Months and
-sensitive-sensitive-sensitive-sensitive-sensitive Non-Interest
30 day 3 month 6 month 12 month Total Sensitive Total
<S> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Cash and cash equivalents $ 29,638 $ 0 $ 0 $ 0 $ 29,638 $ 0 $ 29,638
Investment securities 1,807 0 4,404 2,679 8,890 23,325 32,215
Loans and leases 183,266 19,205 31,369 40,580 274,420 322,770 597,190
Total interest earning assets $214,711 $19,205 $ 35,773 $ 43,259 $312,948 $ 346,095 $ 659,043
Interest bearing liabilities
Deposits $ 20,731 $13,025 $ 9,131 $ 11,463 $ 54,350 $ 23,750 $ 78,100
Short-term borrowings 132,500 0 0 0 132,500 0 132,500
Long-term debt 0 0 0 0 0 154,500 154,500
Subordinated Class A notes* 53,553 0 0 36,854 90,407 92,135 182,542
Total interest bearing
liabilities 206,784 13,025 9,131 48,317 277,257 270,385 547,642
Other
Other non-interest bearing, net 0 0 0 0 0 111,401 111,401
Effect of interest rate swaps &
financial futures (43,400) 40,000 91,000 0 87,600 (87,600) 0
Total $163,384 $53,025 $100,131 $ 48,317 $364,857 $ 294,186 $ 659,043
Repricing difference $ 51,327$(33,820)$(64,358)$(5,058) $(51,909) $ 51,909
Cumulative gap $ 51,327$ 17,507 $(46,851)$(51,909)
Cumulative gap as % total assets 7.79% 2.66% -7.11% -7.88%
</TABLE>
* Net of premiums/discounts.
<PAGE>
Capital
NCB's strong capital position supports growth, ensures continuing
access to financial markets, and allows for greater flexibility during difficult
economic periods.
Historically, NCB has maintained a strong capital structure. NCB's
equity to average assets was 18.9% in 1995 compared with 21.5% and 20.4% in 1994
and 1993, respectively. When including NCB's subordinated Class A notes, NCB's
average total capital to average assets was 48.5% in 1995 compared with 56.4%
and 55.4% during 1994 and 1993, respectively. The Bank Act limits NCB's
outstanding debt to ten times its capital and surplus (including the subordi-
nated Class A notes). As of December 31, 1995, NCB Savings Bank, FSB, had a
risk based capital ratio of 19.9%, well in excess of regulatory requirements.
Patronage policy
Each year, NCB declares patronage refunds approximately equal to its
taxable net income thereby reducing its Federal income tax to insignificant
amounts. In June 1995, NCB distributed $9.0 million to its active member-
borrowers. Of this total, approximately $4.1 million was distributed in cash.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The registrant's financial statements and notes thereto are set forth
beginning at page 24 below. The registrant is not subject to any of the
requirements for supplementary financial information contained in Item 302 of
Regulation S-K.
<PAGE>
Independent Auditors' Report
To the Board of Directors and
Members of National Cooperative Bank
We have audited the accompanying consolidated balance sheets of National
Cooperative Bank and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in members' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of National Cooperative
Bank and subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
January 30, 1996
Washington, D.C.
<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED BALANCE SHEETS
December 31,
1995 1994
Assets
Cash and cash equivalents $ 21,289,376 $ 12,546,834
Restricted cash 8,348,703 8,348,703
Investment securities
Available-for-sale 29,095,559 26,763,587
Held-to-maturity 3,118,956 6,183,909
Loans and lease financing 558,582,284 454,573,762
Loans held for sale 38,608,195 46,515,785
Less: Allowance for loan losses (14,554,240) (13,031,499)
582,636,239 488,058,048
Excess servicing 25,670,305 14,987,605
Premises and equipment, net 1,896,779 2,079,363
Other assets 12,475,747 8,353,194
Total assets $684,531,664 $567,321,243
Liabilities and Members' Equity
Liabilities
Deposits $ 78,100,173 $ 58,918,549
Patronage dividends payable in cash 5,088,851 3,966,724
Other liabilities 12,687,840 10,905,055
Borrowings
Short-term 132,499,998 91,031,114
Long-term 154,688,045 105,356,867
Other 1,008,178
287,188,043 197,396,159
Subordinated Class A notes 183,013,689 182,927,687
Total borrowings 470,201,732 380,323,846
Total liabilities 566,078,596 454,114,174
Members' equity
Common stock
Class B 72,349,754 67,823,071
Class C 21,731,166 24,844,625
Class D 300 300
Retained earnings
Allocated 6,219,707 4,848,218
Unallocated 17,898,103 17,112,436
Unrealized gain (loss) on investment
securities available-for-sale 254,038 (1,421,581)
Total members' equity 118,453,068 113,207,069
Total liabilities and members' equity$684,531,664 $567,321,243
See notes to consolidated financial statements.<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995 1994 1993
Interest income
Loans and lease financing $48,563,512 $38,398,026 $36,487,048
Investment securities 3,934,756 2,725,183 2,510,185
Total interest income 52,498,268 41,123,209 38,997,233
Interest expense
Deposits 3,457,902 2,079,895 1,965,347
Short-term borrowings 6,196,456 2,367,375 1,309,956
Long-term debt, other borrowings
and subordinated Class A notes 21,098,803 16,161,773 17,387,865
Total interest expense 30,753,161 20,609,043 20,663,168
Net interest income 21,745,107 20,514,166 18,334,065
Provision for loan losses 1,904,500 878,401 1,703,907
Net interest income after
provision for loan losses 19,840,607 19,635,765 16,630,158
Non-interest income
Gain on sale of assets 6,009,720 2,916,326 6,557,702
Loan and deposit servicing fees 1,701,682 1,501,847 1,351,390
Other 4,901,623 4,007,233 4,218,637
Total non-interest income 12,613,025 8,425,406 12,127,729
Non-interest expenses
Compensation and employee benefits 10,406,220 9,504,571 8,398,715
Contractual services 5,808,285 3,352,459 3,892,031
Occupancy and equipment 3,060,293 2,839,090 2,833,457
Contribution to NCB
Development Corporation 500,000 500,000 2,000,000
Other 2,817,915 2,403,659 2,171,707
Total non-interest expenses 22,592,713 18,599,779 19,295,910
Income before income taxes 9,860,919 9,461,392 9,461,977
Provision for income taxes 777,683 584,530 845,998
Net income $ 9,083,236 $ 8,876,862 $ 8,615,979
Distribution of net income
Patronage dividends $11,308,558 $ 8,814,942 $ 6,995,245
Retained earnings (2,225,322) 61,920 1,620,734
$ 9,083,236 $ 8,876,862 $ 8,615,979
See notes to consolidated financial statements.
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
For the years ended December 31, 1995, 1994 and 1993
Retained Retained Total
Common Earnings Earnings Unrealized Members'
Stock Allocated Unallocated Gain (Loss) Equity
Balance,
January 1, 1993 $80,472,250 $9,140,950 $15,050,936 $ - $104,664,136
Net income - - 8,615,979 - 8,615,979
Proceeds from issuance
of common stock 100 - - - 100
Cancellation and
redemption of stock (227,202) - 277,367 - 50,165
1992 patronage dividends
Allocated surplus - (143,367) - - (143,367)
1993 patronage dividends
Distributed in cash - - (3,147,860) - (3,147,860)
Retained in form of
equity - 3,847,385 (3,847,385) - -
Balance,
December 31, 1993 80,245,148 12,844,968 16,949,037 - 110,039,153
Net income - - 8,876,862 - 8,876,862
Proceeds from issuance
of common stock 10,200 - - - 10,200
Cancellation and
redemption of common
stock (330,841) - - - (330,841)
Conversion of allocated
surplus to common
stock 12,827,599 (12,844,968) 17,369 - -
1993 patronage
dividends (84,110) - 84,110 - -
1994 patronage dividend
Distributed in cash - - (3,966,724) - (3,966,724)
Retained in form of
equity - 4,848,218(4,848,218) - -
Unrealized loss on
investment securities
available-for-sal - - - (1,421,581) (1,421,581)
Balance,
December 31, 1994 92,667,996 4,848,218 17,112,436(1,421,581)113,207,069
Net income - - 9,083,236 - 9,083,236
Cancellation and
redemption of stock (3,544,579) - 3,234,213 - (310,366)
1994 patronage dividend
Distributed in
common stock and cash 4,957,803 (4,848,218) (198,684) (89,099)
Other dividend paid - - (24,540) - (24,540)
1995 patronage dividends
To be distributed in cash - - (5,088,851) - (5,088,851)
Retained in form of
equity - 6,219,707 (6,219,707) - -
Unrealized gain on
investment securities
available-for-sale - - - 1,675,619 1,675,619
Balance,
December 31, 1995 $94,081,220 $6,219,707$17,898,103 $ 254,038$118,453,068
See notes to consolidated financial statements.<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995 1994 1993
Cash flows from operating activities
Net income $ 9,083,236 $ 8,876,862 $ 8,615,979
Adjustments to reconcile net income to net
cash provided by operating activities
Provisions for loan losses 1,904,500 878,401 1,703,907
Depreciation and amortization 4,950,808 4,335,318 2,917,286
Gain on sale of assets (6,009,720) (2,916,326) (6,557,702)
Loans originated for sale (251,781,768) (127,122,958) (170,405,348)
Proceeds from sale of
loans held for sale 250,676,820 115,566,422 199,481,220
Increase in other assets (1,297,004) (1,875,088) (3,839,316)
Increase in other liabilities 1,782,807 2,182,560 509,065
Transfer from (to) restricted
cash account 12,816 (1,857,794)
Other 405,907 337,495 326,349
Net cash provided by
operating activities 9,715,586 275,502 30,893,646
Cash flows from investing activities
Purchases of investment securities
Available-for-sale (9,155,293) (18,763,180) (9,155,694)
Held-to-maturity (722,785) (5,434,000) (3,380,698)
Proceeds from maturities and sale
of investment securities
Available-for-sale 8,889,188 17,838,887 10,217,820
Held-to-maturity 3,306,785 5,263,097
Loans originated net of
loan repayments (158,775,397) (33,222,070) (51,489,147)
Proceeds from sale
of portfolio loans 51,405,022 2,153,435 23,114,212
Purchases of premises and equipment (613,576) (598,877) (166,838)
Net cash used in
investing activities (105,666,056) (32,762,708) (30,860,345)
Cash flows from financing activities
Net increase(decrease)in deposits 19,181,624 (8,012,885) 14,705,334
Net increase-short-term borrowings 41,468,884 59,489,537 5,489,729
Proceeds from issuance of long-term
debt 74,500,000 30,000,000
Repayment on long-term debt (25,168,822) (54,998,022) (17,000,000)
Repayment on subordinated
Class A notes (314,622)
Repayment on other borrowings (922,176) (1,032,228) (665,068)
Gain on liability hedge 117,344
Proceeds from issuance of common stock 10,200 100
Redemption of common stock (310,366) (330,841) (227,202)
Patronage dividends paid (4,056,132) (3,147,860) (2,970,925)
Net cash provided by (used in)
financing activities 104,693,012 22,095,245 (982,654)
Increase (decrease) in cash and
cash equivalents 8,742,542 (10,391,961) (949,353)
Cash and cash equivalents,
beginning of year 12,546,834 22,938,795 23,888,148
Cash and cash equivalents,
end of year $ 21,289,376 $ 12,546,834 $ 22,938,795
See notes to consolidated financial statements.
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental schedule of noncash investing and financing activities:
1995 1994 1993
Unrealized gain on investment
held for sale $ 1,675,619 $ 1,421,581 $ -
Common stock cancelled
against allowance for
for loan losses 288,585 - -
Contributions of excess
concentration to NCBRFC 2,697,010 - -
Interest paid 30,177,706 19,245,501 21,261,973
Income taxes paid 709,879 762,898 768,307
See notes to consolidated financial statements.
NATIONAL COOPERATIVE BANK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Organization
National Consumer Cooperative Bank, doing business as National Coope-
rative Bank (NCB), is a U.S. Government-chartered corporation organized under
the National Consumer Cooperative Bank Act (the Act). NCB provides loans and
financial services to cooperatives. NCB Mortgage Corporation, a wholly-owned
subsidiary, originates, sells and services real estate and commercial loans for
cooperatives. NCB Financial Corporation, a wholly-owned subsidiary, is the
holding company of NCB Savings Bank, FSB (NCBSB), a federally-chartered
thrift institution. Cooperative Funding Corporation, a wholly-owned subsidiary
of NCB, is a registered broker-dealer and provides corporate financial services.
NCB Investment Advisers, Inc., a wholly-owned subsidiary of NCB, provides in-
vestment advisory services to cooperatives. NCB I, Inc., a wholly-owned
subsidiary, is a special purpose corporation that holds credit enhancement cer-
tificates related to the securitization and sale of cooperative real estate
loans. NCB Retail Finance Corporation (NCBRFC), a wholly-owned subsidiary incor-
porated on December 24, 1994, purchases and sells commercial loans which are
then securitized and issued into commercial paper.
The Act also provided for the formation of NCB Development Corporation
(NCBDC), an affiliate, which is a non-profit organization without capital stock
organized under the laws of the District of Columbia. NCBDC provides loans and
technical support to cooperative enterprises. NCBDC's bylaws provide for six
directors from the NCB board to serve on the NCBDC board, along with three
outside directors elected by NCB directors. Consistent with the Act, NCB
makes deductible, voluntary contributions to NCBDC.
Borrowers from NCB are required to own Class B Stock in NCB. Stock
owned by a borrower may be cancelled by NCB, at NCB's sole discretion, in
case of certain events, including default.
In 1995, it was determined that all income generated by NCB and its
subsidiaries, with the exception of NCB Savings Bank, qualifies as patronage
income under the Internal Revenue Code, with the consequence that NCB is able
to issue tax deductible patronage refunds with respect to all such income.
Principles of Consolidation
The consolidated financial statements include the accounts of NCB
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated. The financial statements of NCB do not include the net
assets or results of operations of NCBDC.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assump-
tions 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.
Investments
Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" was issued in
May 1993 by the Financial Accounting Standards Board. At December 31, 1993,
NCB adopted the requirements of SFAS 115 to classify and account for debt and
equity securities as follows:
Trading Securities - Securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading secu-
rities and reported at market value. Unrealized gains and losses are included
in non-interest income.
Available-for-sale - Securities that will be held for indefinite
periods of time, including those that may be sold in response to changes in mar-
ket interest rates and related changes in the security's prepayment risk,
needs for liquidity and changes in the availability of and the yield of alterna-
tive investments are classified as available-for-sale. These assets are carried
at fair value. Unrealized gains and losses are determined on an aggregate basis,
excluded from earnings and reported as a separate component of members'
equity. Gains and losses on the sale of investment securities are determined
using the adjusted cost of the specific security sold and are included in
earnings.
Held-to-maturity - Securities that management has the positive intent
and ability to hold until maturity are classified as held-to-maturity. They are
reported at amortized cost.
Prior to the adoption of SFAS No. 115, NCB carried securities with the
intention to be held to maturity at amortized cost, securities intended for sale
were carried at the lower of cost or fair value and securities held for
trading were carried at fair value. Changes in the carrying value of securi-
ties held for sale and trading securities were included in income as security
gains or losses.
Interest Rate Futures, Forward Contracts and Interest Rate Swaps
Gains and losses on futures and forward contracts to hedge certain
interest-sensitive assets and liabilities are deferred. Gains or losses are
recognized at the time of disposition of the assets or liabilities being
hedged, or are amortized over the life of the hedged asset or liability as an
adjustment to interest income or interest expense.
Interest rate swap agreements are used to shorten the functional re-
pricing period of the fixed rate debt. The interest income and expense is
earned or charged based on the outstanding balances of the receivable and
payable positions, respectively, applying the related market rates at which
the agreements were purchased and the term outstanding during the period.
The interest income and expense are treated as as an adjustment to interest
expense on the hedged liability.
Loans and Lease Financing
Loans are carried at their principal amounts outstanding, except
for loans held for sale which are carried at the lower of cost or market as
determined on an aggregate basis. NCB discontinues the accrual of interest
on loans when principal or interest payments are ninety days or more in
arrears or sooner when there is reasonable doubt as to collectibility. Loans
may be reinstated to accrual status when all payments are brought current
and, in the opinion of management, collection of the remaining balance can
reasonably be expected.
Leasing operations consist principally of leasing equipment under
direct financing leases expiring in various years through 1998. All lease
financing transactions are full payout direct financing leases. Lease income
is recorded over the term of the lease contract which provides a constant
rate of return on the unrecovered investment. Lease financing is carried
net of unearned income.
Allowance for Loan Losses
The allowance for loan losses is a valuation allowance which manage-
ment believes to be adequate to cover anticipated loan and lease financing
losses in the existing portfolio. A provision for loan losses is added to
the allowance and charged to expense. Loan and lease charge-offs, net of re-
coveries, are deducted from the allowance. The factors utilized by manage-
ment in determining the adequacy of the allowance include, but are not
limited to, the following: the present and prospective financial condition
of the borrowers and the values of any underlying collateral; evaluation of
the loan and lease financing portfolio in conjunction with historical loss
experience; portfolio composition; and current and projected economic
conditions. The allowance for loans losses is maintained at a level believed
by management to be adequate to absorb potential losses inherent in the loan
portfolio. Changes in economic conditions and economic prospects of borrowers
can occur quickly; consequently losses that NCB ultimately realizes could
differ from the estimates made by management.
When a loan is impaired, NCB measures impairment based on the
present value of the expected future cash flows discounted at the loan's
effective interest rate or the fair value of the collateral, less estimated
selling costs, if the loan is collateral-dependent and foreclosure is proba-
ble. NCB recognizes an impairment by creating a valuation allowance. A loan
is impaired when, based on current information, it is probable that a credi-
tor will be unable to collect all amounts due on the contractual terms of the
loan.
Loan-Origination Fees, Commitment Fees, and Related Costs
Loan fees received are accounted for in accordance with Statement
of Financial Accounting Standards No. 91, "Accounting for Nonrefundable Fees
and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases". Loan fees and certain direct loan origination costs are
deferred, and the net fee or cost is recognized as an adjustment to interest
income over the contractual life of the loans. Fees relating to expired
commitments are recognized as non-interest income. If a commitment is
exercised during the commitment period, the fee at the time of exercise is
recognized over the life of the loan as an adjustment of yield.
Loan-Servicing Rights
The cost of loan-servicing rights acquired is amortized in propor-
tion to, and over the period of, estimated net servicing revenues. When par-
ticipating interest in loans sold have an average contractual interest rate,
adjusted for normal servicing fees, that differs from the agreed yield to the
purchaser, gains or losses are recognized equal to the present value of such
differential over the estimated remaining life of such loans. The resulting
"excess servicing" is amortized over the estimated life using a method appro-
ximating the level-yield method.
Substantially all excess servicing pertains to blanket loans made
to cooperative housing corporations as first mortgages. These mortgages are
typically structured with prepayment lockouts followed by prepayment penal-
ties or yield maintenance provisions through maturity. In calculating excess
servicing, NCB discounts the cash flows through the lockout period. Cash
flows beyond the lockout period are discounted only to the extent that NCB is
entitled to receive the prepayment or yield maintenance penalty.
The cost of loan-servicing rights purchased, the excess servicing,
and the amortization thereon are periodically evaluated in relation to esti-
mated future net servicing revenues. NCB evaluates the carrying value of the
servicing portfolio by estimating the future net servicing income of the
portfolio based on management's best estimate of remaining loan lives.
Experience could differ from the estimates used by management. As a result,
the actual amounts NCB ultimately realizes could differ from the estimates
made by management.
NCB will adopt Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights," as of January 1, 1996. If NCB
had implemented SFAS No. 122 as of January 1, 1995, it would not have had a
material impact on its financial condition and results of operations. Ma-
nagement does not anticipate the adoption of SFAS No. 122 to have a material
impact in the future.
Receivables Sold with Recourse
NCB is obligated under various recourse provisions related to the
sales of residential mortgages. Management has accrued a liability for esti-
mated probable losses to these recourse provisions. Management believes the
recourse provisions do not subject NCB to any material risk of loss other
than that provided for in other accrued expenses.
Premises and Equipment
Premises and equipment are carried at cost less accumulated depre-
ciation and include equipment owned under lease financing arrangements.
Depreciation is computed using an accelerated method. Leasehold improvements
are amortized on a straight-line basis over the terms of the leases.
Other Assets
Foreclosed property pending disposition is carried at fair value less
estimated costs to sell. Goodwill relating to the acquisition of NCBSB by NCB
Financial Corporation is being amortized over the estimated remaining lives
of the long-term interest-bearing assets acquired.
Income Taxes
The National Consumer Cooperative Bank Act Amendments of 1981 (P.L.
97-35) provides that, effective January 1, 1982, NCB shall be treated as a
cooperative and subject to the provisions of Subchapter T of the Internal
Revenue Code. Under Subchapter T, NCB issues its member-borrowers patronage
refunds, which are tax deductible to NCB thereby reducing its taxable income.
In 1995, it was determined that all income generated by NCB and its subsidia-
ries, with the exception of NCB Savings Bank, qualifies as patronage income
under the Internal Revenue Code, with the consequence that NCB is able to
issue tax deductible patronage refunds with respect to all such income.
Section 109 of the Act, as amended, provides that NCB is exempt from state
and local taxes with the exception of real estate taxes. Certain NCB subsi-
diaries, however, are subject to federal and state income taxes.
NCB adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes" as of January 1, 1992. The asset and
liability approach of SFAS 109 requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities that have been recognized in NCB's financial statements or tax
returns.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
1995 presentation.
2. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and investment securities
with original maturities of less than ninety days. The balances at
December 31 are as follows:
1995 1994
Cash in bank $ 6,121,646 $ 4,633,405
Securities
Federal funds 7,170,000 5,933,242
Money Market 949,069 863,971
Certificates of deposit,mutual funds
and repurchase agreements 7,048,661 1,116,216
$21,289,376 $12,546,834
3. Investment Securities
The composition of investment securities available for sale at December
31, is as follows:
1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
US Treasury and agency
obligations $15,465,491 $ 195,375 $ 46,896 $15,613,970
Corporate bonds 11,330,949 220,742 9,526 11,542,165
Mutual funds 1,084,707 - 3,013 1,081,694
Money market 960,374 - 102,644 857,730
$28,841,521 $ 416,117 $ 162,079 $29,095,559
1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
US Treasury and agency
obligations $15,349,852 $ 535 $ 819,592 $14,530,795
Corporate bonds 10,367,358 5,268 407,656 9,964,970
Mutual funds 1,566,704 - 56,785 1,509,919
Money market 901,254 - 143,351 757,903
$28,185,168 $ 5,803 $1,427,384 $26,763,587
The maturities of investment securities available-for-sale at
December 31, 1995 are as follows:
Amortized
Cost Fair Value
Within 1 year $ 8,115,216 $ 8,065,426
After 1 year through 5 years 15,745,842 16,052,346
After 5 years through 10 years 3,020,174 3,023,895
After 10 years 1,960,289 1,957,892
$28,841,521 $29,059,559
The composition of investment securities held-to-maturity at
December 31, is as follows:
1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Certificates of deposits $ 398,000 $ - $ - $ 398,000
Mortgage-backed securities 2,720,956 - 1,370,378 1,350,578
$3,118,956 $ - $1,370,378 $1,748,578
1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
US Treasury and agency
obligations $2,466,000 $ 26,694 $ $2,492,694
Mortgage-backed securities 2,626,909 1,342,307 1,284,602
Certificates of deposits 1,091,000 1,091,000
$6,183,909 $ 26,694 $1,342,307 $4,868,296
In 1995, 1994, and 1993 securities available for sale totalling
$4,459,219 and $14,100,000, and $10,217,820 were sold resulting in a (loss)
of $(73,938) and a gain of $12,463 and $85,078, respectively. There were no
sales of securities classified as held-to-maturity during 1995, 1994, or
1993. The change in net unrealized holding (gains) on trading securities
that have been included in earnings for 1993 was $170,813. NCB held callable
investment securities with amortized costs of $4,998,919 and $2,000,000 at
December 31, 1995 and 1994, respectively. The fair values of the callable
securities are $5,116,900 and $1,918,250 in the same respective periods.
4. Loan Servicing and Excess Servicing
Mortgage loans serviced for others are not included in the accom-
panying consolidated balance sheets. The unpaid principal balances of these
loans at December 31, 1995 and 1994 are $1,110,991,000 and $854,863,000
respectively.
NCB has excess servicing substantially pertaining to blanket loans
made to cooperative housing corporations totalling $25,670,305 and
$14,987,605 at December 31, 1995 and 1994, respectively, with fair values of
$27,749,372 and $15,354,320 in the same respective periods.
5. Loans and Lease Financing
Loans and leases outstanding by category at December 31 are as
follows:
1995 1994
Commercial loans $327,214,991 $246,796,452
Real estate loans
Construction 428,201 999,349
Residential 208,487,534 187,010,904
Loans held for sale 38,608,195 46,515,785
Commercial 9,361,090 10,300,718
Lease financing 13,090,468 9,466,339
$597,190,479 $501,089,547
NCB's commercial and real estate loan portfolio is diversified both
in terms of industry and geography. The following is the distribution of the
loans outstanding at December 31:
Commercial Loans Real Estate Loans
1995 1994 1995 1994
By Region
Northeast 25.3% 33.1% 62.8% 56.7%
South Atlantic 17.2 8.5 8.5 17.5
Central 26.7 28.3 22.5 18.4
West 30.8 30.1 6.2 7.4
100.0% 100.0% 100.0% 100.0%
Percentage of Total
Loan Portfolio
1995 1994
By Borrower Type
Real estate
Construction .1% 0.2%
Residential 41.4 46.6
Commercial 1.6 2.1
Commercial
Food processing and distribution 24.2 25.1
Financial services 10.2 5.1
Medical service and supplies 4.2 4.3
Other 16.1 14.7
Lease Financing 2.2 1.9
100.0% 100.0%
NCB originates multifamily blanket mortgages to predominantly
owner-occupied housing cooperatives. A significant portion of NCB's mortgage
loans are located within New York City due to that city's extensive coopera-
tive market. At December 31, 1995, $72,280,000 of real estate loans are
located in New York. The blanket mortgages are collateralized by the building
and proprietary leases of the housing cooperative. The loans are repaid from
operations of the real estate cooperative.
NCB's commercial portfolio has a concentration in the food pro-
cessing and distribution industry. The loan types include lines of credit,
revolving credits, and term loans. These loans are typically collateralized
with general business assets (e.g., inventory, receivables, fixed assets, and
leasehold interests). The loans are expected to be repaid from cash flows
generated by the borrower's operating activities. NCB's exposure to credit
loss in the event of nonperformance by the other parties to the loan is the
carrying amounts of the loans.
The carrying amounts and respective estimated fair values of loans
and leases outstanding at December 31 are as follows (amounts in thousands):
Carrying Amount Estimated Fair Value
1995 1994 1995 1994
Commercial
Fixed rate loans $156,434 $ 51,424 $161,309 $ 49,365
Adjustable rate loans 170,781 195,372 175,960 194,150
Real Estate
Loans held for sale 38,608 46,515 40,317 44,799
Portfolio-fixed rate 60,243 34,653 62,049 33,077
Portfolio-adjustable 158,035 163,660 156,336 160,394
Lease financing 13,090 9,466 13,076 9,686
$597,190 $501,090 $609,047 $491,471
6. Receivables Sold with Recourse
At December 31, 1995 and 1994, restricted cash of $8,348,703 is
held by a trustee for the benefit of certificate holders in the event of a
loss on certain loans sold with balances totalling $37,300,000 and
$92,623,000 in 1993 and 1992, respectively. At December 31, 1995 and 1994,
the outstanding balances of the recourse loan sales totalled $122,264,581
and $127,411,698, respectively. These loans are primarily concentrated in
New York. NCB's exposure to credit loss in the event of nonperformance by the
other parties to the loan is the carrying amounts of the loans up to
$8,348,703. To date NCB has not incurred any losses on these loan sales.
In an unrelated 1993 transaction, NCB sold loans into securities
totalling $25,924,380 of which any losses on the subordinate tranche are
repaid from a security held by NCB totalling $2,720,956 and $2,626,908, at
December 31, 1995 and 1994, respectively. At December 31, 1995 and 1994, the
outstanding balances of the 1993 recourse loan sale was $21,382,078 and
$24,334,574.These loans are primarily concentrated in New York. NCB's expo-
sure to credit loss in the event of nonperformance by the other parties to
the loan is the carrying amounts of the loans up to $2,720,956. To date NCB
has not incurred any losses on these loan sales.
7. Impaired Assets
Loans that became impaired after January 1, 1994 totalled
$2,450,255 and $1,441,327 at December 31, 1995 and 1994,respectively, and
averaged $1,339,000 and $1,374,000 during the same respective periods. The
1995 loans are comprised of nonaccrual loans and a restructured loan total-
ling $1,740,794 and $709,461, respectively. The 1994 loans are comprised of
nonaccrual loans and a restructured loan totalling $722,877 and $718,450,
respectively. A specific allowance of $248,000 and $0 has been set aside for
these loans in 1995 and 1994 , respectively, as management's best estimate of
their fair value is less than the recorded investment of the loans. During
1995 and 1994, the interest collected on the nonaccrual loans was applied to
reduce the outstanding principal. Interest earned on the restructured loan
totalled $54,000 and $57,000 during 1995 and 1994, respectively.
At December 31, 1995, there are no commitments to lend additional
funds to borrowers whose loans are non-performing.
At December 31, 1995 and 1994, NCB had real estate owned of
$1,396,666 and $300,000, respectively, which are classified as other assets.
8. Allowance for Loan Losses
The following is a summary of the activity in the allowance for
loan losses:
1995 1994 1993
Balance at beginning of year $13,031,499 $12,309,359 $10,418,687
Provision for loan losses 1,904,500 878,401 1,703,907
Charge-offs (699,014) (319,592) (252,384)
Recoveries of loans previously
charged off 317,255 163,331 439,149
Balance at end of year $14,554,240 $ 13,031,499 $12,309,359
The allowance for loan losses is 2.5%, 2.6%, and 2.7% of loans and
lease financings at December 31, 1995, 1994, and 1993, respectively.
9. Transactions with Related Parties
Section 103 of the Act, as amended, requires that twelve of the
fifteen members of NCB's Board of Directors be elected by holders of Classes
B and C Stock and that they have actual cooperative experience. NCB stock is,
by law, owned only by borrowers and entities eligible to borrow. The elec-
tion rules require that candidates for the Board of Directors represent co-
operative organizations that currently hold Class B or Class C Stock. NCB
has conflict of interest policies which require, among other things, that a
board member be disassociated from decisions which pose a conflict of inte-
rest or the appearance of a conflict of interest. Loan requests from coopera-
tives with which members of the board may be affiliated are subject to the same
eligibility and credit criteria, as well as the same loan terms and condi-
tions, as all other loan requests.
In addition, NCB through its subsidiary, NCBSB, enters into tran-
sactions in the normal course of business with its directors, officers, and
their family members.
For the year ended December 31, 1995 loans to affiliated coopera-
tives, directors, officers, and their family members have the following
outstanding balances:
January 1, December 31,
1995 Additions Deductions 1995
Loans to affiliated
cooperatives $30,327,980 $33,997,242 $24,963,811 $39,361,411
Loans to directors,
officers, and family
members 821,401 577,211 88,287 1,310,325
$31,149,381 $34,574,453 $25,052,098 $40,671,736
Percent of loans
outstanding 6.2% 6.8%
During 1995, 1994, and 1993 NCB recorded interest income of
$2,957,590, $2,675,104, and $4,009,647 respectively on loans to related parties.
Included in the analysis of loans outstanding to affiliated coope-
ratives as of December 31, 1995 is a $50 million loan to The Co-operative
Central Bank. This loan is serviced by NCB Mortgage Corporation and is 80%
participated to outside banks without recourse to NCB. NCB has adequately
reserved for the $10 million exposure associated with the 20% share it
retained. The loan is secured by US Government guaranteed obligations equal
to 110% of the outstanding balance. The Co-operative Central Bank is an or-
ganization with which an NCB director was formerly affiliated.Said director's
term expired in April 1995 and the related $3million outstanding balance is
included as a deduction to loans to affiliated cooperatives in 1995.
Certain NCB affiliates, and certain directors and officers of NCB
and NCBSB, have deposits with NCBSB. Such deposits, aggregated $3,774,723
and $3,101,247 as of December 31, 1995 and 1994, respectively.
During 1995, NCB extended a $10 million letter of credit to NCBRFC.
The letter of credit provides a credit enhancement in the event of loss on
loans sold by NCBRFC and securitized by a third party. NCB has risk of loss
equal to the amount of funds drawn on the letter of credit. At December 31,
1995, no amounts were drawn on the letter of credit.
10. Premises and Equipment
Premises and equipment as of December 31 consist of the following:
1995 1994
Furniture and equipment $2,617,598 $2,266,851
Leasehold improvements 1,550,812 1,547,096
Other 1,493,722 1,396,178
5,662,132 5,210,125
Less: Accumulated depreciation
and amortization (3,765,353) (3,130,762)
$1,896,779 $2,079,363
11. Leases
NCB leases its headquarters in Washington, D.C. through April 1,
2002. NCB also leases premises for its regional offices with expiration dates
between January 31, 1995 to January 6, 1999. These leases are all non-
cancelable operating leases.
Minimum future rental payments on premises and office equipment
under non-cancelable operating leases having remaining terms in excess of one
year as of December 31, 1995 are as follows:
1996 $1,619,187
1997 1,587,975
1998 1,531,223
1999 1,366,016
2000 1,268,352
2001 and Thereafter 1,585,440
$8,958,193
Rental expense on premises and office equipment in 1995, 1994, and
1993 is $1,744,329, $1,677,412, and $1,669,165, respectively.
During 1992, NCB deferred incentives received in connection with a
new lease for office space. These incentives are being amortized over the ten
year life of the lease. At December 31, 1995 and 1994, the unamortized lease
incentive is $1,296,632 and $1,418,917, respectively.
12. Deposits
Deposits as of December 31 are summarized as follows:
1995 1994
Weighted Weighted
Average Average
Balance Rate Balance Rate
Balances by type
Passbook accounts $ 7,217,986 3.00% $ 3,671,496 3.00%
Money market demand and
NOW accounts 11,211,690 2.50 12,975,248 2.65
Fixed-rate certificates
Less than $100,000 42,008,489 6.04 32,591,552 5.05
More than $100,000 17,662,008 5.60 9,680,253 4.08
$78,100,173 5.15% $58,918,549 4.23%
The contractual maturity of certificate accounts at December 31,
1995 is as follows:
Year Ending December 31 Amount
1996 $35,710,000
1997 19,106,000
1998 3,595,000
1999 1,226,000
2000 and thereafter 33,497
$59,670,497
The estimated fair value of deposits is $77,224,000 and $58,353,000
at December 31, 1995 and 1994, respectively.
13. Short-Term Borrowings
Revolving credit facilities
NCB has $256 million of revolving lines of credit, $120 million of
which are committed until May 30, 1998 and $80 million committed until May
30, 1996. The remaining balance of $56 million is available to NCB based
upon discretion of the lender at December 31, 1995.
Interest expense from borrowings under the revolving line of credit
facilities is $5,004,701, $1,875,744 and $774,657 in 1995, 1994, and 1993,
respectively. The following is a summary of the borrowings under the facili-
ty for the years ended December 31:
1995 1994
Borrowings outstanding
at December 31 $128,000,000 $ 91,000,000
Available capacity
at December 31 128,000,000 100,000,000
Average line of credit borrowings
outstanding during the year 77,704,284 37,711,150
Maximum borrowings during the year 186,000,000 91,000,000
Weighted average borrowing rate
During the year 6.4% 4.9%
At December 31 6.3% 6.2%
Borrowing rates under the revolving credit facility are
indexed off the prime rate, federal funds rate, certificate of deposit rates
or the London Interbank Offered Rate (LIBOR) and vary with the amount of
borrowings outstanding. As of December 31, 1995, commitment fees for the
ine of credit are .20% on $120 million and .125% on $80 million. Total com-
mitment fees paid for revolving credit facilities are $340,000, $458,335, and
$538,630 in 1995, 1994, and 1993, respectively. All borrowings under the fa-
cility which are outstanding at expiration of the facility are due at that
time.
NCB is required under these revolving lines of credit agree-
ments to maintain $25 million of cash, cash equivalents, and investments and
have, among other items, an effective net worth of not less than $265 million
(defined as total members' equity plus subordinated Class A notes). NCB
shall not at any time permit consolidated senior debt to exceed 650% of con-
solidated adjusted net worth.
Other Short-term Debt
In an effort to reduce NCB's cost of funds, NCB developed a
program under which it makes short-term borrowings from certain of its custo-
mers. At December 31, the short-term borrowings outstanding totalled
$4,499,998. During 1995, NCB also entered into a series of reverse repurchase
agreements. The average balance of reverse repurchase agreements outstanding
during 1995 was $19,471,431 and the maximum borrowed during 1995 was
$29,517,612. The weighted average rate on the reverse repurchase agreements
during 1995 was 6.25%. There were no reverse repurchase agreements outstand-
ing at December 31, 1995.
Estimated fair value
The carrying amounts and respective estimated fair values of
short-term borrowings at December 31, 1995 and 1994 are as follows (amounts
in thousands):
Carrying Amount Estimated Fair Value
1995 1994 1995 1994
Line of Credit $128,000 $91,000 $128,018 $90,995
Other 4,500 1,038 4,504 1,039
$132,500 $92,039 $132,522 $92,034
14. Long-term Debt
The following is a schedule of outstanding long-term debt at
December 31, 1995:
Amount Rate Maturity
$ 47,107,429 8.25% 1997
33,000,000 7.90 1998
32,080,616 8.51 2000
30,000,000 7.15 2001
12,500,000 6.60 2002
$154,688,045
NCB has entered into various agreements for extension of credit
with third parties. One agreement, with a major insurance company, provides
NCB with the option to borrow by December 31, 1996, $50 million for terms as
long as 6 years. As of December 31, 1995 , NCB has borrowed $30 million on
this agreement. The majority of the long-term debt has semi-annual term with
principal payments due on a 30/360 basis.
NCB has entered into a series of interest rate swap agreements
which have a combined notional amount of $81 million. The effect of the
agreements is to convert $81 million of the long-term debt from a weighted
average fixed rate of 7.00% to a floating rate based on LIBOR.
The interest rate swap agreements are all tied to the six month
LIBOR rate plus a spread and reprice at different times throughout the year.
At December 31, the six month LIBOR was 5.51%. These agreements expire as
follows:
Maturity
Amount Date
$10,000,000 1997
28,000,000 1997
13,000,000 1998
30,000,000 2001
$81,000,000
NCB is required under these lending agreements to, among other
things, maintain $25 million of cash, cash equivalents and investments and
have an effective net worth of not less than $265 million (defined as total
members' equity plus subordinated Class A notes). NCB shall not at any time
permit consolidated senior debt to exceed 650% of consolidated adjusted net
worth.
The carrying amounts of long-term debt at December 31, 1995 and
1994 are $154,688,045 and $105,356,867, respectively, and the fair values of
the long-term debt are $158,682,000 and $103,191,000 in the same respective
periods.
15. Subordinated Class A Notes
On December 31, 1981, NCB issued unsecured subordinated Class
A notes to the U.S. Treasury (holder) in the amount of $184,270,000 as provi-
ded in the Act, as amended, in full redemption of the Class A Preferred Stock
previously owned by the Government. The notes and all related payments are
subordinated to any secured and unsecured notes and debentures thereafter
issued by NCB, but the notes have first preference with respect to NCB's
assets over all classes of stock issued by NCB. NCB cannot pay any dividend
on any class of stock at a rate greater than the statutory interest rate pay-
able on subordinated Class A notes.
The notes require that proceeds from the sale of Classes B and
C Stock be applied annually toward the repayment of the notes. In 1995 and
1994, no payments were made. In February 1993 and November 1994, NCB adopted
plans to maintain a schedule to ensure accumulation of the funds needed to
repay these notes which mature on October 31, 2020. This involves the creat-
ion of a reserve fund and the issuance of preferred stock or subordinated
debt. Total contributions to the fund, including interest thereon, would
approximate $100 million. The remaining $80 million would be obtained
through the issuance of preferred stock or subordinated debt. As of December
31, 1995 and 1994, NCB had designated investments of $3 million and $2 million,
respectively, for this fund.
The Act states that the amount of NCB borrowings which may be
outstanding at any time shall not exceed 10 times the paid-in capital and
surplus which, as defined by the Act, includes the subordinated Class A notes.
The annual interest payments for each tranche are determined
in accordance with the following schedule which also includes the carrying
amounts and respective estimated fair values of the subordinated Class A
notes at December 31, 1995 (in thousands):
Next Carrying Estimated
Index Rate Repricing Date Amount Fair Value
91-day Treasury rate 5.40% January 1, 1996 $ 53,553 $ 53,553
3-year Treasury rate 4.24 October 1, 1996 36,854 36,566
5-year Treasury rate 6.01 October 1, 2000 55,281 56,627
10-year Treasury rate 8.82 October 1, 2000 36,854 41,839
$182,542 $188,585
NCB has entered into a series of interest rate swap agreements
which have a combined notional amount of $60 million. The effect of the
agreements is to convert $30 million of each of the 5- and 10- year
subordinated Class A notes from a weighted average fixed rate of 7.41% to a
floating rate based on the one month, three month and six month libor which
were 5.69%, 5.63% and 5.51% respectively, at December 31, 1995. The entire
$60 million matures in the year 2000.
16. Common Stock and Members' Equity
NCB's common stock consists of Class B Stock owned by its borrowers,
Class C Stock owned by cooperatives eligible to borrow from NCB, and Class D
non-voting Stock owned by others.
1995 1994
Class B Class C Class D Class B Class C Class D
Par value per share $ 100 $ 100 $ 100 $ 100 $ 100 $ 100
Shares authorized 800,000 300,000 100,000 700,000 300,000 100,000
Shares issued and
outstanding 723,498 217,312 3 678,231 248,446 3
The changes in each class of common stock are described below:
Class B Class C Class D Total
Balance, January 1, 1993 $59,894,353 $20,577,597 $300 $80,472,250
Proceeds from issuance of
of common stock - 100 - 100
Cancellation and redemption
of common stock (223,258) (3,944) - (227,202)
Balance,December 31, 1993 $59,671,095 20,573,753 300 80,245,148
Proceeds from issuance
of common stock 10,000 200 - 10,200
Cancellation and redemption
of common stock (330,841) - - (330,841)
Conversion of allocated
surplus to common stock 8,556,927 4,270,672 - 12,827,599
1994 patronage dividends (84,110) - - (84,110)
Balance,December 31,1994 67,823,071 24,844,625 300 92,667,996
Cancellation and redemption
of common stock (1,135,617) (2,408,962) - (3,544,579)
1994 patronage dividend
distributed in common stock 4,746,618 211,185 - 4,957,803
Reclassification of
stock surplus 915,682 (915,682) - -
Balance,December 31,1995 $72,349,754 $21,731,166 $300 $94,081,220
Members' equity includes the three classes of common stock, alloca-
ted and unallocated retained earnings. Allocated retained earnings have been
designated for patronage dividend distribution, whereas unallocated retained
earnings have not been designated for patronage dividend distribution.
17. Regulatory Capital and Retained Earnings of NCBSB
In connection with the insurance of savings accounts, NCBSB is
required to maintain minimum amounts of regulatory capital. If the savings
bank fails to meet its minimum required capital, the appropriate regulatory
authorities may take such actions, as they deem appropriate, to protect the
Savings Association Insurance Fund (SAIF), the savings bank, and its deposi-
tors and investors. Such actions may include various operating restrictions,
limitations on liability growth, limitations on deposit account interest
rates, and investment restrictions.
NCBSB's capital exceeds the minimum capital requirements at
December 31, 1995. The following table summarizes the NCBSB's capital at
December 31, 1995:
Tangible Core Risk-Based
Capital Capital Capital
NCBSB's regulatory capital $8,474,000 $8,943,000 $9,037,000
Minimum regulatory capital
required 1,310,000 2,620,000 3,630,000
NCBSB's regulatory capital
in excess of minimum
requirement $7,164,000 $6,323,000 $5,407,000
NCBSB's regulatory capital
as a percent of assets 9.70% 10.18% 19.91%
Minimum regulatory capital
required as a percent
of assets 1.50% 3.00% 8.00%
Asset base used for capital
purposes $87,341,000 $87,810,000 $45,378,000
NCBSB's management believes that, under the current regulations,
NCBSB will continue to meet its minimum capital requirements in the foresee-
able future. However, events beyond the control of NCBSB, such as increased
interest rates or a downturn in the economy in areas where NCBSB has most of
its loans, could adversely affect future earnings and, consequently, the abi-
lity of NCBSB to meet its future minimum capital requirements.
The Office of Thrift Supervision (OTS) regulations impose certain
restrictions on NCBSB's payment of dividends. At December 31, 1995, capital
of $3,141,000 is available for cash dividends. Capital unavailable for di-
vidend distribution at December 31, 1995, without the OTS's written consent,
is $6.3 million or 5.3% of NCB's equity.
18. Employee Benefits
Substantially all employees are covered by a non-contributory, de-
fined contribution retirement plan. Total expense for the retirement plan
for 1995, 1994, and 1993 is $329,471, $322,065, and $241,309, respectively.
NCB maintains an employee thrift plan organized under IRS Code
Section 401(k) and contributes up to 6% of each participant's salary. Con-
tributions and expense for 1995, 1994, and 1993 are $275,457, $251,600, and
$234,246, respectively.
19. Income Taxes
Each year under the Act, NCB must declare tax deductible patronage
refunds in the form of cash, stock, or allocated surplus which effectively
reduce NCB's federal income tax to insignificant amounts. In 1995 and 1994,
NCB converted $4,848,218 and $12,844,968, respectively, of allocated surplus
to common stock. In 1996, NCB anticipates that it will declare a patronage
dividend for 1995 of $11,309,000. The anticipated cash portion of the patro-
nage dividend in 1996 of 1995 earnings is shown as dividends payable. The
anticipated stock portion of the patronage dividend in 1996 of 1995 earnings
has been added to allocated retained earnings at December 31, 1995. Patrons
of NCB receiving such patronage dividends consent to include them in their
income.
The provision for income taxes consists of the following:
Year Ended December 31,
1995 1994 1993
Current tax expense
Federal $665,429 $ 602,358 $1,129,171
State and local 19,184 56,234
Total current 684,613 602,358 1,185,405
Deferred tax (expense) benefit
Federal (14,858) 6,242 (351,602)
State and local 107,928 (24,070) 12,195
Total deferred 93,070 (17,828) (339,407)
Total provision $777,683 $ 584,530 $ 845,998
The provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax
rate to pretax income as a result of the following differences:
Year Ended December 31,
1995 1994 1993
Statutory U.S. tax rate $4,510,339 $3,216,873 $3,217,072
Patronage dividends (3,844,910) (2,401,410) (1,970,383)
NOL carryforward (408,000)
State and local taxes 127,112 (169,428) 45,163
Other (14,858) (61,505) (37,854)
Income tax provision $ 777,683 $ 584,530 $ 845,998
Deferred tax assets net of liabilities, included in other assets,
are comprised of the following at December 31, 1995 and 1994:
1995 1994
Deferred commitment fees $103,742 $156,358
Allowance for loan losses 279,017 653,904
Other 77,400 128,016
Gross deferred tax assets 460,159 938,278
Valuation allowance (181,189)
Net deferred tax assets 460,159 757,089
Original issue discount (155,800)
Federal Home Loan Bank stock dividends (32,239) (19,485)
Other (61,574) (33,992)
Gross deferred tax liabilities (93,814) (209,277)
$366,345 $547,812
20. Income Available for Dividends on Stock
Under an existing long-term debt agreement, the aggregate amount of
cash dividends on Class C or Class D Stock, together with patronage dividends
payable in cash, is limited to the sum of $15 million plus 50% of NCB's con-
solidated adjusted net income accumulation (or minus 100% of NCB's consolida-
ted adjusted net income in case of a deficit) from January 1, 1992 through
the end of the most current fiscal year ended. If the aggregate amount of
cash dividends and patronage dividends payable in cash exceeds the limitation
previously described, total patronage dividends payable in cash and cash di-
vidends payable on any calendar year may not exceed 20% of NCB's taxable in-
come for such calendar year.
Notwithstanding the above restriction, NCB is prohibited by law
from paying dividends on its Class C Stock at a rate greater than the statu-
tory interest rate payable on subordinated Class A notes. Those rates for
1995, 1994, and 1993 are 6.3%, 5.4%, and 6.0% respectively. Consequently,
the amounts available for payment on the Class C Stock for 1995, 1994, and
1993 are $1,455,988, $1,552,789 and $1,110,983, respectively. In addition,
under the Act and its bylaws, NCB may not pay dividends on its Class B stock.
21. Financial Instruments with Off-Balance Sheet Risk
NCB is a party to financial instruments with off-balance sheet risk.
NCB uses such instruments in the normal course of business to reduce its own
exposure to fluctuations in interest rates. These financial instruments
include commitments to extend credit, standby letters of credit, interest
rate swaps,forward commitments to sell loans and financial futures contracts.
Those instruments involve, to varying degrees, elements of credit and inte-
rest rate risk in excess of the amount recognized in the balance sheets. The
contract or notional amounts of those instruments reflect the extent of in-
volvement, but not exposure, that NCB has in particular classes of financial
instruments.
NCB's exposure to credit loss in the event of nonperformance by the
other parties to the commitments to extend credit and standby letters of
credit written is represented by the contract or notional amounts of those
instruments. NCB uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. For
interest rate swap transactions, forward commitments, and financial futures
contracts, the contract or notional amounts do not represent exposure to
credit loss. Unless noted otherwise, NCB does not require collateral or
other security to support financial instruments with credit risk.
In the normal course of business, NCB makes loan commitments which
are not reflected in the accompanying financial statements. The commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments general-
ly have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire with-
out being completely drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. NCB evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by NCB upon extension of credit, is based on management's
credit evaluation of the counterparty. Collateral varies but may include
accounts receivable, inventory, property, plant, equipment, residential and
income-producing commercial properties.
Standby letters of credit are conditional commitments by NCB to
guarantee the payment performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers.
The contract or notional amounts and the respective estimated fair
value of NCB's off-balance sheet financial instruments at December 31, are as
follows (amounts in thousands):
Contract of Estimated
Notional Amounts Fair Value
1995 1994 1995 1994
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $149,190 $198,691 $516 $847
Standby letters of credit 69,847 29,600 753 250
Derivative Financial Instruments Held or Issued for Purposes other
than Trading
NCB uses derivative financial instruments in the normal course of
business for the purpose of reducing its own exposure to fluctuations in
interest rates. Existing NCB policies prohibit the use of derivative finan-
cial instruments for any purpose other than managing interest rate risk.
These instruments included interest rate swaps, financial future contracts,
forward commitments, and option-like contracts such as caps, floors, and
collars.
Interest rate swaps are executed to manage the interest rate risk
associated with specific assets or liabilities. An interest rate swap agree-
ment commits each party to make periodic interest payments to the other based
on an agreed-upon fixed rate or floating rate index. There are no exchanges
of principal amounts. Entering into an interest rate swap agreement involves
the risk of default by counterparties and interest rate risk resulting from
unmatched positions. The amounts potentially subject to credit risk are
significantly smaller than the notional amounts of the agreements. NCB is
exposed to credit loss in the event of nonperformance by its counterparties
in the aggregate amount of $8,433,204, representing the estimated cost of
replacing, at current market rates, all outstanding swap agreements.
NCB does not anticipate nonperformance by any of its counterparties. Income
or expense from interest rate swaps is treated as an adjustment to interest
expense/income on the hedged asset or liability.
Financial futures are contracts for delayed delivery of specific
securities at a specified future date and at a specified price or yield. NCB
purchases/sells these contracts to hedge the interest rate risk associated
with originating mortgage loans that will be held for sale. NCB has minimal
credit risk exposure on these financial instruments since changes in market
value of financial futures are settled in cash on the following business day,
and payment is guaranteed by the clearinghouse. Gains and losses from these
contracts are deferred until the time of disposition of the asset or liability.
NCBSB and NCB enter into forward commitments to sell a portion of
their production of loans to Federal National Mortgage Association and Resi-
dential Funding Corporation. The market value of forward commitments is
considered in the lower of cost or market valuation of the loan portfolio
held for sale.
NCB purchases or sells caps, floors, and collars to its customers
in the normal course of business. Caps, floors, and collars are option-like
contracts that provide the holder with benefits of favorable movements in the
price of an underlying asset or index with limited or no exposure to losses from
unfavorable price movements, generally in return for a premium paid at in-
ception by the holder to the issuer. NCB offsets its risks associated with
providing these products to its customers by executing offsetting positions
with other counterparties.
In 1993, NCB entered into a transaction to sell an interest rate
cap in the normal course of business. At December 31, 1995 and 1994, the
notional amount of the cap totalled $1,633,333 and $1,233,333, respectively.
The fair value of the outstanding cap was $3,709 at December 31, 1995. NCB
purchased an offsetting position in February 1994, with a start date of
February 1, 1996.
The contract or notional amounts and the respective estimated fair
value of NCB's off-balance sheet financial instruments at December 31, are as
follows: (amounts in thousands):
Contract or
Notional Amounts Estimated Fair Value
1995 1994 1995 1994
Financial instruments whose notional
or contract amounts exceed the
amount of credit risk:
Forward commitments $ - $ 703 $ - $ 703
Financial futures contracts 53,400 43,900 51,388 43,619
Interest rate swap agreements
In a net receivable position 141,000 116,000 149,438 116,866
In a net payable position (141,000) (116,000)(141,005) (115,758)
At December 31, 1995 and 1994, NCB had deferred gains and (losses)
outstanding on financial futures contracts totalling $15,313 and ($1,347,082)
and $1,075,816 and ($510,459), respectively, which are included in as loans
available for sale. The sale of the related loans is expected to occur in April
1996.
22. Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclo-
sure about Fair Value of Financial Instruments," requires disclosure of fair
value information about financial instruments, whether or not recognized in
the balance sheet, for which it is practicable to estimate that value. In
cases where quoted market prices are not available for identical or compara-
ble instruments, fair values are based on estimates using the present value
of estimated cash flows using a discount rate commensurate with the risks
involved or other valuation techniques. The resultant fair values are
affected by the assumptions used, including the discount rate and estimates
as to the amounts and timing of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to inde-
pendent markets and, accordingly, the fair values may not represent actual
values of the financial instruments that could have been realized as of year
end or that will be realized in the future.
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument for which it is practicable to
estimate that value:
Cash and cash equivalents - The carrying amount approximates fair value.
Investments - Fair values are based on quoted market prices for identical
or comparable securities.
Loans and lease financing - For adjustable rate commercial loans that
reprice frequently and with no significant changes in credit risk, fair
values are based on carrying values. The fair market value of other adjust-
able rate loans is estimated by discounting the future cash flows assuming
that the loans mature on the next repricing date using the rates at which
similar loans would be made to borrowers with similar credit quality and the
same stated maturities. The fair value of fixed rate commercial and of
other loans and leases, excluding loans held for sale, is estimated by
discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit quality and for the same
remaining maturities.
Excess servicing - The fair value of excess servicing is estimated by
discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit quality and the same
stated maturity of the underlying loans for which the excess servicing relates.
Deposit liabilities - The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of deposit is
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates of deposits of similar remaining
maturities.
Short-term and other borrowings - The carrying amounts of the revolving line
of credit balances, advances from the Federal Home Loan Bank and other
borrowings approximate fair value.
Long-term debt - The fair value of long-term debt is estimated by discount-
ing the future cash flows using the current borrowing rates at which similar
types of borrowing arrangements with the same remaining maturities could be
obtained by NCB.
Subordinated Class A notes - The fair value of subordinated Class A notes
is estimated by discounting the future cash flows using the current borrowing
rates at which similar types of borrowing arrangements with the same
remaining maturities could be obtained by NCB.
Interest rate swap agreements - The fair value of interest rate swaps (used
for interest-rate risk management purposes) is the estimated amount that NCB
would receive or pay to terminate the swap agreements at the reporting date,
taking into account current interest rates and the current creditworthiness
of the swap counterparties.
Financial Futures and Forward contracts - The fair value of interest rate
futures is based on the closing price of the Chicago Board of Trade at
December 31, 1995 and 1994. The fair value of forward contracts are based
on current market prices for similar contracts.
Commitments to extend credit, standby letters of credit, and financial
guarantees written - The fair value of commitments is estimated using the
fees currently charged to enter into similar agreements, taking into account
the remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and committed rates. The
fair value of guarantees and letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties at the reporting date.
The estimated fair value of the Bank's financial instruments as of December
31, 1995 are set forth in the notes referenced below:
Cross
Reference
Financial Assets:
Cash and cash equivalents Note 2
Investments Note 3
Excess servicing Note 4
Loans and lease financing Note 5
Financial Liabilities:
Deposits Note 12
Short-term and other borrowings Note 13
Long-term debt Note 14
Subordinated Class A notes Note 15
Off-Balance Sheet Financial Instruments:
Interest rate swap agreements
In a net receivable position Note 21
In a net payable position
Financial futures and
forward contracts Note 21
Commitments to extend credit,
standby letters of credit, and
financial guarantees Note 21
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS,
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERSOF THE REGISTRANT
The directors and executive officers of NCB and the positions held by
each are as follows:
Year First End of
Position Appointed Term Age
Edward J. Dirkswager, Jr. Chairman of the Board of
Directors and Director 1990 1996 57
Charles E. Snyder President and Chief
Executive Officer 1983 - 42
Leo H. Barlow Director 1993 1996 43
Harry J. Bowie Director 1991 1997 60
Joseph A.Cabral Director 1995 1998 47
Pete R. Crear Director 1995 1998 53
Jerry W. Davis Director 1990 1996 56
Thomas D. Henrion Vice Chairman of the Board
of Directors and Director 1991 1997 52
Terry Lewis Director 1991 1997 48
Alfred A. Plamann Director 1995 1998 53
Mary Ann Rothman Director 1993 1996 53
Anthony J. Scallon Director 1995 - 50
Sheila A. Smith Director 1995 - 50
Wally Smith Director 1990 1997 48
Dr. Robert L. Thompson Director 1989 1997 61
Year First End of
Position Appointed Term Age
Caroline Blakely Corporate Vice President,
Real Estate Division
President, NCB Mortgage
Corporation
President and Director,
NCB 1, Inc.
President and Director,
NCB Insurance Brokers, Inc. 1992 - 41
Charles H. Hackman Corporate Vice President,
President and Director,
NCB Financial Corporation
Vice President and Director,
NCB Savings Bank, FSB
Vice President and Director,
NCB Insurance Brokers, Inc. 1984 - 51
Mark W. Hiltz Corporate Vice President,
Special Assets 1982 - 48
Bradford T. Nordholm Corporate Vice President,
Corporate Banking Division
President and Director,
Cooperative Funding Corp.
Vice President and Director,
NCB Investment Advisers, Inc.
President, NCB Retail
Finance Corporation 1984 * 39
Kenneth A. Payton President, NCB Savings
Bank, FSB 1994 - 62
Marlon W. Pickles Corporate Vice President 1985 - 64
* Resigned as of January 1, 1996.
Year First End of
Position Appointed Term Age
Richard L. Reed Senior Vice President and
Chief Financial Officer,
Treasurer, NCB Mortgage
Corporation
Vice President and Director,
NCB Savings Bank, FSB
Vice President, Treasurer and
Director, NCB Investment
Advisers, Inc.
Treasurer, NCB Retail
Finance Corporation 1985 - 37
Barry W. Silver Corporate Vice President,
Credit Policy
Vice President and Director,
NCB Saving Bank, FSB 1992 - 49
Terry D. Simonette President, NCB Development
Corporation 1991 - 46
Nominees For Directorships
Leo H. Barlow
James L. Burns
David I. Ferber
Marilyn J. McQuaide
J. Christopher Michael
Mary Ann Rothman
Edward Yaker
Edward J. Dirkswager, Jr. is a Principal at Partners Consulting
Group, Ltd. since 1993. He was formerly the Chief Executive Officer of LAMAT,
Inc. in 1992 and was an officer of Group Health, Inc. in Minneapolis from
1983-1991.
Charles E. Snyder was named President and Chief Executive Officer of
NCB in January 1992. He had been Corporate Vice President and Chief Financial
Officer of NCB since 1983 to December 1991.
Leo H. Barlow has been President & Chief Executive Officer of Sealaska
Corporation since August 1, 1992. In 1990, he was President & Chief Executive
Officer of Sealaska Timber Corporation.
Harry J. Bowie is the President and Chief Executive Officer of Delta
Foundation, Inc. a community development corporation located in Greenville,
Mississippi since 1986. He has also served as a Director of the Southern
Regional Council located in Atlanta and the Housing Assistance Council
located in Washington, D.C.
Joseph A. Cabral has been the President and Chairman of the Board of
Chatsworth Products, Inc. since its inception in June 1991. He also serves
as President of the California chapter of the ESOP Association and a member
of the Executive Board of the ESOP Association State/Regional Council. Prior
to June 1991, he was associated with Arthur Andersen & Co.
Pete Crear is the acting President of Credit Union National Asso-
ciation, Inc (CUNA) effective December 1995. Prior to that he was the
Executive Vice President and Chief Staff Officer since 1990. Previously, he
was the President and Chief Executive Officer of the Indiana Credit Union
League from 1988 to 1990. He also served as President of the Connecticut
Credit Union League, Vice President of Information and Technical Services
for the Michigan Credit Union League and Chairman of the League Service
Development Committee of the Association of Credit Union League Executives.
Jerry W. Davis has been President and Chief Operating Officer of
Affiliated Foods Southwest, Inc., Little Rock and Van Buren, Arkansas, since
1986. In 1988, he became Chairman of the Board of Shurfine-Central
Corporation and President of the Retailer Owned Food Distributors
Association.
Thomas D. Henrion has been President and Chief Operating Officer of
the Food Servicing Purchasing Cooperative, Inc., Louisville, Kentucky since
1980. He also serves as President and Chief Executive Officer of KFC Mutual
Insurance Company, Ltd., Hamilton, Bermuda.
Terry Lewis has been practicing law in Michigan since 1982. She was
also the President of the National Association of Housing Cooperatives (NAHC)
from 1987 to October 1995. Since November 1995, she chairs the legislation
and government relation's committee of NAHC.
Alfred A. Plamann is the President and Chief Executive Officer of
Certified Grocers of California, Ltd. since 1994. He was the Senior Vice
President and Chief Financial Officer of Certified Grocers from 1989 to 1993.
He has served in an executive capacity with Atlantic Richfield Co. (ARCO) and
has served on the board of directors of several of the cooperative's
subsidiaries. Additionally, he has served on the Board of Directors of the
National American Wholesale Grocers Association (NAWGA) and the California
Grocer's Association (CGA), and has been a member of the Industry Relations
Committee of the Food Marketing Institute (FMI).
Mary Ann Rothman is Executive Director of the Council of New York
Cooperatives since 1980. She also serves on the executive committee of the
National Association of Housing Cooperatives.
Anthony J. Scallon is Chairman of the Board of Directors, Federal
Home Loan Bank of Des Moines since 1994. He is also a Vocational Coordinator,
Independent School District # 197, West St. Paul, Minnesota from 1994 to
present time. He was elected as Minneapolis City Council Member in 1979 and
served until 1993.
Sheila A. Smith is President and Chief Operating Officer of Advanced
Rubber Concept Inc., (ARC) since 1979. In addition to her position at ARC,
she is also President of GRC Industries and Vice President of TQS Group Inc.
Wally Smith is President and Chief Executive Officer and member of
the Board of Directors of Recreational Equipment, Inc., Seattle, Washington
since 1983. He also serves as Chairman of the Board of Independent Colleges of
Washington.
Dr. Robert L. Thompson is President and Chief Executive Officer of
Winrock International starting July 1993 to present time. Previously, he was
Dean of Agriculture, Purdue University from 1987 to 1993.
Caroline E. Blakely became a Corporate Vice President, Real Estate
Division in 1994. She was formerly a Senior Vice President from 1993 to 1994
and a Vice President from 1992 to 1993. Previously, she was a shareholder
and attorney in Fields and Director, PC with a practice in corporate and real
estate law from 1991 to 1992 and was a shareholder and attorney with Golden
Freda & Schraub, PC with a practice in corporate and real estate law from
1985 to 1991.
Charles H. Hackman is a Corporate Vice President with NCB. He was
formerly Corporate Vice President and Chief Financial Officer from 1992 to
1994. He was Corporate Vice President, Credit Policy, of NCB since 1984, and
President of NCB Financial Corporation since its inception in 1988.
Previously, he was Vice President, Credit Administration of Equitable Bank,
N.A., Baltimore.
Mark W. Hiltz became Corporate Vice President and Manager of Special
Assets in 1994. He was Senior Vice President of the Special Assets Division
since 1986. Previously he was Vice President of Loan Administration since
1983 to 1986 and General Auditor from 1982 to 1983.
Bradford T. Nordholm has been Corporate Vice President, Corporate
Banking Division, since 1988 and President of NCB Business Credit Corpo-
ration since 1990. Prior to that he was Senior Vice President of NCB from
1985 to 1988 and was a Vice President from 1984 to 1985. In addition, Mr.
Nordholm was President of NCB Mortgage Corporation from 1987 to 1991.
Previously, he was Manager, Corporate Finance, of Interregional Service
Corporation.
Kenneth A. Payton was named President and Chief Executive Officer
of NCB Savings Bank, FSB in 1994. Previously, he was the President and CEO of
Citizens Savings Bank Co. in 1992. He has served in various executive
capacities at Fifth Third Bank from 1986 to 1992 before being promoted to
President and CEO of Fifth Third Trust Co. and Saving Bank, FSB, Florida.
Marlon W.Pickles has been Corporate Vice President,Special Assets, of
NCB since 1985. Previously, he was a self employed management consultant to
financial institutions, primarily in the area of loan workouts.
Richard L. Reed was named Senior Vice President and Chief Financial
Officer in 1994. Prior to that, he was Vice President and Treasurer from
1992 to 1994. He was Vice President, Treasury from 1989 to 1992.
Barry W. Silver has been Corporate Vice President, Credit Policy,
of NCB since January, 1993 and Senior Vice President, Credit Policy of NCB from
January, 1992 to January, 1993. Previously, he served as a senior lending
officer for NCB since 1980 to 1992.
Terry D. Simonette has been the President and Chief Operating
Officer of NCB Development Corporation since 1992. From 1984 to 1991, he
served as Vice President of NCB Development Corporation.
Nominees for Directorships
Leo H. Barlow has been President and Chief Executive Officr of
Sealaska Corporation since August 1, 1992. In 1990, he was President and Chief
Executive Officer of Sealaska Timber Corporation.
James L. Burns is the President and Chief Executive Officer of The
Co- operative Central Bank since 1972. He is also the President and Chief
Exectuve Officer of Co-operative Investment Fund since 1984. In addition,
he has served as a consultant to the Australian government and the Australian
and New Zealand banking industry.
David I. Ferber is the President of 40 Fifth Avenue Corporation since
1983 and previously served on the board of Village Community School and
chaired committees for them. He also served as general counsel to 186
Riverside Corporation and 67 Park Owners.
Marilyn McQuaide is Senior Vice President and Senior Operations
Officer of Vermont National Bank since 1989. She was a Vice President and
also served on the board of Northeast Cooperatives.
J.Christopher Michael is the President and Chief Executive Officer of
Associated Wholesalers, Inc. since 1990. He also served on the Board of
Directors of Shurfine Eastern, Inc. and currently holds the position of
President and Chairman of the Board.
Mary Ann Rothman is Executive Director of the Council of New York
Cooperatives since 1980. She also serves on the executive committee of the
National Association of Housing Cooperatives.
Edward Yaker is the President and Chairman of the Board of the
Amalgamated Housing Corporation in Bronx, New York since 1984. He also
served as co-chair of the executive committee for the Coordinating Council
of Cooperatives.
COMPOSITION OF BOARD OF DIRECTORS
The Act provides that the Board of Directors of NCB shall
consist of 15 persons serving three-year terms. An officer of NCB may not
also serve as a director. The President of the United States is authorized
to appoint three directors with the advice and consent of the Senate. Of the
Presidential appointees, one must be selected from among proprietors of small
business concerns which are manufacturers or retailers; one must be selected
from among the officers of the agencies and departments of the United States;
and one must be selected from among persons having extensive experience
representing low-income cooperatives eligible to borrow from NCB. Sheila A.
Smith is the Presidential appointee from among proprietors of small business
concerns. There is a vacancy for the Presidential appointee from among the
officers of U.S. agencies and departments. Anthony J. Scallon is the
Presidential appointee from among persons representing low-income
cooperatives.
The remaining 12 directors are elected by the holders of Class B and
Class C stock. Under the bylaws of NCB, each stockholder-elected director
must have at least three years experience as a director or senior officer of
the class of cooperatives which he or she represents. The five classes of
cooperatives are: (a) housing, (b) consumer goods, (c) low-income
cooperatives, (d) consumer services, and (e) all other eligible cooperatives.
At all times each class must have at least one, but not more than three,
directors representing it on the Board.
Only holders of NCB's Class B and Class C stock have voting rights,
and they vote as one class under the terms of the weighted voting system adopted
by NCB to comply with the Act. The NCB by-laws and voting policy provide
that (a) each stockholder of record who is also a borrower from NCB (a
"borrower-stockholder") is entitled to five votes, (2) each borrower-
stockholder is entitled to additional votes, up to a total of 120, based on
a formula measuring the proportion that such borrower-stockholder's patronage
with NCB bears to the total patronage during a period of time fixed by the
election rules, and (3) each stockholder who is not a borrower from NCB shall
receive one vote, and non-borrower stockholders as a class shall receive at
least 10% of the votes allocated.
The by-laws and voting policy further provide that, notwithstanding
any allocations of votes which would otherwise result from the foregoing rules
(1) no stockholder shall be entitled to more than 5% of the total voting
control held by all stockholders, (2) the total votes allocated to any class
of cooperatives shall not exceed 45% of the total, and (3) no stockholder
which is a "developing cooperative" shall be entitled to more than five
votes. A developing cooperative is defined as a cooperative that is in a
developmental or fledgling state of operation and that does not have members
who are ultimate consumers or primary consumers.
NCB has reserved the right to alter its voting policy at any time to
comply with the requirement of the Act that its voting system should not
result in: (1) voting control of NCB becoming concentrated with larger, more
affluent or smaller, less affluent organizations, (2) a disproportionate
concentration of votes in any housing cooperatives or low-income cooperatives
or consumer goods and services cooperatives, or (3) the concentration of more
than 5% of the voting control in any one Class B or Class C stockholder.
NCB may refuse to honor any stockholder's voting rights, except to
the extent of one vote, if the stockholder is more than 90 days late on any
payment to NCB at the time such rights would otherwise be exercised.
Committees of the Board
The Board of Directors directs the management of NCB and
establishes the policies of NCB governing its funding, lending, and other
business operations. In this regard, the Board has established a number of
committees, including Executive, Loan and Business Development, Finance,
Audit, Low Income Policy, and Strategic Planning and Nominating Committees.
The Executive Committee is responsible for exercising all powers
of the Board of Directors when waiting for the next regular meeting will
adversely affect the best interest of NCB. It also reviews and recommends
CEO's annual compensation and benefit plans, authorizes contracts in excess
of $100,000, recommends to the board rules and procedures governing the
board, reviews and recommends policies or actions not within the authority
of any other committee, serves as the appeal authority for loan turn-down,
recommends to the board appointment of representatives to other boards where
NCB is entitled to such representation and approves exceptions to policies not
within the authority of another committee. The members of the committee are
Leo H. Barlow, Harry J. Bowie, Edward J. Dirkswager, Jr.(Chair), Thomas D.
Henrion, Terry Lewis, Wally Smith and Robert L.Thompson.
The Loan and Business Development Committee is responsible for
providing policy to management and for monitoring the lending, fee for
service and business development efforts of NCB and its subsidiaries,
consistent with the board's approved strategic plan. The members of the
committee are Harry J. Bowie, Jerry W. Davis, Terry Lewis, Alfred A.Plamann,
Mary Ann Rothman, Anthony J. Scallon and Wally Smith(Chair).
The Finance Committee is responsible for monitoring NCB's financial
planning, budgeting process, asset liability management and funding
strategies for the Bank. The members of the committee are Leo H. Barlow,
Joseph A. Cabral, Pete Crear, Edward J. Dirkswager, Jr., Thomas D. Henrion,
Sheila A. Smith and Robert L. Thompson(Chair).
The Audit Committee shall assist the Board of Directors in
fulfilling its statutory and fiduciary responsibilities for NCB and its
subsidiaries and affiliate by overseeing all examinations and audits,
monitoring all accounting and financial reporting practices, determining that
there are adequate administrative and internal accounting controls and
assuring that NCB and its subsidiaries and affiliate are operating within
prescribed policies and procedures and in conformance with the applicable
conflict of interest policies. The members of the Committee are Leo H.
Barlow(Chair), Joseph A. Cabral, Pete Crear, Edward J. Dirkswager, Jr.,
Sheila A. Smith and Robert L. Thompson.
The Low Income Policy Committee is responsible for evaluating
NCB's best efforts to achieve 35% of loans outstanding to low income coopera-
tives in accordance with established policies and for recommending to
management ways NCB can increase low income lending. The members of the
committee are Harry J. Bowie(Chair), Jerry W. Davis, Terry Lewis, Alfred A.
Plamann, Mary Ann Rothman and Anthony J. Scallon.
The Strategic Planning Committee monitors and reviews all NCB
related entities' planning activities delegated to them by the board. The
member of the committee are Leo H. Barlow, Harry J. Bowie, Joseph A. Cabral,
Pete Crear, Jerry W. Davis, Edward J. Dirkswager, Jr., Thomas D. Henrion
(Chair),Terry Lewis, Alfred A. Plamann, Mary Ann Rothman, Anthony J. Scallon,
Sheila A. Smith, Wally Smith and Robert L. Thompson.
The Nominating Committee annually oversees the election for NCB
directors. The committee also periodically drafts election rules on behalf
of the Board of Directors. The members of the committee are Harry J. Bowie,
Joseph A. Cabral, Pete Crear, Jerry W. Davis, Edward J. Dirkswager, Jr.,
Thomas D. Henrion(Chair), Terry Lewis, Alfred A. Plamann, Anthony J. Scallon,
Sheila A. Smith, Wally Smith and Robert L. Thompson.<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF THE OFFICERS
The following table sets forth the compensation during the three
fiscal years of NCB's Chief Executive Officer and its four other most highly
compensated executive officers.
All Other
Annual Compensation Compensation
(a) (b) (c) (d) (e)
Name and
Principal Position Year Salary Bonus
Charles E. Snyder, 1995 $275,534 $86,450 $19,320
President & CEO 1994 260,000 64,530 23,264
1993 212,500 47,812 21,507
Bradford T. Nordholm, 1995 180,982 60,655 19,320
CVP, Banking 1994 173,300 55,600 21,691
1993 165,000 33,000 20,259
Charles H. Hackman, 1995 175,147 52,920 19,320
CVP 1994 168,000 51,180 21,345
1993 160,000 36,000 19,183
Caroline Blakely, 1995 138,130 44,750 17,669
CVP, Real Estate 1994 108,531 58,800 13,796
Barry Silver, 1995 129,787 29,541 16,630
CVP, Credit Policy 1994 121,489 33,400 16,335
* The "All Other Compensation" reported for 1995 consists of NCB's
contributions to the defined contribution retirement plan accounts of the
named officers, NCB's matching contributions to the 401 (k) plan accounts of
the named officers, and NCB's payments of term insurance premiums for the
named officers as follows:
Retirement Plan Matching 401(k) Term Insurance
Contribution Contribution Premiums
Mr. Snyder $9,000 $9,000 $1,320
Mr. Nordholm 9,000 9,000 1,320
Mr. Hackman 9,000 9,000 1,320
Ms. Blakely 8,288 8,288 1,093
Mr. Silver 7,800 7,800 1,030
NCB has entered into a severance agreement with Charles E. Snyder, which
provides for certain payments to Mr. Snyder if his employment as NCB's
President and Chief Executive Officer terminates other than for cause or as
a result of his unilateral voluntary resignation. The agreement provides
that, for 90 days after NCB gives notice of Mr. Snyder's termination, he is
to receive his full salary as in effect at the time notice is given (or his
prior salary if it had been reduced in the 30 days prior to such notice ) as
well as continued accrual of vacation and sick leave benefits; and continued
medical, dental, life insurance and pension benefits. Following such 90 day
period, Mr. Snyder is entitled to receive payments of $11,000 per month for
an additional nine months. If, prior to the conclusion of payments under the
agreement, Mr. Snyder obtained a new executive position with another firm,
payments under the agreement would be terminated or reduced.
NCB has also entered into a deferred compensation agreement with Mr.
Snyder. Under the agreement, Mr. Snyder may elect to defer receipt of a
portion of his annual compensation until after his retirement or termination
of employment. Interest on deferred amounts will be credited at a rate of
100 basis points above that of a five year U.S. Treasury Note, with such rate
to be adjusted and compounded quarterly, or at such rate as NCB may obtain
in an interest-earning, federally-insured deposit account.
COMPENSATION OF THE BOARD
Under the Act, directors appointed by the President from among
proprietors of small businesses and from persons with experience in
low-income cooperatives, are entitled to (1) compensation at the daily
equivalent of the compensation of a GS18 civil servant which amounted in 1995
to $387.36 a day, and (2) travel expenses. Typically, they receive
compensation for no more than nine days a year. Directors elected by
shareholders are entitled to (1) annual compensation of $7,000, (2) $1,000
for the chairman of each committee, (3) $1,000 for each board meeting
attended, (4) $250 for each committee meeting attended, and (5) travel
expenses. The Chairman of the Board is entitled to an additional $8,000 in
compensation in addition to the above amounts. Directors of subsidiary
corporations are entitled to (1) $500 for each board meeting attended when
not held in conjunction with NCB board meetings and (2) travel expenses.
Mr. Frank Sollars, whose term as a director expired in July 1995, was
eligible for reimbursement of additional travel expenses up to $7,000
incurred while attending functions or conducting business related to
cooperative business as an official representative of NCB.
NCB entered into deferred compensation agreements with former
directors Gordon E. Lindquist and Jeremiah J. Foley dated June 1, 1991 and
April 20, 1992, respectively. Under the terms of the agreement, fees
payable to Messrs. Lindquist and Foley for their services as Directors of
NCB could be deferred at their option until retirement from the Board.
Interest will be credited, compounded quarterly, at an annual rate equal to
the yield on a 91 day US Treasury Bill plus 50 basis points adjusted quarter
ly. Both of them served on the board until April 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Stock Ownership of Certain Stockholders and Management
Several of NCB's stockholders own in excess of 5 percent of the
outstanding shares of NCB's Class B or Class C stock. The shareholders
purchased a portion of this stock in connection with sizable loans made by
NCB to them and received a portion of the stock as patronage dividends from
NCB. NCB's voting policy, however, does not allocate voting rights solely
based on the number of shares of Class B or Class C stock held and prohibits
any one stockholder from being allocated more than five percent of the votes
allocated in connection with any stockholder action.
The following table shows those cooperatives which owned more than 5
percent of NCB's Class B or Class C stock as of December 31, 1995.
Class B Stock Class C Stock
Name and Addresses of No. of Percent No. of Percent
Shareholders Shares of Class Shares of Class
Co-operative Central Bank 30,500.00 4.22% 27,952.77 12.86%
265 Franklin Street
Boston, MA. 92110
Greenbelt Homes Inc 14,424.28 1.99% 29,383.36 13.52%
Hamilton Place
Greenbelt, MD. 20770
Group Health, Inc (1) 11,200.21 1.55% 14,249.60 6.56%
2829 Univ. Ave., S.E.
Minneapolis, MN 55414
(1) The holdings of Group Health, Inc. (GHI) include 2,442.24
shares and 2,769.48 shares of Class B and C stock,respectively, held of
record by Central Minnesota Group Health Plan which is affiliated to GHI. GHI
disclaims beneficial ownership of these shares.
Because the Act restricts ownership of NCB's Class B and Class C stock
to eligible cooperatives, NCB's officers and directors do not own any Class
B or Class C stock, although cooperatives with which they are affiliated may
own such stock.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Certain Transactions
The following table sets forth information concerning certain
transactions by which NCB and its subsidiaries have made loans or leases to
organizations with which NCB directors or executive officers are affiliated.
The first column lists the name of the director or executive officer who is
related with the loan or lease recipient. The second column sets forth the
name of the organization to which the loan or lease was made. (Loans labeled
as "personal" were made to the named director or officer). The last three
columns list loan balances and interest rates as of the specified dates. The
text following the table further describes the nature of the transactions set
forth in the table.
The following loans and leases were made in the ordinary course
of NCB's business on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons and did not involve more than the normal risk of
uncollectability or present other unfavorable features.
National Cooperative Bank
Largest Interest
Balance Balance as Rate as
in of of
Related Party 1995 12/31/95 12/31/95
Leo H. Barlow Sealaska Timber Corp 13,000,000 11,960,188 9.18%
Sealaska Corp 2,317,467 2,000,932 9.40%
Sealaska Corp 4,300,000 0
Joseph A. Cabral Chatsworth Products 500,000 500,000 9.25%
Chatsworth Products 1,000,000 550,000 9.25%
Chatsworth Products 752,400 556,600 9.25%
Chatsworth Products 1,337,045 1,294,453 9.25%
Pete Crear CUNA Service Group 13,500,000 4,500,000 7.88%
CUNA Service Group 4,925,000 4,863,440 9.38%
Jerry W. Davis Affiliated Food and
Drug 546,698 466,904 10.00%
Affiliated Food, Inc. 1,157,710 0
Affiliated Food, Inc. 5,000,000 5,000,000 7.94%
Affiliated Food, Inc 713,539 713,539 8.38%
Kenyan Enterprises 258,152 140,507 9.38%
Kenyan Enterprises 943,959 886,459 9.50%
Kenyan Enterprises 410,870 274,928 9.37%
Ralph's Fine Food 366,799 290,068 10.00%
John Cox Company 280,788 244,658 10.00%
Buy Rite Food 499,660 304,863 9.07%
Don Huckaby, Inc. 476,028 0
Fisers, Inc. 304,943 217,207 7.75%
Thomas Henrion Food Service Purchasing
Cooperative, Inc. 175,605 63,451 9.55% -
11.00%
Alfred A.Plamann Certified Grocers of CA. 367,677 314,966 lease
Mary Ann Rothman 110- 118 Riverside
Tenants 3,074,056 3,074,056 9.75%
Barry S. Silver International Town and
Country 701,169 474,192 10.50%
Charles H.Hackman Watergate South 670,000 670,000 9.75%
Nominees for Directorship
James L. Burns Coop. Central Bank 3,000,000 3,000,000 6.50%
J. Christopher Michael Associated Wholesalers
Dutch's Market 472,500 463,750 9.44%
Graceton Store, Inc. 344,167 274,167 9.50%
Graceton Store, Inc. 829,417 729,417 9.50%
Gerrity's Supermarket 2,200,000 2,200,000 10.25%
NCB Savings Bank, FSB
Charles H. Hackman Personal 154,005 121,509 7.00%
NCB has two loans outstanding with Sealaska Corporation of
which Mr. Barlow is President and Chief Executive Officer. The first loan
was used to refinance a real estate term loan and the second loan was a line
of credit to provide working capital financing. In addition, NCB has a $13
million loan participation with National Bank of Alaska to acquire timber.
NCB has one term loan and three lines of credit outstanding to
Chatsworth Products, Inc. of which Mr. Cabral is the President. The term
loan was used to facilitate an Employee Stock Ownership Purchase. Two of the
lines of credit are used for the purchase of machinery and equipment and
are termed out after the initial draw periods. The revolving line of credit
is used for working capital financing.
NCB has a line of credit and term loan to CUNA Service Group of
which Mr. Crear is the Acting President and Executive Vice President and
Chief Staff Officer. The line of credit is used for working capital purposes.
The term loan was used for building construction and is secured by the building.
NCB has one loan and a line of credit outstanding to Affiliated
Foods Southwest, Inc. of which Mr. Davis is President and Chief Operating
Officer. One loan was used to refinance a previous loan. The line of credit
is used for working capital purposes. Affiliated Foods Southwest is the
guarantor of certain loans held by NCB which are listed in the above
schedule. The loans were made to members of the Affiliated Foods Southwest,
Inc. for working capital and purchases of inventory.
NCB has one line of credit with Food Service Purchasing Coope-
rative, Inc. of which Mr. Henrion is the President and Chief Executive
Officer. The line of credit is used for working capital purposes.
NCB has an equipment lease outstanding to Certified Grocers of
California of which Mr. Plamann is the President and Chief Executive Officer.
NCB has a line of credit outstanding to 110-118 Riverside Tenants
Cooperative of which Ms. Rothman is a member. The line of credit is used to
fund capital improvements for the housing cooperative.
Mr. Hackman, an officer of NCB, is a member of the Board of
Watergate South, Inc. The purpose of the loan was for capital improvements
to the property.
Mr. Silver, an officer of NCB, is a member of the International
Town and Country Club. This loan predates Mr. Silver's membership in the club.
NCB has a $10 million participation in a $50 million revolving
line of credit outstanding to the Co-operative Central Bank of which Mr.
Burns is the President and Chief Executive Officer.
NCB has loans outstanding to members of Associated Wholesalers,
Inc. (AWI) of which Mr. Michael is the Chief Executive Officer. Associated
Wholesalers, Inc. is a partial guarantor on four loans listed in the above
schedule. The guarantees on the above loans range from 10% to 25%. The loans
are used for equipment and inventory purchases and to acquire new and/or
renovate stores.
In its normal course of business, NCB Savings Bank makes loans to
employees at competitive market rates. NCB Savings Bank has issued a home
mortgage loan to Charles Hackman.
NCB believes that the foregoing transactions contain terms
comparable to those obtainable in an arm's length transaction.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a)(1) The following financial statements are filed as a part of this
report.
Financial Statements as of December 31, 1993, 1994, and 1995.
Page #
19 Consolidated Balance Sheets
20 Consolidated Statements of Income
21 Consolidated Statements of Changes in Members' Equity
22-23 Consolidated Statements of Cash Flows
24-46 Notes to the Consolidated Financial Statements
47 Report of Independent Accountants
(a)(2) Not applicable
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements, or the notes
thereto.
(a)(3)The following exhibits are filed as a part of this report.
Exhibit No.
(a) 3.1 National Consumer Cooperative Bank Act, as amended
through 1981.
(c) 3.2 1989 Amendment to National Consumer Cooperative Bank
Act.
(g) 3.3 Bylaws of NCB
(h) 4.1 Election Rules of the NCB. For other instruments
defining the rights of security holders, see Exhibits
3.1 and 3.2.
(i) 4.2 Form of Assumption Agreements and Amended and Restated
Senior Note Agreements
(i) 4.3 Schedule Concerning Senior Note Agreements
Exhibit No.
(i) 10.1 Second Amended and Restated Loan Agreement with
National Westminster Bank USA et al.
*(h) 10.2 Deferred Compensation Agreement with Jeremiah J.
Foley
*(k) 10.3 Deferred Compensation Agreement with Charles E.
Snyder
*(g) 10.4 Severance Agreement with Charles E. Snyder
*(l) 10.5 Incentive Plan for NCB Executive Officers
*(a) 10.6 Insurance Plan for NCB Executive Officers
(b) 10.7 Subordination Agreement with Consumer Cooperative
Development Corporation (now NCB Development
Corporation)
*(j) 10.8 First Amendment to Deferred Compensation Agreement
with Jeremiah J. Foley
(k) 10.11 Amendment No. 1 to Second Amended and Restated Loan
Agreement
with National Westminster Bank, USA et al.
(e) 10.12 Lease on Headquarters of NCB
(k) 10.13 Note Purchase Agreement with Lutheran Brotherhood
et al.
*(h) 10.14 Employment Agreement with Marlon W. Pickles
(k) 10.15 Master Shelf Agreement with Prudential Insurance
Co. of America et al.
(c) 10.16 Financing Agreement with U.S. Treasury.
(k) 10.17 Term Loan Agreement with Credit Suisse ( Nov. 1994)
(k) 10.18 Term Loan Agreement with Credit Suisse ( Feb. 1995)
(l) 10.19 Amendment No. 2 to the Second Amended and Restated
Loan Agreement with Natwest Bank et al.
(1) 10.20 Term Loan Agreement with Credit Suisse (Sept. 1995)
Exhibit No.
*(e) 10.21 Deferred Compensation Agreement with Gordon E.
Lindquist
(l) 10.22 Senior Note Agreement (Dec. 1995)
(l) 10.23 Term Loan Agreement with Comerica Bank (Dec. 1995)
(l) 22.1 List of Subsidiaries and Affiliates of the NCB
(l) 25.1 Power of Attorney by Joseph Cabral
(i) 25.2 Power of Attorney by Leo Barlow
(d) 25.3 Power of Attorney by Jerry W. Davis
(f) 25.4 Power of Attorney by Harry J. Bowie
(f) 25.5 Power of Attorney by Thomas D. Henrion
(i) 25.6 Power of Attorney by Pete Crear
(i) 25.7 Power of Attorney by Mary Ann Rothman
(d) 25.8 Power of Attorney by Edward J. Dirkswager, Jr.
(d) 25.9 Power of Attorney by Wally Smith
(f) 25.10 Power of Attorney by Terry Lewis
(l) 25.11 Power of Attorney by Alfred A. Plamann
(l) 25.12 Power of Attorney by Anthony J. Scallon
(l) 25.13 Power of Attorney by Sheila A. Smith
(d) 25.14 Power of Attorney by Robert L. Thompson
(l) 27 Financial Data Schedule
* Exhibits marked with an asterisk are management contracts or
compensatory plans.
(a) Incorporated by reference to the exhibit of the same number filed as
part of Registration Statement No. 2-99779 (Filed August 20, 1985).
(b) Incorporated by reference to the exhibit of the same number filed as
part of Amendment No. 1 to Registration Statement No. 2-99779 (Filed
May 7,1986).
(c) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's annual report on Form 10-K for the year ended
December 31, 1989 (File No. 2-99779).
(d) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's annual report on Form 10-K for the year ended
December 31, 1990 (File No. 2-99779).
(e) Incorporated by reference to the exhibit of the same number filed as
part of Registration Statement No. 33-42403 ( filed September 6, 1991 ).
(f) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's annual report on Form 10-K for the year ended
December 31, 1991(File No. 2-99779).
(g) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's quarterly report on Form 10-Q for the three
months ended June 30, 1992 (File No. 2-99779).
(h) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's annual report on Form 10-K for the year ended
December 31, 1992 (File No. 2-99779).
(i) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's annual report on Form 10-K for the year ended
December 31, 1993 (File No. 2-99779).
(j) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's quarterly report on Form 10-Q for the three
months ended September 30, 1994 (File No. 2-99779).
(k) Incorporated by reference to the exhibit of the same number filed as
part of the registrant's annual report on Form 10-K for the year ended
December 31, 1994 (File No. 2-99779).
(l) Filed herewith.
(b) The Registrant did not file any reports on Form 8-K during the last
quarter of 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf of the undersigned, thereunto duly authorized.
NATIONAL CONSUMER COOPERATIVE BANK
DATE March 31, 1996 BY/s/Charles E. Snyder
Charles E. Snyder
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates noted:
Signature Title Date
*/s/Edward J. Dirkswager, Jr Chairman of the Board and 3/31/96
Edward J. Dirkswager, Jr. Director
/s/Richard L. Reed Senior Vice President 3/31/96
Richard L. Reed (Principal Financial Officer)
/s/Marietta J. Orcino Vice President,Tax & 3/31/96
Marietta J. Orcino Regulatory Compliance and an
Authorized Representative
/s/Patricia A. Ferrick Vice President (Principal 3/31/96
Patricia A. Ferrick Accounting Officer)
*/s/Leo H. Barlow Director 3/31/96
Leo H. Barlow
*/s/Harry J. Bowie Director 3/31/96
Harry J. Bowie
*/s/Joseph A. Cabral Director 3/31/96
Joseph A. Cabral
Signature Title Date
*/s/Pete Crear Director 3/31/96
Pete Crear
*/s/Jerry W. Davis Director 3/31/96
Jerry W. Davis
*/s/Thomas D. Henrion Director 3/31/96
Thomas D. Henrion
*/s/Terry Lewis Director 3/31/96
Terry Lewis
*/s/Alfred A. Plamann Director 3/31/96
Alfred A. Plamann
*/s/Mary Ann Rothman Director 3/31/96
Mary Ann Rothman
*/s/Anthony J. Scallon Director 3/31/96
Anthony J. Scallon
*/s/Sheila A.Smith Director 3/31/96
Sheila A. Smith
*/s/Wally Smith Director 3/31/96
Wally Smith
*/s/Dr. Robert L. Thompson Director 3/31/96
Robert L. Thompson
* By /s/Richard L.Reed
Richard L. Reed
(Attorney-in-Fact)
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
With this report, the registrant is furnishing to the Commission for its
information the registrant's proxy materials for its 1996 annual meeting and the
registrant's annual report to securityholders.
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
10.5 Incentive Plan for NCB Executive Officers
10.19 Amendment No. 2 to the Second Amended and Restated Loan
Agreement with National Westminster Bank, USA et al.
10.20 Term Loan Agreement with Credit Suisse (Sept. 1995)
10.22 Senior Note Agreements (Dec. 1995)
10.23 Term Loan Agreement with Comerica Bank (Dec. 1995)
22.1 List of Subsidiaries and Affiliates of NCB
25.1 Power of Attorney by Joseph Cabral
25.6 Power of Attorney by Pete Crear
25.11 Power of Attorney by Alfred A. Plamann
25.12 Power of Attorney by Anthony J. Scallon
25.13 Power of Attorney by Sheila A. Smith
27 Financial Data Schedule
Supplemental Information
Registrant's 1996 Proxy Materials
Exhibit 10.19
AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
AGREEMENT, made as of the 11th day of December, 1995, by and
among:
NATIONAL CONSUMER COOPERATIVE BANK, a corporation chartered
by Act of Congress of the United States which conducts business
under the trade name National Cooperative Bank (the "Borrower");
The Banks which have executed this Agreement (individually,
a "Bank" and, collectively, the "Banks"); and
NATWEST BANK N.A. (formerly National Westminster Bank USA),
as Agent for the Banks (in such capacity, together with its
successors in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS:
(A) The Borrower, the Agent and the banks signatory
thereto entered into a certain Second Amended and Restated Loan
Agreement dated as of December 15, 1993, which was amended
pursuant to a certain Amendment No. 1 to Second Amended and
Restated Loan Agreement dated as of December 12, 1994 (as so
amended, the "Original Loan Agreement"; the Original Loan
Agreement, as amended hereby, and as it may hereafter be further
amended, modified or supplemented, is hereinafter referred as the
"Loan Agreement");
(B) The Borrower wishes to amend the Original Loan
Agreement to, among other things, (i) increase the aggregate
Total Commitment from $170,000,000 to $200,000,000, (ii) extend
the A Commitment Termination Date to May 30, 1998, and (iii)
extend the B Commitment Termination Date to May 30, 1996, and the
Banks and the Agent are willing to amend and supplement the
Original Loan Agreement on the terms and conditions hereinafter
set forth;
(C) Simultaneously with the execution and delivery hereof,
PNC Bank, National Association (the "New Bank") has agreed to
make loans to the Borrower in the amounts set forth opposite its
name on its signature page hereto and the Borrower desires to
accept the Total Commitment of the New Bank and to cause the New
Bank to be added as a "Bank" to the Original Loan Agreement as
amended hereby, and the Agent and the banks signatory to the
Original Loan Agreement are agreeable to the addition of the New
Bank;
(D) Comerica Bank desires to increase its Total Commitment
to the amount set forth opposite its name on its signature page
hereto and the Borrower desires to accept the increased Total
Commitment of Comerica Bank;
(E) Each of the banks signatory to the Original Loan
Agreement desires to reallocate its Total Commitment (as between
its respective A Commitment and B Commitment) to the amounts set
forth opposite its name on its signature page hereto and the
Borrower desires to accept such reallocation of the Total
Commitment of each of them; and
(F) All capitalized terms used herein which are not other-
wise defined herein shall have the respective meanings ascribed
thereto in the Original Loan Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
Article 1. Change in Total Commitments.
Section 1.1 Total Commitments. From and after the
date hereof, for purposes of the Loan Agreement, the Total
Commitment of each Bank shall be the sum of the amounts set forth
opposite each Bank's name on the signature pages hereto as the
same may be reduced pursuant to the terms of the Loan Agreement,
and, with respect to each Bank (other than the New Bank), such
amount shall supersede and be deemed to amend the amount of its
respective Total Commitment as set forth opposite its name on the
signature pages to the Original Loan Agreement.
Section 1.2 New Bank. The New Bank agrees with the
Borrower, the banks signatory to the Original Loan Agreement and
the Agent that (i) it will abide by the terms of the Original
Loan Agreement as amended hereby, and (ii) the Loan Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by and against the New Bank.
Section 1.3 Adjustment of Outstanding Loans. If any
Loans are outstanding under the Original Loan Agreement on the
date hereof, the Banks shall on the date hereof, at the direction
of the Agent, make appropriate adjustments among themselves in
order to insure that the amount (and type) of the Loans
outstanding to the Borrower from each Bank under the Loan
Agreement (as of the date hereof) are proportionate to the
aggregate amount of all of the Total Commitments, after giving
effect to the additional Total Commitment of the New Bank, the
increased amount of the Total Commitment of Comerica Bank and the
reallocation of the amounts of the Total Commitment of each of
the other Banks. The Borrower agrees and consents to the terms of
this subsection 1.3.
Article 2. Amendments to Original Loan Agreement;
Second Substituted Notes.
Section 2.1 The Original Loan Agreement is hereby
amended as follows:
(a) The phrase "the amount set forth opposite
such Bank's name on the signature pages hereof" appearing in the
definition of the terms "A Commitment" and "B Commitment" in
Article 1 of the Original Loan Agreement shall be deemed to refer
to the amounts set forth opposite each Bank's name on the
signature pages hereto.
(b) The definition of "A Commitment Termination
Date" appearing in Article 1 is amended by deleting the date
"December 15, 1997" and substituting therefor the date "May 30,
1998".
(c) The definition of "Additional Interest"
appearing in Article 1 is amended by deleting the reference to
the amount "$50,000,000" appearing on the third line thereof and
substituting therefor the amount "$80,000,000.
(d) The definition of "B Commitment Termination
Date" appearing in Article 1 is amended by deleting the date
"December 11, 1995" and substituting therefor the date "May 30,
1996".
(e) All references to the amount"$50,000,000"
appearing in Section 2.12 are hereby deleted and the amount
"$80,000,000" is substituted therefor.
(f) Section 2.13 is deleted in its entirety and
there is substituted therefor the following:
"(a) The A Loans made by each Bank shall be
evidenced by a single promissory note of the Borrower (each,
a "Second Substituted A Note" and, collectively, the "Second
Substituted A Notes") in substantially the form of Exhibit
A-1 annexed to Amendment No. 2 to Second Amended and
Restated Loan Agreement dated as of December 11, 1995 by and
among the Borrower, the banks signatory thereto and the
Agent ("Amendment No. 2"). Each Second Substituted A Note
shall be dated the date of Amendment No. 2, shall be payable
to the order of such Bank in a principal amount equal to
such Bank's A Commitment as in effect on the date of
Amendment No. 2 and shall otherwise be duly completed. All
A Loans made by each Bank hereunder and all payments and
prepayments made on account of the principal thereof, and
all conversions of such A Loans shall be recorded by such
Bank on the schedule attached to the relevant A Note
(provided that any failure by such Bank to make any such
endorsement shall not affect the obligations of the Borrower
hereunder or under such A Note in respect of such A Loans).
(b) The B Loans made by each Bank shall be
evidenced by a single promissory note of the Borrower (each,
a "Second Substituted B Note" and, collectively, the "Second
Substituted B Notes") in substantially the form of Exhibit
A-2 annexed to Amendment No. 2. Each Second Substituted B
Note shall be dated the date of Amendment No. 2, shall be
payable to the order of such Bank in a principal amount
equal to such Bank's B Commitment as in effect on the date
of Amendment No. 2 and shall otherwise be duly completed.
All B Loans made by each Bank hereunder and all payments and
prepayments made on account of the principal thereof, and
all conversions of such B Loans shall be recorded by such
Bank on the schedule attached to the relevant B Note
(provided that any failure by such Bank to make any such
endorsement shall not affect the obligations of the Borrower
hereunder or under such B Note in respect of such B Loans).
(c) The Swing Line Loans made by the Swing
Line Lender shall be evidenced by a single promissory note
of the Borrower (the "Second Substituted Swing Line Note")
substantially in the form of Exhibit A-3 annexed to
Amendment No. 2. The Second Substituted Swing Line Note
shall be dated the date of Amendment No. 2, shall be payable
to the order of the Swing Line Lender in a principal amount
equal to the Swing Line Loan Commitment and shall be
otherwise duly completed. All Swing Line Loans made by the Swing
Line Lender hereunder and all payments and prepayments on account
of the principal thereof shall be recorded by the Swing Line
Lender on the schedule attached to the Second Substituted Swing
Line Note (provided, that any failure by the Swing Line Lender to
make such endorsement shall not affect the obligations of the
Borrower hereunder or under the Swing Line Note)."
(g) Upon the consummation of the dissolution of
NCB Business Credit and the assumption by the Borrower of the
assets and liabilities of NCB Business Credit, subsection 6.9(f)
shall be deemed amended by deleting the reference to the amount
"$15,000,000" appearing therein and substituting therefor the
amount "$30,000,000" and all references to NCB Business Credit
appearing in subsections 6.9(e) and (f) shall be deemed deleted.
(h) Section 7.4 is deleted in its entirety and
the following is substituted therefor:
"Section 7.4 Mergers, Acquisitions.
Merge or consolidate with any Person (whether or
not the Borrower is the surviving entity), except (i)
for the Dissolution, and (ii) a Subsidiary may
consolidate with, or merge into, the Borrower or
another Subsidiary, or, except as permitted by
subsection 6.9(f), acquire all or substantially all of
the assets or any of the capital stock of any Person."
(i) Exhibit B to the Loan Agreement is amended by
adding "NCB Retail Finance Corporation, a Delaware corporation,
capitalized with 1000 authorized shares of common stock, all of
which are issued and outstanding and held by the Borrower."
Section 2.2 In order to evidence the Loans and the
Swing Line Loan, as amended hereby, the Borrower shall execute
and deliver to each Bank, as the case may be, simultaneously with
the execution and delivery hereof, promissory notes payable to
the order of such Bank in substantially the form of Exhibits A-1,
A-2 and A-3 (in the case of the Swing Line Lender) annexed hereto
(hereinafter referred to individually as a "Second Substituted
Note" and collectively as the "Second Substituted Notes"). Each
of the Banks (other than the New Bank) shall, upon the execution
and delivery by the Borrower of its applicable Second Substituted
Note as herein provided, mark the Substituted Notes delivered to
it in connection with Amendment No. 1 "Replaced by Second
Substituted Note" and return them to the Borrower.
Section 2.3 (a) All references in the Original
Loan Agreement or any other Loan Document to the "Loan(s)", the
"A Note(s)", the "B Note(s)", the "Swing Line Note", the
"Note(s)" and the "Loan Documents" shall be deemed to refer
respectively, to the Loan(s) as amended hereby, the Second
Substituted A Note(s), the Second Substituted B Note(s), the
Second Substituted Swing Line Note, the Second Substituted
Note(s) and the Loan Documents as defined in the Original Loan
Agreement together with, and as amended by, this Amendment No. 2,
the Second Substituted Notes and all agreements, documents and
instruments delivered pursuant thereto or in connection
therewith.
(b) All references in the Original Loan Agreement
and the other Loan Documents to the "Loan Agreement", and also in
the case of the Original Loan Agreement to "this Agreement",
shall be deemed to refer to the Original Loan Agreement, as
amended hereby.
Section 2.4 The Original Loan Agreement and the other
Loan Documents shall each be deemed amended and supplemented
hereby to the extent necessary, if any, to give effect to the
provisions of this Agreement.
Article 3. Representations and Warranties.
The Borrower hereby confirms, reaffirms and restates to
each of the Banks and the Agent all of the representations and
warranties set forth in Article 3 of the Original Loan Agreement
as if such representations and warranties were made as of the
date hereof, except for changes in the ordinary course of
business which, either singly or in the aggregate, are not
materially adverse to the business or financial condition of the
Borrower.
Article 4. Conditions to Effectiveness of this Agreement.
This Amendment No. 2 to Second Amended and Restated
Loan Agreement shall become effective on the date of the
fulfillment (to the satisfaction of the Agent) of the following
conditions precedent:
(a) This Amendment No. 2 shall have been executed
and delivered to the Agent by a duly authorized representative of
the Borrower, the Agent and each Bank.
(b) The Borrower shall have executed and
delivered to each Bank its Second Substituted A Note and Second
Substituted B Note and with respect to the Swing Line Lender, the
Second Substituted Swing Line Note.
(c) The Agent shall have received a Compliance
Certificate from the Borrower dated the date hereof and the
matters certified therein, including, without limitation, that
after giving effect to the terms and conditions of this Amendment
No. 2, no Default or Event of Default shall exist, shall be true.
(d) Shea & Gardner, counsel to the Borrower,
shall have delivered its legal opinion to the Agent, in form and
substance satisfactory to the Agent and its counsel.
(e) The Agent shall have received copies of the
following:
(i) Copies of all corporate action taken by
the Borrower to authorize the execution, delivery and performance
of this Amendment No. 2, the Second Substituted Notes and the
transactions contemplated hereby, certified by its secretary;
(ii) A certificate from the secretary of the
Borrower to the effect that the By-laws of the Borrower delivered
to the Agent pursuant to the Original Loan Agreement have not
been amended since the date of such delivery and that such
document is in full force and effect and is true and correct as
of the date hereof; and
(iii) An incumbency certificate (with
specimen signatures) with respect to the Borrower.
(f) All legal matters incident hereto shall be
satisfactory to the Agent and its counsel.
Article 5. Miscellaneous.
Section 5.1 Article 10 of the Original Loan Agreement.
The miscellaneous provisions under Article 10 of the Original
Loan Agreement, together with the definition of all terms used
therein, and all other sections of the Original Loan Agreement to
which Article 10 refers are hereby incorporated by reference as
if the provisions thereof were set forth in full herein, except
that (i) the terms "Loan Agreement", "Note(s)" and "Loan", shall
be deemed to refer, respectively, to the Original Loan Agreement,
as amended hereby, the Second Substituted Note(s) and the Loans,
as amended hereby; (ii) the term "this Agreement" shall be deemed
to refer to this Agreement; and (iii) the terms "hereunder" and
"hereto" shall be deemed to refer to this Agreement.
Section 5.2 Continued Effectiveness. Except as
amended hereby, the Original Loan Agreement and the other Loan
Documents are hereby ratified and confirmed in all respects and
shall remain in full force and effect in accordance with their
respective terms.
Section 5.3 Counterparts. This Agreement may be
executed by the parties hereto in one or more counterparts, each
of which shall be an original and all of which shall constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first above written.
NATIONAL CONSUMER COOPERATIVE BANK,
D/B/A NATIONAL COOPERATIVE BANK
By__________________________________
Title
<PAGE>
A Commitment NATWEST BANK N.A.,
as Agent and as a Bank, and as a
$24,000,000 Swing Line Lender
By ______________________________
Title
B Commitment Lending Office for Prime Rate
Loans, LIBOR Loans, CD Loans, Fed
$16,000,000 Funds Loans and Address for
notices:
175 Water Street
New York, New York 10038
Attn: James V. Maiorino
Vice President
Telephone No.: 212-602-2560
Telecopier No.: 212-602-2671
Telex No. 62610 NBNA UW
<PAGE>
A Commitment CREDIT SUISSE
$18,000,000
By: _______________________________
Title
B Commitment By: _______________________________
Title
$12,000,000
Lending Office for Prime Rate
Loans, LIBOR Loans, CD Loans, Fed
Funds Loans and address for
notices:
Credit Suisse
12 East 49th Street
New York, New York 10017
Attn: Yvette McQueen
Administrative Assistant
Telephone No.: 212-238-5362
Telecopier No.: 212-238-5389
Telex No.: 420-149
<PAGE>
A Commitment COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. ("Rabobank
$18,000,000 Nederland"), New York Branch
By: _______________________________
Title
By: _______________________________
Title
B Commitment Lending Office for Prime Rate
Loans, LIBOR Loans, CD Loans, Fed
$12,000,000 Funds Loans and address for
notices:
245 Park Avenue
New York, New York 10167-0062
Attn: Corporate Services
Telephone No.: 212-916-7979
Telecopier No.: 212-916-7837
Telex No.: 42 4337
<PAGE>
A Commitment COMERICA BANK
$19,500,000
By:________________________________
Title
B Commitment Lending Office for Prime Rate
Loans, LIBOR Loans, CD Loans, and
$13,000,000 Fed Funds Loans:
Comerica Bank
500 Woodward Avenue
Mail Code 3280
Detroit, Michigan 48226
Attn.: Tammy Gurne
Account Officer
Telephone No.: 313-222-7806
Telecopier No.: 313-222-3330
<PAGE>
A Commitment PNC BANK, NATIONAL ASSOCIATION
$15,000,000
By:________________________________
Title
B Commitment Lending Office for Prime Rate
Loans, LIBOR Loans, CD Loans, Fed
$10,000,000 Funds Loans and address for
notices:
PNC Bank, National Association
100 South Broad Street
Philadelphia, Pennsylvania 19110
Attn.: Steffen W. Crowther
Vice President
Telephone No.: 215-585-5226
Telecopier No.: 215-585-5972
Telex No.: 845 270
<PAGE>
A Commitment SIGNET BANK
$15,000,000
By:________________________________
Title
B Commitment Lending Office for Prime Rate
Loans, LIBOR Loans, CD Loans and
$10,000,000 Fed Funds Loans:
Signet Bank
7799 Leesburg Pike
Falls Church, Virginia 22043
Address for Notices:
Signet Bank
1350 Connecticut Avenue NW
Suite 1000
Washington, D.C. 20036-1701
Attn.: Linwood White
Senior Vice President
Telephone No.: 202-331-5453
Telecopier No.: 202-872-9250
Telex No.: 82-724-0507
<PAGE>
A Commitment FIRST NATIONAL BANK OF MARYLAND
$10,500,000
By:_______________________________
Title
B Commitment Lending Office for Prime Rate
Loans, LIBOR Loans, CD Loans and
$7,000,000 Fed Funds Loans:
First National Bank of Maryland
Internal I.D. BANC 101-716
18th Floor
25 South Charles Street
Baltimore, Maryland 21201
or
P.O. Box 101-710
Baltimore, Maryland 21203
Attn: Robert R. Chafey
Vice President
Telephone No.: 410-244-4032
Telecopier No.: 410-244-4234
Telex No.: 684-9150 FNBUW
<PAGE>
EXHIBITS
A-1 Form of Second Substituted A Note
A-2 Form of Second Substituted B Note
A-3 Form of Second Substituted Swing Line Note
<PAGE>
EXHIBIT A-1
TO AMENDMENT NO. 2
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
NATIONAL CONSUMER COOPERATIVE BANK
AND
CERTAIN BANKS NAMED THEREIN
AND
NATWEST BANK N.A., AS AGENT FOR THE BANKS
FORM OF SECOND SUBSTITUTED A NOTE
[A Commitment Amount] Due May 30, 1998
FOR VALUE RECEIVED, NATIONAL CONSUMER COOPERATIVE BANK D/B/A
NATIONAL COOPERATIVE BANK, (the "Borrower"), hereby promises to
pay to the order of [ ] (the "Bank") by payment to the
Agent for the account of the Bank the principal sum of [amount of
A Commitment] ($__________) Dollars (or such lesser amount as
shall equal the aggregate unpaid principal amount of the A Loans
made by the Bank under the Loan Agreement hereinafter defined,
shown on the schedule annexed hereto and any continuation
thereof), in lawful money of the United States of America and in
immediately available funds on the date or dates determined as
provided in the Loan Agreement but in no event later than May 30,
1998.
The Borrower further promises to pay to the order of the
Bank by payment to the Agent for the account of the Bank interest
on the unpaid principal amount of each Loan from the date such
Loan is made until paid in full, payable at such rates and at
such times as provided for in the Loan Agreement.
The Bank has been authorized by the Borrower to record on
the schedules annexed to this A Note (or on any continuation
thereof) the amount, type, due date and interest rate of each A
Loan made by the Bank under the Loan Agreement and the amount of
each payment or prepayment of principal and the amount of each
payment of interest of each such A Loan received by the Bank, it
being understood, however, that failure to make any such notation
shall not affect the rights of the Bank or the obligations of the
Borrower hereunder or under the Loan Agreement in respect of such
Loans. Such notations shall be deemed correct, absent manifest
error.
This A Note is one of the Notes referred to in the Second
Amended and Restated Loan Agreement dated as of December 15,
1993, as amended by Amendment No. 1 to Second Amended and
Restated Loan Agreement dated as of December 12, 1994 and by
Amendment No. 2 to Second Amended and Restated Loan Agreement
dated as of December 11, 1995 (as so amended, the "Loan
Agreement") among the Borrower, the Banks and NatWest Bank N.A.,
as Agent for the Banks and evidences the A Loans made by the Bank
thereunder. [This A Note supersedes and is given in substitution
for the Substituted A Note dated December 12, 1994 made by the
Borrower to the order of the Bank in the original principal
amount of $ but does not constitute a novation,
extinguishment or termination of the obligations evidenced
thereby.] Capitalized terms used in this Note have the
respective meanings assigned to them in the Loan Agreement.
Upon the occurrence of an Event of Default under the Loan
Agreement, the principal hereof and accrued interest hereon shall
become, or may be declared to be, forthwith due and payable in
the manner, upon the conditions and with the effect provided in
the Loan Agreement.
The Borrower may at its option prepay all or any part of the
principal of this A Note before maturity upon and subject to the
terms provided in the Loan Agreement.
The Borrower agrees to pay costs of collection and reason-
able attorneys' fees in case default occurs in the payment of
this A Note.
Presentment for payment, notice of dishonor, protest and
notice of protest are hereby waived.
This A Note has been executed and delivered this 11th day of
December, 1995 in New York, New York, and shall be construed in
accordance with and governed by the internal laws of the State of
New York.
NATIONAL CONSUMER COOPERATIVE BANK
D/B/A NATIONAL COOPERATIVE BANK
By:________________________________
Title
<PAGE>
SCHEDULE TO SECOND SUBSTITUTED A NOTE
MADE BY NATIONAL CONSUMER COOPERATIVE BANK
IN FAVOR OF _____________________
This Note evidences the Loans made under the within
described Agreement, in the principal amounts, of the types
(Prime Rate Loans, Fed Funds Loans, CD Loans or LIBOR Loans) and
on the dates set forth below, subject to the payments or prepay-
ments set forth below:
Date Made Principal Interest Amount of
or Amount of Type of Due Date Rate on Payment or Balance Notation
Converted Loan Loan of Loan Loan Prepayment Outstanding Made By <PAGE>
EXHIBIT A-2
TO AMENDMENT NO. 2
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
NATIONAL CONSUMER COOPERATIVE BANK
AND
CERTAIN BANKS NAMED THEREIN
AND
NATWEST BANK N.A., AS AGENT FOR THE BANKS
FORM OF SECOND SUBSTITUTED B NOTE
[B Commitment Amount] Due May 30, 1996
FOR VALUE RECEIVED, NATIONAL CONSUMER COOPERATIVE BANK D/B/A
NATIONAL COOPERATIVE BANK (the "Borrower"), hereby promises to pay
to the order of [ ] (the "Bank") by payment to the Agent for
the account of the Bank the principal sum of [amount of B Commit-
ment] ($__________) Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the B Loans made by the
Bank under the Loan Agreement hereinafter defined, shown on the
schedule annexed hereto and any continuation thereof), in lawful
money of the United States of America and in immediately available
funds on the date or dates determined as provided in the Loan
Agreement but in no event later than May 30, 1996.
The Borrower further promises to pay to the order of the Bank
by payment to the Agent for the account of the Bank interest on the
unpaid principal amount of each Loan from the date such Loan is made
until paid in full, payable at such rates and at such times as
provided for in the Loan Agreement.
The Bank has been authorized by the Borrower to record on the
schedules annexed to this B Note (or on any continuation thereof)
the amount, type, due date and interest rate of each B Loan made by
the Bank under the Loan Agreement and the amount of each payment or
prepayment of principal and the amount of each payment of interest
of each such B Loan received by the Bank, it being understood,
however, that failure to make any such notation shall not affect the
rights of the Bank or the obligations of the Borrower hereunder or
under the Loan Agreement in respect of such Loans. Such notations
shall be deemed correct, absent manifest error.
This B Note is one of the Notes referred to in the Second
Amended and Restated Loan Agreement dated as of December 15, 1993,
as amended by Amendment No. 1 to Second Amended and Restated Loan
Agreement dated as of December 12, 1994 and by Amendment No. 2 to
Second Amended and Restated Loan Agreement dated as of December 11,
1995 (as so amended, the "Loan Agreement") among the Borrower, the
Banks, and NatWest Bank N.A., as Agent for the Banks and evidences
the B Loans made by the Bank thereunder. [This B Note supersedes
and is given in substitution for the Substituted B Note dated
December 12, 1994 made by the Borrower to the order of the Bank in
the original principal amount of $ but does not constitute a
novation, extinguishment or termination of the obligations evidenced
thereby.] Capitalized terms used in this Note have the respective
meanings assigned to them in the Loan Agreement.
Upon the occurrence of an Event of Default under the Loan
Agreement, the principal hereof and accrued interest hereon shall
become, or may be declared to be, forthwith due and payable in the
manner, upon the conditions and with the effect provided in the Loan
Agreement.
The Borrower may at its option prepay all or any part of the
principal of this B Note before maturity upon and subject to the
terms provided in the Loan Agreement.
The Borrower agrees to pay costs of collection and reasonable
attorneys' fees in case default occurs in the payment of this B
Note.
Presentment for payment, notice of dishonor, protest and notice
of protest are hereby waived.
This B Note has been executed and delivered this 11th day of
December, 1995 in New York, New York, and shall be construed in
accordance with and governed by the internal laws of the State of
New York.
NATIONAL CONSUMER COOPERATIVE BANK
D/B/A NATIONAL COOPERATIVE BANK
By:________________________________
Title
SCHEDULE TO SECOND SUBSTITUTED B NOTE
MADE BY NATIONAL CONSUMER COOPERATIVE BANK
IN FAVOR OF _____________________
This Note evidences the Loans made under the within described
Agreement, in the principal amounts, of the types (Prime Rate Loans,
Fed Funds Loans, CD Loans or LIBOR Loans) and on the dates set forth
below, subject to the payments or prepayments set forth below:
Date Made Principal Interest Amount of
or Amount of Type of Due Date Rate on Payment or Balance Notation
Converted Loan Loan of Loan Loan Prepayment Outstanding Made By
<PAGE>
EXHIBIT A-3
TO AMENDMENT NO. 2
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
NATIONAL CONSUMER COOPERATIVE BANK
CERTAIN BANKS NAMED THEREIN
AND
NATWEST BANK N.A.,
AS AGENT FOR THE BANKS
FORM OF SECOND SUBSTITUTED SWING LINE NOTE
$10,000,000 Due May 30, 1996
FOR VALUE RECEIVED, NATIONAL CONSUMER COOPERATIVE BANK
D/B/A NATIONAL COOPERATIVE BANK (the "Borrower"), hereby
promises to pay to the order of NATWEST BANK N.A. (the "Bank")
by payment to the Bank of the principal sum of TEN MILLION
DOLLARS ($10,000,000) (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Swing Line Loans made
by the Bank under the Loan Agreement hereinafter defined, shown
on the schedule annexed hereto and any continuation thereof),
in lawful money of the United States of America and in
immediately available funds on the date or dates determined as
provided in the Loan Agreement but in no event later than May
30, 1996.
The Borrower further promises to pay to the order of
the Bank by payment to the Bank interest on the unpaid
principal amount of each Swing Line Loan from the date such
Swing Line Loan is made until paid in full, payable at such
rates and at such times as provided for in the Loan Agreement.
The Bank has been authorized by the Borrower to record
on the schedules annexed to this Swing Line Note (or on any
continuation thereof) the amount, due date and interest rate of
each Swing Line Loan made by the Bank under the Loan Agreement
and the amount of each payment of principal and the amount of
each payment of interest of each such Swing Line Loan received
by the Bank, it being understood, however, that failure to make
any such notation shall not affect the rights of the Bank or
the obligations of the Borrower hereunder or under the Loan
Agreement in respect of such Swing Line Loans. Such notations
shall be deemed correct, absent manifest error.
This Swing Line Note is the Swing Line Note referred to
in the Second Amended and Restated Loan Agreement dated as of
December 15, 1993, as amended by Amendment No. 1 to Second
Amended and Restated Loan Agreement dated as of December 12,
1994 and by Amendment No. 2 to Second Amended and Restated Loan
Agreement dated as of December 11, 1995 (as so amended, the
"Loan Agreement") among the Borrower, the Banks and NatWest
Bank N.A., as Agent for the Banks and evidences the Swing Line
Loans made by the Bank thereunder. Capitalized terms used in
this Swing Line Note have the respective meanings assigned to
them in the Loan Agreement.
Upon the occurrence of an Event of Default, under the
Loan Agreement, the principal hereof and accrued interest
hereon shall become, or may be declared to be, forthwith due
and payable in the manner, upon the conditions and with the
effect provided in the Loan Agreement.
The Borrower agrees to pay costs of collection and
reasonable attorneys' fees in case default occurs in the
payment of this Swing Line Note.
Presentment for payment, notice of dishonor, protest
and notice of protest are hereby waived.
This Swing Line Note has been executed and delivered
this 11th day of December, 1995 in New York, New York, and
shall be construed in accordance with and governed by the laws
of the State of New York.
NATIONAL CONSUMER COOPERATIVE BANK
D/B/A NATIONAL COOPERATIVE BANK
By:________________________________
Title
<PAGE>
SCHEDULE TO SECOND SUBSTITUTED SWING LINE NOTE
MADE BY NATIONAL CONSUMER COOPERATIVE BANK
IN FAVOR OF NATWEST BANK N.A.
This Swing Line Note evidences the Swing Line Loans
made under the within described Agreement, in the principal
amounts, and on the dates set forth below, subject to the
payments set forth below:
Date Made Principal Interest Amount of
or Amount of Type of Due Date Rate on Payment or Balance Notation
Converted Loan Loan of Loan Loan Prepayment Outstanding Made By
<PAGE>
Exhibit 10.20
EXECUTION COPY
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT (this "Agreement") is made
and entered into as of the 15th day of September, 1995, by and
between NATIONAL CONSUMER COOPERATIVE BANK, a banking corporation
organized under the laws of the United States that does business as
the National Cooperative Bank (hereinafter referred to as the
"Company") and CREDIT SUISSE, a banking company organized and
existing under the laws of Switzerland having a New York Branch
operating under a State of New York banking charter (hereinafter
referred to as the "Bank").
IN CONSIDERATION of the mutual covenants and
agreements herein contained, the Company and the Bank hereby agree
as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Definitions. As used in this
Agreement, and unless the context requires a different meaning, the
following terms shall have the meanings indicated (such meanings to
be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Accumulated Funding Deficiency" has the meaning
ascribed to that term in Section 302 of ERISA.
"Affiliate" means, with respect to a Person, any
other Person that, directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is
under common control with, such first Person; unless
otherwise specified, "Affiliate" means an Affiliate of the
Company.
"Asset Securitization" shall mean, with respect to
any Person, a transaction involving the sale or transfer of
receivables by such Person to a special purpose corporation
or grantor trust (an "SPV") established solely for the
purpose of purchasing such receivables from the Company for
Cash in an amount equal to the Fair Market Value thereof; provided,
however, that the Company may (A) establish and maintain a reserve
account containing Cash or Securities as a credit enhancement in
respect of any such sale, or (B) purchase or retain a subordinated
interest in such receivables being sold.
"Asset Securitization Recourse Liability" shall
mean, with respect to any Person, the maximum amount of such
Person's liability (whether matured or contingent) under any
agreement, note or other instrument in connection with any
one or more Asset Securitizations in which such Person has
agreed to repurchase receivables or other assets, to provide
direct or indirect credit support (whether through cash
payments, the establishment of reserve accounts containing
cash or Securities, an agreement to reimburse a provider of
a letter of credit for any draws thereunder, the purchase or
retention of a subordinated interest in such receivables or
other assets, or other similar arrangements), or in which
such Person may be otherwise liable for all or a portion of
any SPV's obligations under Securities issued in connection
with such Asset Securitizations.
"Authorized Officer" means any of the Chairman of
the Board, the President, any Vice President, the Treasurer
of the Company, and any other officer duly authorized to
execute this Agreement on behalf of the Company.
"Bank Lending Office" or "Lending Office of the
Bank" means Credit Suisse, Tower 49, 12 East 49th Street,
New York, New York 10017, or such other office or offices
situated in the United States of America as the Bank may
from time to time designate to the Company by written
notice.
"Base Rate" means for any day the higher of (1) the
base commercial lending rate announced from time to time by
Credit Suisse (New York Branch) as applicable at the opening
of business on such day, or (2) the rate quoted by Credit
Suisse (New York Branch) at approximately 11:00 a.m., New
York City time, to dealers in the New York Federal Funds
Market for the overnight offering of dollars by Credit
Suisse (New York Branch) for deposit, plus one-half of one
per cent (1/2%).
"Benefit Plan" means, at any time, any employee
benefit plan (including a Multiemployer Benefit Plan), the
funding requirements of which (under Section 302 of ERISA or
Section 412 of the Code) are, or at any time within six
years immediately preceding the time in question were, in
whole or in part, the responsibility of the Company or an
ERISA Affiliate.
"Business Day" means any day on which commercial
banks are open for business (and not required or authorized
by law to close) in New York, New York and, for purposes of
the determination of each Interest Payment Date and the
Maturity Date, in London, England.
"Capitalized Lease" means any lease the obligation
for Rentals with respect to which is required to be
capitalized on a balance sheet of the lessee in accordance
with GAAP.
"Cash" means, as to any Person, such Person's cash
and cash equivalents, as defined in accordance with GAAP
consistently applied.
"Class A Notes" means the class A notes issued by
the Company to the Secretary of the Treasury on behalf of
the United States pursuant to Section 3026(a)(3)(A) of the
National Consumer Cooperative Bank Act, as amended, 12
U.S.C. Sec. 3001, et seq. (the "Bank Act") on the Final
Government Equity Redemption Date (the "Redemption Date") in
full and complete redemption of the class A stock of the
Company held by the Secretary of the Treasury on such
Redemption Date and replacement notes for such Class A notes
in a principal amount(s) not greater than those notes being
replaced and containing identical terms of subordination as
the Class A notes. The terms "class A notes", "Final
Government Equity Redemption Date", and "class A stock" are
defined in the Bank Act, which definitions are incorporated
by this reference as if fully set forth herein.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commitment Expiration Date" has the meaning
specified in Section 2.1 of this Agreement.
"Consolidated Adjusted Net Income" for any fiscal
period of the Company, means net earnings or net loss
(determined on a consolidated basis) of the Company and the
Subsidiaries after income taxes for such period, but
excluding from the determination of such earnings the
following items (together with the income tax effect, if
any, applicable thereto):
(a) the proceeds of any life insurance policy;
(b) any gain or loss arising from the sale
of capital assets;
(c) any gain arising from any reappraisal,
revaluation or write-up of assets;
(d) any gain arising from transactions of
a non-recurring or nonoperating and material nature
or arising from sales or other dispositions
relating to the discontinuance of operations;
(e) earnings of any Subsidiary accrued
prior to the date it became a Subsidiary;
(f) earnings of any corporation,
substantially all the assets of which have been
acquired in any manner, realized by such other
corporation prior to the date of such acquisition;
(g) net earnings of any business entity
(other than a Subsidiary) in which the Company or
any Subsidiary has an ownership interest, unless
such net earnings shall have actually been received
by the Company or such Subsidiary in the form of
cash distributions;
(h) any portion of the net earnings of any
Subsidiary which for any reason is unavailable for
payment of dividends to the Company or any other
Subsidiary;
(i) the earnings of any Person to which
assets of the Company shall have been sold,
transferred or disposed of, or into which the
Company shall have merged, prior to the date of
such transaction;
(j) any gain arising from the acquisition
of any Securities of the Company or any Subsidiary;
and
(k) any amortization of deferred or other
credit representing the excess of the equity in any
Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary.
"Consolidated Adjusted Net Worth" at any time
means, with respect to the Company and the Subsidiaries
(determined on a consolidated basis):
(a) the amount of capital stock liability
plus (or minus in the case of a deficit) the
capital surplus and earned surplus of the Company
and the Subsidiaries, less (without duplication)
the sum of
(b) the net book value, after deducting
any reserves applicable thereto, of all items of
the following character which are included in the
assets of the Company and the Subsidiaries:
(i) all deferred charges
and prepaid expenses other than prepaid
taxes and prepaid insurance premiums;
(ii) treasury stock;
(iii) unamortized debt discount
and expense and unamortized stock discount
and expense;
(iv) good will, the excess of
the cost of assets acquired over the book
value of such assets on the books of the
transferor, the excess of the cost of
investments in any Person (including any
Subsidiary) over the value of such
investments on the books of such Person at
the time of making such investments,
organizational or experimental expense,
patents, trademarks, copyrights, trade
names and other intangibles;
(v) all receivables (other
than Eurodollar deposits) owing by Persons
whose principal place of business or
principal assets are located in any
jurisdiction other than the United States
of America or Canada; and
(vi) any increment resulting
from reappraisal, revaluation or write-up
of capital assets subsequent to December
31, 1991.
If the Company shall have any Restricted Investments
outstanding at any time, such Investments shall be excluded
from Consolidated Adjusted Net Worth.
"Consolidated Debt" means at any date of
determination thereof, the aggregate amount of all
Indebtedness of the Company and its Subsidiaries, plus,
without duplication, the aggregate amount of the obligations
of the Company and its Subsidiaries set forth below, at such
time:
(a) the principal amount of all recourse
and non-recourse interest bearing obligations of
the Company or any Subsidiary including, without
limitation, any such obligations bearing an
implicit rate of interest, such as Capitalized
Leases, and interest bearing obligations secured by
any Lien upon Property owned by the Company or any
Subsidiary, even though such Person has not assumed
or become liable for the payment of such
obligations;
(b) the aggregate amount of all demand
and term deposits made by any Person with the
Company or any Subsidiary (including, without
limitation, certificates of deposit issued by the
Company or any Subsidiary);
(c) the face amount of all letters of
credit issued by the Company or any Subsidiary and
all bankers' acceptances accepted by the Company or
any Subsidiary; and
(d) the aggregate amount of all assets
with respect to which the Company or a Subsidiary
has any Asset Securitization Recourse Liabilities
in respect of promissory notes and other interest
bearing obligations sold or otherwise transferred
by the Company or any Subsidiary (regardless of
whether such aggregate amount of assets is in
excess of the amount of such Asset Securitization
Recourse Liabilities), whether for the repurchase
of defaulted notes or obligations or otherwise.
"Consolidated Earnings Available for Fixed Charges"
shall mean, for any period, the sum of: (i) Consolidated
Adjusted Net Income during such period; plus (ii) to the
extent deducted in determining Consolidated Adjusted Net
Income, (a) all provisions for any Federal, state or other
income taxes made by the Company and its Subsidiaries during
such period, and (b) Consolidated Fixed Charges during such
period plus (iii) contributions made by the Company to
Development Corp.
"Consolidated Effective Net Worth" at any time
means the sum of
(a) Consolidated Adjusted Net Worth at
such time; plus
(b) the aggregate outstanding principal
amount of Class A Notes at such time.
"Consolidated Fixed Charges" shall mean, with
respect to the Company on a consolidated basis for any
period, the sum of: (i) all interest and all amortization
of Indebtedness, amortized discount and expense on all
Indebtedness for borrowed money of the Company and its
Subsidiaries, plus (ii) all Rentals payable during such
period by the Company and its Subsidiaries.
"Consolidated Net Earnings" means, for any period,
the net income or loss of the Company and its Subsidiaries,
as applicable (determined on a consolidated basis for such
Persons at such time), for such period, as determined in
accordance with generally accepted accounting principles in
effect at such time.
"Consolidated Net Worth" means, with respect to the
Company, the sum of (i) the common stock account of the
Company determined as of any date in accordance with GAAP
consistent with the principles applied in the preparation of
the Company's consolidated statement of financial condition
for the fiscal year ended December 31, 1993; (ii) the Class
A Notes; and (iii) the consolidated retained earnings
account (whether allocated or unallocated) of the Company
and its Subsidiaries determined as of any date in accordance
with GAAP consistent with the principles applied in the
preparation of the Company's consolidated statement of
financial condition for the fiscal year ended December 31,
1993.
"Consolidated Senior Debt" means all unsecured
Indebtedness of the Company and its Subsidiaries on a
consolidated basis (i) for borrowed money (including the
Indebtedness hereunder, the Senior Notes, Indebtedness under
the NatWest Loan Agreement, and all demand and term deposits
made by any Person with the Company or any of its
Subsidiaries) which is not expressly subordinate or junior
to any other Indebtedness, plus without duplication, (ii)
all "guarantees," as defined in Section 6.2(d) hereof, and
(iii) Asset Securitization Recourse Liabilities to the
extent, but only to the extent, that such obligations have
matured.
"Consolidated Senior Obligations" at any time
means, with respect to the Company and the Subsidiaries
(determined on a consolidated basis), the sum of
(a) the aggregate unpaid principal amount
of Consolidated Senior Debt, plus
(b) the aggregate amount of all
Capitalized Leases plus
(c) Restricted Guarantees computed on the
basis of total outstanding contingent liability.
"Consolidated Subsidiary" means, with respect to
any Person at any time, any Subsidiary or other Person the
accounts of which would be consolidated with those of such
first Person in its consolidated financial statements as of
such time; unless otherwise specified, "Consolidated
Subsidiary" means a Consolidated Subsidiary of the Company.
"Credit Agreement Related Claim" means any claim
(whether civil, criminal or administrative and whether
sounding in tort, contract or otherwise) in any way arising
out of, related to, or connected with, this Agreement, the
Note, or the relationship established hereunder or
thereunder.
"Default" means an Event of Default or an event or
condition the existence or occurrence of which would, with
the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" means the rate of interest
applicable under Section 3.3 from time to time.
"Development Corp." means NCB Development
Corporation, a District of Columbia non-profit corporation
established pursuant to 12 U.S.C. Sec. 3051(b).
"Dollars", "U.S.$" and the sign "$" mean such coin
or currency of the United States of America as at the time
shall constitute legal tender for the payment of public and
private debts.
"Effective Date" means September 15, 1995.
"Eligible Cooperatives" has the meaning assigned to
such term in Section 3015 of Title 12 of the United States
Code.
"Eligible Derivatives" means derivative Securities
which are sold in the ordinary course of the business of the
Company and its Subsidiaries for the purpose of hedging
or otherwise managing portfolio risk.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" means any Person, including a
Subsidiary or other Affiliate, that is a member of any group
of organizations within the meaning of Code Sections 414(b),
(c), (m) or (o) of which the Company is a member.
"Events of Default" has the meaning specified in
Section 7.1 of this Agreement.
"Exchange Act" means the Securities and Exchange
Act of 1934, as amended, and any successor Federal statute.
"Fair Market Value" means, at any time with respect
to any Property, the sale value of such Property that would
be realized in an arm's-length sale at such time between an
informed and willing buyer and an informed and willing
seller, under no compulsion to buy or sell, respectively.
"February 8, 1995 Note" means the Promissory Note
issued to the Bank by the Company in the principal amount of
$8,000,000 under the terms and conditions of that certain
Term Loan Agreement, dated as of February 6, 1995, by and
between the Company and the Bank.
"Fixed Charges" means, with respect to the Company,
for any period, the sum of: (i) all interest and all
amortization of Indebtedness, amortized discount and expense
on all Indebtedness for borrowed money of the Company, plus
(ii) all Rentals payable during such period by the Company.
"Funded Debt" means all Indebtedness for borrowed
money that by its terms matures more than twelve months from
the date as of which any determination of Funded Debt is
made, any and all Indebtedness maturing within twelve months
from such date that is renewable at the option of the
obligor to a date beyond twelve months from the date of such
determination, including any Indebtedness renewable or
extendable (whether or not theretofore renewed or extended)
under, or payable from the proceeds of other Indebtedness
that may be incurred pursuant to the provisions of, any
revolving credit agreement or other similar agreement.
"GAAP" means generally accepted accounting
principles.
"Government Obligations" means any and all direct
obligations of the United States of America or obligations
in respect of which the payment of the principal of, and
interest thereon, is unconditionally guaranteed by the
United States of America.
"Governmental Body" means (i) the United States of
America, any State thereof, any other country or any
political subdivision of such other country, or any
department, agency, commission, board, bureau or
instrumentality of the United States of America, any State
thereof, any other country or political subdivision of such
other country or any subdivision of any of them, and (ii)
any quasi-governmental body, agency or authority (including
any central bank) exercising regulatory authority over the
Bank pursuant to applicable law in respect of the
transactions contemplated by this Agreement.
"Guarantees" at any time means all obligations of
any Person guaranteeing or in effect guaranteeing any
indebtedness or obligation or dividend of any other Person
(the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations
incurred through an agreement contingent or otherwise, by
such Person
(a) to purchase any indebtedness or
obligation or any Property constituting security
therefor,
(b) to advance or supply funds
(i) for the purchase or
payment of any Indebtedness or obligation
or
(ii) to maintain working
capital, equity capital or other balance
sheet condition or otherwise to advance or
make available funds for the purchase or
payment of any indebtedness or obligation,
(c) to purchase Property, Securities or
services primarily for the purpose of assuring the
owner of any indebtedness or obligation of the
ability of the primary obligor to make payment of
the indebtedness or obligation or
(d) otherwise to assure the owner of the
indebtedness or obligation of the primary obligor
against loss in respect thereof.
Liabilities or endorsements in the ordinary course of
business of checks and other negotiable instruments for
deposit or collection and obligations of the Company or the
Subsidiaries to acquire assets from the Bank in the ordinary
course of business shall not be deemed "Guarantees."
"Indebtedness" means, with respect to any Person,
all (i) liabilities or obligations, direct and contingent,
which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side
of a balance sheet of such Person at the date as of which
Indebtedness is to be determined, including, without
limitation, contingent liabilities which, in accordance with
such principles, would be set forth in a specific Dollar
amount on the liability side of such balance sheet; (ii)
liabilities or obligations of others for which such Person
is directly or indirectly liable, by way of guaranty
(whether by direct guaranty, suretyship, discount,
endorsement, take-or-pay agreement, agreement to purchase or
advance or keep in funds or other agreement having the
effect of a guaranty) or otherwise; (iii) liabilities or
obligations secured by liens on any assets of such Person,
whether or not such liabilities or obligations shall have
been assumed by it; (iv) liabilities or obligations of such
Person, direct or contingent, with respect to letters of
credit issued for the account of such Person and banker's
acceptances credited for such Person; (v) obligations in the
form of demand and term deposit accounts maintained by such
Person; and (vi) Asset Securitization Recourse Liabilities
to the extent, but only to the extent, that such obligations
have matured.
"Interest Payment Date" means the same day as the
Loan Date on a quarterly basis after the Loan Date and up to
the Maturity Date.
"Investment" in any Person by the Company means:
(a) the amount paid or committed to be paid, or the value of
property or services contributed or committed to be
contributed, by the Company for or in connection with the
acquisition by the Company of any stock, bonds, notes,
debentures, partnership or other ownership interests or
other securities of such Person; and (b) the amount of any
advance, loan or extension of credit to, or guaranty or
other similar obligation with respect to any Indebtedness
of, such Person by the Company and (without duplication) any
amount committed to be advanced, loaned, or extended to, or
the payment of which is committed to be assured by a
guaranty or similar obligation for the benefit of, such
Person by the Company.
"Lien" means any mortgage, deed of trust, pledge,
security interest, encumbrance, lien or charge of any kind
(including any agreement to give any of the foregoing), any
conditional sale or other title retention agreement, any
lease in the nature of any of the foregoing, and the filing
of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.
"Loan" means the loan to be made by the Bank to the
Company pursuant to this Agreement.
"Loan Date" means September 15, 1995.
"Maturity Date" is defined in Section 2.2.
"Multiemployer Benefit Plan" means any Benefit Plan
that is a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NatWest Loan Agreement" means the Loan Agreement
dated as of December 15, 1993 among the Company, the Banks
listed therein, and National Westminster Bank USA, as Agent,
as amended through the Effective Date.
"NCB Business Credit" means NCB Business Credit
Corporation, a Delaware corporation.
"NCB Financial Corporation" means NCB Financial
Corporation, a Delaware Corporation.
"NCB Mortgage" means NCB Mortgage Corporation, a
Delaware corporation.
"NCCB Senior Obligations" means, at any date of
determination thereof, with respect to the Company, the sum
of:
(a) the aggregate unpaid principal amount
of Senior Debt, plus
(b) the aggregate amount of all
Capitalized Leases, plus
(c) Restricted Guarantees computed on
the basis of total outstanding contingent
liability, plus
(d) Asset Securitization Recourse
Liabilities of the Company (meeting the conditions
set forth in either clause (i) or clause (ii)
below):
(i) to the extent, but
only to the extent, that such obligations
arise from the Company's obligation to
repurchase receivables or other assets as a
result of a default in payment by the
obligor thereunder or any other default in
performance by such obligor under any
agreement related to such receivables; or
(ii) if the Company
shall maintain a reserve account containing
Cash or Securities in respect of any such
obligations or shall retain or purchase a
subordinated interest therein, to the
extent, but only to the extent, of the
amount of such reserve account or
subordinated interest.
"Note" means the Promissory Note issued to the Bank
by the Company pursuant to this Agreement, substantially in
the form (appropriately completed) of Exhibit A to this
Agreement.
"Notice of Borrowing" means any notice given to the
Bank by the Company pursuant to and in accordance with
Section 4.1 of this Agreement.
"November 10, 1994 Note" means the Promissory Note
issued to the Bank by the Company in the principal
amount of $10,000,000 under the terms and
conditions of that certain Term Loan Agreement,
dated as of November 9, 1994, by and between the
Company and the Bank.
"Paid-in-Capital" shall have the meaning ascribed
to it by GAAP.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Permitted Liens" means (i) pledges or deposits by
the Company under workman's compensation laws, unemployment
insurance laws, social security laws, or similar
legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of
Indebtedness of the Company), or leases to which the Company
is a party, or deposits to secure public or statutory
obligations of the Company or deposits of cash or U.S.
government Bonds to secure surety, appeal, performance or
other similar bonds to which the Company is a party, or
deposits as security for contested taxes or import duties or
for the payment of rent; (ii) Liens imposed by law, such as
carriers', warehousemen's, materialmen's and mechanics'
liens, or Liens arising out of judgments or awards against
the Company with respect to which the Company at the time
shall currently by prosecuting an appeal or proceedings for
review; (iii) Liens for taxes not yet subject to penalties
for non-payment and Liens for taxes the payment of which is
being contested as permitted by Section 6.1(j) hereof; and
(iv) Liens incidental to the conduct of the business of the
Company or to the ownership of its property which were not
incurred in connection with Indebtedness of the Company, all
of which Liens do not in the aggregate materially detract
from the value of the properties to which they relate or
materially impair their use in the operation of the business
of the Company.
"Person" means an individual, partnership,
corporation (including a business trust), joint stock
company, trust, unincorporated association, joint venture or
other entity, or a government or any political subdivision
or agency thereof, a court, or any other legal entity,
whether acting in an undivided fiduciary or other capacity.
"Prohibited Transaction" means any transaction that
is prohibited under Code Section 4975 or ERISA Section 406
and not exempt under Code Section 4975 or ERISA Section 408.
"Property" means any interest in any kind of
property or asset, whether real, personal or mixed, or
tangible or intangible.
"Qualified Assets" means, at any date of
determination thereof, the sum of the following items (a),
(b) and (c) owned by the Company:
(a) The principal amount of all
promissory notes and other interest bearing
obligations acquired by the Company in the ordinary
course of its business less (i) reserves for credit
losses applicable thereto, and (ii) unearned
income;
(b) Cash on hand and in banks; and
(c) Investments other than "Restricted
Investments" (as such term is defined in the Senior
Note Agreements as in effect on the date hereof).
"Regulatory Change" means any applicable law,
interpretation, directive, request or guideline (whether or
not having the force of law), or any change therein or in
the administration or enforcement thereof, that becomes
effective or is implemented or first required or expected to
be complied with after the date hereof, whether the same is
(i) the result of an enactment by a government or any agency
or political subdivision thereof, a determination of a court
or regulatory authority, or otherwise or (ii) enacted,
adopted, issued or proposed before or after the date hereof,
including any such that imposes, increases or modifies any
tax, reserve requirement, insurance charge, special deposit
requirement, assessment or capital adequacy requirement, but
excluding any such that imposes, increases or modifies any
income or franchise tax imposed upon the Bank by any
jurisdiction (or any political subdivision thereof) in which
the Bank or any office is located.
"Rentals" means all fixed rentals (including as
such all payments that the lessee is obligated to make to
the lessor on termination of the lease or surrender of the
property) payable by the Company, as lessee or sublessee
under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by the Company
(whether or not designated as rents or additional rents) on
account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called
"percentage leases" shall be computed solely on the basis of
the minimum rents, if any, required to be paid by the lessee
regardless of sales volume or gross revenues.
"Reportable Event" means, with respect to any
Benefit Plan of any Person, (a) the occurrence of any of the
events set forth in ERISA Section 4043(c), other than an
event as to which the requirement of 30 days' notice, or the
penalty for failure to provide such notice, has been waived
by the PBGC, (b) the existence of conditions sufficient to
require advance notice to the PBGC pursuant to ERISA Section
4043(b), (c) the occurrence of any of the events set forth
in ERISA Sections 4062(e) or 4063(a) or the regulations
thereunder, (d) any event requiring such Person or any of
its ERISA Affiliates to provide security to such Benefit
Plan under Code Section 401(a)(29) or (e) any failure to
make a payment required by Code Section 412(m) with respect
to such Benefit Plan.
"Restricted Guarantees" at any time means all
Guarantees by the Company of obligations of others that
constitute sum certain obligations at the time such
Guarantees are incurred.
"Restricted Investments" at any time means any
investment that is not permitted under Section 6.2(i) of
this Agreement.
"Restricted Payment" means any payment by the
Company of the type described in 6.2(f) of this Agreement.
"Security" shall have the meaning ascribed thereto
in Section 2(1) of the Securities Act, as amended; provided,
however, that Asset Securitization Recourse Liabilities
shall not constitute "Securities" except (i) to the extent
that such obligations arise from the Company's obligation to
repurchase receivables or other assets as a result of a
default in payment by the obligor thereunder or any other
default in performance by such obligor under any agreement
related to such receivables or (ii) if the Company shall
maintain a reserve account containing Cash or Securities in
respect of any such obligations or shall retain or purchase
a subordinated interest therein to the extent of the amount
of such reserve account or subordinated interest.
"Selected Banks" means the Bank of Delaware, the
bank signatories to the NatWest Loan Agreement, and the one
hundred largest commercial banks that either are United
States national banking associations or are chartered under
the laws of a state of the United States and that have
ratings by Thompson BankWatch, Inc. no lower than B/C.
"Senior Debt" means all Indebtedness of the Company
for borrowed money (including, without limitation, all
Indebtedness under this Agreement, the Senior Note
Agreements and the Natwest Loan Agreement) that is not
expressly subordinate or junior to any other Indebtedness.
"Senior Note Agreements" means, collectively, (i)
the separate Senior Note Agreements dated as of December 16,
1994 in respect of the Company's (A) 8.84% Series A Senior
Notes due March 31, 2000, (B) 8.85% Series B Senior Notes
due March 31, 2000, and (C) Series C Senior Notes due March
31, 2000, the interest rate for which will be determined
when such Series C Senior Notes are issued, (ii) the
Assumption Agreement and Amended and Restated Senior Note
Agreement dated as of December 1, 1993 in respect of the
Company's Amended and Restated 10.15% Senior Notes due
October 15, 1995, (iii) the separate Assumption Agreement
and Amended and Restated Senior Note Agreement dated as of
December 1, 1993 in respect of the Company's (A) Amended and
Restated 8.18% Series A Senior Notes due June 24, 1997, (B)
Amended and Restated 8.32% Series B Senior Notes due
December 24, 1997, and (C) Amended and Restated 8.44% Series
C Senior Notes due June 24, 1998, as each may be amended
from time to time and (iv) a Master Shelf Agreement dated as
of December 30, 1994, for up to $50,000,000 of Series {62}
Notes between the Company and The Prudential Insurance
Company of America.
"Senior Notes" shall mean the Senior Notes issued
by the Company under the terms and conditions of the Senior
Note Agreements.
"SPV" shall have the meaning assigned to such term
in the definition of "Asset Securitization" in this Article
1 and NCB I, Inc. and any other Subsidiary of the Company
having powers limited to the holding of regular or residual
interests arising out of Asset Securitization.
"Subsidiary" shall mean any corporation a majority
of the capital stock of which at the time outstanding,
having ordinary voting power for the election of directors,
is owned by the Company directly or indirectly.
"Termination Event" means, with respect to any
Benefit Plan, (i) any Reportable Event with respect to such
Benefit Plan, (ii) the termination of such Benefit Plan, or
the filing of a notice of intent to terminate such Benefit
Plan, or the treatment of any amendment to such Benefit Plan
as a termination under ERISA Section 4041(c), (iii) the
institution of proceedings to terminate such Benefit Plan
under ERISA Section 4042 or (iv) the appointment of a
trustee to administer such Benefit Plan under ERISA Section
4042.
"Voting Stock" means Securities of any class or
classes of a corporation the holders of which are
ordinarily, in the absence of contingencies, entitled to
vote in the election of the corporate directors (or persons
performing similar functions).
Section 1.2 Accounting Terms. All accounting
terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles in the
United States.
Section 1.3 Time Period Computations. In the
computation of a period of time specified in this Agreement from a
specified date to a subsequent date, the word "from" means "from and
including" and the words "to" and "until" mean "to but excluding".
ARTICLE II
GENERAL LOAN PROVISIONS
Section 2.1 The Loan. Subject to the terms and
conditions of this Agreement, on the Loan Date the Bank shall lend
to the Company and the Company shall borrow from the Bank, the
aggregate principal amount of TWELVE MILLION UNITED STATES DOLLARS
($12,000,000) (the "Loan").
Section 2.2 Term of Loan. The entire principal
amount of the Loan shall be due and payable on the date in 1998 that
is three years after the Loan Date (the "Maturity Date").
Section 2.3 Proceeds of Loan. The Bank shall,
upon the Company's satisfaction of the conditions specified in
Article IV of this Agreement, make the entire principal amount of
the Loan available to the Company before 12:00 Noon (New York City
time) on the Loan Date in Dollars in immediately available funds at
the bank (and for credit to the account of the Company at such bank
designated by the Company) specified by the Company in the Notice of
Borrowing.
Section 2.4 The Note. The Loan shall be evidenced
by a Promissory Note of the Company, which shall be substantially in
the form of Exhibit A to this Agreement (appropriately completed),
dated the Loan Date, payable to the order of the Bank in the
principal amount of the Loan. The first and last days of each
interest period during the term of the Loan and each payment of
interest on the Loan shall be recorded by the Bank on the "Schedule
of Interest" attached to the Note and by specific reference made a
part thereof. Any prepayment of the principal amount of the Loan
shall be recorded by the Bank on the reverse side of the Note and
indicated on the "Schedule of Interest".
ARTICLE III
INTEREST AND REPAYMENT
Section 3.1 Interest on the Loan. The Loan shall
bear interest at the rate of six and seventy-one one-hundredths
percent (6.71%) per annum on the principal amount of the Loan from
time to time outstanding until the entire principal amount of the
Loan shall have been repaid.
Section 3.2 Additional Interest. If, after the
date of this Agreement, any Regulatory Change
(i) shall subject the Bank to any tax,
duty or other charge with respect to its obligation to make
or maintain the Loan, or shall change the basis of taxation
of payments to the Bank of the principal of or interest on
the Loan in respect of any other amounts due under this
Agreement in respect of its obligation to make the Loan
(except for changes in the rate of tax on the overall net
income of the Bank); or
(ii) shall impose, modify or deem applicable
any reserve, special deposit, capital adequacy or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, the Bank or shall impose
on the Bank any other condition affecting (1) the obligation
of the Bank to make or maintain the Loan; or (2) the Note;
and the result of any of the foregoing is to increase the cost to
the Bank of making or maintaining the Loan or to reduce the amount
of any sum received or receivable by the Bank under this Agreement
or under the Note, by an amount reasonably deemed by the Bank to be
material, then, within fifteen days after demand by the Bank, the
Company shall pay to the Bank such additional amount or amounts as
will compensate the Bank for such increased cost or reduction. A
certificate of the Bank setting forth the basis for determining such
additional amount or amounts necessary to compensate the Bank shall
be conclusive in the absence of manifest error.
Section 3.3 Interest after Maturity. In the event
the Company shall fail to make any payment of the principal amount
of, or interest on, the Loan when due (whether by acceleration or
otherwise), after giving effect to any applicable grace period
provided for in this Agreement, the Company shall pay interest on
such unpaid amount, payable from time to time on demand, from the
date such amount shall have become due to the date of payment
thereof, accruing on a daily basis, at a per annum rate (the
"Default Rate") equal to the greater of (i) the sum of the interest
rate on the Loan in effect immediately before such amount became
due, plus two per cent (2.0%) and (ii) the Base Rate, plus two per
cent (2.0%).
Section 3.4 Payment and Computations.
(A) All payments required or permitted to be made
to the Bank under this Agreement or the Note shall be made
to the Bank in Dollars at the Lending Office of the Bank in
immediately available funds.
(B) Interest on the Loan shall be computed on the
basis of a year of 360 days consisting of 12 months of 30
days each and, in the case of a portion of a month, for the
actual number of days (including the first day but excluding
the last day) elapsed.
(C) Interest on the Loan shall be payable in
arrears on each Interest Payment Date; provided, that in the
event that any Interest Payment Date shall be a day which is
not a Business Day, the obligation to make such payment
shall be deferred to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which
case the Interest Payment Date shall be advanced to the next
preceding Business Day.
(D) Whenever any payment of principal is required
or permitted to be made on a day which is not a Business
Day, the obligation of the Company to make such payment
shall be deferred until the next succeeding Business Day
and, in such case, such extension of time shall be included
in the computation of interest in respect of such principal
amount at the rate in effect at the date such principal
amount was otherwise due and payable.
Section 3.5 Payment at Maturity. Any principal
amount of the Note theretofore not repaid, together with any accrued
interest thereon, shall be due and payable in full on the Maturity
Date.
Section 3.6 Optional Prepayments; Certain Early
Repayments.
(A) Subject to the terms and conditions of this
Section 3.6, the Company may, at its sole option, prepay the
principal amount of the Loan in whole or in part (in any
amount of $1,000,000 or more) at any time and from time to
time (each an "Optional Prepayment") without premium or
penalty. Each Optional Prepayment shall be accompanied by
the payment of all accrued and unpaid interest to the date
of such Optional Prepayment on the principal amount of such
Optional Prepayment.
(B) In respect of each Optional Prepayment
proposed to be made by the Company, the right of the Company
to make such Optional Prepayment is subject to the Bank's
receipt from the Company, at least three Business Days prior
to the date specified therein as the date on which Optional
Prepayment is to be made, of a written notice (which shall
be irrevocable) specifying (i) the principal amount of such
Optional Prepayment and (ii) the date (which shall be a
Business Day) on which such Optional Prepayment will be
made.
(C) If the Company prepays all or any part of the
outstanding principal balance of the Loan in advance of the
Maturity Date (whether due to optional prepayment,
acceleration or for any other reason), in addition to the
payments on principal and accrued and unpaid interest, the
Company shall pay to the Bank, upon the request of the Bank,
such amount or amounts as shall be sufficient in the
reasonable opinion of the Bank, to compensate the Bank for
any loss, cost, or expense incurred as a result of any
payment or prepayment on a date other than the Interest
Payment Date for such loan, such compensation to include,
without limitation, an amount equal to the excess of (i) the
interest that would have been received from the Company
under this Agreement on any amounts to be reemployed during
the period between Interest Payment Dates or its remaining
portion over (ii) the interest component of the return that
the Bank determines it could have obtained had it placed
such amount on deposit in the interbank Dollar market
selected by it for a period equal to such period between
Interest Payment Dates or its remaining portion.
Section 3.7 Highly Leveraged Transaction. In the
event that the Loan shall be designated a "highly leveraged
transaction" (as defined in Bank Circular BC-242, dated October 30,
1989, as supplemented by Supplement 1, dated February 16, 1990, and
as may hereafter be supplemented or amended from time to time), the
Bank shall so notify the Company, whereupon the Company shall pay
additional compensation for the Loan at the rate of $150,000 per
annum from the date of such designation through the date that such
designation ceases to be effective or the Loan is repaid in full.
Such compensation shall be paid quarterly in arrears.
ARTICLE IV
CONDITIONS PRECEDENT TO THE LOAN
Section 4.1 Delivery on or Prior to Loan Date.
The obligation of the Bank to make the Loan to the Company hereunder
is subject to the condition precedent that the Bank shall have
received an irrevocable Notice of Borrowing from the Company on the
Business Day prior to the requested Loan Date that specifies the
Loan Date (which shall be a Business Day) and confirms that the
amount of the Loan shall be $8,000,000; and such obligation is
subject to the further condition precedent that the Bank shall have
received from the Company on or prior to the Loan Date the following
instruments, each dated as of the Loan Date:
(A) The Note, duly executed by the Company;
(B) An opinion of counsel to the Company in
form and substance satisfactory to the Bank;
(C) A certified copy of the resolutions of the
Board of Directors of the Company authorizing the execution
and delivery of this Agreement and the Note;
(D) A certificate of the Secretary, an
Assistant Secretary or an Assistant Treasurer of the Company
certifying the names and true signatures of the Authorized
Officers;
(E) A certified copy of the By-Laws of the
Company as in effect on the Loan Date;
(F) A certified copy of each Senior Note
Agreement and other agreement evidencing Indebtedness of the
Company for borrowed money in effect as of the Loan Date.
Section 4.2 Further Condition Precedent to the
Loan. The obligation of the Bank to make the Loan shall be subject
to the further conditions precedent that on the Loan Date the
following statements shall be true and correct and the Bank shall
have received a certificate signed by an Authorized Officer, dated
the Loan Date, to the effect that:
(A) The representations and warranties of the
Company contained in Article V are correct as of the Loan
Date as though made on and as of the Loan Date;
(B) No event has occurred and is continuing, or
would result from the Loan after giving effect to the
application of the proceeds therefrom, which constitutes an
Event of Default or would constitute an Event of Default but
for the requirement that notice be given or time elapse or
both;
(C) No Default shall have occurred and be
continuing at the time the Loan is to be made or would
result from the making of the Loan or from the application
of the proceeds thereof; and
(D) All legal matters incident to the closing
of the transactions contemplated by this Agreement and the
making of the Loan shall be satisfactory to the Bank and its
counsel.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
Section 5.1 Existence, Power and Authority. Each
of the Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and
authority to carry on its business as currently conducted and to own
or hold under lease its property; the Company is duly qualified or
diligently pursuing to become qualified to do business as a foreign
corporation in good standing in each other jurisdiction in which the
conduct of its business or the maintenance of its property requires
it to be so qualified; the Company has full corporate power and
authority to execute and deliver this Agreement and the Note and to
carry out the transactions contemplated by this Agreement.
Section 5.2 Authorization; Enforceable
Obligations. This Agreement and the Note have been duly authorized
and have been or will be duly executed and delivered by the Company
and constitute, or when executed and delivered pursuant hereto will
constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with their terms
(except as such enforceability may be limited by general principles
of the law of equity or by any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally).
Section 5.3 No Legal Bar. The execution, delivery
and performance by the Company of this Agreement and of the Note,
(i) do not and will not violate the certificate of incorporation or
charter, by-laws or any preferred stock provision of the Company or
(ii) do not and will not violate or conflict with any law,
governmental rule or regulation or any judgment, writ, order,
injunction, award or decree of any court, arbitrator, administrative
agency or other governmental authority applicable to the Company or
any indenture, mortgage, contract, agreement or other undertaking or
instrument to which the Company is a party or by which its property
may be bound and (iii) do not and will not result in the creation or
imposition of any lien, mortgage, security interest or other
encumbrance on any of its property pursuant to the provisions of any
such indenture, mortgage, contract, agreement or other undertaking
or instrument.
Section 5.4 Consents. The execution, delivery and
performance by the Company of this Agreement and of the Note, do not
and will not require any consent, which has not been obtained, of
any other Person (including, without limitation, stockholders of the
Company) or any consent, license, permit, authorization or other
approval of, any giving of notice to, exemption by, any registration
, declaration or filing with, or any taking of any other action in
respect of, any court, arbitrator, administrative agency or other
governmental authority.
Section 5.5 Litigation. Except as previously
disclosed to the Bank in writing, there is no action, suit,
investigation or proceeding by or before any court, arbitrator,
administrative agency or other governmental authority pending or, to
the knowledge of the Company, threatened (i) which involves any of
the transactions contemplated by this Agreement or (ii) against or
affecting the Company which could be reasonably expected to
materially adversely affect the financial condition, business or
operation of the Company.
Section 5.6 No Default. The Company is not in
default under any material order, writ, injunction, award or decree
of any court, arbitrator, administrative agency or other
governmental authority binding upon it or its property, or any
material indenture, mortgage, contract, agreement or other
undertaking or instrument to which it is a party or by which its
property may be bound, and nothing has occurred which would
materially adversely affect the ability of the Company, to carry on
its business or perform its obligations under any such material
order, writ, injunction, award or decree or any such material
indenture, mortgage, contract, agreement or other undertaking or
instrument.
Section 5.7 Financial Condition. The consolidated
balance sheet of the Company and its Consolidated Subsidiaries as at
December 31, 1994, and the related consolidated statements of
income, stockholders' or members' equity and cash flows for the
fiscal year ended on such date, reported upon by Deloitte & Touche,
and the unaudited consolidated statement of financial condition of
the Company and its Consolidated Subsidiaries as at June 30, 1995,
and the related consolidated statements of income and stockholders'
or members' equity for the three (3) months ended that date, present
fairly the consolidated financial condition of the Company and its
Consolidated Subsidiaries as of said date and the consolidated
results of their operations for such fiscal year, in conformity with
GAAP. No material adverse changes have occurred in the financial
condition of the Company or its Consolidated Subsidiaries since June
30, 1995.
Section 5.8 Use of Proceeds. The Company shall
use the proceeds of the Loan for its general corporate purposes.
None of the proceeds of the Loan shall be used to purchase or carry,
or reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulations U and X
of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purchasing or carrying of any margin
stock. If requested by the Bank, the Company shall complete and
sign Part I of a copy of Federal Reserve Form U-1 referred to in
Regulation U and deliver such copy to the Bank.
Section 5.9 Company Not an Investment Company.
The Company is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
Section 5.10 Company and Subsidiaries, Etc. Not a
Holding Company. Neither the Company nor any of its subsidiaries is
a "holding company", or a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
Section 5.11 Environmental Matters. The Company
and its Consolidated Subsidiaries conduct their respective
operations in compliance with all applicable laws and regulations
concerning the discharge of substances into the environment and
other environmental control matters, except to the extent that non-
compliance would not have a material adverse effect on the business,
results of operations or condition (financial or otherwise) of the
Company or its Consolidated Subsidiaries taken as a whole. Neither
the Company nor any of its Consolidated Subsidiaries has any
liability, contingent or otherwise, under any law, ordinance or
regulation relating to the storage, transport, disposal or release
of "oil", "petroleum products", "hazardous substance", "hazardous
waste", "hazardous material", "hazardous chemical substance",
"refuse" or any other term of similar import (as such terms are
defined in any such law, ordinance or regulation), except to the
extent that any such liability would not have a material adverse
effect on the business, results of operations or condition
(financial or otherwise) of the Company or its Consolidated
Subsidiaries taken as a whole.
ARTICLE VI
COVENANTS
Section 6.1 Affirmative Covenants. The Company
covenants and agrees that, so long as this Agreement shall remain in
effect or any of the principal of or interest on the Note hereunder
shall remain unpaid:
(a) The Company will deliver to the Bank,
within ninety (90) days after the end of each fiscal year,
the consolidated and consolidating balance sheet of the
Company and its Consolidated Subsidiaries as at the end of
such fiscal year, and the related consolidated and
consolidating statements of income, stockholders' or
members' equity and cash flows for such fiscal year,
accompanied by a certificate of independent public
accountants of recognized standing satisfactory to the Bank,
which certificate will contain no material exceptions or
qualifications except such as are acceptable to the Bank;
(b) The Company will deliver to the Bank,
within sixty (60) days after the end of each of the first
three quarters of each fiscal year, the consolidated balance
sheet of the Company and its Consolidated Subsidiaries as at
the end of such quarter, and the related consolidated
statements of income and stockholders' equity for such
quarter, certified (subject to year-end audited adjustments)
by an authorized accounting or financial officer of the
Company;
(c) The Company shall deliver to the Bank
within thirty (30) days after it files them with the
Securities and Exchange Commission copies of the annual
reports and of the information, documents, and other reports
(or copies of such portions of any of the foregoing as the
Securities and Exchange Commission may by rules and
regulations prescribe) which the Company is required to file
with the Securities and Exchange Commission pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act
of 1934;
(d) The Company will deliver to the Bank, from
time to time, such additional information regarding its
financial condition, business or affairs as the Bank may
reasonably request;
(e) The Company will deliver to the Bank,
simultaneously with the delivery of each set of financial
statements referred to in (a) above, a certificate of the
President, any Vice President, or the Treasurer of the
Company (i) stating that in the course of the performance of
his duties he would normally obtain knowledge of any
condition or event which constitutes an Event of Default, or
any event, act or condition which with notice or lapse of
time or both would constitute an Event of Default, (ii)
stating whether or not he has obtained knowledge of any such
condition, act or event and, if so, specifying each such
condition, act or event of which he has knowledge and the
nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto;
and (iii) setting forth the calculations necessary to
establish the Company's compliance with Section 6.1(m)
hereof;
(f) The Company will preserve and maintain its
corporate existence and each of the material rights,
privileges, licenses and franchises, which are necessary or
desirable in the normal conduct of its business. The
Company will comply with all applicable laws, rules,
regulations, and orders of any governmental or regulatory
body or authority, a breach of which could have a material
adverse effect on the financial condition or business (taken
as a whole) of the Company, except where contested in good
faith and by proper proceedings;
(g) Promptly after becoming aware thereof the
Company will deliver to the Bank notice of any Event of
Default and any event which, with the passage of time or the
giving of notice or both, would become an Event of Default;
(h) The Company will keep proper books of
record and account in a manner reasonably satisfactory to
the Bank in which, true, complete and correct entries shall
be made of all dealings or transactions in relation to its
business and activities;
(i) The Company will permit the Bank to make or
cause to be made (and, after the occurrence of and during
the continuance of an Event of Default, at the Company's
expense), inspections and audits of any books, records and
papers of the Company and to make extracts therefrom and
copies thereof, or to make inspections and examinations of
any properties and facilities of the Company, on reasonable
notice, at all such reasonable times and as often as the
Bank may reasonably require, in order to assure that the
Company is and will be in compliance with its obligations
under this Agreement;
(j) The Company will pay and discharge all of
its obligations and liabilities, including, without
limitation, all taxes, assessments and governmental charges
upon its income and properties, when due, unless and to the
extent only that such obligations, liabilities, taxes,
assessments and governmental charges shall be contested in
good faith any by appropriate proceedings and that proper
and adequate book reserves relating thereto are established
by the Company, and then only to the extent that a bond is
filed in cases where the filing of a bond is necessary to
avoid the creation of a lien or encumbrance against any of
its properties;
(k) The Company will promptly notify the Bank
in writing of any litigation, legal proceeding or dispute,
other than disputes in the ordinary course of business or,
whether or not in the ordinary course of business, involving
amounts in excess of Two Hundred Fifty Thousand Dollars
($250,000), affecting the Company whether or not fully
covered by insurance, and regardless of the subject matter
thereof (excluding, however, any actions relating to
workmen's compensation claims or negligence claims relating
to use of motor vehicles, if fully covered by insurance,
subject to deductibles);
(l) The Company will:
(i) Maintain with responsible insurance
companies rated "A" or better by A.M. Best Co. such
insurance on such of its properties, in such
amounts and against such risks as is customarily
maintained by similar businesses (including,
without limitation, public liability, embezzlement
or other criminal misappropriation insurance); file
with the Bank upon its request a detailed list of
the insurance then in effect, stating the names of
the insurance companies, the amounts and rates of
the insurance, dates of the expiration thereof and
the properties and risks covered thereby; and,
within 10 days after notice in writing from the
Bank, obtain such additional insurance as the Bank
may reasonably request; and
(ii) Carry all insurance available
through the PBGC or any private insurance companies
covering its obligations (if any) to the PBGC;
(m) The Company will maintain:
(i) At all times, Consolidated Effective
Net Worth in an amount not less than the sum of (i)
Two Hundred Sixty-Five Million Dollars
($265,000,000) plus (ii) the sum, for all fiscal
quarters of the Company ended subsequent to January
1, 1993, of the greater of (A) Zero Dollars ($0)
and (B) fifty percent (50%) of Consolidated Net
Earnings for each such fiscal quarter.
(ii) At all times, Consolidated Adjusted
Net Worth in an amount not less than the sum of (i)
One Hundred Million Dollars ($100,000,000) plus
(ii) the sum, for all fiscal quarters of the
Company ended subsequent to January 1, 1993, of the
greater of (A) Zero Dollars ($0) and (B) fifty
percent (50%) of Consolidated Net Earnings for each
such fiscal quarter.
(iii) With respect to the Company at all
times, Investments of the types described in
Section 6.2(i)(i) through (xii) in an aggregate
amount not less than Twenty-Five Million
($25,000,000) Dollars.
(iv) With respect to the Company for each
period of four (4) consecutive fiscal quarters of
the Company, Consolidated Earnings Available for
Fixed Charges not less than one hundred ten percent
(110%) of Consolidated Fixed Charges for such
period.
(v) With respect to the Company, Paid-in-
Capital in each of the following Subsidiaries in an
amount not greater than the following amounts:
Amount of
Subsidiary Paid-in-Capital
NCB Financial Corporation $15,000,000
NCB Mortgage $15,000,000
NCB Business Credit $15,000,000
(vi) With respect to the Company at all
times, Investments in Subsidiaries (other than as
set forth in subsection 6.1(m)(v) above and
excluding SPV's and secured loans to NCB Business
Credit and NCB Mortgage) in an aggregate amount
with respect to all such Subsidiaries of not
greater than $15,000,000.
(vii) At all times, a ratio of
Consolidated Debt to Consolidated Adjusted Net
Worth in an amount not greater than 8.0 to 1.0.
For purposes of calculating this ratio only,
Consolidated Debt shall include the full balance of
mortgage backed securities sold by the Company or
any of its Subsidiaries with any first loss
recourse provision against the Company or any of
its Subsidiaries attached thereto.
For purposes of calculating the ratio set forth in
subsection 6.1(m)(vii) above and in subsection
6.1(m)(viii) below only, "Consolidated Adjusted Net
Worth" shall be reduced by the amount by which the
sum of 75% of (i) 90 day overdue accounts, (ii)
non-performing loans, (iii) REO, in substance
foreclosure and other miscellaneous repossession
and, (iv) modified loans, exceed the reserves for
credit losses established by the Company and its
Subsidiaries.
(viii) At all times, a ratio of
Consolidated Senior Debt of the Company to
Consolidated Adjusted Net Worth in an amount not
greater than 6.5 to 1.0.
(ix) Qualified Assets of not less than one
hundred (100%) percent of the sum (at any date of
determination thereof) of:
(i) NCCB Senior Obligations,
plus
(ii) the aggregate unpaid
principal amount of Subordinated Debt (as
defined in the Senior Note Agreements as in
effect on the date hereof), less
(iii) the aggregate unpaid
principal amount of Class A Notes.
(n) The Company will comply and remain at all
times in compliance with all material provisions of the
Senior Note Agreements and all other agreements evidencing
Indebtedness of the Company for borrowed money and will
deliver to the Bank a certified copy of each Senior Note
Agreement and other such agreement entered into after the
Loan Date.
Section 6.2 Negative Covenants. The Company
covenants and agrees that, so long as this Agreement shall remain in
effect or any of the principal of or interest on any Note hereunder
shall remain unpaid, the Company, will not:
(a) Merge or consolidate with or into any other
corporation whether or not the Company will be the surviving
or resulting corporation. The Company agrees that it will
not sell, lease or otherwise dispose of all or substantially
all of its property;
(b) Sell or transfer any of its property to
anyone (other than to an entity at least fifty per cent
(50%) of the capital stock of which at the time outstanding,
having ordinary voting power for the election of directors,
is owned by the Company directly or indirectly through
Subsidiaries) with the intention of taking back a lease of
such property, except a lease for a temporary period during
or at the end of which it is intended that the use by the
Company of such property will be discontinued;
(c) Create, or assume or permit to exist, any
Lien on any of the properties or assets of the Company
whether now owned or hereafter acquired, except:
(i) Permitted Liens;
(ii) As set forth on Exhibit B annexed
hereto;
(iii) To secure obligations in connection
with Eligible Derivatives;
(d) Assume, endorse, be or become liable for, or
guarantee, the obligations of any Person, except by the
endorsement of negotiable instruments for deposit or
collection in the ordinary course of business. For the
purposes hereof, the term "guarantee" shall include any
agreement, whether such agreement is on a contingency or
otherwise, to purchase, repurchase or otherwise acquire
Indebtedness of any other Person, or to purchase, sell or
lease, as lessee or lessor, property or services, in any
such case primarily for the purpose of enabling another
person to make payment of Indebtedness, or to make any
payment (whether as an advance, capital contribution,
purchase of an equity interest or otherwise) to assure a
minimum equity, asset base, working capital or other balance
sheet or financial condition, in connection with the
Indebtedness of another Person, or to supply funds to or in
any manner invest in another Person in connection with such
Person's Indebtedness. Asset Securitization Recourse
Liabilities shall not constitute "guarantees" hereunder;
(e) Acquire all or substantially all of the
assets or any of the capital stock of any Person except as
permitted under Section 6.1(m)(vi);
(f) (i) Except for redemptions by the Company of
its Class B1 Common Stock from the holders thereof who no
longer have loans from the Company outstanding, purchase,
redeem, retire or otherwise acquire, directly or indirectly,
or make any sinking fund payments with respect to, any
shares of any class of stock of the Company now or hereafter
outstanding or set apart any sum for any such purpose; or
(ii) Declare or pay any dividends or make
any distribution of any kind on the Company's outstanding
stock, or set aside any sum for any such purpose, except
that the Company may declare or pay any dividend payable
solely in shares of its common stock;
(g) Make any material change in its business, or
in the nature of its operation, or liquidate or dissolve
itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose
of any of its property, assets or business except in the
ordinary course of business and for a fair consideration, or
dispose of any shares of stock or any Indebtedness, whether
now owned or hereafter acquired;
(h) Make any voluntary or optional prepayment of
any Indebtedness of the Company or any of its Subsidiaries
for borrowed money incurred or permitted to exist under the
terms of this Agreement, other than:
(i) Indebtedness evidenced by the November
10, 1994 Note, the February 8, 1995 Note and the Note;
(ii) Indebtedness of NCB Business Credit
and NCB Mortgage to the Company; and
(iii) any Indebtedness which has a
maturity of not more than one year from the date of its
occurrence;
(i) Make, or suffer to exist, any Investment in
any Person, including, without limitation, any shareholder,
director, officer or employee of the Company or any of its
Subsidiaries, except investments in:
(i) Demand deposits in and one-to-four day
unsecured loans to Selected Banks;
(ii) Marketable obligations of the United
States;
(iii) Marketable obligations guaranteed by
or insured by the United States, or those for which
the full faith and credit of the United States is
pledged for the repayment of principal and interest
thereon;
(iv) Marketable obligations issued,
guaranteed, or fully insured by any agency,
instrumentality, or corporation of the United
States established or to be established by the
Congress, for which the credit of such agency,
instrumentality, or corporation is pledged for the
repayment of the principal and interest thereof;
(v) Marketable general obligations of a
state, a territory or a possession of the United
States, or any political subdivision of any of the
foregoing, or the District of Columbia,
unconditionally secured by the full faith and
credit of such state, territory, possession,
political subdivision or district provided that
such state, territory, possession, political
subdivision or district has general taxing
authority and the power to levy such taxes as may
be required for the payment of principal and
interest thereof;
(vi) Domestic and London interbank market,
negotiable time and variable rate certificates of
deposit issued by Selected Banks;
(vii) Marketable bankers' acceptances and
finance bills accepted by Selected Banks;
(viii) Prime commercial paper having a
credit rating equal to at least A-2 issued by
Standard & Poor's Corporation ("S&P"), P-2 issued
by Moody's Investors Service, Inc. ("Moody's") or
Duff-2 issued by Duff & Phelps Inc.;
(ix) Marketable corporate debt securities
having an A credit rating issued by both S&P and
Moody's;
(x) Repurchase, reverse repurchase
agreements and security lending agreements
collateralized by securities of the type described
in subsections (ii) and (iv);
(xi) Asset-backed securities issued
against a pool of receivables which have a long-
term rating of AAA or better by Standard & Poors,
Moodys or Duff & Phelps and which have an average
life or final maturity of no more than five years;
(xii) Mortgaged-backed securities issued
against an underlying pool of mortgages which have
a long-term rating of AAA or better by Standard &
Poors, Moodys or Duff & Phelps; provided such
mortgage-backed securities shall have an average
life, as determined by the dealer's prepayment
assumptions at the time of purchase, of no more
than five years;
(xiii) Subsidiaries, subject to the
limitations stated in subsection 6.1(m)(vi) hereof;
(xiv) Promissory notes and other interest
bearing obligations acquired in the ordinary course
of business and the issuance of letters of credit
in the ordinary course of business;
(j) Change its fiscal year;
(k) (i) Be or become obligated to the Pension
Benefit Guaranty Corporation, other than in respect of
annual premium payments, in excess of $50,000 in the
aggregate;
(ii) Be or become obligated to the IRS with
respect to excise or other penalty taxes provided for in
Section 4975 of the Code in excess of $50,000 in the
aggregate;
(l) Modify, amend, supplement or terminate, or
agree to modify, amend, supplement or terminate its
certificate of incorporation or by-laws;
(m) Except as expressly permitted by this
Agreement, directly or indirectly: (i) make any investment
in an Affiliate; or (ii) consolidate with or purchase or
acquire assets from an Affiliate; or enter into any other
transaction directly or indirectly with or for the benefit
of any Affiliate (including, without limitation, guarantees
and assumptions of obligations of an Affiliate); provided,
however, that (x) any Affiliate who is an individual may
serve as an employee or director of the Company and receive
reasonable compensation for his services in such capacity,
(y) the Company may enter into any transaction with an
Affiliate providing for the leasing of property, the
rendering or receipt of services or the purchase or sale of
product, inventory and other assets in the ordinary course
of business if the monetary or business consideration
arising therefrom would be substantially as advantageous to
the Company as the monetary or business consideration that
would obtain in a comparable arm's length transaction with a
Person not an Affiliate, and (z) subject to compliance with
Section 6.1(m) and the other provisions of this Agreement,
the Company may make annual charitable contributions in
reasonable amounts as may be determined from time to time by
the Board of Directors of the Company to NCB Development
Corporation, a not-for-profit corporation organized under
the laws of the District of Columbia;
(n) Subject to subsections 6.1(m)(vi), (vii) and
(viii), create, incur, permit to exist or have outstanding
any Indebtedness, except:
(i) Indebtedness under the NatWest Loan
Agreement, the November 10, 1994 Note, the February
8, 1995 Note and the Note;
(ii) Taxes, assessments and governmental
charges, non-interest bearing accounts payable and
accrued liabilities, in any case not more than 90
days past due from the original due date thereof
(e.g., deferred compensation and deferred taxes)
and in each case incurred and continuing in the
ordinary course of business;
(iii) Indebtedness under, and as permitted
by, the Senior Note Agreements;
(iv) Indebtedness under the Class A Notes;
and
(v) Indebtedness of NCB Business Credit
and NCB Mortgage to the Company.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1. Events of Default. If one or more of
the following Events of Default shall occur and be continuing, that
is to say:
(a) (i) the Company shall fail to make any
payment of principal on the Note when due; or
(ii) the Company shall fail to make any
payment of interest on the Note when due and such
failure shall continue for a period of three (3)
Business Days; or
(b) the Company shall default in any payment of
principal of or interest on any other obligation for
borrowed money beyond any period of grace provided with
respect thereto or in the performance of any other
agreement, term or condition contained in any instrument or
agreement evidencing, securing, guaranteeing or otherwise
relating to any such obligation and shall not have cured
such default within any period of grace provided by such
agreement, or any event or condition referred to in any such
agreement shall occur or fail to occur, if the effect of
such default, event or condition is to cause, or permit the
holder or holders of such obligations (or a trustee on
behalf of such holder or holders) to cause, such obligation
to become due prior to its stated maturity and such
accelerated obligation is for an amount in excess of one per
cent (1%) of the Indebtedness of the Company and its
Consolidated Subsidiaries; or
(c) any representation or warranty herein made
by the Company, or any certificate or financial statement
furnished pursuant to the provisions hereof, shall prove to
have been false or misleading in any material respect as of
the time made or furnished; or
(d) the Company shall default in the performance
or observance of any covenant, condition or agreement
contained in Section 6.1(g), 6.1(n) or 6.2; or
(e) the Company shall default in the
performance or observance of any other covenant, condition
or provision hereof and such default shall not be remedied
within thirty (30) days after written notice thereof is
delivered to the Company by the holder of the Note; or
(f) a proceeding (other than a proceeding
commenced by the Company) shall have been instituted in a
court having jurisdiction in the premises seeking a decree
or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company
or for any substantial part of its total assets, or for the
winding-up or liquidation of its affairs and such
proceedings shall remain undismissed or unstayed and in
effect for a period of sixty (60) consecutive days or such
court shall enter a decree or order granting the relief
sought in such proceeding; or
(g) the Company shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, shall consent to the entry
of an order for relief in an involuntary case under any such
law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the
Company or for any substantial part of its total assets, or
shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in
furtherance of any of the foregoing; or
(h) a judgment or order shall be entered against
the Company by any court, and (i) in the case of a judgment
or order for the payment of money, either (A) such judgment
or order shall continue undischarged and unstayed for a
period of 10 days in which the aggregate amount of all such
judgments and orders exceeds $500,000 or (B) enforcement
proceedings shall have been commenced upon such judgment or
order and (ii) in the case of any judgment or order for
other than the payment of money, such judgment or order
could, in the reasonable judgment of the Bank, together with
all other such judgments or orders, have a materially
adverse effect on the Company; or
(i) (i) any Termination Event shall occur with
respect to any Benefit Plan, (ii) any Accumulated Funding
Deficiency, whether or not waived, shall exist with respect
to any Benefit Plan, (iii) any Person shall engage in any
Prohibited Transaction involving any Benefit Plan, (iv) the
Company or any ERISA Affiliate shall be in "default" (as
defined in ERISA Section 4219(c)(5)) with respect to
payments owing to a Multiemployer Benefit Plan as a result
of the Company's or any ERISA Affiliate's complete or
partial withdrawal (as described in ERISA Section 4203 or
4205) from such Multiemployer Benefit Plan, (v) the Company
or any ERISA Affiliate shall fail to pay when due an amount
that is payable by it to the PBGC or to a Benefit Plan under
Title IV of ERISA, or (vi) a proceeding shall be instituted
by a fiduciary of any Benefit Plan against the Company or
any ERISA Affiliate to enforce ERISA Section 515 and such
proceeding shall not have been dismissed within 30 days
thereafter, except that no event or condition referred to in
clauses (i) through (vi) shall constitute an Event of
Default if it, together with all other such events or
conditions at the time existing, has not had, and in the
reasonable determination of the Bank will not have, a
materially adverse effect on the Company; or
then, and in any such event, the Bank upon notice to the Company may
(a) declare the entire outstanding principal amount, if any, of the
Note (if then issued), any and all accrued and unpaid interest
thereon and any and all other amounts payable by the Company to the
Bank under this Agreement or the Note to be forthwith due and
payable, whereupon the entire outstanding principal amount, if any,
of the Note, together with any and all accrued and unpaid interest
thereon and any and all other such amounts, shall become and be
forthwith due and payable, and (b) terminate the obligation of the
Bank to make the Loan, in each case without presentment, demand,
protest or further notice of any kind, all of which are hereby
expressly waived by the Company; provided, however, that in the
event of the entry of an order for relief with respect to the
Company under the Federal Bankruptcy Code, (a) any principal amount
of the Note then outstanding, together with any and all accrued and
unpaid interest thereon and any and all such other amounts, shall
thereupon automatically become and be due and payable, and (b) the
Bank's obligation to make the Loan shall thereupon automatically
terminate, in each case without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the
Company.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendments and Waivers; Cumulative
Remedies. No delay or failure of the Bank or the holder of any Note
in exercising any right, power or privilege hereunder shall affect
such right, power or privilege; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or privilege preclude any further
exercise thereof or of any other right, power or privilege. The
rights and remedies of the Bank, of any other holder of any Note
hereunder and of the Company are cumulative and not exclusive of any
rights or remedies which any of them would otherwise have. Any
waiver, permit, consent or approval of any kind or character
(whether involving a breach, default, provision, condition or term
hereof or otherwise) on the part of the Bank, of the holder of any
Note, or of the Company under this Agreement or under any Note must
be in writing and shall be effective only in the specific instance
and for the purpose for which given and only to the extent set forth
specifically in such writing. No notice or demand given hereunder
shall entitle the recipient thereof to any other or further notice
or demand in similar or other circumstances.
Section 8.2 Survival of Representations and
Warranties. All representations, warranties, covenants and
agreements of the Company contained herein or made in writing in
connection herewith shall survive the execution and delivery of this
Agreement, the making of Loans hereunder and the issuance of the
Note, provided that the survival of a representation or warranty
shall not constitute a restatement of such representation or
warranty after the Effective Date.
Section 8.3 Supervening Illegality. If, after the
Loan Date, as the result of (i) the adoption of any law, rule or
regulation by the United States of America or Switzerland, or any
Governmental Body of either thereof, (ii) any change in the existing
laws, rules and regulations of the United States of America or
Switzerland, or any Governmental Body of either thereof, (iii) the
issuance of any order or decree by any Governmental Body of either
thereof, (iv) any change in the interpretation or administration of
any applicable law, rule, regulation, order or decree by any
Governmental Body (including any central bank or similar agency) of
either thereof charged with the interpretation or administration
thereof, or (v) compliance by the Bank with any request or directive
(whether or not having the force of law) of any Governmental Body of
either thereof, it shall be unlawful or impossible for the Bank to
maintain the Loan (after the Bank shall have used reasonable efforts
to avoid such result), the Bank shall so notify the Company and the
Bank may require the Company to prepay the entire principal amount
of, and all accrued and unpaid interest on, the Loan, together with
any amount payable pursuant to Section 3.6(C), by giving the Company
at least thirty (30) business days' prior written notice. If after
the Effective Date and prior to the Loan Date it shall become
unlawful or impossible for the Bank to make the Loan, this Agreement
shall terminate forthwith and neither the Bank nor the Company shall
have any further rights or obligations under this Agreement.
Section 8.4 No Reduction in Payments. All
payments due to the Bank hereunder, and all other terms, conditions,
covenants and agreements to be observed and performed by the Company
hereunder, shall be made, observed or performed by the Company
without any reduction or deduction whatsoever, including any
reduction or deduction for any set-off, recoupment, counterclaim
(whether sounding in tort, contract or otherwise) or tax. The Bank
has submitted to the Company two duly completed and signed copies of
Form 4224 of the United States Internal Revenue Service relating to
all amounts to be received by such Bank pursuant to this Agreement.
The Bank shall, from time to time, submit to the Company such
additional duly completed and signed copies of such forms (or such
successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may be (i) requested
in writing by the Company and (ii) appropriate under then current
United States law or regulations to avoid or reduce United States
withholding taxes on payments in respect of all amounts to be
received by the Bank pursuant to this Agreement.
Section 8.5 Change of Control Option. (A) In the
event that there shall occur any Change of Control (as defined
below) in respect of the Company, the Bank shall have the right, at
its option exercisable at any time within six months following the
Change Date (as defined below), to require the Company to purchase
the Note on the Purchase Date (as defined below) at a purchase price
that shall be equal to the sum of (i) the principal amount of the
Note then outstanding, plus (ii) any and all accrued and unpaid
interest on the Note to the Purchase Date plus (iii) the amount that
would be payable by the Company under Section 3.6(C) in the case of
a prepayment in full of the Note (the "Purchase Price").
(B) The Company shall give the Bank written
notice of the occurrence of a Change of Control within five Business
Days following the Change Date. No failure of the Company to give
notice of a Change of Control shall limit the right of the Bank to
require the Company to purchase the Note pursuant to this Section
8.5.
(C) The Bank may exercise its option hereunder
to require the Company to purchase the Note by delivering to the
Company at any time within six months after the Change Date (i)
written notice of such exercise specifying the Purchase Date and
(ii) the Note duly endorsed. The Bank's commitment shall
automatically terminate immediately upon the Company's receipt of
the Bank's written notice of such exercise of its option under and
in accordance with this Section 8.5.
(D) In the event of the exercise by the Bank of
its option under this Section 8.5 in the manner provided herein, the
Company shall pay or cause to be paid to the Bank on the Purchase
Date the Purchase Price (determined in accordance with Subsection
8.5(A)) in immediately available funds.
(E) As used in this Section 8.5, the term:
(1) "Change Date" means the date on
which any Change of Control shall be deemed to have
occurred; provided, that, if the Company shall fail to give
timely notice of the occurrence of a Change of Control to
the Bank as provided in Subsection 8.5(B) of this Section
8.5, for the purpose of determining the duration of the
option of the Bank granted under this Section 8.5, "Change
Date" shall mean the earlier of (i) the date on which notice
of a Change of Control is duly given by the Company to the
Bank or (ii) the date on which the Bank obtains actual
knowledge of the Change of Control.
(2) "Change of Control" means when, and
shall be deemed to have occurred at such time as, a "person"
or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of more
than fifty per cent (50%) of the then outstanding Voting
Stock of the Company; provided, that fifty per cent shall
become seventy per cent (70%) with respect to any "employee
benefit plan" (as defined in Section 3(3) of ERISA)
maintained by the Company or any Subsidiary of the Company
or any trust or funding vehicle maintained for or pursuant
to such "employee benefit plan".
(3) "Purchase Date" means the date on
which the Company shall purchase the Note from the Bank
pursuant to the exercise by the Bank of its option under
this Section 8.5 pursuant to a notice given to the Company
in accordance with Subsection 8.5(C) of this Section 8.5,
which date shall be a business day not less than 90 nor more
than 120 days after the date the Bank gives the Company
written notice of such exercise.
(4) "Voting Stock" shall mean capital
stock of the Company of any class or classes (however
designated) the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election
of the Board of Directors of the Company, it being
understood that, at the Effective Date, the Common Stock,
Classes B and C $100 par value, of the Company are the only
outstanding classes of capital stock of the Company that
constitute "Voting Stock".
Section 8.6 Stamp Taxes. The Company agrees to
pay, and to save the Bank harmless from all liability for, any
Delaware or Federal stamp, transfer, documentary or similar taxes,
assessments or charges (herein "Stamp Taxes"), and any penalties or
interest with respect thereto, which may be assessed, levied,
collected or imposed, or otherwise become payable, in connection
with the execution and delivery of this Agreement or the Note.
Section 8.7 Notices. Any notice, statement,
request or demand required or permitted hereunder to be in writing
may be given by telex, cable or electronic communication means. All
notices, statements, requests and demands given to or made upon
either party hereto in accordance with the provisions of this
Agreement shall be deemed to have been given or made in the case of
telephonic notice (to the extent expressly permitted hereunder) when
made, or in the case of any other type of notice, when actually
received, if to the Company, to it at
National Consumer Cooperative Bank
1401 Eye Street, N.W. - Suite 700
Washington, D.C. 20005
Attention: Richard L. Reed
Telecopy: (202) 336-7803
and:
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Attention: Martin J. Flynn, Esq.
Telecopy: 202-828-2195
and if to the Bank, to it at:
Credit Suisse
Tower 49
12 East 49th Street
New York, New York 10017
Attention: Dawn E. Rubinstein
Telecopy: (212) 238-5389
or such other address for notice as either party may designate for
itself in a notice to the other party, except in cases where it is
expressly provided herein that such notice, statement, request or
demand shall not be effective until received by the party to whom it
is addressed.
Section 8.8 Governing Law. This Agreement and the
Note shall be deemed to be contracts under the laws of the State of
New York and for all purposes shall be governed by and construed in
accordance with the laws of said state.
Section 8.9 Successors and Assigns. (a) This
Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the
parties hereto, provided that the Company may not assign or transfer
any of its interest hereunder without the prior written consent of
the Bank.
(b) The Bank may make, carry or transfer the
Loan at, to or for the account of, any of its branch offices or the
offices of any of its Affiliates.
(c) The Bank may assign its rights and delegate
its obligations under this Agreement; provided that any such
assignment or delegation (other than the pledge of the Note to the
Federal Reserve Bank) may be made only with the prior written
consent of the Company, which consent shall not be unreasonably
withheld or delayed. The Bank may sell participations in all or any
part of the Loan made by it or its commitment or any other interest
herein or in the Note to another bank or other entity. In the case
of an assignment, upon notice thereof by the Bank to the Company,
the assignee shall have, to the extent of such assignment (unless
otherwise provided thereby), the same rights and benefits as it
would have if it were the Bank hereunder and the holder of the Note,
and, if the assignee has expressly assumed, for the benefit of the
Company, the Bank's obligations hereunder, the Bank shall be
relieved of its obligations hereunder to the extent of such
assignment and assumption. In the case of a participation, the
participant shall not have any rights under this Agreement or the
Note or any other document delivered in connection herewith (the
participant's rights against the Bank in respect of such
participation to be those set forth in the agreement executed by the
Bank in favor of the participant relating thereto) and all amounts
payable by the Company shall be determined as if the Bank had not
sold such participation.
Section 8.10 Maximum Rate of Interest Permitted by
Law. Nothing in this Agreement shall require the Company to pay
interest for the account of the Bank at a rate exceeding the maximum
rate permitted by applicable law to be charged or received by the
Bank, it being understood that neither this Section nor Section 8.8
is intended to make the criminal laws of any jurisdiction applicable
in circumstances in which they would not otherwise apply. If the
rate of interest specified herein or in the Notes would otherwise
exceed the maximum rate so permitted to be charged or received with
respect to any Note, the rate of interest required to be paid for
the account of the Bank shall be automatically reduced to such
maximum rate.
Section 8.11 Expenses; Indemnification. (a) The
Company shall save the Bank harmless against all reasonable out-of-
pocket expenses (including attorneys' fees and expenses) of the Bank
and shall indemnify the Bank, its Affiliates, officers, employees
and agents ("Indemnified Persons") against the costs of preparing
this Term Loan Agreement and the Note, all costs, expenses, losses
and damages arising in connection with this Agreement or the Note,
including with respect to any Credit Agreement Related Claim. The
obligation of the Company under this paragraph shall survive the
payment of the Note.
(b) All amounts payable by the Company under
Section 8.11(a) shall be immediately due upon written request by the
Bank for the payment thereof.
Section 8.12 Set-Off; Suspension of Payment and
Performance. The Bank is hereby authorized by the Company, at any
time and from time to time, without notice, (a) during any Event of
Default, to set off against, and to appropriate and apply to the
payment of, the liabilities of the Company under this Agreement and
the Note (whether matured or unmatured, fixed or contingent or
liquidated or unliquidated) any and all liabilities owing by the
Bank or any of its Affiliates to the Company (whether payable in
Dollars or any other currency, whether matured or unmatured and, in
the case of liabilities that are deposits, whether general or
special, time or demand and however evidenced and whether maintained
at a branch or office located within or without the United States)
and (b) during any Event of Default, to suspend the payment and
performance of such liabilities owing by such Person or its
Affiliates and, in the case of liabilities that are deposits, to
return as unpaid for insufficient funds any and all checks and other
items drawn against such deposits.
Section 8.13 Judicial Proceedings; Waiver of Jury
Trial. Any judicial proceeding brought against the Company with
respect to any Credit Agreement Related Claim may be brought in any
court of competent jurisdiction in the City of New York, and, by
execution and delivery of this Agreement, the Company (a) accepts,
generally and unconditionally, the nonexclusive jurisdiction of such
courts and any related appellate court and irrevocably agrees to be
bound by any judgment rendered thereby in connection with any Credit
Agreement Related Claim and (b) irrevocably waives any objection it
may now or hereafter have as to the venue of any such proceeding
brought in such a court or that such a court is an inconvenient
forum. The Company hereby waives personal service of process and
consents that service of process upon it may be made by certified or
registered mail, return receipt requested, at its address specified
or determined in accordance with the provisions of Section 8.7, and
service so made shall be deemed completed on the third Business Day
after such service is deposited in the mail. Nothing herein shall
affect the right of the Bank or any other Indemnified Person to
serve process in any other manner permitted by law or shall limit
the right of the Bank or any other Indemnified Person to bring
proceedings against the Company in the courts of any other
jurisdiction. Any judicial proceeding by the Company against the
Bank involving any Credit Agreement Related Claim shall be brought
only in a court located in the City and State of New York. THE
COMPANY AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING ANY CREDIT
AGREEMENT RELATED CLAIM.
Section 8.14 LIMITATION OF LIABILITY. NEITHER THE
BANK NOR ANY OTHER INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH
RESPECT TO, AND THE COMPANY HEREBY WAIVES, RELEASES AND AGREES NOT
TO SUE FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED
OR ALLEGED BY THE COMPANY OR THE BANK IN CONNECTION WITH ANY CREDIT
AGREEMENT RELATED CLAIM.
Section 8.15 Severability. The provisions of this
Agreement are severable, and if any clause or provision of this
Agreement shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such clause or provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability of such clause or provision in any other jurisdiction
or the remaining provisions hereof in any jurisdiction.
Section 8.16 Counterparts. This Agreement may be
executed in any number of counterparts and by different parties
hereto on separate counterparts, each complete set of which, when so
executed and delivered by all parties, shall be an original, but all
such counterparts shall together constitute but one and the same
instrument.
Section 8.17 Headings, Bold Type and Index. The
section headings, subsection headings, and bold type used herein and
the Index hereto have been inserted for convenience of reference
only and do not constitute matters to be considered in interpreting
this Agreement.<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their
officers thereunto duly authorized, have executed this Agreement as
of the day and year first above written.
NATIONAL CONSUMER CREDIT SUISSE
COOPERATIVE BANK
By:________________________ By:_____________________________
Name:___________________ Name:_______________________
Title:__________________ Title:______________________
By:____________________________
Name:_______________________
Title:______________________
EXHIBIT A
FORM OF PROMISSORY NOTE
PROMISSORY NOTE
U.S. $12,000,000 Dated: September 15, 1995
FOR VALUE RECEIVED, the undersigned, NATIONAL
CONSUMER COOPERATIVE BANK, a corporation organized under the
laws of the United States (the "Company"), hereby promises to
pay to the order of CREDIT SUISSE (the "Bank") the principal
amount of TWELVE MILLION UNITED STATES DOLLARS ($12,000,000) on
September 15, 1998.
The Company promises to pay interest from the date
hereof until the Maturity Date on the principal amount of this
Promissory Note from time to time outstanding at the per annum
interest rate of SIX AND SEVENTY-ONE ONE-HUNDREDTHS PERCENT
(6.71%), payable on each Interest Payment Date. Interest shall
be computed on the basis of a year of 360 days consisting of 12
months of 30 days each and, in the case of a portion of a
month, for the actual number of days (including the first and
excluding the last) elapsed. Any principal amount of this
Promissory Note which is not paid on the Maturity Date shall
bear interest from the Maturity Date and until paid in full at
the Default Rate. In no event shall the rate of interest borne
by this Promissory Note at any time exceed the maximum rate of
interest permitted at that time under applicable law.
Payments of the principal amount of and interest on
this Promissory Note shall be made in lawful money of the
United States of America to the Bank at Tower 49, 12 East 49th
Street, New York, New York 10017 or at such other place as the
holder of this Note may designate in writing to the Company.
This Promissory Note is the Note referred to in the
Term Loan Agreement, dated as of September 15, 1995 (the "Term
Loan Agreement"), between the Bank and the Company. The Term
Loan Agreement, among other things, contains provisions for
optional prepayments on account of the principal of this
Promissory Note by the Company and for acceleration of the
maturity of this Promissory Note upon the terms and conditions
therein specified. Capitalized terms used (but not defined) in
this Promissory Note shall have the meanings given to them in
the Term Loan Agreement.
NATIONAL CONSUMER COOPERATIVE BANK
By:_______________________________
<PAGE>
SCHEDULE OF INTEREST
This Schedule of Interest attached to the Promissory Note
dated September 15, 1995 of NATIONAL CONSUMER COOPERATIVE
BANK, payable to the order of CREDIT SUISSE, and is, by
specific reference, incorporated in and made a part of the
Promissory Note.
_____________________________________________________________________________
Payments
Interest Principal of
Period Outstanding Interest Notation
First Last Made by
Day Day Amount Date
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
<PAGE>
EXHIBIT B
PURSUANT TO SECTION 6.2
OF TERM LOAN AGREEMENT BY AND BETWEEN
NATIONAL CONSUMER COOPERATIVE BANK
AND
CREDIT SUISSE
________________________________
PERMITTED SECURITY INTERESTS,
LIENS AND ENCUMBRANCES
_________________________________
NCB Savings Bank, FSB, ("NCBSB") has under pledge to the
Federal Home Loan Bank of Cincinnati (FHLBC) its mortgage loan
portfolio under a Blanket Agreement for Advances and Security
Agreement which allows a blanket lien to secure borrowings from
FHLBC. As of August 31, 1995, FHLBC outstanding advances to
NCBSB are not in excess of $2,007,922.
The Company extends lines of credit to NCB Business Credit and
NCB Mortgage, each secured by all assets of NCB Business Credit
and NCB Mortgage pursuant to certain Business Loan/Security
Agreements.
Each of the Company, NCB Mortgage and NCB Business Credit sells
mortgage loans, ESOP loans and other loans from it portfolio in
the ordinary course of business, structured either as an Asset
Securitization or a sale of whole loans. The SPV or other
purchaser typically provides for an alternative security
interest and files a financing statement covering such loans in
order to protect itself against a subsequent determination that
such sale was not a sale but rather a loan.
<PAGE>
Exhibit 10.22
NATIONAL CONSUMER COOPERATIVE BANK
NOTE PURCHASE AGREEMENT
Dated as of December 15, 1995
$12,500,000 6.60% Series D Senior Notes Due December 31, 2002
$12,500,000 Series E Senior Notes Due December 31, 2002
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . 1
1.1 Issue of Notes. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase and Sale of Notes. . . . . . . . . . . . . . . . . . 2
1.3 The Series D Closing. . . . . . . . . . . . . . . . . . . . . 2
1.4 The Series E Closing. . . . . . . . . . . . . . . . . . . . . 2
1.5 Other Purchasers. . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Purchase for Investment; ERISA. . . . . . . . . . . . . . . . 3
1.7 Failure to Deliver. . . . . . . . . . . . . . . . . . . . . . 4
1.8 Expenses, Stamp Tax Indemnity . . . . . . . . . . . . . . . . 4
SECTION 2. WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . 5
2.1 Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . 5
2.2 Corporate Organization and Authority. . . . . . . . . . . . . 6
2.3 Financial Statements; Material Adverse Change;
Description of Business . . . . . . . . . . . . . . . . . . . 6
2.4 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Pending Litigation and Judgments. . . . . . . . . . . . . . . 7
2.6 Title to Properties . . . . . . . . . . . . . . . . . . . . . 7
2.7 Patents and Trademarks. . . . . . . . . . . . . . . . . . . . 7
2.8 Issuance is Legal and Authorized; Conflicting
Agreements and Other Matters. . . . . . . . . . . . . . . . . 7
2.9 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Governmental Consent. . . . . . . . . . . . . . . . . . . . . 8
2.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.12 Margin Securities, etc. . . . . . . . . . . . . . . . . . . . 9
2.13 Private Offering. . . . . . . . . . . . . . . . . . . . . . . 9
2.14 Compliance with Law . . . . . . . . . . . . . . . . . . . . . 9
2.15 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 10
2.16 Restrictions on Company . . . . . . . . . . . . . . . . . . . 10
2.17 Employee Retirement Income Security Act of 1974 . . . . . . . 10
2.18 Investment Company Act. . . . . . . . . . . . . . . . . . . . 11
SECTION 3. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . 11
3.1 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 11
3.2 Warranties and Representations True; No
Prohibited Action . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Compliance with this Agreement. . . . . . . . . . . . . . . . 11
3.4 Officers' Certificates. . . . . . . . . . . . . . . . . . . . 11
3.5 Legality. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Proceedings Satisfactory. . . . . . . . . . . . . . . . . . . 12
3.7 Private Placement Numbers . . . . . . . . . . . . . . . . . . 12
SECTION 4. PURCHASER'S SPECIAL RIGHTS . . . . . . . . . . . . . . . 12
4.1 Direct Payment. . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Delivery Expenses . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5. PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Scheduled Principal Payments. . . . . . . . . . . . . . . . . 13
5.2 Optional Prepayment With Yield-Maintenance
Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Notice of Optional Prepayment . . . . . . . . . . . . . . . . . 13
5.4 Partial Payments Pro Rata . . . . . . . . . . . . . . . . . . . 14
5.5 Retirement of Notes . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6. REGISTRATION: SUBSTITUTION OF NOTES . . . . . . . . . . . 15
6.1 Registration of Notes . . . . . . . . . . . . . . . . . . . . . 15
6.2 Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Replacement of Notes. . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . 16
7.2 Maintenance of Properties and Corporate
Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Payment of Notes and Maintenance of Office. . . . . . . . . . . 17
7.4 Disposal of Shares of a Restricted Subsidiary . . . . . . . . . 17
7.5 Merger or Sale of Assets. . . . . . . . . . . . . . . . . . . . 19
7.6 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.7 Permitted Debt. . . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 Limitations on Debt . . . . . . . . . . . . . . . . . . . . . . 23
7.9 Long-Term Leases. . . . . . . . . . . . . . . . . . . . . . . . 24
7.10 Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.11 Maintenance of Consolidated Adjusted Net Worth
and Consolidated Effective Net Worth. . . . . . . . . . . . . . 24
7.12 Consolidated Earnings Available for Fixed
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.13 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 25
7.14 Restrictions on Investments of Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.15 Transactions with Affiliates. . . . . . . . . . . . . . . . . . 26
7.16 Issuance of Subordinated Debt . . . . . . . . . . . . . . . . . 27
7.17 Voluntary Retirement of Subordinated Debt . . . . . . . . . . . 27
7.18 Subordination Provisions. . . . . . . . . . . . . . . . . . . . 27
7.19 Line of Business. . . . . . . . . . . . . . . . . . . . . . . . 27
7.20 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . . . 28
7.21 Class A Notes . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.22 Incorporation of Affirmative and Negative
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8. INFORMATION AS TO THE COMPANY. . . . . . . . . . . . . . . 29
8.1 Financial and Business Information. . . . . . . . . . . . . . . 29
8.2 Officers' Certificates. . . . . . . . . . . . . . . . . . . . . 31
8.3 Accountants' Certificates . . . . . . . . . . . . . . . . . . . 32
8.4 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . 32
9.1 Nature of Events. . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Default Remedies. . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Annulment of Acceleration of Notes. . . . . . . . . . . . . . . 36
SECTION 10. INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . 36
10.1 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Accounting Principles . . . . . . . . . . . . . . . . . . . . . 57
10.3 Directly or Indirectly. . . . . . . . . . . . . . . . . . . . . 57
10.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 58
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.2 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 58
11.4 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . 58
11.5 Reproduction of Documents . . . . . . . . . . . . . . . . . . . 59
11.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.7 Payments, When Received . . . . . . . . . . . . . . . . . . . . 60
11.8 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . 60
Annex 1 - Purchaser Schedule
Annex 2 - Disclosures of the Company
Exhibit A1 - Form of Series D Senior Note
Exhibit A2 - Form of Series E Senior Note
Exhibit B1 - Form of Company Counsel's Closing Opinion
Exhibit B2 - Form of Special Counsel's Closing Opinion
Exhibit C - Form of Certificate of Officers
Exhibit D - Form of Certificate of Secretary
<PAGE>
National Consumer Cooperative Bank
1401 Eye Street, N.W., Suite 700
Washington, D.C. 20005
NOTE PURCHASE AGREEMENT
$12,500,000 6.60% Series D Senior Notes Due December 31, 2002
$12,500,000 Series E Senior Notes Due December 31, 2002
Dated as of December 15, 1995
[Separately Addressed to each
Purchaser listed on Annex 1 hereto]
Ladies and Gentlemen:
NATIONAL CONSUMER COOPERATIVE BANK, a corporation
organized under the laws of the United States of America which
does business as the National Cooperative Bank (together with
its successors and assigns, the "Company") hereby agrees with
you as follows:
SECTION I. PURCHASE AND SALE OF NOTES
1.1 Issue of Notes.
(a) The Series D Notes. The Company will authorize
the issue of Twelve Million Five Hundred Thousand Dollars
($12,500,000) in aggregate principal amount of its six and
sixty one-hundredths percent (6.60%) Senior Notes due
December 31, 2002 (all such Senior Notes initially issued,
or issued in exchange or substitution for any such Note,
being herein referred to collectively as the "Series D
Notes"). The Series D Notes shall be in the form of
Exhibit A1, and shall have the terms as herein and therein
provided.
(b) The Series E Notes. The Company will authorize
the issue of Twelve Million Five Hundred Thousand Dollars
($12,500,000) in aggregate principal amount of its Senior
Notes due December 31, 2002 (all such Senior Notes
initially issued, or issued in exchange or substitution
for any such Note, being herein referred to collectively
as the "Series E Notes"). The Series E Notes shall be in
the form of Exhibit A2, and shall have the terms as herein
and therein provided.
(c) The Notes. The Series D Notes and the Series E
Notes are herein referred to collectively as the "Notes",
and individually as a "Note".
1.2 Purchase and Sale of Notes.
The Company hereby agrees to sell to you and you hereby
agree to purchase from the Company, in accordance with the
provisions hereof, the aggregate principal amount of Series D
Notes set forth below your name on Annex 1 at one hundred
percent (100%) of the principal amount thereof.
1.3 The Series D Closing.
The closing (the "Series D Closing") of the Company's sale
of Series D Notes will be held on December 28, 1995 (the
"Series D Closing Date") at 9:00 a.m., local time, at the
office of Hebb & Gitlin, your special counsel. At the Series D
Closing, the Company will deliver to you one or more Series D
Notes (as set forth below your name on Annex 1), in the
denominations indicated on Annex 1, dated the Series D Closing
Date and payable to you or payable as indicated on Annex 1,
against payment by federal funds wire transfer in immediately
available funds of the purchase price thereof, as directed by
the Company on Annex 2.
1.4 The Series E Closing.
(a) Notice. Subsequent to the date hereof, the
Company shall deliver to the Purchasers an irrevocable
notice specifying a date no later than February 29, 1996
as the date of purchase of the Series E Notes (the "Series
E Closing Date"). Such notice shall be given not less
than thirty (30) nor more than forty-five (45) days prior
to the Series E Closing Date.
(b) Interest Rate. The interest rate on the Series
E Notes (the "Series E Interest Rate") shall be equal to
the sum of (i) one percent per annum plus (ii) the
Relevant Treasury Yield.
(c) The Series E Closing. The closing of the
Company's sale of the Series E Notes (the "Series E
Closing") will be held on the Series E Closing Date at
9:00 a.m., local time, at the office of Hebb & Gitlin,
your special counsel. At the Series E Closing, the
Company will deliver to each Series E Purchaser one or
more Series E Notes (as set forth in a written notice (the
"Series E Noteholder Notice") delivered by such Series E
Purchaser to the Company prior to the Series E Closing),
bearing interest at the Series E Interest Rate, in the
denominations indicated in the Series E Noteholder Notice,
dated the Series E Closing Date and payable to such Series
E Purchaser (or payable to one or more of its subsidiaries
or affiliates as indicated in the Series E Noteholder
Notice), against payment by federal funds wire transfer in
immediately available funds of the purchase price thereof,
as directed by the Company on Annex 2. As used herein,
the term "Series E Purchaser" means each of AEGON USA
Investment Management, Inc. and The Canada Life Assurance
Company. It is understood by the parties to this
Agreement that AEGON USA Investment Management, Inc. or
its subsidiaries or affiliates will purchase Ten Million
Dollars ($10,000,000) of Series E Notes. It is understood
by the parties to this Agreement that The Canada Life
Assurance Company or its subsidiaries or affiliates will
purchase Two Million Five Hundred Thousand Dollars
($2,500,000) of Series E Notes.
1.5 Other Purchasers.
Contemporaneously with the execution and delivery hereof,
the Company is entering into a separate Note Purchase Agreement
identical (except for the name and signature of the purchaser)
hereto (this Agreement and such other separate Note Purchase
Agreements being herein sometimes referred to collectively as
the "Note Purchase Agreement") with each other purchaser
(individually, an "Other Purchaser," and collectively, the
"Other Purchasers") listed on the Purchaser Schedule attached
to this Agreement as Annex 1 (the "Purchaser Schedule"),
providing for the execution and delivery to each Other
Purchaser of Notes in the aggregate principal amount set forth
below its name on the Purchaser Schedule. The execution and
delivery of Notes to you and to each Other Purchaser are
separate transactions.
1.6 Purchase for Investment; ERISA.
(a) Purchase for Investment. You represent that you
are purchasing the Notes for your own account, for a
separate account (as such term is used in Rule 144A, 17
C.F.R. Sec.230.144A), for the account of another for which
you have sole investment discretion, or for a trust of
which you are the trustee, and not with a view to or for
sale in connection with any distribution thereof within
the meaning of the Securities Act; provided, that you have
the right to dispose of the Notes, or any part thereof, if
you deem it advisable to do so, either pursuant to a
registration of the Notes under the Securities Act or
pursuant to an applicable exemption from the requirement
of such registration (it being understood that the Company
has no obligation hereunder to effect any registration of
the Notes under the Securities Act). It is understood
that, in making the representations set out in Section 2.8
and Section 2.10, the Company is relying, to the extent
applicable, upon your representation as aforesaid.
(b) ERISA. You represent, with respect to the funds
with which you are acquiring the Notes, either that:
(i) General Account -- such funds are from your
general account assets and that all requirements for
an exemption under Department of Labor ("DOL")
Prohibited Transaction Exemption 95-60 (60 F.R.
35925, July 12, 1995) have been satisfied; provided
that in making such representation you are relying on
the Company's representations set forth in Section
2.17;
(ii) Governmental Plan -- such funds are
attributable to a "governmental plan" (as defined in
Title I, section 3(32) of ERISA);
(iii) Pooled Separate Account -- such funds are
attributable to a "separate account" (as defined in
section 3 of ERISA) in respect of which all
requirements for an exemption under DOL Prohibited
Transaction Class Exemption 90-1 (issued January 29,
1990) are met with respect to the use of such funds
to purchase the Notes;
(iv) Bank Collective Investment Fund -- such
funds are attributable to a bank collective
investment fund in respect of which all requirements
for an exemption under DOL Prohibited Transaction
Class Exemption 91-38 (issued July 12, 1991) are met
with respect to the use of such funds to purchase the
Notes;
(v) Qualified Professional Asset Manager --
such funds are attributable to an "investment fund"
managed by a "qualified professional asset manager"
(as such terms are defined in Part V of DOL
Prohibited Transaction Class Exemption 84-14, issued
March 13, 1984) and all requirements for an exemption
under such Exemption are met with respect to the use
of such funds to purchase the Notes, provided that no
other party to the transactions described in this
Agreement and no "affiliate" of such other party (as
defined in section V(c) of Prohibited Transaction
Class Exemption 84-14) has at this time, nor at any
time during the immediately preceding year, exercised
the authority to appoint or terminate said qualified
professional asset manager as manager of the assets
of any "plan" identified in writing pursuant to this
paragraph or to negotiate the terms of said qualified
professional asset manager's management agreement on
behalf of any such identified "plans";
(vi) Disclosed Plans -- such funds are
attributable to one or more "plans" or a separate
account or trust fund comprised of one or more
"plans", each of which has been identified in writing
pursuant to this Subsection (vi); or
(vii) Excluded Plan -- such funds are
attributable to an employee benefit "plan" that is
excluded from the provisions of section 406 of ERISA
by virtue of section 4(b) of ERISA.
As used in this Subsection (b), "plan" shall have the
meaning set forth in Title I, section 3(3) of ERISA.
1.7 Failure to Deliver.
If on the Series D Closing Date or the Series E Closing
Date, the Company fails to tender to you the Notes to be
acquired by you on such date or if the conditions specified in
Section 3 of this Agreement have not been fulfilled on any such
date, you may thereupon elect to be relieved of all further
obligations under this Agreement. Nothing in this Section
shall operate to relieve the Company from any of its
obligations under this Agreement or to waive any of your rights
against the Company.
1.8 Expenses, Stamp Tax Indemnity.
Whether or not the transactions herein contemplated shall
be consummated, the Company agrees to pay directly all of your
out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the
reasonable charges and disbursements of Hebb & Gitlin, your
special counsel, duplicating and printing costs and charges for
shipping the Notes, adequately insured to your satisfaction at
your home office, your custodian bank or at such other place as
you may designate, and so long as you hold any of the Notes,
(a) all such expenses relating to any amendments,
waivers or consents pursuant to the provisions of this
Agreement, whether or not such amendments, waivers or
consents shall be agreed to or become effective, and
(b) the costs and expenses (including attorneys'
fees) incurred by you in enforcing any rights under this
Agreement or the Notes or in responding to any subpoena or
other legal process issued in connection with this
Agreement or the transactions contemplated hereby or by
reason of your having acquired any Note including, without
limitation, costs and expenses incurred in any bankruptcy
case.
The Company also agrees that it will pay and save you harmless
against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined
to be payable in connection with the execution and delivery of
this Agreement or the Notes, whether or not any Notes are then
outstanding. The Company agrees to protect and indemnify you
against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in
connection with the transactions contemplated by this
Agreement.
Without limiting the generality of the foregoing, it is
agreed and understood that the Company will pay, on the Series
D Closing Date and the Series E Closing Date, the statement for
fees and disbursements of your special counsel presented on
such date and the Company will also pay upon receipt of any
statement thereof, each additional statement for reasonable
fees and disbursements of your special counsel rendered
thereafter in connection with the issuance of the Notes or the
matters referred to in the preceding clause (a) of this Section
1.8.
The obligations of the Company under this Section 1.8
shall survive the payment or prepayment of the Notes and the
termination of this Agreement.
SECTION 2. WARRANTIES AND REPRESENTATIONS
The Company hereby warrants and represents to you, as of
each of the Series D Closing Date and the Series E Closing Date
that:
2.1 Subsidiaries and Affiliates.
Annex 2 to this Agreement states the name of each of
(a) the Subsidiaries (specifying which thereof are
Restricted Subsidiaries), its jurisdiction of
incorporation, the percentage of its Voting Stock owned by
the Company and each other Subsidiary and, to the best of
the Company's knowledge, the identity and ownership of any
other holders of its Voting Stock, and
(b) the Company's corporate or joint venture
Affiliates and the nature of the affiliation.
2.2 Corporate Organization and Authority.
Each of the Company and the Subsidiaries
(a) is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation,
(b) has all requisite power and authority and all
necessary licenses and permits to own and operate its
Properties and to carry on its business as now conducted
and as presently proposed to be conducted, and
(c) is duly authorized and has duly qualified to do
business and is in good standing as a foreign corporation
in each jurisdiction where the character of its Properties
or the nature of its activities makes such qualification
necessary.
2.3 Financial Statements;Material Adverse Change;Description of Business.
(a) Financial Statements. The consolidated
statements of financial condition of the Company and the
Subsidiaries as of December 31 in the years 1990, 1991,
1992, 1993 and 1994 inclusive, and the related
consolidated statements of income and cash flows and
changes in members' equity for the fiscal years ended on
such dates, in each case accompanied by reports thereon
containing opinions without qualification, except as
therein noted, by Price Waterhouse (with respect to the
years 1990, 1991 and 1992) or Deloitte & Touche (with
respect to the years 1993 and 1994), independent certified
public accountants, and the consolidated balance sheet of
the Company and the Subsidiaries as of September 30, 1995
and the related consolidated statements of income and cash
flows and reconciliation of net income to net cash
provided by operating activities for the nine (9) month
period ended on such date, copies of which have been
delivered to you, have been prepared in accordance with
generally accepted accounting principles consistently
applied, and present fairly the financial position of the
Company and the Subsidiaries as of such dates and the
results of their operations for such periods. All of the
above-described consolidated financial statements include
the accounts of all Subsidiaries for the respective
periods during which a subsidiary relationship has
existed.
(b) Material Adverse Change. Since December 31,
1994, there has been no material adverse change in the
condition, financial or otherwise, of the Company and the
Subsidiaries, taken as a whole.
(c) Description of Business. The description of the
business conducted and proposed to be conducted by the
Company and the Subsidiaries set forth on Annex 2 is
correct in all material respects.
2.4 Full Disclosure.
Neither the financial statements referred to in Section
2.3 of this Agreement, nor any other written statement
furnished by, or on behalf of, the Company to you in connection
with the negotiation of this Agreement, contains any untrue
statement of a material fact or omits a material fact necessary
to make the statements contained therein or herein not
misleading. There are no facts which the Company has not
disclosed to you in writing that in the aggregate materially
affect adversely nor, so far as the Company can now foresee,
will in the future in the aggregate materially affect adversely
the Properties, business, prospects, profits or condition
(financial or otherwise) of the Company and the Subsidiaries,
taken as a whole, or the ability of the Company to perform its
obligations under this Agreement, the Notes or any other
Financing Document.
2.5 Pending Litigation and Judgments.
There are no proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company or the
Subsidiaries in any court or before any governmental authority
or arbitration board or tribunal that in the aggregate involve
more than a remote possibility of materially and adversely
affecting the Properties, business, prospects, profits or
condition (financial or otherwise) of the Company or the
Subsidiaries, taken as a whole, or the ability of the Company
to perform its obligations under this Agreement, the Notes or
any other Financing Document. Neither the Company nor any
Subsidiary is in default with respect to any order of any
court, governmental authority or arbitration board or tribunal.
No unsatisfied judgment against the Company or any of the
Subsidiaries is outstanding.
2.6 Title to Properties.
Each of the Company and the Subsidiaries has good and
marketable title in fee simple (or its equivalent under
applicable law) to all the real Property, and has good title to
all the other Property, it purports to own, including that
reflected in the most recent balance sheet referred to in
Section 2.3 of this Agreement (except as sold or otherwise
disposed of in the ordinary course of business). All such
Property owned by the Company is free from Liens not permitted
by Section 7.6(a) of this Agreement. All leases necessary in
any material respect for the conduct of the business of the
Company and each of the Subsidiaries are valid and subsisting
and are in full force and effect.
2.7 Patents and Trademarks.
Each of the Company and the Subsidiaries owns or possesses
all the patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing
which are necessary for the present and planned future conduct
of its and their business, without any known conflict with the
rights of others, which, if adversely determined, would have a
materially adverse effect on the Properties, business,
prospects, profits or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or the ability
of the Company to perform its obligations under this Agreement,
the Notes or any other Financing Document.
2.8 Issuance is Legal and Authorized; Conflicting
Agreements and Other Matters.
(a) Issuance is Legal and Authorized. The issuance,
execution and delivery of the Notes by the Company and
compliance by the Company with all of the provisions of
this Agreement and of the Notes are within the corporate
powers of the Company.
<PAGE>
(b) Conflicting Agreements and Other Matters.
Neither the Company nor any Subsidiary is a party to one
or more contracts or agreements or subject to one or more
charter or other corporate restrictions which in the
aggregate materially and adversely affects the Properties,
business, prospects, profits or condition (financial or
otherwise) of the Company or the Subsidiaries, taken as a
whole, or the ability of the Company to perform its
obligations under this Agreement, the Notes or any other
Financing Document. The execution and delivery of this
Agreement, the offering, issuance, execution and delivery
of the Notes and the fulfillment of and compliance with
the terms and provisions of this Agreement and of the
Notes, will not conflict with, or result in a breach of
the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in
the creation of any Lien upon any of the Property of the
Company or any of the Subsidiaries pursuant to, the
charter or by-laws of the Company or any of the
Subsidiaries, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument,
order, judgment, decree, statute, law, rule or regulation
to which the Company or any of the Subsidiaries is
subject.
2.9 No Defaults.
No event has occurred and no condition exists that, upon
the issuance of the Notes, would constitute a Default or an
Event of Default. The Company is not in violation in any
respect of any term of its charter or bylaws. The Company is
not in violation in any material respect of any term in any
agreement or other instrument to which it is a party or by
which it or any of its Property may be bound.
2.10 Governmental Consent.
Neither the nature of the Company or any of the
Subsidiaries, or of any of their respective businesses or
Properties, nor any relationship between the Company or any of
the Subsidiaries and any other Person, nor any circumstance in
connection with the offer and issuance of the Notes, is such as
to require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority
on the part of the Company as a condition to the execution,
delivery and performance of this Agreement or the offer, issue,
execution, delivery and performance of the Notes.
2.11 Taxes.
All tax returns required to be filed by the Company or any
of the Subsidiaries in any jurisdiction have in fact been
filed, and all taxes, assessments, fees and other governmental
charges upon the Company or any of the Subsidiaries, or upon
any of their respective Properties, income or franchises, shown
to be due and payable on said returns have been paid to the
extent such taxes, assessments, fees and charges have become
due and payable. Except as disclosed on Annex 2, neither the
Company nor any of the Subsidiaries knows of any unresolved
additional tax assessments against it. The Federal income tax
liability of the Company and the Subsidiaries has been finally
determined by the Internal Revenue Service and satisfied for
all taxable years up to and including the taxable year ended
December 31, 1991, and no material controversy in respect of
additional income taxes due is pending or, to the knowledge of
the Company, threatened. The provisions for taxes on the books
of the Company and the Subsidiaries are adequate for all open
years, and for its current fiscal period.
2.12 Margin Securities, etc.
The proceeds to be realized upon the issuance of the Notes
will not be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" as defined in Regulation G (12 CFR
Part 207) of the Board of Governors of the Federal Reserve
System (herein called "margin stock") or for the purpose of
maintaining, reducing or retiring any indebtedness that was
originally incurred to purchase or carry any margin stock or
for any other purpose that might constitute such transaction a
"purpose credit" within the meaning of such Regulation G. None
of the transactions contemplated in this Agreement will violate
or result in a violation of Section 7 of the Exchange Act or
any regulations issued pursuant thereto, including, without
limitation, Regulations G, T and X of the Board of Governors of
the Federal Reserve System, 12 C.F.R., Chapter II. The Company
does not own or intend to carry or purchase any margin stock.
None of the proceeds from the sale of the Notes will be used to
purchase, or refinance any borrowing the proceeds of which were
or will be used to purchase, any "security" within the meaning
of the Exchange Act.
2.13 Private Offering.
Neither the Company or any of the Subsidiaries, nor any
agent acting on their behalf, has, directly or indirectly,
offered the Notes or any similar Security of the Company for
sale or exchange to, or solicited any offers to buy the Notes
or any similar Security of the Company from, or otherwise
approached or negotiated with respect to this Agreement with,
any Person other than you and the Other Purchasers, and neither
the Company or any of the Subsidiaries, nor any agent acting on
their behalf, has taken or will take any action that would
subject the issuance of the Notes to the provisions of Section
5 of the Securities Act or to the provisions of any Securities
or Blue Sky law of any applicable jurisdiction.
2.14 Compliance with Law.
Neither the Company nor any of the Subsidiaries:
(a) is in violation of any laws, ordinances, or
governmental rules or regulations to which it is subject;
or
(b) has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary
to the ownership of its Property or to the conduct of its
business,
which violations or failures to obtain might in the aggregate
materially adversely affect the business, prospects, profits,
Properties or condition (financial or otherwise) of the Company
or the Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations under this Agreement, the
Notes or any other Financing Document.
2.15 Indebtedness.
Annex 2 to this Agreement correctly describes all Debt for
borrowed money of the Company outstanding as of the close of
business on the Series D Closing Date, and indicates which of
such indebtedness (if any, and the amount thereof) is secured
by a Lien. The aggregate amount of indebtedness for borrowed
money of the Company outstanding as of the Series D Closing
Date does not exceed one thousand percent (1000%) of the sum of
the paid-in capital and surplus of the Company at such time.
2.16 Restrictions on Company.
Neither the Company nor any of the Subsidiaries is a party
to any contracts or agreements, or subject to any charter or
other corporate restrictions, that in the aggregate, could
materially and adversely affect its business. The Company is
not a party to any contract or agreement that restricts its
right or ability to incur additional Debt, other than this
Agreement and the agreements relating to the Debt described in
Annex 2 to this Agreement. The Company has not agreed or
consented to cause or permit in the future (upon the happening
of a contingency or otherwise) any of its Property, whether now
owned or hereafter acquired, to be subject to a Lien not
permitted by Section 7.6(a) of this Agreement.
2.17 Employee Retirement Income Security Act of 1974.
The present value of all benefits vested under all Pension
Plans did not, as of December 31, 1994, the last annual
valuation date for which a report is available, exceed the
value of the assets of the Pension Plans allocable to such
vested benefits. The consummation of the transactions herein
provided for and compliance by the Company with the provisions
of this Agreement, the Notes and each other Financing Document
will not involve any "prohibited transaction" within the
meaning of ERISA or Section 4975 of the Internal Revenue Code
of 1986, as amended. The Company, the Subsidiaries, their
respective employee benefit plans and any trusts thereunder are
in substantial compliance with ERISA. Neither any of the
employee benefit plans maintained by the Company or the
Subsidiaries, or to which the Company or the Subsidiaries makes
any contribution, nor any trusts thereunder have been
terminated or have incurred any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA
(whether or not waived), since the effective date of ERISA, nor
have there been any "reportable events," as that term is
defined in Section 4043 of ERISA, since the effective date of
ERISA. The only "employee benefit plans" maintained by the
Company with respect to which the Company or any "affiliate" of
the Company is a "party-in-interest" or in respect of which the
Notes could constitute an "employer security" ("employee
benefit plan" and "party-in-interest" having the meanings
specified in section 3 of ERISA and "affiliate" and "employer
security" having the meanings specified in section 407(d) of
ERISA) are a defined contribution retirement plan and an
employee thrift plan, the assets of which are invested in
mutual funds managed by the Fidelity Institutional Retirement
Services Co. No securities issued by the Company have been
acquired by Fidelity Institutional Retirement Services Co. No
assets of either plan are invested in or with any of the
Purchasers.
2.18 Investment Company Act.
The Company is not directly or indirectly controlled by,
or acting on behalf of any Person which is, an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Notes to be
delivered to you at the Series D Closing and the Series E
Closing is subject to the satisfaction, on or before the Series
D Closing Date and the Series E Closing Date, as the case may
be, of the following conditions precedent:
3.1 Opinions of Counsel.
You shall have received from Shea & Gardner, counsel for
the Company, and from Hebb & Gitlin, a Professional
Corporation, your special counsel, the respective closing
opinions described in Exhibit B1 and Exhibit B2 to this
Agreement, dated such date.
3.2 Warranties and Representations True; No
Prohibited Action.
(a) Warranties and Representations True. (i) The
warranties and representations contained in Section 2 of
this Agreement shall (except as affected by transactions
contemplated by this Agreement) be true in all material
respects on such date with the same effect as though made
on and as of that date, and (ii) no Default or Event of
Default shall exist.
(b) No Prohibited Action. The Company shall not
have taken any action or permitted any condition to exist
which would have been prohibited by Section 7 of this
Agreement had this Agreement been binding and effective at
all times during the period from December 31, 1992 to and
including such date.
3.3 Compliance with this Agreement.
The Company shall have performed and complied with all
agreements and conditions contained herein which are required
to be performed or complied with by the Company before or on
such date.
3.4 Officers' Certificates.
You shall have received (a) a certificate, substantially
in the form of Exhibit C to this Agreement, dated such date and
signed by the President or a Vice President and the Treasurer
or an Assistant Treasurer of the Company, certifying that the
conditions specified in Section 3.2 and Section 3.3 of this
Agreement have been fulfilled, and certifying to the other
matters set forth therein, and (b) a certificate, substantially
in the form of Exhibit D to this Agreement, dated such date and
signed by the Secretary or an Assistant Secretary of the
Company, with respect to the matters therein set forth.
3.5 Legality.
The issuance of the Notes by the Company as provided for
in this Agreement shall not violate any applicable law or
governmental regulation (including, without limitation, Section
5 of the Securities Act or Regulation G, T or X of the Board of
Governors of the Federal Reserve System) and shall not subject
you to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental
regulation, and you shall have received such certificates or
other evidence as you may request to establish compliance with
this condition.
3.6 Proceedings Satisfactory.
All proceedings taken in connection with this Agreement
and all documents and papers relating thereto shall be
satisfactory to you and your special counsel. You and your
special counsel shall have received copies of such documents
and papers as you or they may reasonably request in connection
therewith or as a basis for your special counsel's closing
opinion, all in form and substance satisfactory to you and your
special counsel.
3.7 Private Placement Numbers.
The Company shall have obtained or caused to be obtained a
private placement number for each Series of Notes from the
CUSIP Service Bureau of Standard & Poor's, a division of
McGraw-Hill, Inc.
SECTION 4. PURCHASER'S SPECIAL RIGHTS
4.1 Direct Payment.
Notwithstanding any provision to the contrary in this
Agreement or the Notes, the Company will pay all amounts
payable to you with respect to any Notes held by you or your
nominee, or owned by any other institutional holder (without
any presentment thereof and without any notation of such
payment being made thereon), in the manner and at the address
set forth in the Purchaser Schedule or in such other manner or
to such other address in the United States as may be designated
by you or such subsequent holder in writing and, if a bank
account is designated for you in the Purchaser Schedule or in
any written notice to the Company from you or any such
subsequent holder, the Company will initiate such payments in
immediately available funds to such bank account before 11:00
a.m. (New York City time) on the date payment is due. The
holder of any Notes to which this Section 4.1 applies agrees
that if it sells or transfers any Note it will, prior to the
delivery of such Note, make a notation on such Note of the date
to which interest has been paid thereon and of the amount of
any prepayments made on account of the principal thereof.
4.2 Delivery Expenses.
If you surrender any Note to the Company pursuant to this
Agreement, the Company will pay the cost of delivering to or
from your home office or custodian bank from or to the Company,
insured to your satisfaction, the surrendered Note and any Note
issued in substitution or replacement for the surrendered Note.
SECTION 5. PREPAYMENTS
5.1 Scheduled Principal Payments.
(a) Series D Notes. The Company shall pay, and
there shall become due and payable, Four Million One
Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars
and Sixty-Seven Cents ($4,166,666.67) in principal amount
of the Series D Notes on December 31 in each year
beginning on December 31, 2000 and ending on December 31,
2002, inclusive (each, a "Series D Scheduled Principal
Payment"). Each Series D Scheduled Principal Payment
shall be at one hundred percent (100%) of the principal
amount payable, together with interest accrued thereon to
the date of payment. Without limitation of the foregoing,
all of the principal of the Series D Notes remaining
outstanding, if any, on the maturity date of the Series D
Notes, December 31, 2002, together with interest accrued
thereon, shall become due and payable on such date.
(b) Series E Notes. The Company shall pay, and
there shall become due and payable, Four Million One
Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars
and Sixty-Seven Cents ($4,166,666.67) in principal amount
of the Series E Notes on December 31 in each year
beginning on December 31, 2000 and ending on December 31,
2002, inclusive (each, a "Series E Scheduled Principal
Payment"; a Series E Scheduled Principal Payment together
with a Series D Scheduled Principal Payment, collectively,
a "Scheduled Principal Payment"). Each Series E Scheduled
Principal Payment shall be at one hundred percent (100%)
of the principal amount payable, together with interest
accrued thereon to the date of payment. Without
limitation of the foregoing, all of the principal of the
Series E Notes remaining outstanding, if any, on the
maturity date of the Series E Notes, December 31, 2002,
together with interest accrued thereon, shall become due
and payable on such date.
5.2 Optional Prepayment With Yield-Maintenance Premium.
(a) Optional Prepayments. The Notes shall be
subject to prepayment, in whole or in part at any time or
from time to time (in multiples of Five Million Dollars
($5,000,000)), at the option of the Company, at one
hundred percent (100%) of the principal amount so prepaid
plus interest thereon to the prepayment date and the
Yield-Maintenance Premium, if any, with respect to the
amount so prepaid.
(b) Effect of Prepayments. Each partial prepayment
of the Notes pursuant to this Section 5.2 shall be
applied, ratably to each Series of Notes in accordance
with the respective outstanding amounts thereof, to reduce
each Scheduled Principal Payment then remaining in the
inverse order of the maturity thereof.
5.3 Notice of Optional Prepayment.
The Company shall give the holder of each Note irrevocable
written notice of any prepayment pursuant to Section 5.2 of
this Agreement not less than thirty (30) days nor more than
sixty (60) days prior to the prepayment date, specifying
(a) such prepayment date,
(b) the principal amount of the Notes to be prepaid
on such prepayment date,
(c) that such prepayment is to be made pursuant to
Section 5.2 of this Agreement, and
(d) the calculation of an estimated Yield-
Maintenance Premium (assuming the date of prepayment was
the date of such notice) due in connection with such
prepayments, accompanied by a copy of the applicable
source of market data used in determining the Reinvestment
Yield in respect thereof.
Notice of prepayment having been so given, the principal amount
of the Notes specified in such notice, together with interest
thereon to the prepayment date and the Yield-Maintenance
Premium, if any, as herein provided, shall become due and
payable on such prepayment date. Two (2) Business Days prior
to such prepayment the Company shall deliver to each holder of
Notes a certificate of the President, any Vice President or the
Treasurer of the Company specifying the calculation of such
Yield-Maintenance Premium (assuming the date of prepayment was
the date of such notice) payable on the date specified for
prepayment, accompanied by a copy of the applicable source of
market data used in determining the Reinvestment Yield in
respect thereof. If such applicable source of market data at
the time of such notice is not the same as the applicable
source of market data as of the Business Day next preceding the
prepayment date as specified in the definition of "Reinvestment
Yield" herein, then such applicable source of market data as of
such next preceding Business Day as specified in such
definition shall be utilized for the purposes of calculating
the Reinvestment Yield in respect of the Yield-Maintenance
Premium due with such prepayment and notice thereof shall be
delivered simultaneously with such prepayment.
So long as you or any other institutional holder shall
hold any Note, the Company shall, on or before the day on which
it gives written notice of any prepayment pursuant to Section
5.2 of this Agreement, advise an investment professional
assigned to your or such other institutional holder's corporate
finance group by telephone or telecopy of the principal amount
of the Notes to be prepaid and the prepayment date.
5.4 Partial Payments Pro Rata.
If at the time any Scheduled Principal Payment or optional
prepayment is due there is more than one Note of a particular
Series outstanding, the aggregate principal amount of each
Scheduled Principal Payment due with respect to, or each
optional partial prepayment of, such Series of Notes shall be
allocated ratably among the holders of Notes of such Series at
the time outstanding in proportion to the respective unpaid
principal amounts of the Notes of such Series then outstanding.
5.5 Retirement of Notes.
Except for prepayments made in accordance with Section 5.1
and Section 5.2 of this Agreement, the Company may not make any
prepayment of principal in respect of the Notes. The Company
shall not, and shall not permit any of the Subsidiaries or
Affiliates to purchase or otherwise acquire, directly or
indirectly, Notes held by any holder unless the Company or such
Subsidiary or Affiliate shall have offered to prepay or
otherwise retire or purchase or otherwise acquire, as the case
may be, the same proportion of the aggregate principal amount
of Notes held by each other holder of Notes at the time
outstanding upon the same terms and conditions. Any Notes so
retired or purchased or otherwise acquired by the Company or
any of the Subsidiaries or Affiliates shall reduce ratably each
of the Scheduled Principal Payments remaining after such
acquisition and shall not be deemed to be outstanding for any
purpose under this Agreement. In case the Company purchases
any Notes, such Notes shall thereafter be cancelled and no
Notes shall be issued in substitution therefor.
SECTION 6. REGISTRATION: SUBSTITUTION OF NOTES
6.1 Registration of Notes.
The Notes issuable under this Agreement shall be
registered notes. The Company shall cause to be kept at its
office, maintained pursuant to Section 7.3 of this Agreement, a
register for the registration and transfer of the Notes. The
names and addresses of the holders of the Notes, the transfer
thereof and the names and addresses of the transferees of the
Notes shall be registered in the register. The Person in whose
name any Note shall be registered shall be deemed and treated
as the owner and holder thereof for all purposes of this
Agreement, and the Company shall not be affected by any notice
or knowledge to the contrary.
6.2 Exchange of Notes.
Upon surrender of any Note at the office of the Company
maintained pursuant to Section 7.3 of this Agreement, the
Company, at the request of the holder thereof, will execute and
deliver, at the Company's expense (except as provided below),
new Notes of the same Series in exchange, in denominations of
at least One Hundred Thousand Dollars ($100,000) (except as may
be necessary to reflect any principal amount not evenly
divisible by One Hundred Thousand Dollars ($100,000)), in an
aggregate principal amount equal to the unpaid principal amount
of the surrendered Note. Each such new Note shall be payable
to such Person as such holder may request and shall be a
registered note substantially in the form of such Series of
Note set forth in Exhibit A1 or Exhibit A2, as the case may be,
to this Agreement. Each such new Note shall be dated and bear
interest from the date to which interest has been paid on the
surrendered Note. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge
imposed in respect of any transfer.
6.3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of, and the loss, theft,
destruction or mutilation of, any Note and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided, if the
holder of the Note is an institutional investor, its own
unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its expense will execute and deliver in lieu
thereof, a new Note of the same Series, dated and bearing
interest from the date to which interest has been paid on such
lost, stolen, destroyed or mutilated Note.
SECTION 7. COVENANTS.
The Company covenants that on and after the Series D
Closing Date and so long as any of the Notes are outstanding:
7.1 Payment of Taxes and Claims.
The Company and each Subsidiary will pay, before they
become delinquent,
(a) all taxes, assessments and governmental charges
or levies imposed upon it or its Property, and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons
which, if unpaid, might result in the creation of a Lien
upon its Property,
provided that items of the foregoing description need not be
paid while being contested in good faith and by appropriate
proceedings and, provided further, that adequate book reserves
have been established with respect thereto and, provided
further, that the owning company's title to, and its right to
use, its Property is not in the aggregate materially adversely
affected thereby. In the case of any item of the type
described in this Section 7.1 involving an amount in excess of
Five Hundred Thousand Dollars ($500,000), the appropriateness
of the proceeding will be supported by an opinion of the
independent counsel responsible for such proceeding and the
adequacy of such reserves shall be supported by the opinion of
the independent public accountant of the Company.
7.2 Maintenance of Properties and Corporate Existence.
The Company and each Subsidiary will:
(a) Property - maintain, or cause to be maintained,
its Property in good condition and will make, or cause to
be made, all necessary renewals, replacements, additions,
betterments and improvements thereto;
(b) Insurance - maintain, with financially sound and
reputable insurers rated "A" or better by A.M. Best
Company (or accorded a similar rating by another
nationally recognized insurance rating agency of similar
standing if A.M. Best Company is not then in the business
of rating insurers), insurance with respect to its
Properties and business against such casualties and
contingencies, of such types (including, without
limitation, public liability, embezzlement or other
criminal misappropriation insurance) and in such amounts
as is customary in the case of corporations of established
reputations engaged in the same or a similar business and
similarly situated;
(c) Financial Records - keep true books of records
and accounts in which full and correct entries will be
made of all its business transactions, and will reflect in
its financial statements adequate accruals and
appropriations to reserves, all in accordance with
generally accepted accounting principles;
(d) Corporate Existence and Rights - do or cause to
be done all things necessary to preserve and keep in full
force and effect its existence, rights and franchises,
except as otherwise permitted by Section 7.5 of this
Agreement; and
(e) Compliance with Law - not be in violation of any
laws, ordinances, governmental rules and regulations to
which it is subject and will not fail to obtain any
licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its
Properties or to the conduct of its business, which
violations or failures to obtain might in the aggregate
materially adversely affect the business, profits,
Properties or condition (financial or otherwise) of the
Company or any Subsidiary.
7.3 Payment of Notes and Maintenance of Office.
The Company will punctually pay or cause to be paid the
principal, Yield-Maintenance Premium, if any, and interest to
become due in respect of the Notes according to the terms
thereof and will maintain an office in the District of Columbia
where notices, presentations and demands in respect of this
Agreement or the Notes may be made upon it. Such office shall
be maintained at 1401 Eye Street, Suite 700, Washington, D.C.
20005 (Telecopier No. 202-336-7803) until such time as the
Company shall notify the holders of the Notes in writing of any
change of location of such office within the District of
Columbia.
7.4 Disposal of Shares of a Restricted Subsidiary.
The Company shall not at any time sell or otherwise
dispose of any shares of the stock (or any options or warrants
to purchase stock or other Securities exchangeable for or
convertible into stock) of any Restricted Subsidiary (said
stock, options, warrants and other Securities herein called
"Subsidiary Stock"), nor shall the Company permit any
Restricted Subsidiary to issue its own Subsidiary Stock, or to
sell or otherwise dispose of any shares of Subsidiary Stock
issued by any other Restricted Subsidiary, if the effect of the
transaction would be to reduce the proportionate interest of
the Company and the other Restricted Subsidiaries in the
outstanding Subsidiary Stock (the "Disposition Stock") of the
Restricted Subsidiary (the "Disposition Subsidiary") whose
shares are the subject of the transaction, provided that the
foregoing restrictions do not apply to:
(a) the issue of directors' qualifying shares; and
(b) the sale for a cash consideration at one time
(the "Stock Disposition Date") to a Person (other than
directly or indirectly to an Affiliate) of the entire
investment (whether represented by stock, debt, claims or
otherwise) of the Company and the other Restricted
Subsidiaries in such Disposition Subsidiary, if all of the
following conditions shall have been satisfied:
(i) the sum of
(A) the Disposition Value of the assets of
the Disposition Subsidiary, plus
(B) the Disposition Value of the assets of
all Restricted Subsidiaries whose Subsidiary
Stock was subject to a disposition pursuant to
this Section 7.4 during the period ending on the
Stock Disposition Date and commencing three
hundred sixty-five (365) days prior to the Stock
Disposition Date, plus
(C) the aggregate Disposition Value
of assets owned by the Company or any Restricted
Subsidiaries the disposition of which was made
other than pursuant to this Section 7.4 and
consummated during the period ending on the
Stock Disposition Date and commencing three
hundred sixty-five (365) days prior to the Stock
Disposition Date,
does not exceed ten percent (10%) of Consolidated
Assets on the first day of such period;
(ii) in each of the three (3) fiscal years of
the Company most recently ended, the contribution
(expressed as a percentage and exclusive of losses)
to Consolidated Adjusted Net Income for each of such
fiscal years of
(A) the Disposition Subsidiary, plus
(B) the Restricted Subsidiaries whose
Subsidiary Stock was subject to a disposition
subsequent to the commencement of the first of
such fiscal years, plus
(C) assets owned by the Company or
any Restricted Subsidiaries sold or otherwise
disposed of subsequent to the commencement of
the first of such fiscal years,
does not exceed ten percent (10%) of Consolidated
Adjusted Net Income for such fiscal year;
(iii) in the opinion of the Board of Directors,
the sale is for Fair Market Value and is in the best
interests of the Company;
(iv) the Disposition Subsidiary shall have no
continuing investment in the Company or any other
Restricted Subsidiary not being simultaneously
disposed of; and
(v) immediately after the consummation of the
transaction and after giving effect thereto, no
Default or Event of Default would exist.
For purposes of this Section 7.4(b), the assets of any
Restricted Subsidiary that ceases to be a Restricted
Subsidiary in a manner other than by the disposition of
Subsidiary Stock shall be deemed disposed of at the time
of such cessation, provided that the requirements of this
Section 7.4(b) with regard to the receipt of cash
consideration equal to Fair Market Value shall not apply
to such deemed disposition.
7.5 Merger or Sale of Assets.
(a) Sale of Assets. Except as specifically
permitted under Section 7.5(b) and Section 7.5(c) of this
Agreement, the Company shall not, and shall not permit any
Restricted Subsidiary to, sell, lease, transfer or
otherwise dispose of assets; provided that, the foregoing
restriction shall not apply to the sale of such assets
(the "Disposition Assets") for cash consideration at one
time (the "Asset Disposition Date") to a Person other than
directly or indirectly to an Affiliate, if all of the
following conditions are met:
(i) the sum of
(A) the Disposition Value of the
Disposition Assets, plus
(B) the Disposition Value of the assets of
all Subsidiaries that have ceased to be
Restricted Subsidiaries during the period ending
on the Asset Disposition Date and commencing
three hundred sixty-five (365) days prior to the
Asset Disposition Date, plus
(C) the Disposition Value of the
assets of the Company and all other Restricted
Subsidiaries disposed of during the period
ending on the Asset Disposition Date and
commencing three hundred sixty-five (365) days
prior to the Asset Disposition Date,
does not exceed ten percent (10%) of Consolidated
Assets at such time;
(ii) in each of the three (3) fiscal years of
the Company most recently ended, the contribution
(expressed as a percentage and exclusive of losses)
to Consolidated Adjusted Net Income for each of such
fiscal years of
(A) the Disposition Assets, plus
(B) the Restricted Subsidiaries whose
Subsidiary Stock was subject to a disposition
subsequent to the commencement of the first of
such fiscal years, plus
(C) all other assets of the Company
and the Restricted Subsidiaries disposed of
subsequent to the commencement of the first of
such fiscal years,
does not exceed ten percent (10%) of Consolidated
Adjusted Net Income for such fiscal year;
(iii) in the opinion of the Board of Directors,
the sale is for Fair Market Value and is in the best
interests of the Company;
(iv) immediately after the consummation of the
transaction and after giving effect thereto, no
Default or Event of Default would exist; and
(v) in the case of any such transaction
relating to receivables, such transaction is
consummated in the ordinary course of the business of
the Company or such Restricted Subsidiary.
For purposes of this Section 7.5(a), the assets of any
Restricted Subsidiary that ceases to be a Restricted
Subsidiary in a manner other than by the disposition of
Subsidiary Stock shall be deemed to have been sold at the
time of such cessation, provided that the requirements of
this Section 7.5(a) with regard to the receipt of cash
consideration equal to Fair Market Value shall not apply
to any such deemed disposition.
Notwithstanding the foregoing, any sale of assets
shall be deemed to be in compliance with the provisions of
the foregoing clause (i) and clause (ii) if the entire
proceeds of such sale, net of reasonable and ordinary
transaction costs and expenses incurred in connection with
such sale, are applied by the Company or such Restricted
Subsidiary to a Permitted Proceeds Application.
(b) Merger, Consolidation and Sale of All or
Substantially All Assets by the Company and Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, (x) consolidate with, or merge into, any
other Person or permit any other Person to consolidate
with, or merge into, it (except that a Restricted
Subsidiary may consolidate with, or merge into, the
Company or another Restricted Subsidiary) or (y) except as
specifically permitted under Section 7.5(c) of this
Agreement, sell all or substantially all of its assets to
any other Person.
(c) Asset Securitizations. Notwithstanding the
provisions of Section 7.5(a) and Section 7.5(b) of this
Agreement, the Company and the Restricted Subsidiaries
may, at any time and from time to time, sell receivables
in connection with an Asset Securitization if:
(i) such receivables are sold for a cash
consideration equal to the Fair Market Value thereof;
provided, however, that the Company may
(A) establish and maintain a reserve
account containing cash or Securities as a
credit enhancement in respect of any such sale
or
(B) purchase or retain a subordinated
interest in such receivables being sold;
(ii) the entire proceeds of such sale, net of
reasonable and ordinary transaction costs and
expenses incurred in connection with such sale, are
applied by the Company or such Restricted Subsidiary
to a Permitted Proceeds Application; and
(iii) such sale is consummated in the ordinary
course of business of the Company or such Restricted
Subsidiary.
7.6 Liens.
(a) Negative Pledge. The Company shall not, and
shall not permit any Restricted Subsidiary to, (x) cause
or permit or (y) agree or consent to cause or permit in
the future (upon the happening of a contingency or
otherwise), any of its Property, whether now owned or
hereafter acquired, to be subject to a Lien, except that
the Company and any of the Restricted Subsidiaries may
(i) suffer to exist Liens outstanding on the
date of this Agreement and described in Annex 2 to
this Agreement;
(ii) create, incur or suffer to exist Liens
arising in the ordinary course of business that
secure taxes, assessments or governmental charges or
levies or the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and
other like Persons, provided the payment thereof is
not at the time required by Section 7.1 of this
Agreement and that appropriate reserves have been
established therefor on the books of the Company or
such Restricted Subsidiary in accordance with
generally accepted accounting principles;
(iii) create, incur or suffer to exist Liens
incurred or deposits made in the ordinary course of
business
(A) in connection with worker's
compensation, unemployment insurance and other
like laws, or
(B) to secure the performance of letters
of credit, bids, tenders, sales contracts,
leases, Eligible Derivatives, statutory
obligations, surety and performance bonds and
other similar obligations not incurred in
connection with the borrowing of money, the
obtaining of advances or the payment of the
deferred purchase price of Property;
(iv) create, incur or suffer to exist
attachment, judgment and other similar Liens arising
in connection with court proceedings not in excess of
One Million Dollars ($1,000,000) in the aggregate for
all such Liens, provided the execution or other
enforcement of such Liens is effectively stayed and
the claims secured thereby are being actively
contested in good faith and by appropriate
proceedings and that appropriate reserves have been
established therefor on the books of the Company or
such Restricted Subsidiary in accordance with
generally accepted accounting principles;
(v) create, incur or suffer to exist Liens on
Property of a Restricted Subsidiary, provided such
Liens secure only obligations owing to the Company or
a Restricted Subsidiary;
(vi) create, incur or suffer to exist
reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions,
leases and other similar title exceptions or
encumbrances affecting real Property, provided such
exemptions or encumbrances do not in the aggregate
materially detract from the value of said Properties
or materially interfere with their use in the
ordinary conduct of the owning company's business;
(vii) create, incur or suffer to exist Liens
existing at the date of acquisition on Property
acquired in bona fide liquidation, collection or
other realization upon, or settlement of, collateral
held to secure receivable obligations; provided that
any such Lien will not extend to any Property other
than the Property so acquired;
(viii) create, incur or suffer to exist Liens to
secure Debt incurred to finance the cost of
acquisition of any computer or other office equipment
useful and intended to be used in carrying out the
business of the Company or a Restricted Subsidiary;
provided that
(A) any such Lien shall attach solely to
the Property acquired;
(B) the aggregate amount remaining unpaid
on the purchase price shall not be in excess of
one hundred percent (100%) of
(l) the total purchase price or
(ll) the Fair Market Value at the time
of acquisition, whichever is lower; and
(C) such Lien is created or assumed
with respect to such Property, at the time of,
or within twelve (12) months after, such
acquisition;
and
(ix) modify, extend, renew or replace any Lien
permitted by this Section 7.6(a) upon the same
Property theretofore subject thereto, or modify,
extend, renew or replace the Debt secured thereby;
provided, that in any such case the principal amount
(outstanding at the time of such modification,
extension, renewal or replacement) of such Debt so
modified, replaced, extended or renewed shall not be
increased.
(b) Equal and Ratable Lien; Equitable Lien. In case
any Property is subjected to a Lien in violation of this
Section 7.6, the Company shall make or cause to be made
provision (the documents, agreements and instruments by
which such provision is effected being subject to the
approval of the Required Holders) whereby the Notes will
be secured equally and ratably with all other obligations
secured thereby, and in any case the Notes shall have the
benefit, to the full extent that the holders may be
entitled thereto under applicable law, of an equitable
Lien so equally and ratably securing the Notes. Such
violation of this Section 7.6 shall constitute an Event of
Default whether or not any such provision is made pursuant
to this Section 7.6(b).
7.7 Permitted Debt.
Subject to Section 7.8 of this Agreement, the Company
shall not, and shall not permit any Restricted Subsidiary to,
incur, create, issue, assume or permit to exist any Debt other
than
(a) Senior Debt of the Company;
(b) Subordinated Debt of the Company;
(c) liabilities (other than for borrowed money)
incurred in the regular operation of the business of the
Company or a Restricted Subsidiary and not more than three
(3) months overdue, unless contested in good faith by
appropriate proceedings and adequate reserves have been
set aside with respect thereto;
(d) Debt of a Restricted Subsidiary to the Company
or to another Restricted Subsidiary;
(e) Debt of the Company secured by Liens permitted
under the provisions of Section 7.6(a)(viii) of this
Agreement; and
(f) Restricted Guarantees of the Company.
7.8 Limitations on Debt.
The Company shall not at any time permit
(a) Consolidated Debt to exceed eight hundred
percent (800%) of Consolidated Adjusted Net Worth; or
(b) Consolidated Senior Debt to exceed six hundred
fifty percent (650%) of Consolidated Adjusted Net Worth;
or
(c) Qualified Assets to be less than one hundred
percent (100%) of the sum (at such time) of
(i) Company Senior Obligations, plus
(ii) the aggregate unpaid principal amount of
Subordinated Debt, less
(iii) the aggregate unpaid principal amount
of the Notes.
7.9 Long-Term Leases.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, become obligated, as lessee,
under any Long-Term Lease if, at the time of entering into
any such Long-Term Lease and after giving effect thereto,
the aggregate Rentals payable by the Company and the
Restricted Subsidiaries, on a consolidated basis, in any
one fiscal year thereafter under all Long-Term Leases
would exceed five percent (5%) of Consolidated Adjusted
Net Worth determined as at the end of the most recently
ended fiscal year of the Company, at such time.
(b) Any Person that becomes a Restricted Subsidiary
after the Series D Closing Date shall be deemed to have
entered into, at the time that it becomes a Restricted
Subsidiary, all Long-Term Leases on which such Person is
lessee existing immediately after it becomes a Restricted
Subsidiary.
7.10 Guarantees.
The Company shall not, and shall not permit any Restricted
Subsidiary to, become or be liable in respect of any Guarantee
other than a Restricted Guarantee.
7.11 Maintenance of Consolidated Adjusted Net Worth
and Consolidated Effective Net Worth.
(a) The Company shall at all times keep and maintain
Consolidated Adjusted Net Worth in an amount not less than
the sum of (i) One Hundred Million Dollars ($100,000,000)
plus (ii) the sum, for all fiscal quarters of the Company
ended subsequent to January 1, 1993 and at or prior to
such time, of the greater, for each fiscal quarter, of (A)
Zero Dollars ($0) and (B) fifty percent (50%) of
Consolidated Net Earnings for each such fiscal quarter.
(b) The Company shall at all times keep and maintain
Consolidated Effective Net Worth in an amount not less
than the sum of (i) Two Hundred Sixty-Five Million Dollars
($265,000,000) plus (ii) the sum, for all fiscal quarters
of the Company ended subsequent to January 1, 1993 and at
or prior to such time, of the greater, for each fiscal
quarter, of (A) Zero Dollars ($0) and (B) fifty percent
(50%) of Consolidated Net Earnings for each such fiscal
quarter.
7.12 Consolidated Earnings Available for Fixed
Charges.
The Company shall not permit Consolidated Earnings
Available for Fixed Charges for any period of four (4)
consecutive fiscal quarters of the Company to be less than one
hundred ten percent (110%) of Consolidated Fixed Charges for
such period.
<PAGE>
7.13 Restricted Payments.
(a) The Company shall not:
(i) declare or pay any dividends, either in
cash or Property, on any class of its capital stock,
or otherwise, except
(A) Patronage Dividends payable in cash
and cash dividends payable on Class B Stock and
Class C Stock in any calendar year in an
aggregate amount for all such Patronage
Dividends and other dividends up to (but not
exceeding) twenty percent (20%) of the sum of
Consolidated Taxable Income plus, to the extent
deducted in the determination of Consolidated
Taxable Income, Patronage Dividends, for such
calendar year; and
(B) Patronage Dividends and other
dividends, in each case payable by the Company
solely in common stock or allocated surplus of
the Company;
or
(ii) directly, or indirectly or through any
Subsidiary, purchase, redeem or retire any of its
capital stock or any warrants, rights or options to
purchase or otherwise acquire any shares of its
capital stock except
(A) in exchange for or out of the
substantially concurrent issue and sale of
shares of its capital stock, or warrants, rights
or options to purchase or otherwise acquire any
shares of its capital stock, so long as the
proceeds of such concurrent issue and sale are
not required by agreement, statute or regulation
to be otherwise applied by the Company,
(B) out of a substantially concurrent
contribution to capital,
(C) repurchases of Class B1 Common Stock
which the Company is required to make from the
holders thereof who no longer have loans from
the Company outstanding, or
(D) redemptions or cancellations of Class
B Stock or Class C Stock pursuant to Section
6.2(i) of the Company's by-laws as in effect on
the date hereof, so long as no cash or other
Property is paid to the holders thereof; or
(iii) directly, or indirectly or through any
Subsidiary, make any other payment or distribution in
respect of its capital stock
(such declarations and payments of dividends, purchases,
redemptions or retirements of stock, warrants, rights or
options and all such other distributions, together with
all payments in respect of Subordinated Debt pursuant to
Section 7.17(c) of this Agreement being herein
collectively called "Restricted Payments"), if after
giving effect thereto the aggregate amount of Restricted
Payments, together with all Patronage Dividends payable in
cash and all cash dividends on Class B Stock and Class C
Stock, declared or made during the period from and after
December 31, 1991 to and including the date of the
declaration or making of the Restricted Payment in
question, would exceed the sum of
(A) Fifteen Million Dollars ($15,000,000),
plus
(B) fifty percent (50%) of Consolidated
Adjusted Net Income (or minus one hundred
percent (100%) of Consolidated Adjusted Net
Income in the case of a deficit) for the period
commencing on January 1, 1992 and ending on the
last day of the fiscal year of the Company most
recently ended on such date, all computed on a
cumulative basis for said entire period.
(b) The Company shall not declare any dividend
payable more than sixty (60) days after the date of the
declaration thereof.
(c) For the purposes of this Section 7.13, the
amount of any Restricted Payment declared or paid or
distributed in Property of the Company or any Restricted
Subsidiary shall be deemed to be the greater of book value
or Fair Market Value, as determined in good faith by the
Board of Directors (in each case after deducting any
liabilities relating thereto which are, concurrently with
the receipt of such Restricted Payment, assumed by the
recipient thereof), of such Property at the time of the
making of the Restricted Payment in question.
(d) The Company shall not declare or make any
Restricted Payment if, after giving effect thereto, a
Default or an Event of Default would exist.
7.14 Restrictions on Investments of Restricted Subsidiaries.
Any corporation which becomes a Restricted Subsidiary
subsequent to the date of this Agreement shall be deemed to
have made, immediately after becoming a Restricted Subsidiary,
any Restricted Investment that it shall have outstanding at the
time it shall become a Restricted Subsidiary.
7.15 Transactions with Affiliates.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, enter into any transaction,
including, without limitation, the purchase, sale or
exchange of Property or the rendering of any service, with
any Affiliate except (i) for the NCB Development
Corporation Contribution and (ii) in the ordinary course
of and pursuant to the reasonable requirements of the
Company's or such Restricted Subsidiary's business and
upon fair and reasonable terms no less favorable to the
Company or such Restricted Subsidiary than would obtain in
a comparable arm's-length transaction with a Person not an
Affiliate.
(b) Any corporation that becomes a Restricted
Subsidiary subsequent to the date of this Agreement shall
be deemed to have entered into, at the date it becomes a
Restricted Subsidiary, all transactions with Affiliates
with respect to which such corporation will be obligated
immediately after it becomes a Restricted Subsidiary.
7.16 Issuance of Subordinated Debt.
The Company shall not create, issue, assume, guarantee or
in any manner become liable after the date of this Agreement in
respect of any Subordinated Debt having a maturity earlier than
December 31, 2002, or the benefit of any mandatory sinking fund
or similar provision for the prepayment thereof prior to
December 31, 2002.
7.17 Voluntary Retirement of Subordinated Debt.
The Company shall not, directly or indirectly or through
any Subsidiary, purchase, redeem or otherwise retire or acquire
prior to the respective stated maturities thereof, the whole or
any part of any issue of Subordinated Debt except
(a) subject to Section 7.16 of this Agreement, in
accordance with the applicable provisions thereof or of
any indenture, agreement or similar instrument under or
pursuant to which such Debt has been issued,
unconditionally requiring payments into a sinking fund,
periodic prepayments, or other analogous payments for the
amortization of such Debt, or
(b) out of the proceeds of a substantially
concurrent issue or sale of capital stock or Debt ranking
on a parity with, or junior to, the Debt proposed to be
purchased, redeemed or otherwise retired or acquired, or
(c) out of funds that at the time are available for
Restricted Payments pursuant to, and within the
limitations of, Section 7.13 of this Agreement, it being
understood that the amounts so used pursuant to this
clause (c) shall reduce pro tanto the amount otherwise
available for Restricted Payments under Section 7.13 of
this Agreement.
7.18 Subordination Provisions.
The Company shall not, at any time, be a party to any
amendment, waiver or modification of any subordination
provisions or payment provisions applicable to any Subordinated
Debt.
7.19 Line of Business.
The Company shall, and shall cause each of the Restricted
Subsidiaries to, remain primarily in the business conducted by
the Company and the Restricted Subsidiaries on the Series D
Closing Date.
7.20 ERISA Compliance.
The Company and each Subsidiary shall promptly comply with
all provisions of ERISA applicable to any of them which, if not
complied with, might result in a Lien or charge upon any
Property of the Company or any Subsidiary or might in the
aggregate otherwise materially adversely affect the business,
profits, prospects, Properties or condition (financial or
otherwise) of the Company or any Subsidiary. Without limiting
the generality of the foregoing, neither the Company nor any
Subsidiary will cause any Pension Plan maintained or
participated in by it to:
(a) engage in any "prohibited transaction," as such
term is defined in Section 4975 of the Internal Revenue
Code of 1986, as amended; or
(b) incur any material "accumulated funding
deficiency," as such term is defined in Section 302 of
ERISA, whether or not waived.
7.21 Class A Notes.
(a) No Voluntary Prepayment. The Company shall not,
directly or indirectly or through any Subsidiary,
purchase, redeem or otherwise retire or acquire, prior to
the respective stated maturities thereof, the whole or any
part of any Class A Notes except out of the net cash
proceeds of a substantially concurrent issue or sale of
Class B Stock or Class C Stock.
(b) No Amendments. The Company shall not amend,
modify, terminate, or waive any of its rights under the
Financing Agreement or any of the Class A Notes (or any
other agreement or similar instrument under or pursuant to
which such Class A Notes have been issued) without the
prior written consent of the Required Holders, except that
the Company may enter into an amendment of the Financing
Agreement providing for a prepayment of the Class A Notes
in 2010 and 2015 with the proceeds of a substantially
simultaneous issue of equity or Subordinated Debt.
7.22 Incorporation of Affirmative and Negative Covenants.
(a) During all such times as the Bank Loan Agreement
shall remain in force, (i) the Company and the Restricted
Subsidiaries shall comply and remain at all times in
compliance with the provisions of Article 6 and Article 7
thereof and any Financial Covenant set forth in any other
provision thereof and (ii) all of the provisions of
Article 6 and Article 7 of the Bank Loan Agreement and any
other Financial Covenants set forth therein, together with
all relevant definitions pertaining thereto, shall hereby
be incorporated herein by reference, mutatis mutandis.
(b) No Financial Covenant incorporated herein by
virtue of Section 7.22(a) hereof shall supersede, replace,
amend, supplement or modify any other provision of this
Agreement, including any covenant contained herein which
addresses a subject matter similar to that of such
incorporated Financial Covenant.
SECTION 8. INFORMATION AS TO THE COMPANY
8.1 Financial and Business Information.
The Company shall deliver to you, if at the time you or
your nominee holds any Note, and to each other institutional
holder of the then outstanding Notes:
(a) Quarterly Statements -- as soon as practicable
after the end of the first, second and third quarterly
fiscal periods in each fiscal year of the Company, and in
any event within sixty (60) days thereafter, two (2)
copies of:
(i) consolidated balance sheets of the Company
and its consolidated Subsidiaries, and the Company
and the Restricted Subsidiaries, as at the end of
such quarter, and
(ii) consolidated statements of income and cash
flows of the Company and its consolidated
Subsidiaries, and the Company and the Restricted
Subsidiaries, for such quarter and (in the case of
the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures
for the corresponding periods in the previous fiscal year,
all in reasonable detail and certified as complete and
correct, subject to changes resulting from year-end
adjustments, by a principal financial officer of the
Company;
(b) Annual Statements -- as soon as practicable
after the end of each fiscal year of the Company, and in
any event within ninety (90) days thereafter, duplicate
copies of:
(i) consolidating and consolidated balance
sheets of the Company and its consolidated
Subsidiaries, and the Company and the Restricted
Subsidiaries, as at the end of such year, and
(ii) consolidating and consolidated statements
of income, changes in members' equity and cash flows
of the Company and its consolidated Subsidiaries, and
the Company and the Restricted Subsidiaries, for such
year,
setting forth in comparative form the figures for the
previous fiscal year, all in reasonable detail,
satisfactory in scope to the Required Holders and
(A) except in the case of the
consolidating statements which may be certified
as complete and correct by a principal financial
officer of the Company, accompanied by an
opinion thereon, satisfactory in scope and
substance to the Required Holders, of
independent certified public accountants of
recognized national standing selected by the
Company, which opinion shall state that such
financial statements have been prepared in
accordance with generally accepted accounting
principles consistently applied (except for
changes in application in which such accountants
concur and which are noted in the financial
statements) and that the examination of such
accountants in connection with such financial
statements has been made in accordance with
generally accepted auditing standards, and
accordingly included such tests of the
accounting records and such other auditing
procedures as were considered necessary in the
circumstances,
(B) a statement from such independent
certified public accountants that such
consolidating statements were prepared using the
same work papers as were used in the preparation
of such consolidated statements, and
(C) a certification by a principal
financial officer of the Company (in scope and
substance satisfactory to the Required Holders)
that such consolidating and consolidated
statements are true and correct;
(c) Opinions Pursuant to Section 7.1 -- as soon as
practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days
thereafter, duplicate copies of any opinions required
pursuant to Section 7.1 of this Agreement;
(d) Audit Reports -- promptly upon receipt thereof,
one (1) copy of each interim or special audit made by
independent accountants of the books of the Company or any
Subsidiary;
(e) SEC Reports -- promptly upon their becoming
available (but in no event later than the date of filing),
one (1) copy of each regular or periodic report and any
registration statement or prospectus filed by the Company
or any Subsidiary with any securities exchange or with the
Securities and Exchange Commission or any successor
agency;
(f) Materials Sent to Stockholders -- promptly upon
their becoming available (but in no event later than the
date of sending to stockholders), one (1) copy of each
financial statement, report, notice or proxy statement
sent by the Company or any Subsidiary to stockholders
(other than, in the case of any Subsidiary, the Company)
generally;
(g) Notice of Event of Default -- promptly upon
becoming aware of the existence of any condition or event
which constitutes a Default or an Event of Default, a
written notice specifying the nature and period of
existence thereof and what action the Company is taking
and proposes to take with respect thereto;
(h) Notice of Claimed Default -- promptly upon
becoming aware that the holder of any Note or of any
evidence of indebtedness or other Security of the Company
or any Subsidiary has given notice or taken any other
action with respect to a claimed default or Event of
Default, a written notice specifying the notice given or
action taken by such holder and the nature of the claimed
default or Event of Default and what action the Company or
such Subsidiary is taking or proposes to take with respect
thereto;
(i) Loan Portfolio Reports -- together with each
quarterly financial statement required to be delivered
pursuant to clause (a) of this Section 8.1, one (1) copy
of
(i) a monthly Loan Portfolio Report of the
Company setting forth, with respect to loans held in
its portfolio, classifications relating to
delinquency, non-performance, risk rating, loss
allowances and other related matters as of the end of
the last month of the fiscal quarters covered by such
financial statements, to be prepared on substantially
the same basis and to contain substantially the same
information as the Loan Portfolio Report, dated
October 23, 1995, in respect of the month of
September, 1995, a copy of which was delivered to you
prior to the Series D Closing Date, and
(ii) a quarterly Report on Allowances for Loan
Losses and Reserves of the Company, to be prepared on
substantially the same basis and to contain
substantially the same information as the Report on
Allowances for Loan Losses and Reserves, dated
September 30, 1995, a copy of which was delivered to
you prior to the Series D Closing Date,
provided that such monthly and quarterly reports need not,
unless you or any other holder of Notes shall reasonably
so request, disclose the names of the obligors on such
loans; and
(j) Requested Information -- with reasonable
promptness, such other data and information with respect
to the Company and the Restricted Subsidiaries as from
time to time may be reasonably requested, including,
without limitation, information required by 17 C.F.R.
Sec.230.144A.
8.2 Officers' Certificates.
Each set of financial statements delivered to you or any
other institutional holder of the Notes pursuant to Section
8.1(a) or Section 8.1(b) of this Agreement will be accompanied
by a certificate of the President or a Vice President and the
Treasurer or an Assistant Treasurer of the Company setting
forth:
(a) Covenant Compliance -- the information
(including, where applicable, detailed calculations)
required in order to establish whether the Company was in
compliance with the requirements of Section 7 of this
Agreement during the period covered by the financial
statements then being furnished;
(b) Event of Default -- that the signers have
reviewed the relevant terms of this Agreement and the
Financing Agreement and have made, or caused to be made,
under their supervision, a review of the transactions and
conditions of the Company and the Subsidiaries from the
beginning of the accounting period covered by the
financial statements being delivered therewith to the date
of the certificate and that such review has not disclosed
the existence, during such period, of any condition or
event which constitutes a Default or an Event of Default
or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and
what action the Company has taken or proposes to take with
respect thereto; and
(c) Loan Portfolio Changes -- an explanation, in
reasonable detail, of the differences disclosed in the
Loan Portfolio Reports accompanying such financial
statements from the information set forth in the Loan
Portfolio Reports delivered after the end of the
immediately preceding fiscal quarter of the Company.
8.3 Accountants' Certificates.
Each set of annual financial statements delivered pursuant
to Section 8.1(b) of this Agreement will be accompanied by a
certificate of the accountants who certify such financial
statements, stating that they have reviewed this Agreement
insofar as it relates to accounting matters and stating
further, whether, in making their audit, such accountants have
become aware of any condition or event which then constitutes a
Default or an Event of Default, and, if any such condition or
event then exists, specifying the nature and period of
existence thereof.
8.4 Inspection.
The Company will permit any of your representatives, while
you or your nominee holds any Note, or the representatives of
any other institutional holder of the Notes, at your or such
holder's expense so long as no Default or Event of Default is
then continuing and otherwise at the sole expense of the
Company, to visit and inspect any of the Properties of the
Company or any Subsidiary (and to take extracts from, and make
copies of, their respective books and records) and to discuss
their respective affairs, finances and accounts with their
respective officers, employees and independent public
accountants (and by this provision the Company authorizes said
accountants to discuss with your representatives the finances
and affairs of the Company and the Subsidiaries) all at such
reasonable times and as often as may be reasonably requested.
SECTION 9. EVENTS OF DEFAULT
9.1 Nature of Events.
An "Event of Default" shall exist if any of the following
occurs and is continuing:
(a) Principal or Yield-Maintenance Premium Payments
-- the Company fails to make any payment of principal or
Yield-Maintenance Premium on any Note on or before the
date such payment is due;
(b) Interest Payments -- the Company fails to make
any payment of interest on any Note on or before the date
such payment is due and such failure shall continue for a
period of three (3) Business Days;
(c) Particular Defaults -- the Company or any
Subsidiary fails to perform or observe any covenant
contained in Section 7.4 through Section 7.21 (other than
Section 7.14, Section 7.15 and Section 7.19) of this
Agreement, inclusive; or the Company shall terminate or
modify any provision of the Financing Agreement or shall
fail to perform or observe any covenant contained in the
Financing Agreement;
(d) Other Defaults -- the Company or any Subsidiary
fails to comply with any other provision of this
Agreement, and such failure continues for more than thirty
(30) days after any officer of the Company has knowledge
thereof;
(e) Warranties or Representations -- any warranty,
representation or other statement by or on behalf of the
Company contained in this Agreement or in any instrument
furnished by or on behalf of the Company in compliance
with or in reference to this Agreement was or shall have
been false or misleading in any material respect at the
time made;
(f) Default on Indebtedness or Other Security -- the
Company or any Restricted Subsidiary fails to make any
payment due on any one or more Material Obligations or any
event shall occur or any condition shall exist in respect
of any one or more Material Obligations of the Company or
any Restricted Subsidiary, or under any agreement securing
or relating to any such Material Obligations (and any such
failure, event or condition shall not have been cured,
waived or consented to by the holder or holders of such
Material Obligations or a trustee therefor), the effect of
which is
(i) to cause (or permit any holder of such
Material Obligation or a trustee of such holder to
cause) such Material Obligation or Material
Obligations, or a portion thereof, to become due
prior to its or their stated maturity or prior to its
or their regularly scheduled dates of payment
(regardless of any limitations, such as those
applicable to Subordinated Debt, on the amount of
such Material Obligations which may be paid upon such
acceleration),
(ii) to permit a trustee or the holder of any
Security (other than common stock of the Company or
any Restricted Subsidiary) to elect a majority of the
directors on the board of directors of the Company or
such Restricted Subsidiary, or
(iii) to permit the holder of any such Material
Obligation to require the Company or any Restricted
Subsidiary to repurchase such Material Obligation or
a portion thereof from such holder;
(g) Involuntary Bankruptcy Proceeding -- a
receiver, liquidator, custodian or trustee of the Company
or any Restricted Subsidiary, or of any of the Property of
any of such Persons, is appointed by court order and such
order remains in effect for more than ninety (90) days; or
the Company or any Restricted Subsidiary is adjudicated
bankrupt or insolvent; or any of the Property of any of
such Persons is sequestered by court order and such order
remains in effect for more than ninety (90) days; or a
petition is filed against the Company or any Restricted
Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction, whether now or
hereafter in effect, and is not dismissed within thirty
(30) days after such filing;
(h) Voluntary Petitions -- the Company or any
Restricted Subsidiary files a petition in voluntary
bankruptcy or seeking relief under any provisions of any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under
such law;
(i) Assignments for Benefit of Creditors, etc. --
the Company or a Restricted Subsidiary makes an assignment
for the benefit of its creditors, is not paying its debts
generally as they become due, admits in writing its
inability to pay its debts generally as they become due or
consents to the appointment of a receiver, trustee,
custodian or liquidator of the Company or such Restricted
Subsidiary or of all or any part of the Property of any of
such Persons; or
(j) Undischarged Final Judgments -- final judgment
or judgments for the payment of money, aggregating in
excess of Five Hundred Thousand Dollars ($500,000) for all
such judgments, is or are outstanding against the Company
or any of the Restricted Subsidiaries and any one of such
judgments has been outstanding for more than thirty (30)
days from the date of its entry and has not been
discharged in full or stayed.
9.2 Default Remedies.
(a) Acceleration on Event of Default. If an Event
of Default exists, then
(i) if such Event of Default is an Event of
Default specified in clause (g), clause (h) or
clause (i) of Section 9.1 of this Agreement with
respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately
due and payable at par together with interest accrued
thereon, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by
the Company, and
(ii) if such Event of Default is any other Event
of Default, the holder or holders of at least thirty-
five percent (35%) in principal amount of any Series
of Notes then outstanding (exclusive of Notes then
held by any one or more of the Company, any
Restricted Subsidiary or any Affiliate) may exercise
any right, power or remedy permitted to such holder
or holders by law, and may, in particular, at its or
their option, by notice in writing to the Company,
declare all of such Series of Notes to be, and all of
such Series of Notes shall thereupon be and become,
immediately due and payable, together with interest
accrued thereon and together with the Yield-
Maintenance Premium, if any, with respect to each
Note in such Series, without presentment, demand,
protest or other notice of any kind, all of which are
hereby waived by the Company, provided that the
Yield-Maintenance Premium, if any, with respect to
each such Note shall be due and payable upon such
declaration only if
(A) such event is an Event of Default
specified in any of clause (a) to clause (f),
inclusive, or clause (j) of Section 9.1 of this
Agreement,
(B) the holders making such declaration
shall have given to the Company, at least ten
(10) Business Days before such declaration,
written notice stating its or their intention so
to declare such Series of Notes to be
immediately due and payable and identifying one
or more such Events of Default whose occurrence
on or before the date of such notice permits
such declaration and
(C) one or more of the Events of
Default so identified shall be continuing at the
time of such declaration.
(b) Acceleration on Payment Default. During the
existence of an Event of Default described in Section
9.1(a) or Section 9.1(b) hereof, and irrespective of
whether the Notes then outstanding shall have been
declared to be due and payable pursuant to Section
9.2(a)(ii) hereof, any holder of Notes who or which shall
have not consented to any waiver with respect to such
Event of Default may, at his or its option, by notice in
writing to the Company, declare the Notes then held by
such holder to be, and such Notes shall thereupon become,
forthwith due and payable together with all interest
accrued thereon, without any presentment, demand, protest
or other notice of any kind, all of which are hereby
expressly waived, and the Company shall forthwith pay to
such holder the entire principal of and interest accrued
on such Notes and, to the extent permitted by law, the
Yield-Maintenance Premium at such time with respect to
such principal amount of such Notes.
(c) Valuable Rights. The Company acknowledges, and
the parties hereto agree, that the right of each holder to
maintain its investment in the Notes free from repayment
by the Company (except as herein specifically provided
for) is a valuable right and that the provision for
payment of a Yield-Maintenance Premium by the Company in
the event that the Notes are prepaid or are accelerated as
a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such
circumstances.
(d) Other Remedies. If any Event of Default or
Default shall occur and be continuing, the holder of any
Note may proceed to protect and enforce its rights under
this Agreement and such Note by exercising such remedies
as are available to such holder in respect thereof under
applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or
in aid of the exercise of any power granted in this
Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any
other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy
conferred herein or now or hereafter existing at law or in
equity or by statute or otherwise.
(e) Nonwaiver and Expenses. No course of dealing on
the part of any holder of Notes nor any delay or failure
on the part of any holder of Notes to exercise any right
shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. If
the Company shall fail to pay when due any principal of,
or Yield-Maintenance Premium or interest on, any Note, or
shall fail to comply with any other provision hereof, the
Company shall pay to each holder of Notes, to the extent
permitted by law, such further amounts as shall be
sufficient to cover the costs and expenses, including but
not limited to reasonable attorneys' fees, incurred by
such holder in collecting any sums due on such Notes or in
otherwise assessing, analyzing or enforcing any rights or
remedies that are or may be available to it.
9.3 Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 9.2(a)(ii) of
this Agreement in respect of any Series of Notes by any holder
or holders thereof then, and in every such case, the holders of
sixty-six percent (66%) in aggregate principal amount of such
Series of Notes then outstanding (exclusive of Notes then owned
by any one or more of the Company, any Restricted Subsidiary or
any Affiliate) may, by written instrument filed with the
Company, rescind and annul such declaration, and the
consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the
payment of any monies due pursuant to such Series of Notes
or this Agreement;
(b) all arrears of interest upon all of the Notes of
such Series and all other sums payable under such Series
of Notes and under this Agreement (except any principal of
or interest on the Notes of such Series which has become
due and payable by reason of such declaration under
Section 9.2(a)(ii) of this Agreement) shall have been duly
paid; and
(d) each and every other Default and Event of
Default shall have been waived pursuant to Section 11.4 of
this Agreement or otherwise made good or cured,
and provided further that no such rescission and annulment
shall extend to or affect any subsequent Default or Event of
Default or impair any right consequent thereon.
SECTION 10. INTERPRETATION OF THIS AGREEMENT
10.1 Terms Defined.
As used in this Agreement, the following terms have
(unless otherwise limited by the context) the following
respective meanings (or the meanings set forth in the Section
of this Agreement referred to opposite such term) and the
following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Adjusted Tangible Assets" -- at any time means all
assets (including, without duplication, the capitalized
value of any leasehold interest under any Capitalized
Lease) except:
(a) deferred assets and intangible assets,
(b) patents, copyrights, trademarks, trade
names, franchises, goodwill, organizational expense,
experimental expense and other similar intangible
assets,
(c) unamortized debt discount and expense, and
(d) assets located, and notes and receivables
due from obligors domiciled, outside the United
States of America, Puerto Rico or Canada.
"Affiliate" -- means a Person (other than a
Restricted Subsidiary)
(a) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or
is under common control with, the Company,
(b) which beneficially owns or holds five
percent (5%) or more of any class of the Voting Stock
of the Company or
(c) five percent (5%) or more of the Voting
Stock (or in the case of a Person which is not a
corporation, five percent (5%) or more of the equity
interest) of which is beneficially owned or held by
the Company or a Subsidiary.
The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Agreement, this" -- means this agreement, as it may
be amended and/or restated from time to time.
"Asset Disposition Date" -- Section 7.5(a) of this
Agreement.
"Asset Securitization" -- means, with respect to any
Person, a transaction involving the sale or transfer of
receivables by such Person (an "Originator") to a special
purpose corporation or grantor trust (an "SPV")
established solely for the purpose of purchasing such
receivables from the Company for cash in an amount equal
to the Fair Market Value thereof; provided, however, that
the Company may (A) establish and maintain a reserve
account containing cash or Securities as a credit
enhancement in respect of any such sale or (B) purchase or
retain a subordinated interest in such receivables being
sold.
"Asset Securitization Recourse Liability" -- means,
at any time, with respect to any Person, the maximum
amount of such Person's liability (whether matured or
contingent) under any agreement, note or other instrument
in connection with any one or more Asset Securitizations
in which such Person has agreed to repurchase receivables
or other assets, to provide direct or indirect credit
support (whether through cash payments, the establishment
of reserve accounts containing cash or Securities, an
agreement to reimburse a provider of a letter of credit
for any draws thereunder, the purchase or retention of a
subordinated interest in such receivables or other assets,
or other similar arrangements), or in which such Person
may be otherwise liable for all or a portion of any SPV's
obligations under Securities issued in connection with
such Asset Securitizations.
"Bank Loan Agreement" -- means the Second Amended and
Restated Loan Agreement, dated as of December 15, 1993, by
and among the Company, the banks signatory thereto and
National Westminster Bank USA, as agent, as amended by
Amendment No. 1 dated as of December 12, 1994 and
Amendment No. 2 dated December 11, 1995, and as may be
further amended from time to time.
"Board of Directors" -- at any time means the board
of directors of the Company or any committee thereof
which, in the instance, shall have the lawful power to
exercise the power and authority of such board of
directors.
"Business Day" -- at any time means a day other than
a Saturday, a Sunday or, in the case of any Note with
respect to which the provisions of Section 4.1 of this
Agreement are applicable, a day on which the bank
designated (by the holder of such Note) to receive (for
such holder's account) payments on such Note is required
by law (other than a general banking moratorium or holiday
for a period exceeding four (4) consecutive days) to be
closed.
"Capitalized Lease" -- means any lease the obligation
for Rentals with respect to which is required to be
capitalized on a balance sheet of the lessee in accordance
with generally accepted accounting principles.
"Class A Notes" -- means "class A notes" the terms of
which are defined in 12 U.S.C. Sec. 3014 as in effect on the
Series D Closing Date.
"Class B Stock" -- means "class B stock" the terms of
which are defined in 12 U.S.C. Sec. 3014 as in effect on the
Series D Closing Date.
"Class B1 Common Stock" -- means the series of Class
B stock comprising Class B stock purchased for cash after
June 28, 1984.
"Class C Stock" -- means "class C stock" the terms of
which are defined in 12 U.S.C. Sec. 3014 as in effect on the
Series D Closing Date.
"Company" -- introductory sentence to this Agreement.
"Company Senior Obligations" -- at any time means,
with respect to the Company, the sum of
(a) the aggregate unpaid principal amount of
Senior Debt of the Company, plus
(b) the aggregate amount of all Capitalized
Leases of the Company plus
(c) Restricted Guarantees of the Company
computed on the basis of total outstanding contingent
liability, plus
(d) Asset Securitization Recourse Liabilities
of the Company (meeting the conditions set forth in
either clause (i) or clause (ii) below):
(i) to the extent, but only to the extent,
that such obligations arise from the Company's
obligation to repurchase receivables or other
assets as a result of a default in payment by
the obligor thereunder or any other default in
performance by such obligor under any agreement
related to such receivables; or
(ii) if the Company shall maintain a
reserve account containing cash or Securities in
respect of any such obligations or shall retain
or purchase a subordinated interest therein, to
the extent, but only to the extent, of the
amount of such reserve account or subordinated
interest.
"Consolidated Adjusted Net Income" -- for any fiscal
period of the Company means net earnings or net loss
(determined on a consolidated basis) of the Company and
the Restricted Subsidiaries after income taxes for such
period, but excluding from the determination of such
earnings the following items (together with the income tax
effect, if any, applicable thereto):
(a) the proceeds of any life insurance policy;
(b) any gain or loss arising from the sale of
capital assets;
(c) any gain arising from any reappraisal,
revaluation or write-up of assets;
(d) any gain arising from transactions of a
non-recurring or nonoperating and material nature or
arising from sales or other dispositions relating to
the discontinuance of operations;
(e) earnings of any Restricted Subsidiary
accrued prior to the date it became a Restricted
Subsidiary;
(f) earnings of any corporation, substantially
all the assets of which have been acquired in any
manner, realized by such other corporation prior to
the date of such acquisition;
(g) net earnings of any business entity (other
than a Restricted Subsidiary) in which the Company or
any Restricted Subsidiary has an ownership interest,
unless such net earnings shall have actually been
received by the Company or such Restricted Subsidiary
in the form of cash distributions;
(h) any portion of the net earnings of any
Restricted Subsidiary which for any reason is
unavailable for payment of dividends to the Company
or any other Restricted Subsidiary;
(i) the earnings of any Person to which assets
of the Company shall have been sold, transferred or
disposed of, or into which the Company shall have
merged, prior to the date of such transaction;
(j) any gain arising from the acquisition of
any Securities of the Company or any Subsidiary; and
(k) any amortization of deferred or other
credit representing the excess of the equity in any
Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary.
"Consolidated Adjusted Net Worth" -- at any time
means, with respect to the Company and the Restricted
Subsidiaries (determined on a consolidated basis):
(a) the amount of capital stock liability plus
(or minus in the case of a deficit) the capital
surplus and earned surplus of the Company and the
Restricted Subsidiaries, less (without duplication)
the sum of
(b) the net book value, after deducting any
reserves applicable thereto, of all items of the
following character which are included in the assets
of the Company and the Restricted Subsidiaries:
(i) all deferred charges and prepaid
expenses other than prepaid taxes and prepaid
insurance premiums;
(ii) treasury stock;
(iii) unamortized debt discount and
expense and unamortized stock discount and
expense;
(iv) goodwill, the excess of the cost of
assets acquired over the book value of such
assets on the books of the transferor, the
excess of the cost of investments in any Person
(including any Subsidiary) over the value of
such investments on the books of such Person at
the time of making such investments,
organizational or experimental expense, patents,
trademarks, copyrights, trade names and other
intangibles;
(v) all receivables (other than Eurodollar
deposits) owing by Persons whose principal place
of business or principal assets are located in
any jurisdiction other than the United States of
America or Canada; and
(vi) any increment resulting from any
reappraisal, revaluation or write-up of capital
assets subsequent to December 31, 1991.
If the Company shall have any Restricted Investments
outstanding at any time, such Restricted Investments shall
be excluded from Consolidated Adjusted Net Worth.
"Consolidated Assets" -- at any time means the assets
of the Company and the Restricted Subsidiaries that would
be reflected on a consolidated balance sheet for the
Company and the Restricted Subsidiaries at such time.
"Consolidated Debt" -- at any time means all Debt of
the Company and the Restricted Subsidiaries (determined on
a consolidated basis), plus, without duplication, the
aggregate amount of the obligations of the Company and the
Restricted Subsidiaries set forth below, at such time:
(a) the face amount of all letters of credit
issued by the Company or any Restricted Subsidiary
and all bankers' acceptances accepted by the Company
or any Restricted Subsidiary; and
(b) the aggregate amount of Asset
Securitization Recourse Liabilities of the Company or
any Restricted Subsidiary.
"Consolidated Earnings Available for Fixed Charges"
-- for any fiscal period of the Company means the sum of
(a) Consolidated Adjusted Net Income for such
period; plus
(b) to the extent deducted in determining
Consolidated Adjusted Net Income for such period,
(i) all provisions for any Federal, state
or other income taxes made by the Company and
the Restricted Subsidiaries during such period,
and
(ii) Consolidated Fixed Charges during such
period;
plus
(c) the NCB Development Corporation
Contribution.
"Consolidated Effective Net Worth -- at any time
means the sum of
(a) Consolidated Adjusted Net Worth at such
time; plus
(b) the aggregate outstanding principal amount
of Class A Notes at such time.
"Consolidated Fixed Charges" -- for any fiscal period
of the Company means, on a consolidated basis for the
Company and the Restricted Subsidiaries, the sum of:
(a) all interest and all amortization of Debt
discount and expense on all Debt for borrowed money
of the Company and the Restricted Subsidiaries; plus
(b) all Rentals payable during such period by
the Company and the Restricted Subsidiaries.
"Consolidated Net Earnings" -- means, for any period,
the net income or loss of the Company and the Restricted
Subsidiaries, as applicable (determined on a consolidated
basis for such Persons at such time), for such period, as
determined in accordance with generally accepted
accounting principles in effect at such time.
"Consolidated Senior Debt" -- at any time means the
aggregate amount of the obligations of the Company and the
Restricted Subsidiaries set forth below that would be
reflected on a consolidated balance sheet for the Company
and the Restricted Subsidiaries at such time:
(a) the Notes;
(b) all other Debt of the Company or a
Restricted Subsidiary for borrowed money that is not
expressed to be subordinate or junior to any other
Debt;
(c) all Guarantees of the Company or a
Restricted Subsidiary;
(d) all obligations in respect of Capitalized
Leases;
(e) in respect of the Company or any Restricted
Subsidiary, the aggregate amount of all demand and
term deposits made by any Person with the Company or
such Restricted Subsidiary (including, without
limitation, certificates of deposit issued by the
Company or such Restricted Subsidiary); and
(f) Asset Securitization Recourse Liabilities
to the extent, but only to the extent, that such
obligations have matured.
"Consolidated Taxable Income" -- means, in respect of
the Company for any calendar year, the taxable income for
such calendar year reported by the Company on its tax
return filed with the Internal Revenue Service (or other
successor federal agency) for such calendar year.
"Debt" -- at any time with respect to any Person
means all obligations of such Person that in accordance
with generally accepted accounting principles would be
classified on a balance sheet of such Person as
liabilities of such Person (except as specified in clause
(d) below), including (without limitation) all
(a) direct debt and other similar recourse and
non-recourse monetary obligations of such Person,
(b) obligations secured by any Lien upon
Property owned by such Person, even though such
Person has not assumed or become liable for the
payment of such obligations,
(c) obligations created or arising under any
conditional sale, financing lease, or other title
retention agreement with respect to Property acquired
by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor
under such agreement in the event of default are
limited to repossession or sale of such Property,
(d) Guarantees of such Person (whether or not
such Guarantees are classified as liabilities on the
balance sheet of such Person at such time),
(e) obligations in respect of Capitalized
Leases, and
(f) in respect of the Company or any Restricted
Subsidiary, the aggregate amount of all demand and
term deposits made by any Person with the Company or
such Restricted Subsidiary (including, without
limitation, certificates of deposit issued by the
Company or such Restricted Subsidiary).
"Default" -- means an event or condition the
occurrence of which would, with the lapse of time or the
giving of notice or both, become an Event of Default.
"Disposition Assets" -- Section 7.5(a) of this
Agreement.
"Disposition Stock" -- Section 7.4 of this Agreement.
"Disposition Subsidiary" -- Section 7.4 of this
Agreement.
"Disposition Value" -- with respect to any Property
means the greater of
(a) the book value of such Property as
reflected on the balance sheet of the owner of such
Property and
(b) the Fair Market Value of such Property,
in each case as of the time of the disposition of
such Property.
"Distribution" -- in respect of any corporation
means:
(a) dividends or other distributions on capital
stock of the corporation (except distributions in
such stock); and
(b) the redemption or acquisition of such stock
or of warrants, rights or other options to purchase
such stock (except when solely in exchange for such
stock) unless made, contemporaneously, from the net
proceeds of a sale of such stock.
"DOL" -- Section 1.6(b) of this Agreement.
"Eligible Derivatives" -- means derivative Securities
which are sold in the ordinary course of the business of
the Company and the Restricted Subsidiaries for the
purpose of hedging or otherwise managing portfolio risk.
"ERISA" -- means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"Event of Default" -- Section 9.1 of this Agreement.
"Exchange Act" -- means the Securities Exchange Act
of 1934, as amended.
"Fair Market Value" -- at any time with respect to
any Property, means the sale value of such Property that
would be realized in an arm's-length sale at such time
between an informed and willing buyer and an informed and
willing seller, under no compulsion to buy or sell,
respectively.
"Financial Covenant" -- shall mean any covenant,
agreement or provision (including, without limitation, the
definitions applicable thereto) of or applicable to the
Company or any Restricted Subsidiary contained in any
agreement governing, or instrument evidencing, any Debt
(or commitment to lend), other than Debt or a commitment
to lend among the Company and one or more Restricted
Subsidiaries, of the Company or any Restricted Subsidiary
in an aggregate principal amount greater than Five Million
Dollars ($5,000,000), which covenant, agreement or
provision:
(i) requires the Company or any Restricted
Subsidiary to maintain specified financial amounts or
ratios or to meet other financial tests;
(ii) restricts the ability of the Company or any
Restricted Subsidiary to:
(a) make Distributions, investments,
capital expenditures or operating expenditures
of any kind;
(b) incur, create or maintain any Debt (or
other obligations) or Liens;
(c) merge, consolidate or acquire or be
acquired by any Person;
(d) sell, lease, transfer or dispose of
any Property (other than restrictions imposed
solely upon collateral, and not upon Property of
the Company or any Restricted Subsidiary
generally, by holders of Liens thereon which are
permitted by this Agreement); or
(e) issue or sell any capital stock of any
kind;
(iii) is similar to any provision in Section
7 of this Agreement; or
(iv) provides that a default or event of default
shall occur, or that the Company or any Restricted
Subsidiary shall be required to prepay, redeem or
otherwise acquire for value any Debt or security as a
result of its failure to comply with any provision
similar to any of those set forth in any of the
foregoing clauses (i), (ii) or (iii).
"Financing Agreement" -- means the Financing
Agreement, made as of December 21, 1989, by and between
the Department of the Treasury, an executive department of
the United States government, and the Company, as in
effect on the Series D Closing Date.
"Financing Documents" -- means this Agreement, the
Notes, the other Note Purchase Agreements and the other
agreements and instruments to be executed pursuant to the
terms of each of such Financing Documents, as each may be
amended from time to time.
"Guarantees" -- at any time means, subject to the
last sentence of this definition, all obligations of any
Person guaranteeing or in effect guaranteeing any
indebtedness or obligation or dividend of any other Person
(the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by
such Person
(a) to purchase any indebtedness or obligation
or any Property constituting security therefor,
(b) to advance or supply funds
(i) for the purchase or payment of any
indebtedness or obligation or
(ii) to maintain working capital, equity
capital or other balance sheet condition or
otherwise to advance or make available funds for
the purchase or payment of any indebtedness or
obligation,
(c) to purchase Property, Securities or
services primarily for the purpose of assuring the
owner of any indebtedness or obligation of the
ability of the primary obligor to make payment of the
indebtedness or obligation or
(d) otherwise to assure the owner of the
indebtedness or obligation of the primary obligor
against loss in respect thereof (including, without
limitation, contingent reimbursement obligations
under letters of credit).
For purposes of this definition, (i) liabilities or
endorsements in the ordinary course of business of checks
and other negotiable instruments for deposit or
collection, (ii) obligations of the Restricted
Subsidiaries to acquire assets from the Company in the
ordinary course of business, and (iii) Asset
Securitization Recourse Liabilities shall be deemed not to
be "Guarantees."
"Investments" -- has the meaning assigned to such
term in the definition of "Restricted Investments" in this
Section 10.1.
"Lien" -- means any interest in Property securing an
obligation owed to, or a claim by, a Person other than the
owner of the Property, whether such interest is based on
the common law, statute or contract, and including but not
limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security
purposes. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For
the purposes of this Agreement, the Company or a
Restricted Subsidiary shall be deemed to be the owner of
any Property which it has acquired or holds subject to a
conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has
been retained by or vested in some other Person for
security purposes.
"Long-Term Lease" -- means any lease (other than a
Capitalized Lease) having an original term, including any
period for which the lease may be renewed or extended at
the option of the lessor, of more than one (1) year at the
time the lessee shall have entered into such lease.
"Material Obligation(s)" -- means any one or more
Debts or other Securities having an aggregate outstanding
principal or stated amount for all such Debts or other
Securities of One Million Dollars ($1,000,000) or more.
"NCB Development Corporation Contribution" -- means
the contribution made by the Company to NCB Development
Corporation in any fiscal period of the Company pursuant
to 12 U.S.C. Sec.3051(d), as in effect on the Series D
Closing Date.
"Notes" -- Section 1.1(c) of this Agreement.
"Note Purchase Agreement" -- Section 1.5 of this
Agreement.
"Other Purchaser(s)" -- Section 1.5 of this
Agreement.
"Other Restated Agreements" -- means (i) those
certain separate Note Purchase Agreements, each dated as
of December 16, 1994, between the Company and Lutheran
Brotherhood, AUSA Life Assurance Company, Inc.,
International Life Investors Insurance Company, PFL Life
Insurance Company, The Canada Life Assurance Company,
Canada Life Insurance Company of New York, and Canada Life
Insurance Company of America, respectively, (ii) those
certain separate Assumption Agreement and Amended and
Restated Senior Note Agreements, each dated as of December
1, 1993, between the Company and Equitable Variable Life
Insurance Company, The Equitable Life Assurance Society of
the United States, Mellon Bank, N.A., as Trustee for First
Plaza Group Trust (as directed by Equitable Capital
Management Corporation), Principal Mutual Life Insurance
Company, IDS Certificate Company, Safeco Life Insurance
Company, Phoenix Home Life Mutual Insurance Company,
Provident Mutual Life Insurance Company of Philadelphia,
Provident Mutual Life and Annuity Company of America,
Lutheran Brotherhood, and Mutual Service Life Insurance
Company, respectively, and (iii) that certain Master Shelf
Agreement, dated as of December 30, 1994, between the
Company and The Prudential Insurance Company of America.
"Patronage Dividends" -- means "patronage dividend",
as such term is defined in 12 U.S.C. Sec. 3019(b)(2) as in
effect on the Series D Closing Date.
"Pension Plans" -- means all "employee pension
benefit plans", as such term is defined in Section 3 of
ERISA, maintained or participated in by the Company or any
of the Subsidiaries, as from time to time in effect.
"Permitted Proceeds Application" -- means, in
connection with a sale of assets in accordance with
Section 7.5 hereof, the application by the Company or a
Restricted Subsidiary of the amount of proceeds specified
in such Section to any of the following:
(a) the acquisition by the Company or such
Restricted Subsidiary of Adjusted Tangible Assets to
be used in the ordinary course of business of the
Company or such Restricted Subsidiary within ninety
(90) days of such sale, so long as any proceeds to be
applied pursuant to this clause (a) are invested in
accordance with clause (c) hereof until such time as
such proceeds are so applied,
(b) the prepayment, allocated in proportion to
the respective outstanding principal amounts thereof,
of each of the Notes in accordance with Section 5.2
of this Agreement and Section 5.2 of each of the
Other Restated Agreements, as the case may be, within
ten (10) Business Days following the consummation of
such sale, so long as any proceeds to be applied
pursuant to this clause (b) are invested in
accordance with clause (c) hereof until such time as
such proceeds are so applied,
(c) the investment of such proceeds in any
Investment specified in clauses (d) to (k),
inclusive, of the definition of "Restricted
Investment" no later than the next Business Day
following the consummation of such sale; provided
that such proceeds are applied as provided in either
of the foregoing clauses (a) or (b) of this
definition within the period therein specified, or
(d) the repayment of Debt outstanding under any
revolving credit or similar agreement which provides
for successive reborrowings and repayments thereunder
at the Company's option; provided that (i) the
aggregate amount of such proceeds so applied shall
not exceed the lesser of Fifty Million Dollars
($50,000,000) and ten percent (10%) of Consolidated
Assets and (ii) the amount of Debt so repaid shall be
reborrowed and applied as provided in either of the
foregoing clauses (a) or (b) within the period
therein specified.
"Person" -- means an individual, partnership,
corporation, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
"Property" -- means any interest in any kind of
property or asset, whether real, personal or mixed, or
tangible or intangible.
"Purchasers" -- means and includes each of the
Persons listed in the Purchaser Schedule.
"Purchaser Schedule" -- Section 1.5 of this
Agreement.
"Qualified Assets" -- at any time means the sum of
(a) the principal amount of all promissory
notes and other interest bearing obligations of the
Company owned in the ordinary course of the Company's
business less (i) reserves for credit losses
applicable thereto, and (ii) unearned income,
(b) the Company's cash on hand and in banks,
and
(c) the Company's Investments other than
Restricted Investments.
"Reinvestment Yield" -- the definition of "Yield-
Maintenance Premium".
"Relevant Treasury Yield" -- means,
(a) the annual yield to maturity (reported as
of 10:00 a.m., New York City time) on the date that
is five (5) Business Days prior to the Series E
Closing Date on the display page on the Bloomberg
Financial Markets System (Page USD or such other
display on the Bloomberg Financial Markets System as
shall replace Page USD) providing the most current
yields to maturity for actively traded "On The Run"
United States Treasury securities with a maturity of
six (6) years; or, if no such United States Treasury
security is so listed, then
(b) the annual yield to maturity determined by
interpolating between the annual yields to maturity
of the "On The Run" United States Treasury securities
with a maturity:
(i) most nearly equal to and less than six
(6) years; and
(ii) most nearly equal to and greater than
six (6) years.
"Rentals" -- at any time means all fixed rentals
(including as such all payments which the lessee is
obligated to make to the lessor on termination of a lease
or surrender of leased Property) payable by the Company or
a Restricted Subsidiary, as lessee or sublessee under a
lease of Property, exclusive of any amounts required to be
paid by the Company or a Restricted Subsidiary (whether or
not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage
leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee
regardless of sales volume or gross revenues.
"Required Holders" -- at any time means the holder or
holders of at least sixty-six and two-thirds percent
(662/3%) in aggregate principal amount of each of the
Series D Notes and the Series E Notes at the time
outstanding (exclusive of Notes then owned by any one or
more of the Company, any Restricted Subsidiary and any
Affiliates).
"Restricted Guarantees" -- at any time means all
Guarantees by the Company of obligations of others that
constitute sum certain obligations at the time such
Guarantees are incurred.
"Restricted Investments" -- at any time means all
investments, made in cash or by delivery of Property, by
the Company and the Restricted Subsidiaries (x) in any
Person, whether by acquisition of stock, indebtedness or
other obligations or Securities, or by loan, advance or
capital contribution, or otherwise, or (y) in any Property
(items (x) and (y) herein called "Investments"), except
the following:
(a) Investments in and to Restricted
Subsidiaries, including any Investment in a
corporation which, after giving effect to such
Investment, will become a Restricted Subsidiary and
including Investments in a Restricted Subsidiary that
is designated as a Subsidiary in compliance with the
proviso to the definition of "Restricted Subsidiary"
so long as such Investments were made prior to the
date of such designation;
(b) Investments in Property to be used by the
Company and the Restricted Subsidiaries in the
ordinary course of their respective businesses;
(c) Investments in promissory notes and other
interest bearing obligations acquired in the ordinary
course of business of the Company or the Restricted
Subsidiaries;
(d) Investments in commercial paper of any
corporation which, at the time of acquisition by the
Company or a Restricted Subsidiary, is accorded a
rating of A-2 or higher by Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc., Duff-2 or
higher by Duff & Phelps, Inc. or P-2 or higher by
Moody's Investors Service, Inc. (or any other
nationally recognized credit rating agency of similar
standing if none of such corporations is then in the
business of rating commercial paper);
(e) Investments in direct obligations of the
United States of America;
(f) Investments in marketable obligations fully
guaranteed or insured by the United States of America
or marketable obligations for which the full faith
and credit of the United States of America is pledged
for the repayment in full of all principal and
interest thereon;
(g) Investments in marketable obligations
issued or fully guaranteed or insured by any agency,
instrumentality or corporation of the United States
of America established by the United States Congress
or marketable obligations for which the credit of any
such agency, instrumentality or corporation is
pledged for the repayment in full of all principal
and interest thereon;
(h) Investments in marketable general
obligations of any state, territory or possession of
the United States of America, or any political
subdivision of any of the foregoing, or the District
of Columbia, given one of the three (3) highest
credit ratings in respect of the type of such
obligations by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc. or Moody's Investors
Service, Inc., and the obligor of which
(i) has general taxing authority and the
power to levy such taxes as may be required for
the payment of principal and interest thereon,
and
(ii) has unconditionally fully secured the
payment of principal and interest on such
obligations with its full faith and credit;
(i) Investments in domestic and Eurodollar
negotiable time and variable rate certificates of
deposit issued by Selected Commercial Banks;
(j) Investments in marketable bankers'
acceptances and finance bills accepted by Selected
Commercial Banks;
(k) Investments in repurchase, reverse
repurchase and security lending agreements fully
collateralized by marketable obligations issued by
the United States of America or by any agency or
instrumentality thereof;
(l) Investments in federal funds or similar
unsecured loans to Selected Commercial Banks having a
maturity of not more than four (4) days from the date
of acquisition thereof;
(m) Investments in marketable corporate debt
securities given a credit rating of "A" or better by
each of Standard & Poor's Ratings Group, a division
of McGraw-Hill, Inc. and Moody's Investors Service,
Inc.;
(n) Investments in asset-backed securities
issued against a pool of receivables which (i) have
an average life or final maturity of not more than
five (5) years and (ii) have been given a long-term
rating of "AAA" or better by Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. or
Moody's Investors Service, Inc.; and
(o) Investments in mortgage-backed securities
issued against an underlying pool of mortgages which
(i) have an average life, as determined by the
dealer's prepayment assumptions at the time of
purchase, of not more than five (5) years and (ii)
have been given a long-term rating of "AAA" or better
by Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc. or Moody's Investors Service, Inc.;
provided, that notwithstanding the foregoing clauses (a)
through (o), inclusive, the term Restricted Investments
shall for all purposes include all Investments described
in the foregoing clauses (d) through (k), inclusive, to
the extent that they mature more than one (1) year from
the date of acquisition thereof by the Company or a
Restricted Subsidiary.
"Restricted Payments" -- Section 7.14(a) of this
Agreement.
"Restricted Subsidiary" -- means a Subsidiary engaged
in one or more of the businesses referred to in Section
2.3(c) of this Agreement:
(a) organized under the laws of the United
States of America or a jurisdiction thereof;
(b) that conducts substantially all of its
business and has substantially all of its Property
within the United States of America and/or Canada;
(c) one hundred percent (100%) of all stock and
equity Securities (except directors' qualifying
shares) of which are legally and beneficially owned,
directly or indirectly, by the Company; and
(d) that is designated by the Board of
Directors to be included in the definition of
Restricted Subsidiary for all purposes of this
Agreement;
provided, that any Subsidiary having been designated a
Restricted Subsidiary may thereafter become a Subsidiary
(other than a Restricted Subsidiary) by designation of the
Board of Directors if at the time of such change in
characterization and after giving effect thereto
(i) no Default or Event of Default shall exist,
and
(ii) after the elimination of the net
earnings of any such Subsidiary from Consolidated
Adjusted Net Income for the period subsequent to
December 31, 1991, the Company would have been
entitled, pursuant to the provisions of Section 7.13,
to declare or make all Restricted Payments declared
or made during such period.
"Scheduled Principal Payment" -- Section 5.1(b).
"Securities Act" -- means the Securities Act of 1933,
as amended.
"Security" -- shall have the same meaning as in
Section 2(1) of the Securities Act; provided, however,
that Asset Securitization Recourse Liabilities shall not
constitute "Securities" except (i) to the extent that such
obligations arise from the Company's obligation to
repurchase receivables or other assets as a result of a
default in payment by the obligor thereunder or any other
default in performance by such obligor under any agreement
related to such receivables or (ii) if the Company shall
maintain a reserve account containing cash or Securities
in respect of any such obligations or shall retain or
purchase a subordinated interest therein, to the extent of
the amount of such reserve account or subordinated
interest.
"Selected Commercial Bank" -- means
(a) one of the one hundred (100) largest
commercial banks organized under the laws of the
United States of America or any state thereof and
accorded a rating of "B" or better by Thomson
BankWatch, Inc. (or accorded a comparable rating by
another nationally recognized rating agency of
similar standing if Thomson BankWatch, Inc. is not
then in the business of rating commercial banks); or
(b) one of the fifty (50) largest commercial
banks organized under the laws of the United States
of America or any state thereof and accorded a rating
of "B/C" or better by Thomson BankWatch, Inc. (or
accorded a comparable rating by another nationally
recognized rating agency of similar standing if
Thomson BankWatch, Inc. is not then in the business
of rating commercial banks).
"Senior Debt" -- means the Notes, all other Debt of
the Company for borrowed money that is not expressed to be
subordinate or junior to any other Debt, and Asset
Securitization Recourse Liabilities to the extent, but
only to the extent, that such obligations have matured.
"Series; Series of Notes" -- means one or more of the
Series D Notes or the Series E Notes, as the context may
require.
"Series D Closing" -- Section 1.3 of this Agreement.
"Series D Closing Date" -- Section 1.3 of this
Agreement.
"Series D Notes" -- Section 1.1(a) of this Agreement.
"Series D Scheduled Principal Payment" -- Section
5.1(a).
"Series E Notes" -- Section 1.1(b) of this Agreement.
"Series E Closing" -- Section 1.4(c) of this
Agreement.
"Series E Closing Date" -- Section 1.4(a) of this
Agreement.
"Series E Interest Rate" -- Section 1.4(b) of this
Agreement.
"Series E Noteholder Notice" -- Section 1.4(c) of
this Agreement.
"Series E Purchaser" -- Section 1.4(c) of this
Agreement.
"Series E Scheduled Principal Payment" -- Section
5.1(b).
"SPV" -- has the meaning assigned to such term in the
definition of "Asset Securitization" in this Section 10.1.
"Stock Disposition Date" -- Section 7.4(b) of this
Agreement.
"Subordinated Debt" -- means (a) the Class A Notes
and (b) all notes, debentures or other evidences of
indebtedness of the Company for borrowed money of the
Company which shall contain or have applicable thereto
subordination provisions providing for the subordination
of such indebtedness to the Notes and all other Senior
Debt (but not to any other Debt) of the Company
substantially in the following form:
"Anything in this subordinated note to the
contrary notwithstanding, the indebtedness evidenced
by this subordinated note shall be subordinate and
junior in right of payment, to the extent and in the
manner hereinafter set forth, to all indebtedness of
the Company for money borrowed, whether outstanding
at the date of this subordinated note or incurred
after the date of this subordinated note, which is
not by its terms subordinate or junior to any other
indebtedness of the Company (such indebtedness of the
Company, together with (i) all premiums (if any) due
on such indebtedness, (ii) all interest accrued on
such indebtedness (including, without limitation, any
interest which accrues after the commencement of any
case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the
Company, whether or not such interest is allowed
under applicable law), and (iii) all other amounts
payable from time to time to the holders of, or in
respect of, such indebtedness (including, without
limitation, all costs and expenses relating thereto)
to which this subordinated note is subordinate and
junior being herein called "Superior Indebtedness"):
(a) in the event of any sale under or in
accordance with any judgment or decree rendered
in any proceeding by or on behalf of the holder
or holders of this subordinated note or in the
event of any distribution, division or
application, partial or complete, voluntary or
involuntary, by operation of law or otherwise,
of all or any part of the assets of the Company,
or the proceeds thereof, to creditors of the
Company occurring by reason of any liquidation,
dissolution or winding up of the Company or in
the event of any execution sale, receivership,
insolvency, bankruptcy, liquidation,
readjustment, reorganization or other similar
proceeding relative to the Company or its debts
or properties, then in any such event the
holders of any and all Superior Indebtedness
shall be preferred in the payment of their
claims over the holder or holders of this
subordinated note, and such Superior
Indebtedness shall be first paid and satisfied
in full before any payment or distribution of
any kind or character, whether in cash, property
or securities (other than securities which are
subordinate and junior in right of payment to
the payment of all Superior Indebtedness which
may at the time be outstanding pursuant to terms
substantially identical to the terms of this
subordinated note), shall be made upon this
subordinated note; and in any such event any
dividend or distribution of any kind or
character, whether in cash, property or
securities (other than in securities which are
subordinate and junior in right of payment to
the payment of all Superior Indebtedness which
may at the time be outstanding pursuant to terms
substantially identical to the terms of this
subordinated note) which shall be made upon or
in respect of the indebtedness evidenced by this
subordinated note, or any renewals or extensions
hereof, shall be paid over to the holders of
such Superior Indebtedness, pro rata, for
application in payment thereof unless and until
such Superior Indebtedness shall have been paid
and satisfied in full;
(b) in the event that pursuant to the
provisions hereof this subordinated note is
declared or becomes due and payable before its
expressed maturity because of an occurrence of
an event of default described herein (under
circumstances when the foregoing clause (a)
shall not be applicable) or otherwise, no amount
shall be paid by the Company in respect of the
principal, interest or premium on this
subordinated note (or any other amounts due in
respect thereof), except at the stated maturity
hereof (all subject to the foregoing clause (a)
above), unless and until all Superior
Indebtedness outstanding at the time this
subordinated note so becomes due and payable
because of any such event shall have been paid
in full in cash or payment thereof shall have
been provided for in a manner satisfactory to
the holders of such outstanding Superior
Indebtedness;
(c) without limiting the effect of any of
the other provisions hereof, during the
continuance of any default with respect to any
Superior Indebtedness or any agreement relating
thereto, or any default in the payment of any
Superior Indebtedness, no payment of principal,
sinking fund, interest or premium (or any other
amount) shall be made on or with respect to the
indebtedness evidenced by this subordinated note
or any renewals or extensions hereof; and
(d) during any period of time when,
pursuant to the foregoing paragraphs (b) or (c),
payment may not be made on the indebtedness
evidenced by this subordinated note, then the
holder of this subordinated note shall take no
action against or with respect to the Company to
seek or to enforce collection of the Notes or to
exercise any of such holder's rights with
respect to this subordinated note, which
prohibition shall include, without limitation, a
prohibition against any acceleration of this
subordinated note, the filing of a collection
action, or the initiation of a bankruptcy
petition against the Company.
The Company covenants and agrees, for the
benefit of each and every present and future holder
of Superior Indebtedness, that in the event that
pursuant to the provisions hereof this subordinated
note is declared or becomes due and payable because
of an occurrence of an event of default described
herein or otherwise, then each holder of any Superior
Indebtedness then outstanding shall have the right to
declare immediately due and payable on demand all or
any part of such Superior Indebtedness owing and
payable to such holder, regardless of any other
maturity or terms of said Superior Indebtedness; and
if and when any such default has occurred, or any
notice of default under the terms hereof may be
served upon the Company, then in each such event the
Company shall and hereby agrees that it will
immediately notify the holders of the Superior
Indebtedness of such default or notice thereof, as
the case may be.
No right of any present or future holder of any
Superior Indebtedness of the Company to enforce
subordination as herein provided shall at any time or
in any way be prejudiced or impaired by any failure
to act on the part of the Company, or by any
noncompliance by the Company with the terms,
provisions and covenants of this subordinated note,
regardless of any knowledge thereof that any such
holder of Superior Indebtedness may have or be
otherwise charged with. The provisions hereof are
solely for the purpose of defining the relative
rights of the holders of Superior Indebtedness on the
one hand, and the holder or holders of this
subordinated note on the other hand, and nothing
herein shall impair, as between the Company and the
holder of this subordinated note, the obligation of
the Company to pay to the holder hereof the
principal, premium, if any, and interest hereon in
accordance with its terms, nor shall anything herein
prevent the holder of this subordinated note from
exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder,
subject to the rights, if any, of holders of Superior
Indebtedness as herein provided. Each and every
holder of this subordinated note by acceptance hereof
shall undertake and agree for the benefit of each
holder of Superior Indebtedness to execute, verify,
deliver and file any proofs of claim, consents,
assignments or other instruments which any holder of
Superior Indebtedness may at any time require in
order to prove and realize upon any rights or claims
pertaining to this subordinated note and to
effectuate the full benefit of the subordination
contained herein and, upon failure of any such holder
of this subordinated note so to do, any such holder
of Superior Indebtedness shall be deemed to be
irrevocably appointed the agent and attorney-in-fact
of such holder of this subordinated note to execute,
verify, deliver and file any such proofs of claim,
consents, assignments or other instruments."
"Subsidiary" -- means a corporation organized under
the laws of the United States or Canada, or a jurisdiction
thereof, of which the Company owns, directly or
indirectly, more than fifty percent (50%) of the Voting
Stock.
"Subsidiary Stock" -- Section 7.4 of this Agreement.
"Voting Stock" -- means Securities of any class or
classes of a corporation the holders of which are
ordinarily, in the absence of contingencies, entitled to
vote in the election of the corporate directors (or
persons performing similar functions).
"Yield-Maintenance Premium" -- means, with respect to
any Note in any Series of Notes, a premium equal to the
excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of
(i) such Called Principal plus
(ii) interest accrued thereon subsequent to the
most recent scheduled interest payment date up to and
including the Settlement Date with respect to such
Called Principal.
The Yield-Maintenance Premium shall in no event be less
than zero (0).
As used in this definition,
"Called Principal" -- means, with respect to any
Note in any Series, the principal of such Note that
is to be prepaid pursuant to Section 5.2 of this
Agreement or is declared to be immediately due and
payable pursuant to Section 9 of this Agreement, as
the context requires.
"Discounted Value" -- means, with respect to the
Called Principal of any Note, the amount obtained by
discounting all Remaining Scheduled Payments with
respect to such Called Principal from their
respective scheduled due dates to the Settlement Date
with respect to such Called Principal, in accordance
with accepted financial practice and at a discount
factor (applied on a semiannual basis) equal to the
Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" -- means, with respect to
the Called Principal of any Note, the yield to
maturity implied by
(a) the yields reported, as of 10:00 a.m.
(New York City time) on the Business Day next
preceding the Settlement Date with respect to
such Called Principal, on the display designated
as "Page 678" on the Telerate Service (or such
other display as may replace Page 678 on the
Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to
the Remaining Average Life of such Called
Principal as of such Settlement Date, or if such
yields shall not be reported as of such time or
the yields reported as of such time shall not be
ascertainable,
(b) the Treasury Constant Maturity Series
yields reported, for the latest day for which
such yields shall have been so reported as of
the Business Day next preceding the Settlement
Date with respect to such Called Principal, in
Federal Reserve Statistical Release # H.15(519)
(or any comparable successor publication) for
actively traded U.S. Treasury securities having
a constant maturity equal to the Remaining
Average Life of such Called Principal as of such
Settlement Date.
Such implied yield shall be determined, if necessary,
by
(i) converting U.S. Treasury bill
quotations to bond-equivalent yields in
accordance with accepted financial practice and
(ii) interpolating linearly between
reported yields.
"Remaining Average Life" -- means, with respect
to the Called Principal of any Note, the number of
years (calculated to the nearest one-twelfth (1/12)
year) obtained by dividing
(a) such Called Principal into
(b) the sum of the products obtained by
multiplying
(i) each Remaining Scheduled Payment
of such Called Principal (but not of
interest thereon) by
(ii) the number of years (calculated
to the nearest one-twelfth (1/12) year)
which will elapse between the Settlement
Date with respect to such Called Principal
and the scheduled due date of such
Remaining Scheduled Payment.
"Remaining Scheduled Payments" -- means, with
respect to the Called Principal of any Note, all
payments of such Called Principal and interest
thereon that would be due on or after the Settlement
Date with respect to such Called Principal if no
payment of such Called Principal were made prior to
its scheduled due date.
"Settlement Date" -- means, with respect to the
Called Principal of any Note, the date on which such
Called Principal is to be prepaid pursuant to Section
5.2 or is declared to be immediately due and payable
pursuant to Section 9, as the context requires.
10.2 Accounting Principles.
Where the character or amount of any asset or liability or
item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be
made for any purpose under this Agreement, it shall be done in
accordance with generally accepted accounting principles at the
time in effect on the date of, or at the end of the period
covered by, the financial statements from which such asset,
liability, item of income, or item of expense, is derived,
except where such principles are inconsistent with the
requirements of this Agreement.
10.3 Directly or Indirectly.
Where any provision in this Agreement refers to action to
be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
10.4 Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH INTERNAL NEW YORK LAW.
SECTION 11 MISCELLANEOUS
11.1 Notices.
All communications under this Agreement or under the Notes
shall be in writing and shall be mailed by registered or
certified mail, telecopied or sent by overnight courier,
(a) if to you, at your address shown on the
Purchaser Schedule, marked for attention as therein
indicated, or at such other address as you may have
furnished the Company in writing, or
(b) if to the Company, at its address set forth in
Section 7.3 of this Agreement, or at such other address as
it may have furnished in writing to you and all other
holders of the Notes at the time outstanding.
Any notice so addressed and mailed by registered or certified
mail, telecopied or sent by overnight courier shall be deemed
to be given when so mailed, telecopied or sent.
11.2 Survival.
All warranties, representations, and covenants made by the
Company herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by you and shall survive
the delivery to you of the Notes regardless of any
investigation made by you or on your behalf. All statements in
any such certificate or other instrument shall constitute
warranties and representations by the Company under this
Agreement.
11.3 Successors and Assigns.
This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties.
The provisions of this Agreement are intended to be for the
benefit of all holders, from time to time, of the Notes, and
shall be enforceable by any such holder, whether or not an
express assignment to such holder of rights under this
Agreement has been made by you or your successor or assign.
11.4 Amendment and Waiver.
(a) Amendment and Waiver. This Agreement may be
amended, and the observance of any term of this Agreement
may be waived, with (and only with) the written consent of
the Company and the Required Holders; provided, that no
such amendment or waiver of any of the provisions of
Section 1 through Section 5 of this Agreement, inclusive,
shall be effective as to you unless consented to by you in
writing; and provided further, that no such amendment or
waiver shall, without the written consent of the holders
of all the Notes at the time outstanding,
(i) subject to Section 9.3 of this Agreement,
change the amount or time of any payment of principal
or Yield-Maintenance Premium or the rate or time of
payment of interest,
(ii) amend or waive any provision of Section
9.1(a), Section 9.1(b), Section 9.2 or Section 9.3 of
this Agreement,
(iii) amend the definition of "Required Holders"
contained in Section 10.1 hereof, or
(iv) amend or waive any provision of this
Section 11.4.
(B) Binding Effect. Any amendment or waiver shall
apply equally to all holders of Notes and shall be binding
upon them, upon each future holder of any Note and upon
the Company, whether or not such Note shall have been
marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any
obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any
right consequent thereon.
11.5 Reproduction of Documents.
This Agreement and all documents relating thereto,
including without limitation,
(a) consents, waivers and modifications which may
hereafter be executed,
(b) documents received by either party to this
Agreement at the Series D Closing and the Series E Closing
(except the Notes themselves), and
(c) financial statements, certificates and other
information previously or hereafter furnished to either
party to this Agreement,
may be reproduced by either party to this Agreement by any
photographic, photostatic, microfilm, micro-card, miniature
photographic, digital or other similar process and either party
to this Agreement may, at its option, destroy any original
document so reproduced. The parties to this Agreement agree
and stipulate that any such reproduction shall likewise be
admissible in evidence as the original itself in any judicial
or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the
regular course of business) and that any enlargement, facsimile
or further reproduction of such reproduction shall likewise be
admissible in evidence.
11.6 Severability.
Should any part of this Agreement for any reason be
declared invalid, such decision shall not affect the validity
of any remaining portion, which remaining portion shall remain
in force and effect as if this Agreement had been executed with
the invalid portion thereof eliminated and it is hereby
declared the intention of the parties to this Agreement that
they would have executed the remaining portion of this
Agreement without including therein any such part, parts, or
portion which may, for any reason, be hereafter declared
invalid.
11.7 Payments, When Received.
(a) Payments Due on Holidays. If any payment due
on, or with respect to, any Note shall fall due on a day
other than a Business Day, then such payment shall be made
on the first Business Day following the day on which such
payment shall have so fallen due; provided that if all or
any portion of such payment shall consist of a payment of
interest, for purposes of calculating such interest, such
payment shall be deemed to have been originally due on
such first following Business Day, and such interest shall
accrue and be payable to (but not including) the actual
date of payment.
(b) Payments Received after 1:00 p.m.. Any payment
actually received by you before 1:00 p.m. (New York City
time), by federal funds wire transfer on any Business Day,
shall be deemed to have been received by you on such day.
Notwithstanding Section 4.1 of this Agreement, any payment
actually received by you on or after 1:00 p.m. (New York
City time) by federal funds wire transfer on any Business
Day, shall be deemed to have been received on the next
following Business Day. All payments received by you on a
day other than a Business Day, or in a manner other than
by federal funds wire transfer, shall be deemed to have
been received by you on the Business Day such amounts
actually become available to you prior to 1:00 p.m. (New
York City time).
11.8 Duplicate Originals.
Two (2) or more duplicate originals of this Agreement may
be signed by the parties, each of which shall be an original
but all of which together shall constitute one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. NEXT PAGE IS
SIGNATURE PAGE]
<PAGE>
If this Agreement is satisfactory to you, please so
indicate by signing the acceptance at the foot of a counterpart
of this Agreement and returning such counterpart to the
Company, whereupon this Agreement will become binding between
us in accordance with its terms.
Very truly yours,
NATIONAL CONSUMER
COOPERATIVE BANK
By
Name:
Title:
Accepted:
[PURCHASER]
By
Name:
Title:
(Signature page for the NOTE PURCHASE AGREEMENT of NATIONAL CONSUMER
COOPERATIVE BANK in connection with the issuance of its 6.6% Series D
Senior Notes due December 31, 2002 and Series E Senior Notes Due
December 31, 2002)
<PAGE>
ANNEX 1
Purchaser Schedule
Purchaser Name FIRST AUSA LIFE INSURANCE COMPANY
Name in Which Note is Registered FIRST AUSA LIFE INSURANCE COMPANY
Principal Amount, Series and R-1; Series D
Registration Number of Notes to $5,000,000
be Purchased
Payment on Account of Note Federal Funds Wire Transfer
Method Citibank, N.A.
111 Wall Street
Account Information New York, NY 10043
ABA # 021000089
DDA # 36112805
Account of: First AUSA Life Insurance
Company, Inc.
Custody Account No.: 847537
Accompanying Information Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, Series and
final maturity date) of such Notes, a
reference to [PPN# 63556* BL 9 with
respect to the Series D Notes], and the
due date and application (as among
principal, premium and interest) of the
payment being made.
Address for Notices Related to AEGON USA Investment Management, Inc.
Attention: Michael Meese
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
Address for All other Notices AEGON USA Investment Management, Inc.
Attention: Director of Private
Placements
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
Telecopier: 319-369-2009
Address for Delivery of Notes AEGON USA Investment Management, Inc.
Attention: Marla Kempes
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
Tax Identification Number 42-6063494
Annex 1-1
<PAGE>
ANNEX 1
Purchaser Schedule (cont.)
Purchaser Name PFL LIFE INSURANCE COMPANY
Name in Which Note is Registered PFL LIFE INSURANCE COMPANY
Principal Amount,Series and R-2; Series D
Registration Number of Notes to $5,000,000
be Purchased
Payment on Account of Note Federal Funds Wire Transfer
Method Firstar Bank of Iowa
222 Second Street S.E.
Account Information Cedar Rapids, IA 52401
ABA # 073000545
Account of: PFL Life Insurance Company
Account No.: 121-27196-9
Accompanying Information Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, Series and
final maturity date) of such Notes, a
reference to [PPN# 63556* BL 9 with
respect to the Series D Notes], and the
due date and application (as among
principal, premium and interest) of the
payment being made.
Address for Notices Related to AEGON USA Investment Management, Inc.
Payments Attention: Michael Meese
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
Address for All other Notices AEGON USA Investment Management, Inc.
Attention: Director of Private
Placements
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
Telecopier: 319-369-2009
Address for Delivery of Notes AEGON USA Investment Management, Inc.
Attention: Marla Kempes
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
Tax Identification Number 39-0989781
Annex 1-2
<PAGE>
Purchaser Name THE CANADA LIFE ASSURANCE COMPANY
Name in Which Note is Registered INCE & CO.
Principal Amount,Series and R-3: Series D: $2,500,000
Registration Number of Notes to
be Purchased
Payment on Account of Note Federal Funds Wire Transfer
Method
Account Information Morgan Guaranty Trust Company
ABA # 021 000 238
Account No.: 999-99-024
Attn: Custody Collection
For: The Canada Life Assurance Company
Custody Account No. 41233
Accompanying Information Each such wire transfer shall set forth
the name of the Company, the full title
(including the type of security, coupon
rate, Series and final maturity date)
of such Notes, a reference to [PPN#
63556* BL 9 with respect to the Series
D Notes], and the due date and
application (as among principal,
premium and interest) of the payment
being made.
Address for Notices Related to Morgan Guaranty Trust Company
60 Wall Street
New York, NY 10260-0060
Attention: Bob Rich or Peter Frank,
36th Floor
Fax No.: (212) 648-5111
with a copy to:
The Canada Life Assurance Company
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
Attention: Securities Accounting, SP-12
Fax No.: (416) 597-2609
Address for All other Notices The Canada Life Assurance Company
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
Attention: U.S. Private Placements, SP-11
Fax No.: (416) 597-9678
Address for Delivery of Notes Morgan Guaranty Trust Company
55 Exchange Place, Level A
New York, NY 10260-0023
Attention: Marty Petroski
For: The Canada Life Assurance Company
Custody Account No. 41233
Tax Identification Number 38-0397420
ANNEX 2
Disclosures of the Company
SUBSIDIARIES AND AFFILIATES (SECTION 2.1)
Annex 2-1
ANNEX 2
Disclosure of the Company (cont.)
Name of Subsidiary/Affiliate Jurisdiction of Nature and Extent of Affiliation
Incorporation
NCB Mortgage Corporation** Delaware The Company is the owner of all
outstanding stock of NCB Mortgage
Corporation
NCB Business Credit Delaware Wholly owned subsidiary of the
Corporation** Company (1)
NCB Financial Corporation** Delaware Wholly owned subsidiary of the
Company
NCB Savings Bank,FSB** Federal Charter Wholly owned subsidiary of NCB
Financial Corporation
NCB Development Corporation District of The Company was directed by
Columbia non- 12.U.S.C.Sec.3051(b) to organize
profit NCBDC, which has no capital
corporation stock. Six of its nine directors
are directors of the Company.
The Company makes annual
contributions to NCBDC and provides
office space and services for
which the Company is reimbursed
at its cost.
Cooperative Funding Delaware Wholly owned subsidiary of NCB
Corporation** Business Credit Corporation
NCB Insurance Brokers, New York Wholly owned subsidiary of NCB
Inc. ** Mortgage Corporation
NCB Investment Advisers, Wholly owned subsidiary of NCB
Inc.** Business Credit Corporation
NCB I, Inc.** Delaware Special purpose corporation and
wholly owned subsidiary of the
Company
** Restricted Subsidiary
(1) This corporation will be consolidated into the Company effective
12/29/95 by a voluntary dissolution pursuant to which the Comapny will
assume all of its assets and liabilities.
Annex 2-2
ANNEX 2
Disclosures of the Company(cont.)
PAYMENT INSTRUCTIONS (SECTION 1.3)
Signet Bank
Richmond
ABA # 051 006 778
Account: NCB Operating Account
Account #: 652-029-3439
DESCRIPTION OF BUSINESS (SECTION 2.3(c))
The Company and the Subsidiaries provide a broad array of
financial services and products to the Nation's cooperative-
related business sector, including but not limited to
commercial and real estate lending, mortgage banking, capital
markets and advisory services, leasing and lease financing,
depository services, asset securitization, derivatives, and
insurance brokerage.
INDEBTEDNESS (SECTION 2.15)
As of December 19, 1995, the Company had outstanding Debt
for borrowed money as follows:
Investor Amount Maturity
Lutheran Brotherhood $7,000,000 March 31, 2000
AUSA Life Assurance Company, Inc. $7,000,000 March 31, 2000
International Life Investors
Insurance Company $6,100,000 March 31, 2000
PFL Life Insurance Company $4,400,000 March 31, 2000
The Canada Life Assurance Company $5,900,000 March 31, 2000
Canada Life Insurance Company of
New York $600,000 March 31, 2000
Canada Life Insurance Company of
America $1,000,000 March 31, 2000
National Westminster Bank, et al. $200,000,000 May 30, 1998
($65,000,000
outstanding)
Signet Bank/Maryland $11,000,000 Upon demand
($8,000,000
outstanding)
Annex 2-3
ANNEX 2
Disclosures of the Company(cont.)
Investor Amount Maturity
PNC Bank $25,000,000 Upon demand
($25,000,000
outstanding)
Credit Suisse $10,000,000 November 10, 1997
$ 8,000,000 February 8, 1998
$12,000,000 September 15, 1998
Comerica Bank $20,000,000 Upon demand
($0 outstanding)
Equitable Variable Life Insurance $7,000,000 June 24, 1997
$2,000,000 December 24, 1997
The Equitable Life Assurance
Society of the United States $3,000,000 December 24, 1997
Mellon Bank, N.A., as Trustee for $3,000,000 December 24, 1997
First Plaza Group Trust (as
directed by Equitable Capital
Management Corporation)
Principal Mutual Life Insurance
Company $10,000,000 December 24, 1997
IDS Certificate Company $8,000,000 June 24, 1997
Safeco Life Insurance Company $4,000,000 June 24, 1997
Phoenix Home Life Mutual
Insurance Company $5,000,000 June 24, 1998
Provident Mutual Life Insurance
Company of Philadelphia $2,500,000 June 24, 1998
Provident Mutual Life and Annuity
Company of America $1,000,000 June 24, 1998
Lutheran Brotherhood $4,000,000 June 24, 1998
Mutual Service Life Insurance
Company $500,000 June 24, 1998
Prudential Insurance Company of
America $30,000,000 September 29, 2001
FoodService Purchasing
Cooperative, Inc. $4,500,000 January 12, 1996
Klukwan, Inc. $9,788,362 December 29, 1995
All such indebtedness is unsecured.
Annex 2-4
ANNEX 2
Disclosures of the Company (cont.)
RESTRICTIONS ON DEBT (SECTION 2.16)
The National Westminster Bank indebtedness and all of the
other indebtedness, referred to in the above table, each
restrict the Company's right to incur Debt, but none of such
restrictions are violated by the sale of the Notes.
LIENS (SECTION 7.6)
Section 10.5 of the National Westminster Bank Loan
Agreement provides for a Lien and right of setoff in favor of
the Agent and the banks party thereto with respect to deposits
or other sums due to the Company from the Agent or such banks.
Each of the Company, NCB Mortgage Corporation and NCB
Business Credit Corporation sells mortgage loans, ESOP loans
and other loans from its portfolio in the ordinary course of
business, structured either as an Asset Securitization or a
sale of whole loans. The SPV or other purchaser typically
provides for an alternative security interest and files a
financing statement covering the loans sold to it in order to
protect itself against a subsequent determination that such
sale was not a sale but rather a loan.
In order to provide a liquidity facility, NCB Savings
Bank, FSB ("NCBSB") is party to a Blanket Agreement for
Advances And Security Agreement, dated as of March 23, 1990,
with the Federal Home Loan Bank of Cincinnati (the "FHLB")
pursuant to which it grants a security interest to the FHLB in
its FHLB stock and in its mortgage portfolio as security for
advances that the FHLB agrees to make to NCBSB.
<PAGE>
EXHIBIT A1
FORM OF SERIES D SENIOR NOTE
NATIONAL CONSUMER COOPERATIVE BANK
6.60% Series D Senior Note Due December 31, 2002
R-__
$______ [Date]
PPN: 63556* BL 9
FOR VALUE RECEIVED, the undersigned, NATIONAL CONSUMER
COOPERATIVE BANK (herein called the "Company"), a corporation
organized under the laws of the United States which does
business as the National Cooperative Bank, hereby promises to
pay to _______________, or registered assigns, the principal
sum of ______ DOLLARS ($______) on December 31, 2002, with
interest (computed on the basis of a three hundred sixty (360)
day year of twelve (12) thirty (30) day months) on the unpaid
principal balance hereof at the rate of six and sixty one-
hundredths percent (6.60%) per annum from the date hereof,
payable semi-annually on the fifteenth (15th) day of each June
and December in each year, commencing on the interest payment
date next succeeding the date hereof, until the principal
hereof shall have become due and payable, and to pay on demand
interest on any overdue principal (including any overdue
prepayment of principal) and Yield-Maintenance Premium, if any,
and (to the extent permitted by applicable law) on any overdue
installment of interest, at a rate equal to the higher of
(a) eight and sixty one-hundredths percent (8.60%) per annum or
(b) the rate of interest publicly announced by Morgan Guaranty
Trust Company of New York, New York (from time to time in New
York City) as its prime rate for preferred borrowers.
Payments of principal, Yield-Maintenance Premium, if any,
and interest shall be made in such coin or currency of the
United States of America as at the time of payment is legal
tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register
maintained by the Company for such purpose, in the manner
provided in the Note Purchase Agreement (as herein defined).
This Note is one of a series of Series D Senior Notes of
the Company issued in an aggregate principal amount limited to
$12,500,000 pursuant to the Company's separate Note Purchase
Agreements (collectively, the "Note Purchase Agreement"), each
dated as of December 15, 1995, with each of the Purchasers
listed on Annex 1 attached thereto, and is entitled to the
benefits thereof. As provided in the Note Purchase Agreement,
this Note is subject to prepayment, in whole or in part, in
each case as specified in the Note Purchase Agreement.
This Note is a registered note and, as provided in the
Note Purchase Agreement, upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the registered
holder hereof or its attorney duly authorized in writing, a new
Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice
to the contrary.
In case an Event of Default shall occur and be continuing,
the principal of this Note may be declared due and payable in
the manner and with the effect provided in the Note Purchase
Agreement.
The Company agrees to pay, and save the holder hereof
harmless against, any liability for the payment of any costs
and expenses, including reasonable attorneys' fees, arising in
connection with the enforcement by the holder of any of its
rights under this Note or the Note Purchase Agreement.
All capitalized terms used but not specifically defined
herein shall have the respective meanings assigned to them in
the Note Purchase Agreement.
THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
NATIONAL CONSUMER COOPERATIVE BANK
By
Name:
Title:
<PAGE>
EXHIBIT A2
FORM OF SERIES E SENIOR NOTE
NATIONAL CONSUMER COOPERATIVE BANK
Series E Senior Note Due December 31, 2002
R-__
$______ [Date]
PPN: 63556* BM 7
FOR VALUE RECEIVED, the undersigned, NATIONAL CONSUMER
COOPERATIVE BANK (herein called the "Company"), a corporation
organized under the laws of the United States which does
business as the National Cooperative Bank, hereby promises to
pay to _______________, or registered assigns, the principal
sum of ______ DOLLARS ($______) on December 31, 2002, with
interest (computed on the basis of a three hundred sixty (360)
day year of twelve (12) thirty (30) day months) on the unpaid
principal balance hereof at the rate of __________________ one-
hundredths percent (______%) per annum from the date hereof,
payable semi-annually on the fifteenth (15th) day of each June
and December in each year, commencing on the interest payment
date next succeeding the date hereof, until the principal
hereof shall have become due and payable, and to pay on demand
interest on any overdue principal (including any overdue
prepayment of principal) and Yield-Maintenance Premium, if any,
and (to the extent permitted by applicable law) on any overdue
installment of interest, at a rate equal to the higher of
(a) ___________________ one-hundredths percent (______%) per
annum or (b) the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York, New York (from time to time
in New York City) as its prime rate for preferred borrowers.
Payments of principal, Yield-Maintenance Premium, if any,
and interest shall be made in such coin or currency of the
United States of America as at the time of payment is legal
tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register
maintained by the Company for such purpose, in the manner
provided in the Note Purchase Agreement (as herein defined).
This Note is one of a series of Series E Senior Notes of
the Company issued in an aggregate principal amount limited to
$12,500,000 pursuant to the Company's separate Note Purchase
Agreements (collectively, the "Note Purchase Agreement"), each
dated as of December 15, 1995, with each of the Purchasers
listed on Annex 1 attached thereto, and is entitled to the
benefits thereof. As provided in the Note Purchase Agreement,
this Note is subject to prepayment, in whole or in part, in
each case as specified in the Note Purchase Agreement.
This Note is a registered note and, as provided in the
Note Purchase Agreement, upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the registered
holder hereof or its attorney duly authorized in writing, a new
Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice
to the contrary.
In case an Event of Default shall occur and be continuing,
the principal of this Note may be declared due and payable in
the manner and with the effect provided in the Note Purchase
Agreement.
The Company agrees to pay, and save the holder hereof
harmless against, any liability for the payment of any costs
and expenses, including reasonable attorneys' fees, arising in
connection with the enforcement by the holder of any of its
rights under this Note or the Note Purchase Agreement.
All capitalized terms used but not specifically defined
herein shall have the respective meanings assigned to them in
the Note Purchase Agreement.
THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
NATIONAL CONSUMER COOPERATIVE BANK
By
Name:
Title:
<PAGE>
EXHIBIT B1
FORM OF COMPANY COUNSEL'S CLOSING OPINION
[Letterhead of Shea & Gardner]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: NATIONAL CONSUMER COOPERATIVE BANK
6.60% Series D Senior Notes due December 31, 2002
Series E Senior Notes due December 31, 2002
Ladies and Gentlemen:
We have acted as counsel for the National Consumer
Cooperative Bank (the "Company"), a corporation organized under
the laws of the United States of America and which does
business as the National Cooperative Bank, in connection with
the execution and delivery by the Company of each separate Note
Purchase Agreement (collectively, the "Note Purchase
Agreement"), each dated as of December 15, 1995, among the
Company and the purchasers listed on the Purchaser Schedule
thereto (the "Purchasers"), which provides (among other things)
for the execution and delivery by the Company to the Purchasers
of (i) the Company's 6.60% Series D Senior Notes due December
31, 2002, in the aggregate principal amount of $12,500,000,
(ii) the Company's Series E Senior Notes due December 31, 2002,
in the aggregate principal amount of $12,500,000, the interest
rate for which will be determined at the time of issuance (all
in the principal amounts and with the registration numbers set
forth in the Purchaser Schedule, collectively or individually,
as the case may be, the "Notes"). All capitalized terms used
but not specifically defined in this opinion letter have the
respective meanings assigned to them in the Note Purchase
Agreement.
As counsel to the Company, we have examined such
certificates of public officials, certificates of officers of
the Company, and copies certified to our satisfaction of trust
documents and records of the Company and of other papers, and
have made such other investigations, as we have deemed relevant
and necessary as a basis for our opinion hereinafter set forth.
In our examination of all such documents, we have
(i) assumed the genuineness of all signatures (other
than signatures of officers of the Company), the
conformity to original documents of documents submitted to
us as certified or photostatic copies, and the
authenticity of the originals of such documents, and
(ii) relied upon such certificates of public
officials and of officers of the Company with respect to
the accuracy of material factual matters contained therein
which were not independently established.
With respect to the opinion expressed in paragraph 4 hereof, we
have also relied upon the representation made by the Purchasers
in Section 1.6 of the Note Purchase Agreement and the warranty
contained in Section 2.13 of the Note Purchase Agreement.
Based on the foregoing, it is our opinion that:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the United
States of America and has the necessary corporate power and
authority to carry on its businesses as now being conducted and
to enter into and perform its obligations under the Note
Purchase Agreement, the Notes and each other Financing
Document.
2. The Company is duly qualified as a foreign entity and
in good standing in each jurisdiction where the nature of the
business transacted or Properties owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing would not, in the aggregate, have
a materially adverse effect on the operations or financial
condition of the Company.
3. The Note Purchase Agreement, the Notes being
delivered to the Purchasers pursuant to the Note Purchase
Agreement, each other Financing Document and the Financing
Agreement:
(a) have been duly authorized by all requisite
corporate action on the part of the Company (no action by
any holder of any beneficial interest of the Company being
required by law, by the Charter of the Company or the
Bylaws of the Company (as each is in effect on the date
hereof), or otherwise);
(b) have been duly executed and delivered by duly
authorized officers of the Company; and
(c) are the valid obligations of the Company,
legally binding upon and enforceable against the Company
in accordance with their respective terms.
The Notes are entitled to the benefits of the terms of the Note
Purchase Agreement.
4. It is not necessary, under the circumstances
contemplated by the Note Purchase Agreement, to register the
Notes under the Securities Act, or to qualify an indenture in
respect of the Notes under the Trust Indenture Act of 1939, as
amended.
5. None of the transactions contemplated by the Note
Purchase Agreement will result in any violation of Regulation
G, T or X of the Board of Governors of the Federal Reserve
System.
6. The execution and delivery of the Note Purchase
Agreement, the Notes and each other Financing Document, and the
fulfillment of and compliance with the respective provisions of
the Note Purchase Agreement, the Notes, each other Financing
Document and the Financing Agreement, do not and will not
conflict with, or result in a breach of the terms, conditions,
or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any Lien upon
any of the Properties or assets of the Company pursuant to, or
require, except as has been obtained or performed, any
authorization, consent, approval, exemption, or other action by
or notice to or filing with any state or Federal court,
administrative or governmental body, or other Person pursuant
to,
(a) the Charter, as in effect on the date hereof, or
the Bylaws, as in effect on the date hereof, of the
Company,
(b) any applicable law (including any securities or
"Blue Sky" law), statute, rule, or regulation or
(c) insofar as is known to us, any agreement,
instrument, order, judgment, or decree to which the
Company is a party or otherwise subject as of the date
hereof.
All opinions herein contained with respect to the
enforceability of documents and instruments are qualified to
the extent that
(a) the availability of equitable remedies,
including without limitation, specific enforcement and
injunctive relief, is subject to the discretion of the
court before which any proceedings therefor may be
brought; and
(b) the enforceability of certain terms provided in
the Note Purchase Agreement, the Notes and each other
Financing Document may be limited by
(i) applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights
generally as at the time in effect, and
(ii) general principles of equity and the
discretion of a court in granting equitable remedies
(whether enforceability is considered in a proceeding
at law or in equity).
This opinion may be relied upon by the Purchasers, Hebb &
Gitlin, special counsel to the Purchasers, and subsequent
holders, if any, of the Notes.
Very truly yours,
<PAGE>
ANNEX 1
ADDRESSEES
First AUSA Life Insurance Company
AEGON USA Investment Management, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
PFL Life Insurance Company
AEGON USA Investment Management, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
The Canada Life Assurance Company
330 University Avenue
Toronto, Ontario
M5G 1R8
Canada
<PAGE>
EXHIBIT B2
FORM OF SPECIAL COUNSEL'S CLOSING OPINION
[Letterhead of Hebb & Gitlin]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: NATIONAL CONSUMER COOPERATIVE BANK
6.60% Series D Senior Notes due December 31, 2002
Series E Senior Notes due December 31, 2002
Ladies and Gentlemen:
We refer to each separate Note Purchase Agreement
(collectively, the "Note Purchase Agreement"), dated as of
December 15, 1995, among the National Consumer Cooperative Bank
(the "Company"), a corporation organized under the laws of the
United States and which does business as the National
Cooperative Bank, and the purchasers listed on the Purchaser
Schedule (the "Purchasers"), which provide (among other things)
for the execution and delivery by the Company to the Purchasers
of (i) the Company's 6.60% Series D Senior Notes due
December 31, 2002, in the aggregate principal amount of
$12,500,000 (all in the principal amounts and with the
registration numbers set forth in the Purchaser Schedule,
collectively or individually, as the case may be, the "Notes").
The Note Purchase Agreement also provides for the future
issuance of the Company's Series E Senior Notes due December
31, 2002 in the aggregate principal amount of $12,500,000 .
All capitalized terms used and not defined in this opinion
letter have the respective meanings assigned to them in the
Note Purchase Agreement.
In acting as special counsel to the Purchasers in
connection with the transactions contemplated by the Note
Purchase Agreement, we have made such investigations of law,
and have examined the Note Purchase Agreement, such
certificates of public officials and of the Company, and such
other documents and records as we have deemed necessary and
relevant as a basis for our opinion hereinafter set forth,
including the Notes in the principal amounts and with the
registration numbers set forth in the Purchaser Schedule.
In rendering our opinion, we have relied on the opinion,
of even date herewith, of Shea & Gardner, counsel for the
Company, which has been delivered to the Purchasers pursuant to
Section 3.1 of the Note Purchase Agreement, with respect to all
questions concerning the due organization, valid existence,
power and authority, and good standing of, and the
authorization, execution and delivery of documents and
instruments by, the Company. Based on such investigation as we
have deemed appropriate, said opinion is satisfactory in form
and scope to us. While such investigation was not sufficient
to enable us independently to render such opinion, nothing has
come to our attention that would cause us to question the legal
conclusions set forth therein and, in our opinion, you and we
are justified in relying thereon.
We have also relied, to the extent that we deem necessary
and proper, on the representations and warranties contained in
Section 1.6 and Section 2.13 of the Note Purchase Agreement.
Based on the foregoing, it is our opinion that:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the United
States of America and has the necessary corporate power and
authority to enter into and perform its obligations under the
Note Purchase Agreement and the Notes.
2. The Note Purchase Agreement and the Notes being
delivered to the Purchasers pursuant to the Note Purchase
Agreement:
(a) have been duly authorized by all requisite
corporate action on the part of the Company (no action by
any holder of any beneficial interest of the Company being
required by law, by the Charter of the Company or the
Bylaws of the Company (as each is in effect on the date
hereof), or otherwise);
(b) have been duly executed and delivered by duly
authorized officers of the Company; and
(c) are the valid obligations of the Company,
legally binding upon and enforceable against the Company
in accordance with their respective terms.
The Notes are entitled to the benefits of the terms of the Note
Purchase Agreement.
3. Neither the execution and delivery by the Company of
the Note Purchase Agreement, nor compliance by the Company with
the terms of the Notes and the Note Purchase Agreement, will
conflict with, or result in any breach of any of the provisions
of, the Charter or the Bylaws of the Company (as each is in
effect on the date hereof).
4. It is not necessary under existing law and the
circumstances contemplated by the Note Purchase Agreement, to
register the Notes under the Securities Act, or the state
securities or "Blue Sky" laws of the State of New York, or to
qualify an indenture in respect of the Notes under the Trust
Indenture Act of 1939.
All opinions herein contained with respect to the
enforceability of documents and instruments are qualified to
the extent that:
(a) the availability of equitable remedies,
including without limitation, specific enforcement and
injunctive relief, is subject to the discretion of the
court before which any proceedings therefor may be
brought; and
(b) the enforceability of certain terms provided in
the Note Purchase Agreement and the Notes may be limited
by
(i) applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights
generally as at the time in effect, and
(ii) general principles of equity and the
discretion of a court in granting equitable remedies
(whether enforceability is considered in a proceeding
at law or in equity).
Except in reliance on the opinion of Shea & Gardner as
noted above, we express no opinion with respect to the laws of
any jurisdiction other than the federal laws of the United
States of America (as to which, as noted above, we have relied
in certain respects on said opinion of Shea & Gardner) and the
laws of the State of New York. This opinion may be relied upon
by the Purchasers and subsequent holders, from time to time, of
the Notes as if it were specifically addressed to such
subsequent holders.
Very truly yours,
<PAGE>
ANNEX 1
ADDRESSEES
First AUSA Life Insurance Company
AEGON USA Investment Management, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
PFL Life Insurance Company
AEGON USA Investment Management, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
The Canada Life Assurance Company
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF OFFICERS
NATIONAL CONSUMER COOPERATIVE BANK
OFFICERS' CERTIFICATE
We, ______ and ______ each hereby certify as of this
_______th day of __________ ___, 199_, that we are,
respectively, the _________ and the __________ of the NATIONAL
CONSUMER COOPERATIVE BANK (the "Company"), a corporation
organized under the laws of the United States of America, and
that, as such, we are authorized to execute and deliver this
Certificate in the name and on behalf of the Company, and that:
1. This certificate is being delivered pursuant to
Section 3.4 of each separate Note Purchase Agreement
(collectively, the "Note Purchase Agreement"), dated as of
December 15, 1995, among the Company and the purchasers listed
on the Purchaser Schedule attached thereto. All capitalized
terms used, and not defined in this Certificate have the
respective meanings assigned to them in the Note Purchase
Agreement.
2. The warranties and representations contained in
Section 2 of the Note Purchase Agreement are (except as
affected by transactions contemplated by the Note Purchase
Agreement) true in all material respects on the date hereof
with the same effect as though made on and as of the date
hereof.
3. The Company has not taken any action or permitted any
condition to exist which would have been prohibited by Section
7 of the Note Purchase Agreement had such Section been binding
and effective at all times during the period from _______ __,
199_ to and including the date hereof.
4. The Company has performed and complied with all
agreements and conditions contained in the Note Purchase
Agreement that are required to be performed or complied with by
the Company before or at the date hereof.
5. True and correct copies of each of
(a) the Bank Loan Agreement, as amended by
Amendment No. 1 dated December 12, 1994, and
Amendment No. 2 dated December 11, 1995,
(b) the Financing Agreement, and
(c) each of the outstanding Class A Notes; and
(d) Federal Home Loan Bank of Cincinnati Blanket
Agreement for Advances and Security Agreement, as
referenced in Annex 2 to the Note Purchase Agreement;
in each case, as in effect on the date hereof, are attached to
this Certificate as Attachment A, Attachment B, Attachment C,
and Attachment D, respectively.
6. ___________ is on and as of the date hereof, and at
all times subsequent to __________ ___, 199_, has been, the
duly elected, qualified and acting Secretary of the Company,
and the signature appearing on the Certificate of Secretary
dated the date hereof and delivered to the Purchasers
contemporaneously herewith is her genuine signature.
IN WITNESS WHEREOF, we have executed this Certificate in
the name and on behalf of the Company as of the date stated in
the first sentence of this Certificate.
NATIONAL CONSUMER COOPERATIVE BANK
By
Name:
Title:
By
Name:
Title:
<PAGE>
ATTACHMENT A
THE BANK LOAN AGREEMENT, AS AMENDED
[To be Provided by the Company.]
<PAGE>
ATTACHMENT B
THE FINANCING AGREEMENT
[To be Provided by the Company.]
<PAGE>
ATTACHMENT C
OUTSTANDING CLASS A NOTES
[To be Provided by the Company.]
<PAGE>
ATTACHMENT D
FEDERAL HOME LOAN BANK OF CINCINNATI BLANKET AGREEMENT
FOR ADVANCES AND SECURITY AGREEMENT
[To be Provided by the Company.]
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF SECRETARY
NATIONAL CONSUMER COOPERATIVE BANK
CERTIFICATE OF SECRETARY
I, ______, hereby certify as of this ___th day of
__________, 199_, that I am the duly elected, qualified and
acting Secretary of the NATIONAL CONSUMER COOPERATIVE BANK (the
"Company"), a corporation organized under the laws of the
United States, and that, as such, I have access to its
corporate records and am familiar with the matters herein
certified, that I am authorized to execute and deliver this
Certificate in the name and on behalf of the Company, and that:
1. This certificate is being delivered pursuant to
Section 3.4 of each separate Note Purchase Agreement
(collectively, the "Note Purchase Agreement"), dated as of
December 15, 1995, among the Company and the purchasers listed
on the Purchaser Schedule attached thereto. All capitalized
terms used and not defined in this Certificate have the
respective meanings assigned to them in the Note Purchase
Agreement.
2. Attached hereto as Attachment A is a true and correct
copy of Resolution No. 95-18, and the preamble thereto, adopted
by the Board of Directors of the Company on ____________ __,
199_, such Resolution and preambles set forth in Attachment A
hereto were duly adopted by said Board of Directors and are in
full force and effect on and as of the date hereof, not having
been amended, altered or repealed, and such resolutions are
filed with the records of the Board of Directors.
3. The documents listed below were executed and
delivered by the Company pursuant to and in accordance with the
resolutions set forth in Attachment A hereto and said documents
as executed are substantially in the form submitted to and
approved by the Board of Directors of the Company as
aforementioned:
(a) the Note Purchase Agreement; and
(b) the Notes in the respective principal amounts,
bearing the registration numbers and payable as set forth
in the Purchaser Schedule.
4. Attached hereto as Attachment B is a true, correct
and complete copy of the Bylaws of the Company as in full force
and effect on and as of the date hereof, which Bylaws were last
amended by the Board of Directors of the Company on, and have
been in full force and effect in said form at all times from
and after ________ __, 199_ to and including the date hereof,
without modification or amendment in any respect.
5. Each of the following named persons is on and as of
the date hereof, and at all times subsequent to _________ __,
199_, has been a duly elected, qualified and acting officer of
the Company holding the office or offices set forth below
opposite his or her name:
Officers Executing Documents
Charles E. Snyder, President /s/
Richard L. Reed, Treasurer /s/
Louise M. Grant, Secretary /s/
6. The signature appearing opposite the name of each
such person set forth above is his or her, as the case may be,
genuine signature.
7. There have been no amendments or supplements to or
restatements of the Certificate of Incorporation of the Company
since _________ _, 199_.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
as of the date stated in the first sentence of this
Certificate.
By:
Louise M. Grant
Secretary
<PAGE>
Attachment A
NATIONAL CONSUMER COOPERATIVE BANK
BOARD OF DIRECTORS
RESOLUTION NO. 95-18
WHEREAS, the Board of Directors of National Cooperative
Bank ("NCB") previously has authorized senior officers of NCB,
on behalf of NCB, to enter into a maximum of $177,000,000 in
long-term borrowing facilities ("Facilities"); and
WHEREAS, this Board has deemed it prudent to extend to
Management, acting on behalf of NCB, the flexibility to cause
NCB to enter into additional Facilities or to expand existing
Facilities so as to meet the funding needs of NCB brought about
by current and anticipated lending commitments;
NOW THEREFORE, BE IT RESOLVED that the President and the
Treasurer, or either of them acting alone, is authorized and
directed, on behalf of NCB, to execute and deliver such
instruments, agreements and other documents and to take such
other actions as such officers or officer deem necessary or
appropriate to cause NCB to enter into such Facilities up to a
long-term borrowing capacity of no more than $250,000,000 and
to authorize NCB to borrow under such Facilities; and
BE IT FURTHER RESOLVED, that the President and Treasurer
of NCB, or either of them and any person or persons designated
and authorized so to act by them, are hereby each severally
authorized to do and perform or cause to be done and performed,
in the name and on behalf of NCB, all other acts, to pay or
cause to be paid, on behalf of NCB, all related costs and
expenses and to execute deliver or cause to be delivered such
other notices, requests, demands, directions, consents,
approvals, orders, applications, agreements, instruments,
certificates, supplements, amendments, further assurance or
other communications of any kind, under the corporate seal of
NCB or otherwise and in the name of and on behalf of NCB or
otherwise as he, she or they may deem necessary, advisable or
appropriate to effect the intent of the foregoing Resolutions
or to comply with the requirements of the instruments approved
and authorized by the foregoing Resolutions; and
BE IT FURTHER RESOLVED that the Treasurer be required to
present to the Finance Committee of this Board, or in the
absence of such Committee the full Board itself, at each of the
Committee's scheduled meeting, the total amount of all such
existing Facilities.
_______________________________________________________________
I, Louise M. Grant, witness and certify that the Board of
Directors of National Consumer Cooperative Bank enacted the
foregoing resolution effective July 29, 1995.
______________________________________________
Louise M. Grant
Secretary
<PAGE>
ATTACHMENT B
BYLAWS OF THE COMPANY
[To be Provided by the Company.]
<PAGE>
EXHIBIT 10.23
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT (this "Agreement") is made and
entered into as of the ________ day of December, 1995, by and
between NATIONAL CONSUMER COOPERATIVE BANK, a corporation
organized under the laws of the United States that does
business as the National Cooperative Bank ("Company") and
COMERICA BANK, a Michigan banking corporation ("Bank").
IN CONSIDERATION of the mutual covenants and agreements
herein contained, the Company and the Bank hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Definitions. As used in this Agreement, and
unless the context requires a different meaning, the following
terms shall have the meanings indicated (such meanings to be,
when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Accumulated Funding Deficiency" has the meaning ascribed
to that term in Section 302 of ERISA.
"Affiliate" means, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such first Person; unless otherwise
specified, "Affiliate" means an Affiliate of the Company.
"Asset Securitization" shall mean, with respect to any
Person, a transaction involving the sale or transfer of
receivables by such Person to a special purpose corporation or
grantor trust (an "SPV") established solely for the purpose of
purchasing such receivables from the Company for Cash in an
amount equal to the Fair Market Value thereof; provided,
however, that the Company may (A) establish and maintain a
reserve account containing Cash or Securities as a credit
enhancement in respect of any such sale, or (B) purchase or
retain a subordinated interest in such receivables being sold.
"Asset Securitization Recourse Liability" shall mean, with
respect to any Person, the maximum amount of such Person's
liability (whether matured or contingent) under any agreement,
note or other instrument in connection with any one or more
Asset Securitizations in which such Person has agreed to
repurchase receivables or other assets, to provide direct or
indirect credit support (whether through cash payments, the
establishment of reserve accounts containing cash or
Securities, an agreement to reimburse a provider of a letter of
credit for any draws thereunder, the purchase or retention of a
subordinated interest in such receivables or other assets, or
other similar arrangements), or in which such Person may be
otherwise liable for all or a portion of any SPV's obligations
under Securities issued in connection with such Asset
Securitizations.
"Authorized Officer" means any of the Chairman of the
Board, the President, any Vice President, the Treasurer of the
Company, and any other officer duly authorized to execute this
Agreement on behalf of the Company.
"Bank Lending Office" or Lending Office of the Bank means
500 Woodward Avenue, Detroit, Michigan, or such other office or
offices situated in the United States of America as the Bank
may from time to time designate to the Company by written
notice.
"Benefit Plan" means, at any time, any employee benefit
plan (including a Multiemployer Benefit Plan), the funding
requirements of which (under Section 302 of ERISA or Section
412 of the Code) are, or at any time within six years
immediately preceding the time in question were, in whole or in
part, the responsibility of the Company or an ERISA Affiliate.
"Business Day" means any day on which commercial banks are
open for business (and not required or authorized by law to
close) in Detroit, Michigan.
"Capitalized Lease" means any obligation for Rentals which
is required to be capitalized on a balance sheet of the lessee
in accordance with GAAP.
"Cash" means, as to any Person, such Person's cash and
cash equivalents, as defined in accordance with GAAP
consistently applied.
"Class A Notes" means the class A notes issued by the
Company to the Secretary of the Treasury on behalf of the
United States pursuant to Section 116(a)(3)(A) [12 U.S.C.
Sec. 3026(a)(3)(A)] of the National Consumer Cooperative Bank Act,
as amended, 12 U.S.C. Sec. 3001, et seq. (the "Bank Act") on the
Final Government Equity Redemption Date (the "Redemption Date")
in full and complete redemption of the class A stock of the
Company held by the Secretary of the Treasury on such
Redemption Date and replacement notes for such Class A notes in
a principal amount(s) not greater than those notes being
replaced and containing identical terms of subordination as the
Class A notes. The terms "class A notes", "Final Government
Equity Redemption Date", and "class A stock" are defined in the
Bank Act, which definitions are incorporated by this reference
as if fully set forth herein.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commitment Expiration Date" has the meaning specified in
Section 2.1 of this Agreement.
"Consolidated Adjusted Net Income" for any fiscal period
of the Company, means net earnings or net loss (determined on a
consolidated basis) of the Company and the Subsidiaries after
income taxes for such period, but excluding from the
determination of such earnings the following items (together
with the income tax effect, if any, applicable thereto):
(a) the proceeds of any life insurance policy;
(b) any gain or loss arising from the sale of capital
assets;
(c) any gain arising from any reappraisal, revaluation or
write-up of assets;
(d) any gain arising from transactions of a non-recurring
or nonoperating and material nature or arising from
sales or other dispositions relating to the
discontinuance of operations;
(e) earnings of any Subsidiary accrued prior to the date
it became a Subsidiary;
(f) earnings of any corporation, substantially all the
assets of which have been acquired in any manner,
realized by such other corporation prior to the date
of such acquisition;
(g) net earnings of any business entity (other than a
Subsidiary) in which the Company or any Subsidiary
has an ownership interest, unless such net earnings
shall have actually been received by the Company or
such Subsidiary in the form of cash distributions;
(h) any portion of the net earnings of any Subsidiary
which for any reason is unavailable for payment of
dividends to the Company or any other Subsidiary;
(i) the earnings of any Person to which assets of the
Company shall have been sold, transferred or disposed
of, or into which the Company shall have merged,
prior to the date of such transaction;
(j) any gain arising from the acquisition of any
Securities of the Company or any Subsidiary; and
(k) any amortization of deferred or other credit
representing the excess of the equity in any
Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary.
"Consolidated Adjusted Net Worth" at any time means, with
respect to the Company and the Subsidiaries (determined on a
consolidated basis):
(a) the amount of capital stock liability plus (or minus
in the case of a deficit) the capital surplus and
earned surplus of the Company and the Subsidiaries,
less (without duplication) the sum of
(b) the net book value, after deducting any reserves
applicable thereto, of all items of the following
character which are included in the assets of the
Company and the Subsidiaries:
(i) all deferred charges and prepaid expenses other
than prepaid taxes and prepaid insurance
premiums;
(ii) treasury stock;
(iii) unamortized debt discount and expense and
unamortized stock discount and expense;
(iv) good will, the excess of the cost of assets
acquired over the book value of such assets on
the books of the transferor, the excess of the
cost of investments in any Person (including any
Subsidiary) over the value of such investments
on the books of such Person at the time of
making such investments, organizational or
experimental expense, patents, trademarks,
copyrights, trade names and other intangibles;
(v) all receivables (other than Eurodollar deposits)
owing by Persons whose principal place of
business or principal assets are located in any
jurisdiction other than the United States of
America or Canada; and
(vi) any increment resulting from reappraisal,
revaluation or write-up of capital assets
subsequent to December 31, 1991, other than any
adjustment made pursuant to statement of
accounting standards number 115.
If the Company shall have any Restricted Investments
outstanding at any time, such Investments shall be excluded
from Consolidated Adjusted Net Worth.
"Consolidated Debt" means at any date of determination
thereof, the aggregate amount of all Indebtedness of the
Company and its Subsidiaries, plus, without duplication, the
aggregate amount of the obligations of the Company and its
Subsidiaries set forth below, at such time:
(a) the principal amount of all recourse and nonrecourse
interest bearing obligations of the Company or any
Subsidiary including, without limitation, any such
obligations bearing an implicit rate of interest,
such as Capitalized Leases, and interest bearing
obligations secured by any Lien upon Property owned
by the Company or any Subsidiary, even though such
Person has not assumed or become liable for the
payment of such obligations;
(b) the aggregate amount of all demand and term deposits
made by any Person with the Company or any Subsidiary
(including, without limitation, certificates of
deposit issued by the Company or any Subsidiary);
(c) the face amount of all letters of credit issued by
the Company or any Subsidiary and all bankers'
acceptances accepted by the Company or any
Subsidiary; and
(d) the aggregate amount of any Asset Securitization
Recourse Liabilities.
"Consolidated Earnings Available for Fixed Charges" shall
mean, for any period, the sum of: (i) Consolidated Adjusted Net
Income during such period; plus (ii) to the extent deducted in
determining Consolidated Adjusted Net Income, (a) all
provisions for any Federal, state or other income taxes made by
the Company and its Subsidiaries during such period, and (b)
Consolidated Fixed Charges during such period plus (iii)
contributions made by the Company to Development Corp.
"Consolidated Effective Net Worth" at any time means
(a) Consolidated Adjusted Net Worth at such time; plus
(b) the aggregate outstanding principal amount of Class A
Notes at such time.
"Consolidated Fixed Charges" shall mean, with respect to
the Company on a consolidated basis for any period, the sum of:
(i) all interest and all amortized discount and expense on all
Indebtedness for borrowed money of the Company and its
Subsidiaries, plus (ii) all Rentals payable during such period
by the Company and its Subsidiaries.
"Consolidated Net Earnings" means, for any period, the net
income or loss of the Company and its Subsidiaries, as
applicable (determined on a consolidated basis for such Persons
at such time), for such period, as determined in accordance
with generally accepted accounting principles in effect at such
time.
"Consolidated Net Worth" means, with respect to the
Company, the sum of (i) the common stock account of the Company
determined as of any date in accordance with GAAP consistent
with the principles applied in the preparation of the Company's
consolidated statement of financial condition for the fiscal
year ended December 31, 1994; (ii) the Class A Notes; and (iii)
the consolidated retained earnings account (whether allocated
or unallocated) of the Company and its Subsidiaries determined
as of any date in accordance with GAAP consistent with the
principles applied in the preparation of the Company's
consolidated statement of financial condition for the fiscal
year ended December 31, 1994.
"Consolidated Senior Debt" means all unsecured
Indebtedness of the Company and its Subsidiaries on a
consolidated basis (i) for borrowed money (including the
Indebtedness hereunder, the Senior Notes, Indebtedness under
the NatWest Loan Agreement, and all demand and term deposits
made by any Person with the Company or any of its Subsidiaries)
which is not expressly subordinate or junior to any other
Indebtedness, plus without duplication, (ii) all "guarantees,"
as defined in Section 6.2(d) hereof, and (iii) Asset
Securitization Recourse Liabilities to the extent, but only to
the extent, that such obligations have matured and remain
unpaid.
"Consolidated Senior Obligations" at any time means, with
respect to the Company and the Subsidiaries (determined on a
consolidated basis), the sum of
(a) the aggregate unpaid principal amount of Consolidated
Senior Debt, plus
(b) the aggregate amount of all Capitalized Leases, plus
(c) Restricted Guarantees computed on the basis of total
outstanding contingent liability.
"Consolidated Subsidiary" means, with respect to any
Person at any time, any Subsidiary or other Person the accounts
of which would be consolidated with those of such first Person
in its consolidated financial statements as of such time;
unless otherwise specified, "Consolidated Subsidiary" means a
Consolidated Subsidiary of the Company.
"Credit Agreement Related Claim" means any claim (whether
civil, criminal or administrative and whether sounding in tort,
contract or otherwise) in any way arising out of, related to,
or connected with, this Agreement, the Notes, or the
relationship established hereunder or thereunder.
"Default" means an Event of Default or an event or
condition the existence or occurrence of which would, with the
lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means the rate of interest applicable under
Section 3.3 from time to time.
"Development Corp." means NCB Development Corporation, a
District of Columbia non-profit corporation established
pursuant to 12 U.S.C. Sec. 3051(b).
"Dollars", and the sign "$" mean such coin or currency of
the United States of America as at the time shall constitute
legal tender for the payment of public and private debts.
"Effective Date" means December 29, 1995.
"Eligible Cooperatives" has the meaning assigned to such
term in Section 3015 of Title 12 of the United States Code.
"Eligible Derivatives" means derivative Securities which
are sold in the ordinary course of the business of the Company
and its Subsidiaries for the purpose of hedging or otherwise
managing portfolio risk.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" means any Person, including a Subsidiary
or other Affiliate, that is a member of any group of
organizations within the meaning of Code Sections 414(b), (c),
(m) or (o) of which the Company is a member.
"Events of Default" means the occurrence of any of the
events described in Section 7.1 of this Agreement.
"Exchange Act" means the Securities and Exchange Act of
1934, as amended, and any successor Federal statute.
"Fair Market Value" means, at any time with respect to any
Property, the sale value of such Property that would be
realized in an arm's-length sale at such time between an
informed and willing buyer and an informed and willing seller,
under no compulsion to buy or sell, respectively.
"Fixed Charges" means, with respect to the Company, for
any period, the sum of: (i) all interest and all amortized
discount and expense on all Indebtedness for borrowed money of
the Company, plus (ii) all Rentals payable during such period
by the Company.
"Funded Debt" means all Indebtedness for borrowed money
that by its terms matures more than twelve months from the date
as of which any determination of Funded Debt is made, any and
all Indebtedness maturing within twelve months from such date
that is renewable at the option of the obligor to a date beyond
twelve months from the date of such determination, including
any Indebtedness renewable or extendable (whether or not
theretofore renewed or extended) under, or payable from the
proceeds of other Indebtedness that may be incurred pursuant to
the provisions of, any revolving credit agreement or other
similar agreement.
"GAAP" means generally accepted accounting principles.
"Government Obligations" means any and all direct
obligations of the United States of America or obligations in
respect of which the payment of the principal of, and interest
thereon, is unconditionally guaranteed by the United States of
America.
"Governmental Body" means (i) the United States of
America, any State thereof, any other country or any political
subdivision of such other country, or any department, agency,
commission, board, bureau or instrumentality of the United
States of America, any State thereof, any other country or
political subdivision of such other country or any subdivision
of any of them, and (ii) any quasi-governmental body, agency or
authority (including any central bank) exercising regulatory
authority over the Bank pursuant to applicable law in respect
of the transactions contemplated by this Agreement.
"Guarantees" means all obligations of any Person
guaranteeing or in effect guaranteeing any indebtedness or
obligation or dividend of any other Person (the "primary
obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through
an agreement contingent or otherwise, by such Person
(a) to purchase any indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds;
(i) for the purchase or payment of any Indebtedness
or obligation, or
(ii) to maintain working capital, equity capital or
other balance sheet condition or otherwise to
advance or make available funds for the purchase
or payment of any indebtedness or obligation;
(c) to purchase Property, Securities or services
primarily for the purpose of assuring the owner of
any indebtedness or obligation of the ability of the
primary obligor to make payment of the indebtedness
or obligation; or
(d) otherwise to assure the owner of the indebtedness or
obligation of the primary obligor against loss in
respect thereof.
Liabilities or endorsements in the ordinary course of business
of checks and other negotiable instruments for deposit or
collection and obligations of the Company or the Subsidiaries
to acquire assets from the Bank in the ordinary course of
business shall not be deemed "Guarantees."
"Indebtedness" means, with respect to any Person, all (i)
liabilities or obligations, direct and contingent, which in
accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet
of such Person at the date as of which Indebtedness is to be
determined, including, without limitation, contingent
liabilities which, in accordance with such principles, would be
set forth in a specific Dollar amount on the liability side of
such balance sheet; (ii) liabilities or obligations of others
for which such Person is directly or indirectly liable, by way
of guaranty (whether by direct guaranty, suretyship, discount,
endorsement, take-or-pay agreement, agreement to purchase or
advance or keep in funds or other agreement having the effect
of a guaranty) or otherwise; (iii) liabilities or obligations
secured by liens on any assets of such Person, whether or not
such liabilities or obligations shall have been assumed by it;
(iv) liabilities or obligations of such Person, direct or
contingent, with respect to letters of credit issued for the
account of such Person and banker's acceptances credited for
such Person; (v) obligations in the form of demand and term
deposit accounts maintained by such Person; and (vi) Asset
Securitization Recourse Liabilities to the extent, but only to
the extent, that such obligations have matured and remain
unpaid.
"Interest Payment Date" means the same day as a Loan Date
on a quarterly basis after the relevant Loan Date and up to the
Maturity Date.
"Investment" in any Person by the Company means: (a) the
amount paid or committed to be paid, or the value of property
or services contributed or committed to be contributed, by the
Company for or in connection with the acquisition by the
Company of any stock, bonds, notes, debentures, partnership or
other ownership interests or other securities of such Person;
and (b) the amount of any advance, loan or extension of credit
to, or guaranty or other similar obligation with respect to any
Indebtedness of, such Person by the Company and (without
duplication) any amount committed to be advanced, loaned, or
extended to, or the payment of which is committed to be assured
by a guaranty or similar obligation for the benefit of, such
Person by the Company.
"Lien" means any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including
any agreement to give any of the foregoing), any conditional
sale or other title retention agreement, any lease in the
nature of any of the foregoing, and the filing of or agreement
to give any financing statement under the Uniform Commercial
Code of any jurisdiction.
"Loans" means the loans to be made by the Bank to the
Company pursuant to this Agreement.
"Loan Date" means each date, on or before February 28,
1996, when a Loan is advanced pursuant to Section 2.1 hereof.
"Maturity Date" means January _____, 1999.
"Multiemployer Benefit Plan" means any Benefit Plan that
is a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
"NatWest Loan Agreement" means the Loan Agreement dated as
of December 15, 1993 among the Company, the Banks listed
therein, and National Westminster Bank USA, as Agent, as
amended through the Effective Date.
"NCB Business Credit" means NCB Business Credit
Corporation, a Delaware corporation.
"NCB Financial Corporation" means NCB Financial
Corporation, a Delaware Corporation.
"NCB Mortgage" means NCB Mortgage Corporation, a Delaware
corporation.
"NCB Senior Obligations" means, at any date of
determination thereof, with respect to the Company, the sum of:
(a) the aggregate unpaid principal amount of Senior Debt,
plus
(b) the aggregate amount of all Capitalized Leases, plus
(c) Restricted Guarantees computed on the basis of total
outstanding contingent liability, plus
(d) Asset Securitization Recourse Liabilities of the
Company (meeting the conditions set forth in either
clause (i) or clause (ii) below):
(i) to the extent, but only to the extent, that such
obligations arise from the Company's obligation
to repurchase receivables or other assets as a
result of a default in payment by the obligor
thereunder or any other default in performance
by such obligor under any agreement related to
such receivables; or
(ii) if the Company shall maintain a reserve account
containing Cash or Securities in respect of any
such obligations or shall retain or purchase a
subordinated interest therein, to the extent,
but only to the extent, of the amount of such
reserve account or subordinated interest.
"Notes" means each Promissory Note or the Promissory Notes
issued to the Bank by the Company pursuant to this Agreement,
substantially in the form (appropriately completed) of Exhibit
A to this Agreement.
"Notice of Borrowing" means any notice given to the Bank
by the Company pursuant to and in accordance with Section 4.1
of this Agreement.
"Paid-in-Capital" shall have the meaning ascribed to it by
GAAP.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Permitted Liens" means (i) pledges or deposits by the
Company under workman's compensation laws, unemployment
insurance laws, social security laws, or similar legislation,
or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness of the
Company), or leases to which the Company is a party, or
deposits to secure public or statutory obligations of the
Company or deposits of cash or U.S. government Bonds to secure
surety, appeal, performance or other similar bonds to which the
Company is a party, or deposits as security for contested taxes
or import duties or for the payment of rent; (ii) Liens imposed
by law, such as carriers', warehousemen's, materialmen's and
mechanics' liens, or Liens arising out of judgments or awards
against the Company with respect to which the Company at the
time shall currently by prosecuting an appeal or proceedings
for review; (iii) Liens for taxes not yet subject to penalties
for non-payment and Liens for taxes the payment of which is
being contested as permitted by Section 6.1(j) hereof; and (iv)
Liens incidental to the conduct of the business of the Company
or to the ownership of its property which were not incurred in
connection with Indebtedness of the Company, all of which Liens
do not in the aggregate materially detract from the value of
the properties to which they relate or materially impair their
use in the operation of the business of the Company.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof, a
court, or any other legal entity, whether acting in an
undivided fiduciary or other capacity.
"Prepayment Amount" means the present value, discounted at
the Reinvestment Rates, of the positive amount by which: (a)
the interest the Bank would have earned had the amount of
principal prepaid been paid according to a Note's amortization
schedule at a Note's interest rate exceeds, (b) the interest
the Bank would earn by reinvesting the amount of principal
prepaid at the Reinvestment Rates.
"Prohibited Transaction" means any transaction that is
prohibited under Code Section 4975 or ERISA Section 406 and not
exempt under Code Section 4975 or ERISA Section 408.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or
intangible.
"Qualified Assets" means, at any date of determination
thereof, the sum of the following items (a), (b) and (c) owned
by the Company:
(a) The principal amount of all promissory notes and
other interest bearing obligations acquired by the
Company in the ordinary course of its business less
(i) reserves for credit losses applicable thereto,
and (ii) unearned income;
(b) Cash on hand and in banks; and
(c) Investments other than "Restricted Investments" (as
such term is defined in the Senior Note Agreements as
in effect on the date hereof).
"Regulatory Change" means any applicable law,
interpretation, directive, request or guideline (whether or not
having the force of law), or any change therein or in the
administration or enforcement thereof, that becomes effective
or is implemented or first required or expected to be complied
with after the date hereof, whether the same is (i) the result
of an enactment by a government or any agency or political
subdivision thereof, a determination of a court or regulatory
authority, or otherwise or (ii) enacted, adopted, issued or
proposed before or after the date hereof, including any such
that imposes, increases or modifies any tax, reserve
requirement, insurance charge, special deposit requirement,
assessment or capital adequacy requirement, but excluding any
such that imposes, increases or modifies any income or
franchise tax imposed upon the Bank by any jurisdiction (or any
political subdivision thereof) in which the Bank or any office
is located.
"Reinvestment Rates" means the per annum rates of interest
equal to one-half percent (1/2%) above the rates of interest
reasonably determined by the Bank to be in effect not more than
seven days prior to date of any prepayment of principal in the
secondary market for United States Treasury Obligations in
amount(s) and with maturity(ies) which correspond (as closely
as possible) to the principal installment amount(s) and the
prepayment date(s) against which such prepaid principal will be
applied.
"Rentals" means all fixed rentals (including as such all
payments that the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable
by the Company, as lessee or sublessee under a lease of real or
personal property, but shall be exclusive of any amounts
required to be paid by the Company (whether or not designated
as rents or additional rents) on account of maintenance,
repairs, insurance, taxes and similar charges. Fixed rents
under any so-called "percentage leases" shall be computed
solely on the basis of the minimum rents, if any, required to
be paid by the lessee regardless of sales volume or gross
revenues.
"Restricted Guarantees" at any time means all Guarantees
by the Company of obligations of others that constitute sum
certain obligations at the time such Guarantees are incurred.
"Restricted Investments" at any time means any investment
that is not permitted under Section 6.2(i) of this Agreement.
"Restricted Payment" means any payment by the Company of
the type described in 6.2(f) of this Agreement.
"Security" shall have the meaning ascribed thereto in
Section 2(1) of the Securities Act, as amended; provided,
however, that Asset Securitization Recourse Liabilities shall
not constitute "Securities" except (i) to the extent that such
obligations arise from the Company's obligation to repurchase
receivables or other assets as a result of a default in payment
by the obligor thereunder or any other default in performance
by such obligor under any agreement related to such receivables
or (ii) if the Company shall maintain a reserve account
containing Cash or Securities in respect of any such
obligations or shall retain or purchase a subordinated interest
therein to the extent of the amount of such reserve account or
subordinated interest.
"Selected Banks" means the Bank of Delaware, the bank
signatories to the NatWest Loan Agreement, and the one hundred
largest commercial banks that either are United States national
banking associations or are chartered under the laws of a state
of the United States and that have ratings by Thompson
BankWatch, Inc. no lower than B/C.
"Senior Debt" means all Indebtedness of the Company for
borrowed money (including, without limitation, all Indebtedness
under this Agreement, the Senior Note Agreements and the
Natwest Loan Agreement) that is not expressly subordinate or
junior to any other Indebtedness.
"Senior Note Agreements" means, collectively, (i) the
separate Senior Note Agreements dated as of December 16, 1994
in respect of the Company's (A) 8.84% Series A Senior Notes due
March 31, 2000, (B) 8.85% Series B Senior Notes due March 31,
2000, and (C) 7.96% Series C Senior Notes due March 31, 2000,
(ii) the separate Assumption Agreement and Amended and Restated
Senior Note Agreement dated as of December 1, 1993 in respect
of the Company's (A) Amended and Restated 8.18% Series A Senior
Notes due June 24, 1997, (B) Amended and Restated 8.32% Series
B Senior Notes due December 24, 1997, and (C) Amended and
Restated 8.44% Series C Senior Notes due June 24, 1998, as each
may be amended from time to time, (iii) Notes issued in the
amount of $30,000,000 due September 28, 2001 pursuant to a
Master Shelf Agreement dated as of December 30, 1994, for up to
$50,000,000 of Notes between the Company and The Prudential
Insurance Company of America, and (iv) the separate Senior Note
Agreements dated as of December 15, 1995, with respect to
Company's 6.60% Senior Notes due December 31, 2002.
"Senior Notes" shall mean the Senior Notes issued by the
Company under the terms and conditions of the Senior Note
Agreements.
"SPV" shall have the meaning assigned to such term in the
definition of "Asset Securitization" in this Article 1 and NCB
I, Inc., NCB Retail Finance Corporation and any other
Subsidiary of the Company having powers limited to the holding
of regular or residual interests arising out of Asset
Securitization.
"Subsidiary" shall mean any corporation a majority of the
capital stock of which at the time outstanding, having ordinary
voting power for the election of directors, is owned by the
Company directly or indirectly.
"Termination Event" means, with respect to any Benefit
Plan, (i) any Reportable Event with respect to such Benefit
Plan, (ii) the termination of such Benefit Plan, or the filing
of a notice of intent to terminate such Benefit Plan, or the
treatment of any amendment to such Benefit Plan as a
termination under ERISA Section 4041(c), (iii) the institution
of proceedings to terminate such Benefit Plan under ERISA
Section 4042 or (iv) the appointment of a trustee to administer
such Benefit Plan under ERISA Section 4042.
"Voting Stock" means Securities of any class or classes of
a corporation the holders of which are ordinarily, in the
absence of contingencies, entitled to vote in the election of
the corporate directors (or persons performing similar
functions).
Section 1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance
with generally accepted accounting principles in the United
States.
Section 1.3 Time Period Computations. In the computation
of a period of time specified in this Agreement from a
specified date to a subsequent date, the word "from" means
"from and including" and the words "to" and "until" mean "to
but excluding"
ARTICLE II
GENERAL LOAN PROVISIONS
Section 2.1 The Loans. Subject to the terms and conditions
of this Agreement, on the Loan Dates the Bank shall lend to the
Company, and the Company shall borrow from the Bank, the
aggregate principal amount of TWENTY MILLION UNITED STATES
DOLLARS ($20,000,000) (the "Loans") in two separate advances of
TEN MILLION DOLLARS ($10,000,000) each.
Section 2.2 Term of Loans. The entire principal amount of
each Loan shall be due and payable on the Maturity Date.
Section 2.3 Proceeds of Loans. With respect to each Loan,
the Bank shall, upon the Company's satisfaction of the
conditions specified in Article IV of this Agreement, make the
entire principal amount of the Loan available to the Company
before 12:00 Noon (Detroit, Michigan time) on its Loan Date in
Dollars in immediately available funds at the bank (and for
credit to the account of the Company at such bank designated by
the Company) specified by the Company in the Notice of
Borrowing.
Section 2.4 The Notes. Each Loan shall be evidenced by a
Promissory Note of the Company, which shall be substantially in
the form of Exhibit A to this Agreement (appropriately
completed), dated the Loan Date for such Loan, payable to the
order of the Bank in the principal amount of the relevant Loan.
The first and last days of each interest period during the term
of each Loan and each payment of interest on each Loan shall be
recorded by the Bank on the "Schedule of Interest" attached to
the relevant Note and by specific reference made a part
thereof. Any prepayment of the principal amount of a Loan shall
be recorded by the Bank on the reverse side of the relevant
Note and indicated on the "Schedule of Interest".
ARTICLE III
INTEREST AND REPAYMENT
Section 3.1 Interest on the Loan. The first Loan shall
bear interest at the rate of _________________________ percent
(__________%) per annum. The second Loan shall bear interest
at the fixed rate of interest quoted by Bank therefore, in its
discretion, and accepted by the Company therefore, on or prior
to its Loan Date.
Section 3.2 Additional Interest. If, after the date of
this Agreement, any Regulatory Change
(i) shall subject the Bank to any tax, duty or other
charge with respect to its obligation to make or
maintain the Loan, or shall change the basis of
taxation of payments to the Bank of the
principal of or interest on any Loan in respect
of any other amounts due under this Agreement in
respect of its obligation to make any Loan
(except for changes in the rate of tax on the
overall net income of the Bank); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit, capital adequacy or
similar requirement against assets of, deposits
with or for the account of, or credit extended
by, the Bank or shall impose on the Bank any
other condition affecting (1) the obligation of
the Bank to make or maintain the Loan; or (2)
the Note;
and the result of any of the foregoing is to increase the cost
to the Bank of making or maintaining any Loan or to reduce the
amount of any sum received or receivable by the Bank under this
Agreement or under any Note, by an amount reasonably deemed by
the Bank to be material, then, within fifteen days after demand
by the Bank, the Company shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such
increased cost or reduction. A certificate of the Bank setting
forth the basis for determining such additional amount or
amounts necessary to compensate the Bank shall be conclusive in
the absence of manifest error.
Section 3.3 Interest after Maturity. In the event the
Company shall fail to make any payment of the principal amount
of, or interest on, any Loan when due (whether by acceleration
or otherwise), after giving effect to any applicable grace
period provided for in this Agreement, the Company shall pay
interest on such unpaid amount, payable from time to time on
demand, from the date such amount shall have become due to the
date of payment thereof, accruing on a daily basis, at a per
annum rate (the "Default Rate") equal to the sum of the
interest rate on such Loan in effect immediately before such
amount became due, plus two percent (2.0%).
Section 3.4 Payment and Computations.
(A) All payments required or permitted to be made to the
Bank under this Agreement or any Note shall be made to the Bank
in Dollars at the Lending Office of the Bank in immediately
available funds.
(B) Interest on the Loans shall be computed on the basis
of a year of 360 days consisting of 12 months of 30 days each
and, in the case of a portion of a month, for the actual number
of days (including the first day but excluding the last day)
elapsed.
(C) Interest on the Loans shall be payable in arrears on
their respective Interest Payment Dates; provided, that in the
event that any Interest Payment Date shall be a day which is
not a Business Day, the obligation to make such payment shall
be deferred to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case the
Interest Payment Date shall be advanced to the next preceding
Business Day.
(D) Whenever any payment of principal is required or
permitted to be made on a day which is not a Business Day, the
obligation of the Company to make such payment shall be
deferred until the next succeeding Business Day and, in such
case, such extension of time shall be included in the
computation of interest in respect of such principal amount at
the rate in effect at the date such principal amount was
otherwise due and payable.
Section 3.5 Payment at Maturity. Any principal amount of
the Notes theretofore not repaid, together with any accrued
interest thereon, shall be due and payable in full on the
Maturity Date.
Section 3.6 Optional Prepayments; Certain Early
Repayments.
(A) Subject to the terms and conditions of this Section
3.6, the Company may, at its sole option, prepay the principal
amount of either Loan in whole or in part (in any amount of
$1,000,000 or more) at any time and from time to time (each an
"Optional Prepayment"). Each Optional Prepayment shall be
accompanied by the payment of all accrued and unpaid interest
to the date of such Optional Prepayment on the principal amount
of such Optional Prepayment.
(B) In respect of each Optional Prepayment proposed to be
made by the Company, the right of the Company to make such
Optional Prepayment is subject to the Bank's receipt from the
Company, at least three Business Days prior to the date
specified therein as the date on which Optional Prepayment is
to be made, of a written notice (which shall be irrevocable)
specifying (i) the principal amount of such Optional Prepayment
and (ii) the date (which shall be a Business Day) on which such
Optional Prepayment will be made.
(C) If the Company prepays all or any part of the
outstanding principal balance of a Loan in advance of the
Maturity Date (whether due to optional prepayment, acceleration
or for any other reason), in addition to the payments on
principal and accrued and unpaid interest, the Company shall
pay to the Bank, together with such prepayment, the Prepayment
Amount.
ARTICLE IV
CONDITIONS PRECEDENT TO THE LOAN
Section 4.1 Delivery on or Prior to Loan Date. The
obligation of the Bank to make a Loan to the Company hereunder
is subject to the condition precedent that the Bank shall have
received an irrevocable Notice of Borrowing from the Company on
the Business Day prior to the requested Loan Date that
specifies the Loan Date (which shall be a Business Day) and
that the Bank shall have received from the Company, on or prior
to the Loan Date, the following instruments, each dated as of
the Loan Date:
(A) The relevant Note, duly executed by the Company;
(B) An opinion of counsel to the Company in form and
substance satisfactory to the Bank;
(C) A certified copy of the resolutions of the Board of
Directors of the Company authorizing the execution and delivery
of this Agreement and the Notes;
(D) A certificate of the Secretary, an Assistant
Secretary or an Assistant Treasurer of the Company certifying
the names and true signatures of the Authorized Officers;
(E) A certified copy of the By-Laws of the Company as in
effect on the Loan Date;
(F) A certified copy of each Senior Note Agreement and
other agreement evidencing Indebtedness of the Company for
borrowed money in effect as of the Loan Date.
Section 4.2 Further Condition Precedent to the Loan. The
obligation of the Bank to make a Loan shall be subject to the
further conditions precedent that on the relevant Loan Date the
following statements shall be true and correct as of such Loan
Date:
(A) The representations and warranties of the Company
contained in Article V are correct;
(B) No event has occurred and is continuing, or would
result from the Loan after giving effect to the application of
the proceeds therefrom, which constitutes an Event of Default
or would constitute an Event of Default but for the requirement
that notice be given or time elapse or both;
(C) No Default shall have occurred and be continuing at
the time the Loan is to be made or would result from the making
of the Loan or from the application of the proceeds thereof;
and
(D) All legal matters incident to the closing of the
transactions contemplated by this Agreement and the making of
the Loan shall be satisfactory to the Bank and its counsel.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
Section 5.1 Existence, Power and Authority. Each of the
Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power
and authority to carry on its business as currently conducted
and to own or hold under lease its property; the Company is
duly qualified or diligently pursuing to become qualified to do
business as a foreign corporation in good standing in each
other jurisdiction in which the conduct of its business or the
maintenance of its property requires it to be so qualified; the
Company has full corporate power and authority to execute and
deliver this Agreement and the Note and to carry out the
transactions contemplated by this Agreement.
Section 5.2 Authorization: Enforceable Obligations. This
Agreement and the Notes have been duly authorized and have been
or will be duly executed and delivered by the Company and
constitute, or when executed and delivered pursuant hereto will
constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with
their terms (except as such enforceability may be limited by
general principles of the law of equity or by any applicable
bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally).
Section 5.3 No Legal Bar. The execution, delivery and
performance by the Company of this Agreement and of the Note,
(i) do not and will not violate the certificate of
incorporation or charter, by-laws or any preferred stock
provision of the Company or (ii) do not and will not violate or
conflict with any law, governmental rule or regulation or any
judgment, writ, order, injunction, award or decree of any
court, arbitrator, administrative agency or other governmental
authority applicable to the Company or any indenture, mortgage,
contract, agreement or other undertaking or instrument to which
the Company is a party or by which its property may be bound
and (iii) do not and will not result in the creation or
imposition of any lien, mortgage, security interest or other
encumbrance on any of its property pursuant to the provisions
of any such indenture, mortgage, contract, agreement or other
undertaking or instrument.
Section 5.4 Consents. The execution, delivery and
performance by the Company of this Agreement and of the Notes,
do not and will not require any consent, which has not been
obtained, of any other Person (including, without limitation,
stockholders of the Company) or any consent, license, permit,
authorization or other approval of, any giving of notice to,
exemption by, any registration, declaration or filing with, or
any taking of any other action in respect of, any court,
arbitrator, administrative agency or other governmental
authority.
Section 5.5 Litigation. Except as previously disclosed to
the Bank in writing, there is no action, suit, investigation or
proceeding by or before any court, arbitrator, administrative
agency or other governmental authority pending or, to the
knowledge of the Company, threatened (i) which involves any of
the transactions contemplated by this Agreement or (ii) against
or affecting the Company which could be reasonably expected to
materially adversely affect the financial condition, business
or operation of the Company.
Section 5.6 No Default. The Company is not in default
under any material order, writ, injunction, award or decree of
any court, arbitrator, administrative agency or other
governmental authority binding upon it or its property, or any
material indenture, mortgage, contract, agreement or other
undertaking or instrument to which it is a party or by which
its property may be bound, and nothing has occurred which would
materially adversely affect the ability of the Company, to
carry on its business or perform its obligations under any such
material order, writ, injunction, award or decree or any such
material indenture, mortgage, contract, agreement or other
undertaking or instrument.
Section 5.7 Financial Condition. The consolidated balance
sheet of the Company and its Consolidated Subsidiaries as at
December 31, 1994, and the related consolidated statements of
income, stockholders' or members' equity and cash flows for the
fiscal year ended on such date, reported upon by Deloitte &
Touche, and the unaudited consolidated statement of financial
condition of the Company and its Consolidated Subsidiaries as
at September 30, 1994, and the related consolidated statements
of income and stockholders' or members' equity for the three
(3) months ended that date, present fairly the consolidated
financial condition of the Company and its Consolidated
Subsidiaries as of said date and the consolidated results of
their operations for such fiscal year, in conformity with GAAP.
No material adverse changes have occurred in the financial
condition of the Company or its Consolidated Subsidiaries since
September 30, 1994.
Section 5.8 Use of Proceeds. The Company shall use the
proceeds of the Loan for its general corporate purposes. None
of the proceeds of the Loan shall be used to purchase or carry,
or reduce or retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of
Regulations U and X of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the
purchasing or carrying of any margin stock. If requested by the
Bank, the Company shall complete and sign Part I of a copy of
Federal Reserve Form U-1 referred to in Regulation U and
deliver such copy to the Bank.
Section 5.9 Company Not an Investment Company. The Company
is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment
Company Act of 1940, as amended.
Section 5.10 Environmental Matters. The Company and its
Consolidated Subsidiaries conduct their respective operations
in compliance with all applicable laws and regulations
concerning the discharge of substances into the environment and
other environmental control matters, except to the extent that
non-compliance would not have a material adverse effect on the
business, results of operations or condition (financial or
otherwise) of the Company or its Consolidated Subsidiaries
taken as a whole. Neither the Company nor any of its
Consolidated Subsidiaries has any liability, contingent or
otherwise, under any law, ordinance or regulation relating to
the storage, transport, disposal or release of "oil",
"petroleum products", "hazardous substance", "hazardous waste",
"hazardous material", "hazardous chemical substance", "refuse"
or any other term of similar import (as such terms are defined
in any such law, ordinance or regulation), except to the extent
that any such liability would not have a material adverse
effect on the business, results of operations or condition
(financial or otherwise) of the Company or its Consolidated
Subsidiaries taken as a whole.
ARTICLE VI
COVENANTS
Section 6.1 Affirmative Covenants. The Company covenants
and agrees that, so long as this Agreement shall remain in
effect or any of the principal of or interest on either Note
hereunder shall remain unpaid:
(a) The Company will deliver to the Bank, within ninety
(90) days after the end of each fiscal year, the
consolidated and consolidating balance sheet of the
Company and its Consolidated Subsidiaries as at the
end of such fiscal year, and the related consolidated
and consolidating statements of income, stockholders'
or members' equity and cash flows for such fiscal
year, accompanied by a certificate of independent
public accountants of recognized standing
satisfactory to the Bank, which certificate will
contain no material exceptions or qualifications
except such as are acceptable to the Bank;
(b) The Company will deliver to the Bank, within sixty
(60) days after the end of each of the first three
quarters of each fiscal year, the consolidated
balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such quarter, and the
related consolidated statements of income and
stockholders' equity for such quarter, certified
(subject to year-end audited-adjustments) by an
authorized accounting or financial officer of the
Company;
(c) The Company shall deliver to the Bank within thirty
(30) days after it files them with the Securities and
Exchange Commission copies of the annual reports and
of the information, documents, and other reports (or
copies of such portions of any of the foregoing as
the Securities and Exchange Commission may by rules
and regulations prescribe) which the Company is
required to file with the Securities and Exchange
Commission pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934;
(d) The Company will deliver to the Bank, from time to
time, such additional information regarding its
financial condition, business or affairs as the Bank
may reasonably request;
(e) The Company will deliver to the Bank, simultaneously
with the delivery of each set of financial statements
referred to in (a) above, a certificate of the
President, any Vice President, or the Treasurer of
the Company (i) stating that in the course of the
performance of his duties he would normally obtain
knowledge of any condition or event which constitutes
an Event of Default, or any event, act or condition
which with notice or lapse of time or both would
constitute an Event of Default, (ii) stating whether
or not he has obtained knowledge of any such
condition, act or event and, if so, specifying each
such condition, act or event of which he has
knowledge and the nature and period of existence
thereof and the action the Company is taking and
proposes to take with respect thereto; and (iii)
setting forth the calculations necessary to establish
the Company's compliance with Section 6.1(m) hereof;
(f) The Company will preserve and maintain its corporate
existence and each of the material rights,
privileges, licenses and franchises, which are
necessary or desirable in the normal conduct of its
business. The Company will comply with all applicable
laws, rules, regulations, and orders of any
governmental or regulatory body or authority, a
breach of which could have a material adverse effect
on the financial condition or business (taken as a
whole) of the Company, except where contested in good
faith and by proper proceedings;
(g) Promptly after becoming aware thereof the Company
will deliver to the Bank notice of any Event of
Default and any event which, with the passage of time
or the giving of notice or both, would become an
Event of Default;
(h) The Company will keep proper books of record and
account in a manner reasonably satisfactory to the
Bank in which, true, complete and correct entries
shall be made of all dealings or transactions in
relation to its business and activities;
(i) The Company will permit the Bank to make or cause to
be made (and, after the occurrence of and during the
continuance of an Event of Default, at the Company's
expense), inspections and audits of any books,
records and papers of the Company and to make
extracts therefrom and copies thereof, or to make
inspections and examinations of any properties and
facilities of the Company, on reasonable notice, at
all such reasonable times and as often as the Bank
may reasonably require, in order to assure that the
Company is and will be in compliance with its
obligations under this Agreement;
(j) The Company will pay and discharge all of its
obligations and liabilities, including, without
limitation, all taxes, assessments and governmental
charges upon its income and properties, when due,
unless and to the extent only that such obligations,
liabilities, taxes, assessments and governmental
charges shall be contested in good faith and by
appropriate proceedings and that proper and adequate
book reserves relating thereto are established by the
Company, and then only to the extent that a bond is
filed in cases where the filing of a bond is
necessary to avoid the creation of a lien or
encumbrance against any of its properties;
(k) The Company will promptly notify the Bank in writing
of any litigation, legal proceeding or dispute, other
than disputes in the ordinary course of business or,
whether or not in the ordinary course of
business,involving amounts in excess of Two Hundred
Fifty Thousand Dollars ($250,000), affecting the
Company whether or not fully covered by insurance,
and regardless of the subject matter thereof
(excluding, however, any actions relating to
workmen's compensation claims or negligence claims
relating to use of motor vehicles, if fully covered
by insurance, subject to deductibles);
(l) The Company will:
(i) Maintain with responsible insurance companies
rated "A" or better by A.M. Best Co. such
insurance on such of its properties, in such
amounts and against such risks as is customarily
maintained by similar businesses (including,
without limitation, public liability,
embezzlement or other criminal misappropriation
insurance); file with the Bank upon its request
a detailed list of the insurance then in effect,
stating the names of the insurance companies,
the amounts and rates of the insurance, dates of
the expiration thereof and the properties and
risks covered thereby; and, within 10 days after
notice in writing from the Bank, obtain such
additional insurance as the Bank may reasonably
request; and
(ii) Carry all insurance available through the PBGC
or any private insurance companies covering its
obligations (if any) to the PBGC;
(m) The Company will maintain:
(i) At all times, Consolidated Effective Net Worth
in an amount not less than the sum of (i) Two
Hundred Sixty-Five Million Dollars
($265,000,000) plus (ii) the sum, for all fiscal
quarters of the Company ended subsequent to
January 1, 1993, of the greater of (A) Zero
Dollars ($0) and (B) fifty percent (50%) of
Consolidated Net Earnings for each such fiscal
quarter.
(ii) At all times, Consolidated Adjusted Net Worth in
an amount not less than the sum of (i) One
Hundred Million Dollars ($100,000,000) plus (ii)
the sum, for all fiscal quarters of the Company
ended subsequent to January 1, 1993, of the
greater of (A) Zero Dollars ($0) and (B) fifty
percent (50%) of Consolidated Net Earnings for
each such fiscal quarter.
(iii) With respect to the Company at all times,
Investments of the types described in
Section 6.2(i)(i) through (xii) in an
aggregate amount not less than Twenty-Five
Million ($25,000,000) Dollars.
(iv) With respect to the Company for each period of
four (4) consecutive fiscal quarters of the
Company, Consolidated Earnings Available for
Fixed Charges not less than one hundred ten
percent (110%) of Consolidated Fixed Charges for
such period.
(v) With respect to the Company, Paid-in-Capital in
each of the following Subsidiaries in an amount
not greater than the following amounts:
Amount of
Subsidiary Paid-In-Capital
NCB Financial Corporation $15,000,000
NCB Mortgage $15,000,000
NCB Business Credit $15,000,000
(vi) With respect to the Company at all times,
Investments in Subsidiaries (other than as set
forth in subsection 6.1(m)(v) above and
excluding SPV's and secured loans to NCB
Business Credit and NCB Mortgage) in an
aggregate amount with respect to all such
Subsidiaries of not greater than $15,000,000.
Upon the consummation of the dissolution of NCB
Business Credit and the assumption by the
Borrower of the assets and liabilities of NCB
Business Credit ("Dissolution"), subsection
6.1(m)(vi) shall be deemed amended by deleting
the reference to the amount "$15,000,000"
appearing therein and substituting therefor the
amount "$30,000,000" and all references to NCB
Business Credit appearing in subsections
6.1(m)(v) and 6.1(m)(vi) shall be deemed
deleted.
(vii) At all times, a ratio of Consolidated Debt
to Consolidated Adjusted Net Worth in an
amount not greater than 8.0 to 1.0.
For purposes of calculating the ratio set forth
in subsection 6.1(m)(vii) above and in
subsection 6.1(m)(viii) below only,
"Consolidated Adjusted Net Worth" shall be
reduced by the amount by which the sum of 75% of
(i) 90 day overdue accounts, (ii) non-performing
loans, (iii) REO, in substance foreclosure and
other miscellaneous repossession and, (iv)
modified loans, exceed the reserves for credit
losses established by the Company and its
Subsidiaries.
(viii) At all times, a ratio of Consolidated
Senior Debt of the Company to Consolidated
Adjusted Net Worth in an amount not greater
than 6.5 to 1.0.
(ix) Qualified Assets of not less than one hundred
(100%) percent of the sum (at any date of
determination thereof) of:
(i) NCB Senior Obligations, plus
(ii) the aggregate unpaid principal amount of
Subordinated Debt (as defined in the Senior
Note Agreements as in effect on the date
hereof), less
(iii) the aggregate unpaid principal amount
of Class A Notes.
(n) The Company will comply and remain at all times in
compliance with all material provisions of the Senior
Note Agreements and all other agreements evidencing
Indebtedness of the Company for borrowed money and
will deliver to the Bank a certified copy of each
Senior Note Agreement and other such agreement
entered into after the Loan Date.
Section 6.2 Negative Covenants. The Company covenants and
agrees that, so long as this Agreement shall remain in effect
or any of the principal of or interest on any Note hereunder
shall remain unpaid, the Company, will not:
(a) Merge or consolidate with any Persons (whether or not
the Borrower is the surviving entity), except (i) for
the Dissolution, and (ii) a Subsidiary may
consolidate with, or merge into, the Borrower or
another Subsidiary, or, except as permitted by
subsection 6.1(m)(v), acquire all or substantially
all of the assets or any of the capital stock of any
Person.
(b) Sell or transfer any of its property to anyone (other
than to an entity at least fifty percent (50%) of the
capital stock of which at the time outstanding,
having ordinary voting power for the election of
directors, is owned by the Company directly or
indirectly through Subsidiaries) with the intention
of taking back a lease of such property, except a
lease for a temporary period during or at the end of
which it is intended that the use by the Company of
such property will be discontinued;
(c) Create, or assume or permit to exist, any Lien on any
of the properties or assets of the Company whether
now owned or hereafter acquired, except:
(i) Permitted Liens;
(ii) As set forth on Exhibit B annexed hereto;
(iii) To secure obligations in connection with
Eligible Derivatives;
(d) Assume, endorse, be or become liable for, or
guarantee, the obligations of any Person, except by
the endorsement of negotiable instruments for deposit
or collection in the ordinary course of business. For
the purposes hereof, the term "guarantee" shall
include any agreement, whether such agreement is on a
contingency or otherwise, to purchase, repurchase or
otherwise acquire Indebtedness of any other Person,
or to purchase, sell or lease, as lessee or lessor,
property or services, in any such case primarily for
the purpose of enabling another person to make
payment of Indebtedness, or to make any payment
(whether as an advance, capital contribution,
purchase of an equity interest or otherwise) to
assure a minimum equity, asset base, working capital
or other balance sheet or financial condition, in
connection with the Indebtedness of another Person,
or to supply funds to or in any manner invest in
another Person in connection with such Person's
Indebtedness. Asset Securitization Recourse
Liabilities shall not constitute "guarantees"
hereunder;
(e) Acquire all or substantially all of the assets or any
of the capital stock of any Person except as
permitted under Section 6.1(m)(vi);
(f) (i) Except for redemptions by the Company of its
Class B1 Common Stock from the holders thereof
who no longer have loans from the Company
outstanding, purchase, redeem, retire or
otherwise acquire, directly or indirectly, or
make any sinking fund payments with respect to,
any shares of any class of stock of the Company
now or hereafter outstanding or set apart any
sum for any such purpose; or
(ii) Declare or pay any dividends or make any
distribution of any kind on the Company's
outstanding stock, or set aside any sum for any
such purpose, except that the Company may
declare or pay any dividend payable solely in
shares of its common stock;
(g) Make any material change in its business, or in the
nature of its operation, or liquidate or dissolve
itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise
dispose of any of its property, assets or business
except in the ordinary course of business and for a
fair consideration, or dispose of any shares of stock
or any Indebtedness, whether now owned or hereafter
acquired;
(h) Make any voluntary or optional prepayment of any
Indebtedness of the Company or any of its
Subsidiaries for borrowed money incurred or permitted
to exist under the terms of this Agreement, other
than:
(i) Indebtedness evidenced by the Notes;
(ii) Indebtedness of NCB Business Credit and NCB
Mortgage to the Company; and
(iii) any Indebtedness which has a maturity of
not more than one year from the date of its
occurrence;
(i) Make, or suffer to exist, any Investment in any
Person, including, without limitation, any
shareholder, director, officer or employee of the
Company or any of its Subsidiaries, except
investments in:
(i) Demand deposits in and one-to-four day unsecured
loans to Selected Banks;
(ii) Marketable obligations of the United States;
(iii) Marketable obligations guaranteed by or
insured by the United States, or those for
which the full faith and credit of the
United States is pledged for the repayment
of principal and interest thereon;
(iv) Marketable obligations issued, guaranteed, or
fully insured by any agency, instrumentality, or
corporation of the United States established or
to be established by the Congress, for which the
credit of such agency, instrumentality, or
corporation is pledged for the repayment of the
principal and interest thereof;
(v) Marketable general obligations of a state, a
territory or a possession of the United States,
or any political subdivision of any of the
foregoing, or the District of Columbia,
unconditionally secured by the full faith and
credit of such state, territory, possession,
political subdivision or district provided that
such state, territory, possession, political
subdivision or district has general taxing
authority and the power to levy such taxes as
may be required for the payment of principal and
interest thereof;
(vi) Domestic and London interbank market, negotiable
time and variable rate certificates of deposit
issued by Selected Banks;
(vii)Marketable bankers' acceptances and finance
bills accepted by Selected Banks;
(viii) Prime commercial paper having a credit
rating equal to at least A-2 issued by
Standard & Poor's Corporation ("S&P"), P-2
issued by Moody's Investors Service, Inc.
("Moody's") or Duff-2 issued by Duff &
Phelps Inc.;
(ix) Marketable corporate debt securities having an A
credit rating issued by both S&P and Moody's;
(x) Repurchase, reverse repurchase agreements and
security lending agreements collateralized by
securities of the type described in subsections
(ii) and (iv);
(xi) Asset-backed securities issued against a pool of
receivables which have a long-term rating of AAA
or better by Standard & Poors, Moodys or Duff &
Phelps and which have an average life or final
maturity, as determined by the dealer's
prepayment assumptions at the time of purchase,
of no more than five years;
(xii)Mortgaged-backed securities issued against
an underlying pool of mortgages which have
a long-term rating of AAA or better by
Standard & Poors, Moodys or Duff & Phelps;
provided such mortgage-backed securities
shall have an average life, as determined
by the dealer's prepayment assumptions at
the time of purchase, of no more than five
years;
(xiii)Subsidiaries, subject to the limitations
stated in subsection 6.1(m)(vi) hereof;
(xiv) Promissory notes and other interest bearing
obligations acquired in the ordinary course
of business and the issuance of letters of
credit in the ordinary course of business;
(j) Change its fiscal year;
(k) (i) Be or become obligated to the Pension Benefit
Guaranty Corporation, other than in respect of
annual premium payments, in excess of $50,000 in
the aggregate;
(ii) Be or become obligated to the IRS with respect
to excise or other penalty taxes provided for in
Section 4975 of the Code in excess of $50,000 in
the aggregate;
(l) Modify, amend, supplement or terminate, or agree to
modify, amend, supplement or terminate its charter or
by-laws;
(m) Except as expressly permitted by this Agreement,
directly or indirectly: (i) make any investment in an
Affiliate; or (ii) consolidate with or purchase or
acquire assets from an Affiliate; or enter into any
other transaction directly or indirectly with or for
the benefit of any Affiliate (including, without
limitation, guarantees and assumptions of obligations
of an Affiliate); provided, however, that (x) any
Affiliate who is an individual may serve as an
employee or director of the Company and receive
reasonable compensation for his services in such
capacity, (y) the Company may enter into any
transaction with an Affiliate providing for the
leasing of property, the rendering or receipt of
services or the purchase or sale of product,
inventory and other assets in the ordinary course of
business if the monetary or business consideration
arising therefrom would be substantially as
advantageous to the Company as the monetary or
business consideration that would obtain in a
comparable arm's-length transaction with a Person not
an Affiliate, and (z) subject to compliance with
Section 6.1(m) and the other provisions of this
Agreement, the Company may make annual charitable
contributions in reasonable amounts as may be
determined from time to time by the Board of
Directors of the Company to NCB Development
Corporation, a not-for-profit corporation organized
under the laws of the District of Columbia;
(n) Subject to subsections 6.1(m)(vi), (vii) and (viii),
create, incur, permit to exist or have outstanding
any Indebtedness, except:
(i) Indebtedness under the NatWest Loan Agreement,
and the Note;
(ii) Taxes, assessments and governmental charges,
non-interest bearing accounts payable and
accrued liabilities, in any case not more than
90 days past due from the original due date
thereof (e.g., deferred compensation and
deferred taxes) and in each case incurred and
continuing in the ordinary course of business;
(iii) Indebtedness under, and as permitted by,
the Senior Note Agreements;
(iv) Indebtedness under the Class A Notes; and
(v) Indebtedness of NCB Business Credit and NCB
Mortgage to the Company.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1. Events of Default. If one or more of the
following Events of Default shall occur and be continuing:
(a) (i) the Company shall fail to make any payment of
principal on either Note when due; or
(ii) the Company shall fail to make any payment of
interest on either Note when due and such
failure shall continue for a period of three (3)
Business Days; or
(b) the Company shall default in any payment of principal
of or interest on any other obligation for borrowed
money beyond any period of grace provided with
respect thereto or in the performance of any other
agreement, term or condition contained in any
instrument or agreement evidencing, securing,
guaranteeing or otherwise relating to any such
obligation and shall not have cured such default
within any period of grace provided by such
agreement, or any event or condition referred to in
any such agreement shall occur or fail to occur, if
the effect of such default, event or condition is to
cause, or permit the holder or holders of such
obligations (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due
prior to its stated maturity and such accelerated
obligation is for an amount in excess of one percent
(1%) of the Indebtedness of the Company and its
Consolidated Subsidiaries; or
(c) any representation or warranty herein made by the
Company, or any certificate or financial statement
furnished pursuant to the provisions hereof, shall
prove to have been false or misleading in any
material respect as of the time made or furnished; or
(d) the Company shall default in the performance or
observance of any covenant, condition or agreement
contained in Section 6.1(g), 6.1(n) or 6.2; or
(e) the Company shall default in the performance or
observance of any other covenant, condition or
provision hereof and such default shall not be
remedied within thirty (30) days after written notice
thereof is delivered to the Company by the holder of
any Note; or
(f) a proceeding (other than a proceeding commenced by
the Company) shall have been instituted in a court
having jurisdiction in the premises seeking a decree
or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or
for any substantial part of its total assets, or for
the winding-up or liquidation of its affairs and such
proceedings shall remain undismissed or unstayed and
in effect for a period of sixty (60) consecutive days
or such court shall enter a decree or order granting
the relief sought in such proceeding; or
(g) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, shall consent to the
entry of an order for relief in an involuntary case
under any such law, or shall consent to the
appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the
Company or for any substantial part of its total
assets, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any
corporate action in furtherance of any of the
foregoing; or
(h) a judgment or order shall be entered against the
Company by any court, and (i) in the case of a
judgment or order for the payment of money, either
(A) such judgment or order shall continue
undischarged and unstayed for a period of 10 days in
which the aggregate amount of all such judgments and
orders exceeds $500,000 or (B) enforcement
proceedings shall have been commenced upon such
judgment or order and (ii) in the case of any
judgment or order for other than the payment of
money, such judgment or order could, in the
reasonable judgment of the Bank, together with all
other such judgments or orders, have a materially
adverse effect on the Company; or
(i) (i) any Termination Event shall occur with respect to
any Benefit Plan, (ii) any Accumulated Funding
Deficiency, whether or not waived, shall exist with
respect to any Benefit Plan, (iii) any Person shall
engage in any Prohibited Transaction involving any
Benefit Plan, (iv) the Company or any ERISA Affiliate
shall be in "default" (as defined in ERISA Section
4219(c)(5)) with respect to payments owing to a
Multiemployer Benefit Plan as a result of the
Company's or any ERISA Affiliate's complete or
partial withdrawal (as described in ERISA Section
4203 or 4208) from such Multiemployer Benefit Plan,
(v) the Company or any ERISA Affiliate shall fail to
pay when due an amount that is payable by it to the
PBGC or to a Benefit Plan under Title IV of ERISA, or
(vi) a proceeding shall be instituted by a fiduciary
of any Benefit Plan against the Company or any ERISA
Affiliate to enforce ERISA Section 515 and such
proceeding shall not have been dismissed within 30
days thereafter, except that no event or condition
referred to in clauses (i) through (vi) shall
constitute an Event of Default if it, together with
all other such events or conditions at the time
existing, has not had, and in the reasonable
determination of the Bank will not have, a materially
adverse effect on the Company;
then, and in any such event, the Bank upon notice to the
Company may (a) declare the entire outstanding principal
amount, if any, of the Notes (if then issued), any and all
accrued and unpaid interest thereon and any and all other
amounts payable by the Company to the Bank under this Agreement
or the Notes to be forthwith due and payable, whereupon the
entire outstanding principal amount, if any, of the Notes,
together with any and all accrued and unpaid interest thereon
and any and all other such amounts, shall become and be
forthwith due and payable, and (b) terminate the obligation of
the Bank to make Loans, in each case without presentment,
demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company; provided, however, that
in the event of the entry of an order for relief with respect
to the Company under the Federal Bankruptcy Code, (a) any
principal amount of the Notes then outstanding, together with
any and all accrued and unpaid interest thereon and any and all
such other amounts, shall thereupon automatically become and be
due and payable, and (b) the Bank's obligation to make Loans
shall thereupon automatically terminate, in each case without
presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Company.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendments and Waivers; Cumulative Remedies.
No delay or failure of the Bank or the holder of any Note in
exercising any right, power or privilege hereunder shall affect
such right, power or privilege; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps
to enforce such a right, power or privilege preclude any
further exercise thereof or of any other right, power or
privilege. The rights and remedies of the Bank, of any other
holder of any Note hereunder and of the Company are cumulative
and not exclusive of any rights or remedies which any of them
would otherwise have. Any waiver, permit, consent or approval
of any kind or character (whether involving a breach, default,
provision, condition or term hereof or otherwise) on the part
of the Bank, of the holder of any Note, or of the Company under
this Agreement or under any Note must be in writing and shall
be effective only in the specific instance and for the purpose
for which given and only to the extent set forth specifically
in such writing. No notice or demand given hereunder shall
entitle the recipient thereof to any other or further notice or
demand in similar or other circumstances.
Section 8.2 Survival of Representation and Warranties. All
representations, warranties, covenants and agreements of the
Company contained herein or made in writing in connection
herewith shall survive the execution and delivery of this
Agreement, the making of Loans hereunder and the issuance of
the Notes, provided that the survival of a representation or
warranty shall not constitute a restatement of such
representation or warranty after the Effective Date.
Section 8.3 Supervening Illegality. If, after any Loan
Date, as the result of (i) the adoption of any law, rule or
regulation by the United States of America or other
Governmental Body, (ii) any change in the existing laws, rules
and regulations of the United States of America or other
Governmental Body, (iii) the issuance of any order or decree by
any Governmental Body, (iv) any change in the interpretation or
administration of any applicable law, rule, regulation, order
or decree by any Governmental Body (including any central bank
or similar agency) charged with the interpretation or
administration thereof, or (v) compliance by the Bank with any
request or directive (whether or not having the force of law)
of any Governmental Body, it shall be unlawful or impossible
for the Bank to maintain the Loans, or either of them (after
the Bank shall have used reasonable efforts to avoid such
result), the Bank shall so notify the Company and the Bank may
require the Company to prepay the entire principal amount of,
and all accrued and unpaid interest on, such Loan or Loans,
together with any amount payable pursuant to Section 3.6(C), by
giving the Company at least thirty (30) business days' prior
written notice. If after the Effective Date and prior to a Loan
Date it shall become unlawful or impossible for the Bank to
make a Loan, the obligation to make such Loan shall terminate
forthwith.
Section 8.4 No Reduction in Payments. All payments due to
the Bank hereunder, and all other terms, conditions, covenants
and agreements to be observed and performed by the Company
hereunder, shall be made, observed or performed by the Company
without any reduction or deduction whatsoever, including
any,reduction or deduction for any set-off, recoupment,
counterclaim (whether sounding in tort, contract or otherwise)
or tax. The Bank has submitted to the Company two duly
completed and signed copies of Form 4224 of the United States
Internal Revenue Service relating to all amounts to be received
by such Bank pursuant to this Agreement. The Bank shall, from
time to time, submit to the Company such additional duly
completed and signed copies of such forms (or such successor
forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (i) requested in
writing by the Company and (ii) appropriate under then current
United States law or regulations to avoid or reduce United
States withholding taxes on payments in respect of all amounts
to be received by the Bank pursuant to this Agreement.
Section 8.5 Change of Control Option. (A) In the event
that there shall occur any Change of Control (as defined below)
in respect of the Company, the Bank shall have the right, at
its option exercisable at any time within six months following
the Change Date (as defined below), to require the Company to
purchase the Notes on the Purchase Date (as defined below) at a
purchase price that shall be equal to the sum of (i) the
principal amount of the Notes then outstanding, plus (ii) any
and all accrued and unpaid interest on the Notes to the
Purchase Date plus (iii) the amount that would be payable by
the Company under Section 3.6(C) in the case of a prepayment in
full of the Notes (the "Purchase Price").
(B) The Company shall give the Bank written notice of the
occurrence of a Change of Control within five Business Days
following the Change Date. No failure of the Company to give
notice of a Change of Control shall limit the right of the Bank
to require the Company to purchase the Note pursuant to this
Section 8.5.
(C) The Bank may exercise its option hereunder to require
the Company to purchase the Notes by delivering to the Company
at any time within six months after the Change Date (i) written
notice of such exercise specifying the Purchase Date and (ii)
the Notes duly endorsed. The Bank's commitment shall
automatically terminate immediately upon the Company's receipt
of the Bank's written notice of such exercise of its option
under and in accordance with this Section 8.5.
(D) In the event of the exercise by the Bank of its
option under this Section 8.5 in the manner provided herein,
the Company shall pay or cause to be paid to the Bank on the
Purchase Date the Purchase Price (determined in accordance with
Subsection 8.5(A)) in immediately available funds.
(E) As used in this Section 8.5, the term:
(1) "Change Date" means the date on which any Change
of Control shall be deemed to have occurred; provided, that, if
the Company shall fail to give timely notice of the occurrence
of a Change of Control to the Bank as provided in Subsection
8.5(B) of this Section 8.5, for the purpose of determining the
duration of the option of the Bank granted under this Section
8.5, "Change Date" shall mean the earlier of (i) the date on
which notice of a Change of Control is duly given by the
Company to the Bank or (ii) the date on which the Bank obtains
actual knowledge of the Change of Control.
(2) "Change of Control" means when, and shall be
deemed to have occurred at such time as, a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of more than fifty percent
(50%) of the then outstanding Voting Stock of the Company;
provided, that fifty percent shall become seventy percent (70%)
with respect to any "employee benefit plan" (as defined in
Section 3(3) of ERISA) maintained by the Company or any
Subsidiary of the Company or any trust or funding vehicle
maintained for or pursuant to such "employee benefit plan".
(3) "Purchase Date" means the date on which the
Company shall purchase the Note from the Bank pursuant to the
exercise by the Bank of its option under this Section 8.5
pursuant to a notice given to the Company in accordance with
Subsection 8.5(C) of this Section 8.5, which date shall be a
business day not less than 90 nor more than 120 days after the
date the Bank gives the Company written notice of such
exercise.
(4) "Voting Stock" shall mean capital stock of the
Company of any class or classes (however designated) the
holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of the Board
of Directors of the Company, it being understood that, at the
Effective Date, the Common Stock, Classes B and C $100 par
value, of the Company are the only outstanding classes of
capital stock of the Company that constitute "Voting Stock".
Section 8.6 Stamp Taxes. The Company agrees to pay, and to
save the Bank harmless from all liability for, any stamp,
transfer, documentary or similar taxes, assessments or charges
(herein "Stamp Taxes"), and any penalties or interest with
respect thereto, which may be assessed, levied, collected or
imposed, or otherwise become payable, in connection with the
execution and delivery of this Agreement or the Note.
Section 8.7 Notices. Any notice, statement, request or
demand required or permitted hereunder to be in writing may be
given by telex, cable or electronic communication means. All
notices, statements, requests and demands given to or made upon
either party hereto in accordance with the provisions of this
Agreement shall be deemed to have been given or made in the
case of telephonic notice (to the extent expressly permitted
hereunder) when made, or in the case of any other type of
notice, when actually received, if to the Company, to it at
National Consumer Cooperative Bank
1401 Eye Street, N.W. - Suite 700
Washington, D.C. 20005
Attention: Richard L. Reed
Telecopy: (202) 336-7803
and:
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Attention: Martin J. Flynn, Esq.
Telecopy: 202-828-2195
and if to the Bank, to it at:
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Tammy Gurne
Telecopy: (313) 222-3330
or such other address for notice as either party may designate
for itself in a notice to the other party, except in cases
where it is expressly provided herein that such notice,
statement, request or demand shall not be effective until
received by the party to whom it is addressed.
Section 8.8 Governing Law. This Agreement and the Notes
shall be deemed to be contracts under the laws of the State of
Michigan and for all purposes shall be governed by and
construed in accordance with the laws of said state.
Section 8.9 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective
successors and assigns of the parties hereto,
provided that the Company may not assign or transfer
any of its interest hereunder without the prior
written consent of the Bank.
(b) The Bank may make, carry or transfer any Loan at, to
or for the account of, any of its branch offices or
the offices of any of its Affiliates.
(c) The Bank may assign its rights and delegate its
obligations under this Agreement; provided that any
such assignment or delegation (other than the pledge
of the Note to the Federal Reserve Bank) may be made
only with the prior written consent of the Company,
which consent shall not be unreasonably withheld or
delayed. The Bank may sell participations in all or
any part of the Loans made by it or its commitment or
any other interest herein or in the Notes to another
bank or other entity. In the case of an assignment,
upon notice thereof by the Bank to the Company, the
assignee shall have, to the extent of such assignment
(unless otherwise provided thereby), the same rights
and benefits as it would have if it were the Bank
hereunder and the holder of the Notes, and, if the
assignee has expressly assumed, for the benefit of
the Company, the Bank's obligations hereunder, the
Bank shall be relieved of its obligations hereunder
to the extent of such assignment and assumption. In
the case of a participation, the participant shall
not have any rights under this Agreement or the Notes
or any other document delivered in connection
herewith (the participant's rights against the Bank
in respect of such participation to be those set
forth in the agreement executed by the Bank in favor
of the participant relating thereto) and all amounts
payable by the Company shall be determined as if the
Bank had not sold such participation.
Section 8.10 Maximum Rate of Interest Permitted by Law.
Nothing in this Agreement shall require the Company to pay
interest for the account of the Bank at a rate exceeding the
maximum rate permitted by applicable law to be charged or
received by the Bank, it being understood that neither this
Section nor Section 8.8 is intended to make the criminal laws
of any jurisdiction applicable in circumstances in which they
would not otherwise apply. If the rate of interest specified
herein or in the Notes would otherwise exceed the maximum rate
so permitted to be charged or received with respect to any
Note, the rate of interest required to be paid for the account
of the Bank shall be automatically reduced to such maximum
rate.
Section 8.11 Expenses; Indemnification.
(a) The Company shall save the Bank harmless against all
reasonable out-of-pocket expenses (including
attorneys' fees and expenses) of the Bank and shall
indemnify the Bank, its Affiliates, officers,
employees and agents ("Indemnified Persons") against
the costs of preparing this Agreement and the Notes,
all costs, expenses, losses and damages arising in
connection with this Agreement or the Notes,
including with respect to any Credit Agreement
Related Claim. The obligation of the Company under
this paragraph shall survive the payment of the
Notes.
(b) All amounts payable by the Company under Section
8.11(a) shall be immediately due upon written request
by the Bank for the payment thereof.
Section 8.12 Set-Off; Suspension of Payment and
Performance. The Bank is hereby authorized by the Company, at
any time and from time to time, without notice, (a) during any
Event of Default, to set off against, and to appropriate and
apply to the payment of, the liabilities of the Company under
this Agreement and the Notes (whether matured or unmatured,
fixed or contingent or liquidated or unliquidated) any and all
liabilities owing by the Bank or any of its Affiliates to the
Company (whether payable in Dollars or any other currency,
whether matured or unmatured and, in the case of liabilities
that are deposits, whether general or special, time or demand
and however evidenced and whether maintained at a branch or
office located within or without the United States) and (b)
during any Event of Default, to suspend the payment and
performance of such liabilities owing by such Person or its
Affiliates and, in the case of liabilities that are deposits,
to return as unpaid for insufficient funds any and all checks
and other items drawn against such deposits.
Section 8.13 Judicial Proceedings: Waiver of Jury Trial.
Any judicial proceeding brought against the Company with
respect to any Credit Agreement Related Claim may be brought in
any court of competent jurisdiction whose territorial
jurisdiction includes the Eastern District of Michigan, and, by
execution and delivery of this Agreement, the Company (a)
accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby
in connection with any Credit Agreement Related Claim and (b)
irrevocably waives any objection it may now or hereafter have
as to the venue of any such proceeding brought in such a court
or that such a court is an inconvenient forum. The Company
hereby waives personal service of process and consents that
service of process upon it may be made by certified or
registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of
Section 8.7, and service so made shall be deemed complete on
the third Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Bank or any
other Indemnified Person to serve process in any other manner
permitted by law or shall limit the right of the Bank or any
other Indemnified Person to bring proceedings against the
Company in the courts of any other jurisdiction. Any judicial
proceeding by the Company against the Bank involving any Credit
Agreement Related Claim shall be brought only in a court
located in the State of Michigan. THE COMPANY AND THE BANK
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
THEY ARE BOTH PARTIES INVOLVING ANY CREDIT AGREEMENT RELATED
CLAIM.
Section 8.14 LIMITATION OF LIABILITY. NEITHER THE BANK NOR
ANY OTHER INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH
RESPECT TO, AND THE COMPANY HEREBY WAIVES, RELEASES AND AGREES
NOT TO SUE FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES
SUFFERED OR ALLEGED BY THE COMPANY OR THE BANK IN CONNECTION
WITH ANY CREDIT AGREEMENT RELATED CLAIM.
Section 8.15 Severability. The provisions of this
Agreement are severable, and if any clause or provision of this
Agreement shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such clause or provision shall,
as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting
the validity or enforceability of such clause or provision in
any other jurisdiction or the remaining provisions hereof ln
any jurisdiction.
Section 8.16 Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto
on separate counterparts, each complete set of which, when so
executed and delivered by all parties, shall be an original,
but all such counterparts shall together constitute but one and
the same instrument.
Section 8.17 Headings, Bold Type and Index. The section
headings, subsection headings, and bold type used herein and
the Index hereto have been inserted for convenience of
reference only and do not constitute matters to be considered
in interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto, by their officers
"hereunto duly authorized, have executed this Agreement as of
the day and year first above written.
NATIONAL CONSUMER
COOPERATIVE BANK COMERICA BANK
By:_____________________ By:________________________
Its:____________________ Its:_______________________
<PAGE>
EXHIBIT "A"
FORM OF PROMISSORY NOTE
PROMISSORY NOTE
U.S. $10,000,000
Dated:___________________
FOR VALUE RECEIVED, the undersigned, National Consumer
Cooperative Bank, a corporation organized under the laws of the
United States (the "Company"),hereby promises to pay to the
order of Comerica Bank (the "Bank") the principal amount of TEN
MILLION UNITED STATES DOLLARS ($10,000,000) on the Maturity
Date.
The Company promises to pay interest from the date hereof
until the Maturity Date on the principal amount of this
Promissory Note from time to time outstanding at the per annum
interest rate of ______________________________ PERCENT
(__________%), payable on each Interest Payment Date. Interest
shall be computed on the basis of a year of 360 days consisting
of 12 months of 30 days each and, in the case of a portion of a
month, for the actual number of days (including the first and
excluding the last) elapsed. Any principal amount of this
Promissory Note which is not paid on the Maturity Date shall
bear interest from the Maturity Date and until paid in full at
the Default Rate. In no event shall the rate of interest borne
by this Promissory Note at any time exceed the maximum rate of
interest permitted at that time under applicable law.
Payments of the principal amount of and interest on this
Promissory note shall be made in lawful money of the United
States of America to the Bank at 500 Woodward Avenue, Detroit,
Michigan or at such other place as the holder of this Note may
designate in writing to the Company.
This Promissory Note is a Note referred to in the Term
Loan Agreement, of even date herewith (the "Term Loan
Agreement"), between the Bank and the Company. The Term Loan
Agreement, among other things, contains provisions for optional
prepayments on account of the principal of this Promissory Note
by the Company and for acceleration of the maturity of this
Promissory note upon the terms and conditions therein
specified. Capitalized terms used (but not defined) in this
Promissory Note shall have the meanings given to them in the
Term Loan Agreement.
NATIONAL CONSUMER COOPERATIVE BANK
By:___________________________
Its:__________________________
<PAGE>
SCHEDULE OF INTEREST
This Schedule of Interest attached to the
Promissory Note dated __________________,
199___ of NATIONAL CONSUMER COOPERATIVE
BANK, payable to the order of COMERICA
BANK, and is, by specific reference,
incorporated in and made a part of the
Promissory Note.
=================================================================
Interest Period Payment of
First Last Principal Interest Notation
Day Day Outstanding Amount Date Made By
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
<PAGE>
EXHIBIT "B"
PURSUANT TO SECTION 6.2
OF TERM LOAN AGREEMENT BY AND BETWEEN
NATIONAL CONSUMER COOPERATIVE BANK
AND
COMERICA BANK
__________________________________________________
PERMITTED SECURITY INTERESTS,
LIENS AND ENCUMBRANCES
__________________________________________________
NCB Savings Bank, FSB, ("NCBSB") has under pledge to the
Federal Home Loan Bank of Cincinnati (FHLBC) its mortgage loan
portfolio under a Blanket Agreement for Advances and Security
Agreement which allows a blanket lien to secure borrowings from
FHLBC.
The Company extends lines of credit to NCB Business credit and
NCB Mortgage, each secured by all assets of NCB Business Credit
and NCB Mortgage pursuant to certain Business Loan/Security
Agreements.
Each of the Company, NCB Mortgage and NCB Business Credit sells
mortgage loans, ESOP loans and other loans from its portfolio
in the ordinary course of business, structured either as an
Asset Securitization or a sale of whole loans. The SPV or
other purchaser typically provides for an alternative security
interest and files a financing statement covering such loans in
order to protect itself against a subsequent determination that
such sale was not a sale but rather a loan.
Exhibit 22.1
LIST OF SUBSIDIARIES AND AFFILIATE
NCB Mortgage Corporation (wholly-owned) (Delaware)
NCB Financial Corporation (wholly-owned) (Delaware)
NCB Savings Association,FSB (wholly-owned) (Federal)
NCB Investment Advisers, Inc. (wholly-owned) (Delaware)
NCB Insurance Brokers, Inc. (wholly-owned) (New York)
Cooperative Funding Corporation (wholly-owned) (Delaware)
NCB I, Inc. (wholly-owned) (Delaware)
(special purpose corp.)
NCB Retail Finance Corporation (wholly-owned) (Delaware)
(special purpose corp.)
NCB Development Corporation (non-profit corporation
without capital stock)
(District of Columbia)
Exhibit 10.5
EXECUTIVE MANAGEMENT INCENTIVE PLAN FOR 1996
1. LOAN ORIGINATION (25 Points)
The following objectives are weighted 40%, 40% and 20%
respectively.
A. Real Estate Originations $195,000,000
B. Commercial Originations $153,000,000
C. Share Loan and Single Family
Originations $58,000,000
2. CREDIT QUALITY (20 Points)
The following objectives are weighted 40%, 40% and 20%
respectively.
A. As of year end the percentage of the total loan and LC
portfolio that is non-performing(non-accruing, and OREO)
will not exceed 1.5% of total loans and LC's.
If non-performing assets are 1% or less of total
loans at year end then the credit quality component
of the Incentive Plan is weighted 25 points.
B. As of year end the dollar percentage of classified
(substandard) and doubtful) assets will not exceed 6% of
total loans and LC's.
If classified assets are 5% of total loans and LC's
or less then this objective is weighted 50%.
C. Overall loan administration objectives shall be
achieved as reported by Credit Review and measured by the
outside auditors, FCA and OTS.
3. NET INCOME (25% Points)
The following objectives are weighted 50%, 25% and 25%
respectively.
A. Meet budgeted net income. (Each additional $500,000
after the first $500,000 of net income in excess of budget
adds 5 points to the total incentive calculation.)
B. Achieve 8% return on equity.
C. Achieve ratio of 62% or less of operating expense(less
NCBDC contribution) divided by net revenue (plus up to 1%
of gains on asset sales.)
4. LOW INCOME/AFFORDABLE HOUSING (15 Points)
The following objectives are weighted 75% and 25%
respectively and represent business developed jointly with
NCBDC:
A. Low income originations and investments of $60,000,000.
Each $1 million in excess of the goal increases the
` weight of the low income goal by one point to a
maximum of 20 points and increases the weight of this
objective by 5% to a maximum of 90%.
B. Conduct three new market or product opportunity
assessments (50%) and implement one new opportunity (50%).
5. TRAINING AND PEOPLE DEVELOPMENT (10 Points)
The following objectives are weighted equally.
A. 65% of positions filled intgernally at grade 6 and
above.
B. 95% of employees have a personal development plan by
year end.
6. CUSTOMER SATISFACTION (5 Points)
A. Achieve a customer satisfaction rating average of four
on a five point rating scale in annual customer survey.
7. AWARD LEVELS
Points Incentive Award as a Percent of Base Salary
50 - 64.9 Up to 15%
65 - 79.9 Up to 25%
80 - 89.9 Up to 30%
90 and over Up to 35%
Incentive awards are determined by the CEO for each
participant based upon the results of this plan and the
achievement of individual performance objectives.
8. PARTICIPANTS
C.E. Snyder M. Hiltz
C. Blakely R. L. Reed
C. H. Hackman T. W. Simonette
Exhibit 25.12
POWER OF ATTORNEY
Know all men by these presents:
That I Anthony J. Scallon ,
of 3716 40th Ave., South, Minneapolis, MN 55406 ,
a member of the Board of Directors of THE NATIONAL CONSUMER
COOPERATIVE BANK, do hereby make, constitute and appoint as my
true lawful attorney in fact Richard L. Reed or Louise M. Grant
for me and in my name, place and stead to sign any and all of
the following and amendments thereto executed on behalf of THE
NATIONAL CONSUMER COOPERATIVE BANK and filed with the
Securities and Exchange Commission, as follows:
Annual Reports on Form 10-K for the NATIONAL CONSUMER
COOPERATIVE BANK.
IN WITNESS WHEREOF, I have hereunto set my hand this day
of , .
Signature
State of )
) SS:
County of )
On this day of , ,
before me personally appeared the above, to me known and known
to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to
me that he executed the same.
Notary Public
My Commission expires:
<PAGE>
Exhibit 25.13
POWER OF ATTORNEY
Know all men by these presents:
That I Sheila A. Smith ,
of 180 N. LaSalle, Suite 1101, Chicago, IL 60601 ,
a member of the Board of Directors of THE NATIONAL CONSUMER
COOPERATIVE BANK, do hereby make, constitute and appoint as my
true lawful attorney in fact Richard L. Reed or Louise M. Grant
for me and in my name, place and stead to sign any and all of
the following and amendments thereto executed on behalf of THE
NATIONAL CONSUMER COOPERATIVE BANK and filed with the
Securities and Exchange Commission, as follows:
Annual Reports on Form 10-K for the NATIONAL CONSUMER
COOPERATIVE BANK.
IN WITNESS WHEREOF, I have hereunto set my hand this day
of , .
Signature
State of )
) SS:
County of )
On this day of , ,
before me personally appeared the above, to me known and known
to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to
me that he executed the same.
Notary Public
My Commission expires:
<PAGE>
Exhibit 25.11
POWER OF ATTORNEY
Know all men by these presents:
That I Alfred A. Plamann ,of
Certified Grocers, 2601 S. Eastern Ave. Los Angeles CA 90040,
a member of the Board of Directors of THE NATIONAL CONSUMER
COOPERATIVE BANK, do hereby make, constitute and appoint as my
true lawful attorney in fact Richard L. Reed or Louise M. Grant
for me and in my name, place and stead to sign any and all of
the following and amendments thereto executed on behalf of THE
NATIONAL CONSUMER COOPERATIVE BANK and filed with the
Securities and Exchange Commission, as follows:
Annual Reports on Form 10-K for the NATIONAL CONSUMER
COOPERATIVE BANK.
IN WITNESS WHEREOF, I have hereunto set my hand this day
of , .
Signature
State of )
) SS:
County of )
On this day of , ,
before me personally appeared the above, to me known and known
to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to
me that he executed the same.
Notary Public
My Commission expires:
<PAGE>
Exhibit 25.1
POWER OF ATTORNEY
Know all men by these presents:
That I Joseph Cabral ,
of 9541 Mason Ave., Chatsworth, CA 91311 ,
a member of the Board of Directors of THE NATIONAL CONSUMER
COOPERATIVE BANK, do hereby make, constitute and appoint as my
true lawful attorney in fact Richard L. Reed or Louise M. Grant
for me and in my name, place and stead to sign any and all of
the following and amendments thereto executed on behalf of THE
NATIONAL CONSUMER COOPERATIVE BANK and filed with the
Securities and Exchange Commission, as follows:
Annual Reports on Form 10-K for the NATIONAL CONSUMER
COOPERATIVE BANK.
IN WITNESS WHEREOF, I have hereunto set my hand this day
of , .
Signature
State of )
) SS:
County of )
On this day of , ,
before me personally appeared the above, to me known and known
to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to
me that he executed the same.
Notary Public
My Commission expires:
<PAGE>
Exhibit 25.6
POWER OF ATTORNEY
Know all men by these presents:
That I Pete Crear ,
of 5805 Ivanhoe Circle, Fitchburg, WI 53711 ,
a member of the Board of Directors of THE NATIONAL CONSUMER
COOPERATIVE BANK, do hereby make, constitute and appoint as my
true lawful attorney in fact Richard L. Reed or Louise M. Grant
for me and in my name, place and stead to sign any and all of
the following and amendments thereto executed on behalf of THE
NATIONAL CONSUMER COOPERATIVE BANK and filed with the
Securities and Exchange Commission, as follows:
Annual Reports on Form 10-K for the NATIONAL CONSUMER
COOPERATIVE BANK.
IN WITNESS WHEREOF, I have hereunto set my hand this day
of , .
Signature
State of )
) SS:
County of )
On this day of , ,
before me personally appeared the above, to me known and known
to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to
me that he executed the same.
Notary Public
My Commission expires:
Exhibit 27
Financial Data Schedule
Appendix C to Item 601(c) of Regulatorin S-K
Bank Holding Companies and Savings and Loan Holding Companies
Article 9 of Regulation S-X
Item Number Item Description Amount
9-03 (1) Cash 6,121,646
9-03 (2) Int-bearing deposits 7,997,730
9-03 (3) Fed-Funds - Sold 7,170,000
9-03 (4) Trading - Assets 0
9-03 (6) Investments-Held-For-Sale 29,095,559
9-03 (6) Investments - Carrying 3,118,956
9-03 (7) Loans 597,190,479
9-03 (7)(2) Allowance 14,554,240
9-03 (7)(11) Total-Assets 684,531,664
9-03 (12) Deposits 78,100,173
9-03 (13) Short-Term 132,499,998
9-03 (15) Liabilities-Other 17,776,591
9-03 (16) Long-Term 337,701,734
9-03 (21) Common 94,081,220
9-03 (22) Other Stock Equity 254,038
9-03 (23) Total-Liability-and-Equity 684,531,664
9-04 (1) Interest-Loan 48,563,512
9-04 (2) Interest-Investment 3,934,756
9-04 (5) Interest-Total 52,498,268
9-04 (6) Interest-Deposit 3,457,902
9-04 (9) Total Interest-Expense 30,753,161
9-04 (10) Interst Income-Net 21,745,107
9-04 (11) Loan-Losses 1,904,500
9-04 (13)(h) Securities-Realized Loss 73,938
9-04 (14) Expense-Other 22,592,713
9-04 (15) Income-Pretax 9,860,919
9-04 (20) Net-Income 9,083,236
9-04 (21) Eps-Primary 9.65
9-04 (21) Eps-Diluted 9.65
l.B.5 Yield-Actual Int Earning 3.71
lll.C.1 (a) Loans-Non-Accrual 1,740,794
lll.C.1 (b) Loans-Past 90 days/more 1,159,869
lll.C.1 (c) Loans-Troubled 4,040,996
lll.C.2 Loans-Problem 0
lV.A.1 Allowance-Beginning 13,031,499
lV.A.2 Charge-Offs 699,014
lV.A.3 Recoveries 371,255
lV.B.1 Allowance-Domestic 0
lV.B.2 Allowance-Foreign 0
lV.A.4 Allowance-End 14,554,240
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,121,646
<INT-BEARING-DEPOSITS> 7,997,730
<FED-FUNDS-SOLD> 7,170,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,095,559
<INVESTMENTS-CARRYING> 3,118,956
<INVESTMENTS-MARKET> 0
<LOANS> 597,190,479
<ALLOWANCE> 14,554,240
<TOTAL-ASSETS> 684,531,664
<DEPOSITS> 78,100,173
<SHORT-TERM> 132,499,998
<LIABILITIES-OTHER> 17,776,591
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0
0
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<EPS-PRIMARY> 9.65
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</TABLE>
