<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
HAWTHORNE FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other Jurisdiction of
Incorporation or organization)
6035
(Primary Standard Industrial
Classification Code Number)
95-2085671
(I.R.S. Employer
Identification No.)
2381 ROSECRANS AVENUE
2ND FLOOR
EL SEGUNDO, CALIFORNIA 90245
(310) 725-5000
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
SCOTT A. BRALY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HAWTHORNE FINANCIAL CORPORATION
2381 ROSECRANS AVENUE
2ND FLOOR
EL SEGUNDO, CALIFORNIA 90245
(310) 725-5000
(Name, address, including zip code, and telephone number, including area code,
of agents for service)
COPY TO:
GERARD L. HAWKINS, ESQ.
JEFFREY D. HAAS, ESQ.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
734 15TH STREET, N.W.
WASHINGTON, D.C. 20005
Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 1/2% Exchange Notes due 2004 . . $40,000,000 100% $40,000,000 $11,800
============================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(f).
----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
SUBJECT TO COMPLETION, DATED FEBRUARY 3, 1998
PROSPECTUS
HAWTHORNE FINANCIAL CORPORATION
OFFER TO EXCHANGE ITS
12 1/2% EXCHANGE NOTES DUE 2004 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND
ALL OF ITS OUTSTANDING 12 1/2% NOTES DUE 2004
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _______ ___, 1998, UNLESS EXTENDED
----------
Hawthorne Financial Corporation (the "Company"), a Delaware
corporation, hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange up to $40,000,000
principal amount of its 12 1/2% Exchange Notes due 2004 (the "New Notes") which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for a like principal amount of its
outstanding 12 1/2% Notes due 2004 (the "Old Notes"), of which $40,000,000
aggregate principal amount is outstanding. The terms of the New Notes are
identical in all material respects to the terms of the Old Notes, except that
(i) the New Notes have been registered under the Securities Act and therefore
will not be subject to certain restrictions on transfer under federal and state
securities laws applicable to the Old Notes and (ii) the New Notes will not
provide for any prospective increase in the interest rate thereon. See
"Description of New Notes" and "Description of Old Notes." The New Notes are
being offered for exchange in order to satisfy certain obligations of the
Company under a Registration Rights Agreement, dated December 31, 1997, between
the Company and Friedman, Billings, Ramsey & Co., Inc. (the "Initial
Purchaser"), the initial purchaser of the Old Notes from the Company (the
"Registration Rights Agreement").
The Old Notes were issued and the New Notes will be issued as a
separate series under an Indenture, dated December 31, 1997, between the
Company and United States Trust Company of New York (the "Trustee"), as Trustee
thereunder (the "Indenture"). Except as the context may otherwise require or
otherwise expressly stated, the term "Notes" herein means the Old Notes and the
New Notes.
Interest on the Notes will be payable semiannually on June 30 and
December 31 of each year (each an "Interest Payment Date"), commencing on June
30, 1998. On and after December 31, 2002, the Notes will be redeemable at any
time at the option of the Company, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid interest to the date of
redemption. The Notes are not otherwise redeemable prior to December 31, 2002.
Upon the occurrence of a Change of Control (as defined herein) holders of Notes
will have the option to require the Company to repurchase all outstanding Notes
at 101% of their aggregate principal amount, plus accrued and unpaid interest,
if any, to the date of repurchase. The Notes are general unsecured obligations
of the Company. There will be no sinking fund for the retirement of principal
of the Notes prior to maturity. See "Description of New Notes."
The Notes will be represented by one or more global Notes in fully
registered form, deposited with a custodian for and registered in the name of
Cede & Co., as nominee for the Depository Trust Company ("DTC"). Beneficial
interests in such Notes will be shown on, and transfers thereof will be
effected through, records maintained by DTC and its participants. The New
Notes will be issued, and Notes may be transferred, only in blocks having an
aggregate principal amount of not less than $100,000 and in integral multiples
of $1,000 principal amount in excess thereof. See "Description of New Notes."
(continued on the following page)
This Prospectus and the Letter of Transmittal are first being mailed
to all registered holders of Old Notes as of ________ ___, 1998.
SEE "RISK FACTORS" COMMENCING ON PAGE 18 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD NOTES IN THE
EXCHANGE OFFER.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
----------
The date of this Prospectus is __________ ___, 1998.
<PAGE> 3
(Continued from the previous page)
----------
The Company is making the Exchange Offer of the New Notes in reliance
on the position of the staff of the Division of Corporation Finance of the
Securities and Exchange Commission (the "Commission") as set forth in certain
interpretive letters addressed to third parties in other transactions.
However, the Company has not sought its own interpretive letter and there can
be no assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance of the
Commission, and subject to the two immediately following sentences, the Company
believe that New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such New Notes.
However, any holder of Old Notes who is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act (an "Affiliate") or who
intends to participate in the Exchange Offer for the purpose of distributing
New Notes, or any broker-dealer who purchased Old Notes from the Company to
resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any
other available exemption under the Securities Act, (i) will not be able to
rely on the interpretations of the staff of the Division of Corporation Finance
of the Commission set forth in the above-mentioned interpretive letters, (ii)
will not be entitled to tender such Old Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old Notes
(other than pursuant to the Exchange Offer) unless such sale is made pursuant
to an exemption from such requirements. In addition, as described below, if
any broker- dealer (a "Participating Broker-Dealer") holds Old Notes acquired
for its own account as a result of market-making or other trading activities
and exchanges such Old Notes for New Notes, then such Participating
Broker-Dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New
Notes in the Exchange Offer will be required to represent that (i) it is not an
Affiliate of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is
not a broker-dealer, such holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such
New Notes. The Letter of Transmittal contains the foregoing representations.
In addition, the Company may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Company (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) on behalf of whom such
holder holds Old Notes to be exchanged in the Exchange Offer. Each
Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer will be deemed to have acknowledged by execution
of the Letter of Transmittal or delivery of an Agent's Message (as defined
herein) that it acquired the Old Notes for its own account as the result of
market-making activities or other trading activities and must agree that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the staff of
the Division of Corporation Finance of the Commission in the interpretive
letters referred to above, the Company believes that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the New Notes received upon exchange of such Old Notes (other than Old Notes
which represent an unsold allotment from the original sale of the Old Notes)
with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as
2
<PAGE> 4
(Continued from the previous page)
it contains a description of the plan of distribution with respect to the
resale of such New Notes. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company has agreed that this Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of such New Notes for a
period ending 90-days after the Expiration Date (as defined herein) (subject to
extension under certain limited circumstances described below) or, if earlier,
when all such New Notes have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Notes received in exchange for Old Notes pursuant to the Exchange Offer
must notify the Company, or cause the Company to be notified, on or prior to
the Expiration Date, that it is a Participating Broker-Dealer. Such notice may
be given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses set forth herein
under "The Exchange Offer--Exchange Agent." Any person, including any
Participating Broker-Dealer, who is an Affiliate of the Company may not rely on
such interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of New Notes."
In that regard, each Participating Broker-Dealer who surrenders Old
Notes pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agent's Message, that,
upon receipt of notice from the Company of the occurrence of any event or the
discovery of any fact which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or which causes
this Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading or of the occurrence
of certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of New Notes pursuant to this
Prospectus until the Company has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented Prospectus to such Participating Broker-Dealer or the Company
has given notice that the sale of the New Notes may be resumed, as the case may
be. If the Company gives such notice to suspend the sale of the New Notes it
shall extend the 90-day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection with the
resale of New Notes by the number of days during the period from and including
the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Notes or to and
including the date on which the Company has given notice that the sale of New
Notes may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Old Notes. The New Notes will be a new
issue of securities for which there is no existing market. There can be no
assurance as to the development or liquidity of any market for either the Old
Notes or the New Notes. The Company does not intend to apply for listing of
the New Notes on any securities exchange or to seek approval for quotation of
the New Notes through any automated quotation system.
Any Old Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Indenture (except
for those rights which terminate upon consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the holders of Old Notes will
continue to be subject to all of the existing restrictions upon transfer
thereof and the Company will not have any further obligation to such holders to
provide for registration under the Securities Act of the Old Notes held by
them. To the extent that Old Notes are tendered and
3
<PAGE> 5
(Continued from the previous page)
accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes
could be adversely affected. See "Risk Factors--Consequences of a Failure to
Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m., New
York City time, on _________ ___, 1998 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Company (in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended). Tenders of
Old Notes may be withdrawn at any time on or prior to the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain events and conditions which may be waived by the Company and to the
provisions of the Registration Rights Agreement. Old Notes may be tendered in
whole or in part having an aggregate principal amount of not less than $100,000
and/or any integral multiple of $1,000 principal amount in excess thereof. The
Company has agreed to pay all expenses of the Exchange Offer. See "The
Exchange Offer--Fees and Expenses." Holders of New Notes as of the record date
for the payment of interest on June 30, 1998 will be entitled to receive
interest accumulated from December 31, 1997. Holders of the Old Notes whose
Old Notes are accepted for exchange will not receive interest on such Old Notes
and will be deemed to have waived the right to receive any interest on such Old
Notes accumulated from December 31, 1997. See "The Exchange
Offer--Distributions on New Notes."
The Company will not receive any cash proceeds from the issuance of
the New Notes offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
THE NEW NOTES WILL BE ISSUED, AND NOTES MAY BE TRANSFERRED,
ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000
AND IN INTEGRAL MULTIPLES OF $1,000 PRINCIPAL AMOUNT IN EXCESS THEREOF. ANY
TRANSFER, SALE OR OTHER DISPOSITION OF NOTES IN A BLOCK HAVING AN AGGREGATE
PRINCIPAL AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH NOTES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT
OF PRINCIPAL AND INTEREST ON SUCH NOTES, AND SUCH TRANSFEREE SHALL BE DEEMED TO
HAVE NO INTEREST WHATSOEVER IN SUCH NOTES.
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")
(EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO
PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THE NOTES OR
ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH
RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE NOTES OR
ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND
HOLDING THEREOF THAT IT EITHER (I) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS
NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN,
OR (II) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60,
91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING.
4
<PAGE> 6
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
___________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . 6
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . .15
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
RATIOS OF EARNINGS TO FIXED CHARGES . . . . . . . . . . . . . . . . .26
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . .26
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . .27
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . .27
DESCRIPTION OF NEW NOTES . . . . . . . . . . . . . . . . . . . . . .37
DESCRIPTION OF OLD NOTES . . . . . . . . . . . . . . . . . . . . . .53
REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . .53
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . .53
VALIDITY OF NEW NOTES . . . . . . . . . . . . . . . . . . . . . . . .54
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
</TABLE>
5
<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Commission. Reports, proxy statements and other information
concerning the Company can be inspected and copied at prescribed rates at the
Commission's Public Reference Room, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following Regional Offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained by mail from the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. If available, such reports and other information also may be
accessed through the Commission's electronic data gathering, analysis and
retrieval system ("EDGAR") via electronic means, including the Commission's web
site on the Internet (http://www.sec.gov). The common stock of the Company
(the "Common Stock") is quoted on the Nasdaq Stock Market's National Market
under the symbol "HTHR." Consequently, such reports, proxy statements and
other information also may be inspected at the offices of the NASD, 1735 K
Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement on Form
S-4 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and reference is
hereby made to the Registration Statement and to the exhibits relating thereto
for further information with respect to the Company and the New Notes. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company
pursuant to Section 13 of the Exchange Act are incorporated by reference in
this Prospectus:
(a) Annual Report on Form 10-K for the year ended December
31, 1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1997; and
(c) Current Reports on Form 8-K dated April 29, 1997, June
12, 1997, January 28, 1998 and February ___, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus or any supplement thereto to the extent that a statement
contained herein or therein (or in any subsequently filed document that also is
or is deemed to be incorporated by reference herein or therein) modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this
Prospectus, including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein do not purport to
be complete, and where reference is made to
6
<PAGE> 8
the particular provisions of such contract or other document, such provisions
are qualified in all respects by reference to all of the provisions of such
contract or other document.
The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to Hawthorne
Financial Corporation, 2381 Rosecrans Avenue, 2nd Floor, El Segundo, California
90245, Attention: Norman Morales. The Company's telephone number is (310)
725-5000.
7
<PAGE> 9
SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus or incorporated by
reference herein. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information and financial statements, including
the notes thereto, contained elsewhere in this Prospectus or incorporated by
reference herein.
THE COMPANY
The Company is a financial services company specializing in making
loans in market niches which generally provide higher rates of return and
greater growth potential than the traditional mortgage products offered by
financial institutions. The Company generally seeks to originate real
estate-secured loans in which it can charge a premium price for prompt,
efficient execution and for tailoring the terms of the loans to meet the
objectives of both the Company and the borrower. The Company targets a
relatively limited number of high-balance loans in order to provide reasonable
leverage to the Company's fixed loan origination cost structure. The Company,
through its wholly-owned subsidiary, Hawthorne Savings, F.S.B. (the "Bank"),
focuses primarily on originating (1) loans secured by large estate homes
located principally in the southern California area and which generally have
principal balances of $1.0 million or more, (2) loans secured by multi-family
residential and commercial real estate and (3) loans for the construction of
individual and tracts of single-family residential homes and the acquisition
and development of land for the construction of such homes. The Company funds
its lending activities primarily with retail deposits obtained through the
Bank's branch system. At December 31, 1997, the Company had assets of $928.2
million, deposits of $799.5 million and stockholders' equity of $42.3 million.
The Company's principal executive offices are located at 2381
Rosecrans Avenue, 2nd Floor, El Segundo, California 90245, and its telephone
number is (310) 725-5000.
THE EXCHANGE OFFER
The Exchange Offer . . . . . . . . . . . . . . Up to $40,000,000 aggregate
principal amount of New Notes
are being offered in exchange
for a like aggregate
principal amount of Old
Notes. Old Notes may be
tendered for exchange in
whole or in part in an
aggregate principal amount of
not less than $100,000 or any
integral multiple of $1,000
principal amount in excess
thereof. The Company is
making the Exchange Offer in
order to satisfy its
obligations under the
Registration Rights Agreement
relating to the Old Notes.
For a description of the
procedures for tendering Old
Notes, see "The Exchange
Offer--Procedures for
Tendering Old Notes."
Expiration Date . . . . . . . . . . . . . . . . 5:00 p.m., New York City
time, on ________ ___, 1998
unless the Exchange Offer is
extended by the Company (in
which case the Expiration
Date will be the latest date
and time to which the
Exchange Offer is extended).
See "The Exchange
Offer--Terms of the Exchange
Offer."
8
<PAGE> 10
Conditions to the Exchange Offer . . . . . . . The Exchange Offer is
subject to certain
conditions, which may be
waived by the Company in its
sole discretion. The
Exchange Offer is not
conditioned upon any minimum
principal amount of Old Notes
being tendered. See "The
Exchange Offer--Conditions to
the Exchange Offer."
Offer . . . . . . . . . . . . . . . . . . . . . The Company reserves the
right in its sole and
absolute discretion, subject
to applicable law, at any
time and from time to time,
(i) to delay the acceptance
of the Old Notes for
exchange, (ii) to terminate
the Exchange Offer if certain
specified conditions have not
been satisfied, (iii) to
extend the Expiration Date of
the Exchange Offer and retain
all Old Notes tendered
pursuant to the Exchange
Offer, subject, however, to
the right of holders of Old
Notes to withdraw their
tendered Old Notes or (iv) to
waive any condition or
otherwise amend the terms of
the Exchange Offer in any
respect. See "The Exchange
Offer--Terms of the Exchange
Offer."
Withdrawal Rights . . . . . . . . . . . . . . . Tenders of Old Notes may be
withdrawn at any time on or
prior to the Expiration Date
by delivering a written
notice of such withdrawal to
the Exchange Agent in
conformity with certain
procedures set forth below
under "The Exchange
Offer--Withdrawal Rights."
Procedures for Tendering Old Notes . . . . . . Tendering holders of Old
Notes must complete and sign
a Letter of Transmittal in
accordance with the
instructions contained
therein and forward the same
by mail, facsimile or hand
delivery, together with any
other required documents, to
the Exchange Agent, either
with the Old Notes to be
tendered or in compliance
with the specified procedures
for guaranteed delivery of
Old Notes. Certain brokers,
dealers, commercial banks,
trust companies and other
nominees also may effect
tenders by book-entry
transfer, including an
Agent's Message in lieu of a
Letter of Transmittal.
Holders of Old Notes
registered in the name of a
broker, dealer, commercial
bank, trust company or other
nominee are urged to contact
such person promptly if they
wish to tender Old Notes
pursuant to the Exchange
Offer. See "The Exchange
Offer--Procedures for
Tendering Old Notes."
Letters of Transmittal and
certificates representing Old
Notes should not be sent to
the Corporation or the Trust.
Such documents should only be
sent to the Exchange Agent.
See "The Exchange Offer -
Exchange Agent."
Resales of New Notes . . . . . . . . . . . . . The Company is making the
Exchange Offer in reliance on
the position of the staff of
the Division of Corporation
Finance of the Commission as
set forth in certain
interpretive letters
addressed to third parties in
other transactions. However,
the Company has not sought
its own interpretive letter
and there can be no assurance
that the staff of the
Division of
9
<PAGE> 11
Corporation Finance of the
Commission would make a similar
determination with respect to
the Exchange Offer as it has in
such interpretive letters to
third parties. Based on these
interpretations by the staff of
the Division of Corporation
Finance of the Commission, and
subject to the two immediately
following sentences, the
Company believes that New Notes
issued pursuant to this
Exchange Offer in exchange for
Old Notes may be offered for
resale, resold and otherwise
transferred by a holder thereof
(other than a holder who is a
broker-dealer) without further
compliance with the
registration and prospectus
delivery requirements of the
Securities Act, provided that
such New Notes are acquired in
the ordinary course of such
holder's business and that such
holder is not participating,
and has no arrangement or
understanding with any person
to participate, in a
distribution (within the
meaning of the Securities Act)
of such New Notes. However, any
holder of Old Notes who is an
Affiliate of the Company or who
intends to participate in the
Exchange Offer for the purpose
of distributing the New Notes,
or any broker-dealer who
purchased the Old Notes from
the Company to resell pursuant
to Rule 144A or any other
available exemption under the
Securities Act, (i) will not be
able to rely on the
interpretations of the staff of
the Division of Corporation
Finance of the Commission set
forth in the above-mentioned
interpretive letters, (ii) will
not be permitted or entitled to
tender such Old Notes in the
Exchange Offer and (iii) must
comply with the registration
and prospectus delivery
requirements of the Securities
Act in connection with any sale
or other transfer of such Old
Notes unless such sale is made
pursuant to an exemption from
such requirements. In addition,
as described below, if any
broker-dealer holds Old Notes
acquired for its own account as
a result of market-making or
other trading activities and
exchanges such Old Notes for
New Notes, then such
broker-dealer must deliver a
prospectus meeting the
requirements of the Securities
Act in connection with any
resales of such New Notes.
Each holder of Old Notes who
wishes to exchange Old Notes
for New Notes in the Exchange
Offer will be required to
represent in the Letter of
Transmittal or by transmission
of an Agent's Message that (i)
it is not an Affiliate of the
Company, (ii) any New Notes to
be received by it are being
acquired in the ordinary course
of its business, (iii) it has
no arrangement or understanding
with any person to participate
in a distribution (within the
meaning of the Securities Act)
of such New Notes and (iv) if
such holder is not a broker-
dealer, such holder is not
engaged in, and does not intend
to engage in, a distribution
(within the meaning of the
Securities Act) of such New
Notes. The Letter of
Transmittal contains the
foregoing represen-
10
<PAGE> 12
tations. Each Participating
Broker-Dealer that receives
New Notes for its own account
pursuant to the Exchange Offer
will be deemed to have
acknowledged by execution of
the Letter of Transmittal or
delivery of an Agent's Message
that it acquired the Old Notes
for its own account as the
result of market-making
activities or other trading
activities and must agree that
it will deliver a prospectus
meeting the requirements of
the Securities Act in
connection with any resale of
such New Notes. The Letter of
Transmittal states that, by so
acknowledging and by
delivering a prospectus, a
Participating Broker-Dealer
will not be deemed to admit
that it is an "underwriter"
within the meaning of the
Securities Act. Based on the
position taken by the staff of
the Division of Corporation
Finance of the Commission in
the interpretive letters
referred to above, the Company
believes that Participating
Broker-Dealers who acquired
Old Notes for their own
accounts as a result of
market-making activities or
other trading activities may
fulfill their prospectus
delivery requirements with
respect to the New Notes
received upon exchange of such
Old Notes (other than Old
Notes which represent an
unsold allotment from the
original sale of the Old
Notes) with a prospectus
meeting the requirements of
the Securities Act, which may
be the prospectus prepared for
an exchange offer so long as
it contains a description of
the plan of distribution with
respect to the resale of such
New Notes. Accordingly, this
Prospectus, as it may be
amended or supplemented from
time to time, may be used by a
Participating Broker-Dealer in
connection with resales of New
Notes received in exchange for
Old Notes where such Old Notes
were acquired by such
Participating Broker- Dealer
for its own account as a
result of market-making or
other trading activities.
Subject to certain provisions
set forth in the Registration
Rights Agreement and to the
limitations described below
under "The Exchange
Offer--Resales of New Notes,"
the Company has agreed that
this Prospectus, as it may be
amended or supplemented from
time to time, may be used by a
Participating Broker-Dealer in
connection with resales of
such New Notes for a period
ending 90-days after the
Expiration Date (subject to
extension under certain
limited circumstances) or, if
earlier, when all such New
Notes have been disposed of by
such Participating Broker-
Dealer. See "Plan of
Distribution." Any person,
including any Participating
Broker-Dealer, who is an
Affiliate of the Company may
not rely on such interpretive
letters and must comply with
the registration and
prospectus delivery
requirements of the Securities
Act in connection with any
resale transaction. See "The
Exchange Offer--Resales of New
Notes."
11
<PAGE> 13
Certain Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . Based upon current
provisions of the Code,
applicable U.S. Treasury
regulations (including
proposed and temporary
treasury regulations),
judicial authority, and
administrative rulings and
practice, the exchange of an
Old Note for a New Note
pursuant to the Exchange
Offer will not constitute a
taxable event for federal
income tax purposes. There
can be no assurance that the
Internal Revenue Service will
continue to take this
position, and no ruling from
the Internal Revenue Service
has been or will be sought.
Legislative, judicial or
administrative changes or
interpretations may be issued
that could alter or modify
this result. EACH HOLDER OF
OLD NOTES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR AS
TO THE PARTICULAR TAX
CONSEQUENCES OF EXCHANGING
SUCH HOLDER'S OLD NOTES FOR
NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN
TAX LAWS. See "The Exchange
Offer -Certain Federal Income
Tax Consequences of the
Exchange."
Exchange Agent . . . . . . . . . . . . . . . . The exchange agent with
respect to the Exchange Offer
is United States Trust
Company of New York (the
"Exchange Agent"). The
addresses, and telephone and
facsimile numbers, of the
Exchange Agent are set forth
in "The Exchange Offer--
Exchange Agent" and in the
Letter of Transmittal.
Use of Proceeds . . . . . . . . . . . . . . . . The Company will not
receive any cash proceeds
from the issuance of the New
Notes offered hereby. See
"Use of Proceeds."
THE NEW NOTES
Securities Offered . . . . . . . . . . . . . . Up to $40,000,000 aggregate
principal amount of New Notes
which have been registered
under the Securities Act.
The New Notes will be issued,
and the Old Notes were
issued, under the Indenture.
The terms of the New Notes
are identical in all material
respects to the terms of the
Old Notes, except that the
New Notes have been
registered under the
Securities Act and therefore
will not be subject to
certain restrictions on
transfer under federal and
state securities laws and
will not provide for any
prospective increase in the
interest rate thereon. See
"The Exchange Offer--Purpose
and Effect of the Exchange
Offer," "Description of New
Notes" and "Description of
Old Notes."
Denomination . . . . . . . . . . . . . . . . . $100,000 and integral
multiples of $1,000 in excess
thereof.
Interest Payment Dates . . . . . . . . . . . . June 30 and December 31 of
each year, commencing June 30,
1998.
12
<PAGE> 14
Maturity . . . . . . . . . . . . . . . . . . . December 31, 2004.
Ranking . . . . . . . . . . . . . . . . . . . . The New Notes will rank pari
passu with the Old Notes. The
Notes are general unsecured
obligations of the Company.
Because the Company is a
holding company that currently
conducts substantially all of
its operations through the
Bank, the right of the Company
(and therefore the right of the
Company's creditors and
stockholders) to participate in
any distribution of the assets
or earnings of the Bank (or any
other subsidiary of the
Company) is subject to the
prior claims of creditors of
the Bank (or any other
subsidiaries), including any
claims of the Company as a
creditor to the extent such
claims may be recognized. As a
result, the Notes will be
effectively subordinate to the
claims of creditors of the
Company's subsidiaries.
Sinking Fund . . . . . . . . . . . . . . . . . None.
Mandatory Redemption . . . . . . . . . . . . . None.
Optional Redemption . . . . . . . . . . . . . . The Notes are not redeemable
at the election of the Company
prior to December 31, 2002. The
Notes will be subject to
redemption, in whole or in
part, at the election of the
Company upon not less than 30
nor more than 60 days' notice
at any time on or after
December 31, 2002 at the
redemption prices set forth
herein. See "Description of New
Notes--Optional Redemption."
Change of Control . . . . . . . . . . . . . . . Upon a Change of Control (as
defined in the Indenture),
holders of Notes will have the
option to require the Company
to repurchase all outstanding
Notes at 101% of their
principal amount, plus accrued
interest to the date of
repurchase. There can be no
assurance that the Company will
have the funds available to
repurchase the Notes in the
event of a Change of Control.
See "Description of New Notes
--Certain Covenants--Offer to
Purchase Upon a Change of
Control."
Certain Additional Covenants . . . . . . . . . The Indenture pursuant to which
the New Notes will be issued
and the Old Notes were issued
contains certain additional
covenants that, among other
things, limit (i) the
incurrence of certain
indebtedness by the Company
(but not its subsidiaries,
except subordinated
indebtedness of the Bank under
certain circumstances); (ii)
the payment of dividends and
the making of certain other
distributions by the Company
and its subsidiaries; (iii) the
incurrence of certain liens on
the Company's assets; (iv) the
sale or other transfer of
capital stock of the Bank; and
(v) the Company's ability to
enter into any arrangement that
would impose certain
restrictions on the ability of
subsidiaries
13
<PAGE> 15
of the Company to make dividend
and other payments to the
Company. The Indenture also
restricts the Company's and the
Bank's ability to merge,
consolidate or sell all or
substantially all of the assets
of the Company or the Bank. See
"Description of New Notes--
Certain Covenants."
Transfer Restrictions . . . . . . . . . . . . . The New Notes will be issued,
and Notes may be transferred,
only in blocks having an
aggregate principal amount of
not less than $100,000 and
integral multiples of $1,000
principal amount in excess
thereof. Any transfer, sale or
other disposition of Notes in a
block having an aggregate
principal amount of less than
$100,000 shall be deemed to be
void and of no legal effect
whatsoever. See "Description of
New Notes--Form, Denomination
and Book-Entry Procedures."
Absence of Market for the Notes . . . . . . . . The New Notes will be a new
issue of securities for which
there is no existing market.
The New Notes will not be
listed on any national
securities exchange or approved
for quotation on any national
interdealer quotation system.
In connection with the offering
of Old Notes, the Initial
Purchaser informed the
Company that it intends to make
a market in the New Notes and
the Old Notes. However, the
Initial Purchaser is not
obligated to do so, and any
such market making may be
discontinued at any time
without notice to the holders
of the New Notes or Old Notes,
as applicable. In addition,
such market making activity
will be subject to the limits
of the Exchange Act and the
regulations thereunder and may
be limited during the pendency
of the Exchange Offer and
during the period a shelf
registration statement required
to be filed pursuant to the
Registration Rights Agreement
is required to remain
effective. Accordingly, there
can be no assurance as to the
development or liquidity of any
market for the New Notes and
the Old Notes. See "Risk
Factors-- Absence of Public
Market and Restrictions on
Resale."
Risk Factors . . . . . . . . . . . . . . . . . For a discussion of certain
factors that should be
considered in deciding whether
to accept the Exchange Offer,
see "Risk Factors."
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data of the Company set forth
below should be read in conjunction with, and is qualified in its entirety by,
the Consolidated Financial Statements of the Company, including the related
notes, included in the documents incorporated herein by reference. See
"Available Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets $928,197 $847,195 $753,583 $743,793 $881,641
Cash and cash equivalents(1) 9,520 93,978 14,015 18,063 42,901
Investment securities(2) 42,678 38,371 62,793 30,190 52,425
Mortgage-backed securities -- -- -- 57,395 28,891
Loans receivable, net 838,251 672,401 617,328 537,020 623,450
Real estate owned, net 9,859 20,140 37,905 62,613 72,234
Deposits 799,501 717,809 698,008 649,382 829,809
Senior notes and other borrowings 80,000 62,307 12,006 47,141 --
Stockholders' equity 42,319 43,922 38,966 40,827 43,949
Gross nonperforming assets(3) 20,652 36,783 49,203 80,716 151,183
Allowance for credit losses 13,274 13,515 15,192 21,461 46,629
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
Interest revenues $75,616 $65,354 $50,994 $49,571 $58,798
Interest costs 43,825 39,960 34,486 30,443 36,692
------- ------- ------- ------- -------
Net interest income 31,791 25,394 16,508 19,128 22,106
Provision for credit losses 5,137 7,489 14,895 5,298 10,747
------- ------- ------- ------- -------
Net interest income after provision for credit 26,654 17,905 1,613 13,830 11,359
losses
Gain on sales of loans and securities 101 685 3,022 -- --
Other noninterest revenues, net 3,599 1,927 1,311 1,973 3,295
Operating costs 22,009 21,046 20,339 23,911 21,162
(Income) loss from real estate operations, net (229) 956 436 (2,433) 26,684
------- ------- ------- ------- -------
Total noninterest expense 21,780 22,002 20,775 21,478 47,846
Net gain (loss) from disposition of deposits -- 6,413 (117) 2,835 (4,066)
and premises
Other revenues (expenses) -- (3,803)(4) 1,346 -- --
------- ------- ------- ------- -------
Earnings (loss) before income tax benefit
(expense), cumulative effect of change in
accounting principle and extraordinary item 8,574 1,125 (13,600) (2,840) (37,258)
Income tax benefit (expense) 2,577 6,382 (617) (123) 7,648
Cumulative effect of change in accounting -- -- -- -- --
principle ------- ------- ------- ------- -------
Earnings (loss) 11,151 7,507 (14,217) (2,963) (29,610)
Extraordinary loss 1,534(5) -- -- -- --
------- ------- ------- ------- -------
Net earnings (loss) after extraordinary item $ 9,617 $ 7,507 $(14,217) $(2,963) $(29,610)
======== ======= ======== ======= ========
Basic earnings (loss) per share before
extraordinary item $ 3.02 $ 1.95 $ (5.52) $ (1.14) $(11.39)
Basic earnings (loss) per share before
extraordinary item 2.49 1.95 (5.52) (1.14) (11.39)
Diluted earnings (loss) per share before 1.66 1.17 (5.52) (1.14) (11.39)
extraordinary item
Diluted earnings (loss) per share after 1.37 1.17 (5.52) (1.14) (11.39)
extraordinary item
Dividends per share of Common Stock -- -- -- -- .50
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
At or For the Year Ended December 31,
----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS (6)
Return on average assets 1.11% 0.93% (1.96)% (0.36)% (3.09)%
Return on average common
stockholders' equity 19.83 17.75 (47.57) (6.99) (50.80)
Average stockholders' equity to
average assets 5.59 5.24 4.11 5.12 6.08
Interest rate spread(7) 3.57 3.14 2.61 2.72 2.32
Net interest margin(8) 3.78 3.28 2.47 2.56 2.42
Efficiency ratio(9) 62.19 77.03 114.14 113.32 83.31
CAPITAL RATIOS(10)
Tangible 7.55 6.27 5.80 5.15 4.61
Core 7.55 6.27 5.80 5.15 4.61
Risk-based 11.48 11.11 10.27 9.36 8.18
ASSET QUALITY RATIOS
Nonperforming assets to total assets
at end of period(3) 2.22 4.34 6.53 10.85 17.15
Nonperforming loans to total loans
at end of period(3) 1.27 2.43 1.79 3.24 11.78
Allowance for credit losses to loans
at end of period 1.56 1.97 2.40 3.84 6.96
Allowance for credit losses
to nonperforming loans at end of 122.99 81.21 134.47 118.55 59.06
period(3)
</TABLE>
- ----------
(1) Cash and cash equivalents include cash, certificates of deposits in
other financial institutions and federal funds sold.
(2) Investment securities were classified as available for sale at
December 31, 1997, 1996 and 1995.
(3) Nonperforming loans consist of loans delinquent 90 days or more and
nonperforming assets consist of nonperforming loans and real estate
owned acquired through foreclosure or deed-in-lieu thereof, net of
writedowns and reserves. Nonperforming loans do not include loans
which are 30 to 89 days delinquent, which the Company places on
nonaccrual status as a matter of policy, and other loans which are
performing in accordance with their terms but which the Company has
placed on nonaccrual status due to one or more defined weaknesses,
which in the aggregate amounted to $4.6 million at December 31, 1997.
At December 31, 1997, the Company's nonperforming assets plus
nonaccrual loans amounted to $25.3 million or 2.72% of total assets
and nonperforming loans plus nonaccrual loans amounted to 1.84% of
total loans. Nonperforming assets do not include troubled debt
restructurings ("TDRs") which are performing in accordance with their
terms but classified as substandard for regulatory purposes, which
amounted to $3.8 million, $12.9 million, $7.3 million, $3.7 million
and $5.6 million at December 31, 1997, 1996, 1995, 1994 and 1993,
respectively.
(4) Includes a one-time charge on all deposits insured by the Savings
Association Insurance Fund ("SAIF") as of March 31, 1995 to
recapitalize the SAIF.
(5) Relates to the accelerated write off of unamortized issue costs and
original issue discount associated with Senior Notes due 2000 which
were issued by the Company in December 1995 and repaid in full in
December 1997 with a portion of the proceeds from the offering of Old
Notes. See "Use of Proceeds."
16
<PAGE> 18
(6) With the exception of end of period ratios, all ratios are based on
average monthly balances during the periods.
(7) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost
of interest-bearing liabilities.
(8) Net interest margin represents net interest income as a percent of
average interest-earning assets.
(9) Represents operating expenses divided by net interest income before
provision for credit losses plus operating noninterest revenues.
(10) The tangible and core capital ratios are calculated as a percent of
adjusted total assets and the risk-based capital ratio is calculated
as a percent of total risk-weighted assets.
17
<PAGE> 19
RISK FACTORS
Prospective investors should carefully review the following factors,
as well as the other information contained in this Prospectus, in connection
with the Exchange Offer and the New Notes offered hereby. When used in this
Prospectus, the words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project," "believe" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The Company wishes to caution readers that all forward-looking statements
are necessarily speculative and not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and to advise
readers that various risks and uncertainties, including regional and national
economic conditions, changes in levels of market interest rates, credit risks
of lending activities, and competitive and regulatory factors, could affect the
Company's financial performance and could cause the Company's actual results
for future periods to differ materially from those anticipated or projected.
The risks highlighted herein should not be assumed to be the only factors that
could affect the future performance of the Company.
SOURCE OF PAYMENTS ON THE NOTES
The Company is a holding company with no significant business
operations of its own. The Company's only significant asset is all of the
common stock of the Bank. Other than approximately $10.7 million of net
proceeds from the offering of the Old Notes retained by it, the Company's only
source of cash to pay interest on and principal of the Notes is distributions
from the Bank. There can be no assurance that the earnings from the Bank will
be sufficient to make distributions to the Company to enable it to pay interest
on the Notes when due or principal of the Notes at maturity or that such
distributions will be permitted by applicable federal banking laws and
regulations. Moreover, distributions from the Bank may not be sufficient to
pay the principal amount of the Notes prior to maturity upon the occurrence of
an Event of Default (as defined herein) or to repurchase the Notes upon a
Change of Control. There will be no sinking fund for the retirement of
principal of the Notes prior to maturity. The Company currently anticipates
that, in order to pay the principal amount of the Notes upon the occurrence of
an Event of Default or to repurchase the Notes upon a Change of Control or, in
the event that earnings from the Bank are not sufficient to make distributions
to the Company to enable it to pay the principal amount of the Notes at
maturity, the Company may be required to adopt one or more alternatives, such
as borrowing funds, selling its equity securities and/or the equity securities
or assets of the Bank, or seeking loans from the Bank. There can be no
assurance that any of the foregoing actions could be effected on satisfactory
terms, that any of the foregoing actions would enable the Company to pay the
principal amount of the Notes or that any of such actions would be permitted by
the terms of the Indenture or applicable federal banking laws and regulations.
Federal banking laws and regulations, including the regulations of the
Office of Thrift Supervision ("OTS"), limit the Bank's ability to pay dividends
to the Company. The Bank generally may not declare dividends or make any other
capital distribution to the Company if, after the payment of such dividend or
other distribution, it would fall within any of the three undercapitalized
categories under the prompt corrective action standards established by the OTS
and the other federal banking agencies pursuant to Section 38 of the Federal
Deposit Insurance Act. In addition, a capital distribution regulation of the
OTS also limits the Bank's ability to pay dividends and make other capital
distributions in a manner which depends upon the extent to which the Bank meets
its regulatory capital requirements. In addition, the Home Owners' Loan Act
requires every savings association subsidiary of a savings and loan holding
company to give the OTS at least 30 days' advance notice of any proposed
dividends to be made on its guarantee, permanent or other non-withdrawable
stock or else such dividend will be invalid. Further, the OTS may prohibit any
dividend or other capital distribution that it determines would constitute an
unsafe or unsound practice. In addition to the regulation of dividends and
other capital distributions, there are various statutory and regulatory
limitations on the extent to which the Bank can finance or otherwise transfer
funds to the Company or non-banking subsidiaries of the Company, whether
18
<PAGE> 20
in the form of loans, extensions of credit, investments or asset purchases.
The Director of the OTS may further restrict these transactions in the
interests of safety and soundness.
As of December 31, 1997, the Bank met the capital and other
requirements of a "well capitalized" institution under the OTS' prompt
corrective action standards. There can be no assurance that the Bank will
remain "well capitalized" in the future or that the OTS will not require the
Bank to maintain higher levels of capital in light of the risk profile of its
lending activities.
As of December 31, 1997, under regulations of the OTS, the total
capital available for payment of dividends by the Bank to the Company was $21.5
million, assuming application of the OTS' safe harbor for capital
distributions.
RESULTS OF OPERATIONS
The Company reported $11.2 million of earnings before extraordinary
loss for the year ended December 31, 1997 and $7.5 million of net earnings
during the year ended December 31, 1996 (inclusive of $2.6 million and $6.4
million of income tax benefits, respectively), after reporting net losses of
$14.2 million, $3.0 million, $29.6 million and $22.1 million for the years ended
December 31, 1995, 1994, 1993 and 1992, respectively. The losses reported in
prior periods were primarily attributable to the high level of the Company's
nonperforming assets, as reflected in the significant provisions for loan
losses, net loan charge-offs, loss of interest income on nonperforming loans,
write-downs of investments in real estate and increases in operating expenses
related to the Company's asset quality problems. Continued profitability in
future periods will be dependent upon, among other things, the quality of both
its existing assets and the assets to be acquired by the Company in the future.
As a result, there can be no assurance that the Company will maintain
profitability in the near term or at all or that there will not be substantial
inter-period variations in its operating results. Moreover, in the event that
the Company should become unprofitable or record a substantial operating loss,
the Company's ability to utilize its remaining accumulated income tax benefits
at December 31, 1997 could be limited and all or a portion of the Company's $6.8
million net deferred tax asset at such date may be reversed under generally
accepted accounting principles. Such developments may further adversely affect
the Company's results of operations and capital.
LENDING ACTIVITIES
General. The Company generally seeks to originate real estate-secured
loans in which it can charge a premium price for prompt, efficient execution
and for tailoring the terms and condition of such loans to meet the objectives
of both the Company and the borrower. The Company has designed its loan
origination organization and resources to target a relatively limited number of
high-balance loans in order to provide reasonable leverage to the Company's
fixed loan origination cost structure The Company resumed significant lending
activities in 1995 and, as a result, there is not a substantial record of
historical performance with respect to the loans currently emphasized by the
Company. Moreover,the Company continues to take actions which it and
regulatory authorities believe will strengthen the Company's underwriting,
monitoring and asset review functions so that they are appropriate in light of
its lending strategies. The discussion which follows briefly sets forth
certain of the risks attendant to (i) each of the Company's principal lending
activities, (ii) the average size of the loans the Company seeks to originate,
(iii) the terms associated with the types of loans originated, and expected to
be originated, by the Company and (iv) the volume of the Company's lending
activities.
Multi-Family Residential and Commercial Real Estate Loans. Since
1994, the Company's lending activities have emphasized loans secured by
existing multi-family (over four units) residential real estate and commercial
real estate, such as office buildings, retail properties, industrial properties
and various special purpose properties. At December 31, 1997, the Company's
total loan portfolio included $225.7 million, or 22.9%, of multi-family
19
<PAGE> 21
residential loans and $111.9 million, or 11.6%, of commercial real estate
loans. Such loans accounted for 31.6%, 35.1% and 49.6% of the Company's total
loan originations during the years ended December 31, 1997, 1996 and 1995,
respectively. Multi-family residential and commercial real estate lending
generally is considered to involve a higher degree of risk than the
single-family residential lending traditionally emphasized by savings
institutions because the payment experience on multi-family residential and
commercial real estate loans typically is dependent on the successful operation
of the project, and thus such loans may be adversely affected to a greater
extent by adverse conditions in the real estate markets or in the economy
generally, as well as the manner in which the borrower manages the property.
Moreover, the Company's income property loans generally are made with primary
reliance on the operation and/or sale of the property and without recourse to
the borrower.
Construction Loans. The Company also emphasizes loans to developers
for the purpose of construction of tracts of single-family residences ("tract
developments") and individual home construction financing to local builders and
homeowners. At December 31, 1997, construction loan commitments amounted to
$181.6 million, or 18.8%, of the Company's total loan portfolio (of which $93.3
million was outstanding) and land loans amounted to $39.5 million, or 4.1%, of
the Company's total loan portfolio. Construction and land loans amounted to
40.2%, 29.6% and 17.4% of the Company's total loan originations during the
years ended December 31, 1997, 1996 and 1995, respectively. Construction
financing is generally considered to expose the lender to a greater risk of
loss than long-term lending on improved, occupied real estate. The risk of
loss on a construction loan is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction or
development and the estimated cost (including interest) of construction, as
well as the availability of permanent take-out financing. During the
construction phase, a number of factors could result in delays and cost
overruns. If the estimate of value proves to be inaccurate, the Company may be
confronted, at or prior to the maturity of the loan, with a project which, when
completed, has a value which is insufficient to ensure full repayment. In
addition, most of the Company's construction lending is conducted without a
commitment from a party to purchase the property under construction, or on a
"speculative" basis.
Single-Family Residential Loans. Since 1994, a principal focus of the
Company's lending activities has been the origination of loans which are secured
by estate homes located in southern California and have principal amounts of
$1.0 million or more ("estate loans"). At December 31, 1997, estate loans
amounted to $173.8 million, or 17.9%, of the Company's total loan portfolio, and
such loans amounted to 19.6%, 21.8% and 27.2% of the Company's total loan
originations during the years ended December 31, 1997, 1996 and 1995,
respectively. During the years ended December 31, 1997, 1996 and 1995, a
majority of estate loans were made to borrowers who have substantial equity in
the properties which secure the loans but who for a variety of reasons,
including without limitation the size of the loan, were unable or unwilling to
qualify as borrowers under the guidelines established by the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation for the
purchase of loans by such agencies. Estate loans generally involve higher risk
than single-family (one-to-four units) residential loans which conform to the
guidelines established by various federal agencies because, among other things,
(i) the property which secures an estate loan may have such unique
characteristics as to size, amenities or location that its valuation is
difficult to measure and (ii) the market for estate homes is generally more
volatile than the market for traditional single-family residences due to the
smaller number of potential purchasers of estate homes and the effects of
interest rates and other market and real estate conditions on the financing of
such homes, all of which results in a more volatile valuation of estate homes.
As a matter of policy, the Company's estate loans have maximum loan-to-value
ratios of 65% to 80% depending on the size of the loan.
20
<PAGE> 22
Size of Loans. The Company generally seeks to originate relatively
few, high-dollar balance loans within each of its lending businesses. The
Company generally emphasizes loans with individual commitments or multiple
commitments to affiliated borrowers of between $2.0 million and $6.0 million,
although it may make loans up to the Bank's loans-to-one borrower limitation
under applicable laws and regulations, which amounted to $11.9 million at
December 31, 1997. Larger balance loans involve greater risk to the Company
because a small number of such loans could have significant effects on the
amount of the Company's nonperforming assets and the level of its interest
income in the event of default.
Terms of Loans. The Company generally offers a variety of loan terms
and conditions on all loan types, including fixed interest rates and interest
rates which adjust in accordance with various indices; payments which are
interest-only or payments which include the amortization of principal, either
on a partial or fully amortizing basis; varying adjustment frequencies for
adjustable-rate loans and interest rate payment floors and caps; and varying
maturity and extension options. Certain of these terms, which generally are
offered by the competition encountered by the Company in connection with its
lending activities, may increase the risk of default. For example, loans which
are not fully amortizing over their maturity and which have a balloon payment
due at their stated maturity, as is generally the case with the Company's
estate, multi-family residential and commercial real estate loans, involve a
greater risk of loss than fully amortizing loans because the ability of a
borrower to make a balloon payment typically will depend on its ability either
to timely refinance the loan or to timely sell the security property. The
ability of a borrower to accomplish these results will be affected by a number
of factors, including the level of available mortgage rates at the time of sale
or refinancing, the financial condition and operating history of the borrower
and the property which secures the loan, tax laws, prevailing economic
conditions and the availability of financing for such loans generally.
Similarly, adjustable-rate loans, which comprised substantially all of the
loans originated by the Company during the years ended December 31, 1997, 1996
and 1995, may increase the risk of default thereon during periods of rising
interest rates, which could adversely affect a borrower's ability to make
required payments during the term of the loan, as well as at maturity if, as a
result of payment caps, the difference between the interest rate on which
payments are made during the term of the loan is less than the accrual rate of
interest thereon and such difference is added to the principal amount of the
loan due at maturity, or so-called "negative amortization." In addition, under
appropriate but relatively limited circumstances involving estate loans, the
Company may accept reduced or no documentation for verifying a borrower's
income or employment or make loans to borrowers who currently may not have
adequate cash flow to service the loan, which also may increase the risk of
default on the loan.
Volume of Lending Activities. An integral component of the Company's
business plan in future years is for the Company to engage in substantial
lending activities in order to increase both the amount of and yield on the
Company's interest-earning assets. The Company originated an aggregate of $1.0
billion of loans during the years ended December 31, 1997, 1996 and 1995. The
Company's ability to engage in the desired level of lending activities will be
dependent on market and economic conditions, particularly the general level of
interest rates, the competition for such lending activities, which management
believes increased significantly in 1997 for all types of lending in which the
Company is engaged, and other factors which are beyond the control of the
Company. As a result, there can be no assurance that the Company will be able
to engage in the desired level of lending activities in the future.
ASSET QUALITY
At December 31, 1997, the Company's nonperforming assets amounted to
$20.7 million or 2.22% of total assets and consisted of $10.8 million of loans
which were 90 days or more past due ("nonperforming loans") and $9.9 million of
real estate acquired by foreclosure or deed-in-lieu thereof, net of writedowns
and reserves ("real estate owned"). In addition to its nonperforming assets,
at December 31, 1997, the Company had (i) $4.4 million of loans which were
delinquent 30 to 89 days, which the Company places on nonaccrual status as a
matter of policy, and (ii) $36.0 million of performing loans, which the Company
had classified as substandard or lower in
21
<PAGE> 23
accordance with OTS regulations because they were TDRs or contained one or more
defined weaknesses, of which $0.2 million were on nonaccrual status. The
Company's $61.1 million of classified assets at December 31, 1997 were
primarily attributable to loans originated during the late 1980s and early
1990s by prior management of the Company, which generally emphasized loans to
construct single-family residential tract developments, individual
single-family residences and apartment buildings, as well as permanent loans
secured by the properties built with the Company's construction loans. For a
variety of reasons, including the Company's prior underwriting practices,
management of the Company believes that the loans originated by the Company
prior to 1995 generally involve greater risk of loss than the loans originated
by the Company thereafter. At December 31, 1997, loans originated prior to
1995 amounted to $284.5 million or 29.4% of the Company's total loans and
consisted primarily of $120.9 million of single-family residential loans to
individual borrowers, $48.3 million of single-family residential loans made by
the Company to a large number of purchasers of individual units from developers
in the residential housing developments which were constructed with financing
from the Company ("project concentration loans") and $107.3 million of loans
secured by existing multi-family residences which generally were constructed
with financing from the Company. Management of the Company has devoted and
continues to devote substantial time and resources to the identification,
collection and workout of the Company's problem assets, which has resulted in a
significant decrease in the Company's nonperforming assets from a high of
$151.2 million, or 17.2%, of total assets at December 31, 1993. There can be
no assurance, however, that the Company's nonperforming assets will not
increase in future periods, either as a result of (i) loans in the Company's
loan portfolio originated prior to 1995 or (ii) loans in such portfolio
originated subsequent to such date, which generally have performed in
accordance with their terms but involve the risks set forth under "-Lending
Activities" above and have not been outstanding long enough to be considered
mature, seasoned loans.
ADEQUACY OF ALLOWANCES FOR LOSSES
The Company believes that it has established adequate allowances for
losses for its loan portfolio and real estate owned, which respectively
amounted to $13.3 million, or 1.56%, of net loans (exclusive of the allowance
for loan losses) and $2.6 million, or 20.63%, of gross real estate owned at
December 31, 1997. Notwithstanding the foregoing, material future additions to
the allowance for loan losses may be necessary due to changes in economic
conditions, the performance of the Company's loan portfolio, particularly loans
originated after 1994, and increases in loans. Future additions to the
allowance for losses on real estate owned may be necessary to reflect changes
in the economies and markets for real estate in which the Company's real estate
owned is located and other factors which may result in adjustments which are
necessary to ensure that the Company's real estate owned is carried at the
lower of cost or fair value, less estimated costs to dispose of the properties.
In addition, the OTS, as an integral part of its examination process,
periodically reviews the Company's allowances for losses and the carrying
values of its assets. The Company was most recently examined by the OTS in
this regard as of June 30, 1997. Increases in the provisions for losses on
loans and real estate owned would adversely affect the Company's results of
operations.
LIMITATIONS ON USE OF TAX LOSS CARRYFORWARDS
As of December 31, 1997, the Company had federal net operating loss
carryforwards of $12.5 million which expire in 2010 or 2011 and may be used to
reduce taxable income of the Company in future years. In addition, at the same
date the Company had state net operating loss carryforwards of $4.2 million and
$8.1 million which expire in 2000 and 2001, respectively. The Company's net
operating loss carryfowards would be subject to significant limitation under
Section 382 of the Code, if the Company underwent an ownership change (as
defined below, an "Ownership Change"). In the event of an Ownership Change,
Section 382 of the Code imposes an annual limitation on the amount of taxable
income a corporation may offset with net operating losses and certain
recognized built-in-losses. The limitation imposed by Section 382 of the Code
for any post-change year would be determined by multiplying the fair market
value of the Company's stock outstanding at the time of the Ownership Change by
the applicable long-term tax exempt rate (which was 5.23% for January 1998).
Any unused annual limitation may be carried over to later years, and the
limitation may under certain circumstances
22
<PAGE> 24
be increased by the built-in gains in assets held by the Company at the time of
the change that are recognized in the five-year period after the change. Under
current conditions, if an Ownership Change were to occur, the Company's annual
net operating loss utilization would be limited to a maximum of approximately
$3.1 million.
The Company would undergo an Ownership Change if, among other things,
the stockholders who own or have owned, directly or indirectly, 5% or more of
the Common Stock or are otherwise treated as 5% stockholders or a "higher tier
entity" under Section 382 of the Code and the regulations promulgated
thereunder ("5% Stockholders") increase their aggregate percentage ownership of
such stock by more than 50 percentage points over the lowest percentage of such
stock owned by such stockholders at any time during a specified testing period
(generally the preceding three years). Because events which are beyond the
control of the Company could result in an Ownership Change, there can be no
assurance that an Ownership Change will not occur in the future and thereby
limit the Company's ability to utilize its net operating loss carryforwards to
reduce taxable income in future periods.
INTEREST RATE RISK
The Company's operating results depend to a large extent on its net
interest income, which is the difference between the interest income earned on
interest-earning assets and the interest expense incurred in connection with
its interest-bearing liabilities. Changes in the general level of interest
rates can affect the Company's net interest income by affecting the spread
between the Company's interest-earning assets and interest-bearing liabilities.
This may be due to the disparate maturities or period to repricing of the
Company's interest-earning assets and interest-bearing liabilities, as well as
in the case of an increase in the general level of interest rates, periodic
caps which limit the interest rate change on many of the Company's
adjustable-rate mortgage loans. In addition to its effect on the Company's
interest rate spread, changes in the general level of interest rates also
affect, among other things, the ability of the Company to originate loans; the
ability of borrowers to make payments on loans; the value of the Company's
interest-earning assets and its ability to realize gains from the sale of such
assets; the average life of the Company's interest-earning assets; the value of
the Company's mortgage servicing rights; and the Company's ability to obtain
deposits in competition with other available investment alternatives. Interest
rates are highly sensitive to many factors, including governmental monetary
policies, domestic and international economic and political conditions and
other factors beyond the control of the Company.
ECONOMIC CONDITIONS
The success of the Company is dependent to a certain extent upon
general economic conditions, particularly in the areas in southern California
in which it conducts its business activities. Adverse changes in the economic
conditions of these areas may impair the ability of the Company to collect
loans and would otherwise have an adverse effect on its business, including the
demand for new loans, the ability of customers to repay loans and the value of
both the real estate which secures its loans and its real estate owned.
Moreover, earthquakes and other natural disasters could have similar effects.
Although such disasters have not significantly adversely affected the Company
to date, the ability of borrowers to acquire insurance for such disasters in
California is severely limited. As a result, the properties which secure the
Company's loans generally are not covered by such insurance.
COMPETITION
The Company experiences substantial competition both in attracting and
retaining deposits and in making loans. Its most direct competition for
deposits historically has come from other thrift institutions, commercial banks
and credit unions doing business in its market areas in southern California.
In addition, as with all banking organizations, the Company has experienced
increasing competition from nonbanking sources. For example, the Company also
competes for funds with full service and discount broker-dealers and with other
23
<PAGE> 25
investment alternatives, such as mutual funds and corporate and governmental
debt securities. The Company's competition for loans comes principally from
other thrift institutions, commercial banks, mortgage banking companies,
consumer finance companies, insurance companies and other institutional
lenders. A number of institutions with which the Company competes for deposits
and loans have significantly greater assets, capital and other resources than
the Company. In addition, many of the Company's competitors are not subject to
the same extensive federal regulation that governs savings and loan holding
companies such as the Company and federally-chartered and federally-insured
savings institutions such as the Bank. As a result, many of the Company's
competitors have advantages over the Company in conducting certain businesses
and providing certain services.
REGULATION
Both the Company, as a savings and loan holding company, and the Bank,
as a federally-chartered savings institution, are subject to significant
governmental supervision and regulation, which is intended primarily for the
protection of depositors. Statutes and regulations affecting the Company and
the Bank may be changed at any time, and the interpretation of these statutes
and regulations by examining authorities also is subject to change. There can
be no assurance that future changes in applicable statutes and regulations or
in their interpretation will not adversely affect the business of the Company.
The Company is subject to regulation and examination by the OTS, and the Bank
is subject to examination by the OTS, as its chartering authority and primary
regulator, and by the Federal Deposit Insurance Corporation ("FDIC"), as the
insurer of its deposits through the SAIF administered by it. There can be no
assurance that the OTS or the FDIC will not, as a result of such regulation and
examination, impose various requirements or regulatory sanctions upon the
Company or the Bank, as applicable. In addition to governmental supervision
and regulation, each of the Company and the Bank is subject to changes in
federal and state laws, including changes in tax laws, which could materially
affect the real estate industry.
DEPENDENCE ON CHIEF EXECUTIVE OFFICER
Scott A. Braly, President and Chief Executive Officer of the Company,
has had, and will continue to have, a significant role in the development and
management of the Company's business, including in particular its lending
operations. The loss of his services could have an adverse effect on the
Company. The Company and Mr. Braly are not parties to an employment agreement,
and the Company currently does not maintain key man life insurance relating to
Mr. Braly or any of its other officers.
ABSENCE OF PUBLIC MARKET AND RESTRICTIONS ON RESALE
The New Notes will not be listed on any national securities exchange or
approved for quotation on a national inter-dealer quotation system. There can
be no assurance as to the liquidity of any markets that may develop for the New
Notes or the Old Notes, or at what price holders of the New Notes or the Old
Notes will be able to sell their New Notes or their Old Notes, as the case may
be. Future trading prices of the New Notes will depend on many factors,
including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. In connection with the
offering of Old Notes, the Initial Purchaser informed the Company that it
intends to make a market in the New Notes and the Old Notes. However, the
Initial Purchaser is not obligated to do so and any such market making activity
may be terminated at any time without notice to the holders of the New Notes or
the Old Notes, as applicable. In addition, such market making activity will be
subject to the limits of the Exchange Act and the regulations thereunder and
may be limited during the pendency of the Exchange Offer and during the period a
shelf registration statement required to be filed pursuant to the Registration
Rights Agreement is required to remain effective. See "Description of Old Notes"
and "Registration Rights Agreement."
The New Notes will be issued, and Notes may be transferred, only in
blocks having an aggregate principal amount of not less than $100,000 and
integral multiples of $1,000 principal amount in excess thereof. Any transfer,
sale or other disposition of Notes in a block having an aggregate principal
amount of less than $100,000 shall be deemed to be void and of no legal effect
whatsoever. See "Description of New Notes--Form, Denomination and Book-Entry
Procedures."
24
<PAGE> 26
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any
state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case
in compliance with certain other conditions and restrictions. Old Notes which
remain outstanding after consummation of the Exchange Offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement. The Company does not intend to register under
the Securities Act any Old Notes which remain outstanding after consummation of
the Exchange Offer.
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. In addition, although the Old Notes have been designated for trading
by "qualified institutional buyers," as defined in Rule 144A, in the Private
Offerings, Resale and Trading through Automated Linkages market, to the extent
that Old Notes are tendered and accepted in connection with the Exchange Offer,
any trading market for Old Notes which remain outstanding after the Exchange
Offer could be adversely affected.
The Old Notes provide, among other things, that, if a registration
statement relating to the Exchange Offer has not been filed by April 30, 1998
and declared effective by May 30, 1998, the interest rate borne by the Old
Notes commencing on December 31, 1997 will increase by 1.00% per annum until
the Exchange Offer is consummated. Upon consummation of the Exchange Offer,
holders of Old Notes will not be entitled to any prospective increase in the
interest rate thereon or any further registration rights under the Registration
Rights Agreement. The New Notes will not be entitled to any such prospective
increase in the interest rate thereon. See "Description of Old Notes."
EXCHANGE OFFER PROCEDURES
Issuance of the New Notes in exchange for Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Trust of such
Old Notes, a properly completed and duly executed Letter of Transmittal or
Agent's Message in lieu thereof and all other required documents. Therefore,
holders of the Old Notes desiring to tender such Old Notes in exchange for New
Notes should allow sufficient time to ensure timely delivery. The Company is
not under any duty to give notification of defects or irregularities with
respect to the tenders of Old Notes for exchange.
25
<PAGE> 27
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to
fixed charges of the Company for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1996 1995 1994 1993
------ ------ -------- ------- --------
<S> <C> <C> <C> <C> <C>
Ratios of earnings to fixed charges:
Including interest on deposits . . . . . . . . . . 1.19x 1.03x 0.61x 0.91x (0.01)x
Excluding interest on deposits . . . . . . . . . . 2.64x 1.24x (10.20)x (1.83)x (92.29)x
</TABLE>
The dollar amount of the deficiency of earnings to fixed charges during
1995, 1994 and 1993 was $13.6 million, $2.8 million and $37.3 million,
respectively.
For purposes of computing the ratios of earnings to fixed charges,
earnings represent net income (loss) before extraordinary items and cumulative
effect of changes in accounting principles plus applicable income taxes and
fixed charges. Fixed charges, excluding interest on deposits, include gross
interest expense (other than on deposits) and the portion deemed representative
of the interest factor of rent expense, net of income from subleases. Fixed
charges, including gross interest on deposits, include all interest expense and
the portion deemed representative of the interest factor of rent expense, net
of income from subleases.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of
the New Notes offered hereby. Old Notes surrendered in exchange for New Notes
will be retired and cancelled.
Net proceeds to the Company from the offering of the Old Notes
amounted to approximately $37.8 million, after deducting the discount of the
Initial Purchaser and offering expenses payable by the Company. The net
proceeds from the sale of the Old Notes were primarily used to (i) prepay all
of the Company's outstanding Senior Notes due 2000 at a price equal to the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of prepayment, which aggregated $13.55 million, and (ii) redeem all of the
Company's outstanding shares of Series A Preferred Stock at a redemption price
per share equal to the per share liquidation preference thereof ($50,000 per
share), plus accrued and unpaid dividends thereon to the date of redemption,
which aggregated $13.57 million. The remainder of the net proceeds from the
sale of the Old Notes (approximately $10.68 million) is available for use by
the Company for general corporate purposes, including without limitation
contributions to the Bank to fund its operations.
26
<PAGE> 28
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997, which reflects the consummation of the offering
of the Old Notes and the application of the net proceeds therefrom. See "Use of
Proceeds." The table should be read in conjunction with the Consolidated
Financial Statements of the Company, including the related notes, included in
the documents incorporated herein by reference. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
December 31, 1997
-----------------
(Dollars in Thousands)
<S> <C>
Deposits $799,501
Borrowings:
FHLB advances 40,000
Senior notes due 2004 40,000
Accounts payable and other liabilities 6,377
---------
Total borrowings 86,377
--------
Total liabilities 885,878
Stockholders' equity:
Preferred Stock, $0.01 par value;
10,000,000 shares authorized; none outstanding --
Common Stock, $0.01 par value; 20,000,000 shares authorized; 3,095,996
shares issued(1) 31
Capital in excess of par value(1) 10,402
Unrealized gain (loss) on available for sale securities 6
Retained earnings 32,020
--------
42,459
Less:
Treasury stock, at cost (5,400 shares of Common Stock) (48)
Loan to Employee Stock Ownership Plan (92)
---------
Total stockholders' equity 42,319
--------
Total liabilities and stockholders' equity $928,197
=======
</TABLE>
- ----------
(1) Does not reflect the exercise of options to purchase an aggregate of
721,800 shares of Common Stock pursuant to the Company's Stock Option
Plan and outstanding warrants to purchase an aggregate of 2,376,000
shares of Common Stock. See Notes K and L to the Consolidated
Financial Statements included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996. See "Incorporation of
Certain Documents by Reference."
At December 31, 1997, parent-only indebtedness of the Company, which
consisted solely of the Old Notes, amounted to 94.5% of the Company's
stockholders' equity.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into
the Registration Rights Agreement with the Initial Purchaser, pursuant to which
the Company agreed to file and to use its reasonable best efforts to cause to
be declared effective by the Commission a registration statement with respect
to the exchange of the Old Notes for notes with terms identical in all material
respects to the terms of the Old Notes. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
27
<PAGE> 29
The Exchange Offer is being made to satisfy the contractual
obligations of the Company under the Registration Rights Agreement. The form
and terms of the New Notes are the same as the form and terms of the Old Notes,
except that the New Notes (i) have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer under federal
and state securities laws and (ii) will not provide for any prospective
increase in the interest rate thereon. In that regard, the Old Notes provide,
among other things, that, if a registration statement relating to the Exchange
Offer has not been filed by April 30, 1997 and declared effective by May 30,
1998, the interest rate borne by the Old Notes, commencing on December 31,
1997, will increase by 1.00% per annum until the Exchange Offer is consummated.
Upon consummation of the Exchange Offer, holders of Old Notes will not be
entitled to any prospective increase in the interest rate thereon or any
further registration rights under the Registration Rights Agreement. See "Risk
Factors--Consequences of a Failure to Exchange Old Notes" and "Description of
Old Notes."
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old Notes in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any participant in
the DTC system whose name appears on a security position listing as the holder
of such Old Notes and who desires to deliver such Old Notes by book-entry
transfer at DTC.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, to exchange up to $40,000,000 aggregate principal amount of New
Notes for a like aggregate principal amount of Old Notes properly tendered on
or prior to the Expiration Date and not properly withdrawn in accordance with
the procedures described below. The Company will issue, promptly after the
Expiration Date, an aggregate principal amount of up to $40,000,000 of New
Notes in exchange for a like aggregate principal amount of outstanding Old
Notes tendered and accepted in connection with the Exchange Offer. Holders may
tender their Old Notes in whole or in part in a principal amount of not less
than $100,000 or any integral multiple of $1,000 principal amount in excess
thereof, provided that if any Old Notes are tendered in exchange for part, the
untendered aggregate principal amount must be $100,000 or any integral multiple
of $1,000 principal amount in excess thereof.
The Exchange Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered. As of the date of this Prospectus,
$40,000,000 aggregate principal amount of the Old Notes is outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights
in connection with the Exchange Offer. Old Notes which are not tendered for or
are tendered but not accepted in connection with the Exchange Offer will remain
outstanding and will be entitled to the benefits of the Indenture, but will not
be entitled to any further registration rights under the Registration Rights
Agreement. See "Risk Factors--Consequences of a Failure to Exchange Old Notes"
and "Description of Old Notes."
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
Holders who tender Old Notes in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with
28
<PAGE> 30
respect to the exchange of Old Notes in connection with the Exchange Offer.
The Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
THE COMPANY DOES NOT MAKE ANY RECOMMENDATION TO HOLDERS OF OLD NOTES
AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE
THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO,
THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER BASED ON SUCH HOLDER'S OWN
FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
_________ ___, 1998 unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i)
to delay the acceptance of the Old Notes for exchange, (ii) to terminate the
Exchange Offer (whether or not any Old Notes have theretofore been accepted for
exchange) if the Company determines, in its sole and absolute discretion, that
any of the events or conditions referred to under "--Conditions to the Exchange
Offer" have occurred or exist or have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain all Old Notes tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Old Notes to withdraw their tendered Old Notes as described under "--Withdrawal
Rights," and (iv) to waive any condition or otherwise amend the terms of the
Exchange Offer in any respect. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, or if the Company
waives a material condition of the Exchange Offer, the Company will promptly
disclose such amendment by means of a Prospectus supplement that will be
distributed to the registered holders of the Old Notes, and the Company will
extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice thereof to the Exchange Agent
and by making a public announcement thereof, and such announcement in the case
of an extension will be made no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer,
the Company will exchange, and will issue to the Exchange Agent, New Notes for
Old Notes validly tendered and not withdrawn promptly after the Expiration
Date.
In all cases, delivery of New Notes in exchange for Old Notes tendered
and accepted for exchange pursuant to the Exchange Offer will be made only
after timely receipt by the Exchange Agent of (i) Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
29
<PAGE> 31
guarantees, or (in the case of a book-entry transfer) an Agent's Message in
lieu of the Letter of Transmittal, and (iii) any other documents required by
the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The
term "Agent's Message" means a message, transmitted by DTC to and received by
the Exchange Agent and forming a part of a book-entry confirmation, which
states that DTC has received an express acknowledgement from the tendering
participant, which acknowledgment states that such participant has received and
agrees to be bound by the Letter of Transmittal and that the Company may
enforce such Letter of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company
will be deemed to have accepted for exchange, and thereby exchanged, Old Notes
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Exchange Agent of the Company's acceptance of such Old
Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act
as agent for the Company for the purpose of receiving tenders of Old Notes,
Letters of Transmittal and related documents, and as agent for tendering
holders for the purpose of receiving Old Notes, Letters of Transmittal and
related documents and transmitting New Notes to validly tendering holders.
Such exchange will be made promptly after the Expiration Date. If, for any
reason whatsoever, acceptance for exchange or the exchange of any Old Notes
tendered pursuant to the Exchange Offer is delayed (whether before or after the
Company's acceptance for exchange of Old Notes) or the Company extends the
Exchange Offer or is unable to accept for exchange or exchange Old Notes
tendered pursuant to the Exchange Offer, then, without prejudice to the
Company's rights set forth herein, the Exchange Agent may, nevertheless, on
behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act,
retain tendered Old Notes and such Old Notes may not be withdrawn except to the
extent tendering holders are entitled to withdrawal rights as described under
"--Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu
thereof, a holder of Old Notes will warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Notes, that the Company will acquire good, marketable
and unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances, and the Old Notes tendered for exchange
are not subject to any adverse claims or proxies. The holder also will warrant
and agree that it will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment and transfer of the Old
Notes tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD NOTES
Valid Tender. Except as set forth below, in order for Old Notes to be
validly tendered pursuant to the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or (in the case of a book-entry transfer) an Agent's
Message in lieu of a Letter of Transmittal, and any other required documents,
must be received by the Exchange Agent at one of its addresses set forth under
"--Exchange Agent," and (i) tendered Old Notes must be received by the Exchange
Agent, or (ii) such Old Notes must be tendered pursuant to the procedures for
book-entry transfer set forth below and a book-entry confirmation, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal, must be received by the Exchange Agent, in each case on or prior
to the Expiration Date, or (iii) the guaranteed delivery procedures set forth
below must be complied with.
If less than all of the Old Notes are tendered, a tendering holder
should fill in the amount of Old Notes being tendered in the appropriate box on
the Letter of Transmittal or so indicate in an Agent's Message in lieu of the
Letter of Transmittal and the untendered aggregate principal amount must be
$100,000 or any integral
30
<PAGE> 32
multiple of $1,000 principal amount in excess thereof. The entire amount of
Old Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
THE METHOD OF DELIVERY OF NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN-RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Exchange Agent will establish an account
with respect to the Old Notes at DTC for purposes of the Exchange Offer within
two business days after the date of this Prospectus. Any financial institution
that is a participant in DTC's book-entry transfer facility system may make a
book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account at DTC in accordance with DTC's procedures
for transfers. However, although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in lieu of the Letter
of Transmittal, and any other required documents, must in any case be delivered
to and received by the Exchange Agent at its address set forth under
"--Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Notes need not be
endorsed and signature guarantees on the Letter of Transmittal are unnecessary
unless (i) a certificate for the Old Notes is registered in a name other than
that of the person surrendering the certificate or (ii) such holder completes
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (i) or (ii) above,
such certificates for Old Notes must be duly endorsed or accompanied by a
properly executed bond power, with the endorsement or signature on the bond
power and on the Letter of Transmittal guaranteed by a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (an
"Eligible Institution"), unless surrendered on behalf of such Eligible
Institution. See Instruction 1 to the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Notes pursuant
to the Exchange Offer and the certificates for such Old Notes are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or prior to the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, such Old Notes may
nevertheless be tendered, provided that all of the following guaranteed
delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
31
<PAGE> 33
(iii) the certificates (or a book-entry confirmation) representing
all tendered Old Notes, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), or
Agent's Message in lieu thereof, with any required signature guarantees and any
other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Notes
in exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes, or of a book-entry confirmation with respect to
such Old Notes, and a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), or Agent's Message in lieu thereof,
together with any required signature guarantees and any other documents
required by the Letter of Transmittal. Accordingly, the delivery of New Notes
might not be made to all tendering holders at the same time, and will depend
upon when Old Notes, book-entry confirmations with respect to Old Notes and
other required documents are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes tendered pursuant
to any of the procedures described above will constitute a binding agreement
between the tendering holder and the Company upon the terms and subject to the
conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Old Notes will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole and absolute discretion, to
reject any and all tenders determined by it not to be in proper form or the
acceptance of which, or exchange for, may, in the opinion of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Notes of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
The interpretation by the Company of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Notes will be deemed to
have been validly made until all irregularities with respect to such tender
have been cured or waived. None of the Company, any affiliates or assigns of
the Company, the Exchange Agent or any other person shall be under any duty to
give any notification of any irregularities in tenders or incur any liability
for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the
name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
32
<PAGE> 34
RESALES OF NEW NOTES
The Company is making the Exchange Offer for the New Notes in reliance
on the position of the staff of the Division of Corporation Finance of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to the two
immediately following sentences, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any holder of Old Notes who is an
Affiliate of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing New Notes, or any broker-dealer who purchased
Old Notes from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (i) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (ii) will not
be permitted or entitled to tender such Old Notes in the Exchange Offer and
(iii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or other transfer of such Old
Notes, unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, Participating Broker-Dealers
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New
Notes in the Exchange Offer will be required to represent that (i) it is not an
Affiliate of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New
Notes. The Letter of Transmittal contains the foregoing representations. In
addition, the Company may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Company (or
an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of
whom such holder holds the Old Notes to be exchanged in the Exchange Offer.
Each Participating Broker-Dealer will be deemed to have acknowledged by
execution of the Letter of Transmittal or delivery of an Agent's Message that
it acquired the Old Notes for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Based on the position taken by the staff of the Division
of Corporation Finance of the Commission in the interpretive letters referred
to above, the Company believe that Participating Broker-Dealers who acquired
Old Notes for their own accounts as a result of market-making activities or
other trading activities may fulfill their prospectus delivery requirements
with respect to the New Notes received upon exchange of such Old Notes (other
than Old Notes which represent an unsold allotment from the original sale of
the Old Notes) with a prospectus meeting the requirements of the Securities
Act, which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale
of such New Notes. Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject
33
<PAGE> 35
to certain provisions set forth in the Registration Rights Agreement, the
Company has agreed that this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of such New Notes for a period ending 90-days after the Expiration
Date (subject to extension under certain limited circumstances described below)
or, if earlier, when all such New Notes have been disposed of by such
Participating Broker-Dealer. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of New Notes received in exchange for Old Notes pursuant to the
Exchange Offer must notify the Company, or cause the Company to be notified, on
or prior to the Expiration Date, that it is a Participating Broker-Dealer.
Such notice may be given in the space provided for that purpose in the Letter
of Transmittal or may be delivered to the Exchange Agent at one of the
addresses set forth herein under "--Exchange Agent." Any person, including any
Participating Broker-Dealer, who is an Affiliate of the Company may not rely on
such interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
In that regard, each Participating Broker-Dealer who surrenders Old
Notes pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agent's Message in
lieu thereof, that, upon receipt of notice from the Company of the occurrence
of any event or the discovery of any fact which makes any statement contained
or incorporated by reference in this Prospectus untrue in any material respect
or which causes this Prospectus to omit to state a material fact necessary in
order to make the statements contained or incorporated by reference herein, in
light of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New Notes
pursuant to this Prospectus until the Company has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company has given notice that the sale of the New Notes may be resumed, as
the case may be. If the Company gives such notice to suspend the sale of the
New Notes, it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of New Notes by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Notes or to and
including the date on which the Company has given notice that the sale of New
Notes may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if certificates for such
Old Notes have been tendered) the name of the registered holder of the Old
Notes as set forth on the Old Notes, if different from that of the person who
tendered such Old Notes. If Old Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Old Notes, the tendering holder must submit the certificate numbers shown on
the particular Old Notes to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case of
Old Notes tendered for the account of an Eligible Institution. If Old Notes
have been tendered pursuant to the procedures for book-entry transfer set
forth in "--Procedures for Tendering Old Notes," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be effective
if delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Old Notes may not be rescinded. Old
34
<PAGE> 36
Notes properly withdrawn will not be deemed validly tendered for purposes of
the Exchange Offer, but may be retendered at any subsequent time on or prior to
the Expiration Date by following any of the procedures described above under
"--Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company, in
its sole discretion, whose determination shall be final and binding on all
parties. None of the Company, any affiliates or assigns of the Company, the
Exchange Agent or any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old Notes which have
been tendered but which are withdrawn will be returned to the holder thereof
promptly after withdrawal.
DISTRIBUTIONS ON NEW NOTES
Holders of Old Notes whose Old Notes are accepted for exchange will
not receive interest on such Old Notes and will be deemed to have waived the
right to receive any interest on such Old Notes accumulated from and after
December 31, 1997. Accordingly, holders of New Notes as of the record date for
the payment of interest on June 30, 1998 will be entitled to receive interest
accumulated from and after December 31, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any New Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions to or amend
the Exchange Offer, if any of the following conditions have occurred or exists
or have not been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes to be offered for resale, resold and
otherwise transferred by holders thereof (other than broker-dealers and any
such holder which is an Affiliate of the Company) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any person
to participate in the distribution of such New Notes; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company, would reasonably be expected to
impair its ability to proceed with the Exchange Offer;
(c) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect to
the Exchange Offer which, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed with the Exchange
Offer;
(d) a banking moratorium shall have been declared by United States
federal or California or New York state authorities which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company to
proceed with the Exchange Offer;
(e) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company to
proceed with the Exchange Offer; or
35
<PAGE> 37
(f) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration Statement
or proceedings shall have been initiated or, to the knowledge of the Company,
threatened for that purpose, or any governmental approval which the Company
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby has not been obtained.
If the Company determines in its sole and absolute discretion that any
of the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law, terminate the Exchange
Offer (whether or not any Old Notes have theretofore been accepted for
exchange) or may waive any such condition or otherwise amend the terms of the
Exchange Offer in any respect. If such waiver or amendment constitutes a
material change to the Exchange Offer, the Company will promptly disclose such
waiver or amendment by means of a Prospectus supplement that will be
distributed to the registered holders of the Old Notes and will extend the
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE
Based upon current provisions of the Code, applicable U.S. Treasury
regulations (including proposed and temporary treasury regulations), judicial
authority, and administrative rulings and practice, the exchange of an Old Note
for a New Note pursuant to the Exchange Offer will not constitute a taxable
event for federal income tax purposes. There can be no assurance that the
Internal Revenue Service will continue to take this position, and no ruling
from the Internal Revenue Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be issued that could
alter or modify this result. EACH HOLDER OF OLD NOTES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING
SUCH HOLDER'S OLD NOTES FOR NEW NOTES, INCLUDING THE APPLICABILITY AND EFFECT
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Delivery of the Letters of Transmittal and any
other required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
<TABLE>
<CAPTION>
By Facsimile: By Mail: By Hand before 4:30 p.m.:
<S> <C> <C>
(212) 780-0592 United States Trust Company United States Trust Company
Attention: Customer Service of New York of New York
Confirm by Telephone to: P.O. Box 843 Cooper Station 111 Broadway
(800) 548-6565 New York, New York 10276 New York, New York 10006
Attention: Corporate Trust Attention: Lower Level
Services Corporate Trust Window
</TABLE>
By Overnight Courier and By Hand after 4:30 p.m.:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
36
<PAGE> 38
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company also will pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Notes, and in handling or
tendering for their customers.
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, New Notes are
to be delivered to, or are to be issued in the name of, any person other than
the registered holder of the Old Notes tendered, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes in connection with
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
The Company will not make any payment to brokers, dealers or other
nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW NOTES
GENERAL
Pursuant to the terms of the Indenture, the Company has issued the Old
Notes and will issue the New Notes. The Indenture has been qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The summary of certain provisions of the Indenture set forth below
does not purport to be complete and is qualified in its entirety by reference
to all of the provisions of the Indenture and the Notes. Capitalized terms not
otherwise defined herein have the meanings specified in the Indenture.
Whenever sections or defined terms of the Indenture are referred to, such
sections or defined terms are hereby incorporated herein by such reference.
The Notes are limited in aggregate original principal amount to $40
million, including the Old Notes and the New Notes. Upon any exchange of Old
Notes for New Notes pursuant to the Exchange Offer, the Old Notes so exchanged
shall be cancelled and shall no longer be deemed Outstanding for any purpose.
The New Notes will rank pari passu with the Old Notes. The Old Notes and the
New Notes constitute one class for all purposes under the Indenture, including
without limitation amendments, waivers, redemptions and Offers to Purchase, and
for purposes of this description of the Notes all references herein to "Notes"
shall be deemed to refer collectively to Old Notes and New Notes, unless the
context otherwise requires.
The Notes will mature on December 31, 2004 (the "Stated Maturity").
The Notes are general unsecured obligations of the Company. For a description
of restrictions on the incurrence of additional Indebtedness by the Company,
see "--Certain Covenants-Limitations on Indebtedness."
The New Notes will be issued, and Notes may be transferred, only in
registered form without coupons and only in blocks having an aggregate
principal amount of not less than $100,000 and any integral multiple of $1,000
principal amount in excess thereof. Any transfer of Notes in a block having an
aggregate principal amount of less than $100,000 shall be deemed to be void and
of no legal effect whatsoever.
37
<PAGE> 39
The Notes bear interest from December 31, 1997, the date of initial
issuance of the Old Notes, at 12 1/2% per annum, payable semi-annually in
arrears on June 30 and December 31 of each year, commencing June 30, 1998, to
the holders of record at the close of business on the June 15 or December 15
(whether or not a business day), as the case may be, next preceding such
Interest Payment Date (each, a "Regular Record Date"). Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Notes are not savings accounts or deposits and are not insured by
the FDIC or by the United States or any agency or fund thereof. The Notes are
not secured by the assets of the Company or any of its Subsidiaries, including
the Bank, or otherwise and will not have the benefit of a sinking fund for the
retirement of principal or interest. Because the Company is a holding company
that currently conducts all of its operations through the Bank, the right of
the Company to participate in any distribution of assets of the Bank, upon its
liquidation or reorganization or otherwise (and thus the ability of Holders to
benefit indirectly from such distribution) are subject to the prior claims of
creditors of the Bank, including claims of depositors of the Bank.
Additionally, distributions to the Company by the Bank, whether in liquidation,
reorganization or otherwise, are subject to regulatory restrictions and, under
certain circumstances, may be prohibited.
FORM, DENOMINATION AND BOOK-ENTRY PROCEDURES
The Notes will be represented by one or more global Notes (the
"Book-Entry Notes") in definitive fully registered form without coupons, which
will be registered in the name of a nominee of DTC as depository. The
Book-Entry Notes will be exchangeable for certificated Notes, in definitive,
fully registered form without coupons in denominations of $100,000 and integral
multiples of $1,000 in excess thereof in the circumstances described below.
In connection with the issuance of Book-Entry Notes, DTC will credit
on its book-entry registration and transfer system the respective principal
amounts of Book-Entry Notes represented by the global Notes deposited with it
to the accounts of institutions that have accounts with DTC or its nominee
("participants") and that beneficially own (or hold for persons who
beneficially own) interests in such Book-Entry Notes. Ownership of beneficial
interests in the Book-Entry Notes will be limited to participants or persons
that may hold beneficial interests through participants. Ownership of
beneficial interests in the Book-Entry Notes will be shown on, and the transfer
of those ownership interests may be effected only through, records maintained
by DTC (with respect to participants' interests) or such participants (with
respect to persons that may hold beneficial interests in the Book-Entry Notes
through such participants).
So long as DTC or its nominee is the registered holder and owner of a
global Note representing a Book-Entry Note, DTC or such nominee, as the case
may be, will be considered the sole owner and Holder of the related Book-Entry
Note for all purposes of such Book-Entry Note and for all purposes under the
Indenture. Unless (a) DTC notifies the Company that it is unwilling or unable
to continue as depository for such Book-Entry Note, (b) DTC ceases to be a
clearing agency registered under the Exchange Act, (c) the Company delivers to
the Trustee a written notice that the Book-Entry Note shall be exchangeable for
certificated Notes or (d) an Event of Default (as defined in the Indenture and
discussed below) or event that after notice or lapse of time, or both, would
become an Event of Default has occurred and is continuing with respect to the
Notes, owners of beneficial interests in the Book-Entry Note will not be
entitled to have certificated Notes registered in their names, will not receive
and will not be entitled to receive physical delivery of certificated Notes in
definitive form and will not be considered to be the owners or holders of any
Notes under the Indenture or of such Book-Entry Note.
Payment of principal of, interest on and premium, if any, on a
Book-Entry Note will be made to the depository or its nominee, as the case may
be, as the registered owner and holder thereof.
38
<PAGE> 40
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to December 31, 2002, except as
described below and under "--Certain Covenants--Offer to Purchase Upon a Change
of Control." On or after such date, the Notes may be redeemed, in whole or in
part, at the following redemption prices (expressed as a percentage of the
principal amount) plus accrued and unpaid interest to (but excluding) the
Redemption Date, if redeemed during the 12-month period beginning December 31
of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----------
<S> <C>
2002 106.250%
2003 (and thereafter) 103.125
</TABLE>
If at any time fewer than all of the Notes then outstanding are to be
redeemed, the Trustee shall select the Notes or portions thereof to be redeemed
pro rata, by lot or by any other method the Trustee shall deem fair and
appropriate, provided that in the event that a Holder would be required to hold
Notes with an aggregate principal amount of less than $100,000 but more than an
aggregate principal amount of zero as a result of a redemption of the Notes in
part, the Company shall redeem Notes of each such Holder so that after such
redemption such Holder shall hold Notes either with an aggregate principal
amount of at least $100,000 or such Holder no longer holds any Notes and shall
use such method (including, without limitation, by lot) as the Trustee shall
deem fair and appropriate, and provided, further, that any such proration may
be made on the basis of the aggregate principal amount of Notes held by each
Holder thereof and may be made by making such adjustments as the Company deems
fair and appropriate in order that only Notes in denominations of $1,000 or
integral multiples thereof shall be redeemed.
Notice of redemption will be mailed to each Holder of Notes to be
redeemed at such Holder's registered address at least 30, but not more than 60,
days before the Redemption Date. On or after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
NO SINKING FUND OR MANDATORY REDEMPTION
The Notes are not entitled to the benefit of any sinking fund or
mandatory redemption.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitations on Indebtedness. The Company will not create, incur,
issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to, or otherwise permit to exist any
Junior Indebtedness (other than Acquired Indebtedness) unless the Stated
Maturity of principal (or any required repurchase, redemption, defeasance or
sinking fund payments) of such Junior Indebtedness is after the final Stated
Maturity of principal of the Notes.
The Company will not create, incur, assume, guarantee or otherwise in
any manner become directly or indirectly liable for or with respect to, or
otherwise permit to exist, any Funded Indebtedness (including any Funded
Indebtedness assumed in connection with the acquisition of assets from another
Person but excluding the Notes) unless at the time of such event the principal
amount of total Funded Indebtedness of the Company (which includes the Notes)
would not exceed 100% of the Company's Consolidated Tangible Net Worth,
39
<PAGE> 41
provided that for purposes of this requirement Funded Indebtedness shall be net
of any fund or interest reserve account which has been established to fund the
payment of principal and/or interest on Funded Indebtedness.
The Bank will not create or incur, and will not permit any of its
Subsidiaries to create or incur, any Indebtedness that would qualify as
regulatory capital for the Bank under 12 C.F.R. Part 567 (or any successor
regulation) unless (i) the aggregate principal amount thereof does not exceed
65% of the Bank's tangible common equity and (ii) upon creation or incurrence
thereof the Bank would meet any of the capital requirements under 12 C.F.R.
Part 565 (or any successor regulation) which are necessary to enable the Bank
to qualify as a "well capitalized" institution under such regulations.
Restrictions on Issuance and Sale or Disposition of Capital Stock of
Subsidiaries. The Company shall not sell, transfer or otherwise dispose of
shares of Capital Stock of the Bank or permit the Bank to issue, sell or
otherwise dispose of shares of its Capital Stock unless in either case the Bank
remains a Wholly Owned Subsidiary of the Company. In addition, the Indenture
provides that the Company shall not permit the Bank to merge or consolidate
with any other entity (other than the Company or another Wholly Owned
Subsidiary of the Company) unless the surviving entity is the Company or a
Wholly Owned Subsidiary of the Company, or permit the Bank to convey or
transfer its properties and assets substantially as an entirety to any Person
except to the Company or to any Wholly Owned Subsidiary of the Company.
Limitations on Restricted Payments. The Company will not, and will
not permit any Subsidiary to, directly or indirectly, make any Restricted
Payment if, at the time of such Restricted Payment or after giving effect
thereto,
(a) a Default or Event of Default shall have occurred and be
continuing; or
(b) the Bank would fail to meet any of the applicable minimum
capital requirements under the regulations of the OTS which are necessary to
enable the Bank to qualify as a "well capitalized" institution under such
regulations; or
(c) the aggregate amount of all Restricted Payments (the amount of
such payments, if other than in cash, having been determined in good faith by
the Board of Directors, whose determination shall be conclusive and evidenced
by a Board resolution filed with the Trustee) declared and made after the issue
date of the Notes would exceed the sum of
(i) 33% of the aggregate Consolidated Net Income (or, if
such Consolidated Net Income is a deficit, 100% of such deficit) of
the Company accrued on a cumulative basis during the period beginning
on the first day of the fiscal quarter during which the issue date of
the Notes occurred and ending on the last day of the Company's last
fiscal quarter ending prior to the date of such proposed Restricted
Payment, plus
(ii) the aggregate Net Cash Proceeds received by the
Company as capital contributions (other than from a Subsidiary) after
the issue date of the Notes, plus
(iii) the aggregate Net Cash Proceeds and the Fair Market
Value of property not constituting Net Cash Proceeds received by the
Company from the issuance or sale (other than to a Subsidiary) of
Qualified Capital Stock after the issue date of the Notes; plus
(iv) 100% of the amount of any Indebtedness of the Company
or a Subsidiary that is converted into or exchanged for Qualified
Capital Stock of the Company after the issue date of the Notes;
40
<PAGE> 42
provided, however, that the foregoing provisions will not prevent (v) the
payment of a dividend within 60 days after the date of its declaration if at
the date of declaration such payment was permitted by the foregoing provisions,
(w) any Permitted Payment, (x) tax sharing payments by the Company pursuant to
any tax sharing agreement among the Company and its Subsidiaries which is in
accordance with applicable requirements, (y) the prepayment of the Senior Notes
due 2000 in accordance with their terms within 30 days after issuance of the
Old Notes or (z) the redemption of Series A Preferred Stock in accordance with
its terms within 30 days after issuance of the Old Notes.
Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its
Subsidiaries to, create, assume or otherwise cause or suffer to exist or to
become effective any consensual encumbrance or restriction on the ability of
any such Subsidiary to
(a) pay any dividends or make any other distribution on its Capital
Stock;
(b) make payments in respect of any Indebtedness owed to the Company
or any other Subsidiary; or
(c) make loans or advances to the Company or any Subsidiary or to
guarantee Indebtedness of the Company or any other Subsidiary;
other than, in the case of (a), (b) and (c),
(1) restrictions imposed by applicable laws and regulations;
(2) restrictions existing under agreements in effect on the date of
the Indenture under which the Notes are issued;
(3) consensual encumbrances or restrictions binding upon any Person at
the time such Person becomes a Subsidiary of the Company so long as such
encumbrances or restrictions are not created, incurred or assumed in
contemplation of such Person becoming a Subsidiary;
(4) restrictions on the transfer of assets which are subject to Liens;
(5) restrictions existing under agreements evidencing Indebtedness
which is incurred after the date of the Indenture as permitted by the covenants
described under "Limitations on Indebtedness," provided that the terms and
conditions of any such restrictions are no more restrictive than those
contained in the Indenture; and
(6) restrictions existing under any agreement which refinances or
replaces any of the agreements containing the restrictions in clauses (2), (3)
and (5); provided that the terms and conditions of any such restrictions are
not less favorable to the Holders than those under the agreement evidencing or
relating to the Indebtedness refinanced.
Limitations on Transactions with Affiliates. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (except that the Company and any of
its Subsidiaries may enter into any transaction or series of related
transactions with any Subsidiary of the Company without limitation under this
covenant) unless: (i) such transactions or series of related transactions is on
terms that are no less favorable to the Company or such Subsidiary, as the case
may be, than would be available in a comparable transaction in an arm's length
dealing with a Person that is not such an Affiliate or, in the absence of such
a comparable transaction, on terms that the Board of Directors determines in
good faith would be offered to a Person that is not an Affiliate; (ii) with
41
<PAGE> 43
respect to any transaction or series of related transactions involving
aggregate payments in excess of $1 million, the Company delivers an Officers'
Certificate to the Trustee certifying that such transaction or series of
transactions complies with clause (i) above and has been approved by a majority
of the Board of Directors of the Company; and (iii) with respect to any
transaction or series of related transaction involving aggregate payments in
excess of $5 million, the Company delivers to the Trustee a written opinion of
a nationally-recognized expert with experience in appraising the terms and
conditions of the type of transaction or series of transactions for which
approval is required to the effect that the transaction or series of
transactions are fair to the Company or such Subsidiary from a financial point
of view. The limitations set forth in this paragraph will not apply to (i)
transactions entered into pursuant to any agreement already in effect on the
date of the Indenture, (ii) any employment agreement, stock option, employee
benefit, indemnification, compensation, business expense reimbursement or other
employment-related agreement, arrangement or plan entered into by the Company
or any of its Subsidiaries either (A) in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary or (B)
which agreement, arrangement or plan was adopted by the Board of Directors of
the Company or such Subsidiary, as the case may be, (iii) residential mortgage,
credit card and other consumer loans to an Affiliate who is an officer,
director or employee of the Company or any of its Subsidiaries and which comply
with the applicable provisions of 12 U.S.C. Section 1468(b) and any rules and
regulations of the OTS thereunder, (iv) any Restricted Payments or (v) any
transaction or series of transactions in which the total amount involved does
not exceed $250,000.
Limitations on Liens and Guarantees. The Company will not create,
assume, incur or suffer to exist any Lien upon (i) the Capital Stock of the
Bank as security for Indebtedness or (ii) any of the Company's property or
assets (other than the Capital Stock of the Bank) as security for Indebtedness
having a contractual time to maturity greater than one year or prior to the
maturity of the Notes, without, in the case of either (i) or (ii), effectively
providing that the Notes will be equally and ratably secured with (or prior to)
such Indebtedness, provided that if such Indebtedness is Junior Indebtedness
any security interest with respect to such Junior Indebtedness shall be
subordinated to the security interest with respect to the Notes to the same
extent as such Junior Indebtedness is subordinated to the Notes.
In addition, the Company will not permit any Subsidiary of the
Company, directly or indirectly, to guarantee or assume, or subject any of its
assets to a Lien to secure, any Pari Passu Indebtedness or Junior Indebtedness
unless (i) such Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a guarantee of, or pledge of assets to
secure, the Notes by such Subsidiary on terms at least as favorable to the
Holders of the Notes as such guarantee or security interest in such assets is
to the holders of such Pari Passu Indebtedness or Junior Indebtedness, except
that in the event of a guarantee or security interest in such assets with
respect to (x) Pari Passu Indebtedness, the guarantee or security interest in
such assets under the supplemental indenture shall be made pari passu to the
guarantee or security interest in such assets with respect to Pari Passu
Indebtedness or (y) Junior Indebtedness, any such guarantee or security
interest in such assets with respect to such Junior Indebtedness shall be
subordinated to such Subsidiary's guarantee or security interest in such assets
with respect to the Notes to the same extent as such Junior Indebtedness is
subordinated to the Notes and (ii) such Subsidiary waives, and agrees that it
will not in any manner whatsoever claim, or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Subsidiary of the Company as a result of any
payment by such Subsidiary under its guarantees.
Offer to Purchase upon a Change of Control. The Indenture provides
that upon the occurrence of a Change of Control, the Company shall be obligated
to make an offer to purchase (an "Offer to Purchase"), and shall, subject to
the provisions described below, purchase, on a Business Day (the "Change of
Control Purchase Date") not more than 60 days nor less than 30 days following
the occurrence of the Change of Control, all of the then outstanding Notes at a
purchase price (the "Change of Control Purchase Price") equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to (but
excluding) the Change of Control
42
<PAGE> 44
Purchase Date. The Company shall, subject to the provisions described below,
be required to purchase all Notes properly tendered in the Offer to Purchase
and not withdrawn. Prior to the mailing of the notice to Holders provided for
below, the Company must (i) offer to repay in full all Indebtedness which by
its terms requires repayment by the Company prior to any repurchase by the
Company of the Notes and repay the Indebtedness of each lender who has accepted
such offer or (ii) obtain the requisite consent under such Indebtedness to
permit the repurchase of the Notes. If a notice has been mailed when such
condition precedent has not been satisfied, the Company shall have no
obligation to (and shall not) effect the purchase of Notes until such time as
such condition precedent is satisfied. Failure to mail the notice on the date
specified below or to have satisfied the foregoing condition precedent by the
date that the notice is required to be mailed shall in any event constitute a
covenant Default under the Indenture. The Offer to Purchase is required to
remain open for at least 20 Business Days and until the close of business on
the Change of Control Purchase Date.
In order to effect such Offer to Purchase, the Company shall, not
later than the 30th day after the Change of Control, mail to each Holder a
notice, which shall govern the terms of the Offer to Purchase and shall state,
among other things: (i) that a Change of Control has occurred and an Offer to
Purchase is being made, and that, although Holders are not required to tender
their Notes, all Notes that are timely tendered will be accepted for payment;
(ii) the purchase price and the Change of Control Purchase Date, which will be
no earlier than 30 days nor later than 60 days from the date such notice is
mailed; (iii) that any Note not tendered will continue to accrue interest; (iv)
that any Note accepted for payment pursuant to the Offer to Purchase will cease
to accrue interest on and after the Change of Control Purchase Date; (v) the
instructions that Holders will be required to follow in order to have such
Holders' Notes repurchased; (vi) that Holders will be entitled to withdraw
their election not later than the close of business on the third Business Day
preceding the Change of Control Purchase Date and the instructions that Holders
must follow in order to withdraw such election; and (vii) any other information
necessary to enable Holders to tender their Notes and to have such Notes
repurchased.
On the Change of Control Purchase Date, the Company will (i) accept
for payment Notes tendered pursuant to the Offer to Purchase, (ii) deposit with
the Paying Agent money sufficient to pay the purchase price of all Notes so
tendered and (iii) deliver to the Trustee all Notes so accepted together with
an Officers' Certificate stating the principal amount of Notes tendered to and
accepted for payment by the Company. The Company will publicly announce the
results of the Offer to Purchase on or as soon as practicable after the Change
of Control Purchase Date. There can be no assurance that the Company will have
sufficient financial resources to repurchase any or all of the Notes at such
time as it might be required to do so.
Notwithstanding the foregoing, if any Note accepted for payment is not
so paid pursuant to the provisions of this covenant, then, from the Change of
Control Purchase Date until the principal and interest on such Note is paid,
interest will be paid on the unpaid principal and, to the extent permitted by
law, on any accrued but unpaid interest thereon, in each case at the rate or
rates prescribed therefor in the Notes.
Maintenance of Depository Institution Subsidiary. The Indenture
generally provides that the Company shall maintain at all times as a Wholly
Owned Subsidiary an entity that is a bank or thrift or substantially similar
institution subject to regulation by federal or state authorities and do all
things necessary to ensure that savings accounts of the Bank or such other
institution are insured by the FDIC or any successor organization up to the
maximum amount permitted by the Federal Deposit Insurance Act and regulations
thereunder or any succeeding federal law hereinafter enacted.
Provision of Financial Information. Whether or not the Company is
subject to Section 13(a), 14 or 15(d) of the Exchange Act, or any successor
provision thereto, the Company shall prepare the annual reports, quarterly
reports, proxy statements and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13(a), 14 or
15(d) or any successor provision thereto if the Company were
43
<PAGE> 45
so required, and, unless such filing is not permitted under the Exchange Act,
file such reports and other documents with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so required. The
Company shall also in any event within five days of each Required Filing Date
(i) transmit by mail to all Holders, as their names and addresses appear in the
Note Register, without cost to such Holders and (ii) file with the Trustee
copies of such annual reports, quarterly reports, proxy statements and other
documents.
Additional Covenants. The Indenture also contains covenants with
respect to, among other things, the following matters: (i) payment of
principal, premium and interest; (ii) maintenance of corporate existence; (iii)
payment of taxes and other claims; (iv) maintenance of properties; (v)
maintenance of insurance; and (vi) maintenance of books and records.
MERGER AND CONSOLIDATION
The Indenture provides that the Company shall not, in a single
transaction or a series of transactions, consolidate or merge with or into or
transfer, sell, lease or convey all or substantially all of its assets to
another Person unless: (i) either the Company shall be the entity surviving
such merger or consolidation or the corporation formed by or surviving such
consolidation or merger, or the Person to which such transfer, sale, lease or
conveyance shall have been made, shall be a corporation duly organized and
existing under the laws of the United States, any state thereof or the District
of Columbia and shall unconditionally expressly assume by a supplemental
indenture hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, all the obligations of the Company under the Notes and the
Indenture; (ii) immediately before and immediately after giving effect to the
transaction or series of transactions, no Default or Event of Default shall
have occurred and be continuing; (iii) immediately after giving effect to the
transaction or series of transactions, the Company or the surviving entity, as
applicable, and their respective banking and thrift subsidiaries, as
applicable, shall be in compliance with all applicable regulatory capital
requirements; (iv) immediately after giving effect to the transaction or series
of transactions, the Company or the surviving entity, as applicable, could
incur at least $1.00 of additional Funded Indebtedness without violating the
limitations on indebtedness provisions of the Indenture; and (v) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
each stating that such consolidation, merger, business combination, transfer,
sale, lease or conveyance and such supplemental indenture complies with the
Indenture and that all conditions precedent therein relating to such
transaction have been complied with.
MODIFICATION OF THE INDENTURE; WAIVER OF COVENANTS
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of greater than 50% in
aggregate principal amount of the Notes then outstanding; provided, however,
that no such modification or amendment may, without the consent of the Holder
of each outstanding Note affected thereby, (i) change the Stated Maturity of
the principal of, or any installment of principal of or interest on, any Note
or reduce the principal amount thereof, premium, if any, or the rate of
interest thereon, or change the coin or currency in which any Note or any
premium or the interest thereon is payable or impair the right to institute
suit for the enforcement of any such payment after the Stated Maturity thereof;
(ii) reduce the percentage in principal amount of the outstanding Notes, the
consent of whose Holders is required for any such amendment or modification, or
the consent of whose Holders is required for any waiver of compliance with the
Indenture or certain defaults thereunder; and (iii) modify any of the
provisions relating to supplemental indentures requiring the consent of Holders
or relating to the waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage in principal amount of outstanding
Notes required for such action or to provide that certain other provisions of
the Indenture may not be modified or waived without the consent of the Holder
of each Note affected thereby.
44
<PAGE> 46
Notwithstanding the foregoing, without the consent of any Holders of
the Notes, the Company and the Trustee may modify or amend the Indenture (i) to
evidence the succession of another Person to the Company and the assumption by
any such successor of the covenants of the Company in the Indenture and in the
Notes in accordance with the "Merger and Consolidation" provisions of the
Indenture; (ii) to add any additional covenants of the Company for the benefit
of the Holders of the Notes, or to surrender any right or power conferred upon
the Company in the Indenture or in the Notes; (iii) to secure the Notes or to
add a guarantor; (iv) to comply with any requirements of the Commission in
order to effect and maintain the qualification of the Indenture under Trust
Indenture Act; or (v) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent with the
provisions of this Indenture, provided such action pursuant to this clause (v)
shall not adversely affect the interests of the Holders in any material
respect.
The Holders of greater than 50% in aggregate principal amount of the
Notes outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture to include:
(i) failure by the Company to pay the principal and
premium, if any, on any Note when due and payable at maturity or upon
redemption, acceleration or otherwise;
(ii) failure by the Company to pay interest on any Note
when due and payable, if such failure continues for a period of 30
days;
(iii) default in the performance, or breach, of the
provisions described under "Merger and Consolidation" above;
(iv) default, on the Change of Control Purchase Date, in
the purchase of Notes required to be purchased by the Company pursuant
to an Offer to Purchase;
(v) failure by the Company to comply with any other
agreement or covenant contained in the Indenture if such failure
continues for a period of 30 days after notice to the Company by the
Trustee or to the Company and the Trustee by the holders of at least
25% in principal amount of the Notes then Outstanding;
(vi) default by the Company or any Subsidiary of the
Company in the payment of any Indebtedness of the Company or any
Subsidiary of the Company after any applicable grace period after
final maturity or in the event that final maturity is accelerated
because of a default, is not cured, waived or consented to for 30 days
and the total amount of such Indebtedness unpaid or accelerated is
equal to or greater than 5% of the Company's Consolidated Tangible Net
Worth;
(vii) the existence of certain events of bankruptcy or
insolvency of the Company or the Bank;
(viii) one or more final judgments, decrees or orders has
been rendered against the Company or any Subsidiary for the payment of
an amount of money which, individually or in the aggregate, is equal
to or greater than 5% of the Company's Consolidated Tangible Net Worth
and which remains unsatisfied for a period of 60 days without a stay
of execution of any such judgment, decree or order;
45
<PAGE> 47
(ix) failure by the Bank to comply with any of its
Regulatory Capital Requirements; provided, that an Event of Default
under this paragraph (ix) shall not be deemed to have occurred (a)
during the 45-day period following the first day on which the Bank
fails to comply with any of its Regulatory Capital Requirements, if
within such 45-day period the Bank files a capital plan with the OTS,
(b) during the 60-day period following the initial submission of a
capital plan to the OTS by the Bank (or, if the OTS notifies the Bank
in writing that it needs a longer period of time to determine whether
to approve such capital plan, such longer period as is so specified by
the OTS), unless prior to such date the OTS shall have notified the
Bank of its determination not to approve such capital plan, or (c)
during the period that the Bank is operating in material compliance
with a capital plan approved by the OTS; provided, further, that if
the Bank meets the minimum amount of capital required to meet each of
the industry-wide regulatory capital requirements pursuant to 12
U.S.C. Section 1464(t) and 12 C.F.R. Part 567 (and any amendment to
either thereof) or any successor law or regulation, notwithstanding
the Bank's failure to meet an individual minimum capital requirement
pursuant to 12 U.S.C. Section 1464(s) and 12.C.F.R. Section 567.3 (and
any amendment to either thereof) or any successor law or regulation,
no Event of Default shall have occurred pursuant to this paragraph
(ix) unless written notice thereof shall have been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the
Holders of 25% in aggregate principal amount of the Notes then
outstanding; and
(x) failure by the Bank at any time to meet the Capital
Distribution Requirement, provided that an Event of Default under this
paragraph (x) shall not be deemed to have occurred if, notwithstanding
the foregoing, either (a) the Bank shall be permitted by the OTS and
any other applicable supervisory entity to make capital distributions
to the Company in an aggregate amount equal to the aggregate interest
payments scheduled to be made with respect to the Notes for the next
succeeding Interest Payment Date or (b) the Company shall have
delivered to the Trustee an Officers' Certificate within 10 days after
it first proposes to rely on this clause (b) (and shall continue to
deliver such an Officers' Certificate thereafter as of each Interest
Payment Date so long as it proposes to rely on this clause (b)), to
the effect that the Company has liquid assets equal to the aggregate
interest payments scheduled to be made with respect to the Notes for
the next succeeding Interest Payment Date.
The Company covenanted in the Indenture to file annually with the
Trustee a statement regarding compliance by the Company with the terms of the
Indenture and specifying any defaults of which the signers may have knowledge.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of not less than 25% in principal amount of the Notes then outstanding
may declare all the Notes to be immediately due and payable by notice to the
Company (and to the Trustee if given by the Holders). Under certain
circumstances, the Holders of a majority in principal amount of the Notes then
Outstanding may rescind such a declaration.
DEFEASANCE
The Indenture provides that (A) if applicable, the Company will be
discharged from any and all obligations in respect of then Outstanding Notes,
other than the obligation to duly and punctually pay the principal of, and
premium and interest on, the Notes in accordance with the terms of the Notes
and the Indenture, or (B) if applicable, the Company may omit to comply with
certain restrictive covenants, and that such omission shall not be deemed to be
an Event of Default under the Indenture or the Notes, in either case (A) or (B)
upon irrevocable deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations which will provide money in an amount sufficient in the
opinion of a nationally-recognized accounting firm to pay the principal of and
premium, if any, and each installment of interest, if any, on the Outstanding
Notes. With respect to clause (B), the obligations under the Indenture other
than with respect to such covenants shall remain in full
46
<PAGE> 48
force and effect. Such trust may only be established if, among other things,
(i) with respect to clause (A), the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or there has been a
change in law, which in an Opinion of Counsel provides that Holders of the
Notes will not recognize gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount, in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge had not
occurred; or with respect to clause (B), the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of the Note will
not recognize gain or loss for Federal income tax purposes as a result of such
deposit and defeasance and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred; (ii) no Event of Default or event
that with the passing of time or the giving of notice, or both, shall
constitute an Event of Default shall have occurred or be continuing; and (iii)
certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the Notes, as
expressly provided for in the Indenture) as to all outstanding Notes when (i)
either (a) all the Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid) have been delivered
to the Trustee for cancellation or (b) all Notes not theretofore delivered to
the Trustee for cancellation have become due and payable, or will become due
and payable or are to be called for redemption within one year, and the Company
has irrevocably deposited or caused to be deposited with the Trustee funds in
an amount sufficient to pay and discharge the entire Indebtedness on the Notes
not theretofore delivered to the Trustee for cancellation, for principal of,
and premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions to the Trustee from the Company directing the
Trustee to apply such funds to the payment thereof at maturity or redemption,
as the case may be; (ii) the Company has paid all other sums payable under the
Indenture by the Company; and (iii) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
The Indenture and provisions of the Trust Indenture Act incorporated
by reference therein contain limitations on the rights of the Trustee, should
it become a creditor of the Company, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions with the Company or any Affiliate; provided, however, that if it
acquires any conflicting interest (as defined in the Indenture or in the Trust
Indenture Act), it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at
the time such Person becomes a Subsidiary of or is merged with or into any
other Person or (ii) assumed in connection with the acquisition of assets from
such Person, in each case, other than Indebtedness incurred in connection with,
or in contemplation of, such Person becoming a Subsidiary of such other Person
or such acquisition. Acquired Indebtedness shall
47
<PAGE> 49
be deemed to be incurred on the date of the related acquisition of assets from
such Person or the date such Person becomes a Subsidiary of or is merged with
or into such other Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings corresponding to the
foregoing.
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date
of determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Capital Distribution Requirement" means that the Bank shall (a) be a
Tier 1 association as defined in the OTS regulation regarding capital
distributions, located at 12 C.F.R. Section 563.134 (and any amendment thereof)
or any succeeding regulation, and (b) not be subject to any written agreement,
order, prohibition or directive with or by the OTS or any other supervisory
entity regarding capital distributions.
"Capital Lease Obligation" of any Person means any obligations of such
Person under any capital lease for real or personal property which, in
accordance with GAAP, is required to be recorded as a capitalized lease
obligation; and, for the purpose of this Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents in the equity (however designated) of such
Person and any rights (other than debt securities convertible into an equity
interest), warrants or options to acquire an equity interest in such Person.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 25% of the
total Voting Stock of the Company, (ii) the Company consolidates with, or
merges into, another person, or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction between the Company and a Wholly Owned Subsidiary, or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Company's Board of Directors (together
with any new directors whose elections by the Company's Board of Directors or
whose nomination for elections by the stockholders of the Company was approved
by a vote of 65% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors then in office.
"Consolidated Net Income (Loss)" of any Person means, for any period,
the consolidated net income (or loss) of such Person and its consolidated
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income (loss), by excluding,
without duplication, (i) all extraordinary gains and losses (other than those
relating to the use of net operating losses of such Person carried forward),
less all fees and expenses relating thereto, net of taxes, (ii) the portion of
net income (or loss) of any other Person (other than any of such Person's
consolidated Subsidiaries) in which such Person or any of
48
<PAGE> 50
its Subsidiaries has an ownership interest, except to the extent of the amount
of dividends or other distributions actually paid to such Person or its
consolidated Subsidiaries in cash by such other Person during such period,
(iii) net income (or loss) of any Person combined with such Person or any of
its Subsidiaries on a "pooling of interests" basis attributable to any period
prior to the date of combination, (iv) any gain or loss, net of taxes, realized
upon the termination of any employee pension benefit plan or (v) the net income
of any consolidated Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders; provided that, upon the termination or
expiration of such dividend or distribution restrictions, the portion of net
income (or loss) of such consolidated Subsidiary allocable to such Person and
previously excluded shall be added to the Consolidated Net Income (Loss) of
such Person to the extent of the amount of dividends or other distributions
available to be paid to such Person in cash by such Subsidiary.
"Consolidated Tangible Net Worth" of any Person and its Subsidiaries
means as of the date of determination all amounts that would be included under
stockholders' equity on a consolidated balance sheet of such Person and its
Subsidiaries determined in accordance with GAAP, less an amount equal to the
consolidated intangible assets (other than capitalized mortgage servicing
rights) of such Person and its Subsidiaries determined in accordance with GAAP.
"Default" means any event that upon notice or the passage of time or
both would be an Event of Default.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, or is exchangeable for debt securities of the Company or its
Subsidiaries prior to, the final Stated Maturity of principal of the Notes;
provided that only the amount of such Capital Stock that matures or is
redeemable prior to the Stated Maturity of principal of the Notes shall be
deemed to be Disqualified Capital Stock.
"Fair Market Value" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
compulsion to complete the transaction as determined by the Board of Directors
of the Company, acting in good faith, and shall be evidenced by a Board
Resolution delivered to the Trustee.
"Funded Indebtedness" means, with respect to any Person as of the date
of determination Indebtedness which by its terms has a Maturity, or is
extendable or renewable at the option of such Person to a date, which is more
than twelve months after the date of creation or incurrence of such
Indebtedness.
"GAAP" means generally accepted accounting principles.
"Guaranteed Indebtedness" of any Person means, without duplication,
all Indebtedness of any other Person guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness; (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss;
(iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without requiring that
such property be received or such services be rendered); (iv) to maintain
working capital or equity capital of the debtor, or otherwise to maintain the
net worth, solvency or other financial condition of the debtor; or (v)
49
<PAGE> 51
otherwise to assure a creditor with respect to Indebtedness against loss;
provided that the term "guarantee" shall not include endorsements for
collection of deposit, in the ordinary course of business.
"Holder" when used with respect to any Note means a Person in whose
name a Note is registered in the Note Register.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit issued under letter of
credit facilities, and in connection with any agreement by such Person to
purchase, redeem, exchange, convert or otherwise acquire for value any Capital
Stock of such Person now or hereafter outstanding; (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments;
(iii) all indebtedness of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even if the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), but excluding trade payables arising in the ordinary course of
business; (iv) all obligations under interest rate agreements of such Person;
(v) all Capital Lease Obligations of such Person; (vi) all Indebtedness
referred to in clauses (i) through (v) above of other Persons and all dividends
payable by other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien, upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness (the amount of such obligations being deemed to be the lesser of
the value of such property or asset or the amount of the obligations so
secured); (vii) all guarantees by such Person of Guaranteed Indebtedness;
(viii) all Disqualified Capital Stock (valued at the greater of book value and
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends) of such Person; and (ix) any amendment, supplement, modification,
deferral, renewal, extension, refunding or refinancing or any liability of the
types referred to in clauses (i) through (viii) above. For purposes hereof,
(x) the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Capital Stock,
such fair market value is to be determined in good faith by the board of
directors (or any duly authorized committee thereof) of the issuer of such
Disqualified Capital Stock, and (y) Indebtedness is deemed to be incurred
pursuant to a revolving credit facility each time an advance is made
thereunder.
"Junior Indebtedness" means any Indebtedness of the Company
subordinated in right of payment of either principal, premium (if any) or
interest thereon to the Notes.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Capital Stock, or options, warrants or rights to purchase Capital Stock, or
debt securities or Capital Stock that have been converted into or exchanged for
Capital Stock, or any capital contribution in respect of Capital Stock, the
proceeds of such issuance or sale or capital contribution in the form of cash
or cash equivalents, including payments in respect of deferred payment
obligations when received in the form of, or stock or other assets when
disposed for, cash or cash equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any Subsidiary
of the Company), net of attorney's fees, accountant's fees and brokerage,
consulting, underwriting and
50
<PAGE> 52
other fees and expenses actually incurred in connection with such issuance or
sale or capital contribution and net of taxes paid or payable by the Company as
a result thereof.
"Pari Passu Indebtedness" means any Indebtedness of the Company that
is pari passu in right of payment of principal, premium (if any) and interest
thereon to the Notes.
"Permitted Payment" means, so long as no Default or Event of Default
is continuing,
(a) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Capital Stock of the Company or any Affiliate of
the Company (other than a Wholly-Owned Subsidiary, which is unrestricted),
Junior Indebtedness or Pari Passu Indebtedness in exchange for (including any
such exchange pursuant to the exercise of a conversion right or privilege
where, in connection therewith, cash is paid in lieu of the issuance of
fractional shares or scrip), or out of the Net Cash Proceeds or Fair Market
Value of property not constituting Net Cash Proceeds of, a substantially
concurrent issue and sale (other than to a Subsidiary of the Company or to an
employee benefit plan of the Company or any of its Subsidiaries) of Qualified
Capital Stock of the Company; provided that the Net Cash Proceeds or Fair
Market Value of such property received by the Company from the issuance of such
shares of Qualified Capital Stock, to the extent so utilized, shall be excluded
from clause (c)(iii) of the covenant described under "--Certain Covenants--
Limitations on Restricted Payments" above; and
(b) the repurchase, redemption, defeasance or other acquisition or
retirement for value of any Junior Indebtedness or Pari Passu Indebtedness in
exchange for, or out of the Net Cash Proceeds of, a substantially concurrent
issue and sale (other than to a Subsidiary of the Company) of new Indebtedness
of the Company (such a transaction, a "refinancing"); provided, that any such
new Indebtedness (i) shall be in a principal amount that does not exceed an
amount equal to the sum of (A) the principal amount of the Indebtedness so
refinanced less any discount from the face amount of such Indebtedness to be
refinanced expected to be deducted from the amount payable to the holders of
such Indebtedness in connection with such refinancing, (B) the amount of any
premium expected to be paid in connection with such refinancing pursuant to the
terms of the Junior Indebtedness or Pari Passu Indebtedness refinanced or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer, privately negotiated
repurchase or otherwise and (C) the amount of legal, accounting, printing and
other similar expenses of the Company incurred in connection with such
refinancing; provided, further, that for purposes of this clause (i), the
principal amount of any Indebtedness shall be deemed to mean the principal
amount thereof or, if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination; (ii)
(A) if such refinanced Indebtedness has an Average Life to Stated Maturity
shorter than that of the Notes or a final Stated Maturity earlier than the
final Stated Maturity of the Notes, such new Indebtedness shall have an Average
Life to Stated Maturity no shorter than the Average Life to Stated Maturity of
such refinanced Indebtedness and a final Stated Maturity no earlier than the
final Stated Maturity of such refinanced Indebtedness or (B) in all other cases
each Stated Maturity of principal (or any required repurchase, redemption,
defeasance or sinking fund payments) of such new Indebtedness shall be after
the final Stated Maturity of principal of the Notes then outstanding; and (iii)
is (A) made expressly subordinated to or pari passu with the Notes to
substantially the same extent as the Indebtedness being refinanced or (B)
expressly subordinate to such refinanced Indebtedness.
"Person" means any natural person, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Disqualified Capital Stock.
51
<PAGE> 53
"Regulatory Capital Requirements" means (i) the capital requirements
required to be maintained by the Bank in order to be "adequately capitalized"
pursuant to 12 U.S.C. Section 1831o and 12 C.F.R. Part 565 (and any amendment
to either thereof) or any successor law or regulation, (ii) the minimum amount
of capital required to meet each of the industry-wide regulatory capital
requirements applicable to the Bank pursuant to 12 U.S.C. Section 1464(t) and
12 C.F.R. Part 567 (and any amendment to either thereof) or any successor law
or regulation, and (iii) such higher amount of capital as the Bank,
individually, is required to maintain in order to meet any individual minimum
capital standard applicable to the Bank pursuant to 12 U.S.C. Section 1464(s)
and 12 C.F.R. Section 567.3 (and any amendment to either thereof) or any
successor law or regulation. See "Certain Regulatory Matters--Regulatory
Capital Requirements."
"Restricted Payment" means
(a) the declaration, payment or setting apart of any funds for the
payment of any dividend on, or making of any distribution to holders of, the
Capital Stock of the Company or any Subsidiary of the Company (other than (i)
dividends or distributions in Qualified Capital Stock of the Company and, (ii)
dividends or distributions payable on or in respect of any class or series of
Capital Stock of a Subsidiary of the Company as long as the Company receives at
least its pro rata share of such dividends or distributions in accordance with
its ownership interests in such class or series of Capital Stock);
(b) the purchase, redemption or other acquisition or retirement
for value, directly or indirectly, of any Capital Stock of the Company or any
Affiliate of the Company (other than a Wholly Owned Subsidiary); or
(c) the making of any principal payments on, or repurchase,
redemption, defeasance, retirement or other acquisition for value, directly or
indirectly, of any Junior Indebtedness or Pari Passu Indebtedness, prior to the
Stated Maturity of principal or scheduled redemption or defeasance of, or any
scheduled sinking fund payment on, such Junior Indebtedness or Pari Passu
Indebtedness.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon means the date specified in the instrument
governing such Indebtedness as the fixed dates on which any principal amount of
such Indebtedness is due and payable (including, without limitation, by reason
of any required redemption, purchase, defeasance or sinking fund payment) and,
when used with respect to any installment of interest on Indebtedness, means
the date on which such installment is due and payable.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having ordinary voting power to elect a majority of the
directors of such corporation, irrespective of whether or not at the time stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency, is at the time
directly or indirectly owned by the Company, by one or more Subsidiaries of the
Company, or by the Company and one or more Subsidiaries.
"Voting Stock" means Capital Stock of any class or classes, however
designated, having ordinary voting power for the election of a majority of the
board of directors, other than stock having such power only by reason of the
occurrence of a contingency.
"Wholly Owned Subsidiary" means a Subsidiary of which all of the
outstanding Capital Stock (other than directors' qualifying shares) is at the
time directly or indirectly owned by the Company, or by one or more Wholly
Owned Subsidiaries or by the Company and one or more Wholly Owned Subsidiaries.
52
<PAGE> 54
DESCRIPTION OF OLD NOTES
The terms of the Old Notes are identical in all materials respects to
the terms of the New Notes, except that (i) the Old Notes have not been
registered under the Securities Act, are subject to restrictions on transfer
under federal and state securities laws and are entitled to certain rights under
the Registration Rights Agreement (which rights will terminate upon consummation
of the Exchange Offer) and (ii) the New Notes will not provide for any
prospective increase in the interest rate thereon. The Old Notes provide that,
in the event that a registration statement relating to the Exchange Offer has
not been filed by April 30, 1998 and declared effective by May 30, 1998, or, in
certain circumstances, in the event a shelf registration statement with respect
to the resale of the Old Notes is not declared effective by May 30, 1998, then
interest will accrue (in addition to the stated interest rate on the Old Notes)
at the rate of 1.00% per annum on the principal amount of the Old Notes, for the
period from the occurrence of such event until such time as such required
Exchange Offer is consummated or any required shelf registration statement is
effective. The New Notes are not entitled to any such prospective additional
interest. Accordingly, holders of Old Notes should review the information set
forth under "Risk Factors--Consequences of a Failure to Exchange Old Notes" and
"Description of New Notes."
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Registration Rights Agreement, the Company agreed to
file the Registration Statement and conduct the Exchange Offer within specified
periods.
Pursuant to the Registration Rights Agreement, if the Initial Purchaser
determines upon advice of its outside counsel that it is not eligible to
participate in the Exchange Offer with respect to the exchange of Old Notes
constituting any portion of an unsold allotment in the initial distribution of
the Old Notes, as soon as practicable upon receipt by the Company of a written
request from the Initial Purchaser, the Company shall issue and deliver to the
Initial Purchaser, in exchange for the Old Notes held by the Initial Purchaser
(the "Private Exchange"), a like principal amount of New Notes which are
identical (except that such New Notes may bear a customary legend with respect
to restrictions on transfer pursuant to the Securities Act and state
securities laws), to the New Notes which are issued pursuant to the Exchange
Offer (the "Private New Notes"), and which are issued pursuant to the
Indenture. Pursuant to the Indenture, the Old Notes, the New Notes and any
Private New Notes will constitute one class for purposes of the Indenture. Any
Private New Notes shall be of the same series as the New Notes and the Company
shall seek to cause the CUSIP Service Bureau to issue the same CUSIP numbers
for any Private New Notes as for the New Notes issued pursuant to the Exchange
Offer.
Pursuant to the Registration Rights Agreement, if the Company determines
that the Registration Statement relating to the Exchange Offer is not available
under applicable laws and regulations and currently prevailing interpretations
of the staff of the Commission or, upon the request of the Initial Purchaser
with respect to any Old Notes held by it, if the Initial Purchaser is not
permitted, in the opinion of its outside counsel, pursuant to applicable laws
and regulations or applicable interpretations of the staff of the Commission,
to participate in the Exchange Offer and thereby receive freely-tradeable New
Notes (a "Shelf Registration Event" and the date of occurrence thereof a "Shelf
Registration Event Date"), the Company shall use its reasonable best efforts to
cause to be filed as promptly as practicable after the Shelf Registration
Event Date, and in any event within 45 days after such Shelf Registration Event
Date (provided that in no event shall such date be earlier than 75 days after
the issue date of the Old Notes (December 31, 1997)), a registration statement
under the Securities Act which registers for sale any Private New Notes issued
following consummation of the Exchange Offer and registerable Old Notes (the
"Shelf Registration Statement") and to have such Shelf Registration Statement
declared effective by the Commission as soon as practicable thereafter.
Pursuant to the Registration Rights Agreement, the Company generally also
agreed to use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective and useable for resales of the securities
covered thereby for a two-year period or for such shorter period which will
terminate when all of the securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement or cease
to be outstanding.
At December 31, 1997, the Initial Purchaser held $5.7 million of Old
Notes, which represented an unsold allotment in the initial distribution of the
Old Notes. Based on current positions of the staff of the Division of
Corporation Finance of the Commission as set forth in certain interpretive
letters addressed to third parties, the Company believes that the Initial
Purchaser will not be able to exchange any such Old Notes which continue to be
held by it for New Notes in the Exchange Offer. In the event that the Initial
Purchaser continues to hold any such Old Notes upon consummation of the
Exchange Offer, upon request of the Initial Purchaser the Company intends to
effect a private exchange of such Old Notes for Private New Notes and to comply
with the requirements regarding a Shelf Registration Statement set forth in the
Registration Rights Agreement, as discussed above. Upon filing and effectiveness
of the Shelf Registration Statement in accordance with the requirements of the
Registration Rights Agreement, the securities covered thereby will no longer be
entitled to a prospective increase in the interest rate thereon in accordance
with the terms of the Old Notes and the Registration Rights Agreement.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by
Participating Broker-Dealers during the period referred to below in connection
with resales of New Notes received in exchange for Old Notes if such Old Notes
were acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. The Company
has agreed that this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with
resales of such New Notes for a period ending 90 days after the Expiration Date
(subject to extension under certain limited circumstances described herein) or,
if earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Notes received in exchange for
Old Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
for that purpose in the Letter of Transmittal or may be delivered to the
Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer--Exchange Agent." See "The Exchange Offer--Resales of New Notes."
The Company will not receive any cash proceeds from the issuance of
the New Notes offered hereby. New Notes received by broker-dealers for their
own accounts in connection with the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale,
at prices related to such prevailing market prices or at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes.
Any broker-dealer that resells New Notes that were received by it for
its own account in connection with the Exchange Offer and any broker or dealer
that participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
53
<PAGE> 55
VALIDITY OF NEW NOTES
The validity of the New Notes will be passed upon for the Company by
Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
54
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Thirteenth of the Company's Certificate of Incorporation
provides that a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty
as a director except for liability: (i) for any breach of the director's duty
of loyalty to the Company or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv)
for any transaction from which the director derived any improper personal
benefit.
Article Fourteenth of the Company's Certificate of Incorporation
provides that each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director or officer of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans (hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the Company to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may be amended and without
giving effect to any provisions of the Delaware General Corporation Law which
would make such indemnification permissive and not mandatory on the part of the
Company, but, in the case of any amendment of the Delaware General Corporation
Law, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said law permitted the Company to provide
prior to such amendment, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director or officer and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in paragraph (B) of Article Fourteenth with respect to
proceedings to enforce rights to indemnification, the Company shall indemnify
any such indemnitee in connection with a proceeding (or part thereof) initiated
by such indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Company. Article Fourteenth of the Company's
Certificate of Incorporation also provides that the right to indemnification
contained therein shall include the right to be paid by the Company the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Company of an undertaking, by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under Article Fourteenth or
otherwise.
<PAGE> 57
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS
Exhibits are listed by number corresponding to the Exhibit Table of
Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.1 Indenture, dated December 31, 1997, between the Company and United
States Trust Company of New York, as Trustee thereunder
4.2 Form of New Notes
4.3 Registration Rights Agreement, dated December 31, 1997, between
the Company and Friedman, Billings, Ramsey & Co., Inc.
5.1 Opinion and consent of Elias, Matz, Tiernan & Herrick L.L.P. as to
legality of the New Notes to be issued by the Company
12.1 Computation of ratio of earnings to fixed charges (excluding
interest on deposits)
12.2 Computation of ratio of earnings to fixed charges (including
interest on deposits)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in
Exhibit 5.1)
24.1 Power of Attorney of certain directors and officers of the Company
(located on the signature page hereto)
25.1 Form T-1 Statement of Eligibility of United States Trust Company
of New York to act as trustee under the Indenture
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
B. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because they are
not applicable as the required information is included in the financial
statements or notes thereto incorporated by reference herein.
C. REPORTS, OPINIONS OR APPRAISALS.
Not applicable.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Item 4, 10(b), 11 or 13 of this Form within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other
II-2
<PAGE> 58
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of each undersigned Registrant pursuant to the provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the undersigned Registrant of expenses incurred or paid by a
director, officer of controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hawthorne
Financial Corporation certifies that it has reasonable grounds that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of El Segundo, State of California as of the 3rd
day of February 1998.
HAWTHORNE FINANCIAL CORPORATION
By: /s/ SCOTT A. BRALY
-------------------------------------
Scott A. Braly
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of the directors and/or officers
of Hawthorne Financial Corporation whose signature appears below hereby
appoints Scott A. Braly as his or her attorney-in-fact to sign in his or her
name and behalf, in any and all capacities stated below and to file with the
Securities and Exchange Commission any and all amendments, including
post-effective amendments, to this Registration Statement on Form S-4, making
such changes in the Registration Statement as appropriate, and generally to do
all such things in their behalf in their capacities as directors and/or
officers to enable Hawthorne Financial Corporation to comply with the
provisions of the Securities Act of 1933, and all requirements of the
Securities and Exchange Commission.
/s/ MARILYN GARTON AMATO Date: January 30, 1998
- ------------------------------------
Marilyn Garton Amato
Director
/s/ SCOTT A. BRALY Date: January 29, 1998
- ------------------------------------
Scott A. Braly
Director and President and Chief Executive Officer
(principal executive officer)
/s/ TIMOTHY R. CHRISMAN Date: January 30, 1998
- ------------------------------------
Timothy R. Chrisman
Director
- ------------------------------------
R. Michael Hall
Director
II-4
<PAGE> 60
- ------------------------------------
Charles S. Jacobs
Director
- ------------------------------------
Anthony W. Liberati
Vice Chairman
/s/ HARRY F. RADCLIFFE Date: January 30, 1998
- ------------------------------------
Harry F. Radcliffe
Director
- ------------------------------------
Howard E. Ritt
Director
/s/ ROBERT C. TROOST Date: January 30, 1998
- ------------------------------------
Robert C. Troost
Director
/s/ NORMAN A. MORALES Date: January 29, 1998
- ------------------------------------
Norman A. Morales
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
II-5
<PAGE> 61
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.1 Indenture, dated December 31, 1997, between the Company and United
States Trust Company of New York, as Trustee thereunder
4.2 Form of New Notes
4.3 Registration Rights Agreement, dated December 31, 1997, between
the Company and Friedman, Billings, Ramsey & Co., Inc.
5.1 Opinion and consent of Elias, Matz, Tiernan & Herrick L.L.P. as to
legality of the New Notes to be issued by the Company
12.1 Computation of ratio of earnings to fixed charges (excluding
interest on deposits)
12.2 Computation of ratio of earnings to fixed charges (including
interest on deposits)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in
Exhibit 5.1)
24.1 Power of Attorney of certain directors and officers of the Company
(located on the signature page hereto)
25.1 Form T-1 Statement of Eligibility of United States Trust Company
of New York to act as trustee under the Indenture
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
<PAGE> 1
EXHIBIT 4.1
HAWTHORNE FINANCIAL CORPORATION
AND
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
______________________________
INDENTURE
Dated as of December 31, 1997
______________________________
$40,000,000
12.50% Notes due 2004
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE ONE
Definitions and Other Provisions of General Application . . . . . . . . . . . . . 1
-------------------------------------------------------
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Compliance Certificates and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.03. Form of Documents Delivered to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.04. Acts of Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.05. Notices, etc., to Trustee and Company. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.06. Notice to Noteholders; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.07. Effect of Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.08. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.09. Separability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.10. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.11. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.12. Compliance with Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.13. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.14. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE TWO
Note Forms . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------
Section 2.01. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.02. Form of Face of Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.03. Form of Reverse of Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.04. Form of Trustee's Certificate of Authentication. . . . . . . . . . . . . . . . . . . . . 24
ARTICLE THREE
The Notes . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------
Section 3.01. Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.02. Denominations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.03. Execution, Authentication, Delivery and Dating. . . . . . . . . . . . . . . . . . . . . . 26
Section 3.04. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.05. Registration; Registration of Transfer and Exchange. . . . . . . . . . . . . . . . . . . 27
Section 3.06. Mutilated, Destroyed, Lost and Stolen Notes. . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.07. Payment of Interest: Interest Rights Preserved. . . . . . . . . . . . . . . . . . . . . 30
Section 3.08. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.09. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.10. Authentication and Delivery of Original Issue. . . . . . . . . . . . . . . . . . . . . . 32
Section 3.11. Computation of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE FOUR
Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . 32
--------------------------
Section 4.01. Satisfaction and Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.02. Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE FIVE
Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . 34
------------------------------
Section 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.02. Acceleration of Maturity; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . 36
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.04. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.05. Trustee May Enforce Claims Without Possession of Notes. . . . . . . . . . . . . . . . . . 39
Section 5.06. Application of Money Collected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.07 Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.08. Unconditional Right of Noteholders to Receive Principal,
Premium and Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.09. Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.10. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.11. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.12. Control by Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.13. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.14. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.15. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE SIX
The Trustee . . . . . . . . . . . . . . . . . . . . . . . . 43
-----------
Section 6.01. Certain Duties and Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.02. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.03. Certain Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.04. Not Responsible for Recitals or Issuance of Notes. . . . . . . . . . . . . . . . . . . . 45
Section 6.05. May Hold Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.06. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.07. Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.08. Disqualification; Conflicting Interests. . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.09. Corporate Trustee Required; Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.10. Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . . . . . 47
Section 6.11. Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.12. Merger, Conversion, Consolidation or Succession to
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.13. Preferential Collection of Claims Against the Company . . . . . . . . . . . . . . . . . . 49
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE SEVEN
Noteholders' Lists and Reporting by Trustee and Company . . . . . . . . . . . . . 49
-------------------------------------------------------
Section 7.01. Company to Furnish Trustee Names and Addresses of
Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.02. Preservation of Information; Communications to
Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.03. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.04. Reports by Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.05. Officers' Certificate with Respect to Additional Interest. . . . . . . . . . . . . . . . 50
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . . . . . . 50
----------------------------------------------------
Section 8.01. Company May Consolidate, etc., Only on Certain Terms. . . . . . . . . . . . . . . . . . . 50
Section 8.02. Successor Entity Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE NINE
Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . 51
-----------------------
Section 9.01. Supplemental Indentures Without Notice to or Consent of
Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.02. Supplemental Indentures With Consent of Noteholders. . . . . . . . . . . . . . . . . . . 52
Section 9.03. Execution of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.04. Effect of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.05. Reference in Notes to Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . 53
Section 9.06. Conformity With Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE TEN
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 54
---------
Section 10.01. Payment of Principal, Interest and Premium. . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.03. Money for Note Payments to be Held In Trust. . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.04. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.05. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.06. Maintenance of Depository Institution Subsidiary. . . . . . . . . . . . . . . . . . . . . . 56
Section 10.07. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.08. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.09. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.10. Statements as to Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.11. Limitations on Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.12. Limitations on Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 10.13. Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.14. Restrictions on Issuance and Sale or Disposition of Capital
Stock of Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.15. Limitations on Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.16. Limitations on Liens and Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.17. Provision of Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.18. Offer to Purchase Upon a Change of Control . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.19. Payments for Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.20. Waiver of Certain Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE ELEVEN
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 64
----------
Section 11.01. Election to Redeem; Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.02. Selection of Notes to be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.04. Effect of Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.06. Notes Payable on Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.07. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.08. Optional Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE TWELVE
Defeasance and Covenant Defeasance . . . . . . . . . . . . . . . . . . . 67
----------------------------------
Section 12.01. Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.02. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 12.04. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . 68
Section 12.05. Deposited Money and U.S. Government Obligations to be Held
in Trust; Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
iv
<PAGE> 6
INDENTURE, dated as of December 31, 1997, between HAWTHORNE
FINANCIAL CORPORATION, a Delaware corporation, having its principal office at
2381 Rosecrans Avenue, El Segundo, California 90245 (the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York corporation, having its principal
corporate trust office at 114 West 47th Street, New York, New York 10036 (the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation, execution and
delivery of its 12.50% Notes due 2004 (the "Notes"), and to provide the terms
and conditions upon which the Notes are to be authenticated, issued and
delivered, the Company has duly authorized the execution of this Indenture.
All acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee as in this
Indenture provided, the legal, valid and binding obligations of the Company,
and to constitute these presents as a valid indenture and agreement according
to its terms, have been done and performed, and the execution of this Indenture
and the issue hereunder of the Notes have in all respects been duly authorized,
and the Company, in the exercise of the legal right and power vested in it,
executes this Indenture and proposes to make, execute and deliver the Notes.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders
of the Notes as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. DEFINITIONS.
For all purposes of this Indenture except as otherwise
expressly provided or unless the context otherwise requires:
(1) All references in this instrument to designated
"Articles," "Sections" and other subdivisions are to the designated articles,
sections and other subdivisions of this instrument as originally executed. The
words "herein," "hereto" and "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular article, section
or other subdivision;
(2) the terms defined in this Article have the meaning
assigned to them in this Article, and include the plural as well as the
singular;
<PAGE> 7
(3) all other terms used herein which are defined in the
Trust Indenture Act of 1939, as amended, either directly or by reference
therein, have the meanings assigned to them therein; and
(4) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles, which, with respect to any computation required or
permitted hereunder, shall mean such accounting principles as are generally
accepted at the date or time of such computation.
Certain terms, used principally in Article Six, are defined in
that Article.
"Acquired Indebtedness" means Indebtedness of a person (i)
existing at the time such Person becomes a Subsidiary of or is merged with or
into any other Person or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary of
such other Person or such acquisition. Acquired Indebtedness shall be deemed
to be incurred on the date of the related acquisition of assets from such
Person or the date such Person becomes a Subsidiary of or is merged with or
into such other Person.
"Act" when used with respect to any Noteholder has the meaning
specified in Section 1.04.
"Additional Interest" has the meaning set forth in the form of
Note contained in Section 2.02. Unless the context otherwise requires,
references herein to "interest" on the Notes shall include Additional Interest.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
corresponding to the foregoing.
"Authenticating Agent" means any Person authorized by the
Trustee to act on behalf of the Trustee to authenticate Notes.
"Authorized Newspaper" means a newspaper of general
circulation in the relevant geographic area, printed in the English language
and customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays. Whenever successive weekly publications in an
Authorized Newspaper are required hereunder they may be made, unless otherwise
expressly provided herein, on the same or different days of the week and in the
same or in different Authorized Newspapers.
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date
of determination to the date or dates of each successive
2
<PAGE> 8
scheduled principal payment of such Indebtedness multiplied by (b) the amount
of each such principal payment by (ii) the sum of all such principal payments.
"Bank" means (a) Hawthorne Savings, FSB, until a successor
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Bank" shall mean such successor; and (b) any bank or savings or
depository institution that is or shall become an Affiliate of the Company.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day upon which banking institutions or trust
companies in the city in which the principal corporate trust office of the
Trustee is located are authorized or required by law, regulation or executive
order to remain closed.
"Capital Distribution Requirement" means that the Bank shall
(a) be a Tier 1 association as defined in the OTS regulation regarding capital
distributions, located at 12 C.F.R. Section 563.134 (and any amendment thereof)
or any succeeding regulation, and (b) not be subject to any written agreement,
order, prohibition or directive with or by the OTS or any other supervisory
entity regarding capital distributions.
"Capital Lease Obligation" of any Person means any obligations
of such Person under any capital lease for real or personal property which, in
accordance with GAAP, is required to be recorded as a capitalized lease
obligation; and, for the purpose of this Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents in the equity (however
designated) of such Person and any rights (other than debt securities
convertible into an equity interest), warrants or options to acquire an equity
interest in such Person.
"Change of Control" means the occurrence of any of the
following events: (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 25% of the total Voting Stock of the Company, (ii) the Company
consolidates with, or merges into, another person, or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any person, or any person consolidates with, or merges into, the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is changed into
3
<PAGE> 9
or exchanged for cash, securities or other property, other than any such
transaction between the Company and a Wholly Owned Subsidiary, or (iii) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Company's Board of Directors (together with any new
directors whose elections by the Company's Board of Directors or whose
nomination for elections by the stockholders of the Company was approved by a
vote of 65% of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors then in office.
"Change of Control Purchase Date" has the meaning specified in
Section 10.18.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Company Consent," "Company Order" and "Company Request" mean,
respectively, a written consent, order or request signed in the name of the
Company by its Chairman of the Board, President or a Vice President, and by its
Treasurer, an Assistant Treasurer, Controller, an Assistant Controller,
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Consolidated Net Income (Loss)" of any Person means, for any
period, the consolidated net income (or loss) of such Person and its
consolidated Subsidiaries for such period as determined in accordance with
GAAP, adjusted, to the extent included in calculating such net income (loss),
by excluding, without duplication, (i) all extraordinary gains and losses
(other than those relating to the use of net operating losses of such Person
carried forward), less all fees and expenses relating thereto, net of taxes,
(ii) the portion of net income (or loss) of any other Person (other than any of
such Person's consolidated Subsidiaries) in which such Person or any of its
Subsidiaries has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to such Person or its
consolidated Subsidiaries in cash by such other Person during such period,
(iii) net income (or loss) of any Person combined with such Person or any of
its Subsidiaries on a "pooling of interests" basis attributable to any period
prior to the date of combination, (iv) any gain or loss, net of taxes, realized
upon the termination of any employee pension benefit plan or (v) the net income
of any consolidated Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders; provided that, upon the termination or
expiration of such dividend or distribution restrictions, the portion of net
income (or loss) of such consolidated Subsidiary allocable to such Person and
previously excluded shall be added to the Consolidated Net Income (Loss) of
such Person to the extent of the amount of dividends or other distributions
available to be paid to such Person in cash by such Subsidiary.
4
<PAGE> 10
"Consolidated Tangible Net Worth" of any Person and its
Subsidiaries means as of the date of determination all amounts that would be
included under stockholders' equity on a consolidated balance sheet of such
Person and its Subsidiaries determined in accordance with GAAP, less an amount
equal to the consolidated intangible assets (other than capitalized mortgage
servicing rights) of such Person and its Subsidiaries determined in accordance
with GAAP.
"Default" means any event that upon notice or the passage of
time or both would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section
3.07.
"Depositary" means the Person designated to act as Depositary
by the Company in Section 3.01, and any successor Depositary hereunder.
"Disqualified Capital Stock" means any Capital Stock which, by
its terms (or by the terms of any security into which it is convertible or
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, or is exchangeable for debt securities of the Company or its
Subsidiaries prior to, the final Stated Maturity of principal of the Notes;
provided that only the amount of such Capital Stock that matures or is
redeemable prior to the Stated Maturity of principal of the Notes shall be
deemed to be Disqualified Capital Stock.
"Event of Default" has the meaning specified in Article Five.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Note" means a Note issued in exchange for a Rule
144A Note or Notes pursuant to an Exchange Offer or otherwise in a transaction
registered under the Securities Act.
"Exchange Offer" shall mean the offer by the Company to the
Holders to exchange all of the Rule 144A Notes for a like principal amount of
Exchange Notes pursuant to the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
compulsion to complete the transaction as determined by the Board of Directors
of the Company, acting in good faith, and shall be evidenced by a Board
Resolution delivered to the Trustee.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"Funded Indebtedness" means, with respect to any Person as of
the date of determination Indebtedness which by its terms has a Maturity, or is
extendable or renewable at
5
<PAGE> 11
the option of such Person to a date, which is more than twelve months after the
date of creation or incurrence of such Indebtedness.
"GAAP" means generally accepted accounting principles.
"Global Note" means a Note that evidences all or part of the
Notes issued to the Depositary in accordance with Section 3.03 and bearing the
legend(s) prescribed in the form of Note contained in Section 2.02.
"Guaranteed Indebtedness" of any Person means, without
duplication, all Indebtedness of any other Person guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such person through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such
Indebtedness; (ii) to purchase, sell or lease (as lessee or lessor) property,
or to purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss; (iii) to supply funds to, or in any other manner
invest in, the debtor (including any agreement to pay for property or services
without requiring that such property be received or such services be rendered);
(iv) to maintain working capital or equity capital of the debtor, or otherwise
to maintain the net worth, solvency or other financial condition of the debtor;
or (v) otherwise to assure a creditor with respect to Indebtedness against
loss; provided that the term "guarantee" shall not include endorsements for
collection or deposit, in the ordinary course of business.
"Holder" when used with respect to any Note means a
Noteholder.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit issued under
letter of credit facilities, and in connection with any agreement by such
Person to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person now or hereafter outstanding; (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments; (iii) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables arising in
the ordinary course of business; (iv) all obligations under interest rate
agreements of such Person; (v) all Capital Lease Obligations of such Person;
(vi) all Indebtedness referred to in clauses (i) through (v) above of other
Persons and all dividends payable by other Persons, the payment of which is
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien, upon or with respect to
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligations being deemed to be
the lesser of the value of such property or asset or the amount of the
obligations so secured); (vii) all guarantees by such Person of Guaranteed
Indebtedness; (viii) all Disqualified Capital Stock (valued at the greater of
book value and voluntary or
6
<PAGE> 12
involuntary maximum fixed repurchase price plus accrued and unpaid dividends)
of such Person; and (ix) any amendment, supplement, modification, deferral,
renewal, extension, refunding or refinancing or any liability of the types
referred to in clauses (i) through (viii) above. For purposes hereof, (x) the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such
fair market value is to be determined in good faith by the board of directors
(or any duly authorized committee thereof) of the issuer of such Disqualified
Capital Stock, and (y) Indebtedness is deemed to be incurred pursuant to a
revolving credit facility each time an advance is made thereunder.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Junior Indebtedness" means any Indebtedness of the Company
subordinated in right of payment of either principal, premium (if any) or
interest thereon to the Notes.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Maturity" when used with respect to any Note means the date
on which the principal of such Note becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Cash Proceeds" means, with respect to any issuance or
sale of Capital Stock, or options, warrants or rights to purchase Capital
Stock, or debt securities or Capital Stock that have been converted into or
exchanged for Capital Stock, or any capital contribution in respect of Capital
Stock, the proceeds of such issuance or sale or capital contribution in the
form of cash or cash equivalents, including payments in respect of deferred
payment obligations when received in the form of, or stock or other assets when
disposed for, cash or cash equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any Subsidiary
of the Company), net of attorney's fees, accountant's fees and brokerage,
consulting, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale or capital contribution and net of taxes
paid or payable by the Company as a result thereof.
"Note" means either individually or collectively, as the
context requires, the Rule 144A Notes and the Exchange Notes.
7
<PAGE> 13
"Noteholder" means a Person is whose name a Note is registered
in the Note Register.
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 3.05.
"Offer to Purchase" means an offer by the Company to
repurchase Notes, as set forth in Section 10.18 hereof.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President and by the Treasurer,
an Assistant Treasurer, the Controller, an Assistant Controller, the Secretary
or Assistant Secretary of the Company, and delivered to the Trustee. Wherever
this Indenture requires that an Officers' Certificate also be signed by an
accountant or other expert, such accountant or other expert, except as
otherwise expressly provided in this Indenture, may be in the employ of the
Company and shall be acceptable to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may, except as otherwise expressly provided in this Indenture, be counsel for
or an employee of the Company and who shall be acceptable to the Trustee.
"Outstanding" when used with respect to Notes means, as of the
date of determination of Notes Outstanding, all Notes theretofore authenticated
and delivered under this Indenture, except:
(a) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Notes for whose payment or redemption money in the
necessary amount has been theretofore irrevocably deposited with the Trustee or
any Paying Agent in trust for the Holders of such Notes, provided that, if such
Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee
has been made; and
(c) Notes which have been paid pursuant to Section 3.06
or authenticated and delivered in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture, other than
any such Notes in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Notes are held by a bona fide
purchaser in whose hand such Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Notes Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or Affiliate of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes which the Trustee has actual knowledge to be so
owned shall be so disregarded. Notes so
8
<PAGE> 14
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Company or
any other obligor upon the Notes or any Affiliate of the Company or Affiliate
of such other obligor.
"OTS" means the Office of Thrift Supervision or any successor
thereto.
"Pari Passu Indebtedness" means any Indebtedness of the
Company that is pari passu in right of payment of principal, premium (if any)
and interest thereon to the Notes.
"Paying Agent" means any Person authorized by the Company to
pay the principal of and premium, if any, or interest on any Notes on behalf of
the Company. Initially, the Paying Agent shall be the Trustee.
"Permitted Payment" means, so long as no Default or Event of
Default is continuing.
(a) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Capital Stock of the Company or any
Affiliate of the Company (other than a Wholly-Owned Subsidiary, which is
unrestricted), Pari Passu Indebtedness or Junior Indebtedness in exchange for
(including any such exchange pursuant to the exercise of a conversion right or
privilege where, in connection therewith, cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the Net Cash Proceeds or Fair Market
Value of property not constituting Net Cash Proceeds of, a substantially
concurrent issue and sale (other than to a Subsidiary of the Company or to an
employee benefit plan of the Company or any of its Subsidiaries) of Qualified
Capital Stock of the Company; provided that the Net Cash Proceeds or Fair
Market Value of such property received by the Company from the issuance of such
shares of Qualified Capital Stock, to the extent so utilized, shall be excluded
from clause (c)(iii) of Section 10.12 hereof; and
(b) the repurchase, redemption, defeasance or other
acquisition or retirement for value of any Pari Passu Indebtedness or Junior
Indebtedness in exchange for, or out of the Net Cash Proceeds of, a
substantially concurrent issue and sale (other than to a Subsidiary of the
Company) of new Indebtedness of the Company (such a transaction, a
"refinancing"); provided, that any such new Indebtedness of the Company (i)
shall be in a principal amount that does not exceed an amount equal to the sum
of (A) the principal amount of the Indebtedness so refinanced less any discount
from the face amount of such Indebtedness to be refinanced expected to be
deducted from the amount payable to the holders of such Indebtedness in
connection with such refinancing, (B) the amount of any premium expected to be
paid in connection with such refinancing pursuant to the terms of any Pari
Passu Indebtedness or Junior Indebtedness refinanced or the amount of any
premium reasonably determined by the Company as necessary to accomplish such
refinancing by means of a tender offer, privately negotiated repurchase or
otherwise and (C) the amount of legal, accounting, printing and other similar
expenses of the Company incurred in connection with such refinancing; provided,
further, that for purposes of this clause (i), the principal amount of any
Indebtedness shall be deemed to mean the principal amount thereof or, if such
Indebtedness provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration thereof, such
9
<PAGE> 15
lesser amount as of the date of determination; (ii) (A) if such refinanced
Indebtedness has an Average Life to Stated Maturity shorter than that of the
Notes or a final Stated Maturity earlier than the final Stated Maturity of the
Notes, such new Indebtedness shall have an Average Life to Stated Maturity no
shorter than the Average Life to Stated Maturity of such refinanced
Indebtedness and a final Stated Maturity no earlier than the final Stated
Maturity of such refinanced Indebtedness or (B) in all other cases each Stated
Maturity of principal (or any required repurchase, redemption, defeasance or
sinking fund payments) of such new Indebtedness shall be after the final Stated
Maturity of principal of the Notes then outstanding; and (iii) is (A) made
expressly subordinated to or pari passu with the Notes to substantially the
same extent as the Indebtedness being refinanced or (B) expressly subordinate
to such refinanced Indebtedness.
"Person" means any natural person, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Place of Payment" means a city or any political subdivision
thereof designated as such in Article Three.
"Predecessor Notes" of any particular Note means every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 3.06 in exchange for or in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Qualified Capital Stock" of any Person means any and all
Capital Stock of such Person other than Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price" when used with respect to any Note to be
redeemed means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreements" means the Registration Rights
Agreement, dated as of December 31, 1997, between the Company and Friedman,
Billings, Ramsey & Co., Inc., as initial purchaser.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the date specified for that purpose in Section 3.07.
"Regulatory Capital Requirements" means (i) the capital
requirements required to be maintained by the Bank in order to be "adequately
capitalized" pursuant to 12 U.S.C. Section 1831o and 12 C.F.R. Part 565 (and
any amendment to either thereof) or any successor law or regulation, (ii) the
minimum amount of capital required to meet each of the industry-wide regulatory
capital requirements applicable to the Bank pursuant to 12 U.S.C. Section
1464(t) and 12 C.F.R. Part 567 (and any amendment to either thereof) or any
successor law or regulation,
10
<PAGE> 16
and (iii) such higher amount of capital as the Bank, individually, is required
to maintain in order to meet any individual minimum capital standard applicable
to the Bank pursuant to 12 U.S.C. Section 1464(s) and 12 C.F.R. Section 567.3
(and any amendment to either thereof) or any successor law or regulation.
"Responsible Officer" when used with respect to the Trustee
means any officer of the Trustee with responsibility of the administration of
this Indenture and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Payment" means
(a) the declaration, payment or setting apart of any
funds for the payment of any dividend on, or making of any distribution to
holders of, the Capital Stock of the Company or any Subsidiary of the Company
(other than (i) dividends or distributions in Qualified Capital Stock of the
Company and, and (ii) dividends or distributions payable on or in respect of
any class or series of Capital Stock of a Subsidiary of the Company as long as
the Company receives at least its pro rata share of such dividends or
distributions in accordance with its ownership interests in such class or
series of Capital Stock);
(b) the purchase, redemption or other acquisition or
retirement for value, directly or indirectly, of any Capital Stock of the
Company or any Affiliate of the Company (other than a Wholly-Owned Subsidiary);
or
(c) the making of any principal payments on, or
repurchase, redemption, defeasance, retirement or other acquisition for value,
directly or indirectly, of any Pari Passu Indebtedness or Junior Indebtedness,
prior to the Stated Maturity of principal or scheduled redemption or defeasance
of, or any scheduled sinking fund payment on, such Pari Passu Indebtedness or
Junior Indebtedness.
"Rule 144A Note" means a Note that is not an Exchange Note.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes due 2000" means the Company's Senior Notes due
2000.
"Series A Preferred Stock" means the Company's Cumulative
Preferred Stock, Series A.
"Special Record Date" for the payment of any Defaulted
Interest, as defined in Section 3.07, means a date fixed by the Trustee
pursuant to Section 3.07.
"Stated Maturity" when used with respect to any Indebtedness
or any installment of interest thereon means the date specified in the
instrument governing such Indebtedness as the fixed dates on which any
principal amount of such Indebtedness is due and payable (including, without
limitation, by reason of any required redemption, purchase, defeasance or
sinking fund
11
<PAGE> 17
payment) and, when used with respect to any installment of interest on
Indebtedness, means the date on which such installment is due and payable.
"Subsidiary" means any corporation of which at least a
majority of the outstanding stock having ordinary voting power to elect a
majority of the directors of such corporation, irrespective of whether or not
at the time stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency, is at
the time directly or indirectly owned by the Company, by one or more
Subsidiaries of the Company, or by the Company and one or more Subsidiaries.
"Tax Sharing Agreement" means any tax allocation agreement as
may be entered into by the Company and some or all of its Subsidiaries.
"Tax Sharing Payments" means any payment made pursuant to the
Tax Sharing Agreement in accordance with the terms thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, as in force at the date as of which this instrument was executed,
except as otherwise provided in Section 9.06.
"Vice President' when used with respect to the Company or the
Trustee means any vice president, whether or not designated by a number or a
word or words before or after the title "vice president."
"Voting Stock" means Capital Stock of any class or classes,
however designated, having ordinary voting power for the election of a majority
of the board of directors, other than stock having such power only by reason of
the occurrence of a contingency.
"Wholly Owned Subsidiary" means a Subsidiary of which all of
the outstanding Capital Stock (other than directors' qualifying shares) is at
the time directly or indirectly owned by the Company, or by one or more Wholly
Owned Subsidiaries or by the Company and one or more Wholly Owned Subsidiaries.
SECTION 1.02. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such certificate or opinion is specifically required by
any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
12
<PAGE> 18
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he or she has made such examination or investigation as is
necessary to enable him or her to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case in which several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary (except in the case of a natural person) that all such matters be
certified by, or covered by the opinion of, only one representative of such
Person, or that they be so certified or covered by only one document, but one
representative of such Person may certify or give an opinion with respect to
some matters and one or more other representatives of such Person may certify
or give an opinion as to other matters, and any duly authorized representative
of such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations, with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, any officer of the Company
who may sign an Officers' Certificate, stating that the information with
respect to such factual matters is in the possession of the Company, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters is or
are erroneous.
Where any Person is required to make, give or execute two or
more applications, request, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 1.04. ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Noteholders may be embodied
13
<PAGE> 19
in and evidenced by one or more instruments of substantially similar tenor
signed by such Noteholders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee,
and, where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as an "Act"of the Noteholders signing such instruments or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose under this
Indenture and, subject to Section 6.01, conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section 1.04.
Without limiting the generality of the foregoing, a
Noteholder, including the Depositary that is a Noteholder of a Global Note, may
make, give or take, by a proxy or proxies, duly appointed in writing, any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted in this Indenture to be made, given or taken by
Noteholders, and the Depositary that is a Noteholder of a Global Note may
provide its proxy or proxies to the beneficial owners of interest in any such
Global Note.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be provided in any reasonable manner which
the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Holder of any Note shall bind
the Holder of every Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done or suffered
to be done by the Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 1.05. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders or other document provided for or
permitted by this Indenture to be made upon, given or furnished to, or filed
with,
(1) the Trustee by any Noteholder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its principal corporate trust office
specified in the first paragraph of this Indenture or at any other address
furnished in writing to the Noteholders or the Company by the Trustee, or
(2) the Company by the Trustee or by any Noteholder shall
be sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the first
paragraph of this instrument or at any other address furnish in writing to the
Trustee by the Company.
14
<PAGE> 20
SECTION 1.06. NOTICE TO NOTEHOLDERS; WAIVER.
Where this Indenture provides for notice to Noteholders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Noteholder affected by such event, at such Noteholder's address as it
appears in the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. In any case
where notice to Noteholders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Noteholder
shall affect the sufficiency of such notice with respect to other Noteholders.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event required to have been described in such notice, and such
wavier shall be the equivalent of such notice. Waivers of notice by
Noteholders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
wavier.
In case, by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impracticable to give such notice
by mail as required by this Indenture, then such notification as shall be made
with the approval of the Trustee shall constitute a sufficient notification for
every purpose hereunder.
In case, by reason of the suspension of publication of any
Authorized Newspaper, or by reason of any other cause, it shall be impossible
to make publication of any notice in an Authorized Newspaper or Authorized
Newspapers as required by this Indenture, then such method of publication or
notification as shall be made with the approval of the Trustee shall constitute
a sufficient publication of such notice.
SECTION 1.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of
Contents hereof are for convenience only and shall not affect the construction
hereof.
SECTION 1.08. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 1.09. SEPARABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired.
15
<PAGE> 21
SECTION 1.10. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Noteholders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.11. GOVERNING LAW.
This Indenture and each Note shall be governed by and
construed in accordance with the laws of the State of New York as applied to
contracts made or investments entered into and, in each case, made and
performed in the State of New York without regard to principles of conflicts of
laws.
SECTION 1.12. COMPLIANCE WITH TRUST INDENTURE ACT.
This Indenture is subject to and shall be governed by the
provisions of the Trust Indenture Act that are required to be a part of this
Indenture. If any provision hereof limits, qualifies or conflicts with another
provision which is required under or deemed to be included in this Indenture by
any of the provisions of the Trust Indenture Act, such required or deemed
provisions shall control.
SECTION 1.13. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity of any Note shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Notes (other than a provision of the Notes which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or
principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be.
SECTION 1.14. NO RECOURSE AGAINST OTHERS.
This Indenture and the Notes are solely corporate obligations
of the Company. No recourse shall be had against, and no personal liability
shall attach to, any director, officer, employee, incorporator, stockholder or
Affiliate, past, present or future, of the Company or any successor thereto, or
any of them, because of the creation of the indebtedness hereby authorized, or
under, upon or by reason of any obligation, covenant or agreement contained in
this Indenture or in any of the Notes or implied therefrom or any claim based
thereon or in respect thereof; it being expressly understood that all such
recourse and personal liability are hereby expressly waived and released as a
condition of, and as consideration for, the execution of this Indenture and the
issuance of such Notes.
16
<PAGE> 22
ARTICLE TWO
NOTE FORMS
SECTION 2.01. FORMS GENERALLY.
The Notes and the certificates of authentication thereon shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange, or as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Notes.
The definitive Notes shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or in such other manner as the Company may deem appropriate, all as
determined by the officers executing such Notes, as evidenced by their
execution of such Notes.
SECTION 2.02. FORM OF FACE OF NOTE.
[If a Global Note to be held by The Depository Trust Company,
then insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS EXCHANGED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[If a Global Note, then insert - THIS IS A GLOBAL NOTE WITHIN
THE MEANING OF THE INDENTURE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL NOTE MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
[If a Rule 144A Note(s), then insert -- THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER
THIS NOTE NOR ANY INTEREST OR
17
<PAGE> 23
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS
NOTE) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS NOTE
IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (a) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
COMPANY OR THE TRUSTEE PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT
TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii)
PURSUANT TO CLAUSE (D), TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE COMPANY A
LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING
MEMORANDUM DATED DECEMBER 24, 1997. SUCH HOLDER FURTHER AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.]
THE NOTES ARE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND INTEGRAL
MULTIPLES OF $1,000 FOR ANY AMOUNT IN EXCESS THEREOF. ANY SUCH TRANSFER OF
NOTES IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000
SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER AND ANY TRANSFEREE
OF SUCH BLOCK OF NOTES SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH NOTES FOR
ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF PRINCIPAL, PREMIUM (IF
ANY) OR INTEREST OF SUCH NOTES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO
INTEREST WHATSOEVER IN SUCH NOTES.
18
<PAGE> 24
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR (ii) THE ACQUISITION AND HOLDING OF THIS NOTE BY IT IS NOT
PROHIBITED BY EITHER SECTION 406 OF ERISA OR SECTION 4975 OF THE U.S. INTERNAL
REVENUE CODE OF 1986, AS AMENDED, OR EXEMPT FROM ANY SUCH PROHIBITION.
19
<PAGE> 25
HAWTHORNE FINANCIAL CORPORATION
12.50% NOTE DUE 2004
CUSIP No. _____________
$_____________________ No.___________
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR A DEPOSIT AND IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OF THE UNITED STATES.
Hawthorne Financial Corporation, a Delaware corporation
(together with any successor corporation that is permitted under the Indenture
hereinafter referred to, herein called the "Company"), for value received,
hereby promises to pay to ________________________, or registered assigns, the
principal sum of ______________ Dollars on December 31, 2004, and to pay
interest thereon at the rate of 12.50% per annum from December 31, 1997 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually, commencing June 30, 1998, and each June 30 and
December 31 thereafter, until the principal hereof is paid or made available
for payment, and (to the extent that the payment of such interest shall be
legally enforceable) at the rate of 12.50% per annum on any overdue principal
(and premium, if any) and on any overdue installment of interest until paid.
[If a Rule 144A Note(s), then insert -- Pursuant to the Registration Rights
Agreement, in certain limited circumstances the Company will be required to pay
Additional Interest (as defined in the Registration Rights Agreement) with
respect to this Note.]
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be
calculated on the basis of a 360-day year of twelve 30-day months, and will be
paid to the Person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the Regular Record Date for such
interest, which shall be each June 15 and December 15 prior to the applicable
Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the registered Holder on
such Regular Record Date, and may be paid to the Person in whose name this Note
(or one or more Predecessor Notes) is registered at the close of business on a
Special Record Date for the payment of such defaulted interest to be fixed by
the Trustee, notice whereof shall be given to the Holders not less than ten
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture. Payment of the
principal of and interest on this Note will be made at the office or agency of
the Company maintained for that purpose in New York, New York or at such other
office or agency as may be established by the Company pursuant to the Indenture
(initially the principal corporate trust office of the Trustee in New York, New
York), in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that, at the option of the Company, payment of interest may be made
(subject to collection) by check mailed to the address of the Person entitled
thereto as such address shall appear on the Note Register.
20
<PAGE> 26
Reference is hereby made to the further provisions of this
Note set forth on the reverse side hereof and such further provisions shall for
all purposes have the same effect as though fully set forth at this place.
This Note shall not be entitled to any benefit, or be valid or
obligatory for any purpose under the Indenture until the certificate of
authentication hereon shall have been manually signed by the Trustee.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its name by the manual or facsimile signature of its Chairman,
President or Vice President and its corporate seal, or a facsimile thereof,
impressed or imprinted hereon, attested by the manual or facsimile signature of
its Secretary or Assistant Secretary.
Date:
HAWTHORNE FINANCIAL CORPORATION
[Corporate Seal]
By: _______________________________________________
Chairman, President or Vice President
Attest:______________________________________________
Secretary or Assistant Secretary
SECTION 2.03. FORM OF REVERSE OF NOTE.
This Note is one of a duly authorized issue of Notes of the
Company designated as its 12.50% Notes due 2004 (herein called the "Notes"),
limited in aggregate principal amount to $40,000,000, issued and to be issued
under an Indenture dated as of December 31, 1997 (herein called the
"Indenture"), between the Company and United States Trust Company of New York,
as Trustee (herein called the "Trustee," which term includes any successor
Trustee under the Indenture), to which the Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights thereunder of the Company, the Trustee and the Holders of the Notes, and
the terms upon which the Notes are, and are to be, authenticated and delivered.
Copies of the Indenture and all indentures supplemental thereto will be made
available to the Holders for inspection during normal business hours at the
principal office of the Company, which on the date hereof is located at 2381
Rosecrans Avenue, El Segundo, California 90245, and copies of the Indenture
and all indentures supplemental thereto will be mailed to any Holder by the
Company upon the Company's receipt of the written request of such Holder, sent
to the Company addressed to the attention of the Company's Corporate Secretary
at the principal office of the Company.
The indebtedness of the Company evidenced by the Notes,
including the principal thereof and interest thereon (including post- default
interest), (a) is, to the extent and in the manner set forth in the Indenture,
subordinate and junior in right of payment to the Trustee's
21
<PAGE> 27
fees and expenses, and (b) is not secured by any collateral, including the
assets of the Company or any of its Affiliates. Each Holder of a Note, by
acceptance hereof, agrees to and shall be bound by such provisions of the
Indenture and all other provisions of the Indenture.
The Notes may be redeemed in whole or in part at any time, or
from time to time, on or after December 31, 2002, at the Redemption Prices
(expressed in percentages of principal amount) set forth below, plus in each
case an amount equal to accrued interest to (but excluding) the Redemption
Date:
If redeemed during the twelve-month period,
<TABLE>
<CAPTION>
Beginning December 31,
----------------------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . 106.250%
2003 (and thereafter) . . . . . . . . . . . . . . 103.125
</TABLE>
If an Event of Default under the Indenture shall occur and be
continuing, the principal of all the Notes may be declared due and payable in
the manner and with the effect provided in the Indenture. The Indenture
provides that such declaration and its consequences may, in certain events, be
annulled by the Holders of a majority in principal amount of the Notes
Outstanding.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under the
Indenture at any time by the Company with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding, as
determined in accordance with the Indenture. The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount
of the Notes at the time Outstanding, on behalf of the Holders of all the
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by a Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made on
this Note.
Unless the context requires, any Rule 144A Notes and any
Exchange Notes shall constitute one series for all purposes under the
Indenture, including without limitation amendments, waivers, redemptions and
Offers to Purchase.
No references herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest on this Note at the times, places and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, this Note is transferable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company to be maintained for that purpose in New York,
New York, or at such other office or agency as may be established by the
22
<PAGE> 28
Company for such purpose pursuant to the Indenture (initially the principal
corporate trust office of the Trustee in New York, New York), duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed by, the Holder hereof or his or
her attorney duly authorized in writing, and thereupon one or more new Notes,
of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
Section 10.18 of the Indenture provides that upon the
occurrence of a Change of Control and subject to further limitations contained
therein, the Company shall make an offer to purchase the Notes in accordance
with the procedures set forth in the Indenture.
All Notes are issuable and transferable only in fully
registered form, without coupons, in denominations of $100,000 or integral
multiples of $1,000 in excess thereof. Any transfer of Notes in a block having
an aggregate principal amount of less than $100,000 shall be deemed to be void
and of no legal effect whatsoever. As provided in the Indenture and subject to
certain limitations therein set forth, Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
No recourse shall be had for the payment of the principal of
or interest on this Note, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
at law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
of the issue hereof, expressly waived and released.
Certain capitalized terms used in this Note which are not
defined herein have the meanings set forth in the Indenture and exhibits
thereto.
Subject to Section 3.07 hereof, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note be overdue, and neither the Company, the Trustee, nor any such agent shall
be affected by notice to the contrary.
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 10.18 of the Indenture, check the box below:
[ ]
23
<PAGE> 29
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 10.18 of the Indenture, state the amount:
$_______________
Date: ________________ Your Signature:_______________________________________
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a member firm of the
New York Stock Exchange or a commercial bank or trust
company)
SECTION 2.04. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned Indenture.
Dated:
________________________________
_______, as Trustee
By:__________________________________
Authorized Signatory
ARTICLE THREE
THE NOTES
SECTION 3.01. TITLE AND TERMS.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $40,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of other Notes pursuant to Sections 3.04, 3.05,
3.06 and 9.05 or in connection with an Offer to Purchase Notes pursuant to
Section 10.18. The Company may issue Exchange Notes from time to time in
connection with an Exchange Offer pursuant to a Board Resolution, subject to
Section 3.03, included in an Officers' Certificate delivered to the Trustee and
in authorized denominations in exchange for a like principal amount of Rule
144A Notes. Upon any such exchange the Rule 144A Notes shall be cancelled in
accordance with Section 3.09 and shall no longer be deemed Outstanding for any
purpose. In no event shall the aggregate principal amount of Outstanding Rule
144A Notes and Exchange Notes exceed $40,000,000.
The Notes shall be known and designated as the 12.50% Notes
due 2004 of the Company. The Stated Maturity of the principal thereof shall be
December 31, 2004, and shall
24
<PAGE> 30
bear interest from the date and at the rate per annum specified in, and such
interest shall be payable on the dates specified in, the form of Note set forth
in Sections 2.02 and 2.03, until the principal thereof is paid or made
available for payment.
The principal of (and premium, if any) and interest on the
Notes shall be payable at the office or agency of the Company maintained for
such purposes in New York, New York ("Place of Payment"), or at such other
office or agency as may be established by the Company (initially the principal
corporate trust office of the Trustee in New York, New York) pursuant to
Section 10.02, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that, at the option of the Company, payment of interest may
be made (subject to collection) by check mailed to the address of the Person
entitled thereto as such address shall appear on the Note Register.
The Depository for the Rule 144A Notes to be authenticated and
delivered in the form of a Global Note or Notes upon original issuance shall be
The Depository Trust Company ("DTC"). DTC or any successor Depositary must, at
all times while it serves as such Depositary, be a clearing agency registered
under the Exchange Act and any other applicable statute or regulation.
The Notes shall be subject to repurchase by the Company
pursuant to an Offer to Purchase as provided in Section 10.18.
The Notes shall be redeemable as provided in Article Eleven.
The Notes shall be subject to defeasance at the option of the
Company as provided in Article Twelve.
The Notes issued under any provision of this Indenture shall
bear the applicable legends contained in the form of Note set forth in Section
2.02, unless the Company shall have delivered a Company Order to the Trustee
directing that the Note may be issued without such legend(s) thereon.
Unless the context otherwise requires, the Rule 144A Notes and
the Exchange Notes shall constitute one series for all purposes under the
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
SECTION 3.02. DENOMINATIONS.
The Notes shall be issuable and transferable only in
registered form without coupons and only in denominations of $100,000 and any
integral multiple of $1,000 above that amount. Any transfer of Notes in a
block having an aggregate principal amount of less than $100,000 shall be
deemed to be void and of no legal effect whatsoever. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
25
<PAGE> 31
SECTION 3.03. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Notes shall be executed on behalf of the Company by its
Chairman, President or one of its Vice Presidents under its corporate seal
reproduced thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Notes may be manual
or facsimile.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Notes or
did not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Notes; and the Trustee shall
authenticate and deliver such Notes as in this Indenture provided and not
otherwise.
At any time and from time to time after the execution and
delivery of this Indenture and after the effectiveness of a registration
statement under the Securities Act with respect thereto, the Company may
deliver Exchange Notes in exchange for Outstanding Rule 144A Notes, executed by
the Company, together with a Company Order for the authentication and delivery
of such Notes (as well as for the cancellation of a like principal amount of
Rule 144A Notes in accordance with Section 3.09 of this Indenture) and the
Trustee in accordance with the Company Order shall authenticate and deliver
such Notes.
In authenticating Notes in accordance with any Company Order
as provided in the preceding two paragraphs, the Trustee shall be entitled to
receive, and (subject to Section 6.01) shall be fully protected in relying
upon, an Opinion of Counsel stating,
(a) that such Notes when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to the
conditions specified in such Opinion of Counsel will constitute valid
and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles; and
(b) if applicable, that the issuance of the Exchange
Notes in exchange for the Rule 144A Notes has been effected in
compliance with the Securities Act.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
26
<PAGE> 32
The Company shall execute and the Trustee shall authenticate
one or more Global Notes that (i) shall represent an aggregate amount equal to
the aggregate principal amount of such of the Outstanding Notes as the Company
shall have directed the Trustee to authenticate in the form of a Global Note or
Global Notes, (ii) shall be registered in the name of the Depositary or the
nominee of the Depositary, (iii) shall be delivered by the Trustee to the
Depositary or pursuant to the Depositary's instruction and (iv) shall bear a
legend(s) substantially as provided in the form of Note contained in Section
2.02 (or in the form required by the Depositary).
SECTION 3.04. TEMPORARY NOTES.
Pending the preparation of definitive Notes, the Company may
execute and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued, but with such
appropriate insertions, omissions, substitutions or other variations as the
officers executing such Notes may determine to be necessary or appropriate, as
evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company in a Place of Payment, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of authorized denominations. Until
so exchanged the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
SECTION 3.05. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at one of its offices or
agencies maintained pursuant to Section 10.02, a register (herein sometimes
referred to as the "Note Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. Said office or agency is hereby initially
appointed "Note Registrar" for the purpose of registering Notes and transfers
of Notes as herein provided. Such Note Register shall distinguish between Rule
144A Notes and Exchange Notes.
Upon surrender for registration of transfer of any Note at the
office or agency of the Company in the Place of Payment, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denominations, of a like aggregate principal amount
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Notes which the Noteholder making
the exchange is entitled to receive.
27
<PAGE> 33
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and (subject to the provisions in the Rule 144A Notes regarding payment
of Additional Interest) entitled to the same benefits under this Indenture as
the Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing. As a condition to the registration of transfer of any Rule 144A
Notes, the Company or the Trustee may require evidence reasonably satisfactory
to it as to compliance with the restrictions set forth in the legend referred
to below.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Sections 3.04 and 9.05 or in accordance with any Offer to
Purchase pursuant to Section 10.18 not involving any transfer.
The Company shall not be required (i) to issue, transfer or
exchange any Note during a period beginning at the opening of business 15 days
before the day of the mailing of a notice of redemption of Notes selected for
redemption under Section 11.02 and ending at the close of business on the day
of such mailing, or (ii) to transfer or exchange any Note so selected for
redemption in whole or in part.
All Rule 144A Notes issued hereunder shall bear the legend as
provided in the form of Note contained in Section 2.02. All Rule 144A Notes
issued upon transfer or exchange or replacement thereof shall bear such legend
unless the Company shall have delivered to the Trustee (and the Note Registrar,
if other than the Trustee) a Company Order which states that the Note may be
issued without such legend thereon.
Notwithstanding any other provision of this Section, unless
and until it is exchanged in whole or in part for the individual Notes
represented thereby, a Global Note representing all or a portion of the Notes
may not be transferred except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
shall no longer be eligible under Section 3.01, the Company shall appoint a
successor Depositary. If a successor Depositary is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such ineligibility, the Company will execute, and the Trustee, upon receipt
of a Company Order for the authentication and delivery of individual Notes,
will authenticate and deliver individual Notes in an aggregate principal amount
equal to the principal amount of the Global Note or Global Notes representing
Notes in exchange for such Global Note or Global Notes.
28
<PAGE> 34
The Company may at any time and in its sole discretion
determine that individual Notes issued in the form of one or more Global Notes
shall in whole or in part no longer be represented by such Global Note or
Global Notes. In such event, or if an Event of Default has occurred and is
continuing, the Company will execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of individual Notes, will
authenticate and deliver, individual Notes in an aggregate principal amount
equal to the principal amount of the Global Note or Global Notes to be
exchanged therefor.
The Depositary may surrender a Global Note in exchange in
whole or in part for individual Notes on such terms as are acceptable to the
Company and such Depositary. Thereupon, the Company shall execute, and the
Trustee shall authenticate and deliver, without service charge,
(i) to each Person specified by such Depositary a new
individual Note or Notes of any authorized denomination as requested
by such Person in aggregate principal amount equal to and in exchange
for such Person's beneficial interest in the Global Note; and
(ii) to such Depositary a new Global Note in a
denomination equal to the difference, if any, between the principal
amount of the surrendered Global Note and the aggregate principal
amount of individual Notes delivered to Holders thereof.
Upon the exchange of a Global Note for individual Notes, such
Global Note shall be cancelled by the Trustee. Individual Notes issued in
exchange for a Global Note pursuant to this Section shall be registered in such
names and in such authorized denominations as the Depositary for such Global
Note, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee and the Company shall not
have any liability for the accuracy of the instructions received from the
Depositary. The Trustee shall deliver such Notes to the Persons in whose names
such Notes are so registered.
Neither the Company nor the Trustee shall have any
responsibility or obligation to any participant in the Depositary, any Person
claiming a beneficial ownership interest in the Notes under or through the
Depositary or any such participant, or any other Person which is not shown on
the Note Register as being a Holder, with respect to (1) the Notes; (2) the
accuracy of any records maintained by the Depositary or any such participant;
(3) the payment by the Depositary or any such participant of any amount in
respect of the principal of or premium or interest on the Notes; (4) any notice
which is permitted or required to be given to Holders of Notes under this
Indenture, (5) the selection by the Depositary or any such participant of any
Person to receive payment in the event of a partial redemption of the Notes; or
(6) any consent given or other action taken by the Depositary as Holder of
Notes.
SECTION 3.06. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
If (i) any mutilated Note is surrendered to the Trustee, or
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and (ii) there is delivered to the
Company and the Trustee such security or indemnity satisfactory to and as may
be required by each of them to hold each of them harmless, then, in the absence
29
<PAGE> 35
of prior written notice to the Company or the Trustee that such Note has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a new Note of like tenor
and principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Note, pay the Holder of such Note the entire
unpaid principal balance of such Note, together with all accrued but unpaid
interest thereon.
Upon issuance of any new Note under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses, including the fees and expenses of the Trustee, connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude, to the extent lawful, all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 3.07. PAYMENT OF INTEREST: INTEREST RIGHTS PRESERVED.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest payment
specified in this Article Three.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder; and, except as hereinafter provided, such Defaulted Interest may
be paid by the Company, at its election in each case, as provided in clause (1)
or clause (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of the Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
30
<PAGE> 36
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest, which shall not be more than 15 days nor less than ten days
prior to the date of the proposed payment and not less than ten days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Noteholder at his address as it appears in
the Note Register, not less than ten days prior to such Special Record Date.
The Trustee may, in its discretion, in the name and at the expense of the
Company, cause a similar notice to be published at least once in an Authorized
Newspaper in each Place of Payment, but such publication shall not be a
condition precedent to the establishment of such Special Record Date. Notice
of proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names the Notes (or their respective Predecessor Notes
with respect to transfers between a Special Record Date and the Interest
Payment Date related thereto) are registered on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this clause, such payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
The Regular Record Date referred to in this Section for the
payment of interest payable, and punctually paid or duly provided for, on any
Interest Payment Date shall be each June 15 or December 15 prior to the
applicable Interest Payment Date.
All payments of interest on the Notes to the Persons entitled
thereto, whether made by the Company, the Trustee or any Paying Agent, as
authorized pursuant to this Indenture, may be made by check mailed to the
address of the Person entitled thereto, as such address shall appear on the
Note Register.
SECTION 3.08. PERSONS DEEMED OWNERS.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name any Note is registered as the owner
of such Note for the purpose of receiving payment of principal of and premium,
if any, and (subject to Section 3.07) interest on, such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
31
<PAGE> 37
SECTION 3.09. CANCELLATION.
All Notes surrendered for payment, registration of transfer,
exchange or conversion shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and, if not already canceled, shall be
promptly canceled by it. The Company may at any time deliver to the Trustee
for cancellation any Notes previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly canceled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section, except as expressly permitted by this Indenture. All canceled
Notes held by the Trustee shall be destroyed and a certification of such
destruction shall and delivered to the Company unless by a Company Order the
Company shall direct that canceled Notes be returned to it.
SECTION 3.10. AUTHENTICATION AND DELIVERY OF ORIGINAL ISSUE.
Forthwith upon the execution and delivery of this Indenture,
or from time to time thereafter, Notes up to the aggregate principal amount of
$40,000,000 may be executed by the Company and delivered to the Trustee for
authentication upon original issue, and shall thereupon be authenticated and
delivered by the Trustee upon Company Order, without any further action by the
Company.
SECTION 3.11. COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as
to any surviving rights of conversion or registration of transfer or exchange
of Notes herein expressly provided for), and the Trustee, on Company Order of
and at the expense of the Company, shall execute the proper instrument
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and
delivered, other than (i) Notes which have been destroyed, mutilated, lost or
stolen, and which have been replaced or paid as provided in Section 3.06, and
(ii) Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 10.03, have been
delivered to the Trustee for cancellation; or
32
<PAGE> 38
(B) all such Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
Stated Maturity of the principal
thereof within one year, or
(iii) are to be called for redemption
within one year under arrangements
satisfactory to the Trustee for the
giving of notice of redemption by the
Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (B)(i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Trustee canceled or for cancellation, for
principal, premium, if any, and interest to the date of such deposit, in the
case of Notes which have become due and payable, or to the Stated Maturity or
Redemption Date of the principal thereof, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 6.07
and, if money shall have been deposited with the Trustee pursuant to subclause
(B) of clause (1) of this Section, the obligations of the Trustee under Section
4.02 and the last paragraph of Section 10.03 shall survive.
SECTION 4.02. APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Section 4.01
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal,
premium, if any, and interest for whose payment such money has been deposited
with the Trustee; but such money need not be segregated from other funds except
to the extent required by law.
33
<PAGE> 39
ARTICLE FIVE
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of the principal of or premium, if
any, on any Note at its Maturity; or
(2) default in the payment of any interest upon any Note when
it becomes due and payable, and continuance of such default for a period of 30
days; or
(3) default in the performance, or breach, of Section 8.01; or
(4) default, on the Change of Control Purchase Date, in
the purchase of Notes required to be purchased by the Company pursuant to an
Offer to Purchase which has been made to all Holders; or
(5) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture, other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in this
Section 5.01 specifically dealt with, and continuance of such default or breach
for a period of 30 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Notes, a written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(6) default by the Company or any Subsidiary of the
Company in the payment at stated maturity of any Indebtedness for money
borrowed by the Company or any Subsidiary of the Company with a principal
amount due at maturity which is equal to or greater than 5% of the Company's
Consolidated Tangible Net Worth, provided such default shall continue, without
having been satisfied, cured, waived or consented to, beyond any applicable
period of grace, and after acceleration of such Indebtedness, for 30 days; or
receipt by the Trustee of written notice of the occurrence of an event of
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any Subsidiary of the Company (or the payment of
which is guaranteed by the Company or any Subsidiary of the Company), whether
such Indebtedness or guarantee now exists or shall be created hereafter, and
such default shall continue, without having been satisfied, cured, waived or
consented to, beyond any applicable period of grace, and after acceleration of
such Indebtedness, for 30 days; provided, however, that no such event of
default shall constitute an Event of Default hereunder unless the effect of
such event of default is to cause the acceleration of such Indebtedness prior
to its expressed
34
<PAGE> 40
maturity, which together with the principal amount of any such other
Indebtedness so caused to be accelerated, aggregates an amount which is equal
to or greater than 5% of the Company's Consolidated Tangible Net Worth at any
one point in time and such default shall not have been cured or waived and such
acceleration shall not have been rescinded or annulled; or
(7) the entry of a decree or order by a court having
jurisdiction in the premises and adjudging the Company or the Bank a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
adjustment, arrangement, composition of or similar relief for the Company or
the Bank under the Federal Bankruptcy Act, or any other similar applicable law
of any governmental unit, domestic or foreign, and such decree or order shall
have continued undischarged or unstayed for a period of 60 consecutive days; or
a decree or order or other decision of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of the FDIC
or any other Person to act as a receiver or conservator or liquidator or
trustee or assignee in bankruptcy or insolvency of the Company, the Bank or of
a substantial part of either of its property, or for the involuntary winding up
or liquidation of either of its affairs, shall have been entered and such
decree or order shall have remained in force undischarged and unstayed for a
period of 60 consecutive days; or, under the provisions of any insolvency,
bankruptcy, or other law for the relief or aid of creditors or depositors, any
court, or agency or supervisory authority having jurisdiction in the premises
shall assume custody or control of the Company, the Bank or of a substantial
part of either of its property, and such custody and control shall not be
terminated or stayed within 60 days from the date of assumption of such custody
or control; or
(8) the institution of proceedings by either the Company
or the Bank to be adjudicated bankrupt or insolvent, or the consent by it to
the institution of a bankruptcy or insolvency proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization,
adjustment, arrangement, composition, appointment of a receiver or conservator
or similar relief under the Federal Bankruptcy Act, or any other similar
applicable law of any governmental unit, domestic or foreign, or the consent to
the filing of any such petition or the consent to the appointment of a receiver
or conservator or liquidator or trustee or assignee or sequestrator (or similar
official) in insolvency of the Company, the Bank or of a substantial part of
either of its property, or making by either of it of an assignment for the
benefit of creditors, or the admission by either of it in writing of its
inability to pay its debts generally as they become due, or voluntarily
suspending transaction of its business (other than in connection with a labor
dispute), or any corporate action taken by the Company or the Bank in
furtherance of any of the aforesaid purposes; or
(9) one or more final judgments, judicial decrees or
orders by a court having jurisdiction in the premises for the payment of an
amount of money which, individually or in the aggregate, is equal to or greater
than 5% of the Company's Consolidated Tangible Net Worth has been rendered
against the Company or any of its Subsidiaries and any such judgment, decree or
order has continued unsatisfied for a period of 60 consecutive days without a
stay of execution of such judgment, decree or order; or
35
<PAGE> 41
(10) failure by the Bank to comply with any of its
Regulatory Capital Requirements; provided, that an Event of Default under this
paragraph (10) shall not be deemed to have occurred (a) during the 45 day
period following the first day on which the Bank fails to comply with any of
its Regulatory Capital Requirements, if within such 45 day period the Bank
files a capital plan with the OTS, (b) during the 60 day period following the
initial submission of a capital plan to the OTS by the Bank (or, if the OTS
notifies the Bank in writing that it needs a longer period of time to determine
whether to approve such capital plan, such longer period as is so specified by
the OTS), unless prior to such date the OTS shall have notified the Bank of its
determination not to approve such capital plan, or (c) during the period that
the Bank is operating in material compliance with a capital plan approved by
the OTS; provided, further, that if the Bank meets the minimum amount of
capital required to meet each of the industry-wide regulatory capital
requirements pursuant to 12 U.S.C. Section 1464(t) and 12 C.F.R. Part 567 (and
any amendment to either thereof) or any successor law or regulation, then
notwithstanding the Bank's failure to meet an individual minimum capital
requirement pursuant to 12 U.S.C. Section 1464(s) and 12.C.F.R. Section 567.3
(and any amendment to either thereof) or any successor law or regulation, no
Event of Default shall have occurred pursuant to this paragraph 10 unless
written notice thereof shall have been given (x) to the Company by the Trustee
or (y) to the Company and the Trustee by the Holders of 25% in aggregate
principal amount of the Outstanding Notes; or
(11) failure by the Bank at any time to meet the Capital
Distribution Requirement, provided that an Event of Default under this
paragraph (11) shall not be deemed to have occurred if, notwithstanding the
foregoing, either (a) the Bank shall be permitted by the OTS and any other
applicable supervisory entity to make capital distributions to the Company in
an aggregate amount equal to the aggregate interest payments scheduled to be
made with respect to the Notes for the next succeeding Interest Payment Date or
(b) the Company shall have delivered to the Trustee an Officers' Certificate
within 10 days after it first proposes to rely on this clause (b) (and shall
continue to deliver such an Officers' Certificate thereafter as of each
Interest Payment Date so long as it proposes to rely on this clause (b)), to
the effect that the Company has liquid assets equal to the aggregate interest
payments scheduled to be made with respect to the Notes for the next succeeding
Interest Payment Date.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default
specified in Section 5.01(7) or (8)) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Notes Outstanding may declare the principal of all the Notes to
be due and payable immediately, by a notice in writing to the Company, and to
the Trustee if given by Noteholders, and upon any such declaration such
principal and any accrued interest shall become immediately due and payable.
If an Event of Default specified in Section 5.01(7) or (8) occurs, the
principal of and any accrued interest on the Notes then Outstanding shall ipso
facto become immediately due and payable without any declaration or other Act
on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been
made but before a judgment or decree for payment of the money due has been
obtained by the Trustee as
36
<PAGE> 42
hereinafter in this Article provided, the Holders of a majority in principal
amount of the Notes Outstanding, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue installments of interest on all
Notes,
(B) the principal of and premium, if any, on any
Notes which have become due, otherwise than by such declaration of
acceleration, and, to the extent that payment of such interest is lawful,
interest thereon at the rate borne by the Notes,
(C) to the extent that payment of such interest
is lawful, interest upon overdue interest at the rate borne by the Notes, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of
the principal of Notes which have become due solely by such acceleration, have
been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if
(1) default is made in the payment of the principal of or
premium, if any, on any Note at the Maturity thereof or, with respect to any
Note required to have been purchased pursuant to an Offer to Purchase made by
the Company, at the Change of Control Purchase Date, or
(2) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and such
default continues for a period of 30 days,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Notes, the whole amount then due and payable on
such Notes for principal, premium, if any, and interest, with interest upon the
overdue principal and premium, if any, and, to the extent that payment of such
interest shall be legally enforceable, upon overdue installments of interest,
at the rate borne by the Notes; and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the
37
<PAGE> 43
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amount forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Noteholders by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 5.04. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, conservatorship,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or relative to
any other obligor upon the Notes or the property of the Company or of such
other obligor or their creditors, irrespective of whether the principal of the
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee, including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and of the Noteholders allowed in such
judicial proceeding, and
(2) to collect and receive any moneys or securities or
other property payable or deliverable upon the conversion or exchange of the
Notes or upon any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof,
38
<PAGE> 44
or to authorize the Trustee to vote in respect of the claim of any Noteholder
in any such proceeding.
SECTION 5.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 5.06. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium, if any, or interest, upon presentation of the Notes and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.07;
SECOND: In case the principal or premium, if any, of the
Notes shall not have become due, to the payment of interest on the Notes, in
the order of the maturity of the installments of such interest, with interest,
to the extent that such interest has been collected by the Trustee, upon the
overdue installments of interest at the rate borne by the Notes, such payments
to be made ratably to the persons entitled thereto, without discrimination or
preference;
THIRD: In case the principal or premium, if any, of the
Notes shall have become due, by declaration or otherwise, to the payment of the
whole amount then owing and unpaid upon the Notes for principal and interest,
with interest on the overdue principal and, to the extent that such interest
has been collected by the Trustee, upon overdue installments of interest at the
rate borne by the Notes; and in case such monies shall be insufficient to pay
in full the whole amount so due and unpaid upon the Notes, then to the payment
of such principal and interest, without preference or priority of principal
over interest, or of interest over principal, or of any installment of interest
over any other installment of interest, or of any Note over any other Note,
ratably to the aggregate of such principal and accrued and unpaid interest; and
FOURTH: The remainder, if any, shall be paid to the Company,
its successors or assigns, or as a court of competent jurisdiction may direct.
39
<PAGE> 45
SECTION 5.07 LIMITATION ON SUITS.
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate
principal amount of the outstanding Notes shall have made a written request to
the Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all Holders.
SECTION 5.08. UNCONDITIONAL RIGHT OF NOTEHOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and premium, if any, and, subject to
Section 3.07, interest on such Note on the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on the Redemption Date
or, in the case of an Offer to Purchase made by the Company and required to be
accepted as to such Note, on the Change of Control Purchase Date) and to
institute suit for the enforcement of any such payment, and such right shall
not be impaired or affected without the consent of such Holder.
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Noteholder has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Noteholder, then and in every such case the Company,
the Trustee and the Noteholders shall, subject to any determination in
40
<PAGE> 46
such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Trustee and
the Noteholders shall continue as though no such proceeding had been
instituted.
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 3.06, no right or remedy herein conferred upon or reserved to the
Trustee or to the Noteholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.11. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the
Noteholders, as the case may be.
SECTION 5.12. CONTROL BY NOTEHOLDERS.
The Holders of not less than a majority in principal amount of
the Outstanding Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not, as determined by the
Trustee in good faith by a Responsible Officer or Officers of the Trustee, be
in conflict with any rule of law or with this Indenture or expose the Trustee
to personal liability or be unjustly prejudicial to the Holders not joining in
any such direction, and
(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
SECTION 5.13. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of
the Outstanding Notes may on behalf of the Holders of all the Notes waive any
past default hereunder and its consequences, except a default
41
<PAGE> 47
(1) in the payment of the principal of, premium, if any,
or interest on any Note (including any Note which is required to have been
purchased pursuant to an Offer to Purchase which has been made by the Company),
or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 5.14. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any
Note by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate more than 10% in principal amount of the Outstanding
Notes, or to any suit instituted by any Noteholder for the enforcement of the
payment of the principal of or premium, if any, or interest on any Note (or, in
the case of redemption, on or after the Redemption Date or in the case of any
Offer to Purchase which has been made by the Company, on or after the Change of
Control Purchase Date).
SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants, to the extent that it may lawfully do
so, that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company, to the extent
that it may lawfully do so, hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
42
<PAGE> 48
ARTICLE SIX
THE TRUSTEE
SECTION 6.01. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent individual would exercise or use under the circumstances
in the conduct of his or her own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to
limit the effect of Subsection (a) of this Section 6.01;
(2) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of a majority in principal amount of the
Outstanding Notes relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee hereunder; and
(4) no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
43
<PAGE> 49
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 6.02. NOTICE OF DEFAULTS.
The Trustee shall transmit by mail to all Noteholders, as
their names and addresses appear in the Note Register, notice of such defaults
hereunder known to a Responsible Officer of the Trustee, as and to the extent
provided by the Trust Indenture Act, unless such default shall have been cured
or waived; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Note, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interests of the Noteholders; and
provided, further, that in the case of any default of the character specified
in Section 5.01(5), no such notice to Noteholders shall be given until at least
30 days after the occurrence thereof. For the purpose of this Section 6.02,
the term "default" means any event which is, or after notice or lapse of time
or both would become, an Event of Default.
SECTION 6.03. CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Noteholders pursuant to this Indenture, unless such
Noteholders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
44
<PAGE> 50
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be charged with knowledge of
any Event of Default with respect to the Notes unless either (1) a Responsible
Officer of the Trustee assigned to the Corporate Trust Department of the
Trustee (or any successor division or department of the Trustee) shall have
actual knowledge of the Event of Default or (2) written notice of such Event of
Default shall have been given to a Responsible Officer of the Trustee by the
Company or any other obligor on the Notes or by any Noteholder.
SECTION 6.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Notes and
perform its obligations hereunder and that the statements made by it in any
Statement of Eligibility and Qualification on Form T-1 supplied to the Company
are true and accurate, subject to the qualifications set forth therein. The
Trustee shall not be accountable for the use or application by the Company of
the Notes or the proceeds thereof.
SECTION 6.05. MAY HOLD NOTES.
The Trustee, any Paying Agent, the Note Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Notes and, subject to Sections 6.08 and 6.13, if operative,
may otherwise deal with the Company with the same rights it would have if it
were not a Trustee, Paying Agent, Note Registrar or such other agent.
SECTION 6.06. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
45
<PAGE> 51
SECTION 6.07. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel), except any
such expense, disbursement or advance as may be attributable to its negligence
or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of enforcing
this Indenture (including Section 6.07) against the Company and of defending
itself against any claim or liability (whether asserted by any Noteholder or
the Company) in connection with the exercise or performance of any of its
powers or duties hereunder.
As security for the performance of the obligations of the
Company under this Section 6.07, the Trustee shall have a lien prior to the
Notes upon all property and funds held or collected by the Trustee as such,
except funds expressly designated and held in trust for the payment of
principal of, premium, if any, or interest on Notes. The Trustee's right to
receive payment of any amounts due under this Section 6.07 shall not be
subordinate to any other liability or indebtedness of the Company.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(7), the expenses
and the compensation for the services are intended to constitute expenses of
administration under any bankruptcy law.
The Company's obligations under this Section 6.07 and any lien
arising hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article Four of this
Indenture and/or the termination of this Indenture.
SECTION 6.08. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
a corporation organized and doing business under the laws of the United States
or of any state, authorized
46
<PAGE> 52
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000, subject to supervision or examination by
federal or state authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section 6.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section 6.09, it shall resign in the
manner and with the effect hereinafter specified in this Article Six.
SECTION 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If any instrument of acceptance by a successor
trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Notes, delivered
to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with
Section 6.08 after written request therefor by the
Company or any Noteholder who has been a bona fide
Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible
under Section 6.09 and shall fail to resign after
written request therefor by the Company or by any
such Noteholder, or
(3) the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent
or a receiver or conservator of the Trustee or of its
property shall be appointed or any public officer
shall take charge or control of the Trustee or of its
property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee or (ii) subject to Section 5.14, any Noteholder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
47
<PAGE> 53
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Noteholders and accepted appointment in the manner
hereinafter provided, any Noteholder who has been a bona fide Holder of a Note
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee by
mailing written notice of such event within 30 days of the date thereof by
first-class mail, postage prepaid, to the Holders of Notes as their names and
addresses appear in the Note Register. Each notice shall include the name of
the successor Trustee and the address of its principal corporate trust office.
SECTION 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee,
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 6.07. Upon request
of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article Six.
SECTION 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or
conveyed or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article Six, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Notes shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such
48
<PAGE> 54
authenticating Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes.
SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Notes), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTING BY TRUSTEE AND COMPANY
SECTION 7.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS.
The Company will furnish or cause to be furnished to the
Trustee (a) semi-annually, not more than three days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date, (b) at such other
times as the Trustee may request in writing, within 30 days after the receipt
by the Company of any such request, a list of similar form and content as of a
date not more than 15 days prior to the time such list is furnished; provided,
however, that during such time as the Trustee is the Note Registrar, no such
list shall be required to be furnished.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS.
(a) The Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.01 and the
names and addresses of Holders received by the Trustee in its capacity as Note
Registrar (if so acting). The Trustee may destroy any list furnished to it as
provided in Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other
Holders with respect to their rights under this Indenture or under the Notes,
and the corresponding rights and duties of the Trustee, shall be as provided in
the Trust Indenture Act.
(c) Every Holder of Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of information as to the names and addresses of the Holders in
accordance with the Trust Indenture Act.
(d) Unless the Trustee deems it inappropriate under the
circumstances, the Trustee will promptly provide the Company with copies of any
forms of notice or other communication sent to Holders.
49
<PAGE> 55
SECTION 7.03. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto. To the extent that any such report is required by the Trust
Indenture Act with respect to any 12-month period, such report shall cover the
12-month period ending May 15 and shall be transmitted by the next succeeding
May 15.
(b) A copy of each such report shall, at the time of such
transmission to Noteholders, be filed by the Trustee with the Commission, any
stock exchange upon which the Notes are listed, and also with the Company. The
Company will notify the Trustee when the Notes are listed on, or delisted from,
any stock exchange.
SECTION 7.04. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other reports, and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
SECTION 7.05. OFFICERS' CERTIFICATE WITH RESPECT TO ADDITIONAL INTEREST.
Within five Business Days after any event specified in the
Registration Rights Agreement which would require the payment of Additional
Interest or the cessation of any such payment, the Company shall deliver an
Officers' Certificate to the Trustee stating the new interest rate on the Notes
and the date on which it became effective.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.01. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not, in a single transaction or a series of
transactions, consolidate or merge with or into or transfer, sell, lease or
convey all or substantially all of its assets to another Person unless:
(1) either the Company shall be the entity surviving such
merger or consolidation or the corporation formed by or surviving such
consolidation or merger, or the Person to which such transfer, sale,
lease or conveyance shall have been made, shall be a corporation duly
organized and existing under the laws of the United States, any state
thereof or the District of Columbia and shall unconditionally
expressly assume by a supplemental indenture hereto, executed and
delivered to the Trustee, in form
50
<PAGE> 56
satisfactory to the Trustee, all the obligations of the Company under
the Notes and the Indenture; and
(2) immediately before and immediately after giving
effect to the transaction or series of transactions, no Default or
Event of Default shall have occurred and be continuing; and
(3) immediately after giving effect to the transaction or
series of transactions, the Company or the surviving entity, as
applicable, and their respective banking and thrift subsidiaries, as
applicable, shall be in compliance with all applicable regulatory
capital requirements; and
(4) immediately after giving effect to the transaction or
series of transactions, the Company or the surviving entity, as
applicable, could incur at least $1.00 of additional Funded
Indebtedness without violating Section 10.11(b) hereof; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, business combination, transfer, sale, lease or
conveyance and such supplemental indenture complies with this Article
and that all conditions precedent herein relating to such transaction
have been complied with.
SECTION 8.02. SUCCESSOR ENTITY SUBSTITUTED.
Upon any consolidation, merger of the Company into another
entity, business combination or transfer, conveyance, sale or lease of all or
substantially all of the properties and assets of the Company as an entirety in
accordance with Section 8.01, the successor entity formed by such consolidation
or business combination or into which the Company is merged or to which such
transfer, conveyance, sale or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor entity had been named
as the Company herein.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT NOTICE TO OR CONSENT OF
NOTEHOLDERS.
Without notice to or the consent of the Holders of any Notes,
the Company, when authorized by a Board Resolution, and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to the extent permitted under Article Eight hereof,
to evidence the succession of another entity to the Company, and the
assumption by any such successor of the covenants of the Company
herein and in the Notes; or
51
<PAGE> 57
(2) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company; or
(3) to secure the Notes or to add a guarantor; or
(4) to comply with any requirements of the Commission in
order to effect and maintain the qualification of this Indenture under
Trust Indenture Act; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture, provided such
action pursuant to this clause (5) shall not adversely affect the
interests of the Holders in any material respect.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Note affected thereby,
(1) change the Stated Maturity of the principal of, or
any installment of interest on, any Note, or reduce the principal
amount thereof or the interest thereon or change any Place of Payment
where, or the coin or currency in which, any Note or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date or, in the case of an Offer to Purchase which has been made, on
or after the Change of Control Purchase Date), or
(2) reduce the percentage in principal amount of the
Outstanding Notes, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences
provided for in this Indenture, or
(3) modify any of the provisions of this Section 9.02,
Section 5.13 or Section 10.20, except to increase any such percentage
of Holders whose consent is required under any such Section or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Note affected thereby.
52
<PAGE> 58
It shall not be necessary for any Act of Noteholders under this Section 9.02 to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article Nine or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and, subject to Section 6.01, shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture and that all conditions precedent to the execution and delivery of
such supplemental indenture by the Company and the Trustee have been complied
with. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this
Article Nine, this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Notes theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 9.05. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Notes so modified as to conform, in the opinion of the Trustee
and the Board of Directors, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article
shall conform with the requirements of the Trust Indenture Act as then in
effect if this Indenture shall then be qualified under the Trust Indenture Act.
53
<PAGE> 59
ARTICLE TEN
COVENANTS
SECTION 10.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM.
The Company will duly and punctually pay, or cause to be paid,
the principal of (and premium, if any) and interest on the Notes in accordance
with the terms of the Notes and this Indenture and will take any and all action
which may enable it to lawfully pay the principal of (and premium, if any) and
interest on any of the Notes when the same shall become due, whether at the
Maturity thereof, upon redemption, by declaration as authorized by this
Indenture, or otherwise.
SECTION 10.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain an office or agency in each Place of
Payment where Notes may be presented or surrendered for payment, where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and of any change in the location, of such office or agency. If
at any time the Company shall fail to maintain such office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the principal
corporate trust office of the Trustee, and the Company hereby appoints the
Trustee its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change
in the location of any such other office or agency.
SECTION 10.03. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of and premium, if any, or
interest on any of the Notes, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal and premium,
if any, or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and will promptly notify
the Trustee of its action or failure so to act. As provided in Section 5.04,
upon any bankruptcy or reorganization proceeding relative to the Company, the
Trustee shall serve as the Paying Agent and conversion agent (if any) for the
Notes.
Whenever the Company shall have one or more Paying Agents, it
will, on or prior to each due date of the principal of, premium, if any, of or
interest on, any Notes, deposit with a Paying Agent a sum sufficient to pay the
principal and premium, if any, or interest so
54
<PAGE> 60
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal or interest, and unless such Paying Agent is the
Trustee, the Paying Agent will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will
(1) hold all sums held by it for the payment of principal
of, premium, if any, or interest on the Notes in trust for the benefit
of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the
Company, or any other obligor upon the Notes, in the making of any
such payment of principal and premium, if any, or interest; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by Paying Agent to the
Trustee such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of and
premium, if any, or interest on any Note and remaining unclaimed for more than
two years after such principal and premium, if any, or interest has become due
and payable shall, subject to applicable law, be paid to the Company on Company
Request, or, if then held by the Company, shall be discharged from such trust;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be mailed or published once, in an
Authorized Newspaper in each Place of Payment or mail to each such Holder or
both, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, an unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 10.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, and will cause each Subsidiary to pay or discharge or cause to be
paid or discharged, before the same
55
<PAGE> 61
shall become delinquent, (1) all taxes, assessments and governmental charges
levied or imposed upon the Company or such Subsidiary or upon the income,
profits or property of the Company or such Subsidiary and (2) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Company or such Subsidiary; provided, however, that
the Company or such Subsidiary shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings or any such tax, assessment, charge or claim if not
disadvantageous in any material respect to the Noteholders.
SECTION 10.05. CORPORATE EXISTENCE.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and its Subsidiaries, and will comply in all material respects with all
statutes, rules, regulations and orders of and restrictions imposed by
governmental and administrative authorities and agencies applicable to the
Company and its Subsidiaries, a failure to comply with which would have a
material adverse effect on the Company and its Subsidiaries considered as a
single enterprise; provided, however, that the Company shall not be required to
preserve any right or franchise of the Company or its Subsidiaries if the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business the Company or its Subsidiaries and the loss
thereof is not disadvantageous in any material respect to the Noteholders.
SECTION 10.06. MAINTENANCE OF DEPOSITORY INSTITUTION SUBSIDIARY.
Subject to Section 8.01, the Company shall maintain at all
times as a Wholly-Owned Subsidiary an entity that is a bank or thrift or
substantially similar institution subject to regulation by federal or state
authorities and do all things necessary to ensure that savings accounts of the
Bank or such other institution are insured by the FDIC or any successor
organization up to the maximum amount permitted by the Federal Deposit
Insurance Act and regulations thereunder or any succeeding federal law
hereinafter enacted.
SECTION 10.07. MAINTENANCE OF PROPERTIES.
The Company will:
(a) cause all its properties and the properties of its
Subsidiaries used or useful in the conduct of the business of the Company and
its Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary facilities and equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided; however, that nothing in this
subsection shall prevent the Company or a Subsidiary from discontinuing the
operation and maintenance of any of its properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its business and
not disadvantageous in any material respect to the Holders; and
56
<PAGE> 62
(b) take all appropriate steps to maintain the licenses
and permits used in the conduct of the business of the Company and its
subsidiaries; provided, however, that nothing in this subsection shall prevent
the Company or a Subsidiary from selling, abandoning or otherwise disposing of
any such license or permit if such sale, abandonment or disposition is, in the
judgment of the Company, desirable in the conduct of its business and not
disadvantageous in any material respect to the Holders.
SECTION 10.08. INSURANCE.
The Company will at all times maintain and will cause each of
its Subsidiaries to maintain (either in the name of the Company or in such
Subsidiary's own name) with financially sound and reputable insurers, insurance
on all its properties in such amounts as management of the Company reasonably
determines is appropriate under the circumstances.
SECTION 10.09. BOOKS AND RECORDS.
The Company shall, and shall cause each Subsidiary to, at all
times keep proper books of record and account in which proper entries shall be
made in accordance with generally accepted accounting principles and, to the
extent applicable, regulatory accounting principles.
SECTION 10.10. STATEMENTS AS TO COMPLIANCE.
(a) The Company will deliver to the Trustee, within 90
days after the end of each fiscal year, a certificate signed by the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company stating, as to each signer thereof, that
(1) a review of the activities of the Company
during such year and of performance under this Indenture has been made
under his or her supervision; and
(2) to the best of his or her knowledge, based on
such review, the Company has fulfilled all its obligations under this
Indenture throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known
to him or her and the nature and status thereof.
(b) The Company shall deliver to the Trustee, as soon as
possible and in any event within 10 days after the Company becomes aware or
should reasonably become aware of the occurrence of a Default or an Event of
Default, an Officers' Certificate setting forth the details of such Default or
Event of Default and the action which the Company proposes to take with respect
thereto.
SECTION 10.11. LIMITATIONS ON INDEBTEDNESS.
(a) The Company will not create, incur, issue, assume,
guarantee or otherwise in any manner become directly or indirectly liable for
or with respect to, or otherwise permit to exist any Junior Indebtedness (other
than Acquired Indebtedness) unless the Stated Maturity of principal (or any
required repurchase, redemption, defeasance or sinking fund payments) of such
Junior Indebtedness is after the final Stated Maturity of principal of the
Notes.
57
<PAGE> 63
(b) The Company will not create, incur, assume, guarantee
or otherwise in any manner become directly or indirectly liable for or with
respect to, or otherwise permit to exist, any Funded Indebtedness (including
any Funded Indebtedness assumed in connection with the acquisition of assets
from another Person but excluding the Notes) unless at the time of such event
the principal amount of total Funded Indebtedness of the Company (including the
Notes) would not exceed 100% of the Company's Consolidated Tangible Net Worth,
provided that for purposes of this requirement Funded Indebtedness shall be net
of any fund or interest reserve account which has been established to fund the
payment of principal and/or interest on Funded Indebtedness.
(c) The Company will not permit the Bank to create or
incur, and will not permit any of the Bank's Subsidiaries to create or incur,
any Indebtedness that would qualify as regulatory capital for the Bank under 12
C.F.R. Part 567 (or any successor regulation) unless (i) the aggregate
principal amount thereof does not exceed 50% of the Bank's tangible common
equity and (ii) upon creation or incurrence thereof the Bank would meet any of
the capital requirements under 12 C.F.R. Part 565 (or any successor regulation)
which are necessary to enable the Bank to qualify as a "well capitalized"
institution under such regulations.
SECTION 10.12. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, make any Restricted Payment if, at the time of such
Restricted Payment or after giving effect thereto,
(a) a Default or Event of Default shall have occurred and
be continuing or would occur as a result thereof; or
(b) the Bank would fail to meet any of the applicable
capital requirements under 12 C.F.R. Part 565 (or any other successor
provision) which are necessary to enable the Bank to qualify as a
"well capitalized" institution under such regulations; or
(c) the aggregate amount of all Restricted Payments (the
amount of such payments, if other than in cash, having been determined
in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution filed with the Trustee)
declared and made after the issue date of the Notes would exceed the
sum of
(i) 33 1/3% of the aggregate Consolidated Net
Income (or, if such Consolidated Net Income is a deficit, 100%
of such deficit) of the Company accrued on a cumulative basis
during the period beginning on the first day of the fiscal
quarter during which the issue date of the initial series of
Notes issued under this Indenture occurred and ending on the
last day of the Company's last fiscal quarter ending prior to
the date of such proposed Restricted Payment, plus
(ii) the aggregate Net Cash Proceeds received by
the Company as capital contributions (other than from a
Subsidiary) after the issue date of the Notes issued under
this Indenture, plus
58
<PAGE> 64
(iii) the aggregate Net Cash Proceeds and the Fair
Market Value of property not constituting Net Cash Proceeds
received by the Company from the issuance or sale (other than
to a Subsidiary) of Qualified Capital Stock after the issue
date of the initial series of Notes issued under this
Indenture (except, in each case, to the extent such proceeds
are used to purchase, redeem, defease, make sinking fund
payments on or otherwise acquire or retire for value Junior
Indebtedness as set forth in clause (a) of the definition of
Permitted Payment herein), plus
(iv) 100% of the amount of any Indebtedness of the
Company or a Subsidiary that is converted into or exchanged
for Qualified Capital Stock of the Company after the issue
date of the Notes issued under this Indenture;
provided, however, that the foregoing provisions will not prevent (v) the
payment of a dividend within 60 days after the date of its declaration if at
the date of declaration such payment was permitted by the foregoing provisions,
(w) any Permitted Payment, (x) Tax Sharing Payments by the Company pursuant to
any Tax Sharing Agreement among the Company and its Subsidiaries which is in
accordance with applicable OTS requirements, (y) the prepayment of the Senior
Notes due 2000 outstanding as of the date of this Indenture in accordance with
their terms within 30 days after issuance of the Notes or (z) the redemption of
the 270 shares of Series A Preferred Stock outstanding as of the date of this
Indenture in accordance with their terms within 30 days after issuance of the
Notes.
SECTION 10.13. LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any of its
Subsidiaries to, create, assume or otherwise cause or suffer to exist or to
become effective any consensual encumbrance or restriction on the ability of
any such Subsidiary to:
(a) pay any dividends or make any other distribution on
its Capital Stock;
(b) make payments in respect of any Indebtedness owed to
the Company or any other Subsidiary; or
(c) make loans or advances to the Company or any
Subsidiary or to guarantee Indebtedness of the Company or any other Subsidiary;
other than, in the case of (a), (b) and (c),
(1) restrictions imposed by applicable laws and
regulations;
(2) restrictions existing under agreements in effect
on the date of this Indenture;
(3) consensual encumbrances or restrictions binding
upon any Person at the time such Person becomes a Subsidiary of the Company so
long as such encumbrances or
59
<PAGE> 65
restrictions are not created, incurred or assumed in contemplation of such
Person becoming a Subsidiary;
(4) restrictions on the transfer of assets which are
subject to Liens;
(5) restrictions existing under agreements
evidencing Indebtedness which is incurred after the date of this Indenture in
accordance with Section 10.11 hereof, provided that the terms and conditions of
any such restrictions are no more restrictive than those contained in this
Indenture; and
(6) restrictions existing under any agreement which
refinances or replaces any of the agreements containing the restrictions in
clauses (2), (3) and (5); provided that the terms and conditions of any such
restrictions are not less favorable to the Holders than those under the
agreement evidencing or relating to the Indebtedness refinanced.
SECTION 10.14. RESTRICTIONS ON ISSUANCE AND SALE OR DISPOSITION OF CAPITAL
STOCK OF SUBSIDIARIES.
The Company shall not sell, transfer or otherwise dispose of
shares of Capital Stock of the Bank or permit the Bank to issue, sell or
otherwise dispose of shares of its Capital Stock unless, in either case, the
Bank remains a Wholly Owned Subsidiary of the Company. The Company shall not
permit the Bank to merge or consolidate into or with any other Person (other
than the Company or another Wholly Owned Subsidiary of the Company) unless the
surviving entity is the Company or a Wholly Owned Subsidiary of the Company, or
permit the Bank to convey or transfer its properties and assets substantially
as an entirety to any Person except to the Company or to any Wholly Owned
Subsidiary of the Company. Upon any merger or consolidation of the Bank or
transfer of the properties and assets of the Bank substantially as an entirety
in accordance with this Section 10.14, the surviving entity shall thereafter be
deemed to be, and shall be substituted for, the Bank for all purposes under
this Indenture.
SECTION 10.15. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Subsidiary of
the Company to, directly or indirectly enter into any transaction (including,
without limitation, the purchase, sale, lease or exchange of property, the
rendering of any service or the making of any loan or advance, but excluding
transactions between the Company and Wholly Owned Subsidiaries of the Company)
with any Affiliate, unless
(i) such transaction is on terms no less favorable to the
Company or such Subsidiary than those that could be obtained in a
comparable arm's length transaction with an entity that is not an
Affiliate,
(ii) with respect to a transaction or series of
transactions involving aggregate value in excess of $1,000,000, the
Company delivers an Officers' Certificate to the Trustee certifying
that such transaction or series of transactions complies with clause
(i) above and has been approved by a majority of the Board of
Directors of the Company and evidenced by a Board Resolution and
60
<PAGE> 66
(iii) with respect to a transaction or series of
transactions involving aggregate value in excess of $5,000,000, the
Company delivers to the Trustee an opinion of a nationally recognized
investment banking firm stating that the transaction or series of
transactions is fair (from a financial point of view) to the Company.
The limitations set forth in this paragraph shall not apply to
(i) transactions entered into pursuant to any agreement already in effect on
the date of this Indenture, (ii) any employment agreements, stock option,
employee benefit, indemnification, compensation, business expense reimbursement
or other employment-related agreement, arrangement or plan entered into by the
Company or any of its Subsidiaries either (A) in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary or (B) which agreement, arrangement or plan was adopted by the Board
of Directors of the Company or such Subsidiary, as the case may be, (iii)
residential mortgage, credit card and other consumer loans to an Affiliate who
is an officer, director or employee of the Company or any of its Subsidiaries
and which comply with the applicable provisions of 12 U.S.C. Section 1468(b)
and any rules and regulations of the OTS thereunder, (iv) any Restricted
Payments or (v) any transaction or series of transactions in which the total
amount involved does not exceed $250,000.
SECTION 10.16. LIMITATIONS ON LIENS AND GUARANTEES.
(a) The Company shall not create, assume, incur or suffer
to exist any Lien upon (i) the Capital Stock of the Bank as security for
Indebtedness or (ii) any of the Company's property or assets (other than the
Capital Stock of the Bank) as security for Indebtedness of the Company having a
contractual time to maturity greater than one year or prior to the maturity of
the Notes without, in the case of either (i) or (ii), effectively providing
that the Notes will be equally and ratably secured with (or prior to) such
Indebtedness; provided that if such Indebtedness is Junior Indebtedness any
such security interest with respect to such Junior Indebtedness shall be
subordinated to the security interest with respect to the Notes to the same
extent as such Junior Indebtedness is subordinated to the Notes.
(b) The Company will not permit any Subsidiary of the
Company, directly or indirectly, to guarantee or assume, or subject any of its
assets to a Lien to secure, any Pari Passu Indebtedness or Junior Indebtedness
unless (i) such Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a guarantee of, or pledge of assets
to secure, the Notes by such Subsidiary on terms at least as favorable to the
Holders of the Notes as such guarantee or security interest in such assets is
to the holders of such Pari Passu Indebtedness or Junior Indebtedness, except
that in the event of a guarantee or security interest in such assets with
respect to (x) Pari Passu Indebtedness, the guarantee or security interest in
such assets under the supplemental indenture shall be made pari passu to the
guarantee or security interest in such assets with respect to Pari Passu
Indebtedeness or (y) Junior Indebtedness, any such guarantee or security
interest in such assets with respect to such Junior Indebtedness shall be
subordinated to such Subsidiary's guarantee or security interest in such assets
with respect to the Notes to the same extent as such Junior Indebtedness is
subordinated to the Notes and (ii) such Subsidiary waives, and agrees in
writing that it will not in any manner whatsoever claim, or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any
other rights against the Company or any other Subsidiary of the Company as a
result of any payment by such Subsidiary under its guarantees.
61
<PAGE> 67
SECTION 10.17. PROVISION OF FINANCIAL INFORMATION.
Whether or not the Company is subject to Section 13(a), 14 or
15(d) of the Exchange Act, or any successor provision thereto, the Company
shall prepare the annual reports, quarterly reports, proxy statements and other
documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a), 14 or 15(d) or any successor
provision thereto if the Company were so required, and, unless such filing is
not permitted under the Exchange Act, file such reports and other documents
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Company would have been required so to file such documents
if the Company were so required. The Company shall also in any event within
five days of each Required Filing Date (i) transmit by mail to all Holders, as
their names and addresses appear in the Note Register, without cost to such
Holders and (ii) file with the Trustee copies of such annual reports, quarterly
reports, proxy statements and other documents.
SECTION 10.18. OFFER TO PURCHASE UPON A CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Company shall
be obligated to make an offer to purchase (an "Offer to Purchase"), and shall,
subject to the provisions described below, purchase, on a Business Day (the
"Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then outstanding
Notes at a purchase price (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to (but excluding) the Change of Control Purchase Date. The Company shall,
subject to the provisions described below, be required to purchase all Notes
properly tendered in the Offer to Purchase and not withdrawn. Prior to the
mailing of the notice to Holders provided for below, the Company shall (i)
offer to repay in full all Indebtedness which by its terms requires repayment
by the Company prior to any repurchase by the Company of the Notes and repay
the Indebtedness of each lender who has accepted such offer or (ii) obtain the
requisite consent under such Indebtedness to permit the repurchase of the Notes
as provided for under this Section 10.18. If a notice has been mailed when
such condition precedent has not been satisfied, the Company shall have no
obligation to (and shall not) effect the purchase of Notes until such time as
such condition precedent is satisfied. Failure to mail the notice on the date
specified below or to have satisfied the foregoing condition precedent by the
date that the Notice is required to be mailed shall in any event constitute a
covenant Default under clause (5) of Section 5.01.
Notice of an Offer to Purchase shall be mailed by the Company
not later than the 30th day after the Change of Control to the Holders of Notes
at their last registered addresses with a copy to the Trustee and the Paying
Agent. The Offer to Purchase shall remain open from the time of mailing for at
least 20 Business Days and until 5:00 p.m., New York City time, on the Change
of Control Purchase Date. The notice, which shall govern the terms of the
Offer to Purchase, shall include such disclosures as are required by law and
shall state:
(a) that a Change of Control has occurred and an
Offer to Purchase is being made, and that, although Holders
are not required to tender their Notes, all Notes that are
timely tendered will be accepted for payment;
62
<PAGE> 68
(b) the purchase price (including the amount of
accrued interest, if any) for each Note and the Change of
Control Purchase Date, which will be no earlier than 30 days
nor later than 60 days from the date such notice is mailed;
(c) that any Note not tendered for payment will
continue to accrue interest in accordance with the terms
thereof;
(d) that any Note accepted for payment pursuant
to the Offer to Purchase will cease to accrue interest on and
after the Change of Control Purchase Date;
(e) the instructions that Holders must follow in
order to have such Holders' Notes repurchased;
(f) that Holders will be entitled to withdraw
their election not later than the close of business on the
third Business Day preceding the Change of Control Purchase
Date and the instructions that Holders must follow in order to
withdraw such election; and
(g) any other information necessary to enable
Holders to tender their Notes and to have such Notes
repurchased.
On the Change of Control Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof validly tendered pursuant to the
Offer to Purchase, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Notes or portions
thereof so tendered and accepted and (iii) deliver to the Trustee all Notes so
accepted together with an Officers' Certificate stating the principal amount of
Notes tendered to and accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver to the Holders of Notes so accepted payment in
an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered. The Notes not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Offer to
Purchase on or as soon as practicable after the Change of Control Purchase
Date.
If any Note accepted for payment is not so paid pursuant to
the provisions of this covenant, then, from the Change of Control Purchase Date
until the principal and interest on such Note is paid, the Company shall pay
interest on the unpaid principal and, to the extent permitted by law, on any
accrued but unpaid interest thereon, in each case, at the rate or rates
prescribed therefor in the Notes.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to an Offer
to Purchase.
63
<PAGE> 69
SECTION 10.19. PAYMENTS FOR CONSENT.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is paid to
all Holders that provide such consent or so waive or agree to amend.
SECTION 10.20. WAIVER OF CERTAIN COVENANTS.
Without limiting the rights of the Holders and the Company
with respect to waivers and amendments set forth in Sections 5.13 and 9.02, the
Company may omit in any particular instance to comply with any covenant or
condition set forth in Sections 10.04 through 10.19, if before or after the
time for such compliance the Holders of at least a majority in principal amount
of the Notes at the time Outstanding shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION
SECTION 11.01. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Note shall be
evidenced by a Board Resolution.
If the Company elects to redeem less than all of the Notes
pursuant to the optional redemption provisions of Section 11.08 hereof, it
shall notify the Trustee in writing, at least 45 days (unless a shorter period
shall be acceptable to the Trustee) before a Redemption Date fixed by the
Company, of the Redemption Date, the principal amount of Notes to be redeemed
and the Redemption Price.
SECTION 11.02. SELECTION OF NOTES TO BE REDEEMED.
If the Company elects to redeem less than all of the Notes
pursuant to the optional redemption provisions of Section 11.08 hereof, the
Trustee shall select the particular Notes to be redeemed pro rata or by lot or
in accordance with any other method the Trustee considers fair and appropriate
(and in such manner as complies with applicable legal and stock exchange
requirements, if any), provided that in the event that a Holder would be
required to hold Notes with an aggregate principal amount of less than $100,000
but more than an aggregate principal amount of zero as a result of a redemption
of the Notes in part, the Company shall redeem Notes of each such Holder so
that after such redemption such Holder shall hold Notes
64
<PAGE> 70
either with an aggregate principal amount of at least $100,000 or such Holder
no longer holds any Notes, and provided, further, that any such proration may
be made on the basis of the aggregate principal amount of Notes held by each
Holder thereof and may be made by making such adjustments as the Company deems
fair and appropriate in order that only Notes in denominations of $1,000 or
integral multiples thereof shall be redeemed. The Trustee shall make the
selection not less than 30 days before the Redemption Date from Notes
Outstanding not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in the amount of $1,000 or whole multiples thereof.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Notes shall relate, in the case of any
Note redeemed or to be redeemed only in part, to the portion of the principal
of such Note which has been or is to be redeemed.
SECTION 11.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 11.08 hereof, at least
30 days but not more than 60 days before a Redemption Date the Company shall
mail, or cause to be mailed, a notice of redemption by first-class mail,
postage prepaid, to each Holder whose Notes are to be redeemed, at his address
appearing in the Note Register.
The notices of redemption shall identify the Notes to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and addresses of the Paying Agent;
(5) that Notes called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price;
(6) that, unless the Company defaults in making such
redemption payment, interest on each such Note called for redemption
shall cease to accrue on and after the Redemption Date; and
(7) the CUSIP number, if any, of the Notes to be redeemed.
65
<PAGE> 71
Notice of redemption of Notes to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 11.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date at the Redemption
Price set forth in the Note.
SECTION 11.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall
deposit with the Trustee or with the Paying Agent (or, if the Company is acting
as its own Paying Agent, segregated and held in trust as provided in Section
10.03) money in funds immediately available on such Redemption Date sufficient
to pay the Redemption Price of and (except if the Redemption Date shall be an
Interest Payment Date) accrued interest on all Notes to (but excluding) the
Redemption Date. The Trustee or the Paying Agent shall return to the Company
any money deposited with the Trustee or the Paying Agent by the Company in
excess of the amounts necessary to pay the Redemption Price of, and accrued
interest on, all Notes to be redeemed.
SECTION 11.06. NOTES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the
Notes so to be redeemed shall, on the Redemption Date, become due and payable
at the Redemption Price therein specified and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Notes shall cease to bear interest. Upon surrender of such
Notes for redemption in accordance with said notice, such Notes shall be paid
by the Company at the Redemption Price, together with accrued interest to (but
excluding) the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Notes, or one or more Predecessor Notes,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 3.07.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided for by the Note.
SECTION 11.07. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part at a Place
of Payment (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by the Holder thereof or his or her attorney duly
authorized in writing), the Company shall execute and the Trustee shall
authenticate and deliver to such Noteholder at the expense of the Company a new
Note or Notes of any authorized denomination as requested by such Holder in an
aggregate principal
66
<PAGE> 72
amount equal to and in exchange for the unredeemed portion of the principal of
the Note surrendered.
SECTION 11.08. OPTIONAL REDEMPTION.
The Company may redeem all or any portion of the Notes at
any time, or from time to time, on or after December 31, 2002 at the Redemption
Prices (expressed in percentages of principal amount) set forth below, plus in
each case an amount equal to accrued interest to (but excluding) the Redemption
Date:
If redeemed during the twelve-month period
<TABLE>
<CAPTION>
Beginning December 31, Redemption Price
---------------------- ----------------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.250%
2003 (and thereafter) . . . . . . . . . . . . . . . . . . . 103.125
</TABLE>
Any redemption of Notes pursuant to this Section 11.08 shall be made in
accordance with the provisions of this Article Eleven.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.01. APPLICABILITY OF ARTICLE; COMPANY'S OPTION TO EFFECT DEFEASANCE
OR COVENANT DEFEASANCE.
The Company may at its option by Board Resolution, at any
time, elect to have either Section 12.02 (if applicable) or Section 12.03 (if
applicable) applied to the Outstanding Notes upon compliance with the
conditions set forth below in this Article Twelve.
SECTION 12.02. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise of the above option provided in
Section 12.01 applicable to this Section 12.02, the Company shall be deemed to
have been discharged from its obligations with respect to the Outstanding Notes
on and after the date the conditions precedent set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Notes and to have satisfied all its other
obligations under such Notes and this Indenture, insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following, which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Notes to receive, solely from the trust fund described
in Section 12.04, as more fully set forth in such Section, payments of the
principal of (and premium, if any) and interest on such Notes when such
payments are due, (B) the Company's obligations with respect to such Notes
under Sections 3.04, 3.05, 3.06, 10.02 and 10.03 and
67
<PAGE> 73
such obligations as shall be ancillary thereto, (C) the rights, powers, trusts,
duties, immunities and other provisions in respect of the Trustee hereunder and
(D) this Article Twelve. Subject to compliance with this Article Twelve, the
Company may exercise its option under this Section 12.02 notwithstanding the
prior exercise of its option under Section 12.03 with respect to the Notes.
Following a defeasance, payment of the Notes may not be accelerated because of
an Event of Default.
SECTION 12.03. COVENANT DEFEASANCE.
Upon the Company's exercise of the option provided in Section
12.01 applicable to this Section 12.03, (i) the Company shall be released from
its obligations under Section 10.04, Sections 10.06 through 10.16, inclusive
(subject, in the case of Section 10.10, to any requirement of the Trust
Indenture Act), and Sections 10.18 and 10.19 and clauses (2), (3) and (4) of
Section 8.01, and (ii) the occurrence of an event specified in Sections 5.01(3)
(with respect to clauses (2), (3) or (4) of Section 8.01), 5.01(4), 5.01(5)
(with respect to any of Section 10.04, Sections 10.06 through 10.16, inclusive
(subject, in the case of Section 10.10, to any requirement of the Trust
Indenture Act), and Section 10.18), 5.01(6), 5.01(9), 5.01(10) and 5.01(11)
shall not be deemed to be an Event of Default with respect to the Outstanding
Notes on and after the date the conditions set forth below are satisfied
(hereinafter "covenant defeasance"). For this purpose, such covenant
defeasance means that, with respect to the Outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section or Clause, whether
directly or indirectly by reason of any reference elsewhere herein to any such
Section or Clause or by reason of any reference in any such Section or Clause
to any other provision herein or in any other document, but the remainder of
this Indenture and such Notes shall be unaffected thereby.
SECTION 12.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions precedent to application
of either Section 12.02 or Section 12.03 to the then Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such
Notes, (A) money in United States Dollars in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
without reinvestment, in the opinion of a nationally-recognized firm
of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee to pay and discharge, the principal of
(and premium, if any) and interest on the Outstanding Notes on the
Stated Maturity of such principal, premium, if any, or interest in
accordance with the terms of this Indenture and of the Notes. For
this purpose, "U.S. Government Obligations" means securities that are
(x) direct obligations of the
68
<PAGE> 74
United States of America for the payment of which its full faith and
credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any such U.S. Government Obligation or a
specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(2) No Event of Default or event which with notice or lapse
of time or both would become an Event of Default with respect to the
Notes shall have occurred and be continuing (A) on the date of such
deposit and after giving effect thereto or (B) insofar as subsections
5.01(7) and (8) are concerned, at any time during the period ending on
the 123rd day after the date of such deposit or, if longer, ending on
the day following the expiration of the longest preference period
applicable to the Company in respect of such deposit (it being
understood that the condition in this Clause (B) shall not be deemed
satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not (A)
cause the Trustee for the Notes to have a conflicting interest as
defined in Section 6.08 for purposes of the Trust Indenture Act with
respect to any securities of the Company or (B) result in the trust
arising from such deposit to constitute, unless it is qualified as, a
regulated investment company under the Investment Company Act of 1940,
as amended.
(4) Such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, this
Indenture or any other agreement or instrument to which the Company is
a party or by which it is bound.
(5) Such defeasance or covenant defeasance shall not cause
any Notes then listed on any registered national securities exchange
under the Exchange Act to be delisted.
(6) In the case of an election under Section 12.02, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the
date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
69
<PAGE> 75
thereon such opinion shall confirm that, the Holders will not
recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance had not occurred.
(7) In the case of an election under Section 12.03, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss
for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred.
(8) The Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally under any applicable U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the Holders.
(9) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over the other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any creditors of the Company or others.
(10) No event or condition shall exist that would prevent
the Company from making payments of the principal of, premium, if any,
and interest on the Notes on the date of such deposit.
(11) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 12.02 or the covenant defeasance under Section 12.03 (as
the case may be) have been complied with.
SECTION 12.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section
10.03, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 12.04 in respect of the
Outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (but not including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Holders of such Notes, of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
70
<PAGE> 76
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the money or U.S.
Government Obligations deposited pursuant to Section 12.04 or the principal and
interest received in respect thereof.
Anything herein to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 12.04
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent defeasance or covenant defeasance.
SECTION 12.06. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with Section 12.05 by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article Twelve until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 12.05; provided, however,
that if the Company makes any payment of principal of (and premium, if any) or
interest on any such Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or the Paying Agent.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
71
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and the seal of the Company to be hereunto affixed and
attested, all as of the day and year first above written.
HAWTHORNE FINANCIAL CORPORATION
[Company Seal] By:
-------------------------------------
Name: Scott A. Braly
Title: President and Chief
Executive Officer
Attest:
-----------------------------
Name: James D. Sage
Title: Senior Vice President
and Secretary
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
--------------------------------------
Name:
Title:
Attest:
-------------------------------------
Name:
Title:
72
<PAGE> 1
EXHIBIT 4.2
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS EXCHANGED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES
REPRESENTED HEREBY, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
THE NOTES ARE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND INTEGRAL
MULTIPLES OF $1,000 PRINCIPAL AMOUNT IN EXCESS THEREOF. ANY SUCH TRANSFER OF
NOTES IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000
SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER AND ANY TRANSFEREE
OF SUCH BLOCK OF NOTES SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH NOTES FOR
ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF PRINCIPAL, PREMIUM (IF
ANY) OR INTEREST OF SUCH NOTES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO
INTEREST WHATSOEVER IN SUCH NOTES.
<PAGE> 2
HAWTHORNE FINANCIAL CORPORATION
12 1/2% NOTE DUE 2004
CUSIP No.
CERT. No.
$___________
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR A DEPOSIT AND IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OF THE UNITED STATES.
Hawthorne Financial Corporation, a Delaware corporation
(together with any successor corporation that is permitted under the Indenture
hereinafter referred to, herein called the "Company"), for value received,
hereby promises to pay to Cede & Co. or registered assigns, the principal sum
of ______________________________________________ Dollars on December 31, 2004,
and to pay interest thereon at the rate of 12 1/2% per annum from December 31,
1997 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semi-annually, commencing June 30, 1998, and each
June 30 and December 31 thereafter, until the principal hereof is paid or made
available for payment, and (to the extent that the payment of such interest
shall be legally enforceable) at the rate of 12 1/2% per annum on any overdue
principal (and premium, if any) and on any overdue installment of interest
until paid.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be
calculated on the basis of a 360-day year of twelve 30-day months, and will be
paid to the Person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the Regular Record Date for such
interest, which shall be each June 15 and December 15 prior to the applicable
Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the registered Holder on
such Regular Record Date, and may be paid to the Person in whose name this Note
(or one or more Predecessor Notes) is registered at the close of business on a
Special Record Date for the payment of such defaulted interest to be fixed by
the Trustee, notice whereof shall be given to the Holders not less than ten
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture. Payment of the
principal of and interest on this Note will be made at the office or agency of
the Company maintained for that purpose in New York, New York or at such other
office or agency as may be established by the Company pursuant to the Indenture
(initially the principal corporate trust office of the Trustee in New York, New
York), in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private
<PAGE> 3
debts; provided, however, that, at the option of the Company, payment of
interest may be made (subject to collection) by check mailed to the address of
the Person entitled thereto as such address shall appear on the Note Register.
Reference is hereby made to the further provisions of this
Note set forth on the reverse side hereof and such further provisions shall for
all purposes have the same effect as though fully set forth at this place.
This Note shall not be entitled to any benefit, or be valid or
obligatory for any purpose under the Indenture until the certificate of
authentication hereon shall have been manually signed by the Trustee.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its name by the manual or facsimile signature of its Chairman,
President or Vice President and its corporate seal, or a facsimile thereof,
impressed or imprinted hereon, attested by the manual or facsimile signature of
its Secretary or Assistant Secretary.
Date:
HAWTHORNE FINANCIAL CORPORATION
[Corporate Seal]
By:
-----------------------------------------------
Name: Scott A. Braly
Title: President and Chief Executive Officer
Attest:
----------------------------------------------
Name: James D. Sage
Title: Secretary
This is one of the Notes referred to in the within-mentioned Indenture.
Dated: UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
-------------------------------------
Authorized Signatory
2
<PAGE> 4
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the
Company designated as its 12 1/2% Notes due 2004 (herein called the "Notes"),
limited in aggregate principal amount to $40,000,000, issued and to be issued
under an Indenture, dated December 31, 1997 (herein called the "Indenture"),
between the Company and United States Trust Company of New York, as Trustee
(herein called the "Trustee," which term includes any successor Trustee under
the Indenture), to which the Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Company, the Trustee and the Holders of the Notes, and the terms upon which
the Notes are, and are to be, authenticated and delivered. Copies of the
Indenture and all indentures supplemental thereto will be made available to the
Holders for inspection during normal business hours at the principal office of
the Company, which on the date hereof is located at 2381 Rosecrans Avenue, El
Segundo, California 90245, and copies of the Indenture and all indentures
supplemental thereto will be mailed to any Holder by the Company upon the
Company's receipt of the written request of such Holder, sent to the Company
addressed to the attention of the Company's Corporate Secretary at the
principal office of the Company.
The indebtedness of the Company evidenced by the Notes,
including the principal thereof and interest thereon (including post-default
interest), (a) is, to the extent and in the manner set forth in the Indenture,
subordinate and junior in right of payment to the Trustee's fees and expenses,
and (b) is not secured by any collateral, including the assets of the Company
or any of its Affiliates. Each Holder of a Note, by acceptance hereof, agrees
to and shall be bound by such provisions of the Indenture and all other
provisions of the Indenture.
The Notes may be redeemed in whole or in part at any time, or
from time to time, on or after December 31, 2002, at the Redemption Prices
(expressed in percentages of principal amount) set forth below, plus in each
case an amount equal to accrued interest to (but excluding) the Redemption
Date:
If redeemed during the twelve-month period,
<TABLE>
<S> <C>
Beginning December 31,
----------------------
2002 . . . . . . . . . . . . . . . . . . . . . . . 106.250%
2003 (and thereafter) . . . . . . . . . . . . . . 103.125
</TABLE>
If an Event of Default under the Indenture shall occur and be
continuing, the principal of all the Notes may be declared due and payable in
the manner and with the effect provided in the Indenture. The Indenture
provides that such declaration and its consequences may, in certain events, be
annulled by the Holders of a majority in principal amount of the Notes
Outstanding.
<PAGE> 5
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under the
Indenture at any time by the Company with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding, as
determined in accordance with the Indenture. The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount
of the Notes at the time Outstanding, on behalf of the Holders of all the
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by a Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made on
this Note.
Unless the context requires, any Rule 144A Notes and any
Exchange Notes shall constitute one series for all purposes under the
Indenture, including without limitation amendments, waivers, redemptions and
Offers to Purchase.
No references herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest on this Note at the times, places and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, this Note is transferable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company to be maintained for that purpose in New York,
New York, or at such other office or agency as may be established by the
Company for such purpose pursuant to the Indenture (initially the principal
corporate trust office of the Trustee in New York, New York), duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed by, the Holder hereof or his or
her attorney duly authorized in writing, and thereupon one or more new Notes,
of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
Section 10.18 of the Indenture provides that upon the
occurrence of a Change of Control and subject to further limitations contained
therein, the Company shall make an offer to purchase the Notes in accordance
with the procedures set forth in the Indenture.
All Notes are issuable and transferable only in fully
registered form, without coupons, in denominations of $100,000 or integral
multiples of $1,000 in excess thereof. Any transfer of Notes in a block having
an aggregate principal amount of less than $100,000 shall be deemed to be void
and of no legal effect whatsoever. As provided in the Indenture and
2
<PAGE> 6
subject to certain limitations therein set forth, Notes are exchangeable for a
like aggregate principal amount of Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
No recourse shall be had for the payment of the principal of
or interest on this Note, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
at law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
of the issue hereof, expressly waived and released.
Certain capitalized terms used in this Note which are not
defined herein have the meanings set forth in the Indenture and exhibits
thereto.
Subject to Section 3.07 hereof, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note be overdue, and neither the Company, the Trustee, nor any such agent shall
be affected by notice to the contrary.
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 10.18 of the Indenture, check the box below:
[ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 10.18 of the Indenture, state the amount:
$_______________
Date: ________________ Your Signature:_______________________________________
(Sign exactly as your name appears on the
other side of this Note)
3
<PAGE> 7
Signature Guarantee:___________________________________________________________
(Signature must be guaranteed by a member firm of the
New York Stock Exchange or a commercial bank or trust
company)
----------------
4
<PAGE> 1
EXHIBIT 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated December 31, 1997
between
HAWTHORNE FINANCIAL CORPORATION
and
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
as Initial Purchaser
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of December 31, 1997 between HAWTHORNE FINANCIAL
CORPORATION, a Delaware corporation (the "Company"), and FRIEDMAN, BILLINGS,
RAMSEY & CO., INC. ("Friedman Billings" or the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement
dated December 24, 1997 (the "Purchase Agreement"), between the Company, as
issuer of the 12.50% Notes due 2004 (the "Senior Notes"), and the Initial
Purchaser, which provides for, among other things, the sale by the Company to
the Initial Purchaser of Senior Notes with an aggregate principal amount of
$40,000,000. In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchaser
and its direct and indirect transferees the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"Additional Interest" shall have the meaning set forth in Section 2(e)
hereof.
"Advice" shall have the meaning set forth in the last paragraph of
Section 3 hereof.
"Applicable Period" shall have the meaning set forth in Section 3(t)
hereof.
"Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in the City of New York or in El Segundo,
California are authorized or required by law or executive order to close.
"Closing Time" shall mean the Closing Time as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; provided, however, that
1
<PAGE> 3
such depositary must have an address in the Borough of Manhattan, in The City
of New York.
"Effectiveness Period" shall have the meaning set forth in Section
2(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Exchange Offer" shall mean the offer by the Company to the Holders to
exchange all of the Registrable Senior Notes (other than Private Exchange
Senior Notes) for a like principal amount of Exchange Senior Notes pursuant to
Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a)
hereof.
"Exchange Senior Notes" shall mean the Series B 12.50% Notes due 2004
(the "Exchange Senior Notes") containing terms substantially identical to the
Senior Notes (except that they will not contain terms with respect to the
transfer restrictions under the Securities Act (other than requiring minimum
transfers thereof to be in blocks of $100,000 aggregate principal amount) and
will not provide for any Liquidated Damages thereon).
"Holder" shall mean the Initial Purchaser, for so long as it owns any
Registrable Senior Notes, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Senior Notes
under the Indenture.
"Indenture" shall mean the Indenture relating to the Senior Notes and
the Exchange Senior Notes dated as of December 31, 1997 between the Company, as
issuer, and United States Trust Company of New York, as trustee, as the same
may be amended from time to time in accordance with the terms thereof.
"Initial Purchaser" shall have the meaning set forth in the preamble
to this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n) hereof.
2
<PAGE> 4
"Issue Date" shall mean December 31, 1997, the date of original
issuance of the Senior Notes.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Senior Notes.
"Participating Broker-Dealer" shall have the meaning set forth in
Section 3(t) hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability company, or a government or
agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2(a)
hereof.
"Private Exchange Senior Notes" shall have the meaning set forth in
Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Senior Notes covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble
to this Agreement.
"Records" shall have the meaning set forth in Section 3(n) hereof.
"Registrable Senior Notes" shall mean the Senior Notes and, if issued,
the Private Exchange Senior Notes; provided, however, that Senior Notes or
Private Exchange Senior Notes, as the case may be, shall cease to be
Registrable Senior Notes when (i) a Registration Statement with respect to such
Senior Notes or Private Exchange Senior Notes for the exchange or resale
thereof, as the case may be, shall have been declared effective under the
Securities Act and such Senior Notes or Private Exchange Senior Notes, as the
case may be, shall have been disposed of pursuant to such Registration
Statement, (ii) such Senior Notes or Private Exchange Senior Notes, as the case
may be, shall have been sold to the public pursuant to Rule 144(k) (or any
similar provision then in force, but not Rule 144A) under the Securities Act or
are eligible to be sold without restriction as contemplated by Rule 144(k),
(iii) such Senior Notes or Private Exchange Senior Notes, as the case may be,
shall have ceased to be outstanding or (iv) with respect to the Senior Notes,
such Senior Notes shall have been exchanged for Exchange Senior
3
<PAGE> 5
Notes upon consummation of the Exchange Offer and are thereafter freely
tradeable by the holder thereof (other than an affiliate of the Company).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained by any Holder of Registrable Senior Notes in
accordance with the rules and regulations of the NASD, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of one counsel for any
underwriters or Holders in connection with blue sky qualification of any of the
Exchange Senior Notes or Registrable Senior Notes) and compliance with the
rules of the NASD, (iii) all expenses of any Persons in preparing or assisting
in preparing, word processing, printing and distributing any Registration
Statement, any Prospectus and any amendments or supplements thereto, and in
preparing or assisting in preparing, printing and distributing any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency fees,
(v) the fees and disbursements of counsel for the Company and of the
independent certified public accountants of the Company, including the expenses
of any "cold comfort" letters required by or incident to such performance and
compliance, (vi) the fees and expenses of the Trustee, and any exchange agent
or custodian, (vii) all fees and expenses incurred in connection with the
listing, if any, of any of the Exchange Senior Notes or the Registrable Senior
Notes on any securities exchange or exchanges, and (viii) the reasonable fees
and expenses of any special experts retained by the Company in connection with
any Registration Statement.
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Senior Notes or Registrable Senior
Notes pursuant to the provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Rule 144(k) Period" shall mean the period of two years (or such
shorter period as may hereafter be referred to in Rule 144(k) under the
Securities Act (or similar successor rule)) commencing on the Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
4
<PAGE> 6
"Senior Notes" shall have the meaning set forth in the preamble to
this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Event" shall have the meaning set forth in Section
2(b) hereof.
"Shelf Registration Event Date" shall have the meaning set forth in
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) hereof
which covers all of the Registrable Senior Notes or all of the Private Exchange
Senior Notes, as the case may be, on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
"Trustee" shall mean the trustee with respect to the Senior Notes and
the Exchange Senior Notes under the Indenture.
2. Registration Under the Securities Act.
(a) Exchange Offer. Except as set forth in Section 2(b)
below, the Company shall, for the benefit of the Holders, cause to be filed
with the SEC within 120 days after the Issue Date an Exchange Offer
Registration Statement relating to the Exchange Offer, and use its reasonable
best efforts to (i) cause such Exchange Offer Registration Statement to be
declared effective under the Securities Act by the SEC not later than the date
which is 150 days after the Issue Date and (ii) keep such Exchange Offer
Registration Statement effective for not less than 30 calendar days (or longer
if required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Exchange Offer,
it being the objective of such Exchange Offer to enable each Holder eligible
and electing to exchange Registrable Senior Notes for a like principal amount
of Exchange Senior Notes (assuming that such Holder is not an affiliate of the
Company within the meaning of Rule 405 under the Securities Act and is not a
broker-dealer tendering Registrable Senior Notes acquired directly from the
Company for its own
5
<PAGE> 7
account, acquires the Exchange Senior Notes in the ordinary course of such
Holder's business and has no arrangements or understandings with any Person to
participate in the Exchange Offer for the purpose of distributing the Exchange
Senior Notes) to transfer such Exchange Senior Notes from and after their
receipt without any limitations or restrictions under the Securities Act and
under state securities or blue sky laws (other than requiring minimum transfers
in blocks having an aggregate principal amount of $100,000).
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not
less than 30 days after the date notice thereof is mailed to the Holders (or
longer if required by applicable law) (such period referred to herein as the
"Exchange Period");
(iii) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Senior Notes at any time
prior to the close of business, Eastern Time, on the last Business Day of the
Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Senior Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such Senior
Notes exchanged;
(v) notify each Holder that any Senior Notes not tendered by such
Holder in the Exchange Offer will remain outstanding and continue to accrue
interest but will not retain any rights under this Agreement (except in the
case of the Initial Purchaser and Participating Broker-Dealers as provided
herein); and
(vi) otherwise comply in all material respects with all applicable
laws relating to the Exchange Offer.
If the Initial Purchaser determines upon advice of its outside
counsel that it is not eligible to participate in the Exchange Offer with
respect to the exchange of Senior Notes constituting any portion of an unsold
allotment in the initial distribution, as soon as practicable upon receipt by
the Company of a written request from the Initial Purchaser, the Company shall
issue and deliver to the Initial Purchaser, in exchange (the "Private
Exchange") for the Senior Notes held by the Initial Purchaser, a like principal
amount of the Senior Notes of the Company which are identical (except that such
Senior Notes may bear
6
<PAGE> 8
a customary legend with respect to restrictions on transfer pursuant to the
Securities Act) to the Exchange Senior Notes (the "Private Exchange Senior
Notes") and which are issued pursuant to the Indenture (which provides that the
Exchange Senior Notes will not be subject to the transfer restrictions set
forth in the Indenture (other than requiring minimum transfers thereof to be in
blocks of $100,000 aggregate principal amount), and that the Exchange Senior
Notes, the Private Exchange Senior Notes and the Senior Notes will vote and
consent together on all matters as one class and that none of the Exchange
Senior Notes, the Private Exchange Senior Notes or the Senior Notes will have
the right to vote or consent as a separate class on any matter). The Private
Exchange Senior Notes shall be of the same series as the Exchange Senior Notes
and the Company will seek to cause the CUSIP Service Bureau to issue the same
CUSIP Numbers for the Private Exchange Senior Notes as for the Exchange Senior
Notes issued pursuant to the Exchange Offer. If requested by the Company, the
Initial Purchaser will, within a reasonable time in advance of the Company's
filing of an Exchange Offer Registration Statement hereunder, advise the
Company as to the number of Registrable Senior Notes held by it which
constitute an unsold allotment in the initial distribution.
As soon as practicable after the close of the Exchange Offer
and, if applicable, the Private Exchange, the Company shall:
(i) accept for exchange all Senior Notes or portions thereof tendered
and not validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Senior Notes or portions thereof so accepted for exchange by
the Company; and
(iii) issue, and cause the Trustee under the Indenture to promptly
authenticate and deliver to each Holder, new Exchange Senior Notes or Private
Exchange Senior Notes, as applicable, equal in principal amount to the
principal amount of the Senior Notes as are surrendered by such Holder.
Interest on each Exchange Senior Note and Private Exchange
Senior Note issued pursuant to the Exchange Offer and in the Private Exchange
will accrue from the last date on which interest was paid on the Senior Notes
surrendered in exchange therefor or, if no interest has been paid on such
Senior Notes, from the Issue Date. To the extent not prohibited by any law or
applicable interpretations of the staff of the SEC, the Company shall use its
reasonable best efforts to complete the Exchange Offer as provided above, and
shall comply with the applicable requirements of the Securities Act, the
Exchange Act and other applicable laws in connection with the Exchange Offer.
The Exchange Offer shall not be subject to any conditions, other than
7
<PAGE> 9
that the Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the SEC. Each Holder of Registrable Senior
Notes who wishes to exchange such Registrable Senior Notes for Exchange Senior
Notes in the Exchange Offer will be required to make certain customary
representations in connection therewith, including representations that (i) it
is not an affiliate of the Company, (ii) the Exchange Senior Notes to be
received by it were acquired in the ordinary course of its business and (iii)
at the time of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Senior Notes. The Company shall inform the Initial Purchaser,
after consultation with the Trustee, of the names and addresses of the Holders
to whom the Exchange Offer is made, and the Initial Purchaser shall have the
right to contact such Holders and otherwise facilitate the tender of
Registrable Senior Notes in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Senior Notes that are
Private Exchange Senior Notes and Exchange Senior Notes held by Participating
Broker-Dealers, and the Company shall have no further obligation to register
the Registrable Senior Notes (other than Private Exchange Senior Notes) held by
any Holder pursuant to Section 2(b) of this Agreement.
(b) Shelf Registration. In the event that (i) the Company or
the Majority Holders reasonably determine, after conferring with counsel, that
the Exchange Offer Registration provided in Section 2(a) above is not available
under applicable laws and regulations and currently prevailing interpretations
of the staff of the SEC, (ii) the Exchange Offer Registration Statement is not
declared effective within 150 days of the Issue Date or (iii) upon the request
of the Initial Purchaser with respect to any Registrable Senior Notes held by
it, if the Initial Purchaser is not permitted, in the opinion of Manatt, Phelps
& Phillips, pursuant to applicable law or applicable interpretations of the
staff of the SEC, to participate in the Exchange Offer and thereby receive
securities that are freely tradeable without restriction under the Securities
Act and applicable blue sky or state securities laws (any of the events
specified in (i)-(iii) being a "Shelf Registration Event" and the date of
occurrence thereof, the "Shelf Registration Event Date"), then in addition to
or in lieu of conducting the Exchange Offer contemplated by Section 2(a), as
the case may be, the Company shall use its reasonable best efforts to cause to
be filed as promptly as practicable after such Shelf Registration Event Date,
as the case may be, and, in any event, within 45 days after such Shelf
Registration Event Date (provided that in no event shall such date be earlier
than 75 days after the Issue Date), a Shelf Registration Statement providing
for the sale by the Holders of all of the Registrable Senior Notes, and shall
use its reasonable best efforts to have such Shelf
8
<PAGE> 10
Registration Statement declared effective by the SEC as soon as practicable.
No Holder of Registrable Senior Notes shall be entitled to include any of its
Registrable Senior Notes in any Shelf Registration pursuant to this Agreement
unless and until such Holder agrees in writing to be bound by all of the
provisions of this Agreement applicable to such Holder and furnishes to the
Company in writing, within 15 days after receipt of a request therefor, such
information as the Company may, after conferring with counsel with regard to
information relating to Holders that would be required by the SEC to be
included in such Shelf Registration Statement or Prospectus included therein,
reasonably request for inclusion in any Shelf Registration Statement or
Prospectus included therein. Each Holder as to which any Shelf Registration is
being effected agrees to furnish to the Company all information with respect to
such Holder necessary to make the information previously furnished to the
Company by such Holder not materially misleading.
The Company agrees to use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective and usable for resales
for (a) the Rule 144(k) Period in the case of a Shelf Registration Statement
filed pursuant to Section 2(b)(i) or (ii) or (b) 180 days in the case of a
Shelf Registration Statement filed pursuant to Section 2(b)(iii) (subject in
each case to extension pursuant to the last paragraph of Section 3 hereof), or
for such shorter period which will terminate when all of the Registrable Senior
Notes covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or cease to be outstanding (the "Effectiveness
Period"). The Company shall not permit any securities other than Registrable
Senior Notes to be included in the Shelf Registration. The Company will, in
the event a Shelf Registration Statement is declared effective, provide to each
Holder a reasonable number of copies of the Prospectus which is a part of the
Shelf Registration Statement and notify each such Holder when the Shelf
Registration has become effective. The Company further agrees, if necessary,
to supplement or amend the Shelf Registration Statement, if required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration Statement or by the Securities Act or
by any other rules and regulations thereunder for shelf registrations, and the
Company agrees to furnish to the Holders of Registrable Senior Notes copies of
any such supplement or amendment promptly after its being used or filed with
the SEC.
(c) Expenses. The Company, as issuer of the Senior Notes,
shall pay all Registration Expenses in connection with any Registration
Statement filed pursuant to Section 2(a) and/or 2(b) hereof and will reimburse
the Initial Purchaser for the reasonable fees and disbursements of Manatt,
Phelps & Phillips, counsel for the Initial Purchaser, incurred in connection
with the Exchange Offer and, if applicable, the Private Exchange, or any one
other
9
<PAGE> 11
counsel designated in writing by the Majority Holders to act as counsel for the
Holders of the Registrable Senior Notes in connection with a Shelf Registration
Statement, which other counsel shall be reasonably satisfactory to the Company.
Except as provided herein, each Holder shall pay all expenses of its counsel
and any of its other advisors or experts, underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Senior Notes pursuant to the Shelf Registration
Statement.
(d) Effective Registration Statement. An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration
Statement pursuant to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC; provided, however,
that if, after it has been declared effective, the offering of Registrable
Senior Notes pursuant to such Exchange Offer Registration Statement or Shelf
Registration Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or
court, such Registration Statement will be deemed not to have been effective
during the period of such interference, until the offering of Registrable
Senior Notes pursuant to such Registration Statement may legally resume. The
Company will be deemed not to have used its reasonable best efforts to cause
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as the case may be, to become, or to remain, effective during the requisite
period if it voluntarily takes any action that would result in any such
Registration Statement not being declared effective or that would result in the
Holders of Registrable Senior Notes covered thereby not being able to exchange
or offer and sell such Registrable Senior Notes during that period unless such
action is required by applicable laws and regulations or currently prevailing
interpretations of the staff of the SEC.
(e) Additional Interest. In the event that (i) neither the
Exchange Offer Registration Statement is filed with the SEC on or prior to the
120th day after the Issue Date nor a Shelf Registration Statement is filed with
the SEC on or prior to the 45th day after the Shelf Registration Event Date in
respect of a Shelf Registration Event attributable to any of the events set
forth in Sections 2(b)(i) and (ii) (provided that in no event shall such date
be earlier than 75 days after the Issue Date), then commencing on the day after
the applicable required filing date, additional interest ("Additional
Interest") shall accrue on the principal amount of the Senior Notes at a rate
of 1.00% per annum; or
(ii) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the SEC on or prior to the
150th day after the Issue Date (in the case of an Exchange Offer Registration
Statement) or on or prior to the later
10
<PAGE> 12
of (A) the 30th day after the date such Shelf Registration Statement was
required to be filed and (B) the 150th date after the Issue Date (in the case
of a Shelf Registration Statement in respect of a Shelf Registration Event
attributable to any of the events set forth in Sections 2(b)(i) and (ii)),
then, commencing on the 150th day after the Issue Date (in the case of an
Exchange Offer Registration Statement) or the later of (A) the 31st day after
the date such Shelf Registration Statement was required to be filed and (B) the
150th day after the Issue Date (in the case of a Shelf Registration Statement
in respect of a Shelf Registration Event attributable to any of the events set
forth in Sections 2(b)(i) and (ii)), Additional Interest shall accrue on the
principal amount of the Senior Notes at a rate of 1.00% per annum; or
(iii) (A) the Company has not exchanged Exchange Senior Notes for all
Senior Notes validly tendered, in accordance with the terms of the Exchange
Offer on or prior to the 45th day after the date on which the Exchange Offer
Registration Statement was declared effective or (B) if applicable, the Shelf
Registration Statement in respect of a Shelf Registration Event attributable to
any of the events set forth in Sections 2(b)(i) and (ii) has been declared
effective and such Shelf Registration Statement ceases to be effective or
usable for resales (whether as a result of an event contemplated by Section
3(e) or otherwise) at any time prior to the expiration of the Rule 144(k)
Period (other than after such time as all Senior Notes have been disposed of
thereunder or otherwise cease to be Registrable Senior Notes), then Additional
Interest shall accrue on the principal amount of the Senior Notes at a rate of
1.00% per annum commencing on (x) the 46th day after such effective date, in
the case of (A) above, or (y) the day such Shelf Registration Statement ceases
to be effective or usable for resales in the case of (B) above;
provided, however, that the Additional Interest rate on the Senior Notes may
not exceed in the aggregate 1.00% per annum; provided, further, however, that
(1) upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Senior Notes for all Senior Notes tendered (in the case of
clause (iii)(A) above), or at such time as the Shelf Registration Statement
which had ceased to remain effective or usable for resales again becomes
effective and usable for resales (in the case of clause (iii)(B) above),
Additional Interest on the principal amount of the Senior Notes as a result of
such clause (or the relevant subclause thereof) shall cease to accrue.
Any amounts of Additional Interest due pursuant to Section 2(e)(i),
(ii) or (iii) above will be payable in cash on the next succeeding Interest
Payment Date (as defined in the Senior Notes)
11
<PAGE> 13
to Holders on the relevant record dates for the payment of interest pursuant to
the Indenture.
(f) Specific Enforcement. Without limiting the remedies
available to the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Holders for which there
is no adequate remedy at law, that it would not be possible to measure damages
for such injuries precisely and that, in the event of any such failure, any
Holder may obtain such relief as may be required to specifically enforce the
Company's obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration Statements pursuant
to Sections 2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof
within the relevant time period specified in Section 2 hereof on the
appropriate form under the Securities Act, which form (i) shall be
selected by the Company, (ii) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Senior
Notes by the selling Holders thereof and, in the case of an Exchange
Offer, be available for the exchange of Registrable Senior Notes, and
(iii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith; and use its
reasonable best efforts to cause such Registration Statement to become
effective and remain effective (and, in the case of a Shelf
Registration Statement, usable for resales) in accordance with Section
2 hereof; provided, however, that if (1) such filing is pursuant to
Section 2(b), or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2(a) is required to
be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Senior Notes, before filing
any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the
Holders of the Registrable Senior Notes and each such Participating
Broker-Dealer, as the case may be, covered by such Registration
Statement, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents proposed
to be filed. The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of
which the Holders must be afforded an opportunity to review prior to
the filing of such document if the Majority Holders or such
Participating Broker-Dealer, as
12
<PAGE> 14
the case may be, their counsel or the managing underwriters, if any,
shall reasonably object;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
Effectiveness Period or the Applicable Period, as the case may be; and
cause each Prospectus to be supplemented, if so determined by the
Company or requested by the SEC, by any required prospectus supplement
and as so supplemented to be filed pursuant to Rule 424 (or any
similar provision then in force) under the Securities Act, and comply
with the provisions of the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder applicable to it with
respect to the disposition of all securities covered by each
Registration Statement during the Effectiveness Period or the
Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the selling Holders thereof
described in this Agreement (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Senior Notes included in the Shelf Registration
Statement, at least three Business Days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Senior Notes is
being filed and advising such Holder that the distribution of
Registrable Senior Notes will be made in accordance with the method
selected by the Majority Holders; and (ii) furnish to each Holder of
Registrable Senior Notes included in the Shelf Registration Statement
and to each underwriter of an underwritten offering of Registrable
Senior Notes, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment
or supplement thereto and such other documents as such Holder or
underwriter may reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Senior Notes; and (iii)
consent to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Senior Notes
included in the Shelf Registration Statement in connection with the
offering and sale of the Registrable Senior Notes covered by the
Prospectus or any amendment or supplement thereto;
(d) in the case of a Shelf Registration, use its reasonable
best efforts to register or qualify the Registrable Senior Notes under
all applicable state securities or "blue sky" laws of such
jurisdictions by the time the applicable Registration Statement is
declared effective by the SEC as any Holder of Registrable Senior
Notes covered by a Registration Statement and each underwriter of an
underwritten offering of Registrable Senior Notes shall reasonably
request in writing in advance of such date of effectiveness, and do
any and all
13
<PAGE> 15
other acts and things which may be reasonably necessary or advisable
to enable such Holder and underwriter to consummate the disposition in
each such jurisdiction of such Registrable Senior Notes owned by such
Holder; provided, however, that the Company shall not be required to
(i) qualify as a foreign corporation or as a dealer in securities in
any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (ii) file any general consent to service of
process in any jurisdiction where it would not otherwise be subject to
such service of process or (iii) subject itself to taxation in any
such jurisdiction if it is not then so subject;
(e) (1) in the case of a Shelf Registration or (2) if
Participating Broker-Dealers from whom the Company has received prior
written notice that they will be utilizing the Prospectus contained in
the Exchange Offer Registration Statement as provided in Section 3(t)
hereof are seeking to sell Exchange Senior Notes and are required to
deliver Prospectuses, notify each Holder of Registrable Senior Notes,
or such Participating Broker-Dealers, as the case may be, their
counsel and the managing underwriters, if any, promptly and promptly
confirm such notice in writing (i) when a Registration Statement has
become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the SEC
or any state securities authority for amendments and supplements to a
Registration Statement or Prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Registration Statement or the
qualification of the Registrable Senior Notes or the Exchange Senior
Notes to be offered or sold by any Participating Broker-Dealer in any
jurisdiction described in paragraph 3(d) hereof or the initiation of
any proceedings for that purpose, (iv) in the case of a Shelf
Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Senior Notes
covered thereby, the representations and warranties of the Company
contained in any purchase agreement, securities sales agreement or
other similar agreement, if any, cease to be true and correct in all
material respects, and (v) of the happening of any event or the
failure of any event to occur or the discovery of any facts or
otherwise, during the Effectiveness Period, which makes any statement
made in such Registration Statement or the related Prospectus untrue
in any material respect or which causes such Registration Statement or
Prospectus to omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) the Company's reasonable
determination that a post-effective amendment to the Registration
Statement would be appropriate;
14
<PAGE> 16
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Senior Notes included within the coverage of
such Shelf Registration Statement, without charge, one conformed copy
of each Registration Statement relating to such Shelf Registration and
any post-effective amendment thereto (without documents incorporated
therein by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Senior Notes to facilitate the timely
preparation and delivery of certificates representing Registrable
Senior Notes to be sold and not bearing any restrictive legends (other
than with respect to restrictions requiring minimum transfers in
blocks having an aggregate principal amount of $100,000) and in such
denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders or the underwriters
may reasonably request at least two Business Days prior to the closing
of any sale of Registrable Senior Notes pursuant to such Shelf
Registration Statement;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, use its
reasonable best efforts to prepare a supplement or post-effective
amendment to such Registration Statement or the related Prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers
of the Registrable Senior Notes, such Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and to
notify each Holder to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or
omission;
(j) obtain a CUSIP number for all Exchange Senior Notes and
Senior Notes not later than the effective date of a Registration
Statement, and provide the Trustee with printed certificates for the
Exchange Senior Notes or the Registrable Senior Notes, as the case may
be, in a form eligible for deposit with the Depositary;
(k) cause the Indenture to be qualified under the Trust
Indenture Act of 1939 (the "TIA") in connection with the
15
<PAGE> 17
registration of the Exchange Senior Notes or Registrable Senior Notes,
as the case may be, and effect such changes to the Indenture as may be
required for it to be so qualified in accordance with the terms of the
TIA and execute, and use its reasonable best efforts to cause the
Trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(l) in the case of a Shelf Registration, enter into such
agreements (including underwriting agreements) as are customary in
underwritten offerings and take all such other appropriate actions in
connection therewith as are reasonably requested by the holders of at
least 25% in aggregate principal amount of the Registrable Senior
Notes in order to expedite or facilitate the registration or the
disposition of the Registrable Senior Notes; provided, that the
Company shall not be required to enter into any such agreement more
than twice with respect to all of the Registrable Senior Notes and may
delay entering into such agreement until the consummation of any
underwritten public offering which the Company shall have undertaken;
(m) in the case of a Shelf Registration, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration, if requested by (x) the
Initial Purchaser, in the case where the Initial Purchaser holds
Senior Notes acquired by it as part of its initial allotment and (y)
Holders of at least 25% in aggregate principal amount of the
Registrable Senior Notes covered thereby: (i) make such
representations and warranties to Holders of the Registrable Senior
Notes and the underwriters (if any) with respect to the business of
the Company and its subsidiaries as then conducted and the
Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers of debt securities to underwriters in
underwritten offerings, and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company and updates thereof
(which may be in the form of a reliance letter) in form and substance
reasonably satisfactory to the managing underwriters (if any) and the
Holders of a majority in principal amount of the Registrable Senior
Notes being sold, addressed to each selling Holder and the
underwriters (if any) covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such underwriters (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (iii) obtain "cold comfort" letters
and updates thereof in form and substance reasonably satisfactory to
the managing underwriters from the independent certified public
accountants of the
16
<PAGE> 18
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial
data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such letters to be
in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with underwritten offerings
and such other matters as reasonably requested by such underwriters in
accordance with Statement on Auditing Standards No. 72; and (iv) if an
underwriting agreement is entered into, provide indemnification
pursuant to indemnification provisions and procedures no less
favorable than those set forth in Section 4 hereof (or such other
provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Senior Notes covered by such
Registration Statement and the managing underwriters and agents) with
respect to all parties to be indemnified pursuant to said Section
(including, without limitation, such underwriters and selling
Holders). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to Section
2(b) or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2(a) is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Senior Notes during the Applicable Period, make
reasonably available for inspection by any selling Holder of such
Registrable Senior Notes or Participating Broker-Dealer, as
applicable, who certifies to the Company that it has a current
intention to sell Registrable Senior Notes pursuant to the Shelf
Registration, any underwriter participating in any such disposition of
Registrable Senior Notes, if any, and any attorney, accountant or
other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during the Company's normal business hours, all financial and other
records, pertinent corporate documents and properties of the Company
and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all relevant
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential and any records
which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records
is necessary to avoid or correct a material
17
<PAGE> 19
misstatement or omission in such Registration Statement, (ii) subject
to the last sentence of this Section 3(n), the release of such Records
is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or is necessary in connection with any action,
suit or proceeding or (iii) the information in such Records has been
made generally available to the public (other than by an Inspector or
a selling Holder in breach of its obligations hereunder). Each
selling Holder of such Registrable Senior Notes and each such
Participating Broker-Dealer will be required to agree in writing that
information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company unless and until
such is made generally available to the public through no fault of an
Inspector or a Selling Holder. Each selling Holder of such
Registrable Senior Notes and each such Participating Broker-Dealer
will be required to further agree in writing that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction or in connection with any action, suit or
proceeding, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(o) comply in all material respects with all applicable rules
and regulations of the SEC so long as any provision of this Agreement
shall be applicable and make generally available to its
securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promulgated under the Securities Act) no later than 45
days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) com- mencing
at the end of any fiscal quarter in which Registrable Senior Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a Private
Exchange, if requested by the Trustee, obtain an opinion of counsel to
the Company addressed to the Trustee for the benefit of all Holders of
Registrable Senior Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, to the effect that (i) the
Company has duly authorized, executed and delivered the Exchange
Senior Notes and Private Exchange Senior Notes and (ii) each of the
Exchange Senior Notes or the Private Exchange Senior Notes, as the
case may be, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in
18
<PAGE> 20
accordance with its respective terms (in each case, with customary
exceptions);
(q) if an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Senior Notes by Holders
to the Company (or to such other Person as directed by the Company),
in exchange for the Exchange Senior Notes or the Private Exchange
Senior Notes, as the case may be, the Company shall mark, or cause to
be marked, on such Registrable Senior Notes delivered by such Holders
that such Registrable Senior Notes are being cancelled in exchange for
the Exchange Senior Notes or the Private Exchange Senior Notes, as the
case may be; in no event shall such Registrable Senior Notes be marked
as paid or otherwise satisfied;
(r) cooperate with each seller of Registrable Senior Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Senior Notes and
their respective counsel in connection with any filings required to be
made with the NASD;
(s) use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Senior Notes
covered by a Registration Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," which section shall be
reasonably acceptable to the Initial Purchaser or another
representative of the Participating Broker-Dealers, and which shall
contain a summary statement of the positions taken or policies made by
the staff of the SEC with respect to the potential "underwriter"
status of any broker-dealer (a "Participating Broker-Dealer") that
holds Registrable Senior Notes acquired for its own account as a
result of market-making activities or other trading activities and
that will be the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Senior Notes to be received by such
broker-dealer in the Exchange Offer, whether such positions or
policies have been publicly disseminated by the staff of the SEC or
such positions or policies, in the reasonable judgment of the Initial
Purchaser or such other representative, represent the prevailing views
of the staff of the SEC, including a statement that any such
Participating Broker-Dealer who receives Exchange Senior Notes for
Registrable Senior Notes pursuant to the Exchange Offer may be deemed
a statutory underwriter and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of
such Exchange Senior Notes, (ii) furnish to each Participating
Broker-Dealer who has delivered to the Company the notice referred to
in Section 3(e), without
19
<PAGE> 21
charge, as many copies of each Prospectus included in the Exchange
Offer Registration Statement, including any preliminary prospectus,
and any amendment or supplement thereto, as such Participating
Broker-Dealer may reasonably request (the Company hereby consents to
the use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto by any
Person subject to the prospectus delivery requirements of the
Securities Act, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange Senior Notes
covered by the Prospectus or any amendment or supplement thereto),
(iii) use its reasonable best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such
Persons must comply with such requirements under the Securities Act
and applicable rules and regulations in order to resell the Exchange
Senior Notes; provided, however, that such period shall not be
required to exceed 90 days (or such longer period if extended pursuant
to the last sentence of Section 3 hereof) (the "Applicable Period"),
and (iv) include in the transmittal letter or similar documentation to
be executed by an exchange offeree in order to participate in the
Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Senior Notes acquired for its own account as a
result of market-making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any
resale of Exchange Senior Notes received in respect of such
Registrable Senior Notes pursuant to the Exchange Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus
in connection with the exchange of Registrable Senior Notes, the
broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the Securities Act; and
(B) in the case of any Exchange Offer Registration
Statement, the Company agrees to deliver to the Initial Purchaser or
to another representative of the Participating Broker-Dealers, if
requested by the Initial Purchaser or such other representative of
Participating Broker-Dealers, who hold at least 10% aggregate
principal amount of the Registrable Senior Notes covered by the
Exchange Offer Registration Statement on behalf of the Participating
Broker-Dealers upon
20
<PAGE> 22
consummation of the Exchange Offer (i) an opinion of counsel in form
and substance reasonably satisfactory to the Initial Purchaser or such
other representative of the Participating Broker-Dealers, covering the
matters customarily covered in opinions requested in connection with
Exchange Offer Registration Statements and such other matters as may
be reasonably requested (it being agreed that the matters to be
covered by such opinion may be subject to customary qualifications and
exceptions), (ii) an officers' certificate containing certifications
substantially similar to those set forth in Section 5(d) of the
Purchase Agreement and such additional certifications as are
customarily delivered in a public offering of debt securities and
(iii) as well as upon the effectiveness of the Exchange Offer
Registration Statement, a comfort letter, in each case, in customary
form if permitted by Statement on Auditing Standards No. 72.
The Company may require each seller of Registrable Senior
Notes as to which any registration is being effected to furnish to the Company
such information regarding such seller as may be required by the staff of the
SEC to be included in a Registration Statement. The Company may exclude from
such registration the Registrable Senior Notes of any seller who fails to
furnish such information within a reasonable time after receiving such request.
The Company shall have no obligation to register under the Securities Act the
Registrable Senior Notes of a seller who so fails to furnish such information.
In the case of a Shelf Registration Statement, or if
Participating Broker-Dealers who have notified the Company that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof are seeking to sell Exchange Senior Notes
and are required to deliver Prospectuses, each Holder agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, such
Holder will forthwith discontinue disposition of Registrable Senior Notes
pursuant to a Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(i) hereof
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, if so directed by the Company,
such Holder will deliver to the Company (at the Company's expense) all copies
in such Holder's possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Senior Notes
or Exchange Senior Notes, as the case may be, current at the time of receipt of
such notice. If the Company shall give any such notice to suspend the
disposition of Registrable Senior Notes or Exchange Senior Notes, as the case
may be, pursuant to a Registration Statement, the Company shall use its
reasonable best efforts to file and have declared effective (if an amendment)
as soon as practicable an
21
<PAGE> 23
amendment or supplement to the Registration Statement and shall extend the
period during which such Registration Statement is required to be maintained
effective and usable for resales pursuant to this Agreement by the number of
days in the period from and including the date of the giving of such notice to
and including the date when the Company shall have made available to the
Holders (x) copies of the supplemented or amended Prospectus necessary to
resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. (a) In connection
with any Registration Statement, the Company shall indemnify and hold harmless
the Initial Purchaser, each Holder, each underwriter who participates in an
offering of the Registrable Senior Notes, each Participating Broker-Dealer,
each Person, if any, who controls any of such parties within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and each of
their respective partners, directors, officers, employees and agents, as
follows:
(i) from and against any and all loss, liability, claim,
damage and expense whatsoever, joint or several, as incurred, arising
out of any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment
thereto) covering Registrable Senior Notes or Exchange Senior Notes,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) from and against any and all loss, liability, claim,
damage and expense whatsoever, joint or several, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation,
or any investigation or proceeding by any court or governmental agency
or body, commenced or threatened, or of any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the prior
written consent of the Company; and
(iii) from and against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of counsel
chosen by such Holder, such Participating Broker-Dealer, or any
underwriter (except to the extent otherwise expressly provided in
Section 4(c) hereof)), reasonably incurred in investigating, preparing
or defending
22
<PAGE> 24
against any litigation, or any investigation or proceeding by any
court or governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any
such expense is not paid under subparagraph (i) or (ii) of this
Section 4(a);
provided, however, that (i) this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished in writing to the
Company by such Holder, such Participating Broker-Dealer or any underwriter
with respect to such Holder, Participating Broker-Dealer or any underwriter, as
the case may be, expressly for use in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto)
and (ii) the Company shall not be liable to any such Holder, Participating
Broker-Dealer, any underwriter or controlling person, with respect to any
untrue statement or alleged untrue statement or omission or alleged omission in
any preliminary Prospectus to the extent that any such loss, liability, claim,
damage or expense of any Holder, Participating Broker-Dealer, any underwriter
or controlling person results from the fact that such Holder, any underwriter
or Participating Broker-Dealer sold Senior Notes to a person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the final Prospectus as then amended or supplemented if the Company had
previously furnished copies thereof to such Holder, underwriter or
Participating Broker-Dealer and the loss, liability, claim, damage or expense
of such Holder, underwriter, Participating Broker-Dealer or controlling person
results from an untrue statement or omission of a material fact contained in
the preliminary Prospectus which was corrected in the final Prospectus. Any
amounts advanced by the Company to an indemnified party pursuant to this
Section 4 as a result of such losses shall be returned to the Company if it
shall be finally determined by such a court in a judgment not subject to appeal
or final review that such indemnified party was not entitled to indemnification
by the Company.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, any underwriter and the other selling
Holders and each of their respective partners, directors, officers (including
each officer of the Company who signed the Registration Statement), employees
and agents and each Person, if any, who controls the Company, any underwriter
or any other selling Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all loss,
liability, claim, damage and expense whatsoever described in the indemnity
contained in Section 4(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in a
Registration Statement (or any amendment thereto) or any Prospectus (or any
23
<PAGE> 25
amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such selling Holder with
respect to such Holder expressly for use in such Registration Statement (or any
amendment thereto), or any such Prospectus (or any amendment or supplement
thereto); provided, however, that, in the case of a Shelf Registration
Statement, no such Holder shall be liable for any claims hereunder in excess of
the amount of net proceeds received by such Holder from the sale of Registrable
Senior Notes pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability which it may
have under this Section 4, except to the extent that it is materially
prejudiced by such failure. An indemnifying party may participate at its own
expense in the defense of such action, or, if it so elects within a reasonable
time after receipt of such notice, assume the defense of any suit brought to
enforce any such claim; but if it so elects to assume the defense, such defense
shall be conducted by counsel chosen by it and approved by the indemnified
party or parties, which approval shall not be unreasonably withheld. In the
event that an indemnifying party elects to assume the defense of any such suit
and retain such counsel, the indemnified party or parties shall bear the fees
and expenses of any additional counsel thereafter retained by such indemnified
party or parties; provided, however, that the indemnified party or parties
shall have the right to employ counsel (in addition to local counsel) to
represent the indemnified party or parties who may be subject to liability
arising out of any action in respect of which indemnity may be sought against
the indemnifying party if, in the reasonable judgment of counsel for the
indemnified party or parties, there may be legal defenses available to such
indemnified party or parties which are different from or in addition to those
available to the indemnifying party, in which event the fees and expenses of
appropriate separate counsel shall be borne by the indemnifying party. In no
event shall the indemnifying parties be liable for the fees and expenses of
more than one counsel (in addition to local counsel), separate from its own
counsel, for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether
or not the indemnified parties are actual or potential parties thereto),
24
<PAGE> 26
unless such settlement, compromise or consent (i) includes an unconditional
written release in form and substance satisfactory to the indemnified parties
of each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(d) In order to provide for just and equitable contribution
in circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and the Holders, as incurred; provided that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any Person that was not guilty of
such fraudulent misrepresentation. As between the Company and the Holders,
such parties shall contribute to such aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement in
such proportion as shall be appropriate to reflect the relative fault of the
Company, on the one hand, and the Holders, on the other hand, with respect to
the statements or omissions which resulted in such loss, liability, claim,
damage or expense, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holders, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand, or by or on
behalf of the Holders, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Holders of the Registrable Senior
Notes agree that it would not be just and equitable if contribution pursuant to
this Section 4 were to be determined by pro rata allocation or by any other
method of allocation that does not take into account the relevant equitable
considerations. For purposes of this Section 4, each affiliate of a Holder,
and each partner, director, officer, employee, agent and Person, if any, who
controls a Holder or such affiliate within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Holder, and each director of the Company, each officer of
the Company who signed the Registration Statement, and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
the Company.
25
<PAGE> 27
5. Participation in an Underwritten Registration. No
Holder may participate in an underwritten registration hereunder unless such
Holder (a) agrees to sell such Holder's Registrable Senior Notes on the basis
provided in the underwriting arrangement approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents reasonably required under the
terms of such underwriting arrangements.
6. Selection of Underwriters. The Holders of
Registrable Senior Notes covered by the Shelf Registration Statement who desire
to do so may sell the securities covered by such Shelf Registration in an
underwritten offering, subject to the provisions of Section 3(l) hereof. In
any such underwritten offering, the underwriter or underwriters and manager or
managers that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of the Registrable Senior Notes included
in such offering; provided, however, that such underwriters and managers must
be reasonably satisfactory to the Company.
7. Miscellaneous.
(a) Rule 144 and Rule 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act
and any Registrable Senior Notes remain outstanding, the Company will use its
reasonable best efforts to file the reports required to be filed by it under
the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules
and regulations adopted by the SEC thereunder, provided, that if it ceases to
be so required to file such reports, it will, upon the request of any Holder of
Registrable Senior Notes (a) make publicly available such information as is
necessary to permit sales of its securities pursuant to Rule 144 under the
Securities Act, (b) deliver such information to a prospective purchaser as is
necessary to permit sales of its securities pursuant to Rule 144A under the
Securities Act, and (c) take such further action that is reasonable in the
circumstances, in each case, to the extent required from time to time to enable
such Holder to sell its Registrable Senior Notes without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such rule may be amended from time to time, (ii)
Rule 144A under the Securities Act, as such rule may be amended from time to
time, or (iii) any similar rules or regulations hereafter adopted by the SEC.
Upon the request of any Holder of Registrable Senior Notes, the Company will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
(b) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this
26
<PAGE> 28
Agreement enter into any agreement which is inconsistent with the rights
granted to the Holders of Registrable Senior Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Senior Notes affected by such amendment, modification,
supplement, waiver or departure; provided no amendment, modification or
supplement or waiver or consent to the departure with respect to the provisions
of Section 4 hereof shall be effective as against any Holder of Registrable
Senior Notes unless consented to in writing by such Holder of Registrable
Senior Notes. Notwithstanding the foregoing sentence, (i) this Agreement may
be amended, without the consent of any Holder of Registrable Senior Notes, by
written agreement signed by the Company and Friedman Billings, to cure any
ambiguity, correct or supplement any provision of this Agreement that may be
inconsistent with any other provision of this Agreement or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with other provisions of this Agreement, (ii)
this Agreement may be amended, modified or supplemented, and waivers and
consents to departures from the provisions hereof may be given, by written
agreement signed by the Company and Friedman Billings to the extent that any
such amendment, modification, supplement, waiver or consent is, in their
reasonable judgment, necessary or appropriate to comply with applicable law
(including any interpretation of the Staff of the SEC) or any change therein
and (iii) to the extent any provision of this Agreement relates to the Initial
Purchaser, such provision may be amended, modified or supplemented, and waivers
or consents to departures from such provisions may be given, by written
agreement signed by or on behalf of the Initial Purchaser and the Company.
Each Holder of any Registrable Senior Notes then outstanding shall be bound by
any amendment or waiver effected pursuant to this Section 7(c), whether or not
any notice, writing or marking indicating such amendment or waiver appears on
such Registrable Senior Notes or is delivered to such Holder.
(d) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand- delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by
such Holder to the Company by means of a notice given in accordance with the
provisions of this
27
<PAGE> 29
Section 7(d), which address initially is, with respect to the Initial
Purchaser, the address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the Purchase Agreement
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee,
at the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and transferees of
the Initial Purchaser, including, without limitation and without the need for
an express assignment, subsequent Holders; provided, however, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Registrable Senior Notes in violation of the terms of the Purchase Agreement
or the Indenture. If any transferee of any Holder shall acquire Registrable
Senior Notes, in any manner, whether by operation of law or otherwise, such
Registrable Senior Notes shall be held subject to all of the terms of this
Agree- ment, and by taking and holding such Registrable Senior Notes, such
Person shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement and such Person shall
be entitled to receive the benefits hereof.
(f) Entire Agreement. This Agreement and the other writings
referred to herein (including the Indenture) contain the entire understandings
among the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings among the parties with
respect to its subject matter.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
28
<PAGE> 30
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE
BEEN MADE IN THE STATE OF CALIFORNIA. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE
PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE
OF CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Securities Held by the Company or its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Senior Notes is required hereunder, Registrable Senior Notes held
by the Company or its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
29
<PAGE> 31
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
HAWTHORNE FINANCIAL CORPORATION
By:
--------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above
written:
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 5.1
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Telephone (202) 347-0300
February 5, 1998
Board of Directors
Hawthorne Financial Corporation
2381 Rosecrans Avenue
2nd Floor
El Segundo, California 90245
Ladies and Gentlemen:
We have acted as counsel to Hawthorne Financial Corporation (the
"Company") in connection with the registration by the Company under the
Securities Act of 1933, as amended (the "Securities Act"), of $40,000,000
aggregate principal amount of 12 1/2% Exchange Notes due 2004 (the "Notes") to
be issued by the Company pursuant to an Indenture, dated December 31, 1997,
between the Company and United States Trust Company of New York, as trustee
thereunder (the "Indenture"), and a Registration Rights Agreement, dated
December 31, 1997, between the Company and the Initial Purchaser named therein.
The Notes are being registered pursuant to a Registration Statement on Form S-4
(the "Registration Statement") being filed with the Securities and Exchange
Commission on the date hereof.
We have examined such corporate records, certificates and other
documents, and such questions of law, as we have considered necessary or
appropriate for the purposes of this opinion.
Based on the foregoing, and assuming that the Registration Statement
has been declared effective under the Securities Act, we are of the opinion
that when the Notes have been duly executed and authenticated in accordance
with the Indenture and issued and delivered as contemplated in the Registration
Statement, the Notes will constitute valid and legally binding obligations of
the Company in accordance with their terms and the Indenture, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equitable principles.
<PAGE> 2
Board of Directors
February 5, 1998
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the heading
"Validity of New Notes" in the Prospectus included therein. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Gerard L. Hawkins
------------------------------------
Gerard L. Hawkins, a Partner
<PAGE> 1
EXHIBIT 12.1
HAWTHORNE FINANCIAL CORPORATION
Computation of Consolidated Ratio of Earnings to Fixed Charges
(Excluding Interest on Deposits)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------ -------- ------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Net Income (loss) $ 9,617 $7,507 $(14,217) $(2,963) $(29,610)
Extraordinary items, net of tax 1,534 -- -- -- --
Income tax (expense) benefit 2,577 6,382 (617) (123) 7,648
------- ------ -------- ------- --------
Pretax earnings (loss) $ 8,574 $1,125 $(13,600) $(2,840) $(37,258)
======= ====== ======== ======= ========
Fixed charges:
Portion of rental expense which
approximates the interest factor $ 322 $ 322 $ 322 $ 255 $ 269
Interest on borrowed funds 4,905 4,392 893 749 130
------- ------ -------- ------- --------
Total fixed charges $ 5,227 $4,714 $ 1,215 $ 1,004 399
======= ====== ======== ======= ========
Earnings (for ratio calculation) $13,801 $5,839 $(12,385) $(1,836) $(36,859)
======= ====== ======== ======= ========
Ratio of earnings to fixed charges 2.64 1.24 (10.20) (1.83) (92.29)
======= ====== ======== ======= ========
</TABLE>
<PAGE> 1
EXHIBIT 12.2
HAWTHORNE FINANCIAL CORPORATION
Computation of Consolidated Ratio of Earnings to Fixed Charges
(Including Interest on Deposits)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Net Income (loss) $ 9,617 $ 7,507 $(14,217) $ (2,963) $(29,610)
Extraordinary items, net of tax 1,534 -- -- -- --
Income tax (expense) benefit 2,577 6,382 (617) (123) 7,648
------- ------- -------- -------- --------
Pretax earnings (loss) $ 8,574 $ 1,125 $(13,600) $ (2,840) $(37,258)
======= ======= ======== ======== ========
Fixed charges:
Portion of rental expense which
approximates the interest factor $ 322 $ 322 $ 322 $ 255 $ 269
Interest on deposits 38,920 35,568 33,593 29,694 36,562
Interest on borrowed funds 4,905 4,392 893 749 130
------- ------- -------- -------- --------
Total fixed charges $44,147 $40,282 $ 34,808 $ 30,698 $ 36,961
======= ======= ======== ======== ========
Earnings (for ratio calculation) $52,721 $41,407 $ 21,208 $ 27,858 $ (297)
======= ======= ======== ======== ========
Ratio of earnings to fixed charges 1.19 1.03 0.61 0.91 (0.01)
======= ======= ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this
Registration Statement of Hawthorne Financial Corporation on Form S-4 of our
report dated January 31, 1997 appearing in the Annual Report on Form 10-K of
Hawthorne Financial Corporation for the year ended December 31, 1996 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
the Registration Statement.
DELOITTE & TOUCHE LLP
February 5, 1998
Los Angeles, California
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of
trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
Hawthorne Financial Corporation
(Exact name of OBLIGOR as specified in its charter)
Delaware 92-2085671
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2381 Rosecrans Avenue, 2nd Floor 90245
El Segundo, California (Zip code)
(Address of principal executive offices)
--------------------------
12 1/2% Notes due 2004
(Title of the indenture securities)
<PAGE> 2
- 2 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligor currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact business
as a Trust Company, is incorporated by reference to
Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with
the Commission pursuant to the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990
(Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
- 3 -
16. LIST OF EXHIBITS
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York,
as amended, is incorporated by reference to Exhibit T-1.4
to Form T-1 filed on September 15, 1995 with the
Commission pursuant to the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990
(Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of January 29, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 29th day
of January 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ JAMES E. LOGAN
----------------------------
James E. Logan
Vice President
JEL/pg(rev:kk)
<PAGE> 4
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission 450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1997
($ IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and Due from Banks $ 116,582
Short-Term Investments 183,652
Securities, Available for Sale 691,965
Loans 1,669,611
Less: Allowance for Credit Losses 16,067
---------
Net Loans 1,653,544
Premises and Equipment 61,796
Other Assets 125,121
----------
TOTAL ASSETS $2,832,660
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 541,619
Interest Bearing 1,617,028
----------
TOTAL DEPOSITS 2,158,647
Short-Term Credit Facilities 365,235
Accounts Payable and Accrued Liabilities 141,793
----------
TOTAL LIABILITIES $2,665,675
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,542
Retained Earnings 99,601
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 2,847
----------
TOTAL STOCKHOLDER'S EQUITY 166,985
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,832,660
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
November 13, 1997
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
HAWTHORNE FINANCIAL CORPORATION
Offer to Exchange its
12 1/2% Exchange Notes due 2004
which have been registered under the Securities Act of 1933
for any and all of its outstanding
12 1/2% Notes due 2004
Pursuant to the Prospectus
dated ___________ ___, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON __________ ___, 1998, UNLESS THE OFFER IS EXTENDED.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Facsimile: By Mail: By Hand before 4:30 p.m.:
<S> <C> <C>
(212) 780-0592 United States Trust Company United States Trust Company
Attention: Customer Service of New York of New York
Confirm by Telephone to: P.O. Box 843 Cooper Station 111 Broadway
(800) 548-6565 New York, New York 10276 New York, New York 10006
Attention: Corporate Trust Attention: Lower Level
Services Corporate Trust Window
</TABLE>
By Overnight Courier and By Hand after 4:30 p.m.:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes
(as defined below) either if (i) Old Notes are to be forwarded herewith or (ii)
tenders of Old Notes are to be made by book-entry transfer to an account
maintained by United States Trust Company of New York (the "Exchange Agent") at
The Depository Trust Company ("DTC") pursuant to the procedures set forth in
"The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such
Old Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete
the procedures for book-entry transfer on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the
Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF OLD NOTES TENDERED
(See Instruction 4)
<TABLE>
<CAPTION>
If blank, please print name and address of Old Notes tendered
registered holder. (Attach additional list if necessary)
- -------------------------------------------------------------------------------------------------------------
Principal Amount of
Aggregate Old Notes Tendered
Certificate Principal Amount (if less than all
Number(s)* of Old Notes are tendered)**
<S> <C> <C> <C>
Total
Amount
Tendered:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Old Notes may be tendered in whole or in part in blocks with an
aggregate principal amount of $100,000 and integral multiples of
$1,000 principal amount in excess thereof, provided that if any Old
Notes are tendered for exchange in part, the untendered aggregate
principal amount thereof must be $100,000 or any integral multiple of
$1,000 principal amount in excess thereof. All Old Notes held shall
be deemed tendered unless a lesser number is specified in this
column.
2
<PAGE> 3
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution_______________________________________________
DTC Account Number__________________________________________________________
Transaction Code Number_____________________________________________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)________________________________________________
Window Ticket Number (if any)_______________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Name of Institution which Guaranteed Delivery_______________________________
If Guaranteed Delivered is to be made By Book-Entry Transfer:
Name of Tendering Institution_____________________________________
DTC Account Number________________________________________________
Transaction Code Number___________________________________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NONEXCHANGED OR
NONTENDERED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT
NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_______________________________________________________________________
Address:____________________________________________________________________
____________________________________________________________________
Area Code and Telephone Number:_____________________________________________
Contact Person:_____________________________________________________________
3
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby tenders to Hawthorne Financial Corporation (the
"Company"), a Delaware corporation, the above-described aggregate principal
amount of its 12 1/2% Notes due 2004 (the "Old Notes") in exchange for a like
aggregate principal amount of its 12 1/2% Exchange Notes due 2004 (the "New
Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), upon the terms and subject to the conditions
set forth in the Prospectus, dated ________ ___, 1998 (as the same may be
amended or supplemented from time to time, the "Prospectus"), receipt of which
is acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or
any portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent also is acting as agent of the Company in connection with
the Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED
HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
OLD NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE,
THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE
AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE
OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES.
THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL
DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR
DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES
TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF
THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old
Notes tendered hereby should be printed above, if they are not already set
forth above, as they appear on the Certificates representing such Old Notes.
The Certificate number(s) of the Old Notes that the undersigned wishes to
tender should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Old Notes than
are tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered
by book-entry transfer, such Old Notes will be credited to an account
maintained at DTC), without expense to the tendering holder, promptly following
the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any
one of the procedures described in "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the Instructions herein will,
upon the Company's acceptance for exchange of such tendered Old Notes,
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer. The undersigned
recognizes that, under certain circumstances set forth in the Prospectus, the
Company may not be required to accept for exchange any of the Old Notes
tendered hereby.
4
<PAGE> 5
Unless otherwise indicated herein in the box entitled "Special
Issuance Instructions" below, the undersigned hereby directs that the New Notes
be issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Old Notes, that such New Notes be credited to the account indicated
above maintained at DTC. If applicable, substitute Certificates representing
Old Notes not exchanged or not accepted for exchange will be issued to the
undersigned or, in the case of a book-entry transfer of Old Notes, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please deliver New
Notes to the undersigned at the address shown below the undersigned's
signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES
ACT, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN
THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT
OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE EXCHANGE
OFFER AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS
NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A
HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT
WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF
CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES,
THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE OR
(B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET- MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW
NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH
BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN
THE MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE
REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER
(AS DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE
FOR OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING
BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES (AND WHICH DO NOT REPRESENT AN UNSOLD ALLOTMENT FROM
THE ORIGINAL SALE OF THE OLD NOTES), FOR A PERIOD ENDING 90 DAYS AFTER THE
EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES
DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH NEW NOTES HAVE BEEN
DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH
BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AND AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY
TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT,
UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE
DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY
REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND
THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED
OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS
FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING
BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES
MAY BE RESUMED, AS THE CASE MAY BE. IF THE COMPANY GIVES SUCH NOTICE TO
SUSPEND THE SALE OF THE NEW NOTES, IT SHALL EXTEND THE 90-DAY PERIOD REFERRED
TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE
PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS
DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO
AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED
COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF
THE NEW NOTES OR TO AND INCLUDING THE DATE ON WHICH THE COMPANY HAS GIVEN
NOTICE THAT THE SALE OF NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE.
As a result, a Participating Broker-Dealer who intends to use the
Prospectus in connection with resales of New Notes received in exchange for Old
Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer.
5
<PAGE> 6
Such notice may be given in the space provided above or may be delivered to the
Exchange Agent at the address set forth in the Prospectus under "The Exchange
Offer--Exchange Agent."
Holders of Old Notes whose Old Notes are accepted for exchange will
not receive interest on such Old Notes and the undersigned waives the right to
receive any interest on such Old Notes accumulated from and after December 31,
1997. Holders of New Notes as of the record date for the payment of interest
on June 30, 1998 will be entitled to interest accumulated from and after
December 31, 1997.
All authority herein conferred or agreed to be conferred in this
Letter of Transmittal shall survive the death or incapacity of the undersigned
and any obligation of the undersigned hereunder shall be binding upon the
heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of the undersigned.
Except as stated in the Prospectus, this tender is irrevocable.
6
<PAGE> 7
HOLDER(S) SIGN HERE
(See Instructions 2, 5 and 6)
(Please Complete Substitute Form W-9 Below)
(Note: Signature(s) must be guaranteed if required by Instruction 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificates(s) for the Old Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certificates and other information as may be required by the Company
or the Exchange Agent to comply with the restrictions on transfer applicable
to the Old Notes). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting
in a fiduciary capacity or representative capacity, please set forth the
signer's full title. See Instruction 5.
_______________________________________________________________________________
_______________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date___________________, 1998
Name(s)______________________________________________________________________
(PLEASE PRINT)
_______________________________________________________________________________
Area Code(s) and Telephone Number______________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(See Instructions 2 and 5)
Authorized Signature___________________________________________________________
Name___________________________________________________________________________
(PLEASE PRINT)
Date___________________, 1998
Capacity or Title____________________________________________________________
Name of Firm_________________________________________________________________
Address______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number_______________________________________________
7
<PAGE> 8
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if New Notes and/or any Old Notes that are not tendered are
to be issued in the name of someone other than the registered holder of the Old
Notes whose name(s) appear(s) above.
Issue:
[ ] New Notes to:
[ ] Old Notes not tendered to:
Name____________________________________________________________________________
(PLEASE PRINT)
Address_________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if New Notes and/or any Old Notes that are not tendered are
to be sent to someone other than the registered holder of the Old Notes whose
name(s) appear(s) above, or to the registered holder(s) at an address other than
that shown above.
Mail:
[ ] New Notes to:
[ ] Old Notes not tendered to:
Name____________________________________________________________________________
(PLEASE PRINT)
Address_________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
8
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if
(a) tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth under "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus and an Agent's Message is not delivered or (b)
Certificates are to be forwarded herewith. Timely confirmation of a book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC, or
Certificates as well as this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its addresses set forth herein on or prior to
the Expiration Date. Tenders by book-entry transfer also may be made by
delivering an Agent's Message in lieu of this Letter of Transmittal. The term
"book-entry confirmation" means a confirmation of book-entry transfer of Old
Notes into the Exchange Agent's account at DTC. The term "Agent's Message"
means a message transmitted by DTC to and received by the Exchange Agent and
forming a part of a book-entry confirmation, which states that DTC has received
an express acknowledgement from the tendering participant, which acknowledgment
states that such participant has received and agrees to be bound by the Letter
of Transmittal (including the representations contained herein) and that the
Company may enforce the Letter of Transmittal against such participant. Old
Notes may be tendered in whole or in part in blocks with an aggregate principal
amount of $100,000 and integral multiples of $1,000 principal amount in excess
thereof, provided that if any Old Notes are tendered for exchange in part, the
untendered aggregate principal amount thereof must be $100,000 or any integral
multiple of $1,000 principal amount in excess thereof.
Holders who wish to tender their Old Notes and (i) who cannot complete
the procedures for delivery by book-entry transfer on or prior to the
Expiration Date, (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) whose Old Notes are not immediately available,
may tender their Old Notes by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth
under "The Exchange Offer--Procedures for Tendering Old Notes" in the
Prospectus. Pursuant to such procedures: (a) such tender must be made by or
through an Eligible Institution (as defined below); (b) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by the Company, must be received by the Exchange Agent on or prior to
the Expiration Date; and (c) the Certificates (or a book- entry confirmation
(as defined above and in the Prospectus)) representing all tendered Old Notes,
in proper form for transfer, together with a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
Old Notes to be properly tendered pursuant to the guaranteed delivery
procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on
or prior to the Expiration Date. As used herein and in the Prospectus,
"Eligible Institution" means a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as "an eligible guarantor institution," including (as
such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
9
<PAGE> 10
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter
of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant in
DTC whose name appears on a security position listing as the owner of the Old
Notes) of Old Notes tendered herewith, unless such holder(s) has completed
either the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes
will be accepted only in blocks with an aggregate principal amount of $100,000
and integral multiples of $1,000 principal amount in excess thereof, provided
that if any Old Notes are tendered for exchange in part, the aggregate
untendered principal amount thereof must be $100,000 or any integral multiple
of $1,000 principal amount in excess thereof. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the
principal amount of Old Notes which are to be tendered in the box entitled
"Principal Amount of Old Notes Tendered (if less than all are tendered)." In
such case, a new Certificate(s) for the remainder of the Old Notes that were
evidenced by your Old Certificate(s) will be sent to the holder of the Old
Notes, promptly after the Expiration Date, unless the appropriate boxes on this
Letter of Transmittal are completed. All Old Notes represented by Certificates
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written or facsimile
transmission of such notice of withdrawal must be received by the Exchange
Agent at one of its addresses set forth above or in the Prospectus on or prior
to the Expiration Date. Any such notice of withdrawal must specify the name of
the person who tendered the Old Notes to be withdrawn, the aggregate principal
amount of Old Notes to be withdrawn, and (if Certificates for Old Notes have
been tendered) the name of the registered holder of the Old Notes as set forth
on the Certificate for the Old Notes, if different from that of the person who
tendered such Old Notes. If Certificates for the Old Notes have been delivered
or otherwise identified to the Exchange Agent, then prior to the physical
release of such Certificates for the Old Notes, the tendering holder must
submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth under "The
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus, the
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawal of Old Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written or
facsimile transmission on or prior to the Expiration Date. Withdrawals of
tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will
not be deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company in its
sole discretion, whose determination shall be final and binding on all parties.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure
10
<PAGE> 11
to give any such notification. Any Old Notes which have been tendered but
which are withdrawn will be returned to the holder thereof without cost to such
holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Old Notes tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company in its sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered holder(s)
of the Old Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless New Notes are to
be issued in the name of a person other than the registered holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information
as the Company or the Exchange Agent may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to
be issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole
discretion, all questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of Old
Notes, which determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole and absolute discretion, to
reject any and all tenders determined by it not to be in proper form or the
acceptance of which, or exchange for, may, in the view of counsel to the
Company be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under "The Exchange Offer--Certain Conditions to the Exchange
Offer" or any conditions or irregularity in any tender of Old Notes of any
particular holder whether or not similar conditions or irregularities are
waived in the case of other holders. The Company's interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) will be final and binding. No tender of Old Notes
will be deemed to have been validly made until all irregularities with respect
to such tender have been cured or waived. None of the Company, any affiliates
or assigns of the Company, the Exchange Agent, or any other person shall be
under any duty to give notification of any irregularities in tenders or incur
any liability for failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange Agent at
its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
11
<PAGE> 12
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal
income tax law, a holder whose tendered Old Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Old Notes exchanged
pursuant to the Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form
W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days
after the date of the Substitute Form W-9, the amounts retained during the 60
day period will be remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder thereafter. If, however,
the holder has not provided the Exchange Agent with its TIN within such 60 day
period, amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the registered
owner of the Old Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Old Notes. If the Old Notes are registered in
more than one name or are not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to
the steps that must be taken in order to replace the Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen Certificate(s) have been
followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes
for exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes in connection with the Exchange Offer, then the amount of
any such transfer tax (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE.
12
<PAGE> 13
TO BE COMPLETED BY ALL
TENDERING SECURITYHOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: PEOPLES HERITAGE CAPITAL TRUST I
<TABLE>
<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN TIN________________________
Form W-9 THE BOX AT RIGHT AND CERTIFY BY Social Security Number or
SIGNING AND DATING BELOW Employer Identification Number
Department of the Treasury Part 2
Internal Revenue Service Awaiting TIN [ ]
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the
number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), (2) I am not subject
to backup withholding either because (i) I am exempt from backup
withholding, (ii) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup withholding, and (3)
any other information provided on this form is true and correct.
Payer's Request for Taxpayer SIGNATURE______________________________________________________________
Identification Number (TIN) DATE___________________________________________________________________
and Certification
You must cross out item (iii) in Part (2) above if you have been
notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return and you have
not been notified by the IRS that you are no longer subject to backup
withholding.
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU
PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9 FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or
delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments made to
me on account of the New Notes shall be retained until I provide a taxpayer
identification number to the Exchange Agent and that, if I do not provide my
taxpayer identification number within 60 days, such retained amounts shall
be remitted to the Internal Revenue Service as backup withholding and
31% of all reportable payments made to me thereafter will be withheld
and remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature____________________________________ Date____________________________
13
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
12 1/2% NOTES DUE 2004
OF
HAWTHORNE FINANCIAL CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i) the
procedures for delivery by book-entry transfer cannot be completed on or prior
to the Expiration Date (as defined in the Prospectus referred to below), (ii)
certificates for the Company's (as defined below) 12 1/2% Notes due 2004 (the
"Old Notes") are not immediately available or (iii) Old Notes, the Letter of
Transmittal and all other required documents cannot be delivered to United
States Trust Company of New York (the "Exchange Agent") on or prior to the
Expiration Date. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer--Procedures for Tendering Old Notes"
in the Prospectus.
The Exchange Agent for the Exchange Offer is:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Facsimile: By Mail: By Hand before 4:30 p.m.:
<S> <C> <C>
(212) 780-0592 United States Trust Company United States Trust Company
Attention: Customer Service of New York of New York
Confirm by Telephone to: P.O. Box 843 Cooper Station 111 Broadway
(800) 548-6565 New York, New York 10276 New York, New York 10006
Attention: Corporate Trust Attention: Lower Level
Services Corporate Trust Window
</TABLE>
By Overnight Courier and By Hand after 4:30 p.m.:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA A
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Hawthorne Financial Corporation (the
"Company"), a Delaware corporation, upon the terms and subject to the
conditions set forth in the Prospectus, dated __________ ___, 1998 (as the same
may be amended or supplemented from time to time, the "Prospectus"), and the
related Letter of Transmittal (which together constitute the "Exchange Offer"),
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offer--Procedures for
Tendering Old Notes."
Aggregate Principal Amount
Tendered:______________________________________________________________________
Certificate No(s). (if available):_____________________________________________
_______________________________________________________________________________
If Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number:____________________________________________________________
Date:__________________________________________________________________________
Name(s) of Registered Holder(s):
_______________________________________________________________________________
_______________________________________________________________________________
Address(es):
_______________________________________________________________________________
_______________________________________________________________________________
Area Code and Telephone Number(s):_____________________________________________
Signature(s):___________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE> 2
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (a) bank; (b) (i)
a broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (c)(i) a credit
union; (d)(i) a national securities exchange, registered securities association
or clearing agency; or (ii)(e) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Old Notes to the Exchange Agent's account at The Depository
Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and
any other required documents within three business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
Name of Firm:__________________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
(Zip Code)
Area Code and
Telephone Number:______________________________________________________________
_______________________________________________________________________________
(Authorized Signature)
Title:_________________________________________________________________________
Name:___________________________________________________________________________
(Please type or print)
Date:__________________________________________________________________________
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL
SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
2
