<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1997
REGISTRATION NO. 333-
REGISTRATION NO. 333- -01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
STIFEL FINANCIAL CORP. STIFEL FINANCIAL CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS
CHARTER) CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (STATE OR OTHER JURISDICTION OF INCORPORATION OR
ORGANIZATION) ORGANIZATION)
43-1273600 43-6769015
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
------------------------
500 NORTH BROADWAY
ST. LOUIS, MO 63102
(314) 342-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHARLES R. HARTMAN, ESQ.
VICE PRESIDENT AND SECRETARY
STIFEL FINANCIAL CORP.
500 NORTH BROADWAY
ST. LOUIS, MO 63102
(314) 342-2000
FAX: (314) 342-2097
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
JAMES L. NOUSS, JR., ESQ.
BRYAN CAVE LLP
211 NORTH BROADWAY, SUITE 3600
ST. LOUIS, MO 63102
(314) 259-2000
FAX: (314) 259-2020
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE REGISTRATION FEE
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Securities of Stifel Financial Capital
Trust(1)......................................... 2,875,000 $10.00 $28,750,000 $8,713
- - ----------------------------------------------------------------------------------------------------------------------
Subordinated Debentures of Stifel Financial
Corp.(2)......................................... (2) -- -- --
- - ----------------------------------------------------------------------------------------------------------------------
Guarantee of Stifel Financial Corp., with respect
to Preferred Securities(3)....................... (3) -- -- --
======================================================================================================================
</TABLE>
(1) Includes 375,000 Preferred Securities which may be sold by Stifel Financial
Capital Trust to cover over-allotments.
(2) The Subordinated Debentures will be purchased by Stifel Financial Capital
Trust with the proceeds of the sale of the Preferred Securities. Such
securities may later be distributed for no additional consideration to the
holders of the Preferred Securities of Stifel Financial Capital Trust upon
its dissolution and the distribution of its assets.
(3) This Registration Statement is deemed to cover the Subordinated Debentures
of Stifel Financial Corp., the rights of holders of Subordinated Debentures
of Stifel Financial Corp. under the Indenture, and the rights of holders of
the Preferred Securities under the Trust Agreement, the Guarantee and the
Expense Agreement entered into by Stifel Financial Corp. No separate
consideration will be received for the Guarantee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED JUNE 9, 1997
PROSPECTUS
2,500,000 PREFERRED SECURITIES
STIFEL FINANCIAL CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
------------------------------------
STIFEL FINANCIAL CORP.
$25,000,000 % SUBORDINATED DEBENTURES OF
------------------------------------
STIFEL FINANCIAL CORP.
The % Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of Stifel Financial Capital Trust, a statutory business trust
created under the laws of the State of Delaware ("Stifel Capital"). Stifel
Financial Corp., a Delaware corporation ("Stifel Financial" or the "Company"),
will own all the common securities (the "Common Securities" and, together with
the Preferred Securities, the "Trust Securities") representing undivided
beneficial interests in the assets of Stifel Capital.
(continued on next page)
An application will be made to have the Preferred Securities approved for
listing on the New York Stock Exchange (the "NYSE"), subject to official notice
of issuance, under the symbol "SFPr."
------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC COMMISSIONS(1) STIFEL CAPITAL(2)(3)
<S> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------
Per Preferred Security........... $10.00 (2) $
- - -------------------------------------------------------------------------------------------------------------
Total(4)......................... $25,000,000 (2) $
=============================================================================================================
</TABLE>
(1) Stifel Financial and Stifel Capital have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Debentures, Stifel Financial
has agreed to pay the Underwriters as compensation for its arranging the
investment therein of such proceeds, $ per Preferred Security, or
$ in the aggregate ($ if the over-allotment option is
exercised in full). See "Underwriting."
(3) Before deducting offering expenses estimated at $ .
(4) The Company has granted to the Underwriters an option exercisable within 30
days from the date of this Prospectus to purchase up to 375,000 additional
Preferred Securities on the same terms and conditions set forth above to
cover over-allotments, if any. If all such Preferred Securities are
purchased, the total Price to Public and Proceeds to Stifel Capital will be
$28,750,000 and $ , respectively. See "Underwriting."
------------------------------------
The Preferred Securities are being offered by the Underwriters subject to
receipt and acceptance by them, prior sale and the Underwriters' right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of certificates for the Preferred
Securities will be made on or about , 1997.
STIFEL, NICOLAUS & COMPANY
INCORPORATED
June , 1997
<PAGE> 3
is the Property Trustee (as defined herein) of Stifel
Capital. Stifel Capital exists for the purpose of issuing the Preferred
Securities and investing the proceeds thereof in an equivalent amount of %
Subordinated Debentures (the "Subordinated Debentures") of Stifel Financial. The
Subordinated Debentures will mature on June 30, 2027, which date may be (i)
shortened to a date not earlier than June 30, 2002, or (ii) extended to a date
not later than June 30, 2036, in each case if certain conditions are met. The
Preferred Securities will have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation, redemption or
otherwise over the Common Securities. See "Description of the Preferred
Securities -- Subordination of Common Securities."
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of % of the liquidation
amount of $10 per Preferred Security (the "Liquidation Amount"), accruing from
, 1997, the date of original issuance, and payable quarterly in
arrears on the last day of March, June, September and December of each year,
commencing September 30, 1997 (the "Distributions"). Stifel Financial has the
right, so long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, to defer payment of interest on the Subordinated Debentures
at any time or from time to time for a period not to exceed 20 consecutive
quarters with respect to each deferral period (each, an "Extension Period");
provided that no Extension Period may extend beyond the Stated Maturity of the
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, Stifel Financial may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Subordinated Debentures are so deferred, Distributions on the
Preferred Securities will also be deferred, and Stifel Financial will not be
permitted, subject to certain exceptions described herein, to declare or pay any
cash distributions with respect to its capital stock or debt securities that
rank pari passu with or junior to the Subordinated Debentures. DURING AN
EXTENSION PERIOD, INTEREST ON THE SUBORDINATED DEBENTURES WILL CONTINUE TO
ACCRUE (AND THE AMOUNT OF DISTRIBUTIONS TO WHICH HOLDERS OF THE PREFERRED
SECURITIES ARE ENTITLED WILL ACCUMULATE) AT THE RATE OF % PER ANNUM,
COMPOUNDED QUARTERLY, AND HOLDERS OF THE PREFERRED SECURITIES WILL BE REQUIRED
TO INCLUDE INTEREST INCOME IN THEIR GROSS INCOME FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT
TO SUCH DEFERRED INTEREST PAYMENTS. UPON THE OCCURRENCE OF AN EXTENSION PERIOD,
A HOLDER OF PREFERRED SECURITIES THAT DISPOSES OF ITS PREFERRED SECURITIES
BETWEEN RECORD DATES FOR PAYMENTS OF DISTRIBUTIONS (AND CONSEQUENTLY DOES NOT
RECEIVE A DISTRIBUTION FROM STIFEL CAPITAL FOR THE PERIOD PRIOR TO SUCH
DISPOSITION) WILL NEVERTHELESS BE REQUIRED TO INCLUDE ACCRUED BUT UNPAID
INTEREST ON THE SUBORDINATED DEBENTURES THROUGH THE DATE OF DISPOSITION IN
INCOME AS ORDINARY INCOME AND TO ADD SUCH AMOUNT TO ITS ADJUSTED TAX BASIS IN
ITS PRO RATA SHARE OF THE UNDERLYING SUBORDINATED DEBENTURES DEEMED DISPOSED OF.
See "Description of the Subordinated Debentures -- Option to Extend Interest
Payment Period," "Certain Federal Income Tax Consequences -- Potential Extension
of Interest Payment Period and Original Issue Discount" and "-- Disposition of
Preferred Securities."
Stifel Financial and Stifel Capital believe that, taken together, the
obligations of Stifel Financial under the Guarantee, the Trust Agreement, the
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein) provide, in the aggregate, a full, irrevocable and unconditional
guarantee, on a subordinated basis, of all of the obligations of Stifel Capital
under the Preferred Securities. See "Relationship Among the Preferred
Securities, the Subordinated Debentures and the Guarantee -- Full and
Unconditional Guarantee." The Guarantee of Stifel Financial guarantees the
payment of Distributions and payments on liquidation or redemption of the
Preferred Securities, but only in each case to the extent of funds held by
Stifel Capital, as described herein. See "Description of the Guarantee --
General." If Stifel Financial does not make interest payments on the
Subordinated Debentures held by Stifel Capital, Stifel Capital will have
insufficient funds to pay Distributions on the Preferred Securities. The
Guarantee does not cover payments of Distributions when Stifel Capital does not
have sufficient funds to pay such Distributions. In such event, a holder of
Preferred Securities may institute a legal proceeding directly against Stifel
Financial
2
<PAGE> 4
pursuant to the terms of the Indenture to enforce payments of amounts equal to
such Distributions to such holder. See "Description of the Subordinated
Debentures -- Enforcement of Certain Rights by Holders of the Preferred
Securities." The obligations of Stifel Financial under the Guarantee and the
Preferred Securities are subordinate and junior in right of payment to all
Senior Debt, Subordinated Debt and Additional Senior Obligations (each as
defined herein) of Stifel Financial. The Subordinated Debentures are unsecured
obligations of Stifel Financial and are subordinated to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of Stifel Financial.
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Subordinated Debentures at maturity or their
earlier redemption. The Subordinated Debentures are redeemable prior to maturity
at the option of Stifel Financial (i) on or after June 30, 2002, in whole at any
time or in part from time to time, or (ii) at any time, in whole (but not in
part), within 180 days following the occurrence of a Tax Event or an Investment
Company Event (each as defined herein), in each case at a redemption price equal
to the accrued and unpaid interest on the Subordinated Debentures so redeemed to
the date fixed for redemption, plus 100% of the principal amount thereof. See
"Description of the Preferred Securities -- Redemption or Exchange."
Stifel Financial has the right at any time to dissolve Stifel Capital. In
the event of the voluntary or involuntary dissolution of Stifel Capital, after
satisfaction of liabilities to creditors of Stifel Capital as required by
applicable law, the holders of Preferred Securities will be entitled to receive
a Liquidation Amount of $10 per Preferred Security, plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
Subordinated Debenture having an aggregate principal amount equal to the
Liquidation Amount of such Preferred Securities (and carrying with it
accumulated interest in an amount equal to the accumulated and unpaid
Distributions then due on such Preferred Securities), subject to certain
exceptions. See "Description of the Preferred Securities -- Redemption or
Exchange" and "-- Liquidation Distribution Upon Dissolution."
------------------------
Stifel Financial will provide to the holders of Preferred Securities
quarterly reports containing unaudited financial statements and annual reports
containing financial statements audited by Stifel Financial's independent
auditors. Stifel Financial will also furnish annual reports on Form 10-K and
quarterly reports on Form 10-Q free of charge to holders of Preferred Securities
who so request in writing addressed to the Secretary of Stifel Financial.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTING THE PREFERRED SECURITIES AND
BIDDING FOR AND PURCHASING SUCH PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING." SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes that the Underwriters' over-allotment will not be
exercised. Prospective investors should carefully consider the information set
forth under the heading "Risk Factors."
STIFEL FINANCIAL
Stifel Financial, through its wholly owned subsidiaries, principally
Stifel, Nicolaus & Company, Incorporated ("Stifel, Nicolaus"), is principally
engaged in retail brokerage, securities trading, investment banking, investment
advisory, and related financial services throughout the United States. Although
the Company has offices and customers throughout the United States, its
geographic concentration is in the Midwest. Stifel, Nicolaus has a branch office
system located in 13 states, and the Company has a total of 43 locations in 14
states. Stifel, Nicolaus employs approximately 275 registered representatives.
The Company's customers include individual investors, corporations,
municipalities and institutions. In 1996, the Company had revenues of
approximately $109.8 million and net income of approximately $3.4 million and as
of March 31, 1997, the Company had total assets of approximately $343.2 million
and stockholders' equity of approximately $39.5 million. The principal executive
office of Stifel Financial is 500 North Broadway, St. Louis, Missouri 63102, and
its telephone number is (314) 342-2000.
Stifel, Nicolaus trades as a principal in the over-the-counter market and
acts as both principal and agent to facilitate the execution of customers'
orders. Stifel, Nicolaus "makes a market" in various securities of interest
maintaining an inventory of such securities but does not engage in a significant
amount of trading for its own account. It also buys corporate and municipal
bonds for its own account in the secondary market, maintains an inventory and
resells from inventory to other dealers and institutional and retail customers.
Stifel, Nicolaus manages the underwriting of both corporate and municipal
securities and participates as an underwriter in syndicates of issues managed by
other firms. The corporate and public finance departments of Stifel, Nicolaus
are responsible for originating underwritings, mergers and acquisitions,
placements, valuations, financial advisory work and other investment banking
matters. Stifel, Nicolaus acts as an underwriter and dealer in bonds issued by
states, cities and other political subdivisions and may act as manager or
participant in offerings managed by other firms.
In 1996 and 1995, the majority of the Stifel, Nicolaus' investment banking
revenues were generated by the corporate finance department. The growth in the
revenue is due to the department's focus on providing research, financial
advisory services and consulting services for mergers and acquisitions and
serving as a manager or co-manager for underwriting issuances of corporate debt
and equity securities primarily for financial institutions and Real Estate
Investment Trusts (REITs).
The Company has a wholly owned subsidiary, Century Securities Associates,
Inc. ("CSA"), an introducing broker-dealer which clears its transactions through
Stifel, Nicolaus. CSA contracts with independent licensed brokers to sell
securities and other investment products to retail (individual) investor
accounts. CSA is licensed in 50 states and conducts business with approximately
100 independent registered representatives.
The Company's wholly owned subsidiary, Stifel Asset Management Corp.
("SAM"), acts as a holding company for two investment advisory firms, Pin Oak
Capital, Ltd. ("Pin Oak"), and Todd Investment Advisors, Inc. ("Todd"). Both Pin
Oak and Todd provide investment advice and services to individual, fiduciary and
corporate clients. Combined assets under management for the two firms at
December 31, 1996 was approximately $2.6 billion. Pin Oak is registered as an
investment advisor in six states, and Todd is registered as an investment
advisor in fourteen states.
The Company will continue to follow its mission to serve retail customers
emphasizing its regional knowledge and expertise while expanding its capital
markets and investment banking activities in niche areas of expertise. The
Company's strategy will stress its ability to provide sound judgment to clients
in an electronic age where information is increasingly treated as a commodity.
The focus on niche practices in corporate and public finance is a key factor in
our strategic plan.
4
<PAGE> 6
STIFEL CAPITAL
Stifel Capital is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement, dated as of June 6, 1997, executed by Stifel
Financial, as depositor, and the trustees of Stifel Capital (together with the
Property Trustee, the "Trustees"), and (ii) a certificate of trust filed with
the Secretary of State of the State of Delaware on June 6, 1997. The initial
trust agreement will be amended and restated in its entirety (as so amended and
restated, the "Trust Agreement") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the purchasers thereof will own all of the Preferred Securities.
Stifel Financial will acquire all of the Common Securities which will represent
an aggregate liquidation amount equal to at least 3% of the total capital of
Stifel Capital. The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities, except that upon the
occurrence and during the continuance of an Event of Default (as defined herein)
under the Trust Agreement resulting from a Debenture Event of Default, the
rights of Stifel Financial as holder of the Common Securities to payment in
respect of Distributions and payments upon liquidation, redemption or otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
See "Description of the Preferred Securities -- Subordination of Common
Securities." Stifel Capital exists for the exclusive purposes of (i) issuing the
Trust Securities representing undivided beneficial interests in the assets of
Stifel Capital, (ii) investing the gross proceeds of the Trust Securities in the
Subordinated Debentures issued by Stifel Financial and (iii) engaging in only
those other activities necessary, advisable, or incidental thereto. The
Subordinated Debentures and payments thereunder will be the only assets of
Stifel Capital, and payments under the Subordinated Debentures will be the only
revenue of Stifel Capital. Stifel Capital has a term of 55 years but may
terminate earlier as provided in the Trust Agreement. The principal executive
office of Stifel Capital is 500 North Broadway, St. Louis, Missouri 63102, and
its telephone number is (314) 342-2000.
The number of Trustees will, pursuant to the Trust Agreement, initially be
five. Three of the Trustees (the "Administrative Trustees") will be persons who
are employees or officers of, or who are affiliated with, Stifel Financial. The
fourth trustee will be an entity that maintains its principal place of business
in the State of Delaware (the "Delaware Trustee"). Wilmington Trust Company, a
Delaware chartered trust company, will act as Delaware Trustee. A fifth trustee
will be added and will be a financial institution that is unaffiliated with
Stifel Financial, which trustee will serve as institutional trustee under the
Trust Agreement and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). will
be the Property Trustee until removed or replaced by the holder of the Common
Securities. For purposes of compliance with the provisions of the Trust
Indenture Act, will also act as trustee (the "Guarantee Trustee")
under the Guarantee and as Debenture Trustee (as defined herein) under the
Indenture.
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and in such capacity will have
the power to exercise all rights, powers and privileges under the Indenture. The
Property Trustee will also maintain exclusive control of a segregated
non-interest-bearing bank account (the "Property Account") to hold all payments
made in respect of the Subordinated Debentures for the benefit of the holders of
the Trust Securities. The Property Trustee will make payments of Distributions
and payments on liquidation, redemption and otherwise to the holders of the
Trust Securities out of funds from the Property Account. The Guarantee Trustee
will hold the Guarantee for the benefit of the holders of the Preferred
Securities. Stifel Financial, as the holder of all the Common Securities, will
have the right to appoint, remove or replace any Trustee and to increase or
decrease the number of Trustees. Stifel Financial will pay all fees and expenses
related to Stifel Capital and the offering of the Trust Securities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the Trust
Agreement, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
5
<PAGE> 7
THE OFFERING
Securities Offered............ 2,500,000 Preferred Securities having a
Liquidation Amount of $10 per Preferred
Security. The Preferred Securities represent
preferred undivided beneficial interests in the
assets of Stifel Capital, which will consist
solely of the Subordinated Debentures and
payments thereunder. Stifel Capital has granted
the Underwriters an option, exercisable within
30 days after the date of this Prospectus, to
purchase up to an additional 375,000 Preferred
Securities at the initial offering price,
solely to cover over-allotments, if any.
Distributions................. The Distributions payable on each Preferred
Security will be fixed at a rate per annum of
% of the Liquidation Amount of $10 per
Preferred Security, will be cumulative, will
accrue from , 1997, the date of
original issuance of the Preferred Securities,
and will be payable quarterly in arrears, on
March 31, June 30, September 30 and December 31
of each year, commencing September 30, 1997.
See "Description of the Preferred Securities --
Distributions -- Payment of Distributions."
Option to Extend Interest
Payment Period................ Stifel Financial has the right, at any time, so
long as no Debenture Event of Default has
occurred and is continuing, to defer payments
of interest on the Subordinated Debentures for
a period not exceeding 20 consecutive quarters;
provided, that no Extension Period may extend
beyond the Stated Maturity of the Subordinated
Debentures. As a consequence of the extension
by Stifel Financial of the interest payment
period, quarterly Distributions on the
Preferred Securities will be deferred (though
such Distributions would continue to accrue
with interest thereon compounded quarterly,
since interest will continue to accrue and
compound on the Subordinated Debentures) during
any such Extension Period. During an Extension
Period, Stifel Financial will be prohibited,
subject to certain exceptions described herein,
from declaring or paying any cash distributions
with respect to its capital stock or debt
securities that rank pari passu with or junior
to the Subordinated Debentures. Upon the
termination of any Extension Period and the
payment of all amounts then due, Stifel
Financial may commence a new Extension Period,
subject to the foregoing requirements. See
"Description of the Preferred Securities --
Distributions -- Extension Period" and
"Description of the Subordinated Debentures --
Option to Extend Interest Payment Period."
Should an Extension Period occur, holders of
Preferred Securities will be required to
include deferred interest income in their gross
income for United States federal income tax
purposes in advance of receipt of the cash
distributions with respect to such deferred
interest payments. See "Certain Federal Income
Tax Consequences -- Potential Extension of
Interest Payment Period and Original Issue
Discount."
Optional Redemption........... The Preferred Securities are subject to
mandatory redemption, in whole or in part, upon
repayment of the Subordinated Debentures at
maturity or their earlier redemption. The
Subordinated Debentures are redeemable prior to
maturity at the option of Stifel Financial (i)
on or after June 30, 2002, in whole at any time
or in
6
<PAGE> 8
part from time to time, or (ii) at any time, in
whole (but not in part), within 180 days
following the occurrence of a Tax Event or an
Investment Company Event, in each case at the
redemption price equal to 100% of the principal
amount of the Subordinated Debenture, together
with any accrued but unpaid interest to the
date fixed for redemption. See "Description of
the Subordinated Debentures -- Redemption or
Exchange."
Distribution of Subordinated
Debentures.................. Stifel Financial has the right at any time to
terminate the Preferred Securities and cause
the Subordinated Debentures, after satisfaction
of liabilities to creditors of Stifel Capital
as required by applicable law, to be
distributed to holders of Preferred Securities
in dissolution of Stifel Capital. See
"Description of the Preferred
Securities -- Redemption or Exchange" and
"Description of the Preferred
Securities -- Liquidation Distribution Upon
Dissolution."
Guarantee..................... Stifel Financial has guaranteed the payment of
Distributions and payments on liquidation or
redemption of the Preferred Securities, but
only in each case to the extent of funds held
by Stifel Capital, as described herein. Stifel
Financial and Stifel Capital believe that,
taken together, the obligations of Stifel
Financial under the Guarantee, the Trust
Agreement, the Subordinated Debentures, the
Indenture and the Agreement as to Expenses and
Liabilities ("Expense Agreement") provide, in
the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated
basis, of all of the obligations of Stifel
Capital under the Preferred Securities. The
obligations of Stifel Financial under the
Guarantee and the Preferred Securities are
subordinate and junior in right of payment to
all Senior Debt, Subordinated Debt and
Additional Senior Obligations of Stifel
Financial. If Stifel Financial does not make
principal or interest payments on the
Subordinated Debentures, Stifel Capital will
not have sufficient funds to make distributions
on the Preferred Securities; in which event,
the Guarantee will not apply to such
Distributions until Stifel Capital has
sufficient funds available therefor. See
"Description of the Guarantee."
Voting Rights................. The holders of the Preferred Securities will
have no voting rights except in limited
circumstances. See "Description of the
Preferred Securities -- Voting Rights;
Amendment of Trust Agreement."
Use of Proceeds............... The proceeds from the sale of the Preferred
Securities offered hereby will be used by
Stifel Capital to purchase the Subordinated
Debentures issued by Stifel Financial. Stifel
Financial intends to use the net proceeds from
the sale of the Subordinated Debentures for
general corporate purposes, which may include,
among other things, the repayment of long-term
debt, expansion of the Company's business and
the repurchase of the Company's common stock.
See "Use of Proceeds."
Listing....................... An application will be made to have the
Preferred Securities approved for listing on
the NYSE, subject to official notice of
issuance, under the symbol "SFPr."
7
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL DATA(1)
<TABLE>
<CAPTION>
AT OR FOR
THREE MONTHS
ENDED AT OR FOR YEAR ENDED DECEMBER 31,
MARCH 27, ------------------------------------------
1997 1996 1995 1994
------------ ---- ---- ----
(DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues..................................... $ 31,845 $109,813 $ 95,360 $ 93,926
Income (loss) before income taxes and
extraordinary credit....................... 2,752 5,602 1,307 (9,221)
Extraordinary credit......................... -- -- -- --
Net Income (loss)............................ 1,647 3,393 644 (5,503)
Earnings (loss) per share:
Primary.................................... $0.34 $0.71 $0.14 $(1.17)
Fully diluted.............................. 0.28 0.64 0.14 (1.17)
Average common shares and share equivalents
outstanding:
Primary.................................... 4,852 4,780 4,674 4,689
Fully diluted.............................. 6,270 6,281 6,105 6,107
Total assets................................. $343,196 $301,049 $226,775 $ 222,208
Long-term obligations........................ 10,000 10,000 10,760 11,520
Stockholders' equity......................... 39,516 37,752 34,795 34,226
Ratio of Earnings to Fixed Charges(2)........ 2.15 1.67 1.15 nm
<CAPTION>
AT OR FOR
FIVE MONTHS
ENDED AT OR FOR YEAR ENDED
DECEMBER 31, -----------------------------
1993 JULY 30, 1993 JULY 31, 1992
------------ ------------- -------------
(DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues..................................... $ 46,455 $113,471 $108,009
Income (loss) before income taxes and
extraordinary credit....................... 3,060 11,270 9,068
Extraordinary credit......................... -- -- 648
Net Income (loss)............................ 1,915 7,038 6,353
Earnings (loss) per share:
Primary.................................... $0.40 $1.52 $1.44
Fully diluted.............................. 0.36 1.27 1.21
Average common shares and share equivalents
outstanding:
Primary.................................... 4,748 4,626 4,399
Fully diluted.............................. 6,165 6,106 5,817
Total assets................................. $288,203 $196,539 $191,059
Long-term obligations........................ 11,520 10,000 10,000
Stockholders' equity......................... 40,609 38,995 31,597
Ratio of Earnings to Fixed Charges(2)........ 2.66 3.24 2.59
</TABLE>
- - ------------
(1) The summary consolidated financial data set forth herein does not purport to
be complete and should be read in conjunction with, and is qualified in its
entirety by, the more detailed information contained in the consolidated
financial statements of the Company and selected notes included in Appendix
A and Appendix B included herein and the discussion under "Management's
Financial Discussion" included in Appendix A included herein and the
discussion under "Management's Discussion and Analysis of Results of
Operations and Financial Condition" included in Appendix B included herein.
(2) For purposes of calculating the ratio of earnings to combined fixed charges
and preferred stock dividends, earnings consist of income before taxes plus
interest and the portion of rent expense deemed to be interest. Fixed
charges consist of interest and the portion of rent expense deemed to be
interest. For the year ended December 31, 1994 earnings as defined were
inadequate to cover fixed charges. The amounts by which fixed charges
exceeded earnings as defined for the year ended December 31, 1994 was
$9,221,000.
8
<PAGE> 10
RISK FACTORS
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors in evaluating Stifel Financial and its business and
Stifel Capital before purchasing the Preferred Securities offered hereby.
Prospective investors should note, in particular, that this Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Act of 1934, as amended (the "Exchange Act"), and that actual results
could differ materially from those contemplated by such statements. The
considerations listed below represent certain important factors Stifel Financial
believes could cause such results to differ. These considerations are not
intended to represent a complete list of the general or specific risks that may
affect Stifel Financial and Stifel Capital. It should be recognized that other
risks may be significant, presently or in the future, and the risks set forth
below may affect Stifel Financial and Stifel Capital to a greater extent than
indicated.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of Stifel Financial under the Guarantee issued for the
benefit of the holders of Preferred Securities and under the Subordinated
Debentures are unsecured and rank subordinate and junior in right of payment to
all Senior Debt, Subordinated Debt and Additional Senior Obligations of Stifel
Financial, whether now existing or hereafter incurred. At March 27, 1997, the
aggregate outstanding Senior Debt, Subordinated Debt and Additional Senior
Obligations of Stifel Financial was approximately $176.4 million. Because Stifel
Financial is a holding company, the right of Stifel Financial to participate in
any distribution of assets of any of its subsidiaries, including Stifel,
Nicolaus, upon its liquidation or reorganization or otherwise (and thus the
ability of holders of the Preferred Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of the subsidiary,
except to the extent that Stifel Financial may itself be recognized as a
creditor of such subsidiary. The Subordinated Debentures, therefore, will be
effectively subordinated to all existing and future liabilities of any of Stifel
Financial's subsidiaries, and holders of Subordinated Debentures and Preferred
Securities should look only to the assets of Stifel Financial for payments on
the Subordinated Debentures. Neither the Indenture, the Guarantee nor the Trust
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Debt, Subordinated Debt and Additional Senior Obligations, that
may be incurred by Stifel Financial. See "Description of the Guarantee -- Status
of the Guarantee" and "Description of the Subordinated Debentures --
Subordination."
The ability of Stifel Capital to pay amounts due on the Preferred
Securities is solely dependent upon Stifel Financial making payments on the
Subordinated Debentures as and when required. Moreover, Stifel Financial is a
holding company which derives substantially all of its revenues from its
subsidiaries, particularly Stifel, Nicolaus. As such, the Company is dependent
to some extent upon dividends and other payments from its subsidiaries to
generate the funds necessary to meet its cash obligations.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
Stifel Financial has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with respect to each Extension
Period; provided that no Extension Period may extend beyond the Stated Maturity
of the Subordinated Debentures. As a consequence of any such deferral, quarterly
Distributions on the Preferred Securities by Stifel Capital will be deferred
(and the amount of Distributions to which holders of the Preferred Securities
are entitled will accumulate additional Distributions thereon at the rate of
% per annum, compounded quarterly from the relevant payment date for such
Distributions) during any such Extension Period. During any such Extension
Period, Stifel Financial may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of Stifel Financial capital stock, (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of Stifel Financial that rank pari passu with or junior in
interest to the Subordinated Debentures or make any
9
<PAGE> 11
guarantee payments with respect to any guarantee by Stifel Financial of the debt
securities of any subsidiary of Stifel Financial if such guarantee ranks pari
passu with or junior in interest to the Subordinated Debentures (other than
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the Subordinated Debentures or any of the Preferred Securities. Prior to
the termination of any such Extension Period, Stifel Financial may further defer
the payment of interest; provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Subordinated
Debentures. Upon the termination of any Extension Period and the payment of all
interest then accrued and unpaid (together with interest thereon at the annual
rate of % compounded quarterly, to the extent permitted by applicable law),
Stifel Financial may elect to begin a new Extension Period, subject to the above
requirements. Subject to the foregoing, there is no limitation on the number of
times that Stifel Financial may elect to begin an Extension Period. See
"Description of the Preferred Securities -- Distributions -- Extension Period"
and "Description of the Subordinated Debentures -- Option to Extend Interest
Payment Period."
Should an Extension Period occur, each holder of Preferred Securities will
be required to accrue and recognize income (in the form of original issue
discount ("OID")) in respect of its pro rata share of the interest accruing on
the Subordinated Debentures held by Stifel Capital for United States federal
income tax purposes. A holder of Preferred Securities must, as a result, include
such income in gross income for United States federal income tax purposes in
advance of the receipt of cash, and will not receive the cash related to such
income from Stifel Capital if the holder disposes of the Preferred Securities
prior to the record date for the payment of the related Distributions. See
"Certain Federal Income Tax Consequences -- Potential Extension of Interest
Payment Period and Original Issue Discount."
Stifel Financial has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. Should Stifel Financial elect, however, to exercise
such right in the future, the market price of the Preferred Securities is likely
to be adversely affected. A holder that disposes of its Preferred Securities
during an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. As a
result of the existence of Stifel Financial's right to defer interest payments,
the market price of the Preferred Securities may be more volatile than the
market prices of other securities on which original issue discount accrues that
are not subject to such optional deferrals.
TAX EVENT OR INVESTMENT COMPANY EVENT; REDEMPTION
Stifel Financial has the right to redeem the Subordinated Debentures in
whole (but not in part) within 180 days following the occurrence of a Tax Event
or an Investment Company Event (whether occurring before or after June 30,
2002), and, therefore, cause a mandatory redemption of the Preferred Securities.
"Tax Event" means the receipt by Stifel Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) Stifel Capital is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Subordinated Debentures, (ii) interest
payable by Stifel Financial on the Subordinated Debentures is not, or, within 90
days of such opinion, will not be, deductible by Stifel Financial, in whole or
in part, for United States federal income tax purposes, or (iii) Stifel Capital
is, or will be within 90 days of the date of the opinion, subject to more than a
de minimis amount of other taxes, duties or other governmental charges. Stifel
Financial must request and receive an opinion with regard to such matters within
a reasonable period of time after it becomes aware of the possible occurrence of
any of the events described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by Stifel Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in
10
<PAGE> 12
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, Stifel Capital is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), which
change becomes effective on or after the date of original issuance of the
Preferred Securities. See " -- Risk Factors Relating to the Preferred Securities
- - -- Proposed Tax Legislation" for a discussion of certain legislative proposals
that, if adopted, could give rise to a Tax Event, which may permit Stifel
Financial to cause a redemption of the Preferred Securities prior to June 30,
2002.
SHORTENING OR EXTENSION OF STATED MATURITY OF SUBORDINATED DEBENTURES
Stifel Financial has the right, at any time, to shorten the maturity of the
Subordinated Debentures to a date not earlier than June 30, 2002. Stifel
Financial also has the right to extend the maturity of the Subordinated
Debentures (whether or not Stifel Capital is terminated and the Subordinated
Debentures are distributed to holders of the Preferred Securities) to a date no
later than June 30, 2036, the 39th anniversary of the initial issuance of the
Preferred Securities. Such right may only be exercised, however, if at the time
such election is made and at the time of such extension (i) Stifel Financial is
not in bankruptcy, otherwise insolvent or in liquidation, (ii) Stifel Financial
is not in default in the payment of any interest or principal on the
Subordinated Debentures, (iii) Stifel Capital is not in arrears on payments of
Distributions on the Preferred Securities and no deferred Distributions are
accumulated and (iv) Stifel Financial has a Senior Debt rating of investment
grade. See "Description of the Subordinated Debentures -- General."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to the
extent not paid by Stifel Capital, (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that Stifel
Capital has funds available therefor at such time, (ii) the Redemption Price (as
defined herein) with respect to any Preferred Securities called for redemption,
to the extent that Stifel Capital has funds available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of
Stifel Capital (other than in connection with the distribution of Subordinated
Debentures to the holders of Preferred Securities or a redemption of all of the
Preferred Securities), the lesser of (a) the amount of the Liquidation
Distribution (as defined herein), to the extent Stifel Capital has funds
available therefor at such time, or (b) the amount of assets of Stifel Capital
remaining available for distribution to holders of the Preferred Securities in
liquidation of Stifel Capital. The holders of not less than a majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of the Guarantee or to direct the exercise of
any trust power conferred upon the Guarantee Trustee under the Guarantee. Any
holder of the Preferred Securities may institute a legal proceeding directly
against Stifel Financial to enforce its rights under the Guarantee without first
instituting a legal proceeding against Stifel Capital, the Guarantee Trustee or
any other Person (as defined in the Guarantee). If Stifel Financial were to
default on its obligation to pay amounts payable under the Subordinated
Debentures, Stifel Capital would lack funds for the payment of Distributions or
amounts payable on redemption of the Preferred Securities or otherwise, and, in
such event, holders of Preferred Securities would not be able to rely upon the
Guarantee for such amounts. In the event, however, that a Debenture Event of
Default has occurred and is continuing and such event is attributable to the
failure of Stifel Financial to pay interest on or principal of the Subordinated
Debentures on the payment date on which such payment is due and payable, then a
holder of Preferred Securities may institute a legal proceeding directly against
Stifel Financial for enforcement of payment to such holder of the principal of
or interest on such Subordinated Debentures having a principal amount equal to
the aggregate Liquidation Amount of the Preferred Securities of such holder (a
"Direct Action"). The exercise by Stifel Financial of its right, as described
herein, to defer the payment of interest on the Subordinated Debentures does not
constitute a Debenture Event of Default. In connection with such Direct Action,
Stifel Financial will have a right of set-off under the Indenture to the extent
of any payment made by Stifel Financial to such holder of Preferred Securities
in the Direct Action. Except as described herein, holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Subordinated Debentures or assert directly any other rights
in respect of the Subordinated Debentures. See "Description of the Subordinated
Debentures
11
<PAGE> 13
- - -- Enforcement of Certain Rights by Holders of Preferred Securities,"
"Description of the Subordinated Debentures -- Debenture Events of Default" and
"Description of the Guarantee." The Trust Agreement provides that each holder of
Preferred Securities by acceptance thereof agrees to the provisions of the
Guarantee and the Indenture.
NO VOTING RIGHTS EXCEPT IN LIMITED CIRCUMSTANCES
Holders of Preferred Securities will have no voting rights except in
limited circumstances relating only to the modification of the Preferred
Securities and the exercise of the rights of Stifel Capital as holder of the
Subordinated Debentures and the Guarantee. Holders of Preferred Securities will
not be entitled to vote to appoint, remove or replace the Property Trustee or
the Delaware Trustee, as such voting rights are vested exclusively in the holder
of the Common Securities (except upon the occurrence of certain events described
herein). The Property Trustee, the Administrative Trustees and Stifel Financial
may amend the Trust Agreement without the consent of holders of Preferred
Securities to ensure that Stifel Capital will be classified for United States
federal income tax purposes as a grantor trust even if such action adversely
affects the interests of such holders. See "Description of the Preferred
Securities -- Voting Rights; Amendment of Trust Agreement" and "Description of
the Preferred Securities -- Removal of Stifel Capital Trustees."
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "1996 Proposed Legislation") if such debt obligations have a maximum
term in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the "Joint Statement") indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the 1996 Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress would have an effective date
that is no earlier than the date of "appropriate Congressional action." In
addition, subsequent to the publication of the Joint Statement, Senator Daniel
Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to Treasury Department officials concurring with the views expressed in
the Joint Statement. Neither the 1996 Proposed Legislation nor similar
legislation was enacted during the 104th Congress. On February 6, 1997,
President Clinton proposed in the administration's fiscal year 1998 budget
certain tax law changes (the "1997 Proposed Legislation") that would, among
other things, generally deny corporate issuers a deduction for interest or OID
in respect of certain debt obligations if such debt obligations have a maximum
term in excess of 15 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. The 1997 Proposed Legislation also
contains a provision that would deny a deduction to corporate issuers for
interest or OID with respect to debt instruments that have a maximum term of
more than 40 years (including rights to extend, renew or relend), or are payable
in stock of the issuer or a related party. The U.S. Treasury Department's
summary of the 1997 Proposed Legislation states that the above provisions
regarding the deduction of interest would generally be effective for instruments
issued on or after the date of first Congressional committee action with respect
to the 1997 Proposed Legislation. The Ways and Means Committee began a full
committee hearing on the President's fiscal 1998 budget on February 11, 1997.
There can be no assurance that the effective date guidance in the 1997 Proposed
Legislation will be adopted if the proposed change to the tax law is enacted, or
that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of the Company to deduct the interest payable on
the Subordinated Debentures. Consequently, there can be no assurance that a Tax
Event will not occur. A Tax Event would permit the Company to cause a redemption
of the Preferred Securities before, as well as after, June 30, 2002. See
"Description of the Subordinated Debentures -- Redemption or Exchange" and
"Description of the Preferred Securities -- Redemption or Exchange -- Tax Event
Redemption or Investment Company Event Redemption" and "Certain Federal Income
Tax Consequences -- Effect of Proposed Changes in Tax Laws."
12
<PAGE> 14
REDEMPTION; EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED DEBENTURES
Stifel Financial has the right at any time to dissolve Stifel Capital and
cause the Subordinated Debentures, after satisfaction of liabilities to
creditors of Stifel Capital, to be distributed to the holders of the Preferred
Securities in exchange therefor in liquidation of Stifel Capital. Stifel
Financial will have the right, in certain circumstances, to redeem the
Subordinated Debentures in whole or in part, in lieu of a distribution of the
Subordinated Debentures by Stifel Capital, in which event Stifel Capital will
redeem the Trust Securities on a pro rata basis to the same extent as the
Subordinated Debentures are redeemed by Stifel Financial. See "Description of
the Preferred Securities -- Redemption or Exchange -- Tax Event Redemption or
Investment Company Event Redemption."
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon the dissolution of Stifel Capital would not be a
taxable event to holders of the Preferred Securities. If, however, Stifel
Capital is characterized as an association taxable as a corporation at the time
of the dissolution of Stifel Capital, the distribution of the Subordinated
Debentures may constitute a taxable event to holders of Preferred Securities.
Moreover, upon occurrence of a Tax Event, a dissolution of Stifel Capital in
which holders of the Preferred Securities receive cash may be a taxable event to
such holders. See "Certain Federal Income Tax Consequences -- Receipt of
Subordinated Debentures or Cash Upon Liquidation of Stifel Capital."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities upon a dissolution or liquidation of Stifel Capital.
The Preferred Securities or the Subordinated Debentures, may trade at a discount
to the price that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Subordinated
Debentures, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Subordinated Debentures and should
carefully review all the information regarding the Subordinated Debentures
contained herein.
If the Subordinated Debentures are distributed to the holders of Preferred
Securities upon the liquidation of Stifel Capital, Stifel Financial will use its
best efforts to list the Subordinated Debentures on the NYSE, The Nasdaq Stock
Market's National Market or such stock exchanges, if any, on which the Preferred
Securities are then listed.
TRADING PRICE; ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES
The Preferred Securities may trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying Subordinated
Debentures. A holder of Preferred Securities that disposes of its Preferred
Securities between record dates for payments of Distributions (and consequently
does not receive a Distribution from Stifel Capital for the period prior to such
disposition) will nevertheless be required to include accrued but unpaid
interest on the Subordinated Debentures through the date of disposition in
income as ordinary income and to add such amount to its adjusted tax basis in
its pro rata share of the underlying Subordinated Debentures deemed disposed of.
Such holder will recognize a capital loss to the extent the selling price (which
may not fully reflect the value of accrued but unpaid interest) is less than its
adjusted tax basis (which will include all accrued but unpaid interest). Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences -- Disposition of Preferred Securities."
There is no current public market for the Preferred Securities and there
can be no assurance that an active public market will develop for the Preferred
Securities or that, if such market develops, the market price will equal or
exceed the public offering price set forth on the cover page of this Prospectus.
The public offering price for the Preferred Securities has been determined
through negotiations between Stifel Financial and the Underwriters. Prices for
the Preferred Securities will be determined in the marketplace and may be
influenced by many factors, including prevailing interest rates, the liquidity
of the market for the Preferred Securities, investor perceptions of Stifel
Financial and general industry and economic conditions.
13
<PAGE> 15
RISK FACTORS RELATING TO STIFEL FINANCIAL
VOLATILE NATURE OF SECURITIES BUSINESS
The securities business is, by its nature, subject to significant risks,
particularly in volatile or illiquid markets, including the risk of trading
losses, losses resulting from the ownership or underwriting of securities,
counterparty failure to meet commitments, customer fraud, employee fraud, issuer
fraud, errors and misconduct, failures in connection with the processing of
securities transactions and litigation.
The Company's principal business activity, retail broker-dealer operations,
as well as its investment banking, institutional sales, investment advisory,
clearing and other services, are highly competitive and subject to various
risks, volatile trading markets and fluctuations in the volume of market
activity. The securities business is directly affected by many factors,
including economic and political conditions, broad trends in business and
finance, legislation and regulation affecting the national and international
business and financial communities, currency values, inflation, market
conditions, the availability and cost of short-term or long-term funding and
capital, the credit capacity or perceived creditworthiness of the securities
industry in the marketplace and the level and volatility of interest rates.
These and other factors can contribute to lower price levels for securities and
illiquid markets.
Lower price levels of securities may result in (i) reduced volumes of
securities, options and futures transactions, with a consequent reduction in
commission revenues, (ii) losses from declines in the market value of securities
held in trading, investment and underwriting positions and (iii) reduced
management fees calculated as a percentage of assets managed. In periods of low
volume, levels of profitability are further adversely affected because certain
expenses remain relatively fixed. Sudden sharp declines in market values of
securities and the failure of issuers and counterparties to perform their
obligations can result in illiquid markets which, in turn, may result in the
Company having difficulty selling securities, hedging its securities positions
and investing funds under its management. Such negative market conditions, if
prolonged, may also lower the Company's revenues from investment banking and
other activities.
As a result of the varied risks associated with the securities business,
which are beyond the Company's control, the Company's commission and other
revenues could be adversely affected. A reduction in revenues or a loss
resulting from the underwriting or ownership of securities could have a material
adverse effect on the Company's results of operations and financial condition.
In addition, as a result of such risks, the Company's revenues and operating
results may be subject to significant fluctuations from quarter to quarter and
from year to year. See "-- Significant Fluctuations in Quarterly Operating
Results Due to Level of Business Activity and Timing or Transactions."
SIGNIFICANT COMPETITION
All aspects of the Company's business are highly competitive. The Company
competes directly with national and regional full service broker-dealers and, to
a lesser extent, with discount brokers, dealers, investment banking firms,
investment advisors and certain commercial banks and, indirectly for investment
assets, with insurance companies and others. The financial services industry has
become considerably more concentrated as numerous securities firms have either
ceased operations or have been acquired by or merged into other firms. Such
mergers and acquisitions have increased competition from these firms, many of
which have significantly greater equity capital, financial and other resources
than the Company. With respect to retail brokerage activities, certain of the
regional firms with which the Company competes have operated in certain markets
longer than has the Company and have established long-standing client
relationships. In addition, the Company expects competition from commercial
banks to increase as a result of recent and anticipated legislative and
regulatory initiatives in the United States to remove or relieve certain
restrictions on commercial banks relating to the sale of securities. Finally,
the Company competes with others in the financial services industry with respect
to the recruiting of new employees and the retention of current employees. See
"-- Competition for Professional Employees."
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<PAGE> 16
SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS DUE TO LEVEL OF
BUSINESS ACTIVITY AND TIMING OF TRANSACTIONS
The Company's revenues and operating results may fluctuate from quarter to
quarter and from year to year due to a combination of factors. These factors
include the level of institutional and retail brokerage transactions, the number
of underwriting and merger and acquisition transactions completed by the
Company's clients, access to public markets for companies in which the Company
has invested as a principal, valuations of the Company's inventories, variations
in expenditures for personnel, litigation expenses, and the expenses of
establishing new business units. The Company's revenues from an underwriting
transaction are recorded only when the underwritten securities commence trading,
and revenues from a merger or acquisition transaction are recorded only when
retainer fees are received or the transaction closes. Accordingly, the timing of
the Company's recognition of revenue from a significant transaction can
materially affect the Company's quarterly operating results. The Company's cost
structure currently is oriented to meeting the level of demand for corporate
finance transactions experienced during fiscal 1996. As a result, despite the
variability of professional incentive compensation, the Company could experience
losses if demand for these transactions declines more quickly than the Company's
ability to change its cost structure. There can be no assurance that the Company
will be able to sustain profitability on a quarterly or annual basis.
COMPETITION FOR PROFESSIONAL EMPLOYEES
The Company's business is dependent on the highly skilled, and often highly
specialized, individuals it employs. Retention of sales and trading, research,
investment banking, money management and administrative professionals is
particularly important to the Company's prospects. Research professionals
contribute significantly to the Company's ability to secure a role in managing
public offerings.
From time to time, the Company has experienced losses of sales and trading,
research and investment banking professionals. The level of competition for key
personnel has increased recently, particularly due to the market entry efforts
of certain commercial banks and other participants in the financial services
industry into retail brokerage activities. There can be no assurance that losses
of key personnel due to such competition or otherwise will not occur in the
future. The loss of a sales and trading, investment banking or research
professional, particularly a senior professional with a broad range of contacts
in an industry, or a senior could materially and adversely affect the Company's
operating results.
The Company generally does not have employment agreements with its
employees or a senior executive officer. It attempts to retain its employees
with incentives such as long-term deferred compensation plans, the issuance of
Company stock subject to continued employment and the grant of options to buy
Company stock that vest over a number of years of employment. These incentives,
however, may be insufficient in light of the increasing competition for
experienced professionals in the securities industry, particularly if the
Company's stock price declines or fails to appreciate sufficiently to be a
competitive source of a portion of professional compensation.
COMPETITION ASSOCIATED WITH ELECTRONIC SECURITIES TRANSACTIONS
The Company also faces competition from companies offering electronic
brokerage services, a rapidly developing industry. These competitors may have
lower costs or provide fewer services and may offer their customers more
attractive pricing or other terms, than the Company offers. The Company also
anticipates competition from underwriters who attempt to effect public offerings
for emerging growth companies through new means of distribution, including
transactions effected using electronic media such as the Internet. In addition,
disintermediation may occur as issuers attempt to sell their securities directly
to purchasers, including sales using electronic media such as the Internet. To
the extent that issuers and purchasers of securities transact business without
the assistance of financial intermediaries such as the Company, the Company's
operating results and financial condition could be adversely affected.
15
<PAGE> 17
BUSINESS SUBJECT TO EXTENSIVE FEDERAL AND STATE REGULATION
The securities industry and the business of the Company are subject to
extensive regulation in the United States by the Securities and Exchange
Commission (the "Commission"), state securities regulators and other
governmental regulatory authorities. The business of the Company also is
regulated in the United States by industry self-regulatory organizations
("SROs"), including the National Association of Securities Dealers, Inc.
("NASD"), the NYSE and other exchanges. Certain of the Company's subsidiaries
are registered as investment advisers with the Commission and in several states,
and as such are subject to the requirements of the Investment Advisers Act of
1940, as amended (the "Advisers Act"), and the Commission's regulations
thereunder.
LIMITS ON OPERATIONS DUE TO NET CAPITAL REQUIREMENTS
As a registered broker-dealer and member of the NYSE, Stifel, Nicolaus is
subject to the net capital rules administered by the Commission, NYSE and NASD.
These rules, which specify minimum net capital requirements for registered
broker-dealers and NYSE and NASD members, are designed to assure that
broker-dealers maintain adequate regulatory capital in relation to their
liabilities and the size of their customer business. These requirements have the
effect of requiring that at least a substantial portion of a broker-dealer's
assets be kept in cash or highly liquid investments. Compliance with the net
capital requirements could limit those operations that require the intensive use
of capital, such as underwriting and trading activities. These rules also could
restrict the Company's ability to withdraw capital from Stifel, Nicolaus even in
circumstances where Stifel, Nicolaus has more than the minimum amount of
required capital.
PENALTIES DUE TO NONCOMPLIANCE
Compliance with many of the regulations applicable to the Company involves
a number of risks, particularly in areas where applicable regulations may be
subject to varying interpretation. In the event of non-compliance by the Company
or Stifel, Nicolaus with an applicable regulation, governmental regulators and
SROs may institute administrative or judicial proceedings that may result in
censure, fine, civil penalties (including treble damages in the case of insider
trading violations), the issuance of cease-and-desist orders, the deregistration
or suspension of the non-compliant broker-dealer or investment adviser, the
suspension or disqualification of the broker-dealer's officers or employees or
other adverse consequences. The imposition of any future penalties or orders on
the Company or its affiliates could have a material adverse effect on the
Company's operating results and financial condition.
CHANGING REGULATORY ENVIRONMENT
The regulatory environment in which the Company operates is subject to
change. The Company may be adversely affected as a result of new or revised
legislation or regulations imposed by the Commission, other governmental
regulatory authorities or SROs. The Company also may be adversely affected by
changes in the interpretation or enforcement of existing laws and rules by these
governmental authorities and SROs.
RISK OF LOSSES FROM UNDERWRITING AND TRADING
The Company's underwriting, securities trading and market-making activities
are conducted by the Company as principal and subject the Company's capital to
significant risks, including market, credit, counterparty and liquidity risks.
These activities often involve the purchase, sale or short sale of securities as
principal in markets that may be characterized by relative illiquidity or that
may be particularly susceptible to rapid fluctuations in liquidity. The Company
from time to time has large position concentrations in securities of, or
commitments to, a single issuer, or issuers engaged in a specific industry,
particularly as a result of the Company's underwriting activities. The Company
tends to concentrate its trading positions and underwriting activities in a more
limited number of industry sectors and portfolio companies than many other
investment banks, which might result in higher trading losses than would occur
if the Company's positions and activities were less concentrated. In addition,
the trend in all major capital markets, for competitive and other reasons,
16
<PAGE> 18
toward larger commitments on the part of lead underwriters means that, from time
to time, an underwriter (including a co-manager) may retain significant position
concentrations in individual securities.
LITIGATION AND POTENTIAL LIABILITY UNDER SECURITIES LAWS; UNCERTAIN LEGAL
ENVIRONMENT
Many aspects of the Company's business involve substantial risks of
liability. An underwriter is exposed to substantial liability under federal and
state securities laws, other federal and state laws and court decisions,
including decisions with respect to underwriters' liability and limitations on
indemnification of underwriters by issuers. For example, a firm that acts as an
underwriter may be held liable for material misstatements or omissions of fact
in a prospectus used in connection with the securities being offered or for
statements made by its securities analysts or other personnel. In recent years,
there has been an increasing incidence of litigation involving the securities
industry, including class actions that seek substantial damages. As is common in
the securities industry, the Company does not carry insurance that would cover
any such payments. In addition, the Company's charter documents allow
indemnification of the Company's officers, directors and agents to the maximum
extent permitted under Delaware law. The Company has entered into
indemnification agreements with these persons. The Company has been and in the
future may be the subject of indemnification assertions under these charter
documents or agreements by officers, directors or agents of the Company who are
or may become defendants in litigation.
In the normal course of business, the Company is also a defendant in
various civil actions and arbitrations arising out of its activities as a
broker-dealer in securities, as an underwriter, as an employer and as a result
of other business activities. The Company has in the past made substantial
payments in connection with the resolution of disputed claims, and there can be
no assurance that substantial payments in connection with the resolution of
disputed claims will not occur in the future. An adverse resolution of any
pending or future lawsuits against Stifel, Nicolaus or the Company could
materially affect the Company's operating results and financial condition.
In addition to the foregoing financial costs and risks, the defense of
litigation has, to a certain extent, diverted, and is expected to divert in the
future, the efforts and attention of the Company's management and staff. The
amount of time that management and other employees are required to devote in
connection with the defense of litigation could be substantial and might
materially divert their attention from other responsibilities within the
Company. Securities class action litigation in particular is highly complex and
can extend for a protracted period of time, thereby consuming substantial time
and effort of the Company's management and substantially increasing the cost of
such litigation.
The laws relating to securities class actions are currently in a state of
flux. The eventual impact of the Private Securities Litigation Reform Act of
1995 on securities class action litigation is not known.
CHANGES IN OTHER BUSINESS REGULATIONS
The Company's businesses may be materially affected not only by regulations
applicable to it as a financial market intermediary, but also by regulations of
general application. For example, the volume of the Company's underwriting,
merger and acquisition and principal investment businesses in a given time
period could be affected by, among other things, existing and proposed tax
legislation, antitrust policy and other governmental regulations and policies
(including the interest rate policies of the Federal Reserve Board) and changes
in interpretation or enforcement of existing laws and rules that affect the
business and financial communities. The level of business and financing activity
in each of the industries on which the Company focuses can be affected not only
by such legislation or regulations of general applicability, but also by
industry-specific legislation or regulations.
RISK OF SYSTEMS FAILURE
The Company's business is highly dependent on communications and
information systems. Any failure or interruption of the Company's systems, or of
the systems of the Company's clearing broker, could cause delays in the
Company's securities trading activities, which could have a material adverse
effect on the Company's operating results. There can be no assurance that the
Company or its clearing broker will not suffer any such
17
<PAGE> 19
systems failure or interruption, whether caused by an earthquake, fire, other
natural disaster, power or telecommunications failure, act of God, act of war or
otherwise, or that the Company's back-up procedures and capabilities in the
event of any such failure or interruption will be adequate.
USE OF PROCEEDS
Stifel Capital will use the gross proceeds received from the sale of the
Preferred Securities to purchase Subordinated Debentures from Stifel Financial.
Stifel Financial intends to use the net proceeds from the sale of the
Subordinated Debentures for general corporate purposes, which may include, among
other things, the repayment of long-term debt, expansion of the Company's
business and the repurchase of the Company's common stock. Stifel Financial may,
from time to time, engage in additional capital financings of a character and in
amounts to be determined by Stifel Financial in light of its needs at such time
or times and in light of prevailing market conditions.
MARKET FOR THE PREFERRED SECURITIES
An application will be made to have the Preferred Securities approved for
listing on the NYSE. There can be no assurance that an active and liquid trading
market will develop or, if developed, that such a market will continue. The
offering price and distribution rate have been determined by negotiations among
representatives of Stifel Financial and the Underwriters, and the offering price
of the Preferred Securities may not be indicative of the market price following
the offering. See "Underwriting."
ACCOUNTING TREATMENT
Stifel Capital will be treated, for financial reporting purposes, as a
subsidiary of Stifel Financial and, accordingly, the accounts of Stifel Capital
will be included in the consolidated financial statements of Stifel Financial.
The Preferred Securities will be presented as a separate category of long-term
debt in the consolidated balance sheet of Stifel Financial under the caption
"Guaranteed preferred beneficial interests in the Company's subordinated
debentures," and appropriate disclosures about the Preferred Securities, the
Guarantee and the Subordinated Debentures will be included in the notes to
consolidated financial statements. Stifel Financial will record Distributions
payable on the Preferred Securities as an expense in the consolidated statements
of operations for financial reporting purposes.
All future reports of Stifel Financial filed under the Exchange Act will
(a) present the Trust Securities issued by Stifel Capital on the balance sheet
as a separate category of long-term debt item entitled "Guaranteed preferred
beneficial interests in the Company's subordinated debentures," (b) include in a
footnote to the financial statements disclosure that the sole assets of Stifel
Capital are the Subordinated Debentures (including the outstanding principal
amount, interest rate and maturity date of such Subordinated Debentures), and
(c) include in an audited footnote to the financial statements disclosure that
Stifel Financial owns all of the Common Securities of Stifel Capital, the sole
assets of Stifel Capital are the Subordinated Debentures, and the back-up
obligations, in the aggregate, constitute a full and unconditional guarantee by
Stifel Financial of the obligations of Stifel Capital under the Preferred
Securities.
18
<PAGE> 20
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of
Stifel Financial at March 27, 1997 and (ii) the consolidated capitalization of
Stifel Financial giving effect to the issuance of the Preferred Securities
hereby offered by Stifel Capital and receipt by Stifel Financial of the net
proceeds from the corresponding sale of the Subordinated Debentures to Stifel
Capital, as if the sale of the Preferred Securities had been consummated on
March 27, 1997, and assuming the Underwriters' over-allotment option was not
exercised.
<TABLE>
<CAPTION>
AS OF MARCH 27, 1997
-----------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG TERM DEBT:
11.25% Senior Convertible Notes due September 1, 1997
through September 1, 2000, in equal installments....... $ 10,000 $ 10,000
-------- ---------
Guaranteed preferred beneficial interests in the Company's
subordinated debentures................................ -- 25,000(1)
-------- ---------
STOCKHOLDERS' EQUITY:
Common Stock, $0.15 par value, 10,000,000 shares
authorized, 4,767,715 issued and 4,722,491
outstanding............................................ 715 715
Series A Junior Participating Preferred Stock, $1.00 par
value, 3,000,000 shares authorized, none issued or
outstanding............................................ -- --
Additional paid-in capital................................ 21,119 21,119
Retained earnings......................................... 18,238 18,238
Less treasury stock, at cost, 45,224 shares............... 374 374
Less unamortized expense of restricted awards............. 182 182
-------- ---------
TOTAL STOCKHOLDERS' EQUITY........................... 39,516 39,516
-------- ---------
TOTAL CAPITALIZATION................................. $343,196 $ 368,196
======== =========
</TABLE>
- - ------------
(1) In connection with the issuance of the guaranteed preferred beneficial
interests in the Company's Subordinated Debentures, the Company estimates it
will incur expenses of $ (including Underwriters' compensation of
$ ). The Subordinated Debentures will mature on June 30, 2027, which
date may be, if certain conditions are met, (a) shortened to a date not
earlier than June 30, 2002, or (b) extended to a date not later than June
30, 2036.
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<PAGE> 21
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, State Street Bank and Trust Company, will
act as indenture trustee for the Preferred Securities under the Trust Agreement
for purposes of complying with the provisions of the Trust Indenture Act. The
terms of the Preferred Securities will include those stated in the Trust
Agreement and those made part of the Trust Agreement by the Trust Indenture Act.
The following summary of the material terms and provisions of the Preferred
Securities and the Trust Agreement does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Agreement, the Trust Act, and the Trust Indenture Act. Wherever particular
defined terms of the Trust Agreement are referred to, but not defined herein,
such defined terms are incorporated herein by reference. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of
Stifel Capital, will issue the Trust Securities. All of the Common Securities
will be owned by Stifel Financial. The Preferred Securities will represent
preferred undivided beneficial interests in the assets of Stifel Capital and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption or liquidation over
the Common Securities, as well as other benefits as described in the Trust
Agreement. The Trust Agreement does not permit the issuance by Stifel Capital of
any securities other than the Trust Securities or the incurrence of any
indebtedness by Stifel Capital.
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities, except as described under "--
Subordination of Common Securities." Legal title to the Subordinated Debentures
will be held by the Property Trustee in trust for the benefit of the holders of
the Trust Securities. The Guarantee executed by Stifel Financial for the benefit
of the holders of the Preferred Securities will be a guarantee on a subordinated
basis with respect to the Preferred Securities, but will not guarantee payment
of Distributions or amounts payable on redemption or liquidation of such
Preferred Securities when Stifel Capital does not have funds on hand available
to make such payments. State Street Bank and Trust Company, as Guarantee
Trustee, will hold the Guarantee for the benefit of the holders of the Preferred
Securities. See "Description of the Guarantee."
DISTRIBUTIONS
PAYMENT OF DISTRIBUTIONS. Distributions on each Preferred Security will be
payable at the annual rate of % of the stated Liquidation Amount of $10,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, to the holders of the Preferred Securities on the relevant record
dates (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). The record date will be the 15th day of the
month in which the relevant Distribution Date occurs. Distributions will
accumulate from , 1997, the date of original issuance. The first
Distribution Date for the Preferred Securities will be September 30, 1997. The
amount of Distributions payable for any period will be computed on the basis of
a 360-day year of twelve 30-day months. In the event that any date on which
Distributions are payable on the Preferred Securities is not a Business Day,
then payment of the Distributions payable on such date will be made on the next
succeeding day that is a Business Day (and without any additional Distributions,
interest or other payment in respect of any such delay) with the same force and
effect as if made on the date such payment was originally due and payable.
"Business Day" means any day other than a Saturday or a Sunday, a day on which
banking institutions in the City of New York are authorized or required by law
or executive order to remain closed or a day on which the corporate trust office
of the Property Trustee or the Debenture Trustee is closed for business.
EXTENSION PERIOD. Stifel Financial has the right under the Indenture, so
long as no Debenture Event of Default has occurred and is continuing, to defer
the payment of interest on the Subordinated Debentures at any time, or from time
to time (each, an "Extension Period"), which, if exercised, would defer
quarterly
20
<PAGE> 22
Distributions on the Preferred Securities during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of %
thereof, compounded quarterly from the relevant Distribution Date.
"Distributions," as used herein, includes any such additional Distributions. The
right to defer the payment of interest on the Subordinated Debentures is
limited, however, to a period, in each instance, not exceeding 20 consecutive
quarters and no Extension Period may extend beyond the Stated Maturity of the
Subordinated Debentures. During any such Extension Period, Stifel Financial may
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of Stifel Financial
capital stock, (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of Stifel Financial that
rank pari passu with or junior in interest to the Subordinated Debentures or
make any guarantee payments with respect to any guarantee by Stifel Financial of
the debt securities of any subsidiary of Stifel Financial if such guarantee
ranks pari passu with or junior in interest to the Subordinated Debentures
(other than payments under the Guarantee), or (iii) redeem, purchase or acquire
less than all of the Subordinated Debentures or any of the Preferred Securities.
Prior to the termination of any such Extension Period, Stifel Financial may
further defer the payment of interest; provided that such Extension Period may
not exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, Stifel Financial may elect to begin a new
Extension Period, subject to the above requirements. Subject to the foregoing,
there is no limitation on the number of times that Stifel Financial may elect to
begin an Extension Period.
Stifel Financial has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
SOURCE OF DISTRIBUTIONS. The funds of Stifel Capital available for
distribution to holders of its Preferred Securities will be limited to payments
under the Subordinated Debentures in which Stifel Capital will invest the
proceeds from the issuance and sale of its Trust Securities. See "Description of
the Subordinated Debentures." Distributions will be paid through the Property
Trustee who will hold amounts received in respect of the Subordinated Debentures
in the Property Account for the benefit of the holders of the Trust Securities.
If Stifel Financial does not make interest payments on the Subordinated
Debentures, the Property Trustee will not have funds available to pay
Distributions on the Preferred Securities. The payment of Distributions (if and
to the extent Stifel Capital has funds legally available for the payment of such
Distributions and cash sufficient to make such payments) is guaranteed by Stifel
Financial. See "Description of the Guarantee." Distributions on the Preferred
Securities will be payable to the holders thereof as they appear on the register
of holders of the Preferred Securities on the relevant record dates, which will
be the 15th day of the month in which the relevant Distribution Date occurs.
REDEMPTION OR EXCHANGE
GENERAL. The Subordinated Debentures will mature on June 30, 2027. Stifel
Financial will have the right to redeem the Subordinated Debentures (i) on or
after June 30, 2002, in whole at any time or in part from time to time, or (ii)
at any time, in whole (but not in part), within 180 days following the
occurrence of a Tax Event or an Investment Company Event. Stifel Financial will
not have the right to purchase the Subordinated Debentures, in whole or in part,
from Stifel Capital until after June 30, 2002. See "Description of the
Subordinated Debentures -- General."
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of any Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption will be applied by the Property Trustee to redeem a Like Amount (as
defined herein) of the Trust Securities, upon not less than 30 nor more than 60
days notice, at a redemption price (the "Redemption Price") equal to the
aggregate Liquidation Amount of such Trust Securities plus accumulated but
unpaid Distributions thereon to the date of redemption (the "Redemption Date").
See "Description of the Subordinated Debentures -- Redemption or Exchange." If
less than all of the Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption will be
allocated to the redemption of the Trust Securities pro rata.
21
<PAGE> 23
DISTRIBUTION OF SUBORDINATED DEBENTURES. Stifel Financial will have the
right at any time to dissolve Stifel Capital and, after satisfaction of the
liabilities of creditors of Stifel Capital as provided by applicable law, cause
the Subordinated Debentures to be distributed to the holders of Trust Securities
in liquidation of Stifel Capital. See "-- Liquidation Distribution Upon
Termination."
TAX EVENT REDEMPTION OR INVESTMENT COMPANY EVENT REDEMPTION. If a Tax Event
or an Investment Company Event in respect of the Trust Securities occurs and is
continuing, Stifel Financial has the right to redeem the Subordinated Debentures
in whole (but not in part) and thereby cause a mandatory redemption of such
Trust Securities in whole (but not in part) at the Redemption Price within 180
days following the occurrence of such Tax Event or Investment Company Event. In
the event a Tax Event or an Investment Company Event in respect of the Trust
Securities has occurred and Stifel Financial does not elect to redeem the
Subordinated Debentures and thereby cause a mandatory redemption of such Trust
Securities or to liquidate Stifel Capital and cause the Subordinated Debentures
to be distributed to holders of such Trust Securities in liquidation of Stifel
Capital as described below under "-- Liquidation Distribution Upon Termination,"
such Preferred Securities will remain outstanding and Additional Interest (as
defined herein) may be payable on the Subordinated Debentures. "Additional
Interest" means the additional amounts as may be necessary in order that the
amount of Distributions then due and payable by Stifel Capital on the
outstanding Trust Securities will not be reduced as a result of any additional
taxes, duties and other governmental charges to which Stifel Capital has become
subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture, which will be used to pay the Redemption Price of
such Trust Securities, and (ii) with respect to a distribution of Subordinated
Debentures to holders of Trust Securities in connection with a dissolution or
liquidation of Stifel Capital, Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities of the holder to whom
such Subordinated Debentures are distributed. Each Subordinated Debenture
distributed pursuant to clause (ii) above will carry with it accumulated
interest in an amount equal to the accumulated and unpaid interest then due on
such Subordinated Debentures.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
After the liquidation date fixed for any distribution of Subordinated
Debentures for Preferred Securities (i) such Preferred Securities will no longer
be deemed to be outstanding, and (ii) any certificates representing Preferred
Securities will be deemed to represent the Subordinated Debentures having a
principal amount equal to the Liquidation Amount of such Preferred Securities,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on the Preferred Securities until such certificates are
presented to the Administrative Trustees or their agent for transfer or
reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution and liquidation of Stifel Capital were
to occur. The Preferred Securities that an investor may purchase, or the
Subordinated Debentures that an investor may receive on dissolution and
liquidation of Stifel Capital, may, therefore, trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Subordinated Debentures. Redemptions of the Preferred
Securities will be made and the Redemption Price will be payable on each
Redemption Date only to the extent that Stifel Capital has funds on hand
available for the payment of such Redemption Price. See "-- Subordination of
Common Securities."
If Stifel Capital gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date,
to the extent funds are available, the Property Trustee will irrevocably deposit
with the paying agent for the Preferred Securities funds sufficient to pay the
aggregate
22
<PAGE> 24
Redemption Price and will give the paying agent for the Preferred Securities
irrevocable instructions and authority to pay the Redemption Price to the
holders thereof upon surrender of their certificates evidencing such Preferred
Securities. Notwithstanding the foregoing, Distributions payable on or prior to
the Redemption Date for any Preferred Securities called for redemption will be
payable to the holders of such Preferred Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption will have been given
and funds deposited as required, then upon the date of such deposit, all rights
of the holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any additional Distribution, interest
or other payment in respect of any such delay) with the same force and effect as
if made on such date. In the event that payment of the Redemption Price in
respect of Preferred Securities called for redemption is improperly withheld or
refused and not paid either by Stifel Capital, or by Stifel Financial pursuant
to the Guarantee, Distributions on such Preferred Securities will continue to
accrue at the then applicable rate, from the Redemption Date originally
established by Stifel Capital for such Preferred Securities to the date such
Redemption Price is actually paid, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price. See "Description of the Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), and, further provided that Stifel Financial does not
and is not continuing to exercise its right to defer interest payments, Stifel
Financial or its subsidiaries may at any time and from time to time purchase
outstanding Preferred Securities by tender, in the open market or by private
agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Subordinated Debentures to holders of Preferred Securities will
be made to the applicable recordholders thereof as they appear on the register
for the Preferred Securities on the relevant record date, which date will be the
date 15 days prior to the Redemption Date or liquidation date, as applicable.
If less than all of the Trust Securities are to be redeemed on a Redemption
Date, then the aggregate Liquidation Amount of such Trust Securities to be
redeemed will be allocated pro rata to the Trust Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed will be selected by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee deems fair and appropriate and which may provide
for the selection for redemption of portions (equal to $10 or an integral
multiple of $10 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $10. The Property Trustee will promptly
notify the registrar for the Preferred Securities in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of the Trust Agreement, unless the context otherwise requires,
all provisions relating to the redemption of Preferred Securities will relate to
the portion of the aggregate Liquidation Amount of Preferred Securities which
has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless Stifel Financial defaults in payment
of the redemption price on the Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on such Subordinated Debentures or
portions thereof (and Distributions will cease to accrue on the related
Preferred Securities or portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and Common Securities, as applicable, will be made pro rata based on
the Liquidation Amount of the Preferred Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default has occurred and is continuing, no payment of any
Distribution on, or
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Redemption Price of, any of the Common Securities, and no other payment on
account of the redemption, liquidation or other acquisition of such Common
Securities, will be made unless payment in full in cash of all accumulated and
unpaid Distributions on all of the outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all of the
outstanding Preferred Securities then called for redemption, will have been made
or provided for, and all funds available to the Property Trustee will first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Preferred Securities then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, Stifel Financial as holder of the Common Securities will be deemed to
have waived any right to act with respect to any such Event of Default under the
Trust Agreement until the effect of all such Events of Default with respect to
the Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee will act solely on behalf of the holders of the Preferred
Securities and not on behalf of Stifel Financial, as holder of the Common
Securities, and only the holders of the Preferred Securities will have the right
to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Stifel Financial will have the right at any time to dissolve, Stifel
Capital and cause the Subordinated Debentures, after satisfaction of liabilities
to creditors or Stifel Capital, to be distributed to the holders of the
Preferred Securities.
Pursuant to the Trust Agreement, Stifel Capital will automatically dissolve
upon expiration of its term and will dissolve earlier on the first to occur of
(i) certain events of bankruptcy, dissolution or liquidation of Stifel
Financial, (ii) Stifel Financial, as depositor, giving written direction to the
Property Trustee to terminate Stifel Capital (which direction is optional and
wholly within the discretion of Stifel Financial, as depositor), (iii)
redemption of all of the Preferred Securities as described under "Description of
the Preferred Securities -- Redemption or Exchange -- Mandatory Redemption" or
(iv) the entry of an order for the dissolution of Stifel Capital by a court of
competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or (iv) of
the preceding paragraph, Stifel Capital will be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of Stifel Capital as provided by
applicable law, to the holders of such Trust Securities a Like Amount of the
Subordinated Debentures, unless such distribution is determined by the Property
Trustee not to be practical, in which event such holders will be entitled to
receive out of the assets of Stifel Capital available for distribution to
holders, after satisfaction of liabilities to creditors of Stifel Capital as
provided by applicable law, an amount equal to, in the case of holders of
Preferred Securities, the aggregate of the Liquidation Amount plus accrued and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because Stifel Capital has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
Stifel Capital on the Preferred Securities will be paid on a pro rata basis.
Stifel Financial, as the holder of the Common Securities, will be entitled to
receive distributions upon any such liquidation pro rata with the holders of the
Preferred Securities, except that, if a Debenture Event of Default has occurred
and is continuing, the Preferred Securities will have a priority over the Common
Securities. See "-- Subordination of Common Securities."
Under current United States federal income tax law and interpretations and
assuming, as expected, that Stifel Capital is treated as a grantor trust, a
distribution of the Subordinated Debentures should not be a taxable event to
holders of the Preferred Securities. Should there be a change in law, a change
in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences -- Receipt of Subordinated
Debentures or Cash Upon Liquidation of Stifel Capital." If Stifel Financial
elects neither to redeem the Subordinated Debentures prior to maturity nor to
liquidate Stifel Capital and distribute the Subordinated
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Debentures to holders of the Preferred Securities, the Preferred Securities will
remain outstanding until the repayment of the Subordinated Debentures.
If Stifel Financial elects to dissolve Stifel Capital and thereby causes
the Subordinated Debentures to be distributed to holders of the Preferred
Securities in liquidation of Stifel Capital, Stifel Financial will continue to
have the right to shorten or extend the maturity of such Subordinated
Debentures, subject to certain conditions. See "Description of the Subordinated
Debentures -- General."
LIQUIDATION VALUE
The amount of the Liquidation Distribution payable on the Preferred
Securities in the event of any liquidation of Stifel Capital is $10 per
Preferred Security plus accrued and unpaid Distributions thereon to the date of
payment, which may be in the form of a distribution of such amount in
Subordinated Debentures, subject to certain exceptions. See "-- Liquidation
Distribution Upon Termination."
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under the
Trust Agreement (an "Event of Default") with respect to the Preferred Securities
(whatever the reason for such Event of Default and whether voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description
of the Subordinated Debentures -- Debenture Events of Default"); or
(ii) default by Stifel Capital in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period
of 30 days (subject to the deferral of any due date in the case of an
Extension Period); or
(iii) default by Stifel Capital in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trustees in the Trust Agreement (other
than a covenant or warranty a default in the performance of which or the
breach of which is dealt with in clauses (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the Trustee(s) by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Preferred Securities, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by Stifel Financial to
appoint a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and Stifel Financial, as depositor, unless such Event of
Default has been cured or waived. Stifel Financial, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of Stifel Capital. See "-- Liquidation Distribution Upon
Termination." The existence of an Event of Default does not entitle the holders
of Preferred Securities to accelerate the maturity thereof.
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REMOVAL OF STIFEL CAPITAL TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any
Trustee may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
and the Delaware Trustee may be removed at such time by the holders of a
majority in Liquidation Amount of the outstanding Preferred Securities. In no
event, however, will the holders of the Preferred Securities have the right to
vote to appoint, remove or replace the Administrative Trustees, which voting
rights are vested exclusively in Stifel Financial as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee will be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the Trust Property (as defined
in the Trust Agreement) may at the time be located, Stifel Financial, as the
holder of the Common Securities, will have power to appoint one or more Persons
(as defined in the Trust Agreement) either to act as a co-trustee, jointly with
the Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such Trust Property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in such Person or
Persons in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. In case a Debenture
Event of Default has occurred and is continuing, the Property Trustee alone will
have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee is a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Trustee, will be the successor of such Trustee under the Trust Agreement,
provided such Person is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF STIFEL CAPITAL
Stifel Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described below. Stifel
Capital may, at the request of Stifel Financial, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of Stifel Capital with respect to the
Preferred Securities, or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) Stifel Financial expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee in its capacity as the holder of the Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed (including, if applicable, The Nasdaq Stock Market's National
Market), if any, (iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, (v) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, Stifel
Financial has received an opinion from independent counsel to the effect that
(a) such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any
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Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
Stifel Capital nor such successor entity will be required to register as an
"investment company" under the Investment Company Act, and (vi) Stifel Financial
owns all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee, the Indenture, the Subordinated
Debentures, the Trust Agreement and the Expense Agreement. Notwithstanding the
foregoing, Stifel Capital will not, except with the consent of holders of 100%
in Liquidation Amount of the Preferred Securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to any other Person or permit
any other Person to consolidate, amalgamate, merge with or into, or replace it
if such consolidation, amalgamation, merger, replacement, conveyance, transfer
or lease would cause Stifel Capital or the successor entity to be classified as
other than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee -- Amendments and Assignment" and as otherwise required by the Trust
Act and the Trust Agreement, the holders of the Preferred Securities will have
no voting rights.
The Trust Agreement may be amended from time to time by Stifel Financial,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) with respect to acceptance of
appointment by a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement (provided such amendment is not
inconsistent with the other provisions of the Trust Agreement), or (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as is necessary to ensure that Stifel Capital will be classified for United
States federal income tax purposes as a grantor trust at all times that any
Trust Securities are outstanding or to ensure that Stifel Capital will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (ii), such action may not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of such Trust Agreement will become effective
when notice thereof is given to the holders of Trust Securities. The Trust
Agreement may be amended by the Trustees and Stifel Financial with (i) the
consent of holders representing not less than a majority in the aggregate
Liquidation Amount of the outstanding Trust Securities, and (ii) receipt by the
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not affect Stifel Capital's status as a grantor trust for United States
federal income tax purposes or Stifel Capital's exemption from status as an
"investment company" under the Investment Company Act. Notwithstanding anything
in this paragraph to the contrary, without the consent of each holder of Trust
Securities, the Trust Agreement may not be amended to (a) change the amount or
timing of any Distribution on the Trust Securities or otherwise adversely affect
the amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date, or (b) restrict the right of a holder of
Trust Securities to institute suit for the enforcement of any such payment on or
after such date.
The Trustees will not, so long as any Subordinated Debentures are held by
the Property Trustee, (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to the
Subordinated Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures will be due and payable, or (iv)
consent to any amendment, modification or termination of the Indenture or the
Subordinated Debentures, where such consent is required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Preferred Securities; provided, however,
that where a consent under the Indenture requires the consent of each holder of
Subordinated Debentures affected thereby, no such consent will be given by the
Property Trustee without the prior consent of each holder of the Preferred
Securities. The Trustees may not revoke any action previously authorized or
approved by a vote of
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the holders of the Preferred Securities except by subsequent vote of the holders
of the Preferred Securities. The Property Trustee will notify each holder of
Preferred Securities of any notice of default with respect to the Subordinated
Debentures. In addition to obtaining the foregoing approvals of the holders of
the Preferred Securities, prior to taking any of the foregoing actions, the
Trustees must obtain an opinion of counsel experienced in such matters to the
effect that Stifel Capital will not be classified as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for Stifel Capital to redeem and cancel its Preferred Securities in accordance
with the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by Stifel Financial, the Trustees or any
affiliate of Stifel Financial or any Trustee, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made by check
mailed to the address of the holder entitled thereto as such address will appear
on the register of holders of the Preferred Securities. The paying agent for the
Preferred Securities will initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and Stifel Financial. The paying agent for the Preferred Securities may
resign as paying agent upon 30 days' written notice to the Property Trustee and
Stifel Financial. In the event that the Property Trustee no longer is the paying
agent for the Preferred Securities, the Administrative Trustees will appoint a
successor (which must be a bank or trust company acceptable to the
Administrative Trustees and Stifel Financial) to act as paying agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent for
the Preferred Securities. Registration of transfers of Preferred Securities will
be effected without charge by or on behalf of Stifel Capital, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. Stifel Capital will not be required to register or
cause to be registered the transfer of Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, upon the occurrence and
during the continuance of an Event of Default, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Trust Agreement at
the request of any holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. If no Event of Default has occurred and is continuing and the
Property Trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of Preferred Securities are entitled under the Trust Agreement
to vote, then the Property Trustee will take such action as is directed by
Stifel Financial and if not so directed, will take such action as it deems
advisable and in the best interests of the holders of the Trust Securities and
will have no liability except for its own bad faith, negligence or willful
misconduct.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate Stifel Capital in such a way that Stifel Capital will
not be deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Subordinated
Debentures will be treated as indebtedness of Stifel Financial for United States
federal income tax purposes. Stifel Financial and the Administrative Trustees
are authorized, in this connection, to take any action, not inconsistent with
applicable law, the certificate of trust of Stifel Capital or the Trust
Agreement, that Stifel Financial and the Administrative Trustees determine in
their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, Stifel Capital
will invest the proceeds thereof, together with the consideration paid by Stifel
Financial for the Common Securities, in the Subordinated Debentures issued by
Stifel Financial. The Subordinated Debentures will be issued as unsecured debt
under the Indenture, to be dated as of , 1997 (the "Indenture"),
between Stifel Financial and State Street Bank and Trust Company, as trustee
(the "Debenture Trustee"). The Indenture will be qualified as an indenture under
the Trust Indenture Act. The following summary of the material terms and
provisions of the Subordinated Debentures and the Indenture does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
the Indenture and to the Trust Indenture Act. Wherever particular defined terms
of the Indenture are referred to, but not defined herein, such defined terms are
incorporated herein by reference. The form of the Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Subordinated Debentures will be limited in aggregate principal amount
to approximately $25,773,195 (or $29,639,175 if the option described under the
heading "Underwriting" is exercised by the Underwriters), such amount being the
sum of the aggregate stated Liquidation Amount of the Trust Securities. The
Subordinated Debentures will bear interest at the annual rate of % of the
principal amount thereof, payable quarterly in arrears on March 31, June 30,
September 30, and December 31 of each year (each, an "Interest Payment Date")
beginning September 30, 1997, to the Person (as defined in the Indenture) in
whose name each Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the fifteenth day of the last month of
the calendar quarter. It is anticipated that, until the liquidation, of Stifel
Capital, the Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Preferred Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Subordinated Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay), with the same force and effect as if made on the date such
payment was originally payable. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of % thereof,
compounded quarterly. The term "interest," as used herein, includes quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Interest, as applicable.
The Subordinated Debentures will mature on June 30, 2027 (such date, as it
may be shortened or extended as hereinafter described, the "Stated Maturity").
Such date may be shortened at any time by Stifel Financial to any date not
earlier than June 30, 2002. Such date may also be extended at any time at the
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election of Stifel Financial but in no event to a date later than June 30, 2036,
provided that at the time such election is made and at the time of extension (i)
Stifel Financial is not in bankruptcy, otherwise insolvent or in liquidation,
(ii) Stifel Financial is not in default in the payment of any interest or
principal on the Subordinated Debentures, and (iii) Stifel Capital is not in
arrears on payments of Distributions on the Preferred Securities and no deferred
Distributions are accumulated. In the event that Stifel Financial elects to
shorten or extend the Stated Maturity of the Subordinated Debentures, it will
give notice thereof to the Debenture Trustee, Stifel Capital and to the holders
of the Subordinated Debentures no more than 180 days and no less than 90 days
prior to the effectiveness thereof. Stifel Financial will not have the right to
purchase the Subordinated Debentures, in whole or in part, from Stifel Capital
until after June 30, 2002, except if a Tax Event or an Investment Company Event
has occurred and is continuing.
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debt, Subordinated Debt and
Additional Senior Obligations of Stifel Financial. Because Stifel Financial is a
holding company, the right of Stifel Financial to participate in any
distribution of assets of any Subsidiary Bank, upon any such Subsidiary Bank's
liquidation or reorganization or otherwise (and thus the ability of holders of
the Subordinated Debentures to benefit indirectly from such distribution), is
subject to the prior claim of creditors of such Subsidiary Bank, except to the
extent that Stifel Financial may itself be recognized as a creditor of such
Subsidiary Bank. The Subordinated Debentures will, therefore, be effectively
subordinated to all existing and future liabilities of the Subsidiary Banks, and
holders of Subordinated Debentures should look only to the assets of Stifel
Financial for payments on the Subordinated Debentures. The Indenture does not
limit the incurrence or issuance of other secured or unsecured debt of Stifel
Financial, including Senior Debt, Subordinated Debt and Additional Senior
Obligations, whether under the Indenture or any existing indenture or other
indenture that Stifel Financial may enter into in the future or otherwise. See
"-- Subordination."
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving Stifel Financial that may
adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Stifel Financial has the right under the Indenture at any time during the
term of the Subordinated Debentures, so long as no Debenture Event of Default
has occurred and is continuing, to defer the payment of interest at any time, or
from time to time (each, an "Extension Period"). The right to defer the payment
of interest on the Subordinated Debentures is limited, however, to a period, in
each instance, not exceeding 20 consecutive quarters and no Extension Period may
extend beyond the Stated Maturity of the Subordinated Debentures. At the end of
each Extension Period, Stifel Financial must pay all interest then accrued and
unpaid (together with interest thereon at the annual rate of %, compounded
quarterly, to the extent permitted by applicable law). During an Extension
Period, interest will continue to accrue and holders of Subordinated Debentures
(or the holders of Preferred Securities if such securities are then outstanding)
will be required to accrue and recognize income for United States federal income
tax purposes. See "Certain Federal Income Tax Consequences -- Potential
Extension of Interest Payment Period and Original Issue Discount."
During any such Extension Period, Stifel Financial may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of Stifel Financial capital stock, (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of Stifel Financial that rank pari
passu with or junior in interest to the Subordinated Debentures or make any
guarantee payments with respect to any guarantee by Stifel Financial of the debt
securities of any subsidiary of Stifel Financial if such guarantee ranks pari
passu or junior in interest to the Subordinated Debentures (other than payments
under the Guarantee), or (iii) redeem, purchase or acquire less than all of the
Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extension Period, Stifel Financial may further defer the
payment of interest; provided that no Extension Period may exceed 20 consecutive
quarters or extend beyond the Stated Maturity of the Subordinated Debentures.
Upon the termination of any such Extension Period and the payment of all
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amounts then due on any Interest Payment Date, Stifel Financial may elect to
begin a new Extension Period subject to the above requirements. No interest will
be due and payable during an Extension Period, except at the end thereof. Stifel
Financial has no present intention of exercising its rights to defer payments of
interest on the Subordinated Debentures. Stifel Financial must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of its
election of such Extension Period at least two Business Days prior to the
earlier of (i) the next succeeding date on which Distributions on the Trust
Securities would have been payable except for the election to begin such
Extension Period, or (ii) the date the Trust is required to give notice of the
record date, or the date such Distributions are payable, to The Nasdaq Stock
Market's National Market (or other applicable self-regulatory organization) or
to holders of the Preferred Securities, but in any event at least one Business
Day before such record date. Subject to the foregoing, there is no limitation on
the number of times that Stifel Financial may elect to begin an Extension
Period.
ADDITIONAL SUMS
If Stifel Capital or the Property Trustee is required to pay any additional
taxes, duties or other governmental charges as a result of the occurrence of a
Tax Event, Stifel Financial will pay as additional amounts (referred to herein
as "Additional Interest") on the Subordinated Debentures such additional amounts
as may be required so that the net amounts received and retained by Stifel
Capital after paying any such additional taxes, duties or other governmental
charges will not be less than the amounts Stifel Capital would have received had
such additional taxes, duties or other governmental charges not been imposed.
REDEMPTION OR EXCHANGE
Stifel Financial will have the right to redeem the Subordinated Debentures
prior to maturity (i) on or after June 30, 2002, in whole at any time or in part
from time to time, or (ii) at any time in whole (but not in part), within 180
days following the occurrence of a Tax Event or an Investment Company Event, in
each case at a redemption price equal to the accrued and unpaid interest on the
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof.
"Tax Event" means the receipt by Stifel Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) interest payable by Stifel Financial on the
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by Stifel Financial, in whole or in part, for United
States federal income tax purposes, (ii) Stifel Capital is, or will be within 90
days after the date of such opinion of counsel, subject to United States federal
income tax with respect to income received or accrued on the Subordinated
Debentures, or (iii) Stifel Capital is, or will be within 90 days after the date
of such opinion of counsel, subject to more than a de minimis amount of other
taxes, duties, assessments or other governmental charges. Stifel Financial must
request and receive an opinion with regard to such matters within a reasonable
period of time after it becomes aware of the possible occurrence of any of the
events described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by Stifel Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, Stifel Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change becomes effective on or after the date of original
issuance of the Preferred Securities.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debentures to
be redeemed at its registered address. Unless Stifel Financial defaults in
payment of the redemption price for the Subordinated Debentures, on and after
the
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redemption date interest ceases to accrue on such Subordinated Debentures or
portions thereof called for redemption.
The Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities -- Liquidation
Distribution Upon Termination," under certain circumstances involving the
dissolution of Stifel Capital, the Subordinated Debentures may be distributed to
the holders of the Preferred Securities in liquidation of Stifel Capital after
satisfaction of liabilities to creditors of Stifel Capital as provided by
applicable law. If the Subordinated Debentures are distributed to the holders of
Preferred Securities upon the liquidation of Stifel Capital, Stifel Financial
will use its best efforts to list the Subordinated Debentures on The Nasdaq
Stock Market's National Market or such stock exchanges, if any, on which the
Preferred Securities are then listed. There can be no assurance as to the market
price of any Subordinated Debentures that may be distributed to the holders of
Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred a Debenture Event of Default, (ii)
Stifel Financial is in default with respect to its obligations under the
Guarantee, or (iii) Stifel Financial has given notice of its election of an
Extension Period as provided in the Indenture with respect to the Subordinated
Debentures and has not rescinded such notice, or such Extension Period, or any
extension thereof, is continuing, Stifel Financial will not (1) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of Stifel Financial capital stock, (2)
make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of Stifel Financial that rank pari
passu with or junior in interest to the Subordinated Debentures or make any
guarantee payments with respect to any guarantee by Stifel Financial of the debt
securities of any subsidiary of Stifel Financial if such guarantee ranks pari
passu or junior in interest to the Subordinated Debentures (other than payments
under the Guarantee), or (3) redeem, purchase or acquire less than all of the
Subordinated Debentures or any of the Preferred Securities.
SUBORDINATION
The Indenture provides that the Subordinated Debentures issued thereunder
are subordinated and junior in right of payment to all Senior Debt, Subordinated
Debt and Additional Senior Obligations of Stifel Financial. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency, debt restructuring or similar proceedings
in connection with any insolvency or bankruptcy proceedings of Stifel Financial,
the holders of Senior Debt, Subordinated Debt and Additional Senior Obligations
of Stifel Financial will first be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior Debt,
Subordinated Debt and Additional Senior Obligations of Stifel Financial before
the holders of Subordinated Debentures will be entitled to receive or retain any
payment in respect of the principal of or interest on the Subordinated
Debentures.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Debt, Subordinated Debt and Additional
Senior Obligations of Stifel Financial outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
the Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Subordinated Debentures.
No payments on account of principal or interest in respect of the
Subordinated Debentures may be made if there has occurred and is continuing a
default in any payment with respect to Senior Debt, Subordinated Debt or
Additional Senior Obligations of Stifel Financial or an event of default with
respect to any Senior Debt, Subordinated Debt or Additional Senior Obligations
of Stifel Financial resulting in the acceleration of the maturity thereof, or if
any judicial proceeding is pending with respect to any such default.
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"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every capital lease obligation of such Person, and (vi) and every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means, with respect to Stifel Financial, the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
Stifel Financial whether or not such claim for post-petition interest is allowed
in such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Subordinated Debentures; provided, however, that Senior Debt will not be deemed
to include (i) any Debt of Stifel Financial which when incurred and without
respect to any election under section 1111(b) of the United States Bankruptcy
Code of 1978, as amended, was without recourse to Stifel Financial, (ii) any
Debt of Stifel Financial to any of its subsidiaries, (iii) any Debt to any
employee of Stifel Financial, (iv) any Debt which by its terms is subordinated
to trade accounts payable or accrued liabilities arising in the ordinary course
of business to the extent that payments made to the holders of such Debt by the
holders of the Subordinated Debentures as a result of the subordination
provisions of the Indenture would be greater than they otherwise would have been
as a result of any obligation of such holders to pay amounts over to the
obligees on such trade accounts payable or accrued liabilities arising in the
ordinary course of business as a result of subordination provisions to which
such Debt is subject, and (v) Debt which constitutes Subordinated Debt.
"Subordinated Debt" means, with respect to Stifel Financial, the principal
of (and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
Stifel Financial whether or not such claim for post-petition interest is allowed
in such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, which is by its terms expressly provided to be
junior and subordinate to other Debt of Stifel Financial (other than the
Subordinated Debentures).
"Additional Senior Obligations" means, with respect to Stifel Financial,
all indebtedness, whether incurred on or prior to the date of the Indenture or
thereafter incurred, for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; provided, however, that Additional Senior Obligations do not
include claims in respect of Senior Debt or Subordinated Debt or obligations
which, by their terms, are expressly stated to be not superior in right of
payment to the Subordinated Debentures or to rank pari passu in right of payment
with the Subordinated Debentures. "Claim," as used herein, has the meaning
assigned thereto in Section 101(4) of the United States Bankruptcy Code of 1978,
as amended.
The Indenture places no limitation on the amount of additional Senior Debt,
Subordinated Debt or Additional Senior Obligations that may be incurred by
Stifel Financial. Stifel Financial expects from time to time to incur additional
indebtedness constituting Senior Debt, Subordinated Debt and Additional Senior
Obligations. As of March 27, 1997, Stifel Financial had aggregate Senior Debt,
Subordinated Debt and Additional Senior Obligations of approximately $176.4
million. Because Stifel Financial is a holding company, the Subordinated
Debentures are effectively subordinated to all existing and future liabilities
of Stifel Financial subsidiaries, including obligations to depositors of the
Subsidiary Banks.
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PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Subordinated Debentures
will be made at the office of the Debenture Trustee in New York, New York,
except that, at the option of Stifel Financial, payment of any interest may be
made (i) by check mailed to the address of the Person entitled thereto as such
address appears in the register of holders of the Subordinated Debentures, or
(ii) by transfer to an account maintained by the Person entitled thereto as
specified in the register of holders of the Subordinated Debentures, provided
that proper transfer instructions have been received by the regular record date.
Payment of any interest on Subordinated Debentures will be made to the Person in
whose name such Subordinated Debenture is registered at the close of business on
the regular record date for such interest, except in the case of defaulted
interest. Stifel Financial may at any time designate additional paying agents
for the Subordinated Debentures or rescind the designation of any paying agent
for the Subordinated Debentures; however, Stifel Financial will at all times be
required to maintain a paying agent in New York, New York and each place of
payment for the Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent for the
Subordinated Debentures, or then held by Stifel Financial in trust, for the
payment of the principal of or interest on the Subordinated Debentures and
remaining unclaimed for two years after such principal or interest has become
due and payable will be repaid to Stifel Financial on May 31 of each year or (if
then held in trust by Stifel Financial) will be discharged from such trust and
the holder of such Subordinated Debenture will thereafter look, as a general
unsecured creditor, only to Stifel Financial for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent for
the Subordinated Debentures. Subordinated Debentures may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), in New York, New
York or at the office of the registrar in Boston, Massachusetts. Stifel
Financial may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts;
provided that Stifel Financial maintains a transfer agent in New York, New York.
Stifel Financial may at any time designate additional transfer agents with
respect to the Subordinated Debentures. In the event of any redemption, neither
Stifel Financial nor the Debenture Trustee will be required to (i) issue,
register the transfer of or exchange Subordinated Debentures during a period
beginning at the opening of business 15 days before the day of selection for
redemption of Subordinated Debentures and ending at the close of business on the
day of mailing of the relevant notice of redemption, or (ii) transfer or
exchange any Subordinated Debentures so selected for redemption, except, in the
case of any Subordinated Debentures being redeemed in part, any portion thereof
not to be redeemed.
MODIFICATION OF INDENTURE
Stifel Financial and the Debenture Trustee may, from time to time without
the consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting Stifel Financial and the Debenture Trustee, with
the consent of the holders of not less than a majority in principal amount of
the outstanding Subordinated Debentures, to modify the Indenture; provided, that
no such modification may, without the consent of the holder of each outstanding
Subordinated Debenture affected by such proposed modification, (i) extend the
fixed maturity of the Subordinated Debentures, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon,
or (ii) reduce the percentage of principal amount of Subordinated Debentures,
the holders of which are required to consent to any such modification of the
Indenture; provided that so long as any of the Preferred Securities remain
outstanding, no such modification may be made that requires the consent of the
holders of the Subordinated Debentures, and no termination of the Indenture may
occur, and no waiver of any Debenture Event of Default may be effective, without
the prior consent of the holders of at least a majority of the aggregate
Liquidation Amount of the Preferred Securities and that if the consent of the
holder of each
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Subordinated Debenture is required, such modification will not be effective
until each holder of Trust Securities has consented thereto.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures that has occurred and is
continuing constitutes an event of default (each, a "Debenture Event of
Default") with respect to the Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Subordinated
Debentures, when due (subject to the deferral of any due date in the case
of an Extension Period); or
(ii) failure to pay any principal on the Subordinated Debentures when
due whether at maturity, upon redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to Stifel Financial from the Debenture Trustee or the holders of at least
25% in aggregate outstanding principal amount of the Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
Stifel Financial.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee. The
Debenture Trustee, or the holders of not less than 25% in aggregate outstanding
principal amount of the Subordinated Debentures, may declare the principal due
and payable immediately upon a Debenture Event of Default. The holders of a
majority in aggregate outstanding principal amount of the Subordinated
Debentures may annul such declaration and waive the default if the default
(other than the non-payment of the principal of the Subordinated Debentures
which has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of the Subordinated Debentures fail to annul such declaration
and waive such default, the holders of a majority in aggregate Liquidation
Amount of the Preferred Securities will have such right.
Stifel Financial is required to file annually with the Debenture Trustee a
certificate as to whether or not Stifel Financial is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures, and any other amounts payable under
the Indenture, to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of Stifel Financial to pay interest on or
principal of the Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Preferred Securities may institute
a legal proceeding directly against Stifel Financial for enforcement of payment
to such holder of the principal of or interest on such Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities of such holder (a "Direct Action"). In connection with such
Direct Action, Stifel Financial will have a right of set-off under the Indenture
to the extent of any payment made by Stifel Financial to such holder of
Preferred Securities in the Direct Action. Stifel Financial may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities. If the
right to bring a Direct Action is removed, Stifel Capital may become subject to
the reporting obligations under the Exchange Act. Stifel Financial has the right
under the Indenture to set-off any payment made to such holder of Preferred
Securities by Stifel Financial in connection with a Direct Action.
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The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Subordinated Debentures unless there has been an
Event of Default under the Trust Agreement. See "Description of the Preferred
Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
Stifel Financial may not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any
Person, and any Person may not consolidate with or merge into Stifel Financial
or sell, convey, transfer or otherwise dispose of its properties and assets
substantially as an entirety to Stifel Financial, unless (i) in the event Stifel
Financial consolidates with or merges into another Person or conveys or
transfers its properties and assets substantially as an entirety to any Person,
the successor Person is organized under the laws of the United States or any
State or the District of Columbia, and such successor Person expressly assumes
by supplemental indenture Stifel Financial obligations on the Subordinated
Debentures issued under the Indenture, (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, has occurred
and is continuing, and (iii) certain other conditions as prescribed in the
Indenture are met.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to Stifel
Financial obligations to pay certain sums due pursuant to the Indenture and to
provide certain officers' certificates and opinions of counsel described
therein) and Stifel Financial will be deemed to have satisfied and discharged
the Indenture when, among other things, all Subordinated Debentures not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable, or (ii) will become due and payable at their Stated Maturity
within one year or are to be called for redemption within one year, and Stifel
Financial deposits or causes to be deposited with the Debenture Trustee funds,
in trust, for the purpose and in an amount sufficient to pay and discharge the
entire indebtedness on the Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal and interest to the
date of the deposit or to the Stated Maturity or redemption date, as the case
may be.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of Missouri.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
Stifel Financial has agreed, pursuant to the Indenture, for so long as
Trust Securities remain outstanding, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of Stifel Capital (provided that certain
successors which are permitted pursuant to the Indenture may succeed to Stifel
Financial ownership of the Common Securities), (ii) not to voluntarily
terminate, wind up or liquidate Stifel Capital, and (a) in connection with a
distribution of Subordinated Debentures to the holders of the Preferred
Securities in liquidation of Stifel Capital, or (b) in connection with certain
mergers, consolidations or
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amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable
efforts, consistent with the terms and provisions of the Trust Agreement, to
cause Stifel Capital to remain classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes.
DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will be
executed and delivered by Stifel Financial concurrently with the issuance of the
Preferred Securities for the benefit of the holders of the Preferred Securities.
The Guarantee will be qualified as an indenture under the Trust Indenture Act.
The Guarantee Trustee will act as indenture trustee under the Guarantee for
purposes of complying with the provisions of the Trust Indenture Act. The
Guarantee Trustee, State Street Bank and Trust Company, will hold the Guarantee
for the benefit of the holders of the Preferred Securities. The following
summary of the material terms and provisions of the Guarantee does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Guarantee and the Trust Indenture Act. Wherever
particular defined terms of the Guarantee are referred to, but not defined
herein, such defined terms are incorporated herein by reference. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
GENERAL
Stifel Financial will, pursuant to the Guarantee, irrevocably agree to pay
in full on a subordinated basis, to the extent set forth therein, the Guarantee
Payments (as defined below) to the holders of the Preferred Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that
Stifel Capital may have or assert other than the defense of payment. The
following payments with respect to the Preferred Securities, to the extent not
paid by or on behalf of Stifel Capital (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any accrued and unpaid Distributions required to
be paid on the Preferred Securities, to the extent that Stifel Capital has funds
available therefor at such time, (ii) the Redemption Price with respect to any
Preferred Securities called for redemption to the extent that Stifel Capital has
funds available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of Stifel Capital (other than in
connection with the distribution of Subordinated Debentures to the holders of
Preferred Securities or a redemption of all of the Preferred Securities), the
lesser of (a) the amount of the Liquidation Distribution, to the extent Stifel
Capital has funds available therefor at such time, and (b) the amount of assets
of Stifel Capital remaining available for distribution to holders of Preferred
Securities in liquidation of Stifel Capital. The obligation of Stifel Financial
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by Stifel Financial to the holders of the Preferred Securities or by
causing Stifel Capital to pay such amounts to such holders.
The Guarantee will not apply to any payment of Distributions except to the
extent Stifel Capital has funds available therefor. If Stifel Financial does not
make interest payments on the Subordinated Debentures held by Stifel Capital,
Stifel Capital will not pay Distributions on the Preferred Securities and will
not have funds legally available therefor.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Stifel Financial
and will rank subordinate and junior in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of Stifel Financial in the
same manner as the Subordinated Debentures. The Guarantee does not place a
limitation on the amount of additional Senior Debt, Subordinated Debt or
Additional Senior Obligations that may be incurred by Stifel Financial. Stifel
Financial expects from time to time to incur additional indebtedness
constituting Senior Debt, Subordinated Debt and Additional Senior Obligations.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
Stifel Financial to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other Person). The Guarantee will not
be discharged except by payment of the Guarantee Payments in full to the extent
not paid by Stifel Capital or upon
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distribution of the Subordinated Debentures to the holders of the Preferred
Securities. Because Stifel Financial is a holding company, the right of Stifel
Financial to participate in any distribution of assets of any Subsidiary Bank
upon such Subsidiary Bank's liquidation or reorganization or otherwise is
subject to the prior claims of creditors of that Subsidiary Bank, except to the
extent Stifel Financial may itself be recognized as a creditor of that
Subsidiary Bank. Stifel Financial obligations under the Guarantee, therefore,
will be effectively subordinated to all existing and future liabilities of
Stifel Financial subsidiaries, and claimants should look only to the assets of
Stifel Financial for payments thereunder.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of the
outstanding Preferred Securities. See "Description of the Preferred Securities
- - -- Voting Rights; Amendment of Trust Agreement." All guarantees and agreements
contained in the Guarantee will bind the successors, assigns, receivers,
trustees and representatives of Stifel Financial and will inure to the benefit
of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
Stifel Financial to perform any of its payment or other obligations thereunder.
The holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against Stifel Financial to enforce its rights under the Guarantee
without first instituting a legal proceeding against Stifel Capital, the
Guarantee Trustee or any other Person.
Stifel Financial, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not Stifel Financial is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by Stifel Financial in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to such provisions, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of any Preferred Securities, unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon (a)
full payment of the Redemption Price of the Preferred Securities, (b) full
payment of the amounts payable upon liquidation of Stifel Capital, or (c)
distribution of the Subordinated Debentures to the holders of the Preferred
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Preferred Securities must
restore payment of any sums paid under such Preferred Securities or the
Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of Missouri.
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EXPENSE AGREEMENT
Stifel Financial will, pursuant to the Agreement as to Expenses and
Liabilities entered into by it under the Trust Agreement (the "Expense
Agreement"), irrevocably and unconditionally guarantee to each person or entity
to whom Stifel Capital becomes indebted or liable, the full payment of any
costs, expenses or liabilities of Stifel Capital, other than obligations of
Stifel Capital to pay to the holders of the Preferred Securities or other
similar interests in Stifel Capital of the amounts due such holders pursuant to
the terms of the Preferred Securities or such other similar interests, as the
case may be. Third party creditors of Stifel Capital may proceed directly
against Stifel Financial under the Expense Agreement, regardless of whether such
creditors had notice of the Expense Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent Stifel Capital has funds available for the payment of such
Distributions) are irrevocably guaranteed by Stifel Financial as and to the
extent set forth under "Description of the Guarantee." Stifel Financial and
Stifel Capital believe that, taken together, the obligations of Stifel Financial
under the Subordinated Debentures, the Indenture, the Trust Agreement, the
Expense Agreement, and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee, on a subordinated basis, of payment of
Distributions and other amounts due on the Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the obligations of Stifel Capital under the Preferred
Securities. If and to the extent that Stifel Financial does not make payments on
the Subordinated Debentures, Stifel Capital will not pay Distributions or other
amounts due on the Preferred Securities. The Guarantee does not cover payment of
Distributions when Stifel Capital does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of Preferred Securities is
to institute a legal proceeding directly against Stifel Financial for
enforcement of payment of such Distributions to such holder. The obligations of
Stifel Financial under the Guarantee are subordinate and junior in right of
payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations
of Stifel Financial.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover Distributions
and other payments due on the Preferred Securities, primarily because (i) the
aggregate principal amount of the Subordinated Debentures will be equal to the
sum of the aggregate stated Liquidation Amount of the Trust Securities, (ii) the
interest rate and interest and other payment dates on the Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Preferred Securities, (iii) Stifel Financial will pay for all and
any costs, expenses and liabilities of Stifel Capital (except the obligations of
Stifel Capital to holders of the Preferred Securities), and (iv) the Trust
Agreement further provides that Stifel Capital will not engage in any activity
that is not consistent with the limited purposes of Stifel Capital.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding
directly against Stifel Financial to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee,
Stifel Capital or any other Person. A default or event of default under any
Senior Debt, Subordinated Debt or Additional Senior Obligations of Stifel
Financial would not constitute a default or Event of Default. In the event,
however, of payment defaults under, or acceleration of, Senior Debt,
Subordinated Debt or Additional Senior Obligations of Stifel Financial, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Subordinated Debentures until such Senior Debt, Subordinated
Debt
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<PAGE> 41
or Additional Senior Obligations has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Subordinated Debentures would constitute an Event of Default.
LIMITED PURPOSE OF STIFEL CAPITAL
The Preferred Securities evidence a preferred undivided beneficial interest
in the assets of Stifel Capital. Stifel Capital exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of Stifel Capital, (ii) investing the gross proceeds of
the Trust Securities in the Subordinated Debentures issued by Stifel Financial,
and (iii) engaging in only those other activities necessary, advisable, or
incidental thereto. A principal difference between the rights of a holder of a
Preferred Security and the rights of a holder of a Subordinated Debenture is
that a holder of a Subordinated Debenture is entitled to receive from Stifel
Financial the principal amount of and interest accrued on Subordinated
Debentures held, while a holder of Preferred Securities is entitled to receive
Distributions from Stifel Capital (or from Stifel Financial under the Guarantee)
if and to the extent Stifel Capital has funds available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
Stifel Capital involving the liquidation of the Subordinated Debentures, the
holders of the Preferred Securities will be entitled to receive, out of assets
held by Stifel Capital, the Liquidation Distribution in cash. See "Description
of the Preferred Securities -- Liquidation Distribution Upon Termination." Upon
any voluntary or involuntary liquidation or bankruptcy of Stifel Financial, the
Property Trustee, as holder of the Subordinated Debentures, would be a
subordinated creditor of Stifel Financial, subordinated in right of payment to
all Senior Debt, Subordinated Debt and Additional Senior Obligations of Stifel
Financial (as set forth in the Indenture), but entitled to receive payment in
full of principal and interest before any shareholders of Stifel Financial
receive payments or distributions. Since Stifel Financial is the guarantor under
the Guarantee and has agreed to pay for all costs, expenses and liabilities of
Stifel Capital (other than the obligations of Stifel Capital to the holders of
its Preferred Securities), the positions of a holder of the Preferred Securities
and a holder of the Subordinated Debentures relative to other creditors and to
shareholders of Stifel Financial in the event of liquidation or bankruptcy of
Stifel Financial are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the material United States federal income tax
considerations that may be relevant to the purchasers of Preferred Securities
which has been passed upon by Bryan Cave LLP, counsel to Stifel Financial and
Stifel Capital insofar as it relates to matters of law and legal conclusions.
The conclusions expressed herein are based upon current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), regulations thereunder
and current administrative rulings and court decisions, all of which are subject
to change at any time, with possible retroactive effect. Subsequent changes may
cause tax consequences to vary substantially from the consequences described
below. Furthermore, the authorities on which the following summary is based are
subject to various interpretations, and it is therefore possible that the United
States federal income tax treatment of the purchase, ownership, and disposition
of Preferred Securities may differ from the treatment described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion generally focuses on holders of Preferred
Securities who are individual citizens or residents of the United States and who
acquire Preferred Securities on their original issue at their offering price and
hold Preferred Securities as capital assets. The discussion has only limited
application to dealers in securities, corporations, estates, trusts or
nonresident aliens and does not address all the tax consequences that may be
relevant to holders who may be subject to
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<PAGE> 42
special tax treatment, such as, for example, banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, or persons that will hold the
Preferred Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. The following summary also does
not address the tax consequences to persons that have a functional currency
other than the U.S. dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Preferred Securities. Further, it does not include
any description of any alternative minimum tax consequences or the tax laws of
any state or local government or of any foreign government that may be
applicable to the Preferred Securities. Accordingly, each prospective investor
should consult, and should rely exclusively on, such investor's own tax advisors
in analyzing the federal, state, local and foreign tax consequences of the
purchase, ownership or disposition of Preferred Securities.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
Stifel Financial intends to take the position that the Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of Stifel Financial under current law, and, by acceptance of a
Preferred Security, each holder covenants to treat the Subordinated Debentures
as indebtedness and the Preferred Securities as evidence of an indirect
beneficial ownership interest in the Subordinated Debentures. No assurance can
be given, however, that such position of Stifel Financial will not be challenged
by the Internal Revenue Service or, if challenged, that such a challenge will
not be successful. The remainder of this discussion assumes that the
Subordinated Debentures will be classified for United States federal income tax
purposes as indebtedness of Stifel Financial.
CLASSIFICATION OF STIFEL CAPITAL
Under current law and assuming full compliance with the terms of the Trust
Agreement and Indenture (and certain other documents described herein), Stifel
Capital will be classified for United States federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for United States federal income tax purposes, each holder of Preferred
Securities generally will be treated as owning an undivided beneficial interest
in the Subordinated Debentures, and upon the occurrence of an Extension Period
each holder will be required to include in his gross income any original issue
discount ("OID") accrued with respect to its allocable share of the Subordinated
Debentures whether or not cash is actually distributed to such holder.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations"), a debt
instrument will be deemed to be issued with OID if there is more than a "remote"
contingency that periodic stated interest payments due on the instrument will
not be timely paid. Because the exercise by Stifel Financial of its option to
defer the payment of stated interest on the Subordinated Debentures would
prevent Stifel Financial from declaring dividends on any class of equity, Stifel
Financial believes that the likelihood of its exercising the option is "remote"
within the meaning of the Regulations. As a result, Stifel Financial intends to
take the position that the Subordinated Debentures will not be deemed to be
issued with OID. Accordingly, based on this position, stated interest payments
on the Subordinated Debentures will be includible in the ordinary income of a
holder at the time that such payments are paid or accrued in accordance with the
holder's regular method of accounting. Because the Regulations have not yet been
addressed in any published rulings or other published interpretations issued by
the Internal Revenue Service, it is possible that the Internal Revenue Service
could take a position contrary to the position taken by Stifel Financial.
If the Company were to exercise its option to defer the payment of stated
interest on the Subordinated Debentures, the Subordinated Debentures would be
treated, solely for purpose of the OID rules, as being "re-issued" at such time
with OID. Under these rules, a holder of the Subordinated Debentures would be
required to include OID in ordinary income, on a current basis, over the period
that the instrument is held even though the Company would not be making any
actual cash payments during the extended interest payment period. The amount of
interest income includible in the taxable income of a holder of the
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<PAGE> 43
Subordinated Debentures would be determined on the basis of a constant yield
method over the remaining term of the instrument and the actual receipt of
future payments of stated interest on the Subordinated Debentures would no
longer be separately reported as taxable income. The amount of OID that would
accrue, in the aggregate, during the extended interest payment period would be
approximately equal to the amount of the cash payment due at the end of such
period. Any OID included in income would increase the holder's adjusted tax
basis in the Subordinated Debentures and the holder's actual receipt of interest
payments would reduce such basis.
Because income on the Preferred Securities will constitute interest income
for United States federal income tax purposes, corporate holders of Preferred
Securities will not be entitled to claim a dividends received deduction in
respect of such income.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Subordinated Debentures with "market discount"
or "acquisition premium" as such phrases are defined for United States federal
income tax purposes. Such holders are advised to consult their tax advisors as
to the income tax consequences of the acquisition, ownership and disposition of
the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF STIFEL CAPITAL
Under certain circumstances, as described under "Description of the
Preferred Securities -- Redemption or Exchange" and "-- Liquidation Distribution
Upon Termination," the Subordinated Debentures may be distributed to holders of
Preferred Securities upon a liquidation of Stifel Capital. Under current United
States federal income tax law, such a distribution would be treated as a
nontaxable event to each such holder and would result in such holder having an
adjusted tax basis in the Subordinated Debentures received in the liquidation
equal to such holder's adjusted tax basis in the Preferred Securities
immediately before the distribution. A holder's holding period in the
Subordinated Debentures so received in liquidation of Stifel Capital would
include the period for which such holder held the Preferred Securities.
If, however, a Tax Event occurs which results in Stifel Capital being
treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Preferred Securities. Under
certain circumstances described herein, the Subordinated Debentures may be
redeemed for cash and the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Preferred Securities, and a holder would recognize
gain or loss as if the holder sold such Preferred Securities for cash. See
"Description of the Preferred Securities -- Redemption or Exchange" and "--
Liquidation Distribution Upon Termination."
DISPOSITION OF PREFERRED SECURITIES
Upon the sale of the Preferred Securities, a holder will recognize gain or
loss in an amount equal to the difference between his adjusted tax basis in the
Preferred Securities and the amount realized in the sale (except to the extent
of any amount received in respect of accrued but unpaid interest not previously
included in income). A holder's adjusted tax basis in the Preferred Securities
generally will be its initial purchase price increased by OID (if any)
previously includible in the holder's gross income to the date of disposition
and decreased by payments (if any) received on the Preferred Securities in
respect of OID (if any) to the date of disposition. Such gain or loss generally
will be a capital gain or loss and will be a long-term capital gain or loss if
the Preferred Securities have been held for more than one year at the time of
sale.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or OID if the Subordinated
Debentures are treated as having been issued, or reissued, with OID) with
respect to the underlying Subordinated Debentures. A holder who disposes of his
Preferred Securities will be required to include in ordinary income (i) any
portion of the amount realized that is attributable to such accrued but unpaid
interest to the extent not previously included in income, or (ii) any
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amount of OID, in either case, that has accrued on his pro rata share of the
underlying Subordinated Debentures during the taxable year of sale through the
date of disposition. Any such income inclusion will increase the holder's
adjusted tax basis in his Preferred Securities disposed of. To the extent that
the amount realized in the sale is less than the holder's adjusted tax basis, a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
EFFECT OF PROPOSED CHANGES IN TAX LAWS
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "1996 Proposed Legislation") if such debt obligations have a maximum
term in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the "Joint Statement") indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the 1996 Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress would have an effective date
that is no earlier than the date of "appropriate Congressional action." In
addition, subsequent to the publication of the Joint Statement, Senator Daniel
Patrick Moynihan and Representatives Sam. M. Gibbons and Charles B. Rangel wrote
letters to Treasury Department officials concurring with the views expressed in
the Joint Statement. Neither the 1996 Proposed Legislation nor similar
legislation was enacted during the 104th Congress. On February 6, 1997,
President Clinton proposed in the administration's fiscal year 1998 budget
certain tax law changes (the "1997 Proposed Legislation") that would, among
other things, generally deny corporate issuers a deduction for interest or OID
in respect of certain debt obligations if such debt obligations have a maximum
term in excess of 15 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. The 1997 Proposed Legislation also
contains a provision that would deny a deduction to corporate issuers for
interest or OID with respect to debt instruments that have a maximum term of
more than 40 years (including rights to extend, renew or relend), or are payable
in stock of the issuer or a related party. The U.S. Treasury Department's
summary of the 1997 Proposed Legislation states that the above provisions
regarding the deduction of interest would generally be effective for instruments
issued on or after the date of first Congressional committee action with respect
to the 1997 Proposed Legislation. The Ways and Means Committee began a full
committee hearing on the President's fiscal 1998 budget on February 11, 1997.
There can be no assurance that the effective date guidance in the 1997 Proposed
Legislation will be adopted if the proposed change to the tax law is enacted, or
that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of the Company to deduct the interest payable on
the Subordinated Debentures. Consequently, there can be no assurance that a Tax
Event will not occur. A Tax Event would permit the Company to cause a redemption
of the Preferred Securities before, as well as after, June 30, 2002. See
"Description of the Subordinated Debentures -- Redemption or Exchange" and
"Description of the Preferred Securities -- Redemption or Exchange -- Tax Event
Redemption or Investment Company Event Redemption."
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of OID accrued on the Preferred Securities held of record by
individual citizens or residents of the United States, or certain trusts,
estates, and partnerships, will be reported to the Internal Revenue Service on
Forms 1099, which forms should be mailed to such holders of Preferred Securities
by January 31 following each calendar year. Payments made on, and proceeds from
the sale of, the Preferred Securities may be subject to a "backup" withholding
tax (currently at 31%) unless the holder complies with certain identification
and other requirements. Any amounts withheld under the backup withholding rules
will be allowed as a credit against the holder's United States federal income
tax liability, provided the required information is provided to the Internal
Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE
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DEPENDING UPON THE PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES.
HOLDERS OF PREFERRED SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans"), generally may purchase Preferred Securities, subject to the investing
fiduciary's determination that the investment in Preferred Securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the Plan.
In any case, Stifel Financial and/or any of its affiliates may be
considered a "party in interest" (within the meaning of ERISA) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to certain plans (generally, Plans maintained or sponsored by, or
contributed to by, any such persons with respect to which Stifel Financial or an
affiliate is a fiduciary or Plans for which Stifel Financial or an affiliate
provides services). The acquisition and ownership of Preferred Securities by a
Plan (or by an individual retirement arrangement or other Plans described in
Section 4975(e)(1) of the Code) with respect to which Stifel Financial or any of
its affiliates is considered a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, Plans with respect to which Stifel Financial or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable exemption. Any other Plans or other
entities whose assets include Plan assets subject to ERISA or Section 4975 of
the Code proposing to acquire Preferred Securities should consult with their own
counsel.
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UNDERWRITING
The Underwriters named below, represented by (the
"Representative"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, to
purchase from Stifel Capital the number of Preferred Securities set forth
opposite their respective names below. The several Underwriters have agreed in
the Underwriting Agreement, subject to the terms and conditions set forth
therein, to purchase all the Preferred Securities offered hereby if any of the
Preferred Securities are purchased. In the event of default by an Underwriter,
the Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF PREFERRED SECURITIES
----------- ------------------------------
<S> <C>
Stifel, Nicolaus & Company, Incorporated....................
------------
Total.................................................. $
============
</TABLE>
The Representative has advised Stifel Capital that it proposes initially to
offer the Preferred Securities to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such price
less a concession not in excess of $ per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per Preferred Security to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of Stifel
Financial, the Underwriting Agreement provides that Stifel Financial will pay as
compensation to the Underwriters arranging the investment therein of such
proceeds, an amount in immediately available funds of $ per Preferred
Security (or $ in the aggregate) for the accounts of the several
Underwriters.
Stifel Capital has granted the Underwriters an option to purchase up to an
additional 375,000 Preferred Securities at the initial public offering price.
Such option, which expires 30 days from the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage of
the additional Preferred Securities that the number of Preferred Securities to
be purchased initially by the Underwriter is of the 2,500,000 Preferred
Securities initially purchased by the Underwriters.
To the extent that the Underwriters exercise their option to purchase
additional Preferred Securities, Stifel Capital will issue and sell to Stifel
Financial additional Common Securities in such aggregate Liquidation Amount as
is required for Stifel Financial to continue to hold Common Securities in an
aggregate Liquidation Amount equal to at least 3% of the total capital of Stifel
Capital and Stifel Financial will issue and sell to Stifel Capital Subordinated
Debentures in an aggregate principal amount equal to the total aggregate
Liquidation Amount of the additional Preferred Securities being purchased
pursuant to the option and the additional Common Securities.
In connection with the offering of the Preferred Securities, the
Underwriters and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriters
create a short position for their own account by selling more Preferred
Securities
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<PAGE> 47
than they are committed to purchase from the Trust. In such a case, to cover all
or part of the short position, the Underwriters may exercise the over-allotment
option described above or may purchase Preferred Securities in the open market
following completion of the initial offering of the Preferred Securities. The
Underwriters also may engage in stabilizing transactions in which they bid for,
and purchase, shares of the Preferred Securities at a level above that which
might otherwise prevail in the open market for the purpose of preventing or
retarding a decline in the market price of the Preferred Securities. The
Underwriters also may reclaim any selling concessions allowed to an Underwriter
or dealer if the Underwriters repurchase shares distributed by that Underwriter
or dealer. Any of the foregoing transactions may result in the maintenance of a
price for the Preferred Securities at a level above that which might otherwise
prevail in the open market. Neither the Company nor any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
Preferred Securities. The Underwriters are not required to engage in any of the
foregoing transactions and, if commenced, such transactions may be discontinued
at any time without notice.
During a period of 180 days from the date of this Prospectus, neither
Stifel Capital nor Stifel Financial will, subject to certain exceptions, without
the prior written consent of the Representative, directly or indirectly, sell,
offer to sell, grant any option for sale of, or otherwise dispose of, any
Preferred Securities, any security convertible into or exchangeable into or
exercisable for Preferred Securities or Subordinated Debentures or any debt
securities substantially similar to the Subordinated Debentures or equity
securities substantially similar to the Preferred Securities (except for
Subordinated Debentures and the Preferred Securities offered hereby).
An application will be made to have the Preferred Securities approved for
listing on the NYSE, subject to official notice of issuance, under the symbol
"SFPr." Prior to the Offering, there has been no public market for the Preferred
Securities. To meet one of the requirements for listing the Preferred Securities
on the NYSE, the Underwriters will undertake to sell Preferred Securities to a
minimum of 400 beneficial holders. There can be no assurance made as to the
liquidity of such Preferred Securities or that an active and liquid trading
market will develop or, if developed, that it will continue. The offering price
and distribution rate have been determined by negotiations among representatives
of Stifel Financial and the Underwriters, and the offering price of the
Preferred Securities may not be indicative of the market price following the
Offering. The Representative will have no obligation to make a market in the
Preferred Securities, however, and may cease market-making activities, if
commenced, at any time.
Stifel Capital and Stifel Financial have agreed to indemnify the
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act.
Stifel, Nicolaus, a wholly-owned subsidiary of the Company, is also an
Underwriter. Therefore, the underwriting arrangements for the offering will
comply with Conduct Rule 2720 (formerly Schedule E to the By-Laws) of the NASD
("Rule 2720"), which provides that, among other things, when an NASD member
participates in the underwriting of an affiliate's equity securities, the
initial public offering price can be no higher than that recommended by a
"qualified independent underwriter" meeting certain standards. In accordance
with this requirement, has served in such role and has
recommended a price in compliance with the requirements of Rule 2720. In
connection with the offering, in its role as qualified
independent underwriter has performed due diligence investigations and reviewed
and participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part. In addition, the Underwriters
may not confirm sales to any discretionary account without the prior specific
written approval of the customer.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of
Stifel Capital will be passed upon by Richards, Layton & Finger, special
Delaware counsel to Stifel Financial and Stifel Capital. Certain legal matters
for Stifel Financial and Stifel Capital, including the validity of the Guarantee
and the Subordinated Debentures will be passed upon
46
<PAGE> 48
for Stifel Financial and Stifel Capital by Bryan Cave LLP, St. Louis, Missouri,
counsel to Stifel Financial and Stifel Capital. John J. Goebel, a partner of
Bryan Cave LLP, is a director of Stifel Financial and owns 1,274 shares of
Stifel Financial's common stock and options to purchase 6,381 shares of common
stock. Bryan Cave LLP from time to time serves as legal counsel to [several of]
the Underwriters, including Stifel, Nicolaus. Certain legal matters will be
passed upon for the Underwriters by . Bryan Cave LLP and
will rely upon the opinion of Richards, Layton & Finger as to
matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for Stifel Financial by Bryan Cave
LLP.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K and Annual Report to Security Holders for the year ended December 31,
1996 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K and Annual Report to Security Holders for the years ended December 31,
1995 and 1994 have been audited by Coopers & Lybrand L.L.P., independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by Stifel Financial with the
Securities and Exchange Commission pursuant to Section 13 of the Exchange Act,
are incorporated herein by reference:
(a) Stifel Financial's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K") (included as Appendix A hereto);
and
(b) Stifel Financial's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 (included as Appendix B hereto).
In addition, the following portions of Stifel Financial's 1996 Annual
Report to Stockholders are incorporated herein by reference (and are included as
Exhibit 13 to the 1996 Form 10-K, included as Appendix A hereto):
(a) Management's discussion and analysis of financial condition and
results of operations (Management's Financial Discussion); and
(b) Audited Consolidated Statements of Financial Condition,
Consolidated Statements of Operations, Consolidated Statements of
Stockholders' Equity, Consolidated Statements of Cash Flows, Notes to
Consolidated Financial Statements.
Any statement contained 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 to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
STIFEL FINANCIAL WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE
OFFICE OF THE SECRETARY, STIFEL
47
<PAGE> 49
FINANCIAL CORP., 500 NORTH BROADWAY, ST. LOUIS, MISSOURI 63102. TELEPHONE
REQUESTS MAY BE DIRECTED TO (314) 342-2000.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-2
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by Stifel Financial and Stifel Capital with the Commission
under the Securities Act, with respect to the Preferred Securities and the
Subordinated Debentures. This Prospectus does not contain all of the information
set forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, although it does
include a summary of the material terms of the Indenture and the Trust
Agreement. Reference is made to such Registration Statement and to the exhibits
relating thereto for further information with respect to the Stifel Financial,
Stifel Capital, the Preferred Securities and the Subordinated Debentures. Any
statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission
or incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
Stifel Financial is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the following public reference
facilities maintained by the Commission: 450 Fifth Street, N.W., Washington,
D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, upon payment of prescribed rates. The Commission
maintains in Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov. In addition,
reports, proxy statements and other information concerning Stifel Financial may
be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
No separate financial statements of Stifel Capital have been included
herein. Stifel Financial does not consider that such financial statements would
be material to holders of Preferred Securities because (i) all of the voting
securities of Stifel Capital will be owned by Stifel Financial, a reporting
company under the Exchange Act, (ii) Stifel Capital has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of Stifel Capital and investing the
proceeds thereof in Subordinated Debentures issued by Stifel Financial, and
(iii) the obligations of Stifel Financial described herein to provide certain
indemnities in respect of and be responsible for certain costs, expenses, debts
and liabilities of Stifel Capital under the Indenture and pursuant to the Trust
Agreement, the guarantee issued by Stifel Financial with respect to the
Preferred Securities, the Subordinated Debentures purchased by Stifel Capital
and the related Indenture, taken together, constitute, in the belief of Stifel
Financial and Stifel Capital, a full and unconditional guarantee of payments due
on the Preferred Securities. See "Description of the Subordinated Debentures"
and "Description of the Guarantee."
Stifel Capital is not currently subject to the information reporting
requirements of the Exchange Act. Stifel Capital will become subject to such
requirements upon the effectiveness of the Registration Statement, although it
intends to seek and expects to receive an exemption therefrom.
48
<PAGE> 50
APPENDIX A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
-----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------------- ------------------
Commission file number 1-9305
------
STIFEL FINANCIAL CORP.
- - --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 43-1273600
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 N. Broadway
St. Louis, Missouri 63102-2188
- - ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code 314-342-2000
------------------------------------
Securities registered pursuant to Section
12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
- - -------------------------------------- ------------------------------------
Common Stock, Par Value $.15 per share New York Stock Exchange
Chicago Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such report) and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K, or any amendment to this Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates of the
registrant at March 11, 1997 was $32,425,544.
Shares of Common Stock outstanding at March 11, 1997: 4,725,747
shares, par value $.15 per share.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Annual Report to Stockholders for the year ended
December 31, 1996 are incorporated by reference to Part II
hereof. Portions of the Company's Proxy Statement filed with the
SEC in connection with the Company's Annual Meeting of
Stockholders to be held April 22, 1997 are incorporated by
reference to Part III hereof. Exhibit Index located on page 24.
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<PAGE> 51
PART I
ITEM 1. BUSINESS
- - ----------------
Stifel Financial Corp. ("Financial") was organized in fiscal year 1983
pursuant to a plan of reorganization whereby Stifel, Nicolaus &
Company, Incorporated ("Stifel, Nicolaus") became a wholly-owned subsidiary
of Financial. Stifel, Nicolaus is the successor to a partnership founded in
1890. The term "Company" as used herein means Financial and its subsidiaries.
The Company offers securities-related financial services through its
wholly-owned operating subsidiaries, Stifel, Nicolaus, Century Securities
Associates, Inc., Todd Investment Advisors, Inc., and Pin Oak Capital,
Ltd. These subsidiaries provide brokerage, trading, investment banking,
investment advisory, and related financial services primarily to customers
throughout the United States from 43 locations. The Company's customers
include individuals, corporations, municipalities and institutions.
Although the Company has customers throughout the United States, its major
geographic area of concentration is in the Midwest. On May 25, 1995, the
Company sold the majority of the assets related to its operations in
Oklahoma, which consisted of 26 retail securities offices and the municipal
underwriting, trading, and institutional sales operations located in
Oklahoma, and three retail offices in Texas. These operations comprised 14%
of the Company's total revenue for 1994. (See proforma financial
information in Note O of the Consolidated Financial Statements incorporated
by reference herein.)
PRINCIPAL SOURCES OF REVENUE
The amounts of each of the principal sources of revenue of the Company for
the calendar years 1996, 1995 and 1994 is contained in Item 6. Selected
Financial Data, filed herein.
COMMISSIONS
During recent years, most of the Company's securities commissions resulted
from transactions with retail (individual) investor accounts. Retail
commissions are charged on both stock exchange and over-the-counter
transactions in accordance with the Company's commission schedule. In
certain cases (usually on large trades or to active customers),
discounts from that schedule are granted.
The percentage of total commission revenue from institutional customers
was 5% in 1996. Prior to 1996 revenue generated from institutional
customers was not accounted for separately. Institutional accounts are
serviced mainly by the Company's offices in St. Louis. Retail investment
executives also receive orders from institutional customers from time to time.
PRINCIPAL TRANSACTIONS
The Company trades as principal in the over-the-counter market. It acts as
both principal and agent to facilitate the execution of customers' orders.
The Company "makes a market" in various securities of interest to its
customers through buying, selling and maintaining an inventory of these
securities. The Company does not engage in a significant amount of trading
for its own account. The Company also buys corporate and municipal bonds for
its own account in the secondary market, maintains an inventory, and resells
from that inventory to other dealers and to institutional and retail
customers.
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INVESTMENT BANKING
The Company manages the underwriting of both corporate and municipal
securities and participates as an underwriter in syndicates of issues
managed by other firms. The corporate and public finance departments are
responsible for originating underwritings, mergers and acquisitions,
placements, valuations, financial advisory work and other investment
banking matters. The Company acts as an underwriter and dealer in bonds issued
by states, cities and other political subdivisions and may act as manager or
participant in offerings managed by other firms. The majority of the
Company's municipal bond underwritings and corporate underwritings are
originated and sold through its office in St. Louis. Prior to 1994,
the majority of the Company's investment banking related revenue was
generated by its Oklahoma City based public finance department. As a result
of the negative publicity surrounding the two year investigation and civil
injunctive action by the Securities and Exchange Commission, which
was settled in August of 1995, related to certain municipal bond
underwritings managed by the Oklahoma City office, the Company's ability
to generate municipal bond underwritings in Oklahoma and elsewhere was
adversely impacted (see also Item 7 "Management's Financial Discussion" and
Note H of the Consolidated Financial Statements incorporated by
reference herein).
During 1995, the number of municipal bond offerings underwritten by the St.
Louis public finance department was not only affected by the negative
publicity as a result of the Securities and Exchange Commission
investigation and enforcement action but also was effected by the downturn
in the public finance market experienced industry-wide. Interest rates
had not fluctuated downward as dramatically as several years ago, and
consequently the volume of refinancings by institutions and governmental
agencies has remained low.
During 1996, the St. Louis public finance department rebounded somewhat as
evidenced by the increase in the number of awards as senior manager for new
issue underwritings, which increased to 34 awards in 1996 from 24 awards in
1995.
While several broker-dealers have ceased their public finance operations
resulting from the industry-wide slowdown, management is uncertain at this
time what effects, if any, this may have on the department's future
performance.
In calendar years 1996 and 1995, the majority of the Company's investment
banking revenues have been generated by the corporate finance department.
The growth in the revenue is due to the department's focus on providing
research, financial advisory services, and consulting services for merger and
acquisition and serving as a manager or co-manager for underwriting issuances
of corporate debt or equity securities for financial institutions and Real
Estate Investment Trusts (REITs) located primarily in the Midwest. Management
expects the performance of the corporate finance department to remain strong.
The management of and participation in public offerings involves significant
risks. An underwriter may incur losses if it is unable to resell, at a
profit, the securities it has purchased. Under the Securities Act of 1933 and
other statutes and court decisions, an underwriter may be subject to
substantial liability for misstatements or omissions that are judged to be
material in prospectuses and other communications related to underwritings.
Underwriting commitments cause a charge against net capital (as defined by
Rule 15c3-1 administered by the Securities and Exchange Commission -- see
"Regulation"); and, consequently, the aggregate amount of underwriting
commitments at any one time may be limited by the amount of available net
capital of the Company.
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<PAGE> 53
OTHER BUSINESS
The Company has dealer-sales agreements with numerous distributors
of investment company shares. These agreements provide generally for
dealer discounts ranging up to 5.75 percent of the purchase price,
depending upon the size of the transaction.
The Company acts as an agent for its customers' transactions in put and
call options traded on the Chicago Board Options Exchange, Inc.,
American Stock Exchange, Inc., Philadelphia Stock Exchange, Inc., and, to a
much lesser extent, in the over-the- counter market.
The Company has a wholly-owned subsidiary, Century Securities Associates,
Inc. ("CSA"), an introducing broker-dealer which clears its transactions
through Stifel, Nicolaus. CSA contracts with independent licensed brokers to
sell securities and other investment products to retail (individual)
investor accounts. CSA is licensed in 50 states and has 93
registered representatives. Management expects CSA to continue to grow in
significance in relation to the Company's operation as a whole.
In 1993, the Company formed a wholly-owned subsidiary, Stifel Asset
Management Corp. ("SAM"), to act as a holding company for two investment
advisory firms, Pin Oak Capital, Ltd. ("Pin Oak"), and Todd Investment
Advisors, Inc. ("Todd"). Pin Oak, which operated formerly as the investment
advisory division of Stifel, Nicolaus, was formed as an investment advisory
firm and began operations during the five-month transition period ended
December 31, 1993. SAM purchased all of the outstanding stock of Todd, an
investment advisory firm located in Louisville, Kentucky, in December
1993. Both Pin Oak and Todd provide investment advice and services to
individual, fiduciary and corporate clients. Combined assets under
management for the two firms at December 31, 1996 was approximately
$2,575,649,000. Pin Oak holds registrations as an investment advisor in
six states. Todd is registered as an investment advisor in fourteen states.
In late 1994, Stifel, Nicolaus established a program for managing customers'
investment portfolios. Fees are charged based upon a percentage of total
assets of the portfolio. At December 31, 1996, Stifel, Nicolaus had
assets under management of approximately $332,462,000 related to this
program. The Company intends to commit resources to grow this business.
Coincidental with the sale of the Oklahoma based operations, the Company
entered into a clearing agreement to clear the trades of the purchasing
firm's broker-dealer subsidiary and carry its customer accounts on a
fully-disclosed basis. The Company charges for these services based upon
the clearing agreement.
Various subsidiaries of the Company act as General Partners in certain
limited partnerships for which Stifel, Nicolaus has sold limited partnership
interests to the public. The subsidiaries may receive distributions
upon the dissolution of such partnerships, but the amount and timing
of receipts of such distributions, if any, cannot be determined at this time
and are subject to the usual risks and liabilities associated with acting as a
general partner.
CUSTOMER FINANCING
Securities are purchased for customers on either a cash or margin basis. The
customer deposits less than the full cost of the security when securities
are purchased on a margin basis. The Company makes a loan for the balance of
the purchase price. Such loans are collateralized by the securities
purchased. The amounts of the loans are subject to the margin requirements
of Regulation T of the Board of Governors of the Federal Reserve System,
New York Stock Exchange, Inc. ("NYSE") margin requirements, and the
Company's internal policies, which usually are more restrictive than
Regulation T or NYSE requirements. In permitting customers to purchase
securities on margin, the Company is subject to the risk of a market
decline which could reduce the value of its collateral below the amount
of the customers' indebtedness.
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<PAGE> 54
RESEARCH
The Company's research department provides retail and institutional
customers information and recommendations on the securities of specific
companies. These services are rendered without charge. The Company also
purchases research services from other firms.
COMPETITION
The Company competes with other securities firms, some of which offer their
customers a broader range of brokerage services, have substantially greater
resources, and may have greater operating efficiencies. In addition, an
increasing number of specialized firms, as well as banks, savings and loans,
and other financial institutions, now offer discount brokerage services to
individual retail customers. These firms generally charge lower commission
rates to their customers without offering services such as portfolio
valuation, investment recommendations and research. Competition from such
discount brokerage services may adversely affect revenues of the Company and
other firms providing full retail brokerage services. Banks also compete
with brokerage firms by offering certain investment banking and
corporate finance services.
Management relies on the expertise acquired in its market area over its
106-year history, its personnel, and its equity capital to operate in the
competitive environment.
REGULATION
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The Securities and Exchange
Commission ("SEC") is the federal agency charged with the administration of
the federal securities laws. Much of the regulation of broker-dealers,
however, has been delegated to self-regulatory organizations,
principally the National Association of Securities Dealers, Inc., the
Municipal Securities Rulemaking Board, and the national securities
exchanges, such as the NYSE. These self-regulatory organizations adopt rules
(which are subject to approval by the SEC) which govern the industry and
conduct periodic examinations of member broker-dealers. Securities firms are
also subject to regulation by state securities commissions in the states in
which they are registered.
The regulations to which broker-dealers are subject cover all aspects of
the securities business, including sales practices, trade practices among
broker-dealers, capital structure of securities firms, record keeping, and
the conduct of directors, officers and employees. Additional legislation,
changes in rules promulgated by the SEC and by self-regulatory organizations,
and changes in the interpretation or enforcement of existing laws and rules
often directly affect the method of operation and profitability of
broker-dealers. The SEC and the self-regulatory organizations may conduct
administrative proceedings which can result in censures, fines, suspension
or expulsion of a broker- dealer, its officers or employees. The principal
purpose of regulation and discipline of broker-dealers is the protection of
customers and the securities markets rather than the protection of creditors
and stockholders of broker-dealers.
As a broker-dealer and member of the NYSE, Stifel, Nicolaus is subject to
the Uniform Net Capital Rule (Rule 15c3-1) promulgated by the SEC which
provides that a broker-dealer doing business with the public shall not permit
its aggregate indebtedness (as defined) to exceed 15 times its net capital
(as defined) or, alternatively, that its net capital shall not be less
than 2 percent of aggregate debit balances (primarily receivables from
customers and broker-dealers) computed in accordance with the SEC's
Customer Protection Rule (Rule 15c3-3). The Uniform Net Capital Rule is
designed to measure the general financial integrity and liquidity of a
broker-dealer and the minimum net capital deemed necessary to meet the
broker-dealer's continuing commitments to its customers and other
broker/dealers. Both methods allow broker-dealers to increase their
commitments to customers only to the extent their net capital is deemed
adequate to support an increase. Management believes that the alternative
method, which is utilized by most full-
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<PAGE> 55
service securities firms, is more directly related to the level of customer
business. Therefore, Stifel, Nicolaus computes its net capital under the
alternative method.
Under SEC rules, a broker-dealer may be required to reduce its business and
restrict withdrawal of subordinated capital if its net capital is less than 4
percent of aggregate debit balances and may be prohibited from expanding its
business and declaring cash dividends if its net capital is less than 5 percent
of aggregate debit balances. A broker-dealer that fails to comply with the
Uniform Net Capital Rule may be subject to disciplinary actions by the SEC and
self-regulatory agencies, such as the NYSE, including censures, fines,
suspension, or expulsion. In computing net capital, various adjustments are
made to net worth to exclude assets which are not readily convertible into cash
and to state conservatively the other assets such as a firm's position in
securities. Compliance with the Uniform Net Capital Rule may limit those
operations of a firm such as Stifel, Nicolaus which require the use of its
capital for purposes of maintaining the inventory required for a firm trading
in securities, underwriting securities, and financing customer margin account
balances. Stifel, Nicolaus had net capital of approximately $24,182,000 at
December 31, 1996, which was approximately 9.7 percent of aggregate debit
balances and approximately $19,191,000 in excess of required net capital.
EMPLOYEES
There were 733 individuals employed by the Company as of February 28, 1997.
This includes both full and part-time personnel.
ITEM 2. PROPERTIES
- - -------------------
The headquarters and administrative offices of the Company, Stifel, Nicolaus
and CSA are located in downtown Saint Louis, Missouri. Todd is located in
Louisville, Kentucky. Pin Oak is located in New York, New York. Stifel
Nicolaus has a branch office system located in 13 states, primarily in the
Midwest. The Company has a total of 43 locations in 14 states. All offices
of the Company are located in leased premises. The Company's management
believes that at the present time the facilities are suitable and adequate to
meet its needs and that such facilities have sufficient productive capacity and
are appropriately utilized.
The Company also leases communication and other equipment. Aggregate annual
rental expense for the twelve month period ended December 31, 1996, for office
space and equipment, was approximately $3,541,000. Further information about
the lease obligations of the Company is provided in Note D of the Consolidated
Financial Statements incorporated by reference herein
ITEM 3. LEGAL PROCEEDINGS
- - --------------------------
The Company is a defendant in several lawsuits and arbitrations which arose
from its usual business activities. Some of these lawsuits and arbitrations
claim substantial amounts, including punitive damages. While results of
litigation and arbitration cannot be predicted with certainty, management,
based on opinions of outside counsel, has provided for actions most likely of
adverse disposition and believes that the effects of resolution of such
litigation and arbitration beyond the amounts provided will not have a
material adverse effect on the Company's consolidated financial position.
However, depending upon the period of resolution, such effects could be
material to the financial results of an individual operating period. It is
reasonably possible that certain of these lawsuits and arbitrations could be
resolved in the next year and management does not believe such resolutions
will result in losses materially in excess of the amounts previously provided.
During 1995, the SEC completed a formal investigation into possible violations
of the federal securities laws in connection with certain municipal bond
issues managed by the Company's former Oklahoma City
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<PAGE> 56
based public finance department where the Company was the managing or
co-managing underwriter. This investigation resulted in the Company
consenting to a permanent injunction and ancillary relief whereby, the Company
paid approximately $1.1 million in disgorgement and prejudgement interest, and
$250,000 in fines.
Additionally, the Company is named in lawsuits filed by The Oklahoma Turnpike
Authority ("OTA") and The State of Oklahoma. The OTA suit seeks $6.5 million in
compensatory damages and an unspecified amount of punitive damages. The State
of Oklahoma seeks $7.6 million in compensatory damages and that these damages
be trebled.
The OTA suit alleges that an undisclosed fee paid to the Company by a third
party for the placement of a forward purchase contract in an advance refunding
escrow for the proceeds of the 1992 OTA $660 million refinancing should have
been paid to the OTA. The State of Oklahoma suit alleges that the Company and
two former executives of the Company committed violations of the Racketeer
Influenced and Corrupt Organizations Act. This suit alleges essentially the
same facts as are alleged in the OTA suit and were alleged by the SEC in its
action against the Company which was settled in August, 1995, by the Company
without admitting or denying the allegations. Management does not believe the
ultimate resolution of these matters will have a materially adverse effect on
the Company's financial position.
See Note H to the Company's Consolidated Financial Statements,
filed herein.
EXECUTIVE OFFICERS OF THE REGISTRANT
- - ------------------------------------
The following information is furnished pursuant to General
Instruction G(3) of Form 10-K with respect to the executive
officers of Financial:
Positions or Offices Position with the
Name Age with the Company Company Since
- - -------------------- --- ------------------------ -----------------
George H. Walker III 66 Chairman of the Board 1976
of Financial and Stifel,
Nicolaus
Gregory F. Taylor 47 President and Chief 1985
Executive Officer of
Financial and Stifel,
Nicolaus
Stephen J. Bushmann 39 Chief Financial Officer 1981
of Financial
Charles R. Hartman 53 General Counsel and 1994
Senior Vice President of
Stifel, Nicolaus
Michael A. Murphy 45 Senior Vice President - 1989
Director of Retail Group
of Stifel, Nicolaus
Rexford E. Riordan 63 Senior Vice President - 1979
Director of Investment
Services Group of Stifel,
Nicolaus
Lawrence E. Somraty 48 President of Century 1977
Securities Associates,
Inc.
The following are brief summaries of the business experience during the past
five years of each of the executive officers.
George H. Walker III joined Stifel, Nicolaus in 1976, became Chief Executive
Officer of Stifel, Nicolaus in December, 1978, and became Chairman of Stifel,
Nicolaus in July, 1982. From the time of the
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<PAGE> 57
organization of Financial, Mr. Walker has served as its Chairman of the Board
and, until October 26, 1992, Mr. Walker served as its President and Chief
Executive Officer. Mr. Walker is a director of Laclede Steel Company, Laidlaw
Corp., and EAC Corporation. He is active in various community activities and
currently is Chairman of the Missouri Historical Society. He is Chairman of
the Advisory Committee of Webster University Business School and on the
National Counsel of Washington University Business School.
Gregory F. Taylor was branch manager of Stifel, Nicolaus' Chicago branch from
October, 1985 until July, 1988. He became Executive Vice President and
Director of National Sales and Marketing of Stifel, Nicolaus in July, 1988,
Chief Operating Officer in November, 1991 and President and Chief Executive
Officer as of October 26, 1992. He was elected a Vice President of Financial
in October, 1991 and President and Chief Executive Officer as of October 26,
1992.
Stephen J. Bushmann joined Stifel, Nicolaus in October of 1981. He is Chief
Financial Officer and Vice President of Financial and Chief Financial Officer
and Senior Vice President of Stifel, Nicolaus. From 1994 - 1996, Mr. Bushmann
served as Financial Analyst and prior to that he was Assistant Controller.
Charles R. Hartman joined Stifel, Nicolaus in June of 1994. He is the
General Counsel, Senior Vice President and Secretary of Stifel, Nicolaus.
Prior to joining Stifel, Nicolaus, Mr. Hartman was the Regional Counsel for the
Securities and Exchange Commission in Los Angeles, California and since April
of 1982 a Los Angeles partner in the law firm of Rogers & Wells.
Michael A. Murphy joined Stifel, Nicolaus in 1989. He is Senior Vice
President and Director of Retail Group of Stifel, Nicolaus. From 1989 - 1994,
Mr. Murphy served as First Vice President and Director of Branch
Administration.
Rexford E. Riordan joined Stifel, Nicolaus in 1979. He is Senior Vice
President and Director of Investment Services Group of Stifel, Nicolaus. From
1979 - 1995, Mr. Riordan served in various capacities in the firm including
assisting in the National Sales department, Manager of Mutual Funds and Unit
Investment Trusts departments, Director of Training, and served as First Vice
President.
Lawrence E. Somraty has been with Stifel, Nicolaus since 1977.
He served as Option Department Manager, Senior Registered Options Principal,
Investment Advisor and Branch Manager. He became the President of Century
Securities Associates, Inc. in January 1991.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
None
A8
<PAGE> 58
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- - --------------------------------------------------------------
STOCKHOLDER MATTERS
-------------------
a.) MARKET INFORMATION The common stock of Financial is traded on the New York
Stock Exchange and Chicago Stock Exchange under the symbol "SF." The high/low
sales prices for Financial's Common Stock for each full quarterly period for
the two most recent calendar years are as follows:
HIGH AND LOW STOCK PRICE BY QUARTER
------------------------------------------------
1996 1995
QUARTER HIGH - LOW HIGH - LOW
------------------------------------------------
First $ 6 1/4 - 5 7/8 $ 6 1/4 - 5
Second 7 3/4 - 6 1/8 6 1/8 - 5 1/8
Third 7 3/4 - 6 1/4 6 1/2 - 5 1/2
Fourth 8 1/8 - 6 5/8 6 - 5 1/4
------------------------------------------------
b.) HOLDERS The approximate number of stockholders of record on March 11, 1997
was 3,000.
c.) DIVIDENDS
Dividends paid were as follows:
RECORD PAYMENT CASH STOCK
DATE DATE DIVIDEND DIVIDEND
02/10/95 02/24/95 $0.03 5%
05/09/95 05/23/95 $0.03 --
08/08/95 08/22/95 $0.03 --
11/07/95 11/21/95 $0.03 --
02/06/96 02/20/96 $0.03 5%
05/07/96 05/21/96 $0.03 --
11/05/96 11/19/96 $0.03 --
A regular quarterly cash dividend of $0.025 per share was established on
February 9, 1993. On November 30, 1993 the regular quarterly cash dividend was
increased to $0.03 per share. Note E of the Consolidated Financial Statements,
incorporated by reference herein, describes the restrictions of paying future
dividends.
On July 23, 1996, the Board of Directors of Financial approved the redemption
of certain stock rights under a former Shareholder Rights Plan and the adoption
of a new Shareholder Rights Plan. Shareholders on record, as of August 12,
1996, received a payment of $0.05 per share, representing the redemption price
for the former Rights. This payment was in lieu of the regular quarterly cash
dividend of $0.03 per share.
A9
<PAGE> 59
ITEM 6. SELECTED FINANCIAL DATA
- - --------------------------------
<TABLE>
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
FINANCIAL SUMMARY
<CAPTION>
FIVE
MONTHS
YEARS ENDED DECEMBER 31, ENDED YEARS ENDED JULY
-------------------------------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE 1996 1995 1994 Dec. 31, 1993 1993 1992
AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Commissions $ 31,424 $ 28,292 $ 25,407 $ 11,949 $ 26,456 $ 25,204
Principal transactions 17,919 18,980 22,567 9,313 25,201 25,260
Investment banking 15,964 11,674 11,969 10,885 30,551 29,791
Interest 13,774 13,002 10,918 4,057 8,851 9,130
Sale of investment company shares 9,609 8,316 9,674 4,906 10,741 8,638
Sale of unit investment trusts 1,868 1,828 2,736 1,362 3,220 2,611
Sale of insurance products 2,867 2,109 2,207 1,263 1,614 1,676
Other 16,388 11,159 8,448 2,720 6,837 5,699
-------- -------- -------- -------- -------- --------
109,813 95,360 93,926 46,455 113,471 108,009
-------- -------- -------- -------- -------- --------
EXPENSES
Employee compensation and benefits 66,765 57,187 60,652 29,421 68,657 63,891
Commissions and floor brokerage 2,641 2,319 2,120 845 2,485 2,437
Communications and office supplies 6,794 7,651 8,045 3,090 6,836 6,168
Occupancy and equipment rental 7,255 7,884 9,397 3,333 7,648 7,401
Promotional 2,146 2,024 2,868 1,231 2,925 2,206
Interest 8,197 8,312 6,138 1,763 4,838 5,505
Litigation, settlements, and bad debts 3,292 1,610 2,467 473 1,237 3,745
Restructuring charge - - - - 2,672 - - - - - -
Other operating expenses 7,121 7,066 8,788 3,239 7,575 7,588
-------- -------- -------- -------- -------- --------
104,211 94,053 103,147 43,395 102,201 98,941
-------- -------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY CREDIT 5,602 1,307 (9,221) 3,060 11,270 9,068
Provision (benefit) for income taxes 2,209 663 (3,718) 1,145 4,232 3,363
-------- -------- -------- -------- -------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY CREDIT 3,393 644 (5,503) 1,915 7,038 5,705
Extraordinary Credit -- tax benefit
from utilization of net operating
loss carryforward - - - - - - - - - - 648
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) $ 3,393 $ 644 $ (5,503) $ 1,915 $ 7,038 $ 6,353
======== ======== ======== ======== ======== ========
PER SHARE DATA
Primary earnings (loss)(a) $ .71 $ .14 $ (1.17) $ .40 $ 1.52 $ 1.44
Fully Diluted earnings (loss)(a) $ .64 $ .14 $ (1.17) $ .36 $ 1.27 $ 1.21
Cash dividends $ .09 $ .12 $ .09 $ .055 $ .15 - -
OTHER DATA
Total assets $301,049 $226,775 $222,208 $288,203 $196,539 $191,059
Long-term obligations $ 10,000 $ 10,760 $ 11,520 $ 11,520 $ 10,000 $ 10,000
Stockholder's equity $ 37,752 $ 34,795 $ 34,226 $ 40,609 $ 38,995 $ 31,597
Net income as % average equity 9.35% 1.87% * N.M. 4.81% 19.94% 22.55%
Net income as % revenues 3.09% 0.68% * N.M. 4.12% 6.20% 5.88%
Average common shares and share
equivalents outstanding (a):
Primary 4,780 4,674 4,689 4,748 4,626 4,399
Fully diluted 6,281 6,105 6,107 6,165 6,106 5,817
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Retroactively restated to reflect the 5 percent stock dividend declared
January 21, 1997.
* Not Meaningful
A10
<PAGE> 60
The information called for in items 7 and 8 of Part II is set
forth on the pages listed below of the Company's 1996 Annual
Report to Stockholders and is incorporated herein by reference:
PAGES IN ANNUAL REPORT
TO STOCKHOLDERS
(filed herewith in Exhibit 13)
ITEM 7. MANAGEMENT'S FINANCIAL DISCUSSION. 8 through 13
- - ------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 14 through 36
- - ----------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- - --------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
The Company filed a report on Form 8-K dated October 29, 1996. This report Form
8-K contained information under Item 4. "Changes in registrant's certifying
accountants". The Board of Directors of Financial, upon the recommendation of
its Audit Committee, determined to replace Coopers & Lybrand L.L.P. as the
Company's independent auditors for the year ended December 31, 1996.
In addition, the Company filed a report on Form 8-K dated December 9,
1996. This report Form 8-K contained information under Item 4. "Changes in
registrant's certifying accountants". The Board of Directors of Financial, upon
the recommendation of its Audit Committee, determined to appoint Deloitte &
Touche LLP as the Company's newly engaged certifying accountants and
Deloitte & Touche LLP has accepted this appointment. During the two years
ended December 31, 1995 and through the date of their appointment, Deloitte
& Touche LLP has not provided any consultations to the Company.
PART III
--------
ITEMS 10 THROUGH 13
- - -------------------
Financial intends to file with the Securities and Exchange Commission a
definitive proxy statement pursuant to Regulation 14A involving the election
of directors not later than 120 days after the end of its fiscal year
ended December 31, 1996. Accordingly, except to the extent included in Part
I under the caption "Executive Officers of the Registrant", the information
required by Part III (Items 10, 11, 12 and 13) is incorporated herein by
reference to such definitive proxy statement in accordance with General
Instruction G(3) to Form 10-K.
A11
<PAGE> 61
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- - -----------------------------------------------------------------
FORM 8-K
--------
(a) The following documents are filed as a part of
this report: REFERENCE (PAGE)
----------------
ANNUAL FORM 10-K
REPORT TO ANNUAL
STOCKHOLDERS REPORT
------------ ---------
1. The following consolidated financial statements
of Stifel Financial Corp. and subsidiaries,
included on pages 7 through 37 in the 1996
Annual Report to Stockholders, are incorporated
by reference in Item 8
Independent Auditors' Report...........................14
Consolidated Statements of Financial Condition --
December 31, 1996 and December 31, 1995.............15 - 16
Consolidated Statements of Operations --
Years ended December 31, 1996, December 31, 1995
and December 31, 1994.................................17
Consolidated Statements of Stockholders' Equity --
Years ended December 31, 1996, December 31, 1995
and December 31, 1994.................................18
Consolidated Statements of Cash Flows --
Years ended December 31, 1996, December 31, 1995
and December 31, 1994...............................19 - 20
Notes to Consolidated Financial Statements...........21 - 35
2. The following consolidated financial statement
schedules of Stifel Financial Corp. and subsidiaries
are filed herewith pursuant to ITEM 14(d):
Independent Auditors' Report.........................................18
Report of Independent Accountants....................................19
Report of Independent Accountants....................................20
Schedule I - Condensed Financial Information of Registrant.........21 - 23
Schedule II - Valuation and Qualifying Accounts......................24
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
A12
<PAGE> 62
3. Exhibits
--------
Exhibit No. (Referenced to Item 601(b) of Regulation S-K)
(a)(1) Restated Certificate of Incorporation of Financial filed
with the Secretary of State of Delaware on June 1,
1983, incorporated herein by reference to Exhibit 3.1
to Financial's Registration Statement on Form S-1, as
amended (Registration File No. 2-84232) filed July 19,
1983.
(a)(2) Amendment to Restated Certificate of Incorporation of
Financial filed with the Secretary of State of Delaware
on May 11, 1987, incorporated herein by reference to
Exhibit (3)(a)(2) to Financial's Report on Form 10-K
for the year ended July 31, 1987.
(a)(3) Certificate of Designation, Preferences, and Rights of
Series A Junior Participating Preferred Stock of Financial
filed with the Secretary of State of Delaware on July 10,
1987, incorporated herein by reference to Exhibit (3)(a)
(3) to Financial's Report on Form 10-K for the year ended
July 31, 1987.
(a)(4) Amendment to Restated Certificate of Incorporation of
Financial filed with the Secretary of State of Delaware
on November 28, 1989, incorporated herein by reference to
Exhibit (3)(a)(4) to Financial's Report on Form 10-K for
the year ended July 27, 1990.
(b) Amended and Restated By-Laws of Financial, incorporated
herein by reference to Exhibit 3(b)(1) to Financial's Report
on Form 10-K for fiscal year ended July 30, 1993.
4. Note Agreement dated as of October 15, 1988, between Financial and
Bankers United Life Assurance Company and Pacific Fidelity Life
Insurance Company, incorporated herein by reference to Exhibit 4
to Financial's Report on Form 10-Q for the quarterly period ended
April 28, 1989. The Company hereby agrees to furnish the Securities
and Exchange Commission copies of such instruments upon request.
10. (a)(1) Employment Agreement with George H. Walker III dated August
21, 1987, incorporated herein by reference to Exhibit 10(c)
to Financial's Report on Form 10-K for the fiscal year ended
July 31, 1987.
(a)(2) First Amendment to Employment Agreement with George H. Walker
III, incorporated herein by reference to Exhibit 10(a)(2) to
Financial's Report on Form 10-K for the fiscal year ended July
31, 1992.
(b) Form of Indemnification Agreement with directors dated as of
June 30, 1987, incorporated herein by reference to Exhibit
10.2 to Financial's Report on Form 8-K (date of earliest event
reported - June 22, 1987) filed July 14, 1987.
(c) 1983 Incentive Stock Option Plan of Financial, incorporated
herein by reference to Exhibit 4(a) to Financial's Registration
Statement on Form S-8 (Registration File No. 2-94326) filed
November 14, 1984.
(d) 1985 Incentive Stock Option Plan of Financial, incorporated
herein by reference to Exhibit 28C to Financial's Registration
Statement on Form S-8, as amended (Registration File No. 33-10030)
filed November 7, 1986.
A13
<PAGE> 63
(e) 1987 Non-qualified Stock Option Plan of Financial,
incorporated herein by reference to Exhibit 10(h)
to Financial's Report on Form 10-K for the fiscal
year ended July 31, 1987.
(f) Amendment to 1983 Incentive Stock Option Plan, 1985
Incentive Stock Option Plan and 1987 Non-Qualified
Stock Option Plan, incorporated herein by reference
to Exhibit 10(f) to Financial's Report on Form 10-K
for the fiscal year ended July 28, 1989.
(g)(1) 1993 Employee Stock Purchase Plan of Financial, incorporated
herein by reference to ANNEX A of Financial's Definitive Proxy
Statement (Registration File No. 33-16150) filed October 28,
1992.
(g)(2) First Amendment to the 1993 Employee Stock Plan of Financial,
incorporated herein by reference to Exhibit 4.5 to Financial's
Registration Statement on Form S-8 (Registration File No.
33-53097) filed April 11, 1994.
(h) Employment and Non-Competition Agreement with Gregory F.
Taylor dated July 26, 1993, incorporated herein by reference to
Exhibit 10(m) to Financial's Report on Form 10-K for fiscal year
ended July 30, 1993.
(i) Dividend Reinvestment and Stock Purchase Plan of Financial,
incorporated herein by reference to Financial's Registration
Statement on Form S-3 (Registration File No. 33-53699) filed May
18, 1994.
(j) 1997 Incentive Stock Plan of Financial, incorporated herein by
reference to Appendix A of Financial's Definitive Proxy Statement
filed March 21, 1997.
(k) 1998 Employee Stock Plan of Financial, incorporated herein by
reference to Appendix B of Financial's Definitive Proxy Statement
filed March 21, 1997.
11. Statement regarding computation of per share earnings, filed herewith.
13. Annual Report to Stockholders for the year ended December 31, 1996.
Except for those portions of pages expressly incorporated by reference,
the 1996 Annual Report to Stockholders is not deemed filed as part of
this Annual Report on Form 10-K.
21. List of Subsidiaries of Financial, filed herewith.
23. (a) Consent of Independent Auditors, filed herewith.
23. (a) Consent of Independent Accountants, filed herewith.
27. Financial Data Schedule BD, filed herewith.
A14
<PAGE> 64
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K dated October 29, 1996.
This report Form 8-K contained information under Item 4. "Changes
in registrant's certifying accountants". The Board of Directors of
Financial, upon the recommendation of its Audit Committee, determined
to replace Coopers & Lybrand L.L.P. as the Company's independent auditors
for the year ended December 31, 1996.
In addition, the Company filed a report on Form 8-K dated December
9, 1996. This report Form 8-K contained information under Item 4.
"Changes in registrant's certifying accountants". The Board of
Directors of Financial, upon the recommendation of its Audit Committee,
determined to appoint Deloitte & Touche LLP as the Company's
newly engaged certifying accountants and Deloitte & Touche LLP has
accepted this appointment. During the two years ended December 31,
1995 and through the date of their appointment, Deloitte & Touche LLP
has not provided any consultations to the Company.
A15
<PAGE> 65
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of St. Louis, State of Missouri, on the 21st day of March, 1997.
STIFEL FINANCIAL CORP.
(Registrant)
By /s/ Gregory F. Taylor
--------------------------------------------
Gregory F. Taylor
(Principal Executive Officer)
/s/ Stephen J. Bushmann
--------------------------------------------
Stephen J. Bushmann
(Principal Financial and
Accounting Officer)
A16
<PAGE> 66
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant on March 21, 1997, in the capacities indicated.
/s/ George H. Walker III Chairman of the Board
--------------------------------
George H. Walker III
/s/ Gregory F. Taylor President, Chief Executive
--------------------------------
Gregory F. Taylor Officer, and Director
/s/ Bruce A. Beda Director
--------------------------------
Bruce A. Beda
/s/ Belle A. Cori Director
--------------------------------
Belle A. Cori
/s/ Charles A. Dill Director
--------------------------------
Charles A. Dill
/s/ Richard F. Ford Director
--------------------------------
Richard F. Ford
/s/ John J. Goebel Director
--------------------------------
John J. Goebel
/s/ Robert E. Lefton Director
--------------------------------
Robert E. Lefton
/s/ James M. Oates Director
--------------------------------
James M. Oates
A17
<PAGE> 67
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Stifel Financial Corp.
St. Louis, Missouri:
We have audited the consolidated financial statements of Stifel Financial Corp.
and Subsidiaries as of December 31, 1996 and for the year then ended, and have
issued our report thereon dated February 25, 1997; such consolidated financial
statements and report are included in your 1996 Annual Report to Stockholders
and are incorporated herein by reference. Our audit also included the 1996
consolidated financial statement schedules of Stifel Financial Corp. and
Subsidiaries, listed in Item 14. These consolidated financial statement
schedules are the responsibility of the Corporation's management. Our
responsibility is to express an opinion based on our audit. In our opinion,
such 1996 consolidated financial statement schedules, when considered in
relation to the basic 1996 consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
February 25, 1997
A18
<PAGE> 68
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors
Stifel Financial Corp.
We have audited the accompanying consolidated statement of financial
condition of Stifel Financial Corp. and Subsidiaries as of December 31, 1995
and the related consolidated statements of operations, stockholders' equity,
and cash flows for the years ended December 31, 1995 and December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Stifel
Financial Corp. and Subsidiaries as of December 31, 1995 and the consolidated
results of their operations and their cash flows for the years ended December
31, 1995 and December 31, 1994, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 25, 1996
A19
<PAGE> 69
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Stifel Financial Corp.
Our report on the consolidated financial statements of Stifel Financial
Corp. and Subsidiaries is included on page 23 of this Form 10-K. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedules for the years ended December 31, 1995 and
December 31, 1994 listed in the index on page 12 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 25, 1996
A20
<PAGE> 70
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
STIFEL FINANCIAL CORP.
<TABLE>
<CAPTION>
DEC. 31, 1996 DEC. 31, 1995
------------- -------------
<S> <C> <C>
ASSETS
Cash $ 9,155 $ 9,155
Due from subsidiaries (a) 3,711,973 3,887,790
Investment in subsidiaries (a) 41,262,901 37,421,622
Office equipment and leasehold improvements, less
allowances for depreciation and amortization of
$9,705,941 and $12,107,975, respectively 2,182,025 2,972,388
Investments, at cost 815,764 736,549
Goodwill, net of amortization of $462,235 and
$396,480, respectively 1,906,907 1,189,430
Other assets 1,389,304 2,102,135
------------- ------------
TOTAL ASSETS $ 51,278,029 $ 48,319,069
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to subsidiaries (a) $ 1,739,432 $ 402,336
Obligation under capital lease 580,945 774,229
Long-term debt 10,000,000 10,760,000
Other liabilities 1,206,523 1,587,142
------------- ------------
TOTAL LIABILITIES 13,526,900 13,523,707
Stockholders' Equity:
Capital stock 715,158 681,134
Additional paid-in capital 21,402,971 19,622,646
Retained earnings 16,733,073 15,753,713
------------- ------------
38,851,202 36,057,493
Less cost of stock in treasury 892,892 1,162,376
Less unamortized stock awards 207,181 99,755
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 37,751,129 34,795,362
------------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 51,278,029 $ 48,319,069
============= ============
- - --------------------
(a) Eliminated in consolidation.
</TABLE>
See Notes to Consolidated Financial Statements (Item 8)
A21
<PAGE> 71
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CONDENSED STATEMENTS OF OPERATIONS
STIFEL FINANCIAL CORP.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Lease $ 1,406,556 $ 1,708,160 $ 2,162,292
Other (59,024) (162,347) (7,522)
----------- ----------- -----------
1,347,532 1,545,813 2,154,770
EXPENSES:
Depreciation and amortization 1,431,798 1,751,250 2,325,301
Professional fees 246,178 170,664 236,506
Provision for doubtful collection 300,000 - - - -
Miscellaneous 159,460 135,363 128,882
----------- ----------- -----------
2,137,436 2,057,277 2,690,689
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (789,904) (511,464) (535,919)
(Benefit) provision for income taxes (343,024) 52,100 26,246
----------- ----------- -----------
LOSS BEFORE EQUITY IN NET INCOME
(LOSS) OF SUBSIDIARIES (446,880) (563,564) (562,165)
Equity in net income (loss) of
subsidiaries 3,839,382 1,207,085 (4,941,170)
----------- ----------- -----------
NET INCOME (LOSS) $ 3,392,502 $ 643,521 $(5,503,335)
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements (Item 8)
A22
<PAGE> 72
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CONDENSED STATEMENTS OF CASH FLOWS
STIFEL FINANCIAL CORP.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,392,502 $ 643,521 $(5,503,335)
Non-cash items included in net income (loss):
Depreciation and amortization 1,431,798 1,751,250 2,325,301
Unrealized loss on investments 115,000 - - 321,300
Provision for doubtful collection 300,000 - - - -
Deferred tax (benefit) provision (234,353) 105,547 (27,160)
Undistributed (income) loss of subsidiaries (3,839,382) (1,207,085) 4,941,170
Amortization and forfeitures of restricted
stock awards and stock benefits 75,055 84,346 107,341
----------- ----------- -----------
1,240,620 1,377,579 2,164,617
Net change in due to/due from subsidiaries 1,512,913 730,442 (718,361)
Decrease (increase) in other assets 1,187,309 (1,162,037) 1,365,788
(Decrease) increase in other liabilities (379,298) 393,193 180,271
----------- ----------- -----------
CASH PROVIDED BY OPERATING ACTIVITIES 3,561,544 1,339,177 2,992,315
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Employee stock purchase plan 616,670 755,274 611,688
Exercised options 3,098 123,503 81,213
Dividend reinvestment plan 12,570 9,533 944
Payments for:
Retirement of long-term debt (760,000) (760,000) - -
Purchase of stock for treasury (520,321) (546,615) (1,416,932)
Principal payments under capital lease (433,284) (255,053) (710,089)
Cash dividend and rights redemption (625,128) (500,611) (354,368)
----------- ----------- -----------
CASH USED FOR FINANCING ACTIVITIES (1,706,395) (1,173,969) (1,787,544)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Distributions/sales received on investments 36,360 94,893 25,000
Sales of office equipment and leasehold
improvements 23,405 909,762 24,235
Dissolution of subsidiaries - - - - 505,000
Payments for:
Acquisition of investments (1,513,232) - - (52,219)
Office equipment and leasehold improvements (401,682) (1,169,863) (1,706,787)
----------- ----------- -----------
CASH USED FOR INVESTING ACTIVITIES (1,855,149) (165,208) (1,204,771)
----------- ----------- -----------
INCREASE IN CASH 0 0 0
Cash (beginning of period) 9,155 9,155 9,155
----------- ----------- -----------
Cash (end of period) $ 9,155 $ 9,155 $ 9,155
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Schedule of Non-cash Investing and Financing
Activities
Fixed assets acquired under capital lease $ 240,000 - - $ 808,000
Restricted stock awards, net of forfeitures $ 181,000 $ 3,000 $ 146,000
Stock dividends distributed $ 1,788,000 $ 1,406,000 $ 1,287,000
</TABLE>
See Notes to Consolidated Financial Statements (Item 8)
A23
<PAGE> 73
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Balance at Additions Balance
Beginning Charged to Costs at End
Description of Period and Expenses Deductions of Period
----------- ---------- ---------------- ---------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Deducted from asset account:
Allowances for doubtful accounts $ 804,916 $ 28,400 $ 251,370 (1) $ 581,946
Deducted from asset account:
Allowances for doubtful notes
receivables 3,002,220 173,467 624,060 (2) 2,551,627
Deducted from asset account:
Allowances for doubtful collection
of other assets 0 300,000 0 300,000
Deducted from asset account:
Reserves for investments 638,362 115,000 8,000 (3) 745,362
Deducted from asset account:
Reserves for securities owned 200,000 0 0 200,000
YEAR ENDED DECEMBER 31, 1995:
Deducted from asset account:
Allowances for doubtful accounts $1,070,985 $ 0 $ 266,069 (1) $ 804,916
Deducted from asset account:
Allowances for doubtful notes
receivables 2,560,617 802,004 360,401 (2) 3,002,220
Deducted from asset account:
Reserves for investments 972,795 88,500 422,933 (3)(5) 638,362
Deducted from asset account:
Reserves for securities owned 0 0 (200,000)(5) 200,000
YEAR ENDED DECEMBER 31, 1994:
Deducted from asset account:
Allowances for doubtful accounts $1,435,058 $ 0 $ 364,073 (1) $1,070,985
Deducted from asset account:
Allowances for doubtful notes
receivables 0 3,040,969 480,352 (2) 2,560,617
Deducted from asset account:
Reserves for investments 1,071,007 322,404 420,616 (3) 972,795
Deducted from asset account:
Reserves for securities owned 450,000 0 450,000 (4) 0
</TABLE>
- - ----------------
(1) Uncollected accounts written off and recoveries.
(2) Uncollected notes written off and recoveries.
(3) Investments disposed of.
(4) Securities disposed of.
(5) Reserve balance reclassified from Reserve for investments to conform to
1995 presentation.
A24
<PAGE> 74
EXHIBIT INDEX
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1996
Exhibit
Number Description
- - ------- -----------
11. Statement regarding computation of per share earnings.
13. 1996 Annual Report to Stockholders.*
21. Subsidiaries of Stifel Financial Corp.
23.(a) Consent of Independent Auditors.
23.(b) Consent of Independent Accountants.
27. Financial Data Schedule BD.
* Certain portions of the Annual Report to Stockholders are incorporated
herein by reference; the Annual Report to Stockholders is not to be deemed
filed as a part of this Annual Report on Form 10-K.
A25
<PAGE> 75
EXHIBIT 11
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF CONSOLIDATED
EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
PRIMARY
- - -------
Net income (loss) $ 3,392,502 $ 643,521 $(5,503,335)
----------- ----------- -----------
Average number of common shares
outstanding during the period 4,671,863 4,606,775 4,572,498
Additional Shares assuming exercise
of stock options (1) 108,125 67,109 116,656
----------- ----------- -----------
Common shares and equivalents used
to calculate earnings (loss) per share 4,779,988 4,673,884 4,689,154
----------- ----------- -----------
Primary earnings (loss) per share $ 0.71 $ 0.14 $ (1.17)
=========== =========== ===========
FULLY DILUTED
- - -------------
Net income (loss) $ 3,392,502 $ 643,521 $(5,503,335)
After-tax interest savings assuming
conversion of Senior Convertible
Notes (2) 600,961 553,902 684,075
----------- ----------- -----------
Net income (loss) $ 3,993,463 $ 1,197,423 $(4,819,260)
----------- ----------- -----------
Average number of common shares
outstanding during the period 4,671,863 4,606,775 4,572,498
Additional Shares assuming exercise
of stock options (1) 191,639 80,742 116,656
Additional Shares assuming conversion
of Senior Convertible Notes (3) 1,417,716 1,417,716 1,417,716
----------- ----------- -----------
Common shares and equivalents used
to calculate earnings (loss) per share 6,281,218 6,105,233 6,106,870
----------- ----------- -----------
Fully diluted earnings (loss) per share $ 0.64 $ 0.14(4) $ (1.17)(4)
=========== =========== ===========
</TABLE>
(1) Represents the number of shares of common stock issuable on the exercise
of dilutive employee stock options less the number of shares of common
stock which could have been purchased with the proceeds from the exercise of
such options. For primary earnings per share computations, these purchases
were assumed to have been made at the average market price of the common
stock during the period or that part of the period for which the option was
outstanding. For fully diluted earnings per share computations, these
purchases were assumed to have been made at the greater of the market price
of the common stock at the end of the period or average market price of the
common stock during the period or that part of the period for which the
option was outstanding.
(2) Represents the after-tax interest savings resulting from assumed conversion
of $10,000,000 aggregate principal 11.25% Senior Convertible Notes.
(3) Represents the number of shares of common stock issuable upon conversion
of $10,000,000 aggregate principal 11.25% Senior Convertible Notes at a
conversion price of $7.05 share.
(4) Net fully diluted earnings (loss) per share to $0.20 and ($0.79) for the
years ended December 31, 1995 and December 31, 1994, respectively.
Since this is anti-dilutive, fully diluted earnings (loss) per share is
equivalent to primary earnings (loss) per share.
A26
<PAGE> 76
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
MANAGEMENT'S FINANCIAL DISCUSSION
BUSINESS ENVIRONMENT
Stifel Financial Corp. and Subsidiaries (the "Company"), through its principal
subsidiary, Stifel, Nicolaus & Company, Incorporated ("Stifel, Nicolaus"),
provides securities brokerage and investment management and advisory services
primarily to individuals, provides investment banking services to municipal
and corporate clients, and trades fixed income securities and over-the-counter
equity securities. Century Securities Associates, Inc. ("CSA"), a wholly
owned subsidiary of the Company, provides administration services to
independent registered investment executives. Additionally, Pin Oak Capital
Ltd. ("Pin Oak") and Todd Investment Advisors, Inc. ("Todd"), both wholly
owned subsidiaries of the Company, provide fee-based investment advisory
services to both individual and institutional clients.
Results of any individual period should not be considered representative of
future profitability. Many of the Company's activities are sensitive to a
variety of factors, including the securities trading volume, the volatility
and price level of securities markets, the demand for investment banking
services, the level and volatility of interest rates, and investor sentiment.
A portion of the Company's expenses are relatively fixed and do not vary with
market activity. Consequently, sustained periods of reduced transaction
activity or loss of clients may adversely affect profitability.
The Company faces increasing competition from other financial institutions
such as commercial banks, thrifts, and investment firms. Certain financial
services, traditionally provided only by securities firms, are increasingly
being provided by these other financial institutions.
The business environment for the securities industry during 1996 was one of
the most prosperous in recent years. New investors, larger holdings, and
increased activity fueled record market volume and prices. Individuals
continued to evolve from savers to investors as strong corporate earnings, low
interest rates, and low inflation boosted the equity markets.
Historically, a significant source of the Company's investment banking
revenues originated from Oklahoma municipal securities issuances. During the
last three years, the Company's municipal investment banking business has been
adversely impacted by general municipal finance industry conditions and the
negative publicity surrounding a formal investigation and subsequent
enforcement actions by the Securities and Exchange Commission relating to
certain municipal bond issues managed by the Company's Oklahoma municipal
finance department (see Note H of the Notes to Consolidated Financial
Statements filed herein). Additionally, during 1995, the Company sold its
Oklahoma operations (see Note O of the Notes to Consolidated Financial
Statements filed herein), enabling the Company to focus on its retail sales,
fee-based money management services, equity research, corporate finance, and
the St. Louis-based municipal finance department.
A27
<PAGE> 77
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
MANAGEMENT'S FINANCIAL DISCUSSION
RESULTS OF OPERATIONS
The following table summarizes amounts and percentages of changes in the major
categories of revenues and expenses for the periods indicated:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
INCREASE (DECREASE) 1996 VS. 1995 1995 VS . 1994
- - ------------------------------------------------------------------------------------------------------
AMOUNTS IN THOUSANDS AMOUNT PERCENTAGE AMOUNT PERCENTAGE
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Commissions $ 5,184 13.4% $ 1,430 3.8%
Principal transactions (864) (4.2) (4,278) (17.4)
Investment banking 4,132 34.1 (513) (4.1)
Interest 772 5.9 2,084 19.1
Other 5,229 46.9 2,711 32.1
- - ------------------------------------------------------------------------------------------------------
$14,453 15.2% $ 1,434 1.5%
======================================================================================================
EXPENSES:
Employee compensation and benefits $ 9,578 16.7% $(3,465) (5.7)%
Commissions and floor brokerage 322 13.9 199 9.4
Communications and office supplies (857) (11.2) (394) (4.9)
Occupancy and equipment rental (629) (8.0) (1,513) (16.1)
Interest (115) (1.4) 2,174 35.4
Litigation, settlements, and bad debts 1,682 104.5 (857) (34.7)
Restructure charge 0 0 (2,672) (100.0)
Other operating expenses 177 1.9 (2,566) (22.0)
- - ------------------------------------------------------------------------------------------------------
$10,158 10.8% $(9,094) (8.8)%
======================================================================================================
</TABLE>
A28
<PAGE> 78
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
MANAGEMENT'S FINANCIAL DISCUSSION
1996 AS COMPARED TO 1995
The Company recorded $.71 earnings per primary share in 1996 compared to $.14
earnings per primary share in 1995. The increase in earnings per share was
attributed principally to the growth in revenues to $109.8 million in 1996
from $95.4 in 1995.
The Company experienced a $14.5 million (15.2%) growth in total revenues in
1996 over 1995 revenues, increasing to $109.8 million from $95.4 million.
Total revenues in 1996 were the second highest in the Company's history.
Average revenues per Investment Executive increased $43,000 (22.2%) to
$237,000 from $194,000 due to the addition of higher producing Investment
Executives in conjunction with industry-wide record performance and growth
which was attributed in part to increased corporate profits and continued low
interest rates.
Revenue from commissions, which includes sale of investment company shares and
sale of insurance products, increased $5.2 million (13.4%) to $43.9 million
from $38.7 million as a result of strong markets and increased production per
Investment Executive referred to above.
Principal transactions, which accounts for over-the-counter sales and trading
profits and losses on securities the Company held as principal to meet
investors' needs, decreased $900,000 (4.2%) to $19.5 million from $20.4
million primarily as a result of decreased trading in fixed income products --
municipal and corporate debt which decreased $3.0 million (22.5%) to $10.5
million from $13.5 million due to continued low interest rates which fueled
investors' demands for the higher returns generated by the equity products.
This decrease was offset by an increase in over-the-counter principal sales
credits and trading profits of $1.9 million (36.9%) to $7.4 million from $5.5
million. The increase was due to improved trading profits and continued
strong demand for the over-the-counter equity products.
Investment banking, which consists of revenue derived from underwriting
corporate and municipal securities and advisory fees, increased $4.1 million
(34.1%) to $16.2 million from $12.1 million largely as a result of an increase
in corporate finance revenues. Favorable market conditions fueled corporate
new issue underwritings. Revenue for new issue corporate underwritings and
financial advisory fees, primarily for regional financial institutions and
Real Estate Investment Trusts ("REITs"), increased $2.8 million (39.1%) to
$10.1 million from $7.3 million. Municipal investment banking revenues, which
includes fee income, increased $900,000 to $3.8 million from $2.9 million as
the number of awards as senior manager for underwritings increased to 34 in
1996 from 24 in 1995.
Interest income is derived principally from financing customers' margin
accounts. Interest income increased $772,000 (5.9%) to $13.7 million from
$13.0 million as a result of increased borrowing by customers to finance their
investments.
Other income increased $5.2 million (46.9%) to $16.4 million from $11.2
million principally due to a one-time gain of $3.3 million on an investment
resulting from the exercise of warrants generated by the corporate finance
department related to an underwriting and the ultimate sale of the shares
received for the exercise of those warrants. Additionally, managed account
fees, which are derived from management of customers' investment portfolios,
increased $1.4 million (137.0%) to $2.5 million from $1.1 million due
principally to the growth of the managed account program which was introduced
in November 1994.
A29
<PAGE> 79
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
MANAGEMENT'S FINANCIAL DISCUSSION
1996 AS COMPARED TO 1995 (CONTINUED)
Total expenses increased $10.2 million (10.8%) to $104.2 million from $94.0
million largely as a result of increased compensation and benefits, which
increased $9.6 million (16.7%) to $66.8 million from $57.2 million, and
litigation, settlements, and bad debts, which increased $1.7 million (104.5%)
to $3.3 million from $1.6 million.
The fixed portion of compensation and benefits, principally salaries, remained
virtually unchanged from 1995. The variable portion of total compensation and
benefits, principally Investment Executive compensation and incentive
compensation payments, increased coincidentally with increased production and
profitability.
Commission and floor brokerage increased $300,000 (13.9%) to $2.6 million from
$2.3 million coincidentally with increased commission revenue discussed in the
aforementioned increase in commission revenue.
Communications and office supplies and occupancy and equipment rental
decreased $900,000 (11.2%) to $6.8 million from $7.7 million and $600,000
(8.0%) to $7.3 million from $7.9 million, respectively, principally due to the
sale of the Oklahoma offices (see Note O of the Notes to Consolidated
Financial Statements filed herein).
Litigation, settlements, and bad debt increased $1.7 million (104.5%) to $3.3
million from $1.6 million due principally to settlements of claims against
Stifel, Nicolaus resulting from activities initiated in an office which was
closed in 1995.
1995 AS COMPARED TO 1994
For 1995, the Company had net income of $644,000, or $.14 per primary share,
on revenues of $95.4 million. During the year ended December 31, 1994, the
Company had a net loss of $5.5 million, or $1.17 per primary share, on
revenues of $93.9 million. The loss in 1994 included a one-time restructuring
charge of $2.7 million.
Revenues for 1995 increased in commissions, interest income, and other
revenue, but declined in principal transactions. Commission revenue increased
$1.4 million (3.8%) to $38.7 million in 1995 from $37.3 million in 1994
despite the reduction in the number of Investment Executives which resulted
from the sale of the Company's Oklahoma-based operations and the restructuring
plan of 1994. The number of Investment Executives decreased by 79 (21.8%) to
283 at December 31, 1995, from 362 at December 31, 1994. Despite this
decline, average production per Investment Executive increased $17,000 (9.6%)
to $194,000 from $177,000.
Principal transactions decreased $4.3 million (17.4%) to $20.3 million from
$24.6 million largely as a result of decreased fixed income trading activity.
Investment banking decreased only slightly in 1995, $500,000 (4.1%) to $12.1
million from $12.6 million. Public finance-related fee income decreased
significantly, $2.4 million (58.8%) to $1.6 million from $4.0 million, due to
the negative publicity surrounding the SEC's investigation into certain
municipal finance underwritings by the Company's Oklahoma City public finance
department and the reduced number of transactions by municipalities
experienced industry-wide. These decreases were offset by an increase in
corporate finance-related investment banking revenue which increased $3.8
million (279.6%) to $5.2 million from $1.4 million largely as a result of
increased public offerings, particularly for financial institutions and real
estate investment trusts (REITs). In addition, underwriting and syndicate
participation fees and profits on trading new underwriting issues decreased
$1.8 million primarily as a result of the aforementioned decreased municipal
finance activity.
A30
<PAGE> 80
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
MANAGEMENT'S FINANCIAL DISCUSSION
1995 AS COMPARED TO 1994 (CONTINUED)
Interest income increased $2.1 million (19.1%) to $13.0 million from $10.9
million, and net interest (interest income less interest expense) decreased
$90,000. The revenue increase is primarily due to higher customer borrowings
which resulted from increased retail investor activity experienced industry-
wide. Because of the generally corresponding increase in borrowings by the
Company to finance the purchase of marketable securities and underwrite new
securities issues, the net interest retention percentage decreased from 43.8%
to 36.1%.
Other revenue increased $2.7 million (32.1%) to $11.1 million from $8.4
million primarily as a result of increases in managed account fees, money
market distribution fees, clearing revenues, and realized gains on sale of
investments, which increased approximately $1.0 million, $800,000, $500,000,
and $400,000, respectively. Managed account fees increased because of the
introduction of the managed account program in late 1994. Management expects
the managed account fees to continue to grow, which are generated by charging
a fixed rate for managing investment portfolios of customers. Realized gain
on sale of investments increased primarily due to sales of investments held by
the Company's venture capital subsidiary. Money market distribution fees
increased because of higher levels of customer funds invested in money market
funds and the Company's switch to omnibus processing of these funds. Clearing
revenues increased as a direct result of the clearing for Capital West
Securities, Inc., the broker-dealer subsidiary of Capital West, which began in
June 1995.
Total expenses decreased $9.0 million (8.8%) to $94.1 million from $103.1
million. With the exception of commissions and floor brokerage and interest
expense, all expense categories decreased for the year as a result of the sale
of the Oklahoma-based operations and the downsizing and restructuring plan
implemented in the fourth quarter of 1994. The Company charged $2.7 million
to operations related to this plan in the fourth quarter of 1994. There were
no expenses related to that plan charged to operations in 1995.
Employee compensation and benefits decreased $3.5 million (5.7%) to $57.2
million from $60.7 million. Investment Executives' aggregate compensation
decreased $1.9 million, which was directly attributable to the decrease in
aggregate revenue production. Profitability and production-based incentive
compensation increased $2.1 million due to increased profitability and
achievement of production goals. Salaries and benefits decreased $4.6 million
(17.8%) to $21.2 million from $25.8 million. Total full-time and part-time
salaried employees decreased by 93 to 417 from 510. Commissions and floor
brokerage increased $199,000 (9.4%) to $2.3 million from $2.1 million as a
result of increased agency commissions. Communications and office supplies
and occupancy and equipment rental expenses decreased $394,000 (4.9%) to $7.7
million from $8.0 million and $1.5 million (16.1%) to $7.9 million from $9.4
million, respectively.
Interest expense increased $2.2 million (35.4%) to $8.3 million from $6.1
million due primarily to increased levels of short-term borrowings by the
Company and its customers and increased average borrowing rates. The average
level of short-term borrowings from banks for the year was $61.4 million as
compared to $59.0 million for 1994. The average interest rate charged for
these borrowings was 6.57% for 1995 as compared to 4.90% for 1994. The
Company's borrowings increased due to decreased available capital which
resulted primarily from the operating loss in 1994.
Other operating expenses decreased $2.6 million (22.0%) to $9.1 million from
$11.7 million. Included in the caption "Other operating expenses" are legal
fees which increased $600,000 due to continuing litigation surrounding certain
municipal bond issues and transactions completed by the Company's former
Oklahoma City-based public finance department. Management expects legal fees
to decrease in 1996.
Litigation, settlements, and bad debts decreased $857,000 (34.7%) to $1.6
million from $2.5 million in 1994. The charges in 1995 include an amount for
doubtful collection related to notes and advances receivable of former
employees and provision for settlements of Oklahoma suits. The 1994 charges
included doubtful collection of employee note receivables and advances of $2.0
million.
A31
<PAGE> 81
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
MANAGEMENT'S FINANCIAL DISCUSSION
LIQUIDITY AND CAPITAL RESOURCES
The Company's assets are highly liquid, consisting mainly of cash or assets
readily convertible into cash. These assets are financed primarily by the
Company's equity capital, customer credit balances, short-term bank loans,
proceeds from securities lending, long-term notes payable, and other payables.
Changes in securities market volumes, related customer borrowing demands,
underwriting activity, and levels of securities inventory affect the amount of
the Company's financing requirements.
During the year ended December 31, 1996, cash and cash equivalents increased
$1.6 million. Cash used for operating activities totaled $44.1 million due
primarily to increases in operating receivables as a result of increased
borrowings by customers.
The decrease in cash used for operating activities was funded by short-term
borrowings which increased by $46.0 million.
The Company has $2.6 million in receivables from Investment Executives and
other employees who terminated employment with the Company. The Company
intends to vigorously pursue collection of these receivables and does not
anticipate that the outcome of these activities will adversely affect
liquidity or capital resources.
The first installment of the Company's long-term debt is due September 1,
1997, in the amount of $2.5 million. Management believes that funds from
operations and available informal short-term credit arrangements of $82.6
million at December 31, 1996, will provide sufficient resources to meet its
present and anticipated financing needs.
Stifel, Nicolaus & Company, Incorporated, the Company's principal broker-
dealer subsidiary, is subject to certain requirements of the Securities and
Exchange Commission with regard to liquidity and capital requirements. At
December 31, 1996, Stifel, Nicolaus had net capital of approximately $24.2
million, which exceeded the minimum net capital requirements by approximately
$19.2 million.
INFLATION
The Company's assets are primarily monetary, consisting of cash, securities
inventory, and receivables. These monetary assets are generally liquid and
turn over rapidly and, consequently, are not significantly affected by
inflation. However, the rate of inflation affects various expenses of the
Company, such as employee compensation and benefits, communications, and
occupancy and equipment, which may not be readily recoverable in the price of
its services.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company deals in listed options and other products such as collateralized
mortgage obligations which derive their values from the price of some other
security or index. The Company does not deal in complex derivative financial
instruments, such as futures, forwards, and swaps, and therefore has no
disclosure requirements in accordance with the Financial Accounting Standard
Board's Statement 119, "Disclosure About Derivative Financial Instruments and
Fair Value of Financial Instruments."
The Company adopted Statements of Financial Accounting Standards (SFAS) 121,
"Accounting for the Impairment of Long-Lived Assets to Be Disposed of," and
SFAS 123, "Accounting for Stock-Based Compensation," during the year ended
December 31, 1996. The adoption of these new standards did not have a
material impact on the Company's consolidated financial statements.
The Financial Accounting Standards Board has also issued SFAS 125 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." Management believes the adoption of this standard will not have
a material impact on the Company's consolidated financial statements.
A32
<PAGE> 82
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
Independent Auditors' Report
To the Board of Directors and Stockholders of
Stifel Financial Corp.
St. Louis, Missouri
We have audited the accompanying consolidated statements of financial
condition of Stifel Financial Corp. and Subsidiaries (the "Company") as of
December 31, 1996, and the related consolidated statement of operations,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of the Company for the years ended
December 31, 1995 and 1994, were audited by other auditors whose report, dated
February 25, 1996, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such 1996 consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Stifel Financial
Corp. and Subsidiaries as of December 31, 1996, and the consolidated results
of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 25, 1997
St. Louis, Missouri
[Deloitte &
Touche LLP Logo]
A33
<PAGE> 83
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) DECEMBER 31, 1996 DECEMBER 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 7,960 $ 6,344
--------------------------------------------------------------------------------------------
Cash segregated for the exclusive benefit of customers 483 776
--------------------------------------------------------------------------------------------
Receivable from brokers and dealers:
Securities failed to deliver 617 1,790
Deposits paid for securities borrowed 10,284 4,912
Settlement balances with clearing organizations 3,935 9,722
--------------------------------------------------------------------------------------------
14,836 16,424
--------------------------------------------------------------------------------------------
Receivable from customers, net of allowance for doubtful
accounts of $582 and $805, respectively 235,216 156,904
--------------------------------------------------------------------------------------------
Securities owned, at fair value:
U.S. Government obligations 3,619 6,529
State and municipal obligations 9,506 7,111
Corporate obligations 3,502 2,394
Corporate stocks 2,286 3,487
--------------------------------------------------------------------------------------------
18,913 19,521
--------------------------------------------------------------------------------------------
Memberships in exchanges, at cost 513 513
Office equipment and leasehold improvements, at cost,
net of allowances for depreciation and amortization of
$10,125 and $12,517, respectively 2,233 3,015
Goodwill, net of accumulated amortization of $1,107
and $827, respectively 4,488 3,985
Notes receivable from and advances to officers and
employees, net of allowance for doubtful receivables of
$2,552 and $3,002, respectively 3,373 4,328
Refundable income taxes 358 254
Deferred tax asset 3,671 3,902
Other assets 9,005 10,809
--------------------------------------------------------------------------------------------
TOTAL ASSETS $301,049 $226,775
============================================================================================
</TABLE>
A34
<PAGE> 84
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) DECEMBER 31, 1996 DECEMBER 31, 1995
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings from banks $132,400 $ 86,450
-----------------------------------------------------------------------------------------------------
Payable to brokers and dealers:
Securities failed to receive 421 2,572
Deposits received from securities loaned 46,727 20,555
-----------------------------------------------------------------------------------------------------
47,148 23,127
-----------------------------------------------------------------------------------------------------
Payable to customers 32,095 31,806
Securities sold, but not yet purchased, at fair value 3,229 2,744
Drafts payable 15,287 17,867
Accrued employee compensation 14,756 9,526
Obligations under capital leases 581 774
Accounts payable and accrued expenses 7,801 8,876
Long-term debt 10,000 10,760
-----------------------------------------------------------------------------------------------------
Total 263,297 191,930
-----------------------------------------------------------------------------------------------------
Subordinated note - - 50
-----------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock -- $1 par value; authorized
3,000,000 shares; none issued
Common stock -- $.15 par value; authorized 10,000,000
shares; issued 4,767,715 and 4,540,890 shares,
respectively; outstanding 4,632,260 and 4,357,665
shares, respectively 715 681
Additional paid-in capital 21,403 19,622
Retained earnings 16,733 15,754
---------------------------------------------------------------------------------------------------
38,851 36,057
---------------------------------------------------------------------------------------------------
Less:
Treasury stock, at cost 135,455 and 183,225
shares, respectively 892 1,162
Unamortized expense of restricted stock awards 207 100
---------------------------------------------------------------------------------------------------
Total Stockholders' Equity 37,752 34,795
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $301,049 $226,775
===================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
A35
<PAGE> 85
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Commissions $ 43,900 $ 38,716 $ 37,286
Principal transactions 19,498 20,362 24,640
Investment banking 16,253 12,121 12,634
Interest 13,774 13,002 10,918
Other 16,388 11,159 8,448
--------------------------------------------------------------------------
109,813 95,360 93,926
- - ----------------------------------------------------------------------------------------------------
Expenses
- - --------
Employee compensation and benefits 66,765 57,187 60,652
Commissions and floor brokerage 2,641 2,319 2,120
Communications and office supplies 6,794 7,651 8,045
Occupancy and equipment rental 7,255 7,884 9,397
Interest 8,197 8,312 6,138
Litigation, settlements, and bad debts 3,292 1,610 2,467
Restructuring charge - - - - 2,672
Other operating expenses 9,267 9,090 11,656
------------------------------------------------------------------------
104,211 94,053 103,147
- - --------------------------------------------------------------------------------------------------
Income (loss) before income taxes 5,602 1,307 (9,221)
Provision (benefit) for income taxes 2,209 663 (3,718)
- - --------------------------------------------------------------------------------------------------
Net income (loss) $ 3,393 $ 644 $ (5,503)
==================================================================================================
Earnings (Loss) Per
Common Share
and Share Equivalents
Net income (loss) per share:
Primary earnings (loss) per share $ 0.71 $ 0.14 $ (1.17)
Fully diluted earnings (loss) per share $ 0.64 $ 0.14 $ (1.17)
</TABLE>
All earnings per share amounts have been adjusted to reflect the 5 percent stock
dividend declared January 21, 1997.
See Notes to Consolidated Financial Statements.
A36
<PAGE> 86
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unamortized
Additional Expense of
Common Stock Paid-In Retained Treasury Stock Restricted
(In thousands, except share amounts) Shares Amount Capital Earnings Shares Amount Stock Awards Total
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 4,119,239 $617 $17,269 $24,162 $(150,453) $(1,240) $(199) $40,609
- - -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends --
common stock ($.09 per share) (356) (356)
Purchase of treasury shares (188,964) (1,417) (1,417)
Employee benefit plans 88 72,883 614 702
Stock options exercised (34) 13,884 115 81
Restricted stock awards granted (87) 24,500 194 (107) - -
Amortization of restricted stock awards 108 108
Stock benefits 60 1 1
Dividend reinvestment 151 1 1
Net loss for the year (5,503) (5,503)
5% stock dividend 205,712 32 1,255 (1,287) (11,397) - -
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 4,324,951 649 18,491 17,016 (239,336) (1,732) (198) 34,226
- - ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends --
common stock ($.12 per share) (500) (500)
Purchase of treasury shares (88,656) (547) (547)
Employee benefit plans (195) 132,173 948 753
Stock options exercised (36) 22,425 159 123
Restricted stock awards granted (14) 13,000 96 (82) - -
Restricted stock awards forfeited 3 (16,125) (96) 79 (14)
Amortization of restricted stock awards 101 101
Dividend reinvestment (1) 2,019 10 9
Net income for the year 644 644
5% stock dividend 215,939 32 1,374 (1,406) (8,725) - -
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 4,540,890 681 19,622 15,754 (183,225) (1,162) (100) 34,795
- - ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends --
common stock ($.09 per share) (405) (405)
Stock rights redemption --
common stock ($.05 per share) (223) (223)
Purchase of treasury shares (69,713) (520) (520)
Employee benefit plans (132) 118,953 753 621
Stock options exercised (1) 615 4 3
Restricted stock awards 162 3,000 20 (182) - -
Amortization of restricted stock awards 75 75
Dividend reinvestment 1,365 13 13
Net income for the year 3,393 3,393
5% stock dividend 226,825 34 1,752 (1,786) (6,450) - -
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 4,767,715 $715 $21,403 $16,733 (135,455) $(892) $(207) $37,752
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
A37
<PAGE> 87
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
(IN THOUSANDS) DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,393 $ 644 $ (5,503)
- - ---------------------------------------------------------------------------------------------------------
Noncash items included in earnings:
Depreciation and amortization 1,664 1,990 2,572
Provision for litigation and bad debts 905 1,610 2,467
Unrealized loss (gain) on investments 28 (57) (96)
Bonus notes amortization 1,213 1,033 1,134
Deferred compensation 571 468 538
Amortization of restricted stock awards
and stock benefits 75 84 107
Deferred tax provision (benefit) 231 736 (1,735)
Restructuring charge - - - - 2,672
- - ---------------------------------------------------------------------------------------------------------
8,080 6,508 2,156
(Increase) decrease in operating receivables:
Customers (78,291) (17,005) 13,474
Brokers and dealers 1,588 5,409 (4,548)
Increase (decrease) in operating payables:
Customers 289 7,437 (11,955)
Brokers and dealers 24,020 (23,268) 21,873
Decrease (increase) in assets:
Cash and U.S. Government securities segregated
for the exclusive benefit of customers 293 540 (54)
Securities owned 608 3,798 63,191
Notes receivable from officers and employees (1,030) (1,190) (5,427)
Other assets (560) (2,125) (1,779)
Increase (decrease) in liabilities:
Securities sold, not yet purchased 485 (1,508) 345
Drafts payable, accounts payable and accrued
expenses, and accrued employee compensation 397 212 (1,919)
- - ---------------------------------------------------------------------------------------------------------
Cash (Used For) Provided By Operating Activities (44,121) (21,192) 75,357
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
A38
<PAGE> 88
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
(IN THOUSANDS) DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash (Used For) Provided By Operating --
Activities From Previous Page (44,121) (21,192) 75,357
- - ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) for short-term
borrowings from banks 45,950 20,800 (71,300)
Proceeds from:
Employee stock purchase plan 617 755 613
Exercised stock options 3 124 81
Subordinated borrowings - - - - 50
Dividend reinvestment plan 13 10 1
Payments for:
Settlement of long-term debt (760) (760) - -
Purchases of stock for treasury (520) (547) (1,417)
Principal payments under capital lease obligation (433) (256) (710)
Subordinated borrowings (50) - - - -
Cash dividends and rights redemption (626) (500) (356)
- - ---------------------------------------------------------------------------------------------------------
Cash Provided By (Used For) Financing Activities 44,194 19,626 (73,038)
- - ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of office equipment and leasehold
improvements 28 910 24
Sale of investments 3,753 1,694 32
Payments for:
Acquisition of office equipment and leasehold
improvements (443) (1,179) (1,734)
Acquisition of investments (1,795) (440) (258)
- - ---------------------------------------------------------------------------------------------------------
Cash Provided By (Used For) Investing Activities 1,543 985 (1,936)
- - ---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,616 (581) 383
Cash and cash equivalents -- beginning of year 6,344 6,925 6,542
- - ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents -- end of year $ 7,960 $ 6,344 $ 6,925
=========================================================================================================
Supplemental disclosures of cash flow information:
Interest payments $ 8,264 $ 8,237 $ 5,897
Income tax payments $ 2,247 $ 372 $ 118
Schedule of Noncash Investing and Financing
Activities
Fixed assets acquired under capital lease $ 240 - - $ 808
Restricted stock awards, net of forfeitures $ 181 $ 3 $ 146
Stock dividends distributed $ 1,788 $ 1,406 $ 1,287
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
A39
<PAGE> 89
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE A -- ACCOUNTING AND REPORTING POLICIES
NATURE OF OPERATIONS
Stifel Financial Corp. ("the Parent"), through its wholly owned subsidiaries,
principally Stifel, Nicolaus & Company, Incorporated ("Stifel, Nicolaus"),
collectively referred to as ("the Company"), is principally engaged in retail
brokerage, securities trading, investment banking, investment advisory, and
related financial services throughout the United States. Although the Company
has offices throughout the United States, its major geographic area of
concentration is in the Midwest. The Company's principal customers are
individual investors, with the remaining client base composed of corporations,
municipalities, and institutions.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Parent and
its wholly owned subsidiaries, principally Stifel, Nicolaus. Stifel, Nicolaus
is a broker-dealer registered under the Securities Exchange Act of 1934. All
material intercompany balances and transactions are eliminated in
consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Where appropriate, prior years' financial information has been reclassified to
conform with the current year presentation.
For purposes of presenting the consolidated statements of cash flows, the
Company has defined cash equivalents as short-term, highly liquid investments
with original maturities of 90 days or less, other than those held for sale in
the ordinary course of business.
SECURITY TRANSACTIONS
Trading and investment securities owned and securities sold, but not yet
purchased are carried at fair value, and unrealized gains and losses are
reflected in the results of operations. Securities held for investment by the
Parent are included in other assets and are carried at the lower of historical
cost or fair value. Investment securities of the subsidiaries are carried at
fair value or amounts that approximate fair value as determined by management.
Securities failed to deliver and receive represent the contract value of
securities that have not been delivered or received by settlement date.
Receivable from customers includes amounts due on cash and margin
transactions. The value of securities owned by customers and held as
collateral for these receivables is not reflected in the consolidated
statements of financial condition.
Customer security transactions are recorded on a settlement date basis with
related commission income and expense recorded on a trade date basis.
Principal securities transactions are recorded on a trade date basis.
A40
<PAGE> 90
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE A - ACCOUNTING AND REPORTING POLICIES (CONTINUED)
FAIR VALUE
The Company's financial instruments are carried at fair value or amounts that
approximate fair value. Securities owned and securities sold, but not yet
purchased are valued using quoted market or dealer prices, pricing models, or
management's estimates. Customer receivables, primarily consisting of
floating-rate loans collateralized by customer-owned securities, are charged
interest at rates similar to other such loans made throughout the industry.
The Company's remaining financial instruments are generally short-term in
nature, and their carrying values approximate fair value. The Company has
estimated the fair value of its long-term debt using the discounted cash flow
analysis of payments. At December 31, 1996, the estimated fair value of the
notes was $11,004.
INCOME TAXES
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial reporting and income tax
bases of assets and liabilities.
OTHER
Investment banking revenue is recorded as follows: management fees on
effective date of the registration, selling concessions on trade date,
underwriting fees upon completion of the underwriting, and other investment
banking revenue upon the completion of the service.
Securities borrowed and securities loaned are recorded at the amount of cash
collateral advanced or received. Securities borrowed transactions require
Stifel, Nicolaus to deposit cash or other collateral with the lender. With
respect to securities loaned, Stifel, Nicolaus receives collateral in the form
of cash or other collateral in an amount generally in excess of the market
value of securities loaned. Stifel, Nicolaus monitors the market value of
securities borrowed and loaned on a daily basis, with additional collateral
obtained or refunded as necessary.
Amortization of assets under capital lease is computed on a straight-line
basis over the estimated useful life of the asset. Leasehold improvements are
amortized over the lesser of the economic useful life of the improvement or
the term of the lease. Depreciation of office equipment is computed on a
straight-line basis for equipment purchased prior to January 1, 1994, and an
accelerated method for equipment purchased thereafter.
Goodwill recognized in business combinations accounted for as purchases is
being amortized over 15 to 40 years on a straight-line basis.
Earnings (loss) per share of common stock is based upon the weighted average
number of common shares and share equivalents outstanding during the periods.
Common share equivalents include dilutive stock options under the treasury
stock method and dilutive shares from Senior Convertible Notes under the if
converted method.
NOTE B -- SPECIAL RESERVE BANK ACCOUNT
At December 31, 1996, cash of $483 has been segregated in a special reserve
bank account for the exclusive benefit of customers pursuant to Rule 15c3-3
under the Securities Exchange Act of 1934.
A41
<PAGE> 91
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE C -- SHORT-TERM BORROWINGS FROM BANKS
In the normal course of business, Stifel, Nicolaus borrows from various banks
on a demand basis with company-owned and customer securities pledged as
collateral. Available credit arrangements with banks totaled $215,000 at
December 31, 1996, of which $82,600 was unused. There were no compensating
balance requirements under these arrangements. The Company's floating
interest rate short-term borrowings bore interest at a weighted average rate
of 6.07% and 6.63% at December 31, 1996 and 1995, respectively. Certain
short-term borrowings were collateralized by company-owned securities valued
at approximately $19,155 on a settlement date basis. Short-term borrowings
used to finance receivables from customers were collateralized by customer-
owned securities valued at approximately $192,378 at December 31, 1996. The
value of these customer-owned securities is not reflected in the consolidated
statement of financial condition.
NOTE D -- COMMITMENTS AND CONTINGENCIES
In the normal course of business, Stifel, Nicolaus enters into underwriting
commitments. Settlement of transactions relating to such underwriting
commitments which were open December 31, 1996, had no material effect on the
consolidated financial statements.
In connection with margin deposit requirements of The Options Clearing
Corporation, Stifel, Nicolaus has pledged cash and customer-owned securities
valued at $16,566. At December 31, 1996, the amounts on deposit satisfied the
minimum margin deposit requirement of $12,954.
The future minimum rental commitments at December 31, 1996, with initial or
remaining non-cancellable lease terms in excess of one year for office space
and equipment are as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
OPERATING LEASES
----------------------------------------------
MINIMUM FUTURE
LEASE PAYMENTS UNDER MINIMUM RENTAL
YEAR ENDING DECEMBER 31, CAPITAL LEASES COMMITMENTS RELATED SUBLEASE COMMITMENT
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 $384 $ 3,427 $(350) $ 3,077
1998 238 2,852 (169) 2,683
1999 0 2,576 (96) 2,480
2000 0 2,450 (28) 2,422
2001 0 1,396 0 1,396
Thereafter 0 1,804 0 1,804
---- ------- ----- -------
Minimum Commitments $622 $14,505 $(643) $13,862
Less Interest 41 ======= ===== =======
----
Net Present Value of Capital
Lease Obligations $581
====
</TABLE>
A42
<PAGE> 92
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE D - COMMITMENTS AND CONSINGENCIES (CONTINUED)
Rental expense for the years ended 1996, 1995, and 1994 amounted to
approximately $3,541, $3,986, and $4,596, respectively.
Office equipment, under capital leases, with a recorded cost of approximately
$566 net of amortization of $953, collateralizes the above capital lease
obligations and is included in the consolidated statements of financial
condition in the caption of "Office equipment and leasehold improvements."
The Company purchased equipment, that was subject to a capital lease, for
approximately $440 in the first quarter of 1995. During the fourth quarter of
1995, management determined that certain of that equipment with a carrying
value of approximately $248, which was originally intended for use in
operations, was not immediately required and therefore recorded a $195 charge
to fourth quarter operations to write the equipment down to net recoverable
value based on outside dealer quotes.
Amortization and depreciation expense of assets under capital lease and owned
furniture and equipment for 1996, 1995, and 1994 was $1,384, $1,732, and
$2,192, respectively.
NOTE E -- NET CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS
Stifel, Nicolaus is subject to the Uniform Net Capital Rule, Rule 15c3-1 under
the Securities Exchange Act of 1934 (the "rule"), which requires the
maintenance of minimum net capital, as defined. Stifel, Nicolaus has elected
to use the alternative method permitted by the rule which requires maintenance
of minimum net capital equal to the greater of $250 or 2 percent of aggregate
debit items arising from customer transactions, as defined. The rule also
provides that equity capital may not be withdrawn or cash dividends paid if
resulting net capital would be less than 5 percent of aggregate debit items.
At December 31, 1996, Stifel, Nicolaus had net capital of $24,182, which was
9.7 percent of aggregate debit items and $19,191 in excess of minimum required
net capital. At December 31, 1996, the net assets of Stifel, Nicolaus were
$39,351, of which $12,475 was restricted as to the payment of dividends. In
addition, there are restrictions in the Parent's long-term note agreement on
payment of dividends by the Parent to its stockholders based on the amount of
the Company's cumulative consolidated net income, as defined. At December 31,
1996, dividends of $2,032 had been paid against the cumulative available
amounts of $2,204 under such provision.
NOTE F -- EMPLOYEE BENEFIT PLANS
The Company has a profit sharing 401(k) plan (the "PSP") covering qualified
employees as defined in the plans. Contributions to the PSP were based upon a
company match of 50% of the employees' first $500 in annual contributions for
1996, 1995, and 1994. Additional contributions by the Company are
discretionary. The amounts charged to operations for the PSP were $146, $166,
and $185, for 1996, 1995, and 1994, respectively.
Stifel, Nicolaus also has a deferred compensation plan available to Investment
Executives whereby a certain percentage of their earnings is deferred as
defined in the plan and vests over a three to five year period. The
Investment Executives have the right to elect to invest their individual
deferred amounts into several investment options, including Company stock. The
amounts charged to operations related to this plan were $571, $468, and $539,
for 1996, 1995, and 1994, respectively.
A43
<PAGE> 93
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE ARE PER SHARE AMOUNTS)
NOTE G -- STOCK-BASED COMPENSATION PLANS
At December 31, 1996, the Company had several stock-based compensation plans,
which are described below. The Company applies APB Opinion 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its plans. Had compensation cost for the Company's stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under the Fixed Stock Option and the Employee Stock Purchase Plans consistent
with the method of FASB Statement 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
- - ------------------------------------------------------------------
1996 1995
- - ------------------------------------------------------------------
Net income
As reported $3,393 $644
Pro forma $3,345 $621
- - ------------------------------------------------------------------
Primary earnings per share
As reported $.71 $.14
Pro forma $.70 $.13
- - ------------------------------------------------------------------
Fully diluted earnings per share
As reported $.64 $.14
Pro forma $.63 $.13
- - ------------------------------------------------------------------
All option plans are administered by the Compensation Committee of the Board
of Directors of the Parent which has the authority to interpret the Plans,
determine to whom options may be granted under the Plans, determine the terms
of each option, and cancel, with the consent of an optionee, any option
previously granted to such optionee and to grant a new option in place
thereof. All shares issued for the various plans were satisfied with treasury
stock.
A44
<PAGE> 94
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE G -- STOCK-BASED COMPENSATION PLANS (CONTINUED)
Fixed Stock Option Plans
The Company has four fixed option plans. Under the Company's 1983 and 1985
Incentive Stock Option Plans, the Company may grant options up to an aggregate
of 450,000 shares to key employees. Under the Company's 1987 non-qualified
stock option plan, the Company may grant options up to an aggregate of 100,000
shares. Options under these plans are generally granted at 100% of market
value at the date of the grant and expire 10 years from the date of grant. The
options vest at a rate of 25% each anniversary date or on a five-year cliff
vesting period. The Company has also granted stock options to external board
members under a non-qualified plan. These options are generally granted at
100% of market value at the date of the grant and are exercisable one year from
date of grant and expire 10 years from date of grant.
Effective with options granted in 1995 and subsequently, the fair value
of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1996 and 1995, respectively: dividend yield of 1.88% for both years;
expected volatility of 26.7% and 22.2%; risk-free interest rates of 6.17% and
6.06%; and expected lives of 5.25 years for both years.
Activity under all plans for the years ended 1996, 1995, and 1994,
respectively, is set forth on the following table. All amounts and prices have
been adjusted to reflect the 5 percent stock dividend declared January 21, 1997.
The summary of the status of the Company's fixed stock option plans as of
December 31, 1996, 1995, and 1994, and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ ------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
FIXED OPTIONS SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 348,938 $5.55 413,767 $5.69 415,660 $5.51
- - -------------------------------------------------------------------------------------------------------------------
Granted 111,077 5.98 33,352 5.75 47,065 6.23
Exercised (21,062) 5.02 (24,723) 5.00 (16,073) 5.05
Forfeited (5,523) 8.55 (68,993) 6.85 (32,885) 4.49
Expired - - - - (4,465) 4.60 - - - -
- - -------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 433,430 $5.63 348,938 $5.55 413,767 $5.69
===================================================================================================================
Options exercisable at year-end 254,792 262,710 299,384
Weighted-average fair value of
options granted during the year $1.89 $1.53 - -
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
A45
<PAGE> 95
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE G -- STOCK-BASED COMPENSATION PLANS (CONTINUED)
<TABLE>
<CAPTION>
The following table summarizes information about fixed stock options outstanding at December 31, 1996:
- - ------------------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ---------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING AT REMAINING WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-AVERAGE
EXERCISE PRICES 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE 12/31/96 EXERCISE PRICE
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4.00 - $4.99 164,040 2.81 years $4.58 157,963 $4.59
$5.00 - $5.99 62,715 4.66 years 5.58 54,436 5.65
$6.00 - $6.99 182,315 8.12 years 6.20 35,014 6.61
$7.00 - $7.99 - - - - - - - - - -
$8.00 - $8.99 24,360 6.96 years 8.47 7,379 8.53
- - ------------------------------------------------------------------------------------------------------------
Total 433,430 254,792
============================================================================================================
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Under the 1993 Employee Stock Purchase Plan (the "ESPP"), the Company is
authorized to issue up to 125,000 shares of common stock to its full-time
employees, nearly all of whom are eligible to participate. Under the terms of
the ESPP, employees can choose each year to have a specified percentage of
their compensation withheld in 1% increments not to exceed 10%. The
participant may also specify a maximum dollar amount to be withheld. At the
beginning of every year, each participant will be granted an option to
purchase 1,000 shares of common stock at a price equal to the lower of 85% of
the beginning-of-year or end-of-year fair market value of the common stock.
Approximately 29% to 41% of eligible employees have participated in the ESPP
in the last three years. Under the ESPP, the Company sold 115,217 shares,
112,613 shares, and 124,663 shares to employees in 1996, 1995, and 1994,
respectively.
Effective with options granted in 1995, the fair value of each employee's
purchase rights is estimated using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 1996 and 1995,
respectively: dividend yield of 1.88% for both years; expected volatility of
26.7% and 22.2%; risk-free interest rates of 5.09% and 7.05%; and expected
lives of 1 year for both years. The weighted-average fair value of those
purchase rights granted in 1996 and 1995 was $1.30 and $1.07, respectively.
A46
<PAGE> 96
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE G -- STOCK-BASED COMPENSATION PLANS (CONTINUED)
RESTRICTED STOCK AWARDS
Restricted stock awards are made, and shares issued, to certain key employees
without cash payment by the employee. Certain key employees were granted
3,000, 13,000, and 32,500 shares of restricted stock, with a fair value of
$18, $82, and $203, during 1996, 1995, and 1994, respectively. As of December
31, 1996, the restricted stock awards covering 14,334 shares were outstanding,
with the restrictions expiring at various dates through 2000. The shares are
restricted as to resale. Restrictions lapse ratably over three- and five-year
service periods. The deferred cost of the restricted stock awards is
amortized on a straight-line basis.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan (the "ESOP") covering
qualified employees as defined in the plan. Employer contributions are made
to the ESOP as determined by the Compensation Committee of the Board of
Directors of the Parent on behalf of all eligible employees based upon the
relationship of individual compensation (up to a maximum of $150) to total
compensation. At December 31, 1996, the plan held and has allocated 240,926
shares of the Parent common stock valued at $2,108. The Company charged to
operations $280 for the ESOP contribution for 1996. There were no
contributions for the ESOP for 1995 and 1994.
NOTE H -- LEGAL PROCEEDINGS
The Company is a defendant in several lawsuits and arbitrations which arose
from its usual business activities. Some of these lawsuits and arbitrations
claim substantial amounts, including punitive damage claims. While results of
litigation and arbitration cannot be predicted with certainty, management,
based on opinions of outside counsel, has provided for actions most likely of
adverse disposition and believes that the effects of resolution of such
litigation and arbitration beyond the amounts provided will not have a
material adverse effect on the Company's consolidated financial position.
However, depending upon the period of resolution, such effects could be
material to the financial results of an individual operating period. It is
reasonably possible that certain of these lawsuits and arbitrations could be
resolved in the next year, and management does not believe such resolutions
will result in losses materially in excess of the amounts previously provided.
During 1995, the Securities and Exchange Commission (the "SEC") completed a
formal investigation into possible violations of the federal securities laws
in connection with certain municipal bond issues managed by the Company's
former Oklahoma City-based public finance department where the Company was the
managing or co-managing underwriter. This investigation resulted in the
Company consenting to a final judgement of permanent injunction whereby, among
other things, the Company paid approximately $1,100 in disgorgement and
prejudgement interest, and $250 in fines.
A47
<PAGE> 97
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE H -- LEGAL PROCEEDINGS (CONTINUED)
Additionally, the Company is named in lawsuits filed by The Oklahoma Turnpike
Authority ("OTA") and The State of Oklahoma. The OTA suit seeks $6.5 million
in compensatory damages and an unspecified amount of punitive damages. The
State of Oklahoma seeks $7.6 million in compensatory damages and that these
damages be trebled. The OTA suit alleges that an undisclosed fee paid to the
Company by a third party for the placement of a forward purchase contract in
an advance refunding escrow for the proceeds of the 1992 OTA $660 million
refinancing should have been paid to the OTA. The State of Oklahoma suit
alleges that the Company and two former executives of the Company committed
violations of the Racketeer Influenced and Corrupt Organizations Act. This
suit alleges essentially the same facts as are alleged in the OTA suit and
were alleged by the SEC in its action against the Company which was settled in
August 1995 by the Company without admitting or denying the allegations.
Management does not believe the ultimate resolution of these matters will have
a materially adverse effect on the Company's financial statements.
NOTE I -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET CREDIT RISK
In the normal course of business, the Company executes, settles, and finances
customer and proprietary securities transactions. These activities expose the
Company to off-balance sheet risk in the event that customers or other parties
fail to satisfy their obligations.
In accordance with industry practice, securities transactions are recorded on
settlement date, generally three business days after trade date. Should a
customer or broker fail to deliver cash or securities as agreed, the Company
may be required to purchase or sell securities at unfavorable market prices.
The Company borrows and lends securities to finance transactions and
facilitate the settlement process, utilizing both firm proprietary positions
and customer margin securities held as collateral. The Company monitors the
adequacy of collateral levels on a daily basis. The Company periodically
borrows from banks on a collateralized basis utilizing firm and customer
margin securities in compliance with SEC rules. Should the counterparty fail
to return customer securities pledged, the Company is subject to the risk of
acquiring the securities at prevailing market prices in order to satisfy its
customer obligations. The Company sells securities it does not currently own,
and is obligated to subsequently purchase such securities at prevailing market
prices. The Company is exposed to risk of loss if securities prices increase
prior to closing the transactions. The Company controls its exposure to
credit risk by continually monitoring its counterparties' position, and where
deemed necessary, the Company may require a deposit of additional collateral
and/or a reduction or diversification of positions.
CONCENTRATIONS OF CREDIT RISK
The Company maintains margin and cash security accounts for its customers
located throughout the United States. The majority of the Company's customer
receivables are serviced by branch locations in Missouri and Illinois.
A48
<PAGE> 98
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE J -- LONG-TERM DEBT
The Parent has outstanding $10,000 aggregate principal amount of its 11.25
percent Senior Convertible Notes due September 1, 1997, through September 1,
2000, in equal installments. The notes are convertible into shares of the
Company's $.15 par value common stock at any time prior to maturity, unless
previously redeemed, at a conversion price of $7.05 per share. Under certain
conditions, the notes are redeemable in whole or in part at the option of the
Parent by payment of the principal and the accrued interest on the notes to be
redeemed plus a premium of 4.1 percent. The premium decreases approximately
one percentage point each September 1 from 1997 through 1999. The Company is
required to maintain consolidated tangible net worth (as defined by the note
agreement) at an amount not less than $22,000 as long as any amount remains
unpaid.
At December 31, 1995, the Parent had outstanding $760 in promissory notes
issued for the purchase of Todd Investment Advisors, Inc. The principal of
the notes was paid on January 2, 1996, with interest at 3.83%. Interest
charged to operations for these notes was $29 and $58 for years 1995 and 1994,
respectively.
NOTE K -- PREFERRED STOCK PURCHASE RIGHTS
On June 30, 1987, the Company's Board of Directors declared a distribution of
one preferred stock purchase right for each share of the Company's common
stock. On July 23, 1996, the Company's Board of Directors approved the
redemption of these shareholder rights and the adoption of a new Shareholder
Rights Plan. Shareholders of record on August 12, 1996, received a payment of
$.05 per share, representing the redemption price for the existing rights.
This payment was in lieu of the regular quarterly dividend of $.03 per share.
In addition, on July 23, 1996, the Company's Board of Directors authorized and
declared a dividend distribution of one preferred stock purchase right for
each outstanding share of the Company's common stock, par value $0.15 per
share. The dividend was distributed to stockholders of record on August 12,
1996. Each right will entitle the registered holder to purchase one one-
hundredth of a share of a Series A Junior Participating Preferred Stock, par
value $1.00 per share, at an exercise price of $35 per right. The rights
become exercisable on the tenth day after public announcement that a person or
group has acquired 15 percent or more of the Company's common stock or upon
commencement of announcement of intent to make a tender offer for 15 percent
or more of the outstanding shares of common stock without prior written
consent of the Company. If the Company is acquired by any person after the
rights become exercisable, each right will entitle its holder to purchase
shares of common stock at one-half the then current market price, and in the
event of a subsequent merger or other acquisition of the Company, to buy
shares of common stock of the acquiring entity at one-half of the market price
of those shares. The rights may be redeemed by the Company prior to becoming
exercisable by action of the Board of Directors at a redemption price of $.01
per right. These rights will expire, if not previously exercised, on August
12, 2006.
A49
<PAGE> 99
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE L -- INCOME TAXES
The Company's provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT:
Federal $ 1,597 $ (59) $ (1,601)
State 381 (14) (382)
- - ------------------------------------------------------------------------------
$ 1,978 $ (73) $ (1,983)
DEFERRED:
Federal $ 187 $ 594 $ (1,401)
State 44 142 (334)
- - ------------------------------------------------------------------------------
$ 231 $ 736 $ (1,735)
- - ------------------------------------------------------------------------------
$ 2,209 $ 663 $ (3,718)
==============================================================================
</TABLE>
The provision (benefit) for income taxes differs from the amount computed by
applying the statutory federal income tax rate to (loss) income before income
taxes for the following reasons:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax computed at statutory rates $1,904 $444 $(3,135)
State income taxes, net of federal
income tax benefit 281 84 (450)
Tax-exempt interest, net of
interest expense (59) (62) (143)
Goodwill amortization 80 80 80
Meals and entertainment 103 96 107
SEC fine - - 85 - -
Increase in cash surrender value of
life insurance (36) (27) 9
Other, net (64) (37) (186)
- - --------------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes $2,209 $663 $(3,718)
========================================================================================================
</TABLE>
A50
<PAGE> 100
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE L -- INCOME TAXES (CONTINUED)
The net deferred tax asset consists of the following temporary differences:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSET
Receivables from customers, principally
due to allowance for doubtful accounts $ 227 $ 314
Office equipment and leasehold improvements,
principally book over tax depreciation 856 777
Deferred compensation 810 693
Deferred revenue 195 171
Investments, principally due to valuation
allowance 25 155
Provision for litigation and settlements 401 644
Receivables from officers and employees,
principally due to allowance for doubtful
accounts 1,111 1,169
Accrued expenses 382 485
Other 15 8
- - -------------------------------------------------------------------------------
Deferred Tax Asset 4,022 4,416
- - -------------------------------------------------------------------------------
DEFERRED TAX LIABILITY
Intangible assets, principally tax over
book amortization (211) (220)
Investment fee revenue installment
receivable (140) (294)
- - -------------------------------------------------------------------------------
Total Gross Deferred Tax Liability (351) (514)
- - -------------------------------------------------------------------------------
Net Deferred Tax Asset $3,671 $3,902
===============================================================================
</TABLE>
The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax asset is not necessary. Based on
the Company's historical earnings and taxes previously paid, future
expectations of taxable income, and the future reversals of gross deferred tax
liability, management believes it is more likely than not that the Company
will realize the gross deferred tax asset.
A51
<PAGE> 101
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE M -- RELATED PARTY TRANSACTIONS
Four directors of the Parent are associated with firms which provide legal and
consulting services to the Company. The Company charged approximately $801,
$1,263, and $1,287 (primarily for legal fees) to operations for these services
for 1996, 1995, and 1994, respectively. Additionally, several employees of
Stifel, Nicolaus, through their individual ownership or interest in a
corporation or partnership, provide leasing services primarily for branch
office space. The Company charged to operations approximately $17, $20, and
$82 for 1996, 1995, and 1994, respectively, for these services.
A director of the Parent has a general partnership interest in an enterprise
in which the Company also holds general and limited partnership interests
carried at approximately $663 at December 31, 1996, and $623 at December 31,
1995.
The Company has receivables aggregating $1,976 at December 31, 1996, from two
former employees who were also directors and officers of the Company. These
receivables arose from employment contracts which called for the amounts
loaned or advanced to be earned or forgiven if performance criteria defined in
the contracts were met. The employees terminated employment with the Company
in 1994. The Company filed claims to recover the balance of the receivables.
In October 1996, an NASD Regulation, Inc. Office of Dispute Resolution
arbitration awarded the Company $1,260 in compensatory damages plus interest
from one of the two former employees. Additionally, the Company reached a
settlement agreement with the other former employee subsequent to December 31,
1996. The Company is vigorously pursuing collection.
A52
<PAGE> 102
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE N -- PLAN OF RESTRUCTURING
During the fourth quarter of 1994, the Board of Directors of the Parent
approved a restructuring and downsizing plan for the Company to be implemented
beginning in December 1994, which involved the closing or downsizing of 31
office locations and termination of approximately 70 officers and employees.
The plan was completed during 1995. Following is a summary of activity in the
accounts related to the restructuring accrual:
<TABLE>
<CAPTION>
SEVERANCE PAY,
EXTENDED BENEFITS,
NET LEASE AND RECEIVABLES
COMMITMENTS WRITTEN OFF FOR ABANDONMENT
FOR CLOSED TERMINATED CONTRACTUAL OF LEASEHOLD
OFFICES EMPLOYEES COMMITMENTS IMPROVEMENTS TOTAL
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
January 1, 1995 Balance $1,400 $695 $191 $206 $2,492
------ ---- ---- ---- ------
Payments/charges 441 627 61 197 1,326
Adjustments through operations 64 1 130 - - 195
------ ---- ---- ---- ------
December 31, 1995 Balance 895 67 - - 9 971
------ ---- ---- ---- ------
Payments/charges 238 67 - - - - 305
Adjustments through operations - - - - - - 9 9
------ ---- ---- ---- ------
December 31, 1996 Balance $ 657 - - - - - - $ 657
====== ==== ==== ==== ======
</TABLE>
The balances at December 31, 1996, and December 31, 1995, are included in the
statement of financial condition under the caption "Accounts payable and
accrued expenses."
During 1995, the Parent Company's Board of Directors reversed its decision
regarding the payment of certain philanthropic commitments which had been
accrued in 1994 as part of the restructuring charge and included in
"Contractual commitments" above. As a result of this decision, $130 related
to accrued contractual commitments was reversed and credited to operations in
1995.
NOTE O -- SALE OF OKLAHOMA-BASED ASSETS
On May 25, 1995, the Company sold the majority of the assets of its Oklahoma-
based operations to Capital West Financial Corporation ("Capital West").
Capital West is primarily owned by former employees of the Company. Included
in the sale were the majority of the assets related to the Company's retail
offices in Oklahoma, several retail offices in Texas, and the Oklahoma-based
public finance, institutional trading, and sales departments. The Company
received cash, secured and senior notes, and warrants to purchase a minority
interest in Capital West. In addition, Capital West assumed or subleased
certain office and equipment lease obligations of the Company. The sale
resulted in the reduction of approximately 70 Investment Executives and
approximately 50 support staff located in 26 branch offices.
A53
<PAGE> 103
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
NOTE O -- SALE OF OKLAHOMA BASED ASSETS (CONTINUED)
The Company received secured and senior notes with a face amount of $1,850
bearing interest at a 10% annual rate with the final payments due May 24,
2000, in connection with the sale of its Oklahoma-based assets. The notes
were recorded at a discounted cash flows rate of 17%. The Company has
deferred recognition of the gain on the sale in the amount of $570 and has
deferred recognition of any interest income related to the notes until such
time that Capital West has demonstrated the ability to generate earnings and
cash flow to fund interest and principal payments when scheduled. The notes
receivable net of the discount of $336 and deferred gain of $570 are included
in the statement of financial condition under the caption "Other assets" at
December 31, 1995.
Pro forma financial information assuming the transaction had taken place at
the beginning of the year is presented below:
- - ------------------------------------------------------------------------
YEAR ENDED
UNAUDITED PRO FORMA COMBINED RESULTS OF OPERATIONS DECEMBER 31, 1995
- - ------------------------------------------------------------------------
Revenue $85,846
Net income $ 770
Net income per primary share $ .16
- - ------------------------------------------------------------------------
The above pro forma results do not purport to be indicative of results which
actually would have occurred had the sale been made on January 1, 1995.
NOTE P -- SUBSEQUENT EVENT
On January 2, 1997, Capital West was reorganized and a new company, Affinity
Holdings Corporation ("Affinity"), was formed. Affinity assumed the
outstanding debt of Capital West. As part of the reorganization, Affinity
exchanged the remaining balance of the $1,850 secured and senior notes issued
by Capital West for a secured note due December 31, 2001, with a face amount
of $305 bearing interest at a 10% annual rate; two hundred thousand shares of
10% cumulative non-voting preferred stock, par value $1.00; warrants to
purchase a minority interest in Affinity; and substantially all of the fixed
assets of Affinity with a fair value of approximately $300, which will be
leased back to Affinity. Principal and interest payments on the note and
dividend payments will be made monthly based upon the level of activity of
Affinity's broker-dealer subsidiary. The transaction had no material impact
on the results of operations for the Company for the year ended December 31,
1996.
On January 21, 1997, the Company's Board of Directors approved a 5 percent
stock dividend to be distributed and $.03 per share cash dividend to be paid
on February 18, 1997, to shareholders of record on February 4, 1997. All
shares issued and earnings per share amounts included in the consolidated
financial statements and notes thereto have been retroactively adjusted to
give effect to the 5 percent stock dividend.
NOTE Q -- RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." Management believes the adoption of this standard will not have
a material impact on the Company's consolidated financial statements.
******
A54
<PAGE> 104
[STIFEL FINANCIAL CORP. AND SUBSIDIARIES LETTERHEAD]
QUARTERLY RESULTS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
QUARTERLY OPERATING RESULTS (UNAUDITED)
- - ------------------------------------------------------------------------------------------
EARNINGS PRIMARY FULLY DILUTED
(LOSS) NET EARNINGS EARNINGS
BEFORE INCOME (LOSS) (LOSS)
REVENUE INCOME TAXES (LOSS) PER SHARE PER SHARE
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------
YEAR 1996 BY QUARTER
- - ------------------------------------------------------------------------------------------
First $23,438 $ 258 $ 150 $ .03 $ .03
Second 30,707 2,241 1,361 .28 .25
Third 24,203 775 458 .10 .09
Fourth 31,465 2,328 1,424 .30 .25
- - ------------------------------------------------------------------------------------------
YEAR 1995 BY QUARTER
- - ------------------------------------------------------------------------------------------
First $21,895 $ (318) $ (183) $(.04) $(.04)
Second 25,748 593 348 .07 .07
Third 23,055 482 162 .03 .03
Fourth 24,662 550 317 .07 .07
</TABLE>
ALL EARNINGS (LOSS) PER SHARE AMOUNTS HAVE BEEN ADJUSTED TO REFLECT THE
5 PERCENT STOCK DIVIDEND DECLARED JANUARY 21, 1997.
A55
<PAGE> 105
EXHIBIT 21
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
SUBSIDIARIES OF STIFEL FINANCIAL CORP. (1)
<TABLE>
<CAPTION>
STATE OF NAMES UNDER WHICH
NAME INCORPORATION SUBSIDIARY DOES BUSINESS
- - ---- ------------- ------------------------
<S> <C> <C>
- - - Stifel, Nicolaus & Missouri Stifel, Nicolaus & Company,
Company, Incorporated Incorporated
- - - Alliance Realty Corp. Missouri Alliance Realty Corp.
- - - Century Securities Missouri Century Securities
Associates, Inc. Associates, Inc.
- - - Stifel, Nicolaus Insurance Arkansas Stifel, Nicolaus Insurance
Agency, Inc. (2) Agency, Inc.
- - - S-N Capital Corp. (2) Missouri S-N Capital Corp.
- - - Stifel Insurance Agency - Ohio Stifel Insurance Agency -
Ohio, Inc. (4) Ohio, Inc.
- - - Stifel Venture Corp. Missouri Stifel Venture Corp.
- - - Pin Oak Capital, Ltd. (3) Missouri Pin Oak Capital, Ltd.
- - - Stifel Asset Management Corp. Missouri Stifel Asset Management
Corp.
- - - Todd Investment Advisors, Inc. (3) Kentucky Todd Investment Advisors,
Inc.
</TABLE>
- - ------------------
(1) Does not include corporations in which registrant owns 50 percent or
less of the stock.
(2) Wholly owned subsidiary of Stifel, Nicolaus & Company, Incorporated.
(3) Wholly owned subsidiary of Stifel Asset Management Corp.
(4) Majority owned subsidiary of Stifel, Nicolaus & Company, Incorporated.
A56
<PAGE> 106
[DELOITTE & TOUCHE LLP LETTERHEAD]
EXHIBIT 23 (a)
STIFEL FINANCIAL CORP.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statements of
Stifel Financial Corp. and Subsidiaries on Form S-8 (file numbers 2-94326,
33-10030, 33-16150, 33-20568 and 33-53097) and on Form S-3 (file number
33-53699), of our report dated February 25, 1997, incorporated by reference
in the Annual Report on Form 10-K of Stifel Financial Corp. for the year
ended December 31, 1996.
/s/ Deloitte & Touche LLP
February 25, 1997
A57
<PAGE> 107
[COOPERS & LYBRAND LETTERHEAD]
EXHIBIT 23 (b)
STIFEL FINANCIAL CORP.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Stifel Financial Corp. and Subsidiaries on Form S-8 (file numbers 2-94326,
33-10030, 33-16150, 33-20568 and 33-53097) and on Form S-3 (file number
33-53699), of our report dated February 25, 1996 on our audits of the
consolidated financial statements and financial statement schedules of Stifel
Financial Corp. and Subsidiaries as of December 31, 1995 and for the years
ended December 31, 1995 and December 31, 1994, which report is incorporated
by reference in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
St. Louis, Missouri
March 17, 1997
A58
<PAGE> 108
APPENDIX B
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 27, 1997
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 1-9305
------
STIFEL FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1273600
- - ------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 N. Broadway, St. Louis, Missouri 63102-2188
- - -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314-342-2000
------------
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Shares of common stock outstanding at March 27, 1997: 4,722,491
par value $.15.
Exhibit Index is on page 15.
B1
<PAGE> 109
Stifel Financial Corp. And Subsidiaries
Form 10-Q Index
March 27, 1997
PAGE
PART I. FINANCIAL CONDITION ----
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition --
March 27, 1997 and December 31, 1996.............. 3-4
Consolidated Statements of Operations --
Three Months Ended March 27, 1997 and
March 29, 1996.................................... 5
Consolidated Statements of Cash Flows--
Three Months Ended March 27, 1997 and
March 29, 1996.................................... 6-7
Notes to Consolidated Financial Statements........ 8-10
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition.... 11-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................ 13
Item 4. Submission of Matters to a Vote of
Security Holders................................. 13
Item 6. Exhibits and Reports on Form 8-K................. 13
Signatures................................................ 14
B2
<PAGE> 110
PART I. FINANCIAL CONDITION
Item 1. Financial Statements (UNAUDITED)
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
MARCH 27, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 6,126 $ 7,960
Cash segregated for the exclusive
benefit of customers 309 483
Receivable from brokers and dealers 18,991 14,836
Receivable from customers, net of
allowance for doubtful accounts of
$578 and $582, respectively 267,874 235,216
Securities owned, at fair value 27,464 18,913
Membership in exchanges, at cost 513 513
Office equipment and leasehold
improvements, at cost, net of
allowances for depreciation and
amortization of $10,081 and
$10,125, respectively 2,312 2,233
Goodwill, net of accumulated
amortization of $1,184 and $1,107,
respectively 4,411 4,488
Notes receivable from and advances to
officers and employees, net of
allowance for doubtful receivables
of $2,201 and $2,552, respectively
3,343 3,373
Refundable income taxes 354 358
Deferred tax asset 3,552 3,671
Other assets 7,947 9,005
-------- --------
$343,196 $301,049
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
B3
<PAGE> 111
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
(UNAUDITED)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
MARCH 27, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Short-term borrowings from banks $166,375 $132,400
Payable to brokers and dealers 62,089 47,148
Payable to customers 28,534 32,095
Securities sold, but not yet purchased,
at fair value 3,536 3,229
Drafts payable 11,897 15,287
Accrued employee compensation 10,378 14,756
Obligations under capital leases 703 581
Accounts payable and accrued expenses 10,168 7,801
Convertible debt 10,000 10,000
-------- --------
Total Liabilities 303,680 263,297
Stockholders' equity
Preferred stock -- $1 par value;
authorized 3,000,000 shares; none
issued
Common stock -- $.15 par value;
authorized 10,000,000 shares; issued
4,767,715 shares; outstanding
4,722,491 and 4,632,260 shares,
respectively 715 715
Additional paid-in capital 21,119 21,403
Retained earnings 18,238 16,733
-------- --------
40,072 38,851
Less treasury stock, at cost 45,224
and 135,455 shares, respectively 374 892
Less unamortized expense of restricted
stock awards 182 207
-------- --------
Total Stockholders' Equity 39,516 37,752
-------- --------
$343,196 $301,049
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
B4
<PAGE> 112
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 27, 1997 MARCH 29, 1996
-------------- --------------
<S> <C> <C>
REVENUES
Commissions $ 11,420 $ 11,042
Principal transactions 5,266 4,788
Investment banking 7,696 1,214
Interest 4,045 3,190
Other 3,418 3,204
-------- --------
31,845 23,438
EXPENSES
Employee compensation and benefits 20,215 14,526
Commissions and floor brokerage 695 665
Communications and office supplies 1,658 1,696
Occupancy and equipment rental 1,443 1,821
Interest 2,351 1,942
Other operating expenses 2,731 2,530
-------- --------
29,093 23,180
-------- --------
INCOME BEFORE INCOME TAXES 2,752 258
Provision for income taxes 1,105 108
-------- --------
NET INCOME $ 1,647 $ 150
======== ========
Net income per share:
Primary $ 0.34 $0.03
Fully diluted $ 0.28 $0.03
Dividends declared per share $ 0.03 $0.03
Average common equivalent shares
outstanding:
Primary 4,852 4,724
Fully Diluted 6,270 6,145
</TABLE>
See Notes to Consolidated Financial Statements.
B5
<PAGE> 113
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 27, 1997 MARCH 29, 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,647 $ 150
Noncash items included in earnings:
Depreciation and amortization 383 423
Provision for litigation and bad debts 450 133
Net Realized and unrealized gains on
investments (25) (18)
Bonus notes amortization 330 236
Deferred compensation 175 111
Deferred tax provision 119 300
Amortization of restricted stock awards 25 15
-------- --------
3,104 1,350
(Increase) decrease in operating receivables:
Customers (32,658) 16,838
Brokers and dealers (4,155) 1,620
(Decrease) increase in operating payables:
Customers (3,561) (11,865)
Brokers and dealers 14,941 17,696
Decrease (increase) in assets:
Cash and U.S. Government securities
segregated for the exclusive benefit
of customers 174 198
Securities owned (8,551) (3,597)
Notes receivable from officers and employees (263) (579)
Other assets 1,519 3,651
Increase (decrease) in liabilities:
Securities sold, not yet purchased 307 (1,471)
Drafts payable, accounts payable and
accrued expenses, and accrued employee
compensation (5,584) (12,818)
-------- --------
CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES $(34,727) $ 11,023
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
B6
<PAGE> 114
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 27, 1997 MARCH 29, 1996
-------------- --------------
<S> <C> <C>
CASH (USED FOR) PROVIDED BY OPERATING
ACTIVITIES - FROM PREVIOUS PAGE $(34,727) $ 11,023
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) for short-term
borrowings from banks 33,975 (11,700)
Proceeds from:
Temporary subordinated debt 8,000 - -
Employee stock purchase plan 727 617
Exercised stock options 15 - -
Dividend reinvestment plan 2 5
Payments for:
Temporary subordinated debt (8,000) - -
Settlement of long-term debt - - (760)
Purchases of stock for treasury (796) (6)
Principal payments under capital
lease obligation (103) (66)
Cash dividends (143) (134)
-------- --------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 33,677 (12,044)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of office equipment and
leasehold improvements 3 5
Sale of investments - - 190
Payments for:
Acquisition of office equipment and
leasehold improvements (161) (90)
Acquisition of investments (626) (37)
-------- --------
CASH (USED FOR) PROVIDED BY
INVESTING ACTIVITIES (784) 68
-------- --------
Decrease in cash and cash equivalents (1,834) (953)
Cash and cash equivalents -
beginning of period 7,960 6,344
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 6,126 $ 5,391
======== ========
Supplemental disclosure of cash flow
information:
Income tax payments $ 49 $ 20
Interest payments $ 2,449 $ 2,317
Schedule of noncash investing and
financing activities:
Fixed assets acquired under capital lease $ 292 - -
Employee stock ownership plan shares issued $ 287 - -
</TABLE>
See Notes to Consolidated Financial Statements.
B7
<PAGE> 115
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Stifel
Financial Corp. and its subsidiaries (collectively referred to as "the
Company"). The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 27, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1996.
Where appropriate, prior years' financial information has been reclassified
to conform with the current year presentation.
NOTE B - NET CAPITAL REQUIREMENT
The Company's principal subsidiary, Stifel, Nicolaus & Company,
Incorporated ("SN & Co."), is subject to the Uniform Net Capital Rule 15c3-1
under the Securities Exchange Act of 1934 (the "rule"), which requires the
maintenance of minimum net capital, as defined. SN & Co. has elected to use the
alternative method permitted by the rule which requires maintenance of minimum
net capital equal to the greater of $250 or 2 percent of aggregate debit items
arising from customer transactions, as defined. The rule also provides that
equity capital may not be withdrawn or cash dividends paid if resulting net
capital would be less than 5 percent of aggregate debit items.
At March 27, 1997, SN & Co. had net capital of $25,883 which was 9% of its
aggregate debit items and $20,311 in excess of minimum net capital.
B8
<PAGE> 116
NOTE C - PLAN OF RESTRUCTURING
During the fourth quarter of 1994, the Board of Directors of the Company
approved a restructuring and downsizing plan for the Company which was
implemented beginning in December 1994, and involved the closing or downsizing
of 31 office locations and termination of approximately 70 officers and
employees. Detail of the activity during the first three months related to the
restructuring accruals are as follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------
BALANCE ADJUSTMENTS BALANCE
AT RECORDED AT
DECEMBER PAYMENTS/ THROUGH MARCH 27,
31, 1996 CHARGES OPERATIONS 1997
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net lease commitments for closed offices $657 $ 77 $318 $262
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Such amounts are included in the consolidated statement of financial
condition under the caption of "Accounts payable and accrued expenses" at March
27, 1997 and December 31, 1996.
During the period, the Company renegotiated a long-term lease commitment
resulting in a credit to operations which had previously been included in the
restructuring charge taken in 1994.
NOTE D - SALE OF OKLAHOMA-BASED ASSETS
On May 25, 1995, the Company sold the majority of the assets of its
Oklahoma-based operations to Capital West Financial Corporation ("Capital
West"). The Company received secured and senior notes with a face amount of
$1,850 bearing interest at a 10% annual rate with the final payments due May 24,
2000, in connection with the sale of its Oklahoma-based assets. The notes were
recorded at a discounted rate of 17%. The Company had deferred recognition of
the gain on the sale in the amount of $570 and had deferred recognition of any
interest income related to the notes until such time that Capital West had
demonstrated the ability to generate earnings and cash flow to fund interest and
principal payments when scheduled. The Company received payments of $79 toward
the notes. The notes receivable net of the discount of $336 and deferred gain of
$570 are included in the statement of financial condition under the caption
"Other assets" at December 31, 1996.
On January 2, 1997, Capital West was reorganized and a new company,
Affinity Holdings Corporation ("Affinity"), was formed. Affinity assumed the
outstanding debt of Capital West. As part of the reorganization, Affinity
exchanged the remaining balance of the $1,850 secured and senior notes issued by
Capital West for a secured note due December 31, 2001, with a face amount of
$305 bearing interest at a 10% annual rate; two hundred thousand shares of 10%
cumulative non-voting preferred stock, par value $1.00; warrants to purchase a
minority interest in Affinity; and substantially all of the fixed assets of
Affinity with a fair value of approximately $300, which are being leased back to
Affinity. Principal and interest payments to date total $138 and are being made
monthly based upon the level of activity of Affinity's broker-dealer subsidiary.
The note receivable, preferred stock, and lease receivable are included in the
statement of financial
B9
<PAGE> 117
condition under the caption "Other assets" at March 27, 1997. The transaction
had no material impact on the results of operations for the Company for the
quarter ended March 27, 1997.
NOTE E- RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS 128, "Earnings per
Share," which is to be implemented by companies whose fiscal year ends after
December 15, 1997. The adoption of this accounting standard will not have a
material impact on the Company's reported earnings per share.
NOTE F - SUBSEQUENT EVENT
On April 22, 1997, the Company's Board of Directors declared a regular
quarterly dividend of $0.03 per share, payable on May 20, 1997 to stockholders
of record May 6, 1997.
******
B10
<PAGE> 118
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 1997 AND MARCH 1996
The Company recorded net earnings of $1,647, or $0.34 per primary share on
total revenues of $31,845 for the first quarter ended March 27, 1997, compared
to net earnings of $150 or $0.03 per primary share on total revenues of $23,438
for the same period one year earlier.
The increase in 1997 first quarter results over 1996 first quarter results
can be attributed primarily to the increase in revenues. Total revenues
increased $8,407 (35.9%) from $23,438 to $31,845 as retail investor activity
remained strong coupled with a solid investment banking performance.
Investment banking increased $6,482 (533.9%) from $1,214 to $7,696 as a
result of underwriting a number of secondary offerings of trust preferred stocks
for financial institutions and REITs for mortgage banking companies. These
underwritings generated $6,400 in revenue.
Interest revenue increased $855 (26.8%) primarily as a result of increased
secured borrowings by individual investors. Total customer receivables increased
$127,816 (91.3%) from $140,058 at March 29, 1996 to $267,874 at March 27, 1997,
due largely to increases in borrowings by certain customers.
Commissions and principal transactions increased $378 (3.4%) from $11,042
to $11,420 and $478 (10.0%) from $4,788 to $5,266, respectively due to
continued strong markets for individual investor activity. Other revenue
increased $214 (6.7%) from $3,204 to $3,418 principally due to continued growth
of the managed account program.
Total expenses increased $5,913 (25.5%) from $23,180 to $29,093, primarily
as a result of increased compensation and benefits which increased $5,689
(39.2%) from $14,526 to $20,215. The variable component of compensation and
benefits increased $5,458 (53.7%) from $10,161 to $15,619 correspondingly to
increased revenue production and increased profitability. The fixed portion of
compensation and benefits increased $231 (5.3%) from $4,364 to $4,595 due
principally to normal year to year salary adjustments.
Occupancy and equipment rental decreased $378 (20.8%) from $1,821 to
$1,443, primarily as a result of a one time credit related to a renegotiation of
a long term office space lease which had been previously accrued (see Note C of
Notes to Consolidated Financial Statements).
Interest expense increased $409 (21.1%) from $1,942 to $2,351 as a result
of increased borrowings for customer trading activity and increased borrowings
by the firm for underwriting activity and increased level of securities owned.
Average borrowings for the firm increased
B11
<PAGE> 119
$27,734 (41.0%) from $67,681 for the first quarter of 1996 to $95,415
for the first quarter of 1997.
Liquidity and Capital Resources
The Company's assets are highly liquid, consisting mainly of cash or assets
readily convertible into cash. These assets are financed primarily by the
Company's equity capital, customer credit balances, short-term bank loans,
proceeds from securities lending, long-term senior convertible notes, and other
payables. Changes in securities market volumes, related customer borrowing
demands, underwriting activity, and levels of securities inventory affect the
amount of the Company's financing requirements. Because of the nature of the
Company's business, the changes in operating assets and liability account
balances relative to net income for any particular accounting period can be
quite large and somewhat arbitrary and therefore are not very useful indicators
of long-term trends in the Company's cash flow from operations.
In the three months ended March 27, 1997, cash and cash equivalents
decreased $1,834 (23.0%) to $6,126 from $7,960 at December 31, 1996. The
decrease in cash was substantially a result of cash used by operating activities
of $34,727 and offset by cash provided by financing activities of $33,677. The
cash used for operating activities was principally attributed to increases in
operating receivables and securities inventory owned of $36,813 and $8,551,
respectively, and decreases of drafts payable, accounts payable and accrued
expenses, and accrued employee compensation of $5,584. The cash used for
operating activities was partly offset by cash provided by net income adjusted
for noncash charges of $3,104 and an increase in operating payables of $11,380.
The cash provided from financing activity primarily consisted of proceeds for
the short-term borrowings from banks of $33,975.r
SN & Co. is subject to requirements of the Securities and Exchange
Commission with regard to liquidity and capital requirements (see Note B of the
Notes to Consolidated Financial Statements). At March 27, 1997, SN & Co. had net
capital of $25,883 which was 9% of its aggregate debit items and $20,311 in
excess of the 2% net capital requirement.
During the first quarter ended March 27, 1997, SN & Co. obtained and repaid
a temporary subordinated note in the amount of $8,000. The subordinated note was
used to finance underwritings.
The first installment of the company's convertible debt is due September 1,
1997, in the amount of $2,500. Management believes that funds from operations
and available informal short-term credit arrangements of $93,625 at March 27,
1997, will provide sufficient resources to meet the present and anticipated
financing needs.
B12
<PAGE> 120
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There were no material changes, during the three months ended March 27,
1997, in the legal proceedings previously reported in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. Such information is
hereby incorporated by reference.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual meeting of Stockholders was held on April 22,
1997, for the election of four directors, the adoption of the 1997
Incentive Stock Plan, the adoption of the 1998 Employee Stock
Purchase Plan and for the appointment of Deloitte & Touche LLP as
the Company's independent auditors for the year ending December 31,
1997.
(b) Proxies for the meeting were solicited pursuant to
Regulation 14 under the Act. There was no solicitation in
opposition to the Board of Directors' proposals as listed in the Proxy
Statement and all of the proposals were passed.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Sequential
(Reference to Item 601(b) Page
of Regulation S-K) Description Number
------------------------- ----------- ----------
11 Computation of 16
Earnings Per Share
27 Financial Data Schedule 17
(furnished to the Securities
and Exchange Commission for
Electronic Data Gathering,
Analysis, and Retrieval
[EDGAR] purposes only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended March 27, 1997.
B13
<PAGE> 121
SIGNATURES
Pursuant to the requirement of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STIFEL FINANCIAL CORP.
(Registrant)
Date: May 8, 1997 By /s/ Gregory F. Taylor
---------------------------
Gregory F. Taylor
(Chief Executive Officer)
Date: May 8, 1997 By /s/ Stephen J. Bushmann
---------------------------
Stephen J. Bushmann
(Principal Financial and
Accounting Officer)
B14
<PAGE> 122
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
EXHIBIT INDEX
March 27, 1997
Exhibit Sequential
Number Description Page Number
------- ----------- -----------
11 Computation of Earnings Per Share 16
27 Financial Data Schedule 17
(furnished to the Securities and Exchange
Commission for Electronic Data
Gathering, Analysis, and Retrieval
[EDGAR] purposes only)
B15
<PAGE> 123
EXHIBIT 11
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 27, 1997 MARCH 29, 1996
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 1,647 $ 1,647 $ 150 $ 150
After-tax interest savings assuming
conversion of Senior Convertible
Notes (1) - - 129 - - 172
------- ------- ------- -------
Net income adjusted for after-
tax interest savings $ 1,647 $ 1,776 $ 150 $ 322
======= ======= ======= =======
Average number of common shares
outstanding during the period 4,709 4,709 4,669 4,669
Additional shares assuming exercise
of stock options (2) 143 143 55 58
Additional Shares assuming conversion
of Senior Convertible Notes (3) - - 1,418 - - 1,418
------- ------- ------- -------
Average number of common shares used
to calculate earnings per share 4,852 6,270 4,724 6,145
======= ======= ======= =======
Net earnings per share $ 0.34 $ 0.28 $ 0.03 $ 0.03(4)
======= ======= ======= =======
</TABLE>
(1) Represents the after-tax interest savings resulting from
assumed conversion of $10,000,000 aggregate principal 11.25% Senior
Convertible Notes.
(2) Represents the number of shares of common stock issuable on the
exercise of dilutive employee stock options less the number
of shares of common stock which could have been purchased with
the proceeds from the exercise of such options and assumed
purchases of stock from the Employee Stock Purchase Plan (ESPP).
For primary earnings per share computations, these purchases were
assumed to have been made at the average market price of the common
stock during the period or that part of the period for which the
option was outstanding or shares assumed purchased through the ESPP.
For fully diluted earnings per share computations, these purchases
were assumed to have been made at the greater of the market
price of the common stock at the end of the period or average market
price of the common stock during the period or that part of the
period for which the option was outstanding or shares assumed
purchased through the ESPP.
(3) Represents the number of shares of common stock issuable upon
conversion of $10,000,000 aggregate principal 11.25% Senior
Convertible Notes at a conversion price of $7.0536 per share.
(4) Net fully diluted earnings per share computes to $0.05 for the
three months ended March 29, 1996. Since this is anti-dilutive,
fully diluted earnings per share is equivalent to primary earnings
per share.
B16
<PAGE> 124
------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.....................
Risk Factors...........................
Use of Proceeds........................
Market for the Preferred Securities....
Accounting Treatment...................
Capitalization.........................
Description of the Preferred
Securities...........................
Description of the Subordinated
Debentures...........................
Description of the Guarantee...........
Relationship Among the Preferred
Securities, Subordinated Debentures
and the Guarantee....................
Certain Federal Income Tax
Consequences.........................
ERISA Considerations...................
Underwriting...........................
Validity of Securities.................
Experts................................
Incorporation of Certain Documents by
Reference............................
Available Information..................
Appendix A............................. A-1
Appendix B............................. B-1
</TABLE>
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY STIFEL FINANCIAL, STIFEL CAPITAL
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF STIFEL FINANCIAL SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
======================================================
2,500,000 PREFERRED SECURITIES
STIFEL FINANCIAL
CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
[LOGO]
STIFEL FINANCIAL CORP.
------------------------
$25,000,000
% SUBORDINATED DEBENTURES
OF
STIFEL FINANCIAL CORP.
------------------------
Prospectus
June , 1997
------------------------
STIFEL, NICOLAUS & COMPANY
INCORPORATED
------------------------------------------------------
<PAGE> 125
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
discounts and commissions), which other than the SEC registration fee are
estimates, payable by the Company in connection with the sale and distribution
of the shares registered hereby:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $8,713
NASD Filing Fee............................................. 3,375
Printing and Engraving Expenses............................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Blue Sky Fees and Expenses.................................. *
Miscellaneous Expenses...................................... *
------
Total.................................................. $ *
======
</TABLE>
- - ------------
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following is a summary of Section 145 of the General Corporation Law of
the State of Delaware (the "DGCL").
Subject to restrictions contained in the DGCL, a corporation may indemnify
any person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection therewith if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, in connection with any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. A person who is successful on the merits or otherwise in any suit or
matter covered by the indemnification statute, shall be indemnified and
indemnification is otherwise authorized upon a determination that the person to
be indemnified has met the applicable standard of conduct required. Such
determination shall be made by a majority vote of the board of directors who
were not parties to such action, suit or proceeding, even though less than a
quorum, or if there are no such directors, or if such directors so direct, by
special independent counsel in a written opinion, or by the shareholders.
Expenses incurred in defense may be paid in advance upon receipt by the
corporation of a written undertaking by or on behalf of the recipient to repay
such amount if it is ultimately determined that the recipient is not entitled to
indemnification under the statute. The indemnification provided by statute is
not exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of shareholders or disinterested
directors or otherwise, and shall inure to the benefit of the heirs, executors
and administrators of such person. Insurance may be purchased on behalf of any
person entitled to indemnification by the corporation against any liability
asserted against him or her and incurred in an official capacity regardless of
whether the person could be indemnified under the statute. References to the
corporation include all constituent corporations absorbed in a consolidation or
merger as well as the resulting corporation, and anyone seeking indemnification
by virtue of acting in some capacity with a constituent corporation would stand
in the same position as if such person had served the resulting or surviving
corporation in the same capacity.
The By-Laws of the Company provide for indemnification of directors and
officers of the Company to the maximum extent permitted by the DGCL.
II-1
<PAGE> 126
The directors and officers of the Company are insured under a policy of
directors' and officers' liability insurance.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 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 the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
II-2
<PAGE> 127
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-3
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Stifel
Financial Corp. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Louis, State of Missouri, on this 6th day of
June, 1997.
STIFEL FINANCIAL CORP.
By: /s/ GEORGE H. WALKER III
------------------------------------
George H. Walker III
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, the Stifel
Financial Capital Trust certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Louis, State of Missouri, on this 6th day of
June, 1997.
STIFEL FINANCIAL CAPITAL TRUST
By: /s/ GEORGE H. WALKER III
------------------------------------
George H. Walker III
Trustee
By: /s/ GREGORY F. TAYLOR
------------------------------------
Gregory F. Taylor
Trustee
By: /s/ CHARLES R. HARTMAN
------------------------------------
Charles R. Hartman
Trustee
II-4
<PAGE> 129
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints George H. Walker III, Gregory F. Taylor
and Charles R. Hartman and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, and in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this registration statement and all amendments and supplements to
any prospectus relating thereto and any other documents and instruments
incidental thereto, and any registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary or advisable to be done in and about
the premises, as full to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming that each said attorneys-in-fact and
agents and/or any of them, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ GEORGE H. WALKER III Chairman of the Board June 6, 1997
- - ---------------------------------------------
George H. Walker III
/s/ GREGORY F. TAYLOR President and Chief Executive Officer June 6, 1997
- - --------------------------------------------- and Director (Principal Executive
Gregory F. Taylor Officer)
/s/ STEPHEN J. BUSHMANN Vice President, Treasurer and Chief June 6, 1997
- - --------------------------------------------- Financial Officer (Principal Financial
Stephen J. Bushmann Officer and Principal Accounting
Officer)
/s/ BRUCE A. BEDA Director June 6, 1997
- - ---------------------------------------------
Bruce A. Beda
/s/ BELLE A. CORI Director June 6, 1997
- - ---------------------------------------------
Belle A. Cori
/s/ CHARLES A. DILL Director June 6, 1997
- - ---------------------------------------------
Charles A. Dill
/s/ RICHARD F. FORD Director June 6, 1997
- - ---------------------------------------------
Richard F. Ford
/s/ JOHN J. GOEBEL Director June 6, 1997
- - ---------------------------------------------
John J. Goebel
/s/ STUART I. GREENBAUM Director June 6, 1997
- - ---------------------------------------------
Stuart I. Greenbaum
/s/ ROBERT E. LEFTON Director June 6, 1997
- - ---------------------------------------------
Robert E. Lefton
/s/ JAMES M. OATES Director June 6, 1997
- - ---------------------------------------------
James M. Oates
</TABLE>
II-5
<PAGE> 130
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <S>
*1.1 Underwriting Agreement, dated as of , 1997,
by and between the Company and Stifel, Nicolaus & Company,
Incorporated, as representatives of the several Underwriters
4.1(a) Restated Certificate of Incorporation of the Company filed
with the Secretary of State of the State of Delaware on June
1, 1983 (incorporated herein by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-1, as amended
(Registration File No. 2-84232)
4.1(b) Amendment to Restated Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on May
11, 1987 (incorporated herein by reference to Exhibit
(3)(a)(2) to the Company's Report on Form 10-K for the year
ended July 31, 1987)
4.1(c) Certificate of Designation, Preferences, and Rights of
Series A Junior Participating Preferred Stock of the Company
filed with the Secretary of State of Delaware on July 10,
1987 (incorporated herein by reference to Exhibit (3)(a)(3)
to the Company's Report on Form 10-K for the year ended July
31, 1987)
4.1(d) Amendment to Restated Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on
November 28, 1989 (incorporated herein by reference to
Exhibit (3)(a)(4) to the Company's Report on Form 10-K for
the year ended July 27, 1990)
4.2 Amended and Restated Bylaws of the Company (incorporated
herein by reference to Exhibit 3.1 to the Company's Report
on Form 10-K for the fiscal year ended July 30, 1993)
4.3 Note Agreement dated as of October 15, 1988, between the
Company and Bankers United Life Assurance Company and
Pacific Fidelity Life Insurance Company (incorporated herein
by reference to Exhibit 4 to the Company's Report on Form
10-Q for the quarterly period ended April 28, 1989)
4.4 Form of Indenture dated as of , 1997 by and
between the Company and relating to the
Junior Subordinated Debentures
4.5 Form of Debenture (included as Exhibit A to Exhibit 4.4)
4.6 Certificate of Trust of Stifel Financial Capital Trust
4.7 Trust Agreement of Stifel Financial Capital Trust
4.8 Form of Amended and Restated Trust Agreement
4.9 Form of Preferred Security Certificate for Stifel Financial
Capital Trust (included as an exhibit to Exhibit 4.8)
4.10 Form of Common Security Certificate for Stifel Financial
Capital Trust (included as an exhibit to Exhibit 4.8)
4.11 Form of Preferred Securities Guarantee Agreement of the
Company for Stifel Financial Capital Trust
4.12 Form of Agreement as to Expenses and Liabilities (included
as an exhibit to Exhibit 4.8)
*5.1 Opinion of Bryan Cave LLP as to legality of the Subordinated
Debentures and the Guarantee to be issued by the Company
*5.2 Opinion of Richards, Layton & Finger as to legality of the
Capital Securities to be issued by Stifel Financial Capital
Trust
*8.1 Opinion of Bryan Cave LLP as to certain federal income tax
matters
10.1(a) Employment Agreement with George H. Walker III dated August
21, 1987 (incorporated herein by reference to Exhibit 10(c)
to the Company's Report on Form 10-K for the fiscal year
ended July 31, 1987)
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <S>
10.1(b) First Amendment to Employment Agreement with George H.
Walker III (incorporated herein by reference to Exhibit
10(a)(2) to the Company's Report on Form 10-K for the fiscal
year ended July 31, 1992)
10.2 Form of Indemnification Agreement with directors of the
Company dated as of June 30, 1987 (incorporated herein by
reference to Exhibit 10.2 to the Company's Report on Form
8-K (date of earliest event reported - June 22, 1987) filed
July 14, 1987)
10.3 1983 Incentive Stock Option Plan of the Company
(incorporated herein by reference to Exhibit 4(a) to the
Company's Registration Statement on Form S-8 (Registration
File No. 2-94326) filed November 14, 1984)
10.4 1985 Incentive Stock Option Plan of the Company
(incorporated herein by reference to Exhibit 28C to the
Company's Registration Statement on Form S-8 (Registration
File No. 33-10033) filed November 7, 1986)
10.5 1987 Non-qualified Stock Option Plan of the Company
(incorporated herein by reference to Exhibit 10(h) to the
Company's Report on Form 10-K for the fiscal year ended July
31, 1987)
10.6 Amendment to 1983 Incentive Stock Option Plan, 1985
Incentive Stock Option Plan and 1987 Non-Qualified Stock
Option Plan (incorporated herein by reference to Exhibit
10(f) to the Company's Report on Form 10-K for the fiscal
year ended July 28, 1989)
10.7(a) 1993 Employee Stock Purchase Plan of the Company
(incorporated herein by reference to ANNEX A of the
Company's Definitive Proxy Statement (Registration File No.
33-16150) filed October 28, 1992)
10.7(b) First Amendment to the 1993 Employee Stock Plan of the
Company (incorporated herein by reference to Exhibit 4.5 to
the Company's Registration Statement on Form S-8
(Registration File No. 33-53097) filed April 11, 1994)
10.8 Employment and Non-Competition Agreement with Gregory F.
Taylor dated July 26, 1993 (incorporated herein by reference
to Exhibit 10(m) to the Company's Report on Form 10-K for
fiscal year ended July 30, 1993)
10.9 Dividend Reinvestment and Stock Purchase Plan of the Company
(incorporated herein by reference to the Company's
Registration Statement on Form S-3 (Registration File No.
33-53699) filed May 18, 1994)
10.10 1997 Incentive Stock Plan of the Company (incorporated
herein by reference to Appendix A of the Company's
Definitive Proxy Statement filed March 21, 1997)
10.11 1998 Employee Stock Purchase Plan of the Company
(incorporated herein by reference to Appendix B of the
Company's Definitive Proxy Statement filed March 21, 1997)
*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)
13.1 Annual Report on Form 10-K of the Company for the fiscal
year ended December 31, 1996 (included herein as Appendix A)
13.2 Quarterly Report on Form 10-Q of the Company for the fiscal
quarter ended March 31, 1997 (included herein as Appendix B)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Coopers & Lybrand LLP
*23.3 Consent of Bryan Cave LLP (included in Exhibit 5.1)
*23.4 Consent of Richards, Layton & Finger (included in Exhibit
5.2)
24.1 Power of Attorney of certain officers and directors of the
Company (located on the signature page hereto)
</TABLE>
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <S>
*25.1 Form T-1 Statement of Eligibility of to act as trustee under the Indenture
*25.2 Form T-1 Statement of Eligibility of to act as trustee under the Declaration of
Trust of Stifel Financial Capital Trust
*25.3 Form T-1 Statement of Eligibility of under the Guarantee for the benefit of
the holders of Capital Securities of Stifel Financial Capital Trust
</TABLE>
- - ------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 4.4
===============================================================================
STIFEL FINANCIAL CORP.
AND
____________________________
AS TRUSTEE
INDENTURE
_________% SUBORDINATED DEBENTURES DUE 2027
DATED AS OF _________________________, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Definitions of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II Issue, Description, Terms, Conditions Registration and Exchange of
the Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.1 Designation and Principal Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2. Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.3. Form and Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.4. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.5. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.6. Execution and Authentications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7. Registration of Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.8. Temporary Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.9. Mutilated, Destroyed, Lost or Stolen Debentures. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.10. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.11. Benefit of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.12. Authentication Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III Redemption of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.2. Special Event Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.3. Optional Redemption by Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.4. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.5. Payment Upon Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.6. No Sinking Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV Extension of Interest Payment Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.1. Extension of Interest Payment Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.2. Notice of Extension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.3. Limitation on Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V Particular Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1. Payment of Principal and Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2. Maintenance of Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.3. Paying Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.4. Appointment To Fill Vacancy in Office of Trustee. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.5. Compliance with Consolidation Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.6. Limitation on Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.7. Covenants as to the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.8. Covenants as to Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI Debentureholders' Lists and Reports by the Company and the Trustee . . . . . . . . . . . . . . . . . . . . 22
Section 6.1. Company To Furnish Trustee Names and Addresses of Debentureholders. . . . . . . . . . . . . . . 22
Section 6.2. Preservation of Information Communications with Debentureholders. . . . . . . . . . . . . . . . 23
Section 6.3. Reports by the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.4. Reports by the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII Remedies of the Trustee and Debentureholders on Event of Default . . . . . . . . . . . . . . . . . . . . 24
Section 7.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.2. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . 26
Section 7.3. Application of Moneys Collected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.4. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.5. Rights and Remedies Cumulative; Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . . 28
Section 7.6. Control by Debentureholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.7. Undertaking To Pay Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII Form of Debenture and Original Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.1. Form of Debenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.2. Original Issue of Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IX Concerning the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.1. Certain Duties and Responsibilities of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.2. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.3. Certain Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.4. Trustee Not Responsible for Recitals, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.5. May Hold Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.6. Moneys Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.7. Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.8. Reliance on Officers' Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.9. Disqualification; Conflicting Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.10. Corporate Trustee Required; Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.11. Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . . . . . . . . 35
Section 9.12. Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.13. Merger, Conversion, Consolidation or Succession to Business. . . . . . . . . . . . . . . . . . 37
Section 9.14. Preferential Collection of Claims Against the Company. . . . . . . . . . . . . . . . . . . . . 37
ARTICLE X Concerning the Debentureholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.1. Evidence of Action by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.2. Proof of Execution by Debentureholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.3. Who May Be Deemed Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.4. Certain Debentures Owned by Company Disregarded. . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.5. Actions Binding on Future Debentureholders. . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XI Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.1. Supplemental Indentures Without the Consent of Debentureholders. . . . . . . . . . . . . . . . 39
Section 11.2. Supplemental Indentures with Consent of Debentureholders. . . . . . . . . . . . . . . . . . . 40
Section 11.3. Effect of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.4. Debentures Affected by Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.5. Execution of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XII Successor Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.1. Company May Consolidate, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.2. Successor Corporation Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.3. Evidence of Consolidation, Etc. to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XIII Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 13.1. Satisfaction and Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 13.2. Discharge of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 13.3. Deposited Moneys To Be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 13.4. Payment of Monies Held by Paying Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 13.5. Repayment to Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE XIV Immunity of Incorporators, Stockholders, Officers and Directors . . . . . . . . . . . . . . . . . . . . . 44
Section 14.1. No Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE XV Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.1. Effect on Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.2. Actions by Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.3. Surrender of Company Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.5. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 15.6. Treatment of Debentures as Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 15.7. Compliance Certificates and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 15.8. Payments on Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 15.9. Conflict with Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 15.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 15.11. Separability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 15.12. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 15.13. Acknowledgment of Rights; Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XVI Subordination of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 16.1. Agreement to Subordinate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 16.2. Default on Senior Debt, Subordinated Debt or Additional Senior Obligations. . . . . . . . . . 48
Section 16.3. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 16.4. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 16.5. Trustee To Effectuate Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 16.6. Notice by the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 16.7. Rights of the Trustee; Holders of Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . 52
Section 16.8. Subordination May Not Be Impaired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
iv
<PAGE> 6
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
- - ------------------- ---------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9, 9.11
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.14
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.14
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1, 6.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2(c)
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2(c)
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(a)
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(b)
313(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(a), 6.4(b)
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(c)
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3(a)
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.7
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.7
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1(a), 9.3
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1(b)
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 7.6
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4(b)
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1(b)
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Indenture
and shall not affect the interpretation of any of its terms or provisions.
v
<PAGE> 7
INDENTURE
INDENTURE, dated as of __________, 1997, between STIFEL
FINANCIAL CORP., a Delaware corporation (the "Company"), and
____________________________, a trust company duly organized and existing under
the laws of the _________________ of ________________, as property trustee (the
"Trustee");
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the execution and delivery of this Indenture to provide for the
issuance of securities to be known as its ____% Subordinated Debentures due
2027 (hereinafter referred to as the "Debentures"), the form and substance of
such Debentures and the terms, provisions and conditions thereof to be set
forth as provided in this Indenture;
WHEREAS, Stifel Financial Capital Trust, a Delaware statutory
business trust (the "Trust"), has offered to the public up to $28.75 million
aggregate liquidation amount of its Preferred Securities (as defined herein)
and proposes to invest the proceeds from such offering, together with the
proceeds of the issuance and sale by the Trust to the Company of up to $889,500
aggregate liquidation amount of its Common Securities (as defined herein), in
$29,639,500 aggregate principal amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute
and deliver this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a
valid instrument in accordance with its terms, and to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been performed, and the execution and
delivery of this Indenture have been duly authorized in all respects:
WHEREAS, to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered, the Company has duly
authorized the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the
purchase of the Debentures by the holders thereof, it is mutually covenanted
and agreed as follows for the equal and ratable benefit of the holders of the
Debentures:
<PAGE> 8
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS OF TERMS.
The terms defined in this Section 1.1 (except as in this
Indenture otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1 and
shall include the plural as well as the singular. All other terms used in this
Indenture that are defined in the Trust Indenture Act, or that are by reference
in the Trust Indenture Act defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires), shall
have the meanings assigned to such terms in the Trust Indenture Act and in the
Securities Act as in force at the date of the execution of this instrument.
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with Generally Accepted
Accounting Principles.
"Accelerated Maturity Date" means if the Company elects to
accelerate the Maturity Date in accordance with Section 2.2(c), the date
selected by the Company which is prior to the Scheduled Maturity Date, but is
after June 30, 2002.
"Additional Interest" shall have the meaning set forth in
Section 2.5.
"Additional Senior Obligations" means all indebtedness of the
Company whether incurred on or prior to the date of this Indenture or
thereafter incurred, for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; provided, however, that Additional Senior Obligations does not
include claims in respect of Senior Debt or Subordinated Debt or obligations
which, by their terms, are expressly stated to be not superior in right of
payment to the Debentures or to rank pari passu in right of payment with the
Debentures. For purposes of this definition, "claim" shall have the meaning
assigned thereto in Section 101(4) of the United States Bankruptcy Code of
1978, as amended.
"Administrative Trustees" shall have the meaning set forth in
the Trust Agreement.
"Affiliate" means, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding with power to vote
10% or more of the outstanding voting securities or other ownership interests
of the specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the specified Person; and (f)
if the specified Person is an individual, any entity of which the specified
Person is an officer, director or general partner.
2
<PAGE> 9
"Authenticating Agent" means an authenticating agent with
respect to the Debentures appointed by the Trustee pursuant to Section 2.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company or any duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification.
"Business Day" means, with respect to the Debentures, any day
other than a Saturday or a Sunday or a day on which federal or state banking
institutions in the Borough of Manhattan, The City of New York, are authorized
or required by law, executive order or regulation to close, or a day on which
the Corporate Trust Office of the Trustee or the Property Trustee is closed for
business.
"Certificate" means a certificate signed by the principal
executive officer, the principal financial officer, the principal accounting
officer, the treasurer or any vice president of the Company. The Certificate
need not comply with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in
the definition of "Investment Company Event."
"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.
"Common Securities" means undivided beneficial interests in
the assets of the Trust which rank pari passu with the Preferred Securities;
provided, however, that upon the occurrence of an Event of Default, the rights
of holders of Common Securities to payment in respect of (i) distributions, and
(ii) payments upon liquidation, redemption and otherwise, are subordinated to
the rights of holders of Preferred Securities.
"Company" means Stifel Financial Corp., a corporation duly
organized and existing under the laws of the State of Delaware, and, subject to
the provisions of Article XII, shall also include its successors and assigns.
"Compounded Interest" shall have the meaning set forth in
Section 4.1.
"Corporate Trust Office" means the office of the Trustee at
which, at any particular time, its corporate trust business shall be
principally administered, which office at the
3
<PAGE> 10
date hereof is located at Two International Place, 4th Floor, Boston,
Massachusetts 02110, Attention: Corporate Trust Department.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Custodian" means any receiver, trustee, assignee, liquidator,
or similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals
hereto.
"Debentureholder," "holder of Debentures," "registered
holder," or other similar term, means the Person or Persons in whose name or
names a particular Debenture shall be registered on the books of the Company or
the Trustee kept for that purpose in accordance with the terms of this
Indenture.
"Debenture Register" shall have the meaning set forth in
Section 2.7(b).
"Debenture Registrar" shall have the meaning set forth in
Section 2.7(b).
"Debt" means with respect to any Person, whether recourse is
to all or a portion of the assets of such Person and whether or not contingent,
(i) every obligation of such Person for money borrowed; (ii) every obligation
of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such
Person; and (vi) and every obligation of the type referred to in clauses (i)
through (v) of another Person and all dividends of another Person the payment
of which, in either case, such Person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice
or lapse of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in
Section 4.1.
"Dissolution Event" means that as a result of the occurrence
and continuation of a Special Event, the Trust is to be dissolved in accordance
with the Trust Agreement and, the Debentures held by the Property Trustee are to
be distributed, after satisfaction of liabilities of creditors of the Trust as
required by applicable law, to the holders of the Trust Securities issued by the
Trust pro rata, in accordance with the Trust Agreement.
"Distribution" shall have the meaning set forth in the Trust
Agreement.
4
<PAGE> 11
"Event of Default" means, with respect to the Debentures, any
event specified in Section 7.1, which has continued for the period of time, if
any, and after the giving of the notice, if any, therein designated.
"Exchange Act," means the Securities Exchange Act of 1934, as
amended, as in effect at the date of execution of this instrument.
"Extended Maturity Date" means if the Company elects to extend
the Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is after the Scheduled Maturity Date but before June 30, 2036.
"Extension Period" shall have the meaning set forth in Section
4.1.
"Generally Accepted Accounting Principles" means such
accounting principles as are generally accepted at the time of any computation
required hereunder.
"Governmental Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged; or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America that, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depositary receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"Herein," "hereof," and "hereunder," and other words of
similar import, refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date" shall have the meaning set forth in
Section 2.5.
"Investment Company Act," means the Investment Company Act of
1940, as amended, as in effect at the date of execution of this instrument.
"Investment Company Event" means the receipt by the Trust of
an Opinion of Counsel, rendered by a law firm experienced in such matters, to
the effect that, as a result of the occurrence of a change in law or regulation
or a change in interpretation or application of law or
5
<PAGE> 12
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Trust is or shall be considered an
"investment company" that is required to be registered under the Investment
Company Act, which Change in 1940 Act Law becomes effective on or after the date
of original issuance of the Preferred Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature
and on which the principal shall be due and payable together with all accrued
and unpaid interest thereon including Compounded Interest and Additional
Interest, if any.
"Ministerial Action" shall have the meaning set forth in
Section 3.2.
"Officers' Certificate" means a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Controller or an Assistant Controller or the Secretary or an Assistant
Secretary of the Company that is delivered to the Trustee in accordance with
the terms hereof. Each such certificate shall include the statements provided
for in Section 15.7, if and to the extent required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal
counsel, who may be an employee of or counsel for the Company, that is
delivered to the Trustee in accordance with the terms hereof. Each such
opinion shall include the statements provided for in Section 15.7, if and to
the extent required by the provisions thereof.
"Outstanding," when used with reference to the Debentures,
means, subject to the provisions of Section 10.4, as of any particular time,
all Debentures theretofore authenticated and delivered by the Trustee under
this Indenture, except (a) Debentures theretofore canceled by the Trustee or
any paying agent, or delivered to the Trustee or any paying agent for
cancellation or that have previously been canceled; (b) Debentures or portions
thereof for the payment or redemption of which moneys or Governmental
Obligations in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been
set aside and segregated in trust by the Company (if the Company shall act as
its own paying agent); provided, however, that if such Debentures or portions
of such Debentures are to be redeemed prior to the maturity thereof, notice of
such redemption shall have been given as in Article III provided, or provision
satisfactory to the Trustee shall have been made for giving such notice; and
(c) Debentures in lieu of or in substitution for which other Debentures shall
have been authenticated and delivered pursuant to the terms of Section 2.7.
"Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 5.3.
"Person" means any individual, corporation, partnership,
joint-venture, joint-stock company, unincorporated organization or government
or any agency or political subdivision thereof.
"Predecessor Debenture" means every previous Debenture
evidencing all or a portion of the same debt as that evidenced by such
particular Debenture; and, for the purposes of
6
<PAGE> 13
this definition, any Debenture authenticated and delivered under Section 2.9 in
lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the
same debt as the lost, destroyed or stolen Debenture.
"Preferred Securities" means undivided beneficial interests in
the assets of the Trust which rank pari passu with Common Securities issued by
the Trust; provided, however, that upon the occurrence of an Event of Default,
the rights of holders of Common Securities to payment in respect of (i)
distributions, and (ii) payments upon liquidation, redemption and otherwise,
are subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the
Company may enter into with the Trustee or other Persons that operate directly
or indirectly for the benefit of holders of Preferred Securities.
"Property Trustee" has the meaning set forth in the Trust
Agreement.
"Responsible Officer" when used with respect to the Trustee
means the Chairman of the Board of Directors, the President, any Vice
President, the Secretary, the Treasurer, any trust officer, any corporate trust
officer or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of his or her knowledge of and familiarity with the particular
subject.
"Scheduled Maturity Date" means June 30, 2027.
"Securities Act," means the Securities Act of 1933, as
amended, as in effect at the date of execution of this instrument.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to the Company;
(ii) any Debt of the Company to any of its subsidiaries; (iii) Debt to any
employee of the Company; (iv) Debt which by its terms is subordinated to trade
accounts payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of such Debt by the
holders of the Debentures as a result of the subordination provisions of this
Indenture would be greater than they otherwise would have been as a result of
any obligation of such holders to pay amounts over to the obligees on such trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject;
and (v) Debt which constitutes Subordinated Debt.
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"Senior Indebtedness" shall have the meaning set forth in
Section 16.1.
"Special Event" means a Tax Event or an Investment Company
Event.
"Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of this
Indenture or thereafter incurred, which is by its terms expressly provided to
be junior and subordinate to other Debt of the Company (other than the
Debentures).
"Subsidiary" means, with respect to any Person, (i) any
corporation at least a majority of whose outstanding Voting Stock shall at the
time be owned, directly or indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries; (ii) any
general partnership, joint venture, trust or similar entity, at least a
majority of whose outstanding partnership or similar interests shall at the
time be owned by such Person, or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries; and (iii) any limited partnership
of which such Person or any of its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Trust of an Opinion of
Counsel, rendered by a law firm experienced in such matters, to the effect
that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the Preferred Securities under the Trust Agreement, there is
more than an insubstantial risk that (i) the Trust is, or shall be within 90
days after the date of such Opinion of Counsel, subject to United States
federal income tax with respect to income received or accrued on the
Debentures; (ii) interest payable by the Company on the Debentures is not, or
within 90 days after the date of such Opinion of Counsel, shall not be,
deductible by the Company, in whole or in part, for United States federal
income tax purposes; or (iii) the Trust is, or shall be within 90 days after
the date of such Opinion of Counsel, subject to more than a de minimis amount
of other taxes, duties, assessments or other governmental charges. The Trust
or the Company shall request and receive such Opinion of Counsel with regard to
such matters within a reasonable period of time after the Trust or the Company
shall have become aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
"Trust" means Stifel Financial Capital Trust, a Delaware
statutory business trust.
"Trust Agreement" means the Amended and Restated Trust
Agreement, dated as of ____________, 1997, of the Trust.
"Trustee" means _____________________ and, subject to the
provisions of Article IX, shall also include its successors and assigns, and,
if at any time there is more than one Person acting in such capacity hereunder,
"Trustee" shall mean each such Person.
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"Trust Indenture Act," means the Trust Indenture Act of 1939, as
amended, subject to the provisions of Sections 11.1, 11.2, and 12.1, as in
effect at the date of execution of this instrument.
"Trust Securities" means the Common Securities and Preferred
Securities, collectively.
"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest
(however designated) in such Person having ordinary voting power for the
election of a majority of the directors (or the equivalent) of such Person,
other than shares, interests, participations or other equivalents having such
power only by reason of the occurrence of a contingency.
ARTICLE II
Issue, Description, Terms, Conditions Registration and Exchange of the
Debentures
Section 2.1 Designation and Principal Amount.
There is hereby authorized Debentures designated the "___%
Subordinated Debentures due 2027," limited in aggregate principal amount up to
$29,639,500, which amount shall be as set forth in any written order of the
Company for the authentication and delivery of Debentures pursuant to Section
2.6.
Section 2.2. Maturity.
(a) The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to extend the Maturity
Date beyond the Scheduled Maturity Date in accordance with Section 2.2(b), the
Extended Maturity Date; or
(iii) if the Company elects to accelerate the
Maturity Date to be a date prior to the Scheduled Maturity Date in
accordance with Section 2.2(c), the Accelerated Maturity Date.
(b) The Company may at any time before the day which is
90 days before the Scheduled Maturity Date, elect to extend the Maturity Date
to the Extended Maturity Date, provided that the following conditions in this
Section 2.2(b) are satisfied both at the date the Company gives notice in
accordance with Section 2.2(d) of its election to extend the Maturity Date and
at the Scheduled Maturity Date:
(i) the Company is not in bankruptcy, otherwise
insolvent or in liquidation;
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(ii) the Company is not in default in the payment
of interest or principal on the Debentures; and
(iii) the Trust is not in arrears on payments of
Distributions on the Trust Securities issued by it and no deferred
Distributions are accumulated;
(c) The Company may, on one occasion, at any time before
the day which is 90 days before the Scheduled Maturity Date and after June 30,
2002, elect to shorten the Maturity Date to the Accelerated Maturity Date.
(d) If the Company elects to extend the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice to the registered
holders of the Debentures, the Property Trustee and the Trust of the extension
of the Maturity Date and the Extended Maturity Date at least 90 days and no
more than 180 days before the Scheduled Maturity Date.
(e) If the Company elects to accelerate the Maturity Date
in accordance with Section 2.2(c), the Company shall give notice to the
registered holders of the Debentures, the Property Trustee and the Trust of the
acceleration of the Maturity Date and the Accelerated Maturity Date at least 90
days and no more than 180 days before the Accelerated Maturity Date.
Section 2.3. Form and Payment.
The Debentures shall be issued in fully registered
certificated form without interest coupons. Principal and interest on the
Debentures issued in certificated form shall be payable, the transfer of such
Debentures shall be registrable and such Debentures shall be exchangeable for
Debentures bearing identical terms and provisions at the office or agency of
the Trustee; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the holder at such address as shall
appear in the Debenture Register or by wire transfer to an account maintained
by the holder as specified in the Debenture Register, provided that the holder
provides proper transfer instructions by the regular record date.
Notwithstanding the foregoing, so long as the holder of any Debentures is the
Property Trustee, the payment of the principal of and interest (including
Compounded Interest and Additional Interest, if any) on such Debentures held by
the Property Trustee shall be made at such place and to such account as may be
designated by the Property Trustee.
Section 2.4. [Intentionally Omitted]
Section 2.5. Interest.
(a) Each Debenture shall bear interest at the rate of
___% per annum (the "Coupon Rate") from the original date of issuance until the
principal thereof becomes due and payable, and on any overdue principal and (to
the extent that payment of such interest is enforceable under applicable law)
on any overdue installment of interest at the Coupon Rate, compounded
quarterly, payable (subject to the provisions of Article IV) quarterly in
arrears on
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March 31, June 30, September 30, and December 31 of each year (each, an
"Interest Payment Date," commencing on September 30, 1997), to the Person in
whose name such Debenture or any Predecessor Debenture is registered, at the
close of business on the regular record date for such interest installment,
which shall be the fifteenth day of the last month of the calendar quarter.
(b) The amount of interest payable for any period shall
be computed on the basis of a 360-day year of twelve 30-day months. The amount
of interest payable for any period shorter than a full quarterly period for
which interest is computed shall be computed on the basis of the number of days
elapsed in a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on the Debentures is not a Business Day, then
payment of interest payable on such date shall be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay) with the same force and effect as if made on the
date such payment was originally payable.
(c) If, at any time while the Property Trustee is the
holder of any Debentures, the Trust or the Property Trustee is required to pay
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other
taxing authority, then, in any case, the Company shall pay as additional
interest ("Additional Interest") on the Debentures held by the Property
Trustee, such additional amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after paying such
taxes, duties, assessments or other governmental charges shall be equal to the
amounts the Trust and the Property Trustee would have received had no such
taxes, duties, assessments or other government charges been imposed.
Section 2.6. Execution and Authentications.
(a) The Debentures shall be signed on behalf of the
Company by its Chief Executive Officer, President or one of its Vice
Presidents, under its corporate seal attested by its Secretary or one of its
Assistant Secretaries. Signatures may be in the form of a manual or facsimile
signature. The Company may use the facsimile signature of any Person who shall
have been a Chief Executive Officer, President or Vice President thereof, or of
any Person who shall have been a Secretary or Assistant Secretary thereof,
notwithstanding the fact that at the time the Debentures shall be authenticated
and delivered or disposed of such Person shall have ceased to be the Chief
Executive Officer, President or a Vice President, or the Secretary or an
Assistant Secretary, of the Company. The seal of the Company may be in the
form of a facsimile of such seal and may be impressed, affixed, imprinted or
otherwise reproduced on the Debentures. The Debentures may contain such
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Debenture shall be dated the date of its authentication by the
Trustee.
(b) A Debenture shall not be valid until manually
authenticated by an authorized signatory of the Trustee, or by an
Authenticating Agent. Such signature shall be conclusive evidence that the
Debenture so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.
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(c) At any time and from time to time after the execution
and delivery of this Indenture, the Company may deliver Debentures executed by
the Company to the Trustee for authentication, together with a written order of
the Company for the authentication and delivery of such Debentures signed by
its Chief Executive Officer, President or any Vice President and its Treasurer
or any Assistant Treasurer, and the Trustee in accordance with such written
order shall authenticate and deliver such Debentures.
(d) In authenticating such Debentures and accepting the
additional responsibilities under this Indenture in relation to such
Debentures, the Trustee shall be entitled to receive, and (subject to Section
9.1) shall be fully protected in relying upon, an Opinion of Counsel stating
that the form and terms thereof have been established in conformity with the
provisions of this Indenture.
(e) The Trustee shall not be required to authenticate
such Debentures if the issue of such Debentures pursuant to this Indenture
shall affect the Trustee's own rights, duties or immunities under the
Debentures and this Indenture or otherwise in a manner that is not reasonably
acceptable to the Trustee.
Section 2.7. Registration of Transfer and Exchange.
(a) Debentures may be exchanged upon presentation thereof
at the office or agency of the Company designated for such purpose in the
Borough of Manhattan, the City of New York, or at the office of the Debenture
Registrar, for other Debentures and for a like aggregate principal amount, upon
payment of a sum sufficient to cover any tax or other governmental charge in
relation thereto, all as provided in this Section 2.7. In respect of any
Debentures so surrendered for exchange, the Company shall execute, the Trustee
shall authenticate and such office or agency shall deliver in exchange therefor
the Debenture or Debentures that the Debentureholder making the exchange shall
be entitled to receive, bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its
office or agency designated for such purpose in the Borough of Manhattan, the
City of New York, or at the office of the Debenture Registrar, or such other
location designated by the Company a register or registers (herein referred to
as the "Debenture Register") in which, subject to such reasonable regulations
as it may prescribe, the Company shall register the Debentures and the
transfers of Debentures as provided in this Article II and which at all
reasonable times shall be open for inspection by the Trustee. The registrar
for the purpose of registering Debentures and transfer of Debentures as herein
provided shall initially be the Trustee and thereafter as may be appointed by
the Company as authorized by Board Resolution (the "Debenture Registrar").
Upon surrender for transfer of any Debenture at the office or agency of the
Company designated for such purpose, the Company shall execute, the Trustee
shall authenticate and such office or agency shall deliver in the name of the
transferee or transferees a new Debenture or Debentures for a like aggregate
principal amount. All Debentures presented or surrendered for exchange or
registration of transfer, as provided in this Section 2.7, shall be accompanied
(if so required by the Company or the Debenture Registrar) by a written
instrument or instruments of transfer, in
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form satisfactory to the Company or the Debenture Registrar, duly executed by
the registered holder or by such holder's duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or
registration of transfer of Debentures, or issue of new Debentures in case of
partial redemption, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge in relation thereto, other than
exchanges pursuant to Section 2.8, Section 3.5(b) and Section 11.4 not
involving any transfer.
(d) The Company shall not be required (i) to issue,
exchange or register the transfer of any Debentures during a period beginning
at the opening of business 15 days before the day of the mailing of a notice of
redemption of less than all the Outstanding Debentures and ending at the close
of business on the day of such mailing; nor (ii) to register the transfer of or
exchange any Debentures or portions thereof called for redemption.
Section 2.8. Temporary Debentures.
Pending the preparation of definitive Debentures, the Company
may execute, and the Trustee shall authenticate and deliver, temporary
Debentures (printed, lithographed, or typewritten). Such temporary Debentures
shall be substantially in the form of the definitive Debentures in lieu of
which they are issued, but with such omissions, insertions and variations as
may be appropriate for temporary Debentures, all as may be determined by the
Company. Every temporary Debenture shall be executed by the Company and be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with like effect, as the definitive Debentures. Without
unnecessary delay the Company shall execute and shall furnish definitive
Debentures and thereupon any or all temporary Debentures may be surrendered in
exchange therefor (without charge to the holders), at the office or agency of
the Company designated for the purpose in the Borough of Manhattan, the City of
New York, and the Trustee shall authenticate and such office or agency shall
deliver in exchange for such temporary Debentures an equal aggregate principal
amount of definitive Debentures, unless the Company advises the Trustee to the
effect that definitive Debentures need not be executed and furnished until
further notice from the Company. Until so exchanged, the temporary Debentures
shall be entitled to the same benefits under this Indenture as definitive
Debentures authenticated and delivered hereunder.
Section 2.9. Mutilated, Destroyed, Lost or Stolen Debentures.
(a) In case any temporary or definitive Debenture shall
become mutilated or be destroyed, lost or stolen, the Company (subject to the
next succeeding sentence) shall execute, and upon the Company's request the
Trustee (subject as aforesaid) shall authenticate and deliver, a new Debenture
bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Debenture, or in lieu of and in substitution for
the Debenture so destroyed, lost or stolen. In every case the applicant for a
substituted Debenture shall furnish to the Company and the Trustee such
security or indemnity as may be required by them to save each of them harmless,
and, in every case of destruction, loss or
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theft, the applicant shall also furnish to the Company and the Trustee evidence
to their satisfaction of the destruction, loss or theft of the applicant's
Debenture and of the ownership thereof. The Trustee may authenticate any such
substituted Debenture and deliver the same upon the written request or
authorization of the Chairman, President or any Vice President and the
Treasurer or any Assistant Treasurer of the Company. Upon the issuance of any
substituted Debenture, 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. In case any Debenture that has matured or is about to
mature shall become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Debenture, pay or authorize the payment of the
same (without surrender thereof except in the case of a mutilated Debenture) if
the applicant for such payment shall furnish to the Company and the Trustee
such security or indemnity as they may require to save them harmless, and, in
case of destruction, loss or theft, evidence to the satisfaction of the Company
and the Trustee of the destruction, loss or theft of such Debenture and of the
ownership thereof.
(b) Every replacement Debenture issued pursuant to the
provisions of this Section 2.9 shall constitute an additional contractual
obligation of the Company whether or not the mutilated, destroyed, lost or
stolen Debenture shall be found at any time, or be enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder. All
Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Debentures, and shall preclude (to the
extent lawful) any and all other rights or remedies, notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
Section 2.10. Cancellation.
All Debentures surrendered for the purpose of payment,
redemption, exchange or registration of transfer shall, if surrendered to the
Company or any paying agent, be delivered to the Trustee for cancellation, or,
if surrendered to the Trustee, shall be canceled by it, and no Debentures shall
be issued in lieu thereof except as expressly required or permitted by any of
the provisions of this Indenture. On request of the Company at the time of
such surrender, the Trustee shall deliver to the Company canceled Debentures
held by the Trustee. In the absence of such request the Trustee may dispose of
canceled Debentures in accordance with its standard procedures and deliver a
certificate of disposition to the Company. If the Company shall otherwise
acquire any of the Debentures, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are delivered to the Trustee for cancellation.
Section 2.11. Benefit of Indenture.
Nothing in this Indenture or in the Debentures, express or
implied, shall give or be construed to give to any Person, other than the
parties hereto and the holders of the Debentures (and, with respect to the
provisions of Article XVI, the holders of Senior Indebtedness) any legal or
equitable right, remedy or claim under or in respect of this Indenture, or
under any covenant,
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condition or provision herein contained; all such covenants, conditions and
provisions being for the sole benefit of the parties hereto and of the holders
of the Debentures (and, with respect to the provisions of Article XVI, the
holders of Senior Indebtedness).
Section 2.12. Authentication Agent.
(a) So long as any of the Debentures remain Outstanding
there may be an Authenticating Agent for any or all such Debentures, which the
Trustee shall have the right to appoint. Said Authenticating Agent shall be
authorized to act on behalf of the Trustee to authenticate Debentures issued
upon exchange, transfer or partial redemption thereof, and Debentures so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. All references in this Indenture to the authentication of
Debentures by the Trustee shall be deemed to include authentication by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall be a corporation that has a combined capital and surplus, as
most recently reported or determined by it, sufficient under the laws of any
jurisdiction under which it is organized or in which it is doing business to
conduct a trust business, and that is otherwise authorized under such laws to
conduct such business and is subject to supervision or examination by federal
or state authorities. If at any time any Authenticating Agent shall cease to
be eligible in accordance with these provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by
giving written notice of resignation to the Trustee and to the Company. The
Trustee may at any time (and upon request by the Company shall) terminate the
agency of any Authenticating Agent by giving written notice of termination to
such Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint
an eligible successor Authenticating Agent acceptable to the Company. Any
successor Authenticating Agent, upon acceptance of its appointment hereunder,
shall become vested with all the rights, powers and duties of its predecessor
hereunder as if originally named as an Authenticating Agent pursuant hereto.
ARTICLE III
Redemption of Debentures
Section 3.1. Redemption.
The Company may redeem the Debentures issued hereunder on and
after the dates set forth in and in accordance with the terms of this Article
III.
Section 3.2. Special Event Redemption.
If a Special Event has occurred and is continuing, then,
notwithstanding Section 3.3(a) but subject to Section 3.3(b), the Company shall
have the right upon not less than 30 days nor more than 60 days notice to the
holders of the Debentures to redeem the Debentures, in whole but not in part,
for cash within 180 days following the occurrence of such Special Event (the
"180-Day Period") at a redemption price equal to 100% of the principal amount
to be
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redeemed plus any accrued and unpaid interest thereon to the date of such
redemption (the "Redemption Price"), provided that if at the time there is
available to the Company the opportunity to eliminate, within the 180-Day
Period, a Tax Event by taking some ministerial action (a "Ministerial Action"),
such as filing a form or making an election, or pursuing some other similar
reasonable measure which has no adverse effect on the Company, the Trust or the
holders of the Trust Securities issued by the Trust, the Company shall pursue
such Ministerial Action in lieu of redemption, and, provided further, that the
Company shall have no right to redeem the Debentures while the Trust is
pursuing any Ministerial Action pursuant to its obligations under the Trust
Agreement. The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or such earlier time as the Company
determines, provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the
date such Redemption Price is to be paid.
Section 3.3. Optional Redemption by Company.
(a) Subject to the provisions of Section 3.3(b), except
as otherwise may be specified in this Indenture, the Company shall have the
right to redeem the Debentures, in whole or in part, from time to time, on or
after June 30, 2002, at a Redemption Price equal to 100% of the principal
amount to be redeemed plus any accrued and unpaid interest thereon to the date
of such redemption. Any redemption pursuant to this Section 3.3(a) shall be
made upon not less than 30 days nor more than 60 days notice to the holder of
the Debentures, at the Redemption Price. If the Debentures are only partially
redeemed pursuant to this Section 3.3, the Debentures shall be redeemed pro
rata or by lot or in such other manner as the Trustee shall deem appropriate
and fair in its discretion. The Redemption Price shall be paid prior to 12:00
noon, New York time, on the date of such redemption or at such earlier time as
the Company determines provided that the Company shall deposit with the Trustee
an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time,
on the date such Redemption Price is to be paid.
(b) If a partial redemption of the Debentures would
result in the delisting of the Preferred Securities issued by the Trust from
The Nasdaq Stock Market's National Market, the New York Stock Exchange or any
other national securities exchange or other organization on which the Preferred
Securities are then listed, the Company shall not be permitted to effect such
partial redemption and may only redeem the Debentures in whole.
Section 3.4. Notice of Redemption.
(a) In case the Company shall desire to exercise such
right to redeem all or, as the case may be, a portion of the Debentures in
accordance with the right reserved so to do, the Company shall, or shall cause
the Trustee to upon receipt of 45 days' written notice from the Company (which
notice shall, in the event of a partial redemption, include a representation to
the effect that such partial redemption shall not result in the delisting of
the Preferred Securities as described in Section 3.3(b) above), give notice of
such redemption to holders of the Debentures to be redeemed by mailing, first
class postage prepaid, a notice of such redemption not less than
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30 days and not more than 60 days before the date fixed for redemption to such
holders at their last addresses as they shall appear upon the Debenture
Register unless a shorter period is specified in the Debentures to be redeemed.
Any notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the registered holder receives
the notice. In any case, failure duly to give such notice to the holder of any
Debenture designated for redemption in whole or in part, or any defect in the
notice, shall not affect the validity of the proceedings for the redemption of
any other Debentures. In the case of any redemption of Debentures prior to the
expiration of any restriction on such redemption provided in the terms of such
Debentures or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with any such
restriction. Each such notice of redemption shall specify the date fixed for
redemption and the Redemption Price and shall state that payment of the
Redemption Price shall be made at the office or agency of the Company in the
Borough of Manhattan, The City of New York or at the Corporate Trust Office,
upon presentation and surrender of such Debentures, that interest accrued to
the date fixed for redemption shall be paid as specified in said notice and
that from and after said date interest shall cease to accrue. If less than all
the Debentures are to be redeemed, the notice to the holders of the Debentures
shall specify the particular Debentures to be redeemed. If the Debentures are
to be redeemed in part only, the notice shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
redemption date, upon surrender of such Debenture, a new Debenture or
Debentures in principal amount equal to the unredeemed portion thereof shall be
issued.
(b) If less than all the Debentures are to be redeemed,
the Company shall give the Trustee at least 45 days' notice in advance of the
date fixed for redemption as to the aggregate principal amount of Debentures to
be redeemed, and thereupon the Trustee shall select, by lot or in such other
manner as it shall deem appropriate and fair in its discretion, the portion or
portions (equal to $10 or any integral multiple thereof) of the Debentures to
be redeemed and shall thereafter promptly notify the Company in writing of the
numbers of the Debentures to be redeemed, in whole or in part. The Company
may, if and whenever it shall so elect pursuant to the terms hereof, by
delivery of instructions signed on its behalf by its President or any Vice
President, instruct the Trustee or any paying agent to call all or any part of
the Debentures for redemption and to give notice of redemption in the manner
set forth in this Section 3.4, such notice to be in the name of the Company or
its own name as the Trustee or such paying agent may deem advisable. In any
case in which notice of redemption is to be given by the Trustee or any such
paying agent, the Company shall deliver or cause to be delivered to, or permit
to remain with, the Trustee or such paying agent, as the case may be, such
Debenture Register, transfer books or other records, or suitable copies or
extracts therefrom, sufficient to enable the Trustee or such paying agent to
give any notice by mail that may be required under the provisions of this
Section 3.4.
Section 3.5. Payment Upon Redemption.
(a) If the giving of notice of redemption shall have been
completed as above provided, the Debentures or portions of Debentures to be
redeemed specified in such notice shall become due and payable on the date and
at the place stated in such notice at the applicable
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Redemption Price, and interest on such Debentures or portions of Debentures
shall cease to accrue on and after the date fixed for redemption, unless the
Company shall default in the payment of such Redemption Price with respect to
any such Debenture or portion thereof. On presentation and surrender of such
Debentures on or after the date fixed for redemption at the place of payment
specified in the notice, said Debentures shall be paid and redeemed at the
Redemption Price (but if the date fixed for redemption is an interest payment
date, the interest installment payable on such date shall be payable to the
registered holder at the close of business on the applicable record date
pursuant to Section 3.3).
(b) Upon presentation of any Debenture that is to be
redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debenture is presented shall
deliver to the holder thereof, at the expense of the Company, a new Debenture
of authorized denomination in principal amount equal to the unredeemed portion
of the Debenture so presented.
Section 3.6. No Sinking Fund.
The Debentures are not entitled to the benefit of any sinking
fund.
ARTICLE IV
Extension of Interest Payment Period
Section 4.1. Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing,
the Company shall have the right, at any time and from time to time during the
term of the Debentures, to defer payments of interest by extending the interest
payment period of such Debentures for a period not exceeding 20 consecutive
quarters (the "Extension Period"), during which Extension Period no interest
shall be due and payable; provided that no Extension Period may extend beyond
the Maturity Date. Interest, the payment of which has been deferred because of
the extension of the interest payment period pursuant to this Section 4.1,
shall bear interest thereon at the Coupon Rate compounded quarterly for each
quarter of the Extension Period ("Compounded Interest"). At the end of the
Extension Period, the Company shall calculate (and deliver such calculation to
the Trustee) and pay all interest accrued and unpaid on the Debentures,
including any Additional Interest and Compounded Interest (together, "Deferred
Interest") that shall be payable to the holders of the Debentures in whose
names the Debentures are registered in the Debenture Register on the first
record date after the end of the Extension Period. Before the termination of
any Extension Period, the Company may further extend such period, provided that
such period together with all such further extensions thereof shall not exceed
20 consecutive quarters, or extend beyond the Maturity Date of the Debentures.
Upon the termination of any Extension Period and upon the payment of all
Deferred Interest then due, the Company may commence a new Extension Period,
subject to the foregoing requirements. No interest shall be due and payable
during an Extension Period, except at the end thereof, but the Company may
prepay at any time all or any portion of the interest accrued during an
Extension Period.
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Section 4.2. Notice of Extension.
(a) If the Property Trustee is the only registered holder
of the Debentures at the time the Company selects an Extension Period, the
Company shall give written notice to the Administrative Trustees, the Property
Trustee and the Trustee of its selection of such Extension Period two Business
Days before the earlier of (i) the next succeeding date on which Distributions
on the Trust Securities issued by the Trust are payable; or (ii) the date the
Trust is required to give notice of the record date, or the date such
Distributions are payable, to The Nasdaq Stock Market's National Market, to the
New York Stock Exchange or other applicable self-regulatory organization or to
holders of the Preferred Securities issued by the Trust, but in any event at
least one Business Day before such record date.
(b) If the Property Trustee is not the only holder of the
Debentures at the time the Company selects an Extension Period, the Company
shall give the holders of the Debentures and the Trustee written notice of its
selection of such Extension Period at least two Business Days before the
earlier of (i) the next succeeding Interest Payment Date; or (ii) the date the
Company is required to give notice of the record or payment date of such
interest payment to The Nasdaq Stock Market's National Market, the New York
Stock Exchange or other applicable self-regulatory organization or to holders
of the Debentures.
(c) The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20
quarters permitted in the maximum Extension Period permitted under Section 4.1.
Section 4.3. Limitation on Transactions.
If (i) the Company shall exercise its right to defer payment
of interest as provided in Section 4.1; or (ii) there shall have occurred any
Event of Default, then (a) the Company shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock; (b) the
Company shall not make any payment of interest, principal or premium, if any,
or repay, repurchase or redeem any debt securities issued by the Company which
rank pari passu with or junior to the Debentures; provided, however, that
notwithstanding the foregoing the Company may make payments pursuant to its
obligations under the Preferred Securities Guarantee; and (c) the Company shall
not redeem, purchase or acquire less than all of the Outstanding Debentures or
any of the Preferred Securities.
ARTICLE V
Particular Covenants of the Company
Section 5.1. Payment of Principal and Interest.
The Company shall duly and punctually pay or cause to be paid
the principal of and interest on the Debentures at the time and place and in
the manner provided herein.
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Section 5.2. Maintenance of Agency.
So long as any of the Debentures remain Outstanding, the
Company shall maintain an office or agency in the Borough of Manhattan, The
City of New York, and at such other location or locations as may be designated
as provided in this Section 5.2, where (i) Debentures may be presented for
payment; (ii) Debentures may be presented as hereinabove authorized for
registration of transfer and exchange; and (iii) notices and demands to or upon
the Company in respect of the Debentures and this Indenture may be given or
served, such designation to continue with respect to such office or agency
until the Company shall, by written notice signed by its President or a Vice
President and delivered to the Trustee, designate some other office or agency
for such purposes or any of them. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, notices and demands may
be made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
notices and demands. In addition to any such office or agency, the Company may
from time to time designate one or more offices or agencies outside of the
Borough of Manhattan, The City of New York, where the Debentures may be
presented for registration or transfer and for exchange in the manner provided
herein, and the Company may from time to time rescind such designation as the
Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain any such office or agency in the Borough of Manhattan,
The City of New York, for the purposes above mentioned. The Company shall give
the Trustee prompt written notice of any such designation or rescission
thereof.
Section 5.3. Paying Agents.
(a) The Property Trustee shall act as the Paying Agent.
If the Company shall appoint one or more paying agents for the Debentures,
other than the Property Trustee, the Company shall cause each such paying agent
to execute and deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as
such agent for the payment of the principal of or interest on the
Debentures (whether such sums have been paid to it by the Company or
by any other obligor of such Debentures) in trust for the benefit of
the Persons entitled thereto;
(ii) that it shall give the Trustee notice of any
failure by the Company (or by any other obligor of such Debentures) to
make any payment of the principal of or interest on the Debentures
when the same shall be due and payable;
(iii) that it shall, at any time during the
continuance of any failure referred to in the preceding paragraph
(a)(ii) above, upon the written request of the Trustee, forthwith pay
to the Trustee all sums so held in trust by such Paying Agent; and
(iv) that it shall perform all other duties of
Paying Agent as set forth in this Indenture.
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(b) If the Company shall act as its own Paying Agent with
respect to the Debentures, it shall on or before each due date of the principal
of or interest on such Debentures, set aside, segregate and hold in trust for
the benefit of the Persons entitled thereto a sum sufficient to pay such
principal or interest so becoming due on Debentures until such sums shall be
paid to such Persons or otherwise disposed of as herein provided and shall
promptly notify the Trustee of such action, or any failure (by it or any other
obligor on such Debentures) to take such action. Whenever the Company shall
have one or more Paying Agents for the Debentures, it shall, prior to each due
date of the principal of or interest on any Debentures, deposit with the Paying
Agent a sum sufficient to pay the principal or interest so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal or interest, and (unless such Paying Agent is the Trustee) the
Company shall promptly notify the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the
contrary, (i) the agreement to hold sums in trust as provided in this Section
5.3 is subject to the provisions of Section 13.3 and 13.4; and (ii) the Company
may at any time, for the purpose of obtaining the satisfaction and discharge of
this Indenture or for any other purpose, pay, or direct any Paying Agent to
pay, to the Trustee all sums held in trust by the Company or such Paying Agent,
such sums to be held by the Trustee upon the same terms and conditions as those
upon which such sums were held by the Company or such Paying Agent; and, upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Section 5.4. Appointment To Fill Vacancy in Office of Trustee.
The Company, whenever necessary to avoid or fill a vacancy in
the office of Trustee, shall appoint, in the manner provided in Section 9.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
Section 5.5. Compliance with Consolidation Provisions.
The Company shall not, while any of the Debentures remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its property to any other company unless the
provisions of Article XII hereof are compiled with.
Section 5.6. Limitation on Transactions.
If Debentures are issued to the Trust or a trustee of the
Trust in connection with the issuance of Trust Securities by the Trust and (i)
there shall have occurred any event that would constitute an Event of Default;
(ii) the Company shall be in default with respect to its payment of any
obligations under the Preferred Securities Guarantee relating to the Trust; or
(iii) the Company shall have given notice of its election to defer payments of
interest on such Debentures by extending the interest payment period as
provided in this Indenture and such period, or any extension thereof, shall be
continuing, then (a) the Company shall not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock; (b) the Company
shall not
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make any payment of interest, principal or premium, if any, or repay,
repurchase or redeem any debt securities issued by the Company which rank pari
passu with or junior to the Debentures; provided, however, that the Company may
make payments pursuant to its obligations under the Preferred Securities
Guarantee; and (c) the Company shall not redeem, purchase or acquire less than
all of the Outstanding Debentures or any of the Preferred Securities.
Section 5.7. Covenants as to the Trust.
For so long as the Trust Securities of the Trust remain
outstanding, the Company shall (i) maintain 100% direct or indirect ownership
of the Common Securities of the Trust; provided, however, that any permitted
successor of the Company under this Indenture may succeed to the Company's
ownership of the Common Securities; (ii) use its reasonable efforts to cause
the Trust (a) to remain a business trust, except in connection with a
distribution of Debentures, the redemption of all of the Trust Securities of
the Trust or certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement; and (b) to otherwise continue not to be
treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; and (iii) use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an individual
beneficial interest in the Debentures. In connection with the distribution of
the Debentures to the holders of the Preferred Securities issued by the Trust
upon a Dissolution Event, the Company shall use its best efforts to list such
Debentures on The Nasdaq Stock Market's National Market, on the New York Stock
Exchange or on such other exchange as the Preferred Securities are then listed.
Section 5.8. Covenants as to Purchases.
Except upon the exercise by the Company of its right to redeem
the Debentures pursuant to Section 3.2 upon the occurrence and continuation of
a Special Event, the Company shall not purchase any Debentures, in whole or in
part, from the Trust prior to June 30, 2002.
ARTICLE VI
Debentureholders' Lists and Reports by the Company and the Trustee
Section 6.1. Company To Furnish Trustee Names and Addresses of
Debentureholders.
The Company shall furnish or cause to be furnished to the
Trustee (a) on a quarterly basis on each regular record date (as described in
Section 2.5) a list, in such form as the Trustee may reasonably require, of the
names and addresses of the holders of the Debentures as of such regular record
date, provided that the Company shall not be obligated to furnish or cause to
furnish such list at any time that the list shall not differ in any respect
from the most recent list furnished to the Trustee by the Company (in the event
the Company fails to provide such list on a monthly basis, the Trustee shall be
entitled to rely on the most recent list provided by the Company); and (b) at
such other times as the Trustee may request in writing within 30 days after the
receipt by the Company of any such request, a list of similar form and content
as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that, in either case, no such list need be furnished if the
Trustee shall be the Debenture Registrar.
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Section 6.2. Preservation of Information Communications with
Debentureholders.
(a) The Trustee shall preserve, in as current a form as
is reasonably practicable, all information as to the names and addresses of the
holders of Debentures contained in the most recent list furnished to it as
provided in Section 6.1 and as to the names and addresses of holders of
Debentures received by the Trustee in its capacity as Debenture Registrar for
the Debentures (if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as
provided in Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in
Section 312(b) of the Trust Indenture Act with other Debentureholders with
respect to their rights under this Indenture or under the Debentures.
Section 6.3. Reports by the Company.
(a) The Company covenants and agrees to file with the
Trustee, within 15 days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that the
Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections, then to
file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b) The Company covenants and agrees to file with the
Trustee and the Commission, in accordance with the rules and regulations
prescribed from to time by the Commission, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Indenture as may be required from
time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail,
first class postage prepaid, or reputable overnight delivery service that
provides for evidence of receipt, to the Debentureholders, as their names and
addresses appear upon the Debenture Register, within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to subsections (a) and (b)
of this Section 6.3 as may be required by rules and regulations prescribed from
time to time by the Commission.
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Section 6.4. Reports by the Trustee.
(a) On or before July 15 in each year in which any of the
Debentures are Outstanding, the Trustee shall transmit by mail, first class
postage prepaid, to the Debentureholders, as their names and addresses appear
upon the Debenture Register, a brief report dated as of the preceding May 15,
if and to the extent required under Section 313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and
313(c) of the Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Debentureholders, be filed by the Trustee with the Company,
with each stock exchange upon which any Debentures are listed (if so listed)
and also with the Commission. The Company agrees to notify the Trustee when
any Debentures become listed on any stock exchange.
ARTICLE VII
Remedies of the Trustee and Debentureholders on Event of Default
Section 7.1. Events of Default.
(a) Whenever used herein with respect to the Debentures,
"Event of Default" means any one or more of the following events that has
occurred and is continuing:
(i) the Company defaults in the payment of any
installment of interest upon any of the Debentures, as and when the
same shall become due and payable, and continuance of such default for
a period of 30 days; provided, however, that a valid extension of an
interest payment period by the Company in accordance with the terms of
this Indenture shall not constitute a default in the payment of
interest for this purpose;
(ii) the Company defaults in the payment of the
principal on the Debentures as and when the same shall become due and
payable whether at maturity, upon redemption, by declaration or
otherwise; provided, however, that a valid extension of the maturity
of such Debentures in accordance with the terms of this Indenture
shall not constitute a default in the payment of principal;
(iii) the Company fails to observe or perform any
other of its covenants or agreements with respect to the Debentures
for a period of 90 days after the date on which written notice of such
failure, requiring the same to be remedied and stating that such
notice is a "Notice of Default" hereunder, shall have been given to
the Company by the Trustee, by registered or certified mail, or to the
Company and the Trustee by the holders of at least 25% in principal
amount of the Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning
of any Bankruptcy Law (i) commences a voluntary case; (ii) consents to
the entry of an order for relief against it in an involuntary case;
(iii) consents to the appointment of a Custodian of it or
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for all or substantially all of its property; or (iv) makes a general
assignment for the benefit of its creditors;
(v) a court of competent jurisdiction enters an
order under any Bankruptcy Law that (i) is for relief against the
Company in an involuntary case; (ii) appoints a Custodian of the
Company for all or substantially all of its property; or (iii) orders
the liquidation of the Company, and the order or decree remains
unstayed and in effect for 90 days; or
(vi) the Trust shall have voluntarily or
involuntarily dissolved, except in connection with (i) the
distribution of Debentures to holders of Trust Securities in
liquidation of their interests in the Trust; (ii) the redemption of
all of the outstanding Trust Securities of the Trust; or (iii) certain
mergers, consolidations or amalgamations, each as permitted by the
Trust Agreement.
(b) In each and every such case, unless the principal of
all the Debentures shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of
the Debentures then Outstanding hereunder, by notice in writing to the Company
(and to the Trustee if given by such Debentureholders) may declare the
principal of all the Debentures to be due and payable immediately, and upon any
such declaration the same shall become and shall be immediately due and
payable, notwithstanding anything contained in this Indenture or in the
Debentures.
(c) At any time after the principal of the Debentures
shall have been so declared due and payable, and before any judgment or decree
for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the holders of a majority in aggregate principal amount
of the Debentures then Outstanding hereunder, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its consequences
if: (i) the Company has paid or deposited with the Trustee a sum sufficient to
pay all matured installments of interest upon all the Debentures and the
principal of any and all Debentures that shall have become due otherwise than
by acceleration (with interest upon such principal, and upon overdue
installments of interest, at the rate per annum expressed in the Debentures to
the date of such payment or deposit) and the amount payable to the Trustee
under Section 9.7; and (ii) any and all Events of Default under this Indenture,
other than the nonpayment of principal on Debentures that shall not have become
due by their terms, shall have been remedied or waived as provided in Section
7.6. No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce
any right with respect to Debentures under this Indenture and such proceedings
shall have been discontinued or abandoned because of such rescission or
annulment or for any other reason or shall have been determined adversely to
the Trustee, then and in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
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Section 7.2. Collection of Indebtedness and Suits for Enforcement by
Trustee.
(a) The Company covenants that (1) in case it shall
default in the payment of any installment of interest on any of the Debentures,
and such default shall have continued for a period of 90 Business Days; or (2)
in case it shall default in the payment of the principal of any of the
Debentures when the same shall have become due and payable, whether upon
maturity of the Debentures or upon redemption or upon declaration or otherwise,
then, upon demand of the Trustee, the Company shall pay to the Trustee, for the
benefit of the holders of the Debentures, the whole amount that then shall have
been become due and payable on all such Debentures for principal or interest,
or both, as the case may be, with interest upon the overdue principal and upon
overdue installments of interest at the rate per annum expressed in the
Debentures; and (if the Debentures are held by the Trust or a trustee of the
Trust, without duplication of any other amounts paid by the Trust or trustee in
respect thereof) upon overdue installments of interest at the rate per annum
expressed in the Debentures; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, and the
amount payable to the Trustee under Section 9.7.
(b) If the Company shall fail to pay such amounts set
forth in Section 7.2(a) forthwith upon such demand, the Trustee, in its own
name and as trustee of an express trust, shall be entitled and empowered to
institute any action or proceedings at law or in equity for the collection of
the sums so due and unpaid, and may prosecute any such action or proceeding to
judgment or final decree, and may enforce any such judgment or final decree
against the Company or other obligor upon the Debentures and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or other obligor upon the Debentures, wherever
situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition or judicial
proceedings affecting the Company or the creditors or property thereof, the
Trustee shall have power to intervene in such proceedings and take any action
therein that may be permitted by the court and shall (except as may be
otherwise provided by law) be entitled to file such proofs of claim and other
papers and documents as may be necessary or advisable in order to have the
claims of the Trustee and of the holders of the Debentures allowed for the
entire amount due and payable by the Company under this Indenture at the date
of institution of such proceedings and for any additional amount that may
become due and payable by the Company after such date, and to collect and
receive any moneys or other property payable or deliverable on any such claim,
and to distribute the same after the deduction of the amount payable to the
Trustee under Section 9.7; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized by each of the holders of the Debentures
to make such payments to the Trustee, and, in the event that the Trustee shall
consent to the making of such payments directly to such Debentureholders, to
pay to the Trustee any amount due it under Section 9.7.
(d) All rights of action and of asserting claims under
this Indenture, or under any of the terms established with respect to
Debentures, may be enforced by the Trustee without the possession of any of
such Debentures, or the production thereof at any trial or other
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proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for payment to the Trustee of
any amounts due under Section 9.7, be for the ratable benefit of the holders of
the Debentures. In case of an Event of Default hereunder, the Trustee may in
its discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law. Nothing
contained herein shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Debentureholder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any holder thereof or to authorize the Trustee to vote in
respect of the claim of any Debentureholder in any such proceeding.
Section 7.3. Application of Moneys Collected.
Any moneys collected by the Trustee pursuant to this Article
VII with respect to the Debentures shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal or interest, upon presentation of the
Debentures, and notation thereon of the payment, if only partially paid, and
upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and
of all amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the
Company if and to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon
the Debentures for principal and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Debentures for principal and interest, respectively.
Section 7.4. Limitation on Suits.
(a) Except as provided in Section 15.13 hereof, no holder
of any Debenture shall have any right by virtue or by availing of any provision
of this Indenture to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Indenture or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless (i) such holder
previously shall have given to the Trustee written notice of an Event of
Default and of the continuance thereof with respect to the Debentures
specifying such Event of Default, as hereinbefore provided; (ii) the holders of
not less than 25% in aggregate principal amount of the Debentures then
Outstanding shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as trustee hereunder; (iii) such
holder or holders shall have offered to the Trustee such reasonable indemnity
as it may require against the costs,
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expenses and liabilities to be incurred therein or thereby; and (iv) the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity, shall have failed to institute any such action, suit or proceeding;
and (v) during such 60 day period, the holders of a majority in principal
amount of the Debentures do not give the Trustee a direction inconsistent with
the request.
(b) Notwithstanding anything contained herein to the
contrary or any other provisions of this Indenture, the right of any holder of
the Debentures to receive payment of the principal of and interest on the
Debentures, as therein provided, on or after the respective due dates expressed
in such Debenture (or in the case of redemption, on the redemption date), or to
institute suit for the enforcement of any such payment on or after such
respective dates or redemption date, shall not be impaired or affected without
the consent of such holder and by accepting a Debenture hereunder it is
expressly understood, intended and covenanted by the taker and holder of every
Debenture with every other such taker and holder and the Trustee, that no one
or more holders of Debentures shall have any right in any manner whatsoever by
virtue or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of the holders of any other of such Debentures, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of
Debentures. For the protection and enforcement of the provisions of this
Section 7.4, each and every Debentureholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
Section 7.5. Rights and Remedies Cumulative; Delay or Omission Not Waiver.
(a) Except as otherwise provided in Section 2.9, all
powers and remedies given by this Article VII to the Trustee or to the
Debentureholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any other powers and remedies available to the Trustee or
the holders of the Debentures, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder
of any of the Debentures to exercise any right or power accruing upon any Event
of Default occurring and continuing as aforesaid shall impair any such right or
power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 7.4, every
power and remedy given by this Article VII or by law to the Trustee or the
Debentureholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Debentureholders.
Section 7.6. Control by Debentureholders.
The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding, determined in accordance with Section 10.4,
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided, however, that such direction shall
not be in conflict with any rule of law or with this Indenture. Subject to the
provisions of
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Section 9.1, the Trustee shall have the right to decline to follow any such
direction if the Trustee in good faith shall, by a Responsible Officer or
Officers of the Trustee, determine that the proceeding so directed would
involve the Trustee in personal liability. The holders of a majority in
aggregate principal amount of the Debentures at the time Outstanding affected
thereby, determined in accordance with Section 10.4, may on behalf of the
holders of all of the Debentures waive any past default in the performance of
any of the covenants contained herein and its consequences, except (i) a
default in the payment of the principal of or interest on, any of the
Debentures as and when the same shall become due by the terms of such
Debentures otherwise than by acceleration (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
has been deposited with the Trustee (in accordance with Section 7.1(c)); (ii) a
default in the covenants contained in Section 5.6; or (iii) in respect of a
covenant or provision hereof which cannot be modified or amended without the
consent of the holder of each Outstanding Debenture affected; provided,
however, that if the Debentures are held by the Trust or a trustee of the
Trust, such waiver or modification to such waiver shall not be effective until
the holders of a majority in liquidation preference of Trust Securities of the
Trust shall have consented to such waiver or modification to such waiver;
provided further, that if the consent of the holder of each Outstanding
Debenture is required, such waiver shall not be effective until each holder of
the Trust Securities of the Trust shall have consented to such waiver. Upon
any such waiver, the default covered thereby shall be deemed to be cured for
all purposes of this Indenture and the Company, the Trustee and the holders of
the Debentures shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 7.7. Undertaking To Pay Costs.
All parties to this Indenture agree, and each holder of any
Debentures by such holder's acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the enforcement
of any right or remedy under this Indenture, or in any suit against the Trustee
for any action taken or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 7.8 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Debentureholder, or
group of Debentureholders holding more than 10% in aggregate principal amount
of the Outstanding Debentures, or to any suit instituted by any Debentureholder
for the enforcement of the payment of the principal of or interest on the
Debentures, on or after the respective due dates expressed in such Debenture or
established pursuant to this Indenture.
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ARTICLE VIII
Form of Debenture and Original Issue
Section 8.1. Form of Debenture.
The Debenture and the Trustee's Certificate of Authentication
to be endorsed thereon are to be substantially in the forms contained as
Exhibit A attached hereto and incorporated herein by reference.
Section 8.2. Original Issue of Debentures.
Debentures in the aggregate principal amount of $25,773,500
may, upon execution of this Indenture, be executed by the Company and delivered
to the Trustee for authentication. If the Underwriters exercise their Option
and there is an Option Closing Date (as such terms are defined in that certain
Underwriting Agreement, dated ______________, 1997, by and among the Company,
the Trust and Stifel, Nicolaus & Company, Incorporated for itself and as
representative of the Underwriters named therein) then, on such Option Closing
Date, Debentures in the additional aggregate principal amount of $3,866,000 may
be executed by the Company and delivered to the Trustee for authentication. In
either such event, the Trustee shall thereupon authenticate and deliver said
Debentures to or upon the written order of the Company, signed by its Chairman,
its Vice Chairman, its President, or any Vice President and its Treasurer or an
Assistant Treasurer, without any further action by the Company.
ARTICLE IX
Concerning the Trustee
Section 9.1. Certain Duties and Responsibilities of Trustee.
(a) The Trustee, prior to the occurrence of an Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform with respect to the Debentures such duties and only
such duties as are specifically set forth in this Indenture, and no implied
covenants shall be read into this Indenture against the Trustee. In case an
Event of Default has occurred that has not been cured or waived, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture,
and use the same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of
Default and after the curing or waiving of all such Events of Default
that may have occurred:
(i) the duties and obligations of the
Trustee shall with respect to the Debentures be determined
solely by the express provisions of this
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Indenture, and the Trustee shall not be liable with respect to
the Debentures except for the performance of such duties and
obligations as are specifically set forth in this Indenture,
and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on the
part of the Trustee, the Trustee may with respect to the
Debentures conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions that by
any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture;
(2) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;
(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 not less than a
majority in principal amount of the Debentures at the time Outstanding
relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee under this Indenture with respect to
the Debentures; and
(4) none of the provisions contained in this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if
there is reasonable ground for believing that the repayment of such
funds or liability is not reasonably assured to it under the terms of
this Indenture or adequate indemnity against such risk is not
reasonably assured to it.
Section 9.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer
of the Trustee of the occurrence of any default hereunder with respect to the
Debentures, the Trustee shall transmit by mail to all holders of the
Debentures, as their names and addresses appear in the Debenture Register,
notice of such default, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default in the payment of the
principal or interest (including any Additional Interest) on any Debenture, 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 the
directors and/or Responsible Officers of the Trustee determines in good faith
that the withholding of such notice is in the interests of the holders of such
Debentures; and provided, further, that in the case of any default of the
character specified in Section 7.1(a)(iii), no such notice to holders of
Debentures need be sent until at least 30 days after the occurrence thereof.
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For the purposes of this Section 9.2, the term "default" means any event which
is, or after notice or lapse of time or both, would become, an Event of Default
with respect to the Debentures.
Section 9.3. Certain Rights of Trustee.
Except as otherwise provided in Section 9.1:
(a) The Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the
Company mentioned herein shall be sufficiently evidenced by a Board Resolution
or an instrument signed in the name of the Company by the President or any Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of
a default or an Event of Default, other than an Event of Default specified in
Section 7.1(a)(i); or (ii), unless and until it receives written notification
of such Event of Default from the Company or by holders of at least 25% of the
aggregate principal amount of the Debentures at the time Outstanding;
(d) The Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted hereunder in good faith and in reliance thereon;
(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,
order or direction of any of the Debentureholders, pursuant to the provisions
of this Indenture, unless such Debentureholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of
an Event of Default (that has not been cured or waived) to exercise with
respect to the Debentures such of the rights and powers vested in it by this
Indenture, and to use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs;
(f) The Trustee shall not be liable for any action taken
or omitted to be taken by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture;
(g) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, security, or other papers or documents, unless requested in
writing so to do by the holders of not less than a majority in principal amount
of the Outstanding Debentures (determined as provided in Section 10.4);
provided, however, that if the
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payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such costs, expenses or liabilities as a condition
to so proceeding. The reasonable expense of every such examination shall be
paid by the Company or, if paid by the Trustee, shall be repaid by the Company
upon demand; and
(h) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 9.4. Trustee Not Responsible for Recitals, Etc.
(a) The Recitals contained herein and in the Debentures
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or
application by the Company of any of the Debentures or of the proceeds of such
Debentures, or for the use or application of any moneys paid over by the
Trustee in accordance with any provision of this Indenture, or for the use or
application of any moneys received by any paying agent other than the Trustee.
Section 9.5. May Hold Debentures.
The Trustee or any Paying Agent or Debenture Registrar for the
Debentures, in its individual or any other capacity, may become the owner or
pledgee of Debentures with the same rights it would have if it were not
Trustee, Paying Agent or Debenture Registrar.
Section 9.6. Moneys Held in Trust.
Subject to the provisions of Section 13.5, all moneys received
by the Trustee shall, until used or applied as herein provided, be held in
trust for the purposes for which they were received, but need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any moneys received by it hereunder except
such as it may agree with the Company to pay thereon.
Section 9.7. Compensation and Reimbursement.
(a) The Company covenants and agrees to pay to the
Trustee, and the Trustee shall be entitled to, such reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), as the Company and the
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Trustee may from time to time agree in writing, for all services rendered by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and,
except as otherwise expressly provided herein, the Company shall pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all Persons not
regularly in its employ) except any such expense, disbursement or advance as
may arise from its negligence or bad faith. The Company also covenants to
indemnify the Trustee (and its officers, agents, directors and employees) for,
and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on the part of the Trustee and arising out of
or in connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim of liability in
the premises.
(b) The obligations of the Company under this Section 9.7
to compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder.
Section 9.8. Reliance on Officers' Certificate.
Except as otherwise provided in Section 9.1, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking
or suffering or omitting to take any action hereunder, such matter (unless
other evidence in respect thereof be herein specifically prescribed) may, in
the absence of negligence or bad faith on the part of the Trustee, be deemed to
be conclusively proved and established by an Officers' Certificate delivered to
the Trustee and such certificate, in the absence of negligence or bad faith on
the part of the Trustee, shall be full warrant to the Trustee for any action
taken, suffered or omitted to be taken by it under the provisions of this
Indenture upon the faith thereof.
Section 9.9. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee
and the Company shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act.
Section 9.10. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee with respect to the
Debentures issued hereunder which shall at all times be a corporation organized
and doing business under the laws of the United States of America or any State
or Territory thereof or of the District of Columbia, or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, and subject to supervision or examination by federal,
state, territorial, or District of Columbia authority. If such 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
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purposes of this Section 9.10, 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. The Company may not, nor
may any Person directly or indirectly controlling, controlled by, or under
common control with the Company, serve as Trustee. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 9.10, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.11.
Section 9.11. Resignation and Removal; Appointment of Successor.
(a) The Trustee or any successor hereafter appointed, may
at any time resign by giving written notice thereof to the Company and by
transmitting notice of resignation by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee with respect to Debentures by written
instrument, in duplicate, executed by order of the Board of Directors, one copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed
and have accepted appointment within 30 days after the mailing of such notice
of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee with respect to
Debentures, or any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, subject to the provisions
of Section 9.9, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor trustee. Such court
may thereupon after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any one of the following shall
occur:
(i) the Trustee shall fail to comply with the
provisions of Section 9.9 after written request therefor by the
Company or by any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.10 and shall fail to
resign after written request therefor by the Company or by any such
Debentureholder; or
(iii) the Trustee shall become incapable of acting,
or shall be adjudged a bankrupt or insolvent, or commence a voluntary
bankruptcy proceeding, or a receiver of the Trustee or of its property
shall be appointed or consented to, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then, in any
such case, the Company may remove the Trustee with respect to all
Debentures and appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of
which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee, or, subject to the provisions of
Section 9.9, unless the Trustee's duty to resign is stayed as provided
herein, any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, on behalf of that
holder and all others similarly situated, petition any court of
competent jurisdiction for the removal of
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the Trustee and the appointment of a successor trustee. Such court
may thereupon after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal
amount of the Debentures at the time Outstanding may at any time remove the
Trustee by so notifying the Trustee and the Company and may appoint a successor
Trustee with the consent of the Company.
(d) Any resignation or removal of the Trustee and
appointment of a successor trustee with respect to the Debentures pursuant to
any of the provisions of this Section 9.11 shall become effective upon
acceptance of appointment by the successor trustee as provided in Section 9.12.
(e) Any successor trustee appointed pursuant to this
Section 9.11 may be appointed with respect to the Debentures, and at any time
there shall be only one Trustee with respect to the Debentures.
Section 9.12. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor
trustee with respect to the Debentures, every successor trustee so appointed
shall execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor trustee all the rights, powers, and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor trustee
all property and money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor trustee all such rights, powers and trusts
referred to in paragraph (a) of this Section 9.12.
(c) No successor trustee shall accept its appointment
unless at the time of such acceptance such successor trustee shall be qualified
and eligible under this Article IX.
(d) Upon acceptance of appointment by a successor trustee
as provided in this Section 9.12, the Company shall transmit notice of the
succession of such trustee hereunder by mail, first class postage prepaid, to
the Debentureholders, as their names and addresses appear upon the Debenture
Register. If the Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be transmitted at the expense of the Company.
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Section 9.13. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation shall be qualified under the provisions of Section 9.9 and eligible
under the provisions of Section 9.10, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. In case any Debentures shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Debentures so authenticated with the same
effect as if such successor Trustee had itself authenticated such Debentures.
Section 9.14. Preferential Collection of Claims Against the Company.
The Trustee shall comply with Section 311(a) of the Trust
Indenture Act, excluding any creditor relationship described in Section 311(b)
of the Trust Indenture Act. A Trustee who has resigned or been removed shall
be subject to Section 311(a) of the Trust Indenture Act to the extent included
therein.
ARTICLE X
Concerning the Debentureholders
Section 10.1. Evidence of Action by Holders.
(a) Whenever in this Indenture it is provided that the
holders of a majority or specified percentage in aggregate principal amount of
the Debentures may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action the holders of
such majority or specified percentage have joined therein may be evidenced by
any instrument or any number of instruments of similar tenor executed by such
holders of Debentures in Person or by agent or proxy appointed in writing.
(b) If the Company shall solicit from the
Debentureholders any request, demand, authorization, direction, notice,
consent, waiver or other action, the Company may, at its option, as evidenced
by an Officers' Certificate, fix in advance a record date for the determination
of Debentureholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Debentureholders of record at the
close of business on the record date shall be deemed to be Debentureholders for
the purposes of determining whether Debentureholders of the requisite
proportion of Outstanding Debentures have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or
other action, and for that purpose the Outstanding Debentures shall be computed
as of the record date; provided, however, that no such
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authorization, agreement or consent by such Debentureholders on the record date
shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.
Section 10.2. Proof of Execution by Debentureholders.
Subject to the provisions of Section 9.1, proof of the
execution of any instrument by a Debentureholder (such proof shall not require
notarization) or his agent or proxy and proof of the holding by any Person of
any of the Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person
of any instrument may be proved in any reasonable manner acceptable to the
Trustee.
(b) The ownership of Debentures shall be proved by the
Debenture Register of such Debentures or by a certificate of the Debenture
Registrar thereof.
(c) The Trustee may require such additional proof of any
matter referred to in this Section 10.2 as it shall deem necessary.
Section 10.3. Who May Be Deemed Owners.
Prior to the due presentment for registration of transfer of
any Debenture, the Company, the Trustee, any Paying Agent, any Authenticating
Agent and any Debenture Registrar may deem and treat the Person in whose name
such Debenture shall be registered upon the books of the Company as the
absolute owner of such Debenture (whether or not such Debenture shall be
overdue and notwithstanding any notice of ownership or writing thereon made by
anyone other than the Debenture Registrar) for the purpose of receiving payment
of or on account of the principal of and interest on such Debenture (subject to
Section 2.3) and for all other purposes; and neither the Company nor the
Trustee nor any Paying Agent nor any Authenticating Agent nor any Debenture
Registrar shall be affected by any notice to the contrary.
Section 10.4. Certain Debentures Owned by Company Disregarded.
In determining whether the holders of the requisite aggregate
principal amount of Debentures have concurred in any direction, consent or
waiver under this Indenture, the Debentures that are owned by the Company or
any other obligor on the Debentures or by any Person directly or indirectly
controlling or controlled by or under common control with the Company or any
other obligor on the Debentures shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination, except that for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver, only Debentures that the Trustee actually
knows are so owned shall be so disregarded. The Debentures so owned that have
been pledged in good faith may be regarded as Outstanding for the purposes of
this Section 10.4, if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Debentures and that
the pledgee is not a Person directly or indirectly controlling or controlled by
or under direct or indirect common
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control with the Company or any such other obligor. In case of a dispute as to
such right, any decision by the Trustee taken upon the advice of counsel shall
be full protection to the Trustee.
Section 10.5. Actions Binding on Future Debentureholders.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 10.1, of the taking of any action by the
holders of the majority or percentage in aggregate principal amount of the
Debentures specified in this Indenture in connection with such action, any
holder of a Debenture that is shown by the evidence to be included in the
Debentures the holders of which have consented to such action may, by filing
written notice with the Trustee, and upon proof of holding as provided in
Section 10.2, revoke such action so far as concerns such Debenture. Except as
aforesaid any such action taken by the holder of any Debenture shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Debenture, and of any Debenture issued in exchange therefor, on
registration of transfer thereof or in place thereof, irrespective of whether
or not any notation in regard thereto is made upon such Debenture. Any action
taken by the holders of the majority or percentage in aggregate principal
amount of the Debentures specified in this Indenture in connection with such
action shall be conclusively binding upon the Company, the Trustee and the
holders of all the Debentures.
ARTICLE XI
Supplemental Indentures
Section 11.1. Supplemental Indentures Without the Consent of
Debentureholders.
In addition to any supplemental indenture otherwise authorized
by this Indenture, the Company and the Trustee may from time to time and at any
time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect),
without the consent of the Debentureholders, for one or more of the following
purposes:
(a) to cure any ambiguity, defect, or inconsistency
herein, or in the Debentures;
(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition
to or in place of certificated Debentures;
(d) to add to the covenants of the Company for the
benefit of the holders of all or any of the Debentures or to surrender any
right or power herein conferred upon the Company;
(e) to add to, delete from, or revise the conditions,
limitations, and restrictions on the authorized amount, terms, or purposes of
issue, authentication, and delivery of Debentures, as herein set forth;
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(f) to make any change that does not adversely affect the
rights of any Debentureholder in any material respect;
(g) to provide for the issuance of and establish the form
and terms and conditions of the Debentures, to establish the form of any
certifications required to be furnished pursuant to the terms of this Indenture
or of the Debentures, or to add to the rights of the holders of the Debentures;
(h) qualify or maintain the qualification of this
Indenture under the Trust Indenture Act; or
(i) to evidence a consolidation or merger involving the
Company as permitted under Section 12.1.
The Trustee is hereby authorized to join with the Company in
the execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. Any supplemental indenture authorized by the
provisions of this Section 11.1 may be executed by the Company and the Trustee
without the consent of the holders of any of the Debentures at the time
Outstanding, notwithstanding any of the provisions of Section 11.2.
Section 11.2. Supplemental Indentures with Consent of Debentureholders.
With the consent (evidenced as provided in Section 10.1) of
the holders of not less than a majority in aggregate principal amount of the
Debentures at the time Outstanding, the Company, when authorized by Board
Resolutions, and the Trustee may from time to time and at any time enter into
an indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying
in any manner not covered by Section 11.1 the rights of the holders of the
Debentures under this Indenture; provided, however, that no such supplemental
indenture shall without the consent of the holders of each Debenture then
Outstanding and affected thereby, (i) extend the fixed maturity of any
Debentures, reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, without the consent of the holder of
each Debenture so affected; or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are required to consent to any such
supplemental indenture; provided further, that if the Debentures are held by
the Trust or a trustee of the Trust, such supplemental indenture shall not be
effective until the holders of a majority in liquidation preference of Trust
Securities of the Trust shall have consented to such supplemental indenture;
provided further, that if the consent of the holder of each Outstanding
Debenture is required, such supplemental indenture shall not be effective until
each holder of the Trust Securities of the Trust shall have consented to such
supplemental indenture. It shall not be necessary for the consent of the
Debentureholders affected thereby under this Section 11.2 to approve the
particular form of
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any proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Section 11.3. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture pursuant to
the provisions of this Article XI, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Debentures shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 11.4. Debentures Affected by Supplemental Indentures.
Debentures affected by a supplemental indenture, authenticated
and delivered after the execution of such supplemental indenture pursuant to
the provisions of this Article XI, may bear a notation in form approved by the
Company, provided such form meets the requirements of any exchange upon which
the Debentures may be listed, as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Debentures so
modified as to conform, in the opinion of the Board of Directors of the
Company, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Company, authenticated by the
Trustee and delivered in exchange for the Debentures then Outstanding.
Section 11.5. Execution of Supplemental Indentures.
(a) Upon the request of the Company, accompanied by its
Board Resolutions authorizing the execution of any such supplemental indenture,
and upon the filing with the Trustee of evidence of the consent of
Debentureholders required to consent thereto as aforesaid, the Trustee shall
join with the Company in the execution of such supplemental indenture unless
such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion but shall not be obligated to enter into such supplemental
indenture. The Trustee, subject to the provisions of Sections 9.1, may receive
an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article XI is authorized or permitted by, and
conforms to, the terms of this Article XI and that it is proper for the Trustee
under the provisions of this Article XI to join in the execution thereof.
(b) Promptly after the execution by the Company and the
Trustee of any supplemental indenture pursuant to the provisions of this
Section 11.5, the Trustee shall transmit by mail, first class postage prepaid,
a notice, setting forth in general terms the substance of such supplemental
indenture, to the Debentureholders as their names and addresses appear upon the
Debenture Register. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
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ARTICLE XII
Successor Corporation
Section 12.1. Company May Consolidate, Etc.
Nothing contained in this Indenture or in any of the
Debentures shall prevent any consolidation or merger of the Company with or
into any other corporation or corporations (whether or not affiliated with the
Company, as the case may be), or successive consolidations or mergers in which
the Company, as the case may be, or its successor or successors shall be a
party or parties, or shall prevent any sale, conveyance, transfer or other
disposition of the property of the Company, as the case may be, or its
successor or successors as an entirety, or substantially as an entirety, to any
other corporation (whether or not affiliated with the Company, as the case may
be, or its successor or successors) authorized to acquire and operate the same;
provided, however, that the Company hereby covenants and agrees that, (i) upon
any such consolidation, merger, sale, conveyance, transfer or other
disposition, the due and punctual payment, in the case of the Company, of the
principal of and interest on all of the Debentures, according to their tenor
and the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be kept or performed by the Company as the case
may be, shall be expressly assumed, by supplemental indenture (which shall
conform to the provisions of the Trust Indenture Act, as then in effect)
satisfactory in form to the Trustee executed and delivered to the Trustee by
the entity formed by such consolidation, or into which the Company, as the case
may be, shall have been merged, or by the entity which shall have acquired such
property; (ii) in case the Company consolidates with or merges into another
Person or conveys or transfers its properties and assets substantially then as
an entirety to any Person, the successor Person is organized under the laws of
the United States or any state or the District of Columbia; and (iii)
immediately after giving effect thereto, an Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have occurred and be continuing.
Section 12.2. Successor Corporation Substituted.
(a) In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and interest on all of the Debentures Outstanding
and the due and punctual performance of all of the covenants and conditions of
this Indenture to be performed by the Company, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it
had been named as the Company herein, and thereupon the predecessor corporation
shall be relieved of all obligations and covenants under this Indenture and the
Debentures.
(b) In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition such changes in phraseology and form
(but not in substance) may be made in the Debentures thereafter to be issued as
may be appropriate.
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(c) Nothing contained in this Indenture or in any of the
Debentures shall prevent the Company from merging into itself or acquiring by
purchase or otherwise all or any part of the property of any other Person
(whether or not affiliated with the Company).
Section 12.3. Evidence of Consolidation, Etc. to Trustee.
The Trustee, subject to the provisions of Section 9.1, may
receive an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or other disposition, and any
such assumption, comply with the provisions of this Article XII.
ARTICLE XIII
Satisfaction and Discharge
Section 13.1. Satisfaction and Discharge of Indenture.
If at any time: (a) the Company shall have delivered to the
Trustee for cancellation all Debentures theretofore authenticated (other than
any Debentures that shall have been destroyed, lost or stolen and that shall
have been replaced or paid as provided in Section 2.9) and Debentures for whose
payment money or Governmental Obligations have theretofore been deposited in
trust or segregated and held in trust by the Company (and thereupon repaid to
the Company or discharged from such trust, as provided in Section 13.5); or (b)
all such Debentures not theretofore delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit or cause to be deposited with the
Trustee as trust funds the entire amount in moneys or Governmental Obligations
sufficient or a combination thereof, sufficient in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay at maturity or upon
redemption all Debentures not theretofore delivered to the Trustee for
cancellation, including principal and interest due or to become due to such
date of maturity or date fixed for redemption, as the case may be, and if the
Company shall also pay or cause to be paid all other sums payable hereunder by
the Company; then this Indenture shall thereupon cease to be of further effect
except for the provisions of Sections 2.3, 2.7, 2.9, 5.1, 5.2, 5.3, 9.7 and
9.10, that shall survive until the date of maturity or redemption date, as the
case may be, and Sections 9.6 and 13.5, that shall survive to such date and
thereafter, and the Trustee, on demand of the Company and at the cost and
expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture.
Section 13.2. Discharge of Obligations.
If at any time all Debentures not heretofore delivered to the
Trustee for cancellation or that have not become due and payable as described
in Section 13.1 shall have been paid by the Company by depositing irrevocably
with the Trustee as trust funds moneys or an amount of Governmental Obligations
sufficient in the opinion of a nationally recognized certified public
accounting firm to pay at maturity or upon redemption all Debentures not
theretofore delivered to the Trustee for cancellation, including principal and
interest due or to
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become due to such date of maturity or date fixed for redemption, as the case
may be, and if the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then after the date such moneys or
Governmental Obligations, as the case may be, are deposited with the Trustee,
the obligations of the Company under this Indenture shall cease to be of
further effect except for the provisions of Sections 2.3, 2.7, 2.9, 5.1, 5.2,
5.3, 9.6, 9.10 and 13.5 hereof that shall survive until such Debentures shall
mature and be paid. Thereafter, Sections 9.6 and 13.5 shall survive.
Section 13.3. Deposited Moneys To Be Held in Trust.
All monies or Governmental Obligations deposited with the
Trustee pursuant to Sections 13.1 or 13.2 shall be held in trust and shall be
available for payment as due, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), to the holders of the
Debentures for the payment or redemption of which such moneys or Governmental
Obligations have been deposited with the Trustee.
Section 13.4. Payment of Monies Held by Paying Agents.
In connection with the satisfaction and discharge of this
Indenture, all moneys or Governmental Obligations then held by any Paying Agent
under the provisions of this Indenture shall, upon demand of the Company, be
paid to the Trustee and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys or Governmental Obligations.
Section 13.5. Repayment to Company.
Any monies or Governmental Obligations deposited with any
Paying Agent or the Trustee, or then held by the Company in trust, for payment
of principal of or interest on the Debentures that are not applied but remain
unclaimed by the holders of such Debentures for at least two years after the
date upon which the principal of or interest on such Debentures shall have
respectively become due and payable, shall be repaid to the Company, as the
case may be, on May 31 of each year or (if then held by the Company) shall be
discharged from such trust; and thereupon the Paying Agent and the Trustee
shall be released from all further liability with respect to such moneys or
Governmental Obligations, and the holder of any of the Debentures entitled to
receive such payment shall thereafter, as an unsecured general creditor, look
only to the Company for the payment thereof.
ARTICLE XIV
Immunity of Incorporators, Stockholders, Officers and Directors
Section 14.1. No Recourse.
No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of the Debentures, or for any claim based
thereon or otherwise in respect thereof, shall be had against any incorporator,
stockholder, officer or director, past, present or future as such, of the
Company or of any predecessor or successor corporation, either directly or
through
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the Company or any such predecessor or successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued hereunder are solely corporate
obligations, and that no such personal liability whatever shall attach to, or
is or shall be incurred by, the incorporators, stockholders, officers or
directors as such, of the Company or of any predecessor or successor
corporation, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Debentures or implied therefrom;
and that any and all such personal liability of every name and nature, either
at common law or in equity or by constitution or statute, of, and any and all
such rights and claims against, every such incorporator, stockholder, officer
or director as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Debentures or implied therefrom,
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of such
Debentures.
ARTICLE XV
Miscellaneous Provisions
Section 15.1. Effect on Successors and Assigns.
All the covenants, stipulations, promises and agreements in
this Indenture contained by or on behalf of the Company shall bind their
respective successors and assigns, whether so expressed or not.
Section 15.2. Actions by Successor.
Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the corresponding board, committee or officer of any corporation that
shall at the time be the lawful sole successor of the Company.
Section 15.3. Surrender of Company Powers.
The Company by instrument in writing executed by appropriate
authority of its Board of Directors and delivered to the Trustee may surrender
any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company, as the case may be, and as
to any successor corporation.
Section 15.4. Notices.
Except as otherwise expressly provided herein any notice or
demand that by any provision of this Indenture is required or permitted to be
given or served by the Trustee or by the holders of Debentures to or on the
Company may be given or served by being deposited first class postage prepaid
in a post-office letterbox addressed (until another address is filed in writing
by the Company with the Trustee), as follows: c/o Stifel Financial Corp., 500
North Broadway,
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St. Louis, Missouri 63102-2188, Attention: Chief Financial Officer. Any
notice, election, request or demand by the Company or any Debentureholder to or
upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
Section 15.5. Governing Law.
This Indenture and each Debenture shall be deemed to be a
contract made under the internal laws of the State of Missouri and for all
purposes shall be construed in accordance with the laws of said State.
Section 15.6. Treatment of Debentures as Debt.
It is intended that the Debentures shall be treated as
indebtedness and not as equity for federal income tax purposes. The provisions
of this Indenture shall be interpreted to further this intention.
Section 15.7. Compliance Certificates and Opinions.
(a) Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.
(b) Each certificate or opinion of the Company provided
for in this Indenture and delivered to the Trustee with respect to compliance
with a condition or covenant in this Indenture shall include (1) a statement
that the Person making such certificate or opinion has read such covenant or
condition; (2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; (3) a statement that, in the opinion of such
Person, he has made such examination or investigation as, in the opinion of
such Person, is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (4) a
statement as to whether or not, in the opinion of such Person, such condition
or covenant has been complied with.
Section 15.8. Payments on Business Days.
In any case where the date of maturity of interest or
principal of any Debenture or the date of redemption of any Debenture shall not
be a Business Day, then payment of interest or principal may (subject to
Section 2.5) be made on the next succeeding Business Day with the same force
and effect as if made on the nominal date of maturity or redemption, and no
interest shall accrue for the period after such nominal date.
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Section 15.9. Conflict with Trust Indenture Act.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
Section 15.10. Counterparts.
This Indenture may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
Section 15.11. Separability.
In case any one or more of the provisions contained in this
Indenture or in the Debentures shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Indenture or of
the Debentures, but this Indenture and the Debentures shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
Section 15.12. Assignment.
The Company shall have the right at all times to assign any of
its respective rights or obligations under this Indenture to a direct or
indirect wholly owned Subsidiary of the Company, provided that, in the event of
any such assignment, the Company shall remain liable for all such obligations.
Subject to the foregoing, this Indenture is binding upon and inures to the
benefit of the parties thereto and their respective successors and assigns.
This Indenture may not otherwise be assigned by the parties thereto.
Section 15.13. Acknowledgment of Rights; Right of Setoff.
(a) The Company acknowledges that, with respect to any
Debentures held by the Trust or a trustee of the Trust, if the Property Trustee
fails to enforce its rights under this Indenture as the holder of the
Debentures held as the assets of the Trust, any holder of Preferred Securities
may institute legal proceedings directly against the Company to enforce such
Property Trustee's rights under this Indenture without first instituting any
legal proceedings against such Property Trustee or any other person or entity.
Notwithstanding the foregoing, and notwithstanding the provisions of Section
7.4(a) hereof, if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or
principal on the Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), the Company
acknowledges that a holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Debentures.
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(b) Notwithstanding anything to the contrary contained in
this Indenture, the Company shall have the right to setoff any payment it is
otherwise required to make hereunder in respect of any Trust Securities to the
extent that the Company has previously made, or is concurrently making, a
payment to the holder of such Trust Securities under the Guarantee or in
connection with a proceeding for enforcement of payment of the principal of or
interest on the Debentures directly brought by holders of any Trust Securities.
ARTICLE XVI
Subordination of Debentures
Section 16.1. Agreement to Subordinate.
The Company covenants and agrees, and each holder of
Debentures issued hereunder by such holder's acceptance thereof likewise
covenants and agrees, that all Debentures shall be issued subject to the
provisions of this Article XVI; and each holder of a Debenture, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions. The payment by the Company of the principal of and
interest on all Debentures issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all Senior Debt, Subordinated Debt and Additional
Senior Obligations (collectively, "Senior Indebtedness") to the extent provided
herein, whether outstanding at the date of this Indenture or thereafter
incurred. No provision of this Article XVI shall prevent the occurrence of any
default or Event of Default hereunder.
Section 16.2. Default on Senior Debt, Subordinated Debt or Additional
Senior Obligations.
In the event and during the continuation of any default by the
Company in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness of the Company, or in the event that the maturity of
any Senior Indebtedness of the Company has been accelerated because of a
default, then, in either case, no payment shall be made by the Company with
respect to the principal (including redemption payments) of or interest on the
Debentures. In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding sentence of this Section 16.2, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.
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Section 16.3. Liquidation; Dissolution; Bankruptcy.
(a) Upon any payment by the Company or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due upon
all Senior Indebtedness of the Company shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made by the Company on account of the principal or interest on the
Debentures; and upon any such dissolution or winding-up or liquidation or
reorganization, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the holders of the Debentures or the Trustee would be entitled to receive
from the Company, except for the provisions of this Article XVI, shall be paid
by the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the holders of
the Debentures or by the Trustee under this Indenture if received by them or
it, directly to the holders of Senior Indebtedness of the Company (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness held
by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the holders of
Debentures or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, prohibited by the foregoing, shall be
received by the Trustee before all Senior Indebtedness of the Company is paid
in full, or provision is made for such payment in money in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of such Senior Indebtedness
or their representative or representatives, or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing such Senior
Indebtedness may have been issued, as their respective interests may appear, as
calculated by the Company, for application to the payment of all Senior
Indebtedness of the Company, as the case may be, remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the benefit of the holders of such Senior Indebtedness.
(c) For purposes of this Article XVI, the words "cash,
property or securities" shall not be deemed to include shares of stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article XVI with respect to the Debentures to the payment of all Senior
Indebtedness of the Company, as the case may be, that may at the time be
outstanding, provided that (i) such Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment;
and (ii) the rights of the holders of such Senior Indebtedness are not, without
the consent of such holders, altered by such reorganization
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or readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 16.3
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article XII.
Nothing in Section 16.2 or in this Section 16.3 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 9.7.
Section 16.4. Subrogation.
(a) Subject to the payment in full of all Senior
Indebtedness of the Company, the rights of the holders of the Debentures shall
be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of cash, property or securities of the
Company, as the case may be, applicable to such Senior Indebtedness until the
principal of and interest on the Debentures shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the holders of
such Senior Indebtedness of any cash, property or securities to which the
holders of the Debentures or the Trustee would be entitled except for the
provisions of this Article XVI, and no payment over pursuant to the provisions
of this Article XVI to or for the benefit of the holders of such Senior
Indebtedness by holders of the Debentures or the Trustee, shall, as between the
Company, its creditors other than holders of Senior Indebtedness of the
Company, and the holders of the Debentures, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is understood that
the provisions of this Article XVI are and are intended solely for the purposes
of defining the relative rights of the holders of the Debentures, on the one
hand, and the holders of such Senior Indebtedness on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in
this Indenture or in the Debentures is intended to or shall impair, as between
the Company, its creditors (other than the holders of Senior Indebtedness of
the Company), and the holders of the Debentures, the obligation of the Company,
which is absolute and unconditional, to pay to the holders of the Debentures
the principal of and interest on the Debentures as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Debentures and creditors
of the Company, as the case may be, other than the holders of Senior
Indebtedness of the Company, as the case may be, nor shall anything herein or
therein prevent the Trustee or the holder of any Debenture from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article XVI of the holders
of such Senior Indebtedness in respect of cash, property or securities of the
Company, as the case may be, received upon the exercise of any such remedy.
(c) Upon any payment or distribution of assets of the
Company referred to in this Article XVI, the Trustee, subject to the provisions
of Article IX, and the holders of the
50
<PAGE> 57
Debentures shall be entitled to conclusively rely upon any order or decree made
by any court of competent jurisdiction in which such dissolution, winding-up,
liquidation or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, delivered to the Trustee or to the holders
of the Debentures, for the purposes of ascertaining the Persons entitled to
participate in such distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, as the case may be, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XVI.
Section 16.5. Trustee To Effectuate Subordination.
Each holder of Debentures by such holder's acceptance thereof
authorizes and directs the Trustee on such holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article XVI and appoints the Trustee such holder's attorney-in-fact for
any and all such purposes.
Section 16.6. Notice by the Company.
(a) The Company shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the Company that would
prohibit the making of any payment of monies to or by the Trustee in respect of
the Debentures pursuant to the provisions of this Article XVI. Notwithstanding
the provisions of this Article XVI or any other provision of this Indenture,
the Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment of monies to or by the Trustee in
respect of the Debentures pursuant to the provisions of this Article XVI,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof from the Company or a holder or holders of Senior
Indebtedness or from any trustee therefor; and before the receipt of any such
written notice, the Trustee, subject to the provisions of Section 9.1, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for in this
Section 16.6 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Debenture),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within two Business Days
prior to such date.
(b) The Trustee, subject to the provisions of Section
9.1, shall be entitled to conclusively rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior Indebtedness
of the Company (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of such Senior Indebtedness or a trustee on
behalf of any such holder or holders. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of
any Person as a holder of such Senior Indebtedness to participate in any
payment or distribution pursuant to this Article XVI, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee
51
<PAGE> 58
as to the amount of such Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution
and any other facts pertinent to the rights of such Person under this Article
XVI, and, if such evidence is not furnished, the Trustee may defer any payment
to such Person pending judicial determination as to the right of such Person to
receive such payment.
Section 16.7. Rights of the Trustee; Holders of Senior Indebtedness.
(a) The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article XVI in respect of any
Senior Indebtedness at any time held by it, to the same extent as any other
holder of Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder. The Trustee's right to
compensation and reimbursement of expenses as set forth in Section 9.7 shall
not be subject to the subordination provisions of the Article XVI.
(b) With respect to the holders of Senior Indebtedness of
the Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article XVI,
and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Section 9.1, the Trustee
shall not be liable to any holder of such Senior Indebtedness if it shall pay
over or deliver to holders of Debentures, the Company or any other Person money
or assets to which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article XVI or otherwise.
Section 16.8. Subordination May Not Be Impaired.
(a) No right of any present or future holder of any
Senior Indebtedness of the Company to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with.
(b) Without in any way limiting the generality of Section
16.8(a), the holders of Senior Indebtedness of the Company may, at any time and
from time to time, without the consent of or notice to the Trustee or the
holders of the Debentures, without incurring responsibility to the holders of
the Debentures and without impairing or releasing the subordination provided in
this Article XVI or the obligations hereunder of the holders of the Debentures
to the holders of such Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend
or supplement in any manner such Senior Indebtedness or any instrument
evidencing the same or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii)
release any Person
52
<PAGE> 59
liable in any manner for the collection of such Senior Indebtedness; and (iv)
exercise or refrain from exercising any rights against the Company and any
other Person.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
<TABLE>
<S> <C>
STIFEL FINANCIAL CORP.
By
-------------------------------------------------------------
Name:
-----------------------------------------------------------
Title:
----------------------------------------------------------
Attest:
- - -------------------------------------------
----------------------------
as Trustee
By
-------------------------------------------------------------
Name:
-----------------------------------------------------------
Title:
----------------------------------------------------------
Attest:
- - -------------------------------------------
</TABLE>
53
<PAGE> 60
STATE OF _________ )
) ss
COUNTY OF __________ )
On this ______ day of ______________________, 1997, before me
appeared ___________________, to me personally known, who, being by me duly
sworn, did say that he is the _____________________ of STIFEL FINANCIAL CORP.,
and that the seal affixed to said instrument is the corporate seal of said
corporation, and that said instrument was signed and sealed in behalf of said
corporation by authority of its board of directors and said
_____________________________, acknowledged said instrument to be the free act
and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed
my official seal at my office in said county and state the day and year last
above written.
______________________________
Notary Public
My term expires:
[seal]
COMMONWEALTH OF )
) ss
COUNTY OF )
On this ______ day of ______________________, 1997, before me
appeared ______________________________________, to me personally known, who,
being by me duly sworn, did say that he is the ___________________________ of
_________________________, and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its board of directors and
said ______________________________________, acknowledged said instrument to be
the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed
my official seal at my office in said county and commonwealth the day and year
last above written.
______________________________
Notary Public
My term expires:
[seal]
54
<PAGE> 61
EXHIBIT A
(FORM OF FACE OF DEBENTURE)
<TABLE>
<S> <C>
No. _____________________________ $_______________________
CUSIP No. _______________________
</TABLE>
STIFEL FINANCIAL CORP.
___% SUBORDINATED DEBENTURE
DUE JUNE 30, 2027
Stifel Financial Corp., a Delaware corporation (the "Company," which
term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
___________________________________ as Property Trustee for Stifel Financial
Capital Trust, or registered assigns, the principal sum of ______________
Dollars ($___________) on June 30, 2027 (the "Stated Maturity"), and to pay
interest on said principal sum from [Date of original issuance], 1997, or from
the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, quarterly (subject
to deferral as set forth herein) in arrears on March 31, June 30, September 30
and December 31 of each year commencing September 30, 1997, at the rate of ___%
per annum until the principal hereof shall have become due and payable, and on
any overdue principal and (without duplication) on any overdue installment of
interest at the same rate per annum compounded quarterly. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year of twelve 30-day months. The amount of interest for any partial
period shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on this Debenture is not a business day, then payment of
interest payable on such date shall be made on the next succeeding day that is
a business day (and without any interest or other payment in respect of any
such delay) with the same force and effect as if made on such date. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date shall, as provided in the Indenture, be paid to the
person in whose name this Debenture (or one or more Predecessor Debentures, as
defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, which shall be the close of
business on the fifteenth day of the month in which the Interest Payment Date
occurs unless otherwise provided in the Indenture. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to
be payable to the registered holders on such regular record date and may be
paid to the Person in whose name this Debenture (or one or more Predecessor
Debentures) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the registered holders of the Debentures not less
than 10 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 Debentures may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Exhibit A-1
<PAGE> 62
Indenture. The principal of and the interest on this Debenture shall be payable
at the office or agency of the Trustee maintained for that purpose in any coin
or currency of the United States of America that at the time of payment is
legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the registered holder at such address as shall appear in the Debenture
Register. Notwithstanding the foregoing, so long as the holder of this
Debenture is the Property Trustee, the payment of the principal of and interest
on this Debenture shall be made at such place and to such account as may be
designated by the Trustee.
The Stated Maturity may be shortened at any time by the Company to any
date not earlier than June 30, 2002, subject to the Company having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. Such date may also be extended
at any time at the election of the Company for one or more periods, but in no
event to a date later than June 30, 2036, subject to certain limitations
described in the Indenture.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each holder of
this Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided; and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated ______________________
Exhibit A-2
<PAGE> 63
<TABLE>
<S> <C>
STIFEL FINANCIAL CORP.
By:______________________________
Name:____________________________
Title:___________________________
Attest:
By: _____________________________
Name: ___________________________
Title: ____________________________
</TABLE>
Exhibit A-3
<PAGE> 64
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned Indenture.
<TABLE>
<S> <C>
Dated:
___________________________________, _____________________________
as Trustee or Authentication Agent
By ___________________________________ By ___________________________
Authorized Signatory
</TABLE>
Exhibit A-4
<PAGE> 65
[FORM OF REVERSE OF DEBENTURE]
______________% SUBORDINATED DEBENTURE
(CONTINUED)
This Debenture is one of the subordinated debentures of the Company
(herein sometimes referred to as the "Debentures"), specified in the Indenture,
all issued or to be issued under and pursuant to an Indenture dated as of
_________, 1997 (the "Indenture") duly executed and delivered between the
Company and ___________________________________, as Trustee (the "Trustee"), to
which Indenture reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Debentures. The Debentures are
limited in aggregate principal amount as specified in the Indenture.
In certain circumstances because of the occurrence and continuation of
a Special Event, this Debenture may become due and payable prior to its stated
maturity at the principal amount together with any interest accrued thereon
(the "Redemption Price"). The Redemption Price shall be paid prior to 12:00
noon, Eastern Standard Time, time, on the date of such redemption or at such
earlier time as the Company determines. The Company shall have the right to
redeem this Debenture at the option of the Company, without premium or penalty,
in whole or in part at any time on or after June 30, 2002 (an "Optional
Redemption"), or at any time in certain circumstances upon the occurrence of a
Special Event, at a Redemption Price equal to 100% of the principal amount plus
any accrued but unpaid interest, to the date of such redemption. Any redemption
pursuant to this paragraph shall be made upon not less than 30 days nor more
than 60 days notice, at the Redemption Price. If the Debentures are only
partially redeemed by the Company pursuant to an Optional Redemption, the
Debentures shall be redeemed pro rata or by lot or by any other method utilized
by the Trustee.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in
the name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, as
defined in the Indenture, to execute supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Debentures; provided, however, that
no such supplemental indenture shall (i) extend the fixed maturity of the
Debentures except as provided in the Indenture, or reduce the principal amount
thereof, or reduce the rate or extend the time of
Exhibit A-5
<PAGE> 66
payment of interest thereon, without the consent of the holder of each
Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures,
the holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of each Debenture then
outstanding and affected thereby. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding, on behalf of all of the holders of the
Debentures, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture,
and its consequences, except a default in the payment of the principal of or
interest on any of the Debentures. Any such consent or waiver by the registered
holder of this Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Debenture and of any Debenture issued in exchange herefor or in place
hereof (whether by registration of transfer or in place hereof, irrespective of
whether or not any notation of such consent or waiver is made upon this
Debenture).
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal and interest
on this Debenture at the time and place and at the rate and in the money herein
prescribed.
The Company shall have the right at any time during the term of the
Debentures and from time to time to extend the interest payment period of such
Debentures for up to 20 consecutive quarters (each, an "Extension Period"), at
the end of which period the Company shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Debentures
to the extent that payment of such interest is enforceable under applicable
law). Before the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such Extension Period
together with all such further extensions thereof shall not exceed 20
consecutive quarters. At the termination of any such Extension Period and upon
the payment of all accrued and unpaid interest and any additional amounts then
due, the Company may commence a new Extension Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered holder
hereof on the Debenture Register of the Company, upon surrender of this
Debenture for registration of transfer at the office or agency of the Trustee
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Debentures of authorized denominations and for the same aggregate
principal amount shall be issued to the designated transferee or transferees.
No service charge shall be made for any such transfer, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other
Exhibit A-6
<PAGE> 67
than the Debenture Registrar) for the purpose of receiving payment of or on
account of the principal hereof and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $10 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Exhibit A-7
<PAGE> 1
EXHIBIT 4.6
CERTIFICATE OF TRUST
OF
STIFEL FINANCIAL CAPITAL TRUST
THIS CERTIFICATE OF TRUST OF STIFEL FINANCIAL CAPITAL TRUST (the
"Trust"), dated as of June 6, 1997, is being duly executed and filed
by WILMINGTON TRUST COMPANY, a Delaware banking corporation, George H. Walker
III, Gregory F. Taylor and Charles R. Hartman, each an individual, as trustees,
to form a business trust under the Delaware Business Trust Act (12 Del. C.
Section 3801 et seq.).
1. NAME. The name of the business trust formed hereby is Stifel
Financial Capital Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust
Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective
on June 6, 1997.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, has
executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY, as trustee
By: /s/ Norma P. Closs
------------------------------------
Name: Norma P. Closs
------------------------------------
Title: Vice President
------------------------------------
/s/ George H. Walker III
------------------------------------
George H. Walker III, as Trustee
/s/ Gregory F. Taylor
------------------------------------
Gregory F. Taylor, as Trustee
/s/ Charles R. Hartman
------------------------------------
Charles R. Hartman, as Trustee
A-1
<PAGE> 1
Exhibit 4.7
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of June 6, 1997 (this "Trust Agreement"),
among (i) Stifel Financial Corp., a Delaware corporation (the "Depositor"), (ii)
Wilmington Trust Company, a Delaware banking corporation, as trustee, and (iii)
George H. Walker III, Gregory F. Taylor and Charles R. Hartman, each an
individual, as trustees (each of such trustees in (ii) and (iii) a "Trustee" and
collectively, the "Trustees"). The Depositor and the Trustees hereby agree as
follows:
1. The trust created hereby (the "Trust") shall be known as "STIFEL
FINANCIAL CAPITAL TRUST" in which name the Trustees, or the Depositor to the
extent provided herein, may engage in the transactions contemplated hereby, make
and execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over the
Trustees the sum of $10.00. The Trustees hereby acknowledge receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust Act"),
and that this document constitutes the governing instrument of the Trust. The
Trustees are hereby authorized and directed to execute and file a certificate of
trust with the Delaware Secretary of State in accordance with the provisions of
the Business Trust Act.
3. The Depositor and the Trustees will enter into an amended and restated
Trust Agreement, satisfactory to each such party and substantially in the form
included as an exhibit to the 1933 Act Registration Statement (as defined
below), to provide for the contemplated operation of the Trust created hereby
and the issuance of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and restated Trust
Agreement, the Trustees shall not have any duty or obligation hereunder or with
respect to the trust estate, except as otherwise required by applicable law or
as may be necessary to obtain prior to such execution and delivery of any
licenses, consents or approvals required by applicable law or otherwise.
4. The Depositor and the Trustees hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-2 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Preferred Securities of the
Trust and possibly certain other securities and (b) a Registration Statement on
Form 8-A (the "1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the registration of the
Preferred Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with The Nasdaq Stock Market's National Market, The New
York Stock
<PAGE> 2
Exchange or any other national stock exchange (each, an "Exchange") and execute
on behalf of the Trust one or more listing applications and all other
applications, statements, certificates, agreements and other instruments as
shall be necessary or desirable to cause the Preferred Securities to be listed
on any of the Exchanges; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Preferred Securities under the securities
or blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust,
may deem necessary or desirable; and (iv) to execute on behalf of the Trust that
certain Underwriting Agreement relating to the Preferred Securities, among the
Trust, the Depositor and the several Underwriters named therein, substantially
in the form included as an exhibit to the 1933 Act Registration Statement. In
the event that any filing referred to in clauses (i), (ii) and (iii) above is
required by the rules and regulations of the Commission, an Exchange or state
securities or blue sky laws, to be executed on behalf of the Trust by one or
more of the Trustees, each of the Trustees, in its or his capacity as a Trustee
of the Trust, is hereby authorized and, to the extent so required, directed to
join in any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that Wilmington Trust Company in its capacity as
a Trustee of the Trust shall not be required to join in any such filing or
execute on behalf of the Trust any such document unless required by the rules
and regulations of the Commission, the Exchange or state securities or blue sky
laws. In connection with the filings referred to above, the Depositor and George
H. Walker III, Gregory F. Taylor and Charles R. Hartman, each as Trustees and
not in their individual capacities, hereby constitutes and appoints George H.
Walker III, Gregory F. Taylor and Charles R. Hartman, and each of them, as its
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for the Depositor or such Trustee or in the Depositor's or
such Trustees' name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Commission, the Exchange and administrators of the state securities or
blue sky laws, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Depositor or such Trustee might or could to in person, hereby ratifying and
confirming all that said attorneys-in- fact and agents or any of them, or their
respective substitute or substitutes, shall do or cause to be done by virtue
hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be four and thereafter the number
of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Depositor which may increase or decrease the
number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any Trustee at any
time. The Trustees may resign upon 30 days' prior notice to the Depositor.
2
<PAGE> 3
7. This Trust Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (without regard to conflict of laws of
principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed as of the day and year first above written.
STIFEL FINANCIAL CORP.
as Depositor
By: /s/ George H. Walker III
--------------------------------------------
Name: George H. Walker III
Title: Chairman of the Board
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ Norma P. Closs
Name: Norma P. Closs
---------------------------------------
Title: Vice President
--------------------------------------
/s/ George H. Walker III
--------------------------------------------
George H. Walker III
as Trustee
/s/ George H. Walker III
--------------------------------------------
Gregory F. Taylor
as Trustee
/s/ Charles R. Hartman
--------------------------------------------
Charles R. Hartman
as Trustee
3
<PAGE> 1
Exhibit 4.8
================================================================================
---------------------------
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
STIFEL FINANCIAL CORP., AS DEPOSITOR
___________________________________, AS PROPERTY TRUSTEE
WILMINGTON TRUST COMPANY, AS DELAWARE TRUSTEE,
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF _________________________, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I Defined Terms......................................................2
Section 101. Definitions...............................................2
ARTICLE II Establishment of the Trust........................................9
Section 201. Name......................................................9
Section 202. Office of the Delaware Trustee; Principal Place of
Business..................................................9
Section 203. Initial Contribution of Trust Property;
Organizational Expenses..................................10
Section 204. Issuance of the Preferred Securities.....................10
Section 205. Issuance of the Common Securities; Subscription and
Purchase of Debentures...................................10
Section 206. Declaration of Trust.....................................11
Section 207. Authorization To Enter into Certain Transactions.........11
Section 208. Assets of Trust..........................................15
Section 209. Title to Trust Property..................................15
ARTICLE III Payment Account.................................................15
Section 301. Payment Account..........................................15
ARTICLE IV Distributions; Redemption........................................15
Section 401. Distributions............................................15
Section 402. Redemption...............................................16
Section 403. Subordination of Common Securities.......................18
Section 404. Payment Procedures.......................................18
Section 405. Tax Returns and Reports..................................19
Section 406. Payment of Taxes, Duties, Etc. of the Trust..............19
Section 407. Payments Under Indenture.................................19
ARTICLE V Trust Securities Certificates.....................................19
Section 501. Initial Ownership........................................19
Section 502. The Trust Securities Certificates........................19
Section 503. Execution, Authentication and Delivery of Trust
Securities Certificates..................................20
Section 504. Registration of Transfer and Exchange of Preferred
Securities Certificates..................................20
Section 505. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates..................................21
Section 506. Persons Deemed Securityholders...........................22
Section 507. Access to List of Securityholders' Names and
Addresses................................................22
Section 508. Maintenance of Office or Agency..........................22
Section 509. Appointment of Paying Agent..............................23
Section 510. Ownership of Common Securities by Depositor..............23
i
<PAGE> 3
Section 511. Preferred Securities Certificates........................23
Section 512. [Intentionally Omitted]..................................24
Section 513. [Intentionally Omitted]..................................24
Section 514. Rights of Securityholders................................24
ARTICLE VI Acts of Securityholders; Meetings; Voting........................25
Section 601. Limitations on Voting Rights.............................25
Section 602. Notice of Meetings.......................................26
Section 603. Meetings Of Preferred Securityholders....................26
Section 604. Voting Rights............................................26
Section 605. Proxies, Etc.............................................26
Section 606. Securityholder Action by Written Consent.................27
Section 607. Record Date for Voting and Other Purposes................27
Section 608. Acts of Securityholders..................................27
Section 609. Inspection of Records....................................28
ARTICLE VII Representations and Warranties..................................28
Section 701. Representations and Warranties of the Bank and the
Property Trustee.........................................28
Section 702. Representations and Warranties of the Delaware Bank
and the Delaware Trustee.................................29
Section 703. Representations and Warranties of Depositor..............31
ARTICLE VIII Trustees.......................................................31
Section 801. Certain Duties and Responsibilities......................31
Section 802. Certain Notices..........................................32
Section 803. Certain Rights of Property Trustee.......................33
Section 804. Not Responsible for Recitals or Issuance of
Securities...............................................35
Section 805. May Hold Securities......................................35
Section 806. Compensation; Indemnity; Fees............................35
Section 807. Corporate Property Trustee Required; Eligibility of
Trustees.................................................36
Section 808. Conflicting Interests....................................36
Section 809. Co-Trustees and Separate Trustee.........................36
Section 810. Resignation and Removal; Appointment of Successor........38
Section 811. Acceptance of Appointment by Successor...................39
Section 812. Merger, Conversion, Consolidation or Succession to
Business.................................................40
Section 813. Preferential Collection of Claims Against Depositor
or Trust.................................................40
Section 814. Reports by Property Trustee..............................40
Section 815. Reports to the Property Trustee..........................41
Section 816. Evidence of Compliance with Conditions Precedent.........41
Section 817. Number of Trustees.......................................41
Section 818. Delegation of Power......................................41
Section 819. Voting...................................................42
ii
<PAGE> 4
ARTICLE IX Termination, Liquidation and Merger..............................42
Section 901. Termination upon Expiration Date.........................42
Section 902. Early Termination........................................42
Section 903. Termination..............................................42
Section 904. Liquidation..............................................43
Section 905. Mergers, Consolidations, Amalgamations or
Replacements of the Trust................................44
ARTICLE X Miscellaneous Provisions..........................................45
Section 1001. Limitation of Rights of Securityholders.................45
Section 1002. Amendment...............................................45
Section 1003. Separability............................................46
Section 1004. Governing Law...........................................46
Section 1005. Payments Due on Non-Business Day........................47
Section 1006. Successors..............................................47
Section 1007. Headings................................................47
Section 1008. Reports, Notices and Demands............................47
Section 1009. Agreement Not To Petition...............................48
Section 1010. Trust Indenture Act; Conflict with Trust Indenture
Act.....................................................48
Section 1011. Acceptance of Terms of Trust Agreement, Guarantee
and Indenture...........................................49
iii
<PAGE> 5
CROSS-REFERENCE TABLE
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
- - ------------------- ---------------
310(a)(1)...................................................................807
310(a)(2)...................................................................807
310(a)(3)...................................................................807
310(a)(4)............................................................207(a)(ii)
310(b)......................................................................808
311(a)......................................................................813
311(b)......................................................................813
312(a)......................................................................507
312(b)......................................................................507
312(c)......................................................................507
313(a)...................................................................814(a)
313(a)(4)................................................................814(b)
313(b)...................................................................814(b)
313(c).....................................................................1008
313(d)...................................................................814(c)
314(a)......................................................................815
314(b)...........................................................Not Applicable
314(c)(1)...................................................................816
314(c)(2)...................................................................816
314(c)(3)........................................................Not Applicable
314(d)...........................................................Not Applicable
314(e).................................................................101, 816
315(a)...........................................................801(a), 803(a)
315(b)................................................................802, 1008
315(c)...................................................................801(a)
315(d).................................................................801, 803
316(a)(2)........................................................Not Applicable
316(b)...........................................................Not Applicable
316(c)......................................................................607
317(a)(1)........................................................Not Applicable
317(a)(2)........................................................Not Applicable
317(b)......................................................................509
318(a).....................................................................1010
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect any interpretation of any of its terms or provisions.
iv
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _________, 1997, among
(i) STIFEL FINANCIAL CORP., a Delaware corporation (including any successors or
assigns, the "Depositor"), (ii) ___________________________________, a trust
company duly organized and existing under the laws of the ______________ of
_____________, as property trustee (the "Property Trustee" and, in its separate
corporate capacity and not in its capacity as Property Trustee, the "Bank"),
(iii) WILMINGTON TRUST COMPANY, a Delaware banking corporation duly organized
and existing under the laws of the State of Delaware, as Delaware trustee (the
"Delaware Trustee," and, in its separate corporate capacity and not in its
capacity as Delaware Trustee, the "Delaware Bank") (iv) GEORGE H. WALKER III, an
individual, GREGORY F. TAYLOR, an individual, and CHARLES R. HARTMAN, an
individual, each of whose address is c/o Stifel Financial Corp., 500 North
Broadway, St. Louis, Missouri 63102-2188, (each an "Administrative Trustee" and
collectively the "Administrative Trustees") (the Property Trustee, the Delaware
Trustee and the Administrative Trustees referred to collectively as the
"Trustees"), and (v) the several Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor, the Delaware Trustee, and George H. Walker III,
Gregory F. Taylor and Charles R. Hartman, each as an Administrative Trustee,
have heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act (as hereinafter defined) by the entering into of
that certain Trust Agreement, dated as of _________, 1997 (the "Original Trust
Agreement"), and by the execution and filing by the Delaware Trustee, the
Depositor and the Administrative Trustees with the Secretary of State of the
State of Delaware of the Certificate of Trust, filed on ______________, 1997,
the form of which is attached as Exhibit A; and
WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and the
Administrative Trustees desire to amend and restate the Original Trust Agreement
in its entirety as set forth herein to provide for, among other things, (i) the
issuance of the Common Securities (as defined herein) by the Trust (as defined
herein) to the Depositor; (ii) the issuance and sale of the Preferred Securities
(as defined herein) by the Trust pursuant to the Underwriting Agreement (as
defined herein); (iii) the acquisition by the Trust from the Depositor of all of
the right, title and interest in the Debentures (as defined herein); and (iv)
the appointment of the Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party, for the benefit of the
other parties and for the benefit of the Securityholders (as defined herein),
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows:
<PAGE> 7
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to them
in this Article I and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an "Article" or
a "Section" refers to an Article or a Section, as the case may be, of this Trust
Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Trust Agreement as a whole and not to any particular
Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1 of the
Indenture.
"Administrative Trustee" means each of George H. Walker III, Gregory F.
Taylor and Charles R. Hartman, solely in his capacity as Administrative Trustee
of the Trust formed and continued hereunder and not in his individual capacity,
or such Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, any Person 10% or more of whose outstanding voting securities
or other ownership interests are directly or indirectly owned, controlled or
held with power to vote by the specified Person; (b) any Person directly or
indirectly controlling, controlled by, or under common control with the
specified Person; (c) a partnership in which the specified Person is a general
partner; (d) any officer or director of the specified Person; and (e) if the
specified Person is an individual, any entity of which the specified Person is
an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to the
Preferred Securities appointed by the Property Trustee pursuant to Section 503.
2
<PAGE> 8
"Bank" has the meaning specified in the Preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in the
premises adjudging such Person a bankrupt or insolvent, or approving as properly
filed a petition seeking liquidation or reorganization of or in respect of such
Person under the United States Bankruptcy Code of 1978, as amended, or any other
similar applicable federal or state law, and the continuance of any such decree
or order unvacated and unstayed for a period of 90 days; or the commencement of
an involuntary case under the United States Bankruptcy Code of 1978, as amended,
in respect of such Person, which shall continue undismissed for a period of 90
days or entry of an order for relief in such case; or the entry of a decree or
order of a court having jurisdiction in the premises for the appointment on the
ground of insolvency or bankruptcy of a receiver, custodian, liquidator, trustee
or assignee in bankruptcy or insolvency of such Person or of its property, or
for the winding up or liquidation of its affairs, and such decree or order shall
have remained in force unvacated and unstayed for a period of 90 days; or
(b) the institution by such Person of proceedings to be adjudicated a
voluntary bankrupt, or the consent by such Person to the filing of a bankruptcy
proceeding against it, or the filing by such Person of a petition or answer or
consent seeking liquidation or reorganization under the United States Bankruptcy
Code of 1978, as amended, or other similar applicable Federal or State law, or
the consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or custodian
or liquidator or trustee or assignee in bankruptcy or insolvency of such Person
or of its property, or shall make a general assignment for the benefit of
creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date of
such certification, and delivered to the appropriate Trustee.
"Business Day" means a day other than a Saturday or Sunday, a day on which
banking institutions in the City of New York are authorized or required by law,
executive order or regulation to remain closed, or a day on which the Property
Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
3
<PAGE> 9
"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.
"Common Security" means an undivided beneficial interest in the assets of
the Trust, having a Liquidation Amount of $10 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means the office at which, at any particular time,
the corporate trust business of the Property Trustee or the Debenture Trustee,
as the case may be, shall be principally administered, which office at the date
hereof, in each such case, is located at _____________________________________
Attention: _________________.
"Debenture Event of Default" means an "Event of Default" as defined in
Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Trustee" means ___________________________________, a banking
corporation company organized under the laws of the ________________ of
______________ and any successor thereto, as trustee under the Indenture.
"Debentures" means the $29,639,500 aggregate principal amount of the
Depositor's ____% Subordinated Debentures due 2027, issued pursuant to the
Indenture.
"Delaware Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from time to
time.
"Delaware Trustee" means the commercial bank or trust company identified as
the "Delaware Trustee" in the Preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust formed and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the Preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 401(a).
4
<PAGE> 10
"Distributions" means amounts payable in respect of the Trust Securities as
provided in Section 401.
"Early Dissolution Event" has the meaning specified in Section 902.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such default
for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Trustees in this Trust Agreement (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clause (b) or (c), above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Trustee or Trustees by the
Holders of at least 25% in aggregate Liquidation Amount of the Outstanding
Preferred Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property Trustee
within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extension Period" has the meaning specified in Section 4.1 of the
Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement executed and
delivered by the Depositor and ___________________________________, as trustee,
contemporaneously with the execution and delivery of this Trust Agreement, for
the benefit of the holders of the Preferred Securities, as amended from time to
time.
5
<PAGE> 11
"Indenture" means the Indenture, dated as of _______________, 1997, between
the Depositor and the Debenture Trustee, as trustee, as amended or supplemented
from time to time pertaining to the Debentures of the Depositor.
"Investment Company Act," means the Investment Company Act of 1940, as
amended, as in effect at the date of execution of this instrument.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to the principal amount of
Debentures to be contemporaneously redeemed in accordance with the Indenture and
the proceeds of which shall be used to pay the Redemption Price of such Trust
Securities; and (b) with respect to a distribution of Debentures to Holders of
Trust Securities in connection with a dissolution or liquidation of the Trust,
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the Holder to whom such Debentures are distributed. Each
Debenture distributed pursuant to clause (6) above shall carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Debenture.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed
to Holders of Trust Securities in connection with a dissolution and liquidation
of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Controller
or an Assistant Controller or the Secretary or an Assistant Secretary, of the
Depositor, and delivered to the appropriate Trustee. One of the officers signing
an Officers' Certificate given pursuant to Section 816 shall be the principal
executive, financial or accounting officer of the Depositor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
6
<PAGE> 12
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who may
be counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the Recitals to
this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means, as of
the date of determination, all Preferred Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property Trustee or
delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Preferred Securities; provided that, if
such Preferred Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or in lieu
of which other Preferred Securities have been executed and delivered pursuant to
Sections 504, 505 and 511; provided, however, that in determining whether the
Holders of the requisite Liquidation Amount of the Outstanding Preferred
Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Preferred Securities owned by the Depositor, any
Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded
and deemed not to be Outstanding, except that (a) in determining whether any
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Preferred Securities
that such Trustee knows to be so owned shall be so disregarded; and (b) the
foregoing shall not apply at any time when all of the outstanding Preferred
Securities are owned by the Depositor, one or more of the Trustees and/or any
such Affiliate. Preferred Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Administrative Trustees the pledgee's right so to act with
respect to such Preferred Securities and the Pledgee is not the Depositor or any
other Obligor upon the Preferred Securities or a Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Depositor or any Affiliate of the Depositor.
"Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust department
for the benefit of the Securityholders in which all amounts paid in respect of
the Debentures shall be held and
7
<PAGE> 13
from which the Property Trustee shall make payments to the Securityholders in
accordance with Sections 401 and 402.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $10 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate", means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
E.
"Property Trustee" means the commercial bank or trust company identified as
the "Property Trustee," in the Preamble to this Trust Agreement solely in its
capacity as Property Trustee of the Trust heretofore formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Trust Agreement;
provided that each Debenture Redemption Date and the stated maturity of the
Debentures shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, paid by the Depositor upon the concurrent
redemption of a Like Amount of Debentures, allocated on a pro rata basis (based
on Liquidation Amounts) among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust Security
or Securities is registered in the Securities Register; any such Person is a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means the Delaware business trust created and continued hereby and
identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the
same may be modified, amended or supplemented in accordance with the applicable
provisions hereof, including all exhibits hereto, including, for all purposes of
this Trust Agreement and any
8
<PAGE> 14
such modification, amendment or supplement, the provisions of the Trust
Indenture Act that are deemed to be a part of and govern this Trust Agreement
and any such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939, as amended, is
amended after such date, "Trust Indenture Act" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of the Property
Trustee under the Guarantee; (c) any cash on deposit in, or owing to, the
Payment Account; and (d) all proceeds and rights in respect of the foregoing and
any other property and assets for the time being held or deemed to be held by
the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
____________, 1997, among the Trust, the Depositor and the Underwriters named
therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME.
The Trust created and continued hereby shall be known as "Stifel Financial
Capital Trust," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may engage in the
transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or
such other address in the State of Delaware as the Delaware Trustee may
designate by written notice to the Securityholders and the
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Depositor. The principal executive office of the Trust is c/o Stifel Financial
Corp., 500 North Broadway, St. Louis, Missouri 63102-2188, Attention: Chief
Financial Officer.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES.
The Trustees acknowledge receipt in trust from the Depositor in connection
with the Original Trust Agreement of the sum of $10, which constituted the
initial Trust Property. The Depositor shall pay organizational expenses of the
Trust as they arise or shall, upon request of any Trustee, promptly reimburse
such Trustee for any such expenses paid by such Trustee. The Depositor shall
make no claim upon the Trust Property for the payment of such expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES.
On __________, 1997, the Depositor and an Administrative Trustee, on behalf
of the Trust and pursuant to the Original Trust Agreement, executed and
delivered the Underwriting Agreement. Contemporaneously with the execution and
delivery of this Trust Agreement, an Administrative Trustee, on behalf of the
Trust, shall execute in accordance with Section 502 and deliver in accordance
with the Underwriting Agreement, Preferred Securities Certificates, registered
in the name of the Persons entitled thereto, in an aggregate amount of 2,500,000
Preferred Securities having an aggregate Liquidation Amount of $25,000,000
against receipt of the aggregate purchase price of such Preferred Securities of
$25,000,000, which amount such Administrative Trustee shall promptly deliver to
the Property Trustee. If the underwriters exercise their Option and there is an
Option Closing Date (as such terms are defined in the Underwriting Agreement),
then an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver in accordance with the Underwriting
Agreement, Preferred Securities Certificates, registered in the name of the
Persons entitled thereto, in an aggregate amount of up to 375,000 Preferred
Securities having an aggregate Liquidation Amount of up to $3,750,000 against
receipt of the aggregate purchase price of such Preferred Securities of
$3,750,000, which amount such Administrative Trustee shall promptly deliver to
the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF
DEBENTURES.
(a) Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver to the Depositor, Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
77,350 Common Securities having an aggregate Liquidation Amount of $773,500
against payment by the Depositor of such amount. Contemporaneously therewith, an
Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase
from the Depositor, Debentures, registered in the name of the Property Trustee
on behalf of the Trust and having an aggregate principal amount equal to
$25,773,500, and, in satisfaction of the purchase price for such Debentures, the
Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum
of $25,773,500.
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(b) If the underwriters exercise the Option and there is an Option Closing
Date, then an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver to the Depositor, Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
11,600 Common Securities having an aggregate Liquidation Amount of up to
$116,000 against payment by the Depositor of such amount. Contemporaneously
therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to
and purchase from the Depositor, Debentures, registered in the name of the Trust
and having an aggregate principal amount of up to $3,866,000, and, in
satisfaction of the purchase price of such Debentures, the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor the amount received from one
of the Administrative Trustees pursuant to the last sentence of Section 204.
SECTION 206. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Trust Securities and use the proceeds from such sale to acquire the Debentures;
and (b) to engage in those activities necessary, convenient or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to
have all the rights, powers and duties to the extent set forth herein, and the
Trustees hereby accept such appointment. The Property Trustee hereby declares
that it shall hold the Trust Property in trust upon and subject to the
conditions set forth herein for the benefit of the Securityholders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrative Trustees set
forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Delaware Business Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance with
the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section 207 and Article VIII, and in accordance with the
following provisions (i) and (ii), the Administrative Trustees shall have the
authority to enter into all transactions and agreements determined by the
Administrative Trustees to be appropriate in exercising the authority, express
or implied, otherwise granted to the Administrative Trustees under this Trust
Agreement, and to perform all acts in furtherance thereof, including without
limitation, the following:
(i) As among the Trustees, each Administrative Trustee, acting singly
or jointly, shall have the power and authority to act on behalf of the
Trust with respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute, deliver and
perform on behalf of the Trust, the Expense Agreement and such other
agreements
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or documents as may be necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting in the registration of the Preferred Securities
under the Securities Act of 1933, as amended, and under state
securities or blue sky laws, and the qualification of this Trust
Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities upon The
Nasdaq Stock Market's National Market, the New York Stock Exchange or
such other securities exchange or exchanges as shall be determined by
the Depositor and the registration of the Preferred Securities under
the Exchange Act, and the preparation and filing of all periodic and
other reports and other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of default) and
other information regarding the Trust Securities and the Debentures to
the Securityholders in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, Authenticating Agent and
Securities Registrar in accordance with this Trust Agreement;
(G) to the extent provided in this Trust Agreement, dissolution
and liquidation of the Trust and the preparation, execution and filing
of the certificate of cancellation with the Secretary of State of the
State of Delaware;
(H) to take all action that may be necessary or appropriate for
the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under
the laws of the State of Delaware and of each other jurisdiction in
which such existence is necessary to protect the limited liability of
the Holders of the Preferred Securities or to enable the Trust to
effect the purposes for which the Trust was created; and
(I) the taking of any action incidental to the foregoing as the
Administrative Trustees may from time to time determine is necessary
or advisable to give effect to the terms of this Trust Agreement for
the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the power,
duty and authority to act on behalf of the Trust with respect to the
following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
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(C) the collection of interest, principal and any other payments
made in respect of the Debentures in the Payment Account;
(D) the distribution of amounts owed to the Securityholders in
respect of the Trust Securities in accordance with the terms of this
Trust Agreement;
(E) the exercise of all of the rights, powers and privileges of a
holder of the Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with the
terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
dissolution and liquidation of the Trust;
(I) after an Event of Default, the taking of any action
incidental to the foregoing as the Property Trustee may from time to
time determine is necessary or advisable to give effect to the terms
of this Trust Agreement and protect and conserve the Trust Property
for the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder);
(J) registering transfers of the Trust Securities in accordance
with this Trust Agreement; and
(K) except as otherwise provided in this Section 207(a)(ii), the
Property Trustee shall have none of the duties, liabilities, powers or
the authority of the Administrative Trustees set forth in Section
207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or the
Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement; (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein; (iii) take any action that would cause the
Trust to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes; (iv) incur any indebtedness for borrowed money or issue any
other debt; or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
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(c) In connection with the issue and sale of the Preferred Securities, the
Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the Commission and
the execution on behalf of the Trust of a registration statement on the
appropriate form in relation to the Preferred Securities and the
Debentures, including any amendments thereto;
(ii) the determination of the States in which to take appropriate
action to qualify or, register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions which must
be taken by or on behalf of the Trust, and advise the Trustees of actions
they must take on behalf of the Trust, and prepare for execution and filing
any documents to be executed and filed by the Trust or on behalf of the
Trust, as the Depositor deems necessary or advisable in order to comply
with the applicable laws of any such States;
(iii) the preparation for filing by the Trust and execution on behalf
of the Trust of an application to The Nasdaq Stock Market's National
Market, the New York Stock Exchange or any other national stock exchanges
or other organizations for listing upon notice of issuance of any Preferred
Securities and to file or cause an Administrative Trustee to file
thereafter with such exchange or organization such notifications and
documents as may be necessary from time to time;
(iv) the preparation for filing by the Trust with the Commission and
the execution on behalf of the Trust of a registration statement on Form
8-A relating to the registration of the Preferred Securities under Section
12(b) or 12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution and delivery
of, the Underwriting Agreement providing for the sale of the Preferred
Securities; and
(vi) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust shall not be deemed to be an "investment
company" required to be registered under the Investment Company Act, shall be
classified as a "grantor trust" and not as an association taxable as a
corporation for United States federal income tax purposes and so that the
Debentures shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section 1002, the
Depositor and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law or this Trust Agreement, that
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each of the Depositor and the Administrative Trustees determines in their
discretion to be necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Securityholders in accordance with
this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall establish
the Payment Account. The Property Trustee and any agent of the Property Trustee
shall have exclusive control and sole right of withdrawal with respect to the
Payment Account for the purpose of making deposits and withdrawals from the
Payment Account in accordance with this Trust Agreement. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Property Trustee in the Payment Account for the exclusive benefit of
the Securityholders and for distribution as herein provided, including (and
subject to) any priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and shall
accumulate whether or not there are funds of the Trust available for the payment
of Distributions. Distributions shall accumulate from September 30, 1997, and,
except during any Extension Period with respect to the Debentures, shall be
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing on September 30, 1997. If any date on which a
Distribution is otherwise payable on the Trust Securities is not a Business Day,
then the payment of such Distribution shall be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) with the same force
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and effect as if made on such date (each date on which distributions are payable
in accordance with this Section 401(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests in the
Trust Property. Distributions on the Trust Securities shall be payable at a rate
of ___% per annum of the Liquidation Amount of the Trust Securities. The amount
of Distributions payable for any full period shall be computed on the basis of a
360-day year of twelve 30-day months. The amount of Distributions for any
partial period shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30 day months. During any Extension Period with respect
to the Debentures, Distributions on the Preferred Securities shall be deferred
for a period equal to the Extension Period. The amount of Distributions payable
for any period shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the Property
Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available by 12:30 p.m. on each Distribution Date in the Payment
Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a Distribution
Date shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
15th day of the month in which the Distribution is payable.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Trust shall be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Securities Register. The Property
Trustee shall have no responsibility for the accuracy of any CUSIP number
contained in such notice. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the aggregate Liquidation Amount of
the particular Trust Securities to be redeemed; and
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(v) that, on the Redemption Date, the Redemption Price shall
become due and payable upon each such Trust Security to be redeemed
and that Distributions thereon shall cease to accumulate on and after
said date.
(c) The Trust Securities redeemed on each Redemption Date shall be redeemed
at the Redemption Price with the proceeds from the contemporaneous redemption of
Debentures. Redemptions of the Trust Securities shall be made and the Redemption
Price shall be payable on each Redemption Date only to the extent that the Trust
has immediately available funds then on hand and available in the Payment
Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any
Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, subject to Section 402(c), the Property Trustee shall deposit with the
Paying Agent funds sufficient to pay the applicable Redemption Price and shall
give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price to the Holders thereof upon surrender of their Preferred
Securities Certificates. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the Holders of such Trust Securities as they appear on the
Securities Register for the Trust Securities on the relevant record dates for
the related Distribution Dates. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit, all rights
of Securityholders holding Trust Securities so called for redemption shall
cease, except the right of such Securityholders to receive the Redemption Price
and any Distribution payable on or prior to the Redemption Date, but without
interest, and such Trust Securities shall cease to be Outstanding. In the event
that any date on which any Redemption Price is payable is not a Business Day,
then payment of the Redemption Price payable on such date shall be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) with the same force and effect as if made
on such date. In the event that payment of the Redemption Price in respect of
any Trust Securities called for redemption is improperly withheld or refused and
not paid either by the Trust or by the Depositor pursuant to the Guarantee,
Distributions on such Trust Securities shall continue to accumulate, at the then
applicable rate, from the Redemption Date originally established by the Trust
for such Trust Securities to the date such Redemption Price is actually paid, in
which case the actual payment date shall be the date fixed for redemption for
purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be made
to the record holders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be the date 15 days
prior to the relevant Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Property Trustee from the Outstanding Preferred Securities not previously called
for redemption,
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by such method (including, without limitation, by lot) as the Property Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $10 or an integral multiple of $10 in excess
thereof) of the Liquidation Amount of Preferred Securities of a denomination
larger than $10. The Property Trustee shall promptly notify the Securities
Registrar in writing of the Preferred Securities selected for redemption and, in
the case of any Preferred Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of this Trust
Agreement, unless the context otherwise requires, all provisions relating to the
redemption of Preferred Securities shall relate, in the case of any Preferred
Securities redeemed or to be redeemed only in part, to the portion of the
Liquidation Amount of Preferred Securities which has been or is to be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if applicable)
on, and the Redemption Price of, the Trust Securities, as applicable, shall be
made, subject to Section 402(f), pro rata among the Common Securities and the
Preferred Securities based on the Liquidation Amount of the Trust Securities;
provided, however, that if on any Distribution Date or Redemption Date any Event
of Default resulting from a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions (including Additional Amounts, if applicable) on all
Outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full amount
of such Redemption Price on all Outstanding Preferred Securities then called for
redemption, shall have been made or provided for, and all funds immediately
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions (including Additional Amounts, if applicable) on,
or the Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting from a
Debenture Event of Default, the Holder of Common Securities shall be deemed to
have waived any right to act with respect to any such Event of Default under
this Trust Agreement until the effect of all such Events of Default with respect
to the Preferred Securities shall have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities shall have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
Holders of the Preferred Securities and not the Holder of the Common Securities,
and only the Holders of the Preferred Securities shall have the right to direct
the Property Trustee to act on their behalf.
SECTION 404. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable) in
respect of the Preferred Securities shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear on the Securities
Register. Payments in respect of
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the Common Securities shall be made in such manner as shall be mutually agreed
between the Property Trustee and the Common Securityholder.
SECTION 405. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
form required to be filed in respect of the Trust in each taxable year of the
Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
furnished to such Securityholder or the information required to be provided on
such form. The Administrative Trustees shall provide the Depositor with a copy
of all such returns and reports promptly after such filing or furnishing. The
Property Trustee shall comply with United States federal withholding and backup
withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Interest, the Property
Trustee, at the direction of an Administrative Trustee or the Depositor, shall
promptly pay any taxes, duties or governmental charges of whatsoever nature
(other than withholding taxes) imposed on the Trust by the United States or any
other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE.
Any amount payable hereunder to any Holder of Preferred Securities shall be
reduced by the amount of any corresponding payment such Holder has directly
received under the Indenture pursuant to Section 514(b) or (c) hereof.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 203 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES.
The Preferred Securities Certificates shall be issued in minimum
denominations of $10 Liquidation Amount and integral multiples of $10 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $10 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by
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manual or facsimile signature of at least one Administrative Trustee. Trust
Securities Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be validly issued and entitled
to the benefits of this Trust Agreement, notwithstanding that such individuals
or any of them shall have ceased to be so authorized prior to the delivery of
such Trust Securities Certificates or did not hold such offices at the date of
delivery of such Trust Securities Certificates. A transferee of a Trust
Securities Certificate shall become a Securityholder, and shall be entitled to
the rights and subject to the obligations of a Securityholder hereunder, upon
due registration of such Trust Securities Certificate in such transferee's name
pursuant to Sections 504 and 511.
SECTION 503. EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST SECURITIES
CERTIFICATES.
(a) On the Closing Date and on the date on which the Underwriter exercises
the Option, as applicable (the "Option Closing Date"), the Administrative
Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation
Amount as provided in Sections 204 and 205, to be executed on behalf of the
Trust by at least one of the Administrative Trustees and delivered to or upon
the written order of the Depositor, signed by its Chief Executive Officer,
President, any Vice President, the Treasurer or any Assistant Treasurer without
further corporate action by the Depositor, in authorized denominations.
(b) A Preferred Securities Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the Property
Trustee. The signature shall be conclusive evidence that the Preferred
Securities Certificate has been authenticated under this Trust Agreement. Each
Preferred Security Certificate shall be dated the date of its authentication.
(c) Upon the written order of the Trust signed by the Administrative
Trustee, the Property Trustee shall authenticate and make available for delivery
the Preferred Securities Certificates.
(d) The Property Trustee may appoint an Authenticating Agent acceptable to
the Trust to authenticate the Preferred Securities. An Authenticating Agent may
authenticate the Preferred Securities whenever the Property Trustee may do so.
Each reference in this Trust Agreement to authentication by the Property Trustee
includes authentication by such agent. An Authenticating Agent has the same
rights as the Property Trustee to deal with the Depositor or the Trust.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES
CERTIFICATES.
(a) The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 508, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of
Preferred Securities Certificates (herein referred to as the "Securities
Register") in which the registrar designated by the Depositor (the "Securities
Registrar"), subject to such reasonable regulations as it may prescribe, shall
provide for the registration of Preferred Securities Certificates and Common
Securities Certificates
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(subject to Section 510 in the case of the Common Securities Certificates) and
registration of transfers and exchanges of Preferred Securities Certificates as
herein provided. The Property Trustee shall be the initial Securities Registrar.
(b) Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 508, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee or
Trustees. The Securities Registrar shall not be required to register the
transfer of any Preferred Securities that have been called for redemption. At
the option of a Holder, Preferred Securities Certificates may be exchanged for
other Preferred Securities Certificates in authorized denominations of the same
class and of a like aggregate Liquidation Amount upon surrender of the Preferred
Securities Certificates to be exchanged at the office or agency maintained
pursuant to Section 508.
(c) Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Property Trustee in accordance with its customary practice. The Trust shall not
be required to (i) issue, register the transfer of, or exchange any Preferred
Securities during a period beginning at the opening of business 15 calendar days
before the date of mailing of a notice of redemption of any Preferred Securities
called for redemption and ending at the close of business on the day of such
mailing; or (ii) register the transfer of or exchange any Preferred Securities
so selected for redemption, in whole or in part, except the unredeemed portion
of any such Preferred Securities being redeemed in part.
(d) No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES CERTIFICATES.
If (a) any mutilated Trust Securities Certificate shall be surrendered to
the Securities Registrar, or if the Securities Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate; and (b) there shall be delivered to the Securities Registrar, the
Property Trustee and the Administrative Trustees such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice that such Trust Securities Certificate shall have been acquired by a bona
fide purchaser, the Administrative Trustees, or any one of them, on behalf of
the Trust shall execute and make available for delivery, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Trust Securities
Certificate, a new Trust Securities Certificate of like class, tenor and
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denomination. In connection with the issuance of any new Trust Securities
Certificate under this Section 505, the Administrative Trustees or the
Securities Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Securities Certificate issued pursuant to this Section 505
shall constitute conclusive evidence of an undivided beneficial interest in the
assets of the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Trust Securities Certificate shall be found at any time.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS.
The Trustees, the Paying Agent and the Securities Registrar shall treat the
Person in whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Securities Registrar shall be bound by any notice
to the contrary.
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or cause
to be furnished to the Property Trustee (a) semi-annually on or before January
15 and July 15 in each year, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Securityholders as of the
most recent record date; and (b) promptly after receipt by any Administrative
Trustee or the Depositor of a request therefor from the Property Trustee in
order to enable the Property Trustee to discharge its obligations under this
Trust Agreement, in each case to the extent such information is in the
possession or control of the Administrative Trustees or the Depositor and is not
identical to a previously supplied list or has not otherwise been received by
the Property Trustee in its capacity as Securities Registrar. The rights of
Securityholders to communicate with other Securityholders with respect to their
rights under this Trust Agreement or under the Trust Securities, and the
corresponding rights of the Trustee shall be as provided in the Trust Indenture
Act. Each Holder, by receiving and holding a Trust Securities Certificate, and
each owner shall be deemed to have agreed not to hold the Depositor, the
Property Trustee or the Administrative Trustees accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.
The Administrative Trustees shall maintain in a location or locations
designated by the Administrative Trustees, an office or offices or agency or
agencies where Preferred Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate the Corporate Trust Office of the
Property Trustee, _________________________, ____________________________, as
the principal corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
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SECTION 509. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall initially be the Property Trustee, and any co-paying
agent chosen by the Property Trustee must be acceptable to the Administrative
Trustees and the Depositor. The Paying Agent shall make Distributions to
Securityholders from the Payment Account and shall report the amounts of such
Distributions to the Property Trustee and the Administrative Trustees. Any
Paying Agent shall have the revocable power to withdraw funds from the Payment
Account for the purpose of making the Distributions referred to above. The
Administrative Trustees may revoke such power and remove the Paying Agent if
such Trustees determine in their sole discretion that the Paying Agent shall
have failed to perform its obligations under this Trust Agreement in any
material respect. Any Person acting as Paying Agent shall be permitted to resign
as Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee shall
no longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent shall hold all sums, if any, held by it for payment
to the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and, upon removal of a
Paying Agent, such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 801, 803 and 806 shall apply to
the Property Trustee also in its role as Paying Agent, for so long as the
Property Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Trust Agreement to
the Paying Agent shall include any co-paying agent unless the context requires
otherwise.
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain beneficial and
record ownership of the Common Securities. To the fullest extent permitted by
law, any attempted transfer of the Common Securities (other than a transfer in
connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE".
SECTION 511. PREFERRED SECURITIES CERTIFICATES.
(a) Each owner shall receive a Preferred Securities Certificate
representing such owner's interest in such Preferred Securities. Upon the
issuance of Preferred Securities Certificates, the Trustees shall recognize the
record holders of the Preferred Securities
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Certificates as Securityholders. The Preferred Securities Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as evidenced by the
execution thereof by the Administrative Trustees or any one of them.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 512. [INTENTIONALLY OMITTED]
SECTION 513. [INTENTIONALLY OMITTED]
SECTION 514. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 209, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights. When issued and delivered to Holders
of the Preferred Securities against payment of the purchase price therefor, the
Preferred Securities shall be fully paid and nonassessable interests in the
Trust. The Holders of the Preferred Securities, in their capacities as such,
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if, upon a
Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Preferred Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Debenture Trustee; and upon any such declaration such principal amount of
and the accrued interest on all of the Debentures shall become immediately due
and payable, provided that the payment of principal and interest on such
Debentures shall remain subordinated to the extent provided in the Indenture.
(c) For so long as any Preferred Securities remain outstanding, if, upon a
Debenture Event of Default arising from the failure to pay interest or principal
on the Debentures, the Holders of any Preferred Securities then Outstanding
shall, to the fullest extent permitted by law, have the right to directly
institute proceedings for enforcement of payment to such Holders of principal of
or interest on the Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities of such Holders.
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ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 601, in Sections 514, 810 and 1002
and in the Indenture and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures; (ii) waive any past default which is waivable under Article VII of
the Indenture; (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each Holder of outstanding Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior written consent of each holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote of the
Holders of the Outstanding Preferred Securities, except by a subsequent vote of
the Holders of the Outstanding Preferred Securities. The Property Trustee shall
notify each Holder of the Outstanding Preferred Securities of any notice of
default received from the Debenture Trustee with respect to the Debentures. In
addition to obtaining the foregoing approvals of the Holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Trustees shall, at
the expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust shall continue to be classified as a
grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or the
Trustees otherwise propose to effect, (i) any action that would adversely affect
in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise; or (ii) the dissolution of the Trust, other than pursuant to the
terms of this Trust Agreement, then the Holders of Outstanding Preferred
Securities as a class shall be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of the Holders of at least a majority in Liquidation Amount of the Outstanding
Preferred Securities. No amendment to this Trust Agreement may be made if, as a
result of such amendment, the Trust would cease to be classified as a grantor
trust or would be classified as an association taxable as a corporation for
United States federal income tax purposes.
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SECTION 602. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders, stating the time,
place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 1008 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.
(a) No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Securityholders to
vote on any matter in respect of which Preferred Securityholders are entitled to
vote upon the written request of the Preferred Securityholders of 25% of the
Outstanding Preferred Securities (based upon their aggregate Liquidation Amount)
and the Administrative Trustees or the Property Trustee may, at any time in
their discretion, call a meeting of Preferred Securityholders to vote on any
matters as to which the Preferred Securityholders are entitled to vote.
(b) Preferred Securityholders of record of 50% of the Outstanding Preferred
Securities (based upon their aggregate Liquidation Amount), present in person or
by proxy, shall constitute a quorum at any meeting of Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their aggregate
Liquidation Amount) held by the Preferred Securityholders of record present,
either in person or by proxy, at such meeting shall constitute the action of the
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 604. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each $10 of Liquidation
Amount represented by their Trust Securities in respect of any matter as to
which such Securityholders are entitled to vote.
SECTION 605. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy, shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
When Trust Securities are held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Trust Securities,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in
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respect of such Trust Securities. A proxy purporting to be executed by or on
behalf of a Securityholder shall be deemed valid unless challenged at or prior
to its exercise, and, the burden of proving invalidity shall rest on the
challenger. No proxy shall be valid more than three years after its date of
execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Securityholders at a meeting may be taken
without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their aggregate Liquidation Amount)
entitled to vote in respect of such action (or such larger proportion thereof as
shall be required by any express provision of this Trust Agreement) shall
consent to the action in writing (based upon their aggregate Liquidation
Amount).
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of Distribution or other action, as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
SECTION 608. ACTS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Securityholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Securityholders in
person or by an agent duly appointed in writing; and, except as otherwise
expressly provided herein, such action shall become effective when such
instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 801) conclusive in favor
of the Trustees, if made in the manner provided in this Section 608.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person
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executing the same, may also be proved in any other manner which any Trustee
receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the Securities
Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
(f) A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust or any Person.
SECTION 609. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection and copying by
Securityholders and their authorized representatives during normal business
hours for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY
TRUSTEE.
The Bank and the Property Trustee, each severally on behalf of and as to
itself, as of the date hereof, and each successor Property Trustee at the time
of the successor Property Trustee's acceptance of its appointment as Property
Trustee hereunder (the term "Bank" being used to refer to such successor
Property Trustee in its separate corporate capacity) hereby represents and
warrants (as applicable) for the benefit of the Depositor and the
Securityholders that:
(a) the Bank is a trust company duly organized, validly existing and in
good standing under the laws of the ____________________ of __________________;
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(b) the Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement and has
taken all necessary action to authorize the execution, delivery and performance
by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and delivered
by the Property Trustee and constitutes the valid and legally binding agreement
of the Property Trustee enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Property Trustee of this
Trust Agreement has been duly authorized by all necessary corporate or other
action on the part of the Property Trustee and does not require any approval of
stockholders of the Bank and such execution, delivery and performance shall not
(i) violate the Bank's charter or by-laws; (ii) violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of, any Lien on any properties included in the
Trust Property pursuant to the provisions of, any indenture, mortgage, credit
agreement, license or other agreement or instrument to which the Property
Trustee or the Bank is a party or by which it is bound; or (iii) violate any
law, governmental rule or regulation of the United States or the
____________________ of ____________________, as the case may be, governing the
banking or trust powers of the Bank or the Property Trustee (as appropriate in
context) or any order, judgment or decree applicable to the Property Trustee or
the Bank;
(e) neither the authorization, execution or delivery by the Property
Trustee of this Trust Agreement nor the consummation of any of the transactions
by the Property Trustee contemplated herein or therein requires the consent or
approval of, the giving of notice to, the registration with or the taking of any
other action with respect to any governmental authority or agency under any
existing federal law governing the banking or trust powers of the Bank or the
Property Trustee, as the case may be, under the laws of the United States or the
____________________ of ____________________; and
(f) there are no proceedings pending or, to the best of the Property
Trustee's knowledge, threatened against or affecting the Bank or the Property
Trustee in any court or before any governmental authority, agency or arbitration
board or tribunal which, individually or in the aggregate, would materially and
adversely affect the Trust or would question the right, power and authority of
the Property Trustee to enter into or perform its obligations as one of the
Trustees under this Trust Agreement.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND THE
DELAWARE TRUSTEE.
The Delaware Bank and the Delaware Trustee, each severally on behalf of and
as to itself, as of the date hereof, and each successor Delaware Trustee at the
time of the successor Delaware Trustee's acceptance of appointment as Delaware
Trustee hereunder (the term "Delaware Bank" being used to refer to such
successor Delaware Trustee in its separate corporate
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capacity), hereby represents and warrants (as applicable) for the benefit of the
Depositor and the Securityholders that:
(a) the Delaware Bank is a Delaware banking corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) the Delaware Bank has full corporate power, authority and legal right
to execute, deliver and perform its obligations under this Trust Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and delivered
by the Delaware Trustee and constitutes the valid and legally binding agreement
of the Delaware Trustee enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Delaware Trustee of this
Trust Agreement has been duly authorized by all necessary corporate or other
action on the part of the Delaware Trustee and does not require any approval of
stockholders of the Delaware Bank and such execution, delivery and performance
shall not (i) violate the Delaware Bank's charter or by-laws; (ii) violate any
provision of, or constitute, with or without notice or lapse of time, a default
under, or result in the creation or imposition of, any Lien on any properties
included in the Trust Property pursuant to the provisions of, any indenture,
mortgage, credit agreement, license or other agreement or instrument to which
the Delaware Bank or the Delaware Trustee is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the United States or
the State of Delaware, as the case may be, governing the banking or trust powers
of the Delaware Bank or the Delaware Trustee (as appropriate in context) or any
order, judgment or decree applicable to the Delaware Bank or the Delaware
Trustee;
(e) neither the authorization, execution or delivery by the Delaware
Trustee of this Trust Agreement nor the consummation of any of the transactions
by the Delaware Trustee contemplated herein or therein requires the consent or
approval of, the giving of notice to, the registration with or the taking of any
other action with respect to any governmental authority or agency under any
existing federal law governing the banking or trust powers of the Delaware Bank
or the Delaware Trustee, as the case may be, under the laws of the United States
or the State of Delaware; and
(f) there are no proceedings pending or, to the best of the Delaware
Trustee's knowledge, threatened against or affecting the Delaware Bank or the
Delaware Trustee in any court or before any governmental authority, agency or
arbitration board or tribunal which, individually or in the aggregate, would
materially and adversely affect the Trust or would question the right, power and
authority of the Delaware Trustee to enter into or perform its obligations as
one of the Trustees under this Trust Agreement.
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SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date or the
Option Closing Date, if applicable, on behalf of the Trust have been duly
authorized and, shall be, as of such date or dates, if applicable, duly and
validly executed, issued and delivered by the Administrative Trustees pursuant
to the terms and provisions of, and in accordance with the requirements of, this
Trust Agreement and the Securityholders shall be, as of such date or dates, if
applicable, entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by the
Trust (or the Trustees on behalf of the Trust) under the laws of the State of
Delaware or any political subdivision thereof in connection with the execution,
delivery and performance by the Bank, the Property Trustee or the Delaware
Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as provided by
this Trust Agreement and, in the case of the Property Trustee, by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Trust
Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. No Administrative Trustee nor the Delaware Trustee shall be liable for its
act or omissions hereunder except as a result of its own gross negligence or
willful misconduct. The Property Trustee's liability shall be determined under
the Trust Indenture Act. Whether or not therein expressly so provided, every
provision of this Trust Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustees shall be subject to the
provisions of this Section 801. To the extent that, at law or in equity, the
Delaware Trustee or an Administrative Trustee has duties (including fiduciary
duties) and liabilities relating thereto to the Trust or to the Securityholders,
the Delaware Trustee or such Administrative Trustee shall not be liable to the
Trust or to any Securityholder for such Trustee's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust Agreement, to
the extent that they restrict the duties and liabilities of the Delaware Trustee
or the Administrative Trustees otherwise existing at law or in equity, are
agreed by the Depositor and the Securityholders to replace such other duties and
liabilities of the Delaware Trustee and the Administrative Trustees, as the case
may be.
(b) All payments made by the Property Trustee or a Paying Agent in respect
of the Trust Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property
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to enable the Property Trustee or a Paying Agent to make payments in accordance
with the terms hereof. With respect to the relationship of each Securityholder
and the Trustee, each Securityholder, by its acceptance of a Trust Security,
agrees that it shall look solely to the revenue and proceeds from the Trust
Property to the extent legally available for distribution to it as herein
provided and that the Trustees are not personally liable to it for any amount
distributable in respect of any Trust Security or for any other liability in
respect of any Trust Security. This Section 801(b) does not limit the liability
of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the
case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in
Liquidation Amount of the Trust Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with the
Depositor and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Payment Account maintained by the Property Trustee pursuant to Section
301 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor with
their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for the negligence, default or misconduct
of the Administrative Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within 5 Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to
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the extent provided in Section 1008, notice of such Event of Default to the
Securityholders, the Administrative Trustees and the Depositor, unless such
Event of Default shall have been cured or waived. For purposes of this Section
802 the term "Event of Default" means any event that is, or after notice or
lapse of time or both would become, an Event of Default.
(b) The Administrative Trustees shall transmit, to the Securityholders in
the manner and to the extent provided in Section 1008, notice of the Depositor's
election to begin or further extend an Extension Period on the Debentures
(unless such election shall have been revoked) within the time specified for
transmitting such notice to the holders of the Debentures pursuant to the
Indenture as originally executed.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the Property
Trustee is required to decide between alternative courses of action; or (ii) in
construing any of the provisions of this Trust Agreement the Property Trustee
finds the same ambiguous or inconsistent with other provisions contained herein;
or (iii) the Property Trustee is unsure of the application of any provision of
this Trust Agreement, then, except as to any matter as to which the Preferred
Securityholders are entitled to vote under the terms of this Trust Agreement,
the Property Trustee shall deliver a notice to the Depositor requesting written
instructions of the Depositor as to the course of action to be taken and the
Property Trustee shall take such action, or refrain from taking such action, as
the Property Trustee shall be instructed in writing to take, or to refrain from
taking, by the Depositor; provided, however, that if the Property Trustee does
not receive such instructions of the Depositor within 10 Business Days after it
has delivered such notice, or such reasonably shorter period of time set forth
in such notice (which to the extent practicable shall not be less than 2
Business Days), it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Trust Agreement as it shall deem
advisable and in the best interests of the Securityholders, in which event the
Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative Trustees
contemplated by this Trust Agreement shall be sufficiently evidenced by an
Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the Property
Trustee shall deem it desirable that a matter be established before undertaking,
suffering or omitting any action hereunder, the Property Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an
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Officer's Certificate which, upon receipt of such request, shall be promptly
delivered by the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording, filing
or registration of any instrument (including any financing or continuation
statement, any filing under tax or securities laws or any filing under tax or
securities laws) or any rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice (which
counsel may be counsel to the Depositor or any of its Affiliates) and the advice
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon and, in accordance with such advice, such counsel may be
counsel to the Depositor or any of its Affiliates, and may include any of its
employees; the Property Trustee shall have the right at any time to seek
instructions concerning the administration of this Trust Agreement from any
court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through its agents or
attorneys, provided that the Property Trustee shall be responsible for its own
negligence or recklessness with respect to selection of any agent or attorney
appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust Securities in respect of such
remedy, right or action; (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received; and (iii) shall
be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under
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the provisions of this Trust Agreement. No provision of this Trust Agreement
shall be deemed to impose any duty or obligation on the Property Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it, in any jurisdiction in which it shall be illegal, or
in which the Property Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts, or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Property Trustee shall be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The Recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 805. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 808 and 813 and except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
SECTION 806. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation for
all services rendered by them hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees or the
Delaware Trustee, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee for, and
to hold the Trustees harmless against, any loss, damage, claims, liability,
penalty 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
Agreement, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except any such expense, disbursement or advance as
may
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be attributable to such Trustee's negligence, bad faith or willful misconduct
(or, in the case of the Administrative Trustees or the Delaware Trustee, any
such expense, disbursement or advance as may be attributable to its, his or her
gross negligence, bad faith or willful misconduct).
No Trustee may claim any Lien or charge on any Trust Property as a result
of any amount due pursuant to this Section 806.
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with respect
to the Trust Securities. The Property Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section 807,
the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware; or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
SECTION 808. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Depositor shall have power to appoint,
and upon the written request of the Property Trustee, the Depositor shall for
such purpose join with the Property Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved
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by the Property Trustee either to act as co-trustee, jointly with the Property
Trustee, of all or any part of such Trust Property, or to the extent required by
law to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in the capacity aforesaid, any property, title, right or power
deemed necessary or desirable, subject to the other provisions of this Section
809. If the Depositor does not join in such appointment within 15 days after the
receipt by it of a request so to do, or in case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment. Any co-trustee or separate trustee appointed pursuant to this
Section 809 shall either be (i) a natural person who is at least 21 years of age
and a resident of the United States; or (ii) a legal entity with its principal
place of business in the United States that shall act through one or more
persons authorized to bind such entity.
(b) Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and delivered
by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(i) The Trust Securities shall be executed and delivered and all
rights, powers, duties and obligations hereunder in respect of the custody
of securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder, shall be
exercised, solely by such Trustees and not by such co-trustee or separate
trustee.
(ii) The rights, powers, duties and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to the
extent that under any law of any jurisdiction in which any particular act
is to be performed, the Property Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties
and obligations shall be exercised and performed by such co-trustee or
separate trustee.
(iii) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept
the resignation of or remove any co-trustee or separate trustee appointed
under this Section 809, and, in case a Debenture Event of Default has
occurred and is continuing, the Property Trustee shall have the power to
accept the resignation of, or remove, any such co-trustee or separate
trustee without the concurrence of the Depositor. Upon the written request
of the Property Trustee, the Depositor shall join with the Property Trustee
in the execution, delivery and performance of all instruments and
agreements necessary or proper to
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effectuate such resignation or removal. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the manner
provided in this Section 809.
(iv) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any
other trustee hereunder.
(v) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article VIII shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time with respect to the Trust Securities by giving written
notice thereof to the Securityholders. If the instrument of acceptance by the
successor Trustee required by Section 811 shall not have been delivered to the
Relevant Trustee within 30 days after the giving of such notice of resignation,
the Relevant Trustee may petition, at the expense of the Depositor, any court of
competent jurisdiction for the appointment of a successor Relevant Trustee with
respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time.
(d) If any Trustee shall resign, be removed or become incapable of acting
as Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and the successor
Trustee shall comply with the applicable requirements of Section 811. If the
Property Trustee or the Delaware Trustee shall resign, be removed or become
incapable of continuing to act as the Property Trustee or the Delaware Trustee,
as the case may be, at a time when a Debenture Event of Default shall have
occurred and is continuing, the Preferred Securityholders, by Act of the
Securityholders of a majority in Liquidation Amount of the Preferred Securities
then Outstanding
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delivered to the retiring Relevant Trustee, shall promptly appoint a successor
Relevant Trustee or Trustees with respect to the Trust Securities and the Trust,
and such successor Trustee shall comply with the applicable requirements of
Section 811. If an Administrative Trustee shall resign, be removed or become
incapable of acting as Administrative Trustee, at a time when a Debenture Event
of Default shall have occurred and be continuing, the Common Securityholder, by
Act of the Common Securityholder delivered to an Administrative Trustee, shall
promptly appoint a successor Administrative Trustee or Administrative Trustees
with respect to the Trust Securities and the Trust, and such successor
Administrative Trustee or Administrative Trustees shall comply with the
applicable requirements of Section 811. If no successor Relevant Trustee with
respect to the Trust Securities shall have been so appointed by the Common
Securityholder or the Preferred Securityholders and accepted appointment in the
manner required by Section 811, any Securityholder who has been a Securityholder
of Trust Securities on behalf of himself and all others similarly situated may
petition a court of competent jurisdiction for the appointment of a successor
Relevant Trustee with respect to the Trust Securities.
(e) The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
(f) Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of remaining Administrative Trustees if
there are at least two of them; or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees set forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Relevant Trustee
with respect to the Trust Securities and the Trust, the retiring Relevant
Trustee and each successor Relevant Trustee with respect to the Trust Securities
shall execute and deliver an instrument hereto wherein each successor Relevant
Trustee shall accept such appointment and which shall contain such provisions as
shall be necessary or desirable to transfer and confirm to, and to vest in, each
successor Relevant Trustee all the rights, powers, trusts and duties of the
retiring Relevant Trustee with respect to the Trust Securities and the Trust and
upon the execution and delivery of such instrument the resignation or removal of
the retiring Relevant Trustee shall become effective to the extent provided
therein and each such successor Relevant Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the Trust; but, on request of the Trust or any successor Relevant Trustee such
retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Relevant Trustee all Trust
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Property, all proceeds thereof and money held by such retiring Relevant Trustee
hereunder with respect to the Trust Securities and the Trust.
(b) Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the immediately preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article VIII.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Relevant Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of such Relevant Trustee, shall be the successor of such Relevant Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article VIII, without the execution or filing of any paper or any further
act on the part of any of the parties hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST.
If and when the Property Trustee or the Delaware Trustee shall be or become
a creditor of the Depositor or the Trust (or any other obligor upon the
Debentures or the Trust Securities), the Property Trustee or the Delaware
Trustee, as the case may be, shall be subject to and shall take all actions
necessary in order to comply with the provisions of the Trust Indenture Act
regarding the collection of claims against the Depositor or Trust (or any such
other obligor).
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) The Property Trustee shall transmit to Securityholders such reports
concerning the Property Trustee, its actions under this Trust Agreement and the
property and funds in its possession as Property Trustee as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Property Trustee with The Nasdaq Stock Market's
National Market, and/or the New York Stock Exchange, and each national
securities exchange or other organization upon which the Trust Securities are
listed, and also with the Commission and the Depositor.
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SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the Holder of all
of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware Trustee
may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 817(a), or if the
number of Trustees is increased pursuant to Section 817(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 810.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of a Trustee shall not operate to annul the
Trust. Whenever a vacancy in the number of Administrative Trustees shall occur,
until such vacancy is filled by the appointment of an Administrative Trustee in
accordance with Section 810, the Administrative Trustees in office, regardless
of their number (and notwithstanding any other provision of this Agreement),
shall have all the powers granted to the Administrative Trustees and shall
discharge all the duties imposed upon the Administrative Trustees by this Trust
Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
207(a); and
(b) The Administrative Trustees shall have power to delegate from time to
time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or
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otherwise as the Administrative Trustees may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.
SECTION 819. VOTING.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 901. DISSOLUTION UPON EXPIRATION DATE.
Unless earlier dissolved, the Trust shall automatically dissolve on March
31, 2051 (the "Expiration Date") subject to distribution of the Trust Property
in accordance with Section 904.
SECTION 902. EARLY DISSOLUTION.
The first to occur of any of the following events is an "Early Dissolution
Event:"
(a) the occurrence of a Bankruptcy Event in respect of, or the dissolution
or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the Depositor
at any time (which direction is wholly optional and within the discretion of the
Depositor) to dissolve the Trust and distribute the Debentures to
Securityholders in exchange for the Preferred Securities in accordance with
Section 904;
(c) the redemption of all of the Preferred Securities in connection with
the redemption of all of the Debentures; and
(d) the entrance of an order for dissolution of the Trust by a court of
competent jurisdiction.
SECTION 903. TERMINATION.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 904, or upon the
redemption of all of the Trust Securities pursuant to Section 402, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge
of all administrative duties of the Administrative Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
Securityholders; and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Delaware Business Trust Act.
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SECTION 904. LIQUIDATION.
(a) If an Early Dissolution Event specified in clause (a), (b), or (d) of
Section 902 occurs or upon the Expiration Date, the Trust shall be liquidated by
the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 904(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities shall no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange shall be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Securities Certificates for Debentures, or, if
Section 904(d) applies, receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to effect the
liquidation of the Trust and distribution of the Debentures to Securityholders,
the Property Trustee shall establish a record date for such distribution (which
shall be not more than 45 days prior to the Liquidation Date) and, either itself
acting as exchange agent or through the appointment of a separate exchange
agent, shall establish such procedures as it shall deem appropriate to effect
the distribution of Debentures in exchange for the Outstanding Trust Securities
Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the Liquidation
Date, (i) the Trust Securities shall no longer be deemed to be outstanding; (ii)
certificates representing a Like Amount of Debentures shall be issued to holders
of Trust Securities Certificates upon surrender of such certificates to the
Administrative Trustees or their agent for exchange; (iii) the Depositor shall
use its reasonable efforts to have the Debentures listed on The Nasdaq Stock
Market's National Market, the New York Stock Exchange or on such other
securities exchange or other organization as the Preferred Securities are then
listed or traded; (iv) any Trust Securities Certificates not so surrendered for
exchange shall be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last Distribution
Date on which a Distribution was made on such Trust Securities Certificates
until such certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal shall be made to holders of
Trust Securities Certificates with respect to such Debentures); and (v) all
rights of Securityholders holding Trust Securities shall cease, except the right
of such Securityholders to receive Debentures upon surrender of Trust Securities
Certificates.
43
<PAGE> 49
(d) In the event that, notwithstanding the other provisions of this Section
904, whether because of an order for dissolution entered by a court of competent
jurisdiction or otherwise, distribution of the Debentures in the manner provided
herein is determined by the Property Trustee not to be practical, the Trust
Property shall be liquidated, and the Trust shall be dissolved, wound-up or
terminated, by the Property Trustee in such manner as the Property Trustee
determines. In such event, on the date of the dissolution of the Trust,
Securityholders shall be entitled to receive out of the assets of the Trust
available for distribution to Securityholders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to the
Liquidation Amount per Trust Security plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, the Liquidation Distribution can
be paid only in part because the Trust has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust Securities
shall be paid on a pro rata basis (based upon Liquidation Amounts). The holder
of the Common Securities shall be entitled to receive Liquidation Distributions
upon any such dissolution, winding-up or termination pro rata (determined as
aforesaid) with Holders of Preferred Securities, except that, if a Debenture
Event of Default has occurred and is continuing, the Preferred Securities shall
have a priority over the Common Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE
TRUST.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Section 905. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; provided, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Preferred Securities; or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise; (ii) the
Depositor expressly appoints a trustee of such successor entity possessing
substantially the same powers and duties as the Property Trustee as the holder
of the Debentures; (iii) the Successor Securities are listed or traded, or any
Successor Securities shall be listed or traded upon notification of issuance, on
any national securities exchange or other organization on which the Preferred
Securities are then listed, if any; (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect; (v)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Depositor has received an Opinion of Counsel to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect; and (b) following such
44
<PAGE> 50
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor such successor entity shall be required to register as an
"investment company" under the Investment Company Act; and (vi) the Depositor
owns all of the Common Securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee, the Debentures, the Indenture, this Trust
Agreement and the Expense Agreement. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in Liquidation Amount of
the Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death or incapacity of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such Person or any
Securityholder for such Person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding-up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the Trustees
and the Depositor, without the consent of any Securityholders, (i) as provided
in Section 811 with respect to acceptance of appointment by a successor Trustee;
(ii) to cure any ambiguity, correct or supplement any provision herein or
therein which may be inconsistent with any other provision herein or therein, or
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, that shall not be inconsistent with the other provisions
of this Trust Agreement; or (iii) to modify, eliminate or add to any provisions
of this Trust Agreement to such extent as shall be necessary to ensure that the
Trust shall be classified for United States federal income tax purposes as a
grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Trust shall not be required to register as an "investment
company" under the Investment Company Act; provided, however, that in the case
of clause (ii), such action shall not adversely affect in any material respect
the interests of any Securityholder, and any amendments of this Trust Agreement
shall become effective when notice thereof is given to the Securityholders.
(b) Except as provided in Section 601(c) or Section 1002(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and the
Depositor (i) with the consent of Trust Securityholders representing not less
than a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding; and (ii) upon receipt by the Trustees of an
45
<PAGE> 51
Opinion of Counsel to the effect that such amendment or the exercise of any
power granted to the Trustees in accordance with such amendment shall not affect
the Trust's status as a grantor trust for United States federal income tax
purposes or the Trust's exemption from status of an "investment company" under
the Investment Company Act.
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the consent of each affected Securityholder (such consent
being obtained in accordance with Section 603 or 606 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date; or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 603 or 606 hereof), this
paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be amended in
a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees shall promptly provide to the Depositor a copy of such
amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be required
to enter into any amendment to this Trust Agreement which affects its own
rights, duties or immunities under this Trust Agreement. The Property Trustee
shall be entitled to receive an Opinion of Counsel and an Officers' Certificate
stating that any amendment to this Trust Agreement is in compliance with this
Trust Agreement.
SECTION 1003. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 1004. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE
46
<PAGE> 52
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF MISSOURI
(WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day that
is not a Business Day, then such payment need not be made on such date but may
be made on the next succeeding day which is a Business Day, with the same force
and effect as though made on the date fixed for such payment, and no
distribution shall accumulate thereon for the period after such date.
SECTION 1006. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the benefit
of any successor to the Depositor, the Trust or the Relevant Trustee(s),
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article XII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
SECTION 1007. HEADINGS.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
any Securityholder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a
Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Stifel Financial
Corp., 500 North Broadway, St. Louis, Missouri 63102-2188 Attention: Chief
Financial Officer, facsimile no.: (314) 342-2097. Any notice to Preferred
Securityholders shall also be given to such owners as have, within two years
preceding the giving of such notice, filed their names and addresses with the
Property Trustee for that purpose. Such notice, demand or other communication to
or upon a Securityholder shall be deemed to have been sufficiently given or
made, for all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(a) with respect to the Property Trustee to __________________________________,
_____________________________________,
47
<PAGE> 53
______, Attention: Corporate Trust Department; (b) with respect to the Delaware
Trustee, to Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; and (c) with respect to the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of Stifel Financial Capital Trust." Such notice, demand
or other communication to or upon the Trust or the Property Trustee shall be
deemed to have been sufficiently given or made only upon actual receipt of the
writing by the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and 1 day after the Trust has been
terminated in accordance with Article IX, they shall not file, or join in the
filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws") or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 1009, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor (which expense shall be paid prior to the
filing), it shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such petition by the Depositor against the Trust or the
commencement of such action and raise the defense that the Depositor has agreed
in writing not to take such action and should be stopped and precluded
therefrom. The provisions of this Section 1009 shall survive the termination of
this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee for
the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Trust Agreement as so modified
or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
48
<PAGE> 54
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY
OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE
OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
STIFEL FINANCIAL CORP.
By
---------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
-----------------------------------------,
as Property Trustee
By
---------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By
---------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
49
<PAGE> 55
-----------------------------------------------
George H. Walker III, as Administrative
Trustee
-----------------------------------------------
Gregory F. Taylor, as Administrative Trustee
-----------------------------------------------
Charles R. Hartman, as Administrative Trustee
50
<PAGE> 56
EXHIBIT A
CERTIFICATE OF TRUST
OF
STIFEL FINANCIAL CAPITAL TRUST
THIS CERTIFICATE OF TRUST OF STIFEL FINANCIAL CAPITAL TRUST (the
"Trust"), dated as of June 6, 1997, is being duly executed and filed
by WILMINGTON TRUST COMPANY, a Delaware banking corporation, George H. Walker
III, Gregory F. Taylor and Charles R. Hartman, each an individual, as trustees,
to form a business trust under the Delaware Business Trust Act (12 Del. C.
Section 3801 et seq.).
1. NAME. The name of the business trust formed hereby is Stifel
Financial Capital Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust
Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective
on June 6, 1997.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, has
executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY, as trustee
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
------------------------------------
George H. Walker III, as Trustee
------------------------------------
Gregory F. Taylor, as Trustee
------------------------------------
Charles R. Hartman, as Trustee
A-1
<PAGE> 57
EXHIBIT B
[Intentionally Omitted]
B-1
<PAGE> 58
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER ________. NUMBER OF COMMON SECURITIES
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
STIFEL FINANCIAL CAPITAL TRUST
COMMON SECURITIES
STIFEL FINANCIAL CAPITAL TRUST, a statutory business trust created under
the laws of the (LIQUIDATION AMOUNT $10 PER COMMON SECURITY) State of Delaware
(the "Trust"), hereby certifies that Stifel Financial Corp. (the "Holder") is
the registered owner of ________________ (_____) common securities of the Trust
representing undivided beneficial interests in the assets of the Trust and
designated the ___% Common Securities (liquidation amount $10 per Common
Security) (the "Common Securities"). In accordance with Section 510 of the Trust
Agreement (as defined below), the Common Securities are not transferable and any
attempted transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences, and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of _______________, 1997, as the same may be amended from time to time (the
"Trust Agreement"), including the designation of the terms of the Common
Securities as set forth therein. The Trust shall furnish a copy of the Trust
Agreement to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this _____ day of __________, 1997.
STIFEL FINANCIAL CAPITAL TRUST
By:
-----------------------------------------------
Name:
Title: Administrative Trustee
C-1
<PAGE> 59
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") dated as of
_____________, 1997, between STIFEL FINANCIAL CORP., a Delaware corporation
("the Company"), and STIFEL FINANCIAL CAPITAL TRUST, a Delaware business
trust (the "Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the "Common
Securities") to, and receive Debentures from, the Company and to issue and sell
up to 2,875,000 _____% Cumulative Trust Preferred Securities (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Amended and Restated Trust Agreement of the Trust dated
as of ____________, 1997, as the same may be amended from time to time (the
"Trust Agreement");
WHEREAS, the Company shall directly or indirectly own all of the
Common Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit
the Company and which purchase the Company acknowledges shall be made in
reliance upon the execution and delivery of this Agreement, the Company,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY THE COMPANY
Subject to the terms and conditions hereof, the Company, including in
its capacity as holder of the Common Securities, hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment
when and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust other than obligations of the Trust to pay to holders
of any Preferred Securities or other similar interests in the Trust the amounts
due such holders pursuant to the terms of the Preferred Securities or such
other similar interests, as the case may be. This Agreement is intended to be
for the benefit of, and to be enforceable by, all such Beneficiaries, whether
or not such Beneficiaries have received notice hereof.
SECTION 1.2. TERM OF AGREEMENT
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise); and (b) the date on which
there are no
D-1
<PAGE> 60
Beneficiaries remaining; provided, however, that this Agreement shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
holder of Preferred Securities or any Beneficiary must restore payment of any
sums paid under the Preferred Securities, under any obligation, under the
Preferred Securities Guarantee Agreement dated the date hereof by the Company
and ___________________________________ as guarantee trustee, or under this
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
SECTION 1.3. WAIVER OF NOTICE
The Company hereby waives notice of acceptance of this Agreement and
of any obligation to which it applies or may apply, and the Company hereby
waives presentment, demand for payment, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
SECTION 1.4. NO IMPAIRMENT
The obligations, covenants, agreements and duties of the Company under
this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all
or any portion of the obligations or for the performance of any other
obligation under, arising out of, or in connection with, the obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Beneficiaries to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Beneficiaries with respect to the obligations
or any action on the part of the Trust granting indulgence or extension of any
kind; or
(c) the voluntary or involuntary dissolution, liquidation,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement composition or
readjustment of debt of, or other similar proceedings affecting, the Trust or
any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to,
or obtain the consent of, the Company with respect to the happening of any of
the foregoing.
SECTION 1.5. ENFORCEMENT
A Beneficiary may enforce this Agreement directly against the Company,
and the Company waives any right or remedy to require that any action be
brought against the Trust or any other person or entity before proceeding
against the Company.
D-2
<PAGE> 61
ARTICLE II
SECTION 2.1. BINDING EFFECT
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the Beneficiaries.
SECTION 2.2. AMENDMENT
So long as there remains any Beneficiary or any Preferred Securities
of any series are outstanding, this Agreement shall not be modified or amended
in any manner adverse to such Beneficiary or to the holders of the Preferred
Securities.
SECTION 2.3. NOTICES
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same by facsimile
transmission (confirmed by mail), telex, or by registered or certified mail,
addressed as follows (and if so given, shall be deemed given when mailed or
upon receipt of an answer back, if sent by telex):
Stifel Financial Capital Trust c/o Stifel Financial Corp., 500 North
Broadway, St. Louis, Missouri 63102-2188. Facsimile No.: (314) 342-2097
Attention: Chief Financial Officer.
Stifel Financial Corp., 500 North Broadway, St. Louis, Missouri
63102-2188. Facsimile No.: (314) 342-2097 Attention: Chief Financial Officer.
SECTION 2.4 This agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Missouri (without
regard to conflict of laws principles).
THIS AGREEMENT is executed as of the day and year first above written.
STIFEL FINANCIAL CORP.
By:________________________________
Name:
Title:
STIFEL FINANCIAL CAPITAL TRUST
By:________________________________
Name:
Title: Administrative Trustee
D-3
EXHIBIT E
<PAGE> 62
EXHIBIT E
Certificate Number Number of Preferred Securities
P-
Certificate Evidencing Preferred Securities
of
Stifel Financial Capital Trust
% Cumulative Trust Preferred Securities
(liquidation amount $10 per Preferred Security)
Stifel Financial Capital Trust, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of _____ preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust and designated the __________% Cumulative Trust Preferred
Securities (liquidation amount $10 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in Section
504 of the Trust Agreement. The designations, rights, privileges, restrictions,
preferences, and other terms and provisions of the Preferred Securities are set
forth in, and this certificate and the Preferred Securities represented hereby
are issued and shall in all respects be subject to the terms and provisions of,
the Amended and Restated Trust Agreement of the Trust dated as of _____________,
1997, as the same may be amended from time to time (the "Trust Agreement"),
including the designation of the terms of Preferred Securities as set forth
therein. The Holder is entitled to the benefits of the Preferred Securities
Guarantee Agreement entered into by Stifel Financial Corp., a Delaware
corporation, and ___________________________________, as guarantee trustee,
dated as of _______________, 1997 (the "Guarantee"), to the extent provided
therein. The Trust shall furnish a copy of the Trust Agreement and the Guarantee
to the Holder without charge upon written request to the Trust at its principal
place of business or registered office. Upon receipt of this certificate, the
Holder is bound by the Trust Agreement and is entitled to the benefits
thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this _____day of _______________, 1997.
STIFEL FINANCIAL CAPITAL TRUST
By:
--------------------------------------------
Name:
Title: Administrative Trustee
E-1
<PAGE> 63
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the _____% Cumulative Trust Preferred Securities
described in the within-mentioned Amended and Restated Trust Agreement.
Dated:
, STIFEL FINANCIAL CAPITAL TRUST
- - ---------------------------------------
as Authentication Agent and Registrar
By By
------------------------------------- ----------------------------------
Authorized Signatory Administrative Trustee
<PAGE> 1
Exhibit 4.11
================================================================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
STIFEL FINANCIAL CORP.
AND
-----------------------------------
_______________, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions And Interpretation.....................................1
Section 1.1. Definitions And Interpretation............................1
ARTICLE II Trust Indenture Act...............................................4
Section 2.1. Trust Indenture Act; Application..........................4
Section 2.2. Lists Of Holders Of Securities............................5
Section 2.3. Reports By The Preferred Guarantee Trustee................5
Section 2.4. Periodic Reports To Preferred Guarantee Trustee...........5
Section 2.5. Evidence Of Compliance With Conditions Precedent..........5
Section 2.6. Events Of Default; Waiver.................................5
Section 2.7. Event Of Default; Notice..................................6
Section 2.8. Conflicting Interests.....................................6
ARTICLE III Powers, Duties And Rights Of Preferred Guarantee Trustee.........6
Section 3.1. Powers And Duties Of The Preferred Guarantee Trustee......6
Section 3.2. Certain Rights Of Preferred Guarantee Trustee.............8
Section 3.3. Not Responsible For Recitals Or Issuance Of Guarantee....10
ARTICLE IV Preferred Guarantee Trustee......................................10
Section 4.1. Preferred Guarantee Trustee; Eligibility.................10
Section 4.2. Appointment, Removal And Resignation Of Preferred
Guarantee Trustee........................................11
ARTICLE V Guarantee.........................................................11
Section 5.1. Guarantee................................................11
Section 5.2. Waiver Of Notice And Demand..............................12
Section 5.3. Obligations Not Affected.................................12
Section 5.4. Rights Of Holders........................................13
Section 5.5. Guarantee Of Payment.....................................13
Section 5.6. Subrogation..............................................13
Section 5.7. Independent Obligations..................................13
ARTICLE VI Limitation Of Transactions; Subordination........................14
Section 6.1. Limitation On Transactions...............................14
Section 6.2. Ranking..................................................14
ARTICLE VII Termination.....................................................14
Section 7.1. Termination..............................................14
ARTICLE VIII Indemnification................................................14
Section 8.1. Exculpation..............................................14
Section 8.2. Indemnification..........................................15
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ARTICLE IX Miscellaneous....................................................15
Section 9.1. Successors And Assigns...................................15
Section 9.2. Amendments...............................................15
Section 9.3. Notices..................................................16
Section 9.4. Benefit..................................................16
Section 9.5. Governing Law............................................16
ii
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CROSS-REFERENCE TABLE
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
- - ------------------- ---------
310(a)...................................................................4.1(a)
310(b)..............................................................4.1(c), 2.8
310(c)...........................................................Not Applicable
311(a)...................................................................2.2(b)
311(b)...................................................................2.2(b)
311(c)...........................................................Not Applicable
312(a).................................................................. 2.2(a)
312(b).................................................................. 2.2(b)
313........................................................................ 2.3
314(a)......................................................................2.4
314(b)...........................................................Not Applicable
314(c)......................................................................2.5
314(d)...........................................................Not Applicable
314(e).............................................................1.1, 2.5,3.2
314(f).................................................................2.1, 3.2
315(a)...................................................................3.1(d)
315(b)......................................................................2.7
315(c)......................................................................3.1
315(d)...................................................................3.1(d)
316(a)............................................................1.1, 2.6, 5.4
316(b)......................................................................5.3
317(a)......................................................................3.1
317(b)...........................................................Not Applicable
318(a)......................................................................2.1
318(b)......................................................................2.1
318(c)...................................................................2.1(b)
Note: This Cross-Reference Table does not constitute part of this Agreement
and shall not affect the interpretation of any of its terms or provisions.
iii
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PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred Securities
Guarantee"), dated as of ___________, 1997, is executed and delivered by STIFEL
FINANCIAL CORP., a Delaware corporation (the "Guarantor"), and
___________________________________, a trust company organized and existing
under the laws of the Commonwealth of Massachusetts, as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of Stifel Financial
Capital Trust, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of ___________, 1997, among the trustees of the Trust
named therein, the Guarantor, as depositor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof up to 2,875,000 preferred securities, having an aggregate
liquidation amount of up to $28,750,000, designated the ________% Cumulative
Trust Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, to pay to the Holders of the
Preferred Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Preferred Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) terms defined in the Trust Agreement as at the date of execution of
this Preferred Securities Guarantee have the same meaning when used in this
Preferred Securities Guarantee;
<PAGE> 6
(c) a term defined anywhere in this Preferred Securities Guarantee has the
same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles and
Sections are to Articles and Sections of this Preferred Securities Guarantee,
unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which federal or state
banking institutions in New York, New York are authorized or required by law,
executive order or regulation to close or a day on which the Corporate Trust
Office of the Preferred Guarantee Trustee is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Preferred Securities Guarantee is located at Two
International Place, 4th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust Department.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the ____% Subordinated Debentures due June 30, 2027, of
the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Preferred Securities Guarantee.
"Guarantor" means Stifel Financial Corp., a Delaware corporation.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Trust: (i) any accrued and unpaid Distributions that are required to
be paid on such Preferred Securities, to the extent the Trust shall have funds
available therefor, (ii) the redemption price, including all
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<PAGE> 7
accrued and unpaid Distributions to the date of redemption (the "Redemption
Price"), to the extent the Trust has funds available therefor, with respect to
any Preferred Securities called for redemption by the Trust, and (iii) upon a
voluntary or involuntary dissolution of the Trust (other than in connection with
the distribution of Debentures to the Holders in exchange for Preferred
Securities as provided in the Trust Agreement), the lesser of (a) the aggregate
of the Liquidation Amount and all accrued and unpaid Distributions on the
Preferred Securities to the date of payment, to the extent the Trust shall have
funds available therefor (the "Liquidation Distribution"), and (b) the amount of
assets of the Trust remaining available for distribution to Holders in
liquidation of the Trust.
"Holder" shall mean any holder, as registered on the books and records of
the Trust, of any Preferred Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of _____________, 1997, among the
Debenture Issuer and ___________________________________, as trustee, and any
indenture supplemental thereto pursuant to which Subordinated Debentures of the
Debenture Issuer are to be issued to the Property Trustee of the Trust.
"Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments.
"Majority in Liquidation Amount of the Preferred Securities" means the
holders of more than 50% of the Liquidation Amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two authorized officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
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<PAGE> 8
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means ___________________________________,
until a Successor Preferred Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Preferred Securities
Guarantee and thereafter means each such Successor Preferred Guarantee Trustee.
"Redemption Price" has the meaning provided therefor in the definition of
Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust Office of the Preferred Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as
in force at the date of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939, as amended, is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939, as so amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of the
Trust Indenture Act that are required to be part of this Preferred Securities
Guarantee and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Section 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
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<PAGE> 9
SECTION 2.2. LISTS OF HOLDERS OF SECURITIES.
(a) In the event the Preferred Guarantee Trustee is not also the Securities
Registrar, the Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities (the "List of
Holders") as of such date, (i) within 1 Business Day after January 1 and June 30
of each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
15 days before such List of Holders is given to the Preferred Guarantee Trustee;
provided, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The
Preferred Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations under
Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
On or before July 15 of each year, the Preferred Guarantee Trustee shall
provide to the Holders of the Preferred Securities such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.4. PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6. EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in Liquidation Amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this
5
<PAGE> 10
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7. EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided, that the Preferred Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Preferred Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Trust Agreement shall
have obtained actual knowledge.
SECTION 2.8. CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of Preferred Securities exercising his
or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee. The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
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<PAGE> 11
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Preferred Guarantee Trustee
shall be determined solely by the express provisions of this Preferred
Securities Guarantee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and obligations as
are specifically set forth in this Preferred Securities Guarantee, and
no implied covenants or obligations shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and conforming to the
requirements of this Preferred Securities Guarantee; but in the case
of any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Preferred Guarantee
Trustee, the Preferred Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Preferred
Guarantee Trustee, unless it shall be proved that the Preferred Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
Liquidation Amount of the Preferred Securities relating to the time, method
and place of conducting any proceeding
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<PAGE> 12
for any remedy available to the Preferred Guarantee Trustee, or exercising
any trust or power conferred upon the Preferred Guarantee Trustee under
this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall require
the Preferred Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers, if the
Preferred Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured to
it under the terms of this Preferred Securities Guarantee or indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee, against such
risk or liability is not reasonably assured to it.
SECTION 3.2. CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively rely, and shall
be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this
Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate;
(iii) whenever, in the administration of this Preferred Securities
Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting any
action hereunder, the Preferred Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any rerecording,
refiling or registration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel, and the
written advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its employees.
The Preferred Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Preferred Securities
Guarantee from any court of competent jurisdiction;
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<PAGE> 13
(vi) the Preferred Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred
Securities Guarantee at the request or direction of any Holder, unless such
Holder shall have provided to the Preferred Guarantee Trustee such security
and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee,
against the costs, expenses (including attorneys' fees and expenses and the
expenses of the Preferred Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying with
such request or direction, including such reasonable advances as may be
requested by the Preferred Guarantee Trustee; provided that, nothing
contained in this Section 3.2(a)(vi) shall be taken to relieve the
Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this
Preferred Securities Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Preferred Guarantee
Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the Preferred
Guarantee Trustee shall not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with due care by it
hereunder;
(ix) any action taken by the Preferred Guarantee Trustee or its agents
hereunder shall bind the Holders of the Preferred Securities, and the
signature of the Preferred Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party shall
be required to inquire as to the authority of the Preferred Guarantee
Trustee to so act or as to its compliance with any of the terms and
provisions of this Preferred Securities Guarantee, both of which shall be
conclusively evidenced by the Preferred Guarantee Trustee's or its agent's
taking such action;
(x) whenever in the administration of this Preferred Securities
Guarantee the Preferred Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Preferred Guarantee Trustee (i) may
request instructions from the Holders of a Majority in Liquidation Amount
of the Preferred Securities, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in accordance
with such instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or
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exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Preferred Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Preferred
Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the statements
of the Guarantor, and the Preferred Guarantee Trustee does not assume any
responsibility for their correctness. The Preferred Guarantee Trustee makes no
representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least
$50,000,000, and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above,
then, for the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
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SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEE.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed
and has accepted such appointment by written instrument executed by such
Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or until
its removal or resignation. The Preferred Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Preferred Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Preferred Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to
the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1. GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Trust), as and when due, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
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SECTION 5.2. WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.3. OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor under
this Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or any extension of the maturity date of the Debentures permitted
by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary dissolution, liquidation, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) any failure or omission to receive any regulatory approval or consent
required in connection with the Preferred Securities (or the common equity
securities issued by the Trust);
(g) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
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(h) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. RIGHTS OF HOLDERS.
(a) The Holders of a Majority in Liquidation Amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee.
(b) Any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other Person.
SECTION 5.5. GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and not
of collection.
SECTION 5.6. SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7. INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Trust with respect to the Preferred Securities, and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (h), inclusive, of Section 5.3 hereof.
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ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1. LIMITATION ON TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if there shall have
occurred an Event of Default under this Preferred Securities Guarantee, an Event
of Default under the Trust Agreement or during an Extended Interest Payment
Period (as defined in the Indenture), then (a) the Guarantor shall not declare
or pay any dividend on, make any distributions with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock and (b) the Guarantor shall not make any payment of interest or
principal on or repay, repurchase or redeem any debt securities issued by the
Guarantor which rank pari passu with or junior to the Debentures other than
payments under this Preferred Securities Guarantee and (c) the Guarantor shall
not redeem, purchase or acquire less than all of the Outstanding Debentures or
any of the Preferred Securities.
SECTION 6.2. RANKING.
This Preferred Securities Guarantee will constitute an unsecured obligation
of the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, (ii) pari passu with the most senior
preferred securities or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
in respect of any preferred securities or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION.
This Preferred Securities Guarantee shall terminate upon (i) full payment
of the Redemption Price of all Preferred Securities, (ii) upon full payment of
the amounts payable in accordance with the Trust Agreement upon liquidation of
the Trust, or (iii) upon distribution of the Debentures to the Holders of the
Preferred Securities. Notwithstanding the foregoing, this Preferred Securities
Guarantee shall continue to be effective or shall be reinstated, as the case may
be, if at any time any Holder of Preferred Securities must restore payment of
any sums paid under the Preferred Securities or under this Preferred Securities
Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in
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good faith in accordance with this Preferred Securities Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Preferred
Securities Guarantee or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such Indemnified
Person's negligence or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Guarantor and upon such information, opinions, reports
or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2. INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person 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 the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.
SECTION 9.2. AMENDMENTS.
Except with respect to any changes that do not materially adversely affect
the rights of Holders (in which case no consent of Holders will be required),
this Preferred Securities Guarantee may only be amended with the prior approval
of the Holders of at least a Majority in Liquidation Amount of the Preferred
Securities. The provisions of Article VI of the Trust Agreement with respect to
meetings of Holders of the Preferred Securities apply to the giving of such
approval.
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SECTION 9.3. NOTICES.
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee
Trustee's mailing address set forth below (or such other address as the
Preferred Guarantee Trustee may give notice of to the Holders of the Preferred
Securities):
------------------------------
------------------------------
------------------------------
------------------------------
(b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Holders
of the Preferred Securities):
Stifel Financial Corp.
500 North Broadway
St. Louis, Missouri 63102-2188
Attention: Chief Financial Officer
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 9.4. BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION 9.5. GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MISSOURI.
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This Preferred Securities Guarantee is executed as of the day and year
first above written.
STIFEL FINANCIAL CORP.
as Guarantor
By
---------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
-------------------------------------------,
as Preferred Guarantee Trustee
By
---------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Stifel Financial Corp. on Form S-2 of our reports dated February 25, 1997,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
Stifel Financial Corp. for the year ended December 31, 1996 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
June 6, 1997
<PAGE> 1
EXHIBIT 23.2
[COOPERS & LYBRAND LETTERHEAD]
STIFEL FINANCIAL CORP.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Stifel Financial Corp. and Subsidiaries on Form S-2, of our report dated
February 25, 1996 on our audits of the consolidated financial statements and
financial statement schedules of Stifel Financial Corp. and Subsidiaries as of
December 31, 1995 and for the years ended December 31, 1995 and 1994, which
report is included in the Company's Annual Report on Form 10-K. We also
consent to the reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
June 5, 1997
