<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1998
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 1-11515
COMMERCIAL FEDERAL CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEBRASKA 47-0658852
------------------------------- ------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification Number)
2120 SOUTH 72ND STREET, OMAHA, NEBRASKA 68124
--------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
(402) 554-9200
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
-------------------------------------------------------
(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________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 6, 1998
----------------------------- -------------------------------
Common Stock, $0.01 Par Value 60,526,891 Shares
<PAGE>
COMMERCIAL FEDERAL CORPORATION
------------------------------
FORM 10-Q
---------
INDEX
-----
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION PAGE NUMBER
--------------------- -----------
Item 1. Financial Statements:
Consolidated Statement of Financial Condition as of
September 30, 1998 and June 30, 1998 3
Consolidated Statement of Operations for the Three
Months Ended September 30, 1998 and 1997 4-5
Consolidated Statement of Comprehensive Income for the
Three Months Ended September 30, 1998 and 1997 6
Consolidated Statement of Cash Flows for the Three
Months Ended September 30, 1998 and 1997 7-8
Notes to Consolidated Financial Statements 9-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-24
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURE PAGE 27
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2
<PAGE>
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements:
-----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) September 30, June 30,
ASSETS 1998 1998
- ------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash (including short-term investments of $17,800 and $62,886) $ 176,370 $ 217,012
Investment securities available for sale, at fair value 79,914 141,116
Mortgage-backed securities available for sale, at fair value 208,872 171,393
Loans held for sale, net 270,519 290,380
Investment securities held to maturity (fair value of $408,701 and $533,078) 406,399 532,188
Mortgage-backed securities held to maturity (fair value of $847,722 and $921,716) 843,660 920,456
Loans and leases receivable, net of allowances of $72,420 and $64,660 8,346,416 7,567,578
Federal Home Loan Bank stock 144,616 131,132
Interest receivable, net of allowances of $1,228 and $201 67,503 66,353
Real estate, net 24,134 22,195
Premises and equipment, net 154,114 134,951
Prepaid expenses and other assets 176,964 127,289
Intangible assets, net of accumulated amortization of $35,179 and $31,924 183,931 77,186
- ------------------------------------------------------------------------------------------------------------
Total Assets $ 11,083,412 $ 10,399,229
- ------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------
Liabilities:
Deposits $ 7,275,914 $ 6,558,207
Advances from Federal Home Loan Bank 2,289,806 2,379,182
Securities sold under agreements to repurchase 234,294 334,294
Other borrowings 194,613 110,674
Interest payable 46,750 36,261
Other liabilities 128,874 119,416
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 10,170,251 9,538,034
- ------------------------------------------------------------------------------------------------------------
Commitments and Contingencies -- --
- ------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued -- --
Common stock, $.01 par value; 120,000,000 shares authorized;
60,390,988 and 58,714,826 shares issued and outstanding 604 587
Additional paid-in capital 375,372 337,697
Retained earnings 546,047 534,245
Unearned Employee Stock Ownership Plan (ESOP) shares (11,069) (11,404)
Accumulated other comprehensive income, net 2,207 70
- ------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 913,161 861,195
- ------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 11,083,412 $ 10,399,229
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data) Three Months Ended
September 30,
1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Loans and leases receivable $ 168,470 $ 152,746
Mortgage-backed securities 17,049 21,381
Investment securities 13,342 13,697
- --------------------------------------------------------------------------------------
Total interest income 198,861 187,824
Interest Expense:
Deposits 81,707 79,821
Advances from Federal Home Loan Bank 34,109 27,765
Securities sold under agreements to repurchase 4,961 9,374
Other borrowings 3,464 3,221
- --------------------------------------------------------------------------------------
Total interest expense 124,241 120,181
Net Interest Income 74,620 67,643
Provision for Loan and Lease Losses (3,800) (1,688)
- --------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan and Lease Losses 70,820 65,955
Other Income:
Loan servicing fees 8,431 8,876
Retail fees and charges 9,370 7,099
Real estate operations (161) (23)
Gain on sales of loans 1,905 579
Gain on sales of securities 1,688 23
Other operating income 5,701 6,436
- --------------------------------------------------------------------------------------
Total other income 26,934 22,990
Other Expense:
General and administrative expenses -
Compensation and benefits 23,017 21,755
Occupancy and equipment 8,343 6,705
Data processing 2,614 2,831
Regulatory insurance and assessments 1,448 1,273
Advertising 3,674 3,188
Other operating expenses 10,887 10,718
Merger expenses 15,963 187
- --------------------------------------------------------------------------------------
Total general and administrative expenses 65,946 46,657
Amortization of intangible assets 3,255 1,745
- --------------------------------------------------------------------------------------
Total other expense 69,201 48,402
- --------------------------------------------------------------------------------------
Income Before Income Taxes 28,553 40,543
Provision for Income Taxes 13,430 14,588
- --------------------------------------------------------------------------------------
Net Income $ 15,123 $ 25,955
- --------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data) Three Months Ended
September 30,
1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Weighted average number of common shares
outstanding used in basic earnings per share calculation 58,605,879 55,247,359
Add assumed exercise of outstanding stock options
as adjustments for dilutive securities 842,023 1,309,216
- --------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding used in diluted earnings per share calculation 59,447,902 56,556,575
- --------------------------------------------------------------------------------------------
Earnings per common share:
Basic $ .26 $ .47
=========== ===========
Diluted $ .25 $ .46
=========== ===========
- --------------------------------------------------------------------------------------------
Dividends declared per common share $ .055 $ .047
- --------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
(Dollars in Thousands) Three Months Ended
September 30,
---------------------
1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 15,123 $ 25,955
Other comprehensive income, before income taxes:
Unrealized holding gains on securities
available for sale arising during periods 4,975 2,780
Less reclassification adjustment for net gains included
in net income (1,688) (23)
- -----------------------------------------------------------------------------------
3,287 2,757
Provision for income taxes 1,150 965
- -----------------------------------------------------------------------------------
Other comprehensive income, net of income taxes 2,137 1,792
- -----------------------------------------------------------------------------------
Comprehensive Income $ 17,260 $ 27,747
- -----------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(Dollars in Thousands) Three Months Ended
September 30,
----------------------
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,123 $ 25,955
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Amortization of intangible assets 3,255 1,745
Provision for loss on loans and leases and real estate 4,077 1,877
Depreciation and amortization 3,617 3,066
Accretion of deferred discounts and fees, net 421 (371)
Amortization of mortgage servicing rights 2,979 2,458
Amortization of deferred compensation on restricted
stock and deferred compensation plans and premiums on other borrowings 783 695
Gain on sales of real estate, loans and loan servicing rights, net (2,267) (1,282)
Gain on sales of securities (1,688) (23)
Stock dividends from Federal Home Loan Bank (2,389) (1,742)
Proceeds from the sale of loans 515,169 221,243
Origination of loans held for sale (157,072) (128,439)
Purchases of loans held for resale (328,022) (114,366)
Decrease in interest receivable 8,987 2,024
Increase in interest payable and other liabilities 689 10,117
Other items, net (26,610) (2,989)
-------- -------
Total adjustments 21,929 (5,987)
-------- -------
Net cash provided by operating activities 37,052 19,968
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of loans (119,075) (157,080)
Repayment of loans, net of originations 240,428 49,413
Principal repayments of mortgage-backed securities held to maturity 75,148 55,033
Purchases of mortgage-backed securities available for sale (49,756) (40,757)
Proceeds from sales of mortgage-backed securities available for sale 76,114 --
Principal repayments of mortgage-backed securities available for sale 30,879 18,347
Maturities and repayments of investment securities held to maturity 124,870 101,834
Purchases of investment securities held to maturity -- (67,461)
Purchases of investment securities available for sale -- (79,864)
Maturities and repayments of investment securities available for sale 87,625 10,628
Proceeds from sales of investment securities available for sale 4,112 7,908
Purchases of mortgage loan servicing rights (5,569) (3,101)
Proceeds from sales of mortgage loan servicing rights -- 387
Purchases of Federal Home Loan Bank stock (2,913) (15,857)
Proceeds from sale of Federal Home Loan Bank stock 5,000 --
Proceeds from sales of real estate 3,397 5,983
Payments to acquire real estate (116) (1,028)
Acquisition, net of cash received (11,067) --
Purchases of premises and equipment, net (8,949) (1,835)
Other items, net (631) (1,015)
-------- -------
Net cash provided (used) by investing activities 449,497 (118,465)
- --------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
7
<PAGE>
COMMERCIAL FEDERAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(Dollars in Thousands) Three Months Ended
September 30,
----------------------
1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in deposits $(234,062) $ (98,301)
Proceeds from Federal Home Loan Bank advances -- 622,570
Repayments of Federal Home Loan Bank advances (306,135) (332,960)
Proceeds from securities sold under agreements to repurchase 25,000 --
Repayments of securities sold under agreements to repurchase (125,000) (75,000)
Proceeds from issuances of other borrowings 85,000 34,835
Repayments of other borrowings (3,770) (63,584)
Payments of cash dividends on common stock (2,313) (3,652)
Issuance of common stock 36,018 2,565
Other items, net (1,929) (2,712)
---------- ---------
Net cash (used) provided by financing activities (527,191) 83,761
- --------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS:
Decrease in net cash position (40,642) (14,736)
Balance, beginning of year 217,012 177,403
Adjustment to convert acquistions to fiscal year end -- (32,583)
---------- ---------
Balance, end of period $ 176,370 $ 130,084
========== =========
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest expense $ 122,513 $ 98,997
Income taxes, net 1,261 8,330
Non-cash investing and financing activities -
Loans exchanged for mortgage-backed securities -- 16,075
Loans transferred to real estate 3,740 1,404
Loans to facilitate the sale of real estate 82 --
- --------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
8
<PAGE>
COMMERCIAL FEDERAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
(Columnar Dollars in Footnotes are in Thousands Except Per Share Amounts)
- --------------------------------------------------------------------------------
A. BASIS OF CONSOLIDATION AND PRESENTATION:
----------------------------------------
The unaudited consolidated financial statements are prepared on an accrual basis
and include the accounts of Commercial Federal Corporation (the Corporation) and
its wholly-owned subsidiary, Commercial Federal Bank, a Federal Savings Bank
(the Bank), and all majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
During the three months ended September 30, 1998, the Corporation consummated
the acquisitions of AmerUs Bank (AmerUs) and First Colorado Bancorp, Inc. (First
Colorado). The accounts and results of operations of AmerUs are reflected in the
Corporation's consolidated financial statements beginning July 31, 1998 since
this acquisition was accounted for as a purchase. The First Colorado acquisition
was accounted for as a pooling of interests and, accordingly, the Corporation's
historical consolidated financial statements were restated for all periods prior
to this acquisition to include the accounts and results of operations of First
Colorado. See Note B for additional information regarding these acquisitions.
Effective July 1, 1998, the Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 130 entitled "Reporting Comprehensive Income"
(SFAS No. 130). This statement requires disclosures of the components of
comprehensive income and the accumulated balance of other comprehensive income
within consolidated total stockholders' equity. The adoption of the provisions
of SFAS No. 130, which are only of a disclosure nature, did not effect the
Corporation's consolidated financial position, results of operations or
liquidity.
The accompanying interim consolidated financial statements have not been audited
by independent auditors. However, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments, the required restatement of
all periods prior to the merger with First Colorado and the merger expenses and
other nonrecurring charges recorded during the first three months of fiscal year
1999) considered necessary to fairly present the financial statements have been
included. The consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Corporation's June 30, 1998, Annual Report to Stockholders. The results of
operations for the three month period ended September 30, 1998, are not
necessarily indicative of the results which may be expected for the entire
fiscal year 1999. Certain amounts in the prior fiscal year period have been
reclassified for comparative purposes.
B. CONSUMMATED ACQUISITIONS:
-------------------------
AMERUS BANK. On July 31, 1998, the Corporation consummated its acquisition of
AmerUs, a wholly-owned subsidiary of AmerUs Group Co. Under the terms of the
Stock Purchase Agreement, the Corporation acquired through a taxable acquisition
all of the outstanding shares of the common stock of AmerUs for total
consideration of $178,269,000. Such consideration consisted of (i) certain
assets retained by AmerUs Group Co. in lieu of cash (primarily FHA Title One
single-family residential mortgage loans and a receivable for income tax
benefits) totaling approximately $85,027,000, (ii) cash (as adjusted per the
agreement) totaling $53,242,000, and (iii) a one-year promissory note for
$40,000,000 bearing interest, adjusted monthly, at 150 basis points over the
one-year Treasury bill rate.
AmerUs was a federally chartered savings bank headquartered in Des Moines, Iowa
and operated 47 branches in Iowa (26), Missouri (8), Nebraska (6), Kansas (4),
Minnesota (2) and South Dakota (1). At July 31, 1998, before purchase accounting
adjustments, AmerUs had total assets of approximately $1.3 billion, deposits of
approximately $949,700,000 and stockholder's equity of approximately
$84,800,000. This acquisition was accounted for as a purchase with two months of
amortization expense recorded through September 30, 1998. The fair value
adjustments and other purchase accounting adjustments, as well as amortization
methods and lives, are to be finalized during fiscal year 1999.
9
<PAGE>
B. CONSUMMATED ACQUISITIONS (Continued):
------------------------------------
The accounts and consolidated results of operations for the three months ended
September 30, 1998 include the results of AmerUs beginning July 31, 1998. The
following table summarizes results on an unaudited consolidated pro forma basis
(including an after-tax loss of $22,504,000 from AmerUs for the month of July
1998) as though this purchase had occurred at the beginning of fiscal year 1998:
- -------------------------------------------------------------------------------
Three Months Fiscal Year
Ended Ended
September 30, 1998 June 30, 1998
- -------------------------------------------------------------------------------
Total interest income and other income $ 206,513 $ 871,127
Net income (loss) (7,975) 69,481
Diluted earnings (loss) per common share (.13) 1.67
- -------------------------------------------------------------------------------
FIRST COLORADO BANCORP, INC. On August 14, 1998, the Corporation consummated its
acquisition of First Colorado. Under the terms of the agreement, the Corporation
acquired in a tax-free reorganization all 18,564,766 outstanding shares of First
Colorado's common stock in exchange for 18,278,789 shares of its common stock.
Based on the Corporation's closing stock price of $26.375 at August 14, 1998,
the total consideration for this acquisition, including cash paid for fractional
shares, approximated $482,154,000.
An additional requirement of the transaction with First Colorado was the
issuance of 1,400,000 shares of First Colorado common stock immediately prior to
the consummation of the merger. Such requirement was necessary to cure the taint
on the treasury stock of First Colorado so this transaction could be accounted
for as a pooling of interests. These shares offered directly by First Colorado
resulted in gross cash proceeds (prior to any transaction costs) of $33,425,000
less the placement agent's commission of $919,000, or net proceeds to First
Colorado totaling $32,506,000.
First Colorado, headquartered in Lakewood, Colorado, was a unitary savings and
loan holding company and the parent company of First Federal Bank of Colorado, a
federally chartered stock savings bank that operated 27 branches located in
Colorado, with 23 branches located in the Denver metropolitan area and four in
Colorado's western slope region. At July 31, 1998, on a pro forma basis, First
Colorado had assets of approximately $1.6 billion, deposits of approximately
$1.2 billion and stockholders' equity of approximately $254.7 million. Total
assets and stockholders' equity, include the net proceeds of $32,506,000 from
the aforementioned private placement of 1,400,000 shares on August 14, 1998.
This acquisition was accounted for as a pooling of interests.
The following table summarizes results of operations of the Corporation and
First Colorado for the comparable three months ended September 30, 1997, as
separately reported prior to the merger, that are included herein:
- --------------------------------------------------------------------------------
Corporation First Colorado Combined
- --------------------------------------------------------------------------------
Total interest income and other income $ 181,973 $ 28,841 $ 210,814
Total interest expense 105,001 15,180 120,181
Net income 20,775 5,180 25,955
- --------------------------------------------------------------------------------
Prior to merger into the Corporation, results of operations for First Colorado
were reported on a calendar year basis. However, in restating prior periods, the
accounts and results of operations of First Colorado were conformed to the
Corporation's fiscal year ended June 30, 1998. Accordingly in changing fiscal
years, First Colorado's accounts and results of operations for the six months
ended June 30, 1997, including total interest income and other income of
$55,737,000, total interest expense of $29,399,000 and net income of $5,363,000
(net of a cash dividend of $3,477,000) will be excluded from reported results of
operations for the restated combined companies but are included in the
Corporation's consolidated total stockholders' equity.
10
<PAGE>
B. CONSUMMATED ACQUISITIONS (Continued):
------------------------------------
The following table summarizes results on a pro forma basis for the years ended
June 30, 1998, 1997 and 1996, as if this acquisition, accounted for as a pooling
of interests, had occurred at the beginning of the respective fiscal years:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
First
Corporation Colorado Combined
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
FISCAL YEAR 1998:
Total interest income and other income $ 735,883 $ 119,139 $ 855,022
Total interest expense 417,188 60,201 477,389
Net income 67,333 20,080 87,413
Earnings per diluted common share 1.62 1.23 1.48
- -----------------------------------------------------------------------------------
FISCAL YEAR 1997:
Total interest income and other income $ 688,737 $ 110,126 $ 798,863
Total interest expense 396,775 57,194 453,969
Extraordinary items, net of tax benefit (583) -- (583)
Net income 54,884 13,372 68,256
Earnings per diluted common share -
Income before extraordinary items 1.35 .73 1.14
Extraordinary items, net of tax benefit (.01) -- (.01)
Net income 1.34 .73 1.13
- -----------------------------------------------------------------------------------
FISCAL YEAR 1996:
Total interest income and other income $ 644,501 $ 99,469 $ 743,970
Total interest expense 378,580 58,863 437,443
Net income 66,195 12,638 78,833
Earnings per diluted common share 1.59 .63 1.26
- -----------------------------------------------------------------------------------
</TABLE>
Net income and diluted earnings per share presented on a pro forma basis above
do not include any expected cost savings and benefits of related synergies, or
any nonrecurring merger transaction costs, as a result of the merger of First
Colorado.
11
<PAGE>
C. MERGER EXPENSES AND OTHER NONRECURRING CHARGES:
-----------------------------------------------
The Corporation incurred merger expenses and other nonrecurring charges totaling
$17,165,000 for the three months ended September 30, 1998, associated primarily
with the First Colorado acquisition. These expenses for the three months ended
Setpember 30, 1998 are detailed below with other nonrecurring charges not
classified in the merger expenses category of general and administrative
expenses included in such other expense categories as noted in the following
table.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C>
Merger expenses:
Transaction costs related to the combinations $ 8,015
Employee severance and other termination costs 1,449
Costs to combine operations 6,499
- ------------------------------------------------------------------------------------
15,963
Other nonrecurring charges:
Additional loan loss reserves - (provision for loan and lease losses) 1,000
Conforming accounting practices of combining companies -
(compensation and benefits) 202
- ------------------------------------------------------------------------------------
Total merger expenses and other nonrecurring charges, before income taxes 17,165
Income tax benefit (3,367)
- ------------------------------------------------------------------------------------
Total merger expenses and other nonrecurring charges, after-tax $ 13,798
- ------------------------------------------------------------------------------------
</TABLE>
D. PENDING ACQUISITION:
--------------------
On August 14, 1998, the Corporation entered into a reorganization and merger
agreement with Midland First Financial Corporation (Midland), parent company of
Midland Bank. Under the terms of the agreement, the Corporation will acquire in
a taxable acquisition all of the outstanding shares of Midland's common stock.
The total purchase consideration of this pending acquisition is $83,000,000,
including cash to pay off existing Midland debt totaling $5,550,000, the
retirement of preferred stock of both Midland and Midland Bank totaling
$11,562,000 and $810,000 for advisor fees. If under certain conditions this
transaction is terminated by Midland a breakup fee of $2,500,000 would be
payable to the Corporation by Midland.
Midland Bank is a privately-held commercial bank headquartered in Lee's Summit,
Missouri that operates eight branches in the greater Kansas City area. At
September 30, 1998, Midland had total assets of approximately $408,000,000,
deposits of approximately $352,000,000 and stockholders' equity of approximately
$27,200,000. This pending acquisition, approved by Midland's shareholders, is
subject to receipt of regulatory approvals and other conditions, and is expected
to close during the quarter ending March 31, 1999. This acquisition will be
accounted for as a purchase with resulting intangible assets amortized pursuant
to the methods and lives according to generally accepted accounting principles.
12
<PAGE>
E. COMMITMENTS AND CONTINGENCIES:
------------------------------
At September 30, 1998, the Corporation issued commitments, excluding undisbursed
portions of loans in process, of approximately $719,760,000 as follows:
$324,204,000 to originate loans, $152,549,000 to purchase loans, $50,000,000 to
purchase mortgage-backed securities and $193,007,000 to provide unused lines of
credit for commercial and consumer use. Loan commitments, which are funded
subject to certain limitations, extend over various periods of time. Generally,
unused loan commitments are canceled upon expiration of the commitment term as
outlined in each individual contract. These outstanding loan commitments to
extend credit do not necessarily represent future cash requirements since many
of the commitments may expire without being drawn upon. In addition, at
September 30, 1998, the Corporation had issued commitments to sell mortgage
loans and securities totaling $496,320,000 as follows: $416,317,000 in mandatory
forward delivery commitments to sell residential mortgage loans, $76,003,000 in
commitments to sell mortgage-backed securities and $4,000,000 in commitments to
sell investment securities. Loans sold subject to recourse provisions totaled
approximately $26,987,000, which represents the total potential credit risk
associated with these particular loans. Such credit risk would, however, be
offset by the value of the single-family residential properties which
collateralize these loans.
The Corporation is subject to a number of lawsuits and claims for various
amounts which arise out of the normal course of its business. In the opinion of
management, the disposition of claims currently pending will not have a material
adverse effect on the Corporation's financial position or results of operations.
On September 12, 1994, the Bank and the Corporation commenced litigation against
the United States in the United States Court of Federal Claims seeking to
recover monetary relief for the government's refusal to honor certain contracts
that it had entered into with the Bank. The suit alleges that such governmental
action constitutes a breach of contract and an unlawful taking of property by
the United States without just compensation or due process in violation of the
Constitution of the United States. The Bank aslo assumed a lawsuit in the merger
with Mid Continent against the United Sates also relating to a supervisory
goodwill claim filed by the former Mid Continent. The litigation status and
process of legal actions, as well as that of numerous actions brought by others
alleging similar claims with respect to supervisory goodwill and regulatory
capital credits, make the value of the claims asserted by the Bank (including
the Mid Continent claim) uncertain as their ultimate outcome, and contingent on
a number of factors and future events which are beyond the control of the Bank,
both as to substance, timing and the dollar amount of damages may be awarded to
the Bank and the Corporation if they finally prevail in this litigation.
F. CURRENT ACCOUNTING PRONOUNCEMENTS:
----------------------------------
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION:
Effective July 1, 1998, the Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 131 entitled "Disclosures About Segments of
an Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 does not
need to be applied to interim statements in the initial year of application but
such comparative information will be required in interim statements for the
second year. Comparative information for earlier years will be restated in the
initial year of application. This statement supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," and utilizes the "management
approach" for segment reporting. The management approach is based on the way
that the chief operating decision maker organizes segments within a company for
making operating decisions and assessing performance. Reportable segments are
based on any manner in which management disaggregates its company such as by
products and services, geography, legal structure and management structure. SFAS
No. 131 requires disclosures for each segment that are similar to those required
under current standards with the addition of quarterly disclosure requirements
and more specific and detailed geographic disclosures especially by countries as
opposed to broad geographic regions. This statement also requires descriptive
information about the way the operating segments were determined, the
products/services provided by the operating segments, the differences between
the measurements used in reporting segment information and those used in the
general purpose financial statements, and the changes in the measurement of
segment amounts from period to period.
13
<PAGE>
F. CURRENT ACCOUNTING PRONOUNCEMENTS (Continued):
----------------------------------------------
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS:
Effective July 1, 1998, the Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 132 entitled "Employers' Disclosures About
Pensions and Other Postretirement Benefits" (SFAS No. 132). This statement
amends Statement Nos. 87 and 88 relating to pension disclosures, and SFAS No.
106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" to
disclose the effects of a one-percentage-point decrease in the assumed health
care cost trend rate as well as the required effects of a one-percentage-point
increase in the same. Restatement of disclosures for earlier periods provided
for comparable purposes is required unless the information is not readily
available, in which case the notes to financial statements should include all
available information and a description of the information not available. Such
disclosure will be provided in the Corporation's annual report for fiscal year
ended June 30, 1999.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133 entitled "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). This statement requires the
recognition of all derivative financial instruments as either assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. The accounting for gains and losses associated with
changes in the fair value of a derivative and the effect on the consolidated
financial statements will depend on its hedge designation and whether the hedge
is highly effective in achieving offsetting changes in the fair value or cash
flows of the asset or liability hedged. Under the provisions of SFAS No. 133,
the method that will be used for assessing the effectiveness of a hedging
derivative, as well as the measurement approach for determining the ineffective
aspects of the hedge, must be established at the inception of the hedge. The
methods must be consistent with the entity's approach to managing risk.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999, or July 1, 1999, for the Corporation, with initial
application as of the beginning of the first fiscal quarter. On that date,
hedging relationships must be designated anew and documented pursuant to the
provisions of this statement. Management of the Corporation does not believe
that such adoption will have a material effect on the Corporation's financial
position, liquidity or results of operations.
ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF
MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE:
In October 1998, the FASB issued Statement of Financial Accounting Standards No.
134 entitled "Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise,
an amendment of FASB Statement No. 65" (SFAS No. 134). FASB Statement 65, as
amended by FASB Statements No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," and No. 125, " Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," requires that after the
securitization of a mortgage loan held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed security as a trading
security. SFAS No. 134 further amends Statement 65 to require that after the
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold those
investments. This Statement conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortage banking enterprise.
The provisions of SFAS No. 134 shall be effective for the first fiscal quarter
beginning after December 15, 1998, or as of July 1, 1999 for the Corporation. On
the date that SFAS No. 134 is initially applied, an enterprise may reclassify
mortgage-backed securities and other beneficial interests retained after the
securitization of mortgage loans held for sale from the trading category, except
for those with sales commitments in place. Those securities and other interests
shall be classified based on the entity's ability and intent, on the date this
Statement is initially applied, to hold those investments. Transfers from the
trading category that result from implementing this Statement shall be accounted
for in accordance with the provisions of Statement 115. Management of the
Corporation does not believe that the adoption of SFAS No. 134 will have a
material effect on the Corporation's financial position, liquidity or results of
operations.
14
<PAGE>
G. REGULATORY CAPITAL REQUIREMENTS:
--------------------------------
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Corporation's financial position and results of operations. The regulations
require the Bank to meet specific capital adequacy guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's capital classification is also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios as set forth in the
following tables of tangible, core and total risk-based capital. Prompt
Corrective Action provisions contained in the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA) require specific supervisory
actions as capital levels decrease. To be considered well-capitalized under the
regulatory framework for Prompt Corrective Action provisions under FDICIA, the
Bank must maintain minimum Tier I leverage, Tier I risk-based and total
risk-based capital ratios as set forth in the following table. At September 30,
1998, and June 30, 1998, the Bank exceeded the minimum requirements for the
well-capitalized category.
The following presents the Bank's regulatory capital levels and ratios relative
to its minimum capital requirements:
- --------------------------------------------------------------------------
As of September 30, 1998
------------------------------------
Actual Capital Required Capital
---------------- ----------------
Amount Ratio Amount Ratio
- --------------------------------------------------------------------------
OTS capital adequacy:
Tangible capital $795,528 7.25% $164,503 1.50%
Core capital 807,703 7.36 329,370 3.00
Risk-based capital 870,956 13.92 500,437 8.00
FDICIA regulations to be
classified well-capitalized:
Tier 1 leverage capital 807,703 7.36 548,950 5.00
Tier 1 risk-based capital 807,703 12.91 375,328 6.00
Total risk-based capital 870,956 13.92 625,547 10.00
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
As of June 30, 1998
------------------------------------
Actual Capital Required Capital
---------------- ----------------
Amount Ratio Amount Ratio
- --------------------------------------------------------------------------
OTS capital adequacy:
Tangible capital $813,961 7.88% $154,993 1.50%
Core capital 826,686 7.99 310,278 3.00
Risk-based capital 878,363 15.49 453,593 8.00
FDICIA regulations to be
classified well-capitalized:
Tier 1 leverage capital 826,686 7.99 517,130 5.00
Tier 1 risk-based capital 826,686 14.58 340,195 6.00
Total risk-based capital 878,363 15.49 566,992 10.00
- --------------------------------------------------------------------------
As of September 30, 1998, the most recent notification from the OTS categorized
the Bank as "well-capitalized" under the regulatory framework for Prompt
Corrective Action provisions under FDICIA. There are no conditions or events
since such notification that management believes have changed the Bank's
classification.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
On August 14, 1998, the Corporation consummated the acquisition of First
Colorado. This acquisition was accounted for as a pooling of interests and,
accordingly, the Corporation's historical consolidated financial statements were
restated for all periods prior to this acquisition to include the accounts and
results of operations of First Colorado.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
The Corporation's principal asset is its investment in the capital stock of the
Bank, and because it does not generate any significant revenues independent of
the Bank, the Corporation's liquidity is dependent on the extent to which it
receives dividends from the Bank. The Bank's ability to pay dividends to the
Corporation is dependent on its ability to generate earnings and is subject to a
number of regulatory restrictions and tax considerations. Under capital
distribution regulations of the OTS, a savings institution that, immediately
prior to, and on a pro forma basis after giving effect to, a proposed dividend,
has total capital that is at least equal to the amount of its fully phased-in
capital requirements (a "Tier I Association") is permitted to pay dividends
during a calendar year in an amount equal to the greater of (i) 75.0% of its net
income for the recent four quarters, or (ii) 100.0% of its net income to date
during the calendar year plus an amount that would reduce by one-half the amount
by which its ratio of total capital to assets exceeded its fully phased-in
risk-based capital ratio requirement at the beginning of the calendar year. At
September 30, 1998, the Bank qualified as a Tier I Association, and would be
permitted to pay an aggregate amount approximating $68.3 million in dividends
under these regulations. Should the Bank's regulatory capital fall below certain
levels, applicable law would require approval by the OTS of such proposed
dividends and, in some cases, would prohibit the payment of dividends.
At September 30, 1998, the cash of Commercial Federal Corporation (the parent
company) totaled $37.0 million. Due to the parent company's limited independent
operations, management believes that its cash balance at September 30, 1998, is
currently sufficient to meet operational needs. However, the parent company's
ability to make future interest and principal payments on its $50.0 million of
7.95% fixed-rate subordinated extendible notes due December 1, 2006 (the Notes),
on its $46.4 million of 9.375% fixed-rate junior subordinated debentures due May
15, 2027 (the Debentures), on its $40.0 million of one-year variable rate notes
due July 31, 1999 to acquire AmerUs, and on its $43.75 million unsecured
variable rate term note due July 31, 2003, is dependent upon its receipt of
dividends from the Bank. Accordingly, for the three months ended September 30,
1998, a dividend totaling $18.250 million was paid by the Bank to the parent
company. Such dividend from the Bank was paid primarily to cover (i) interest
payments totaling $2.679 million on the parent company's debt, (ii) principal
payments of $2.250 million on the parent company's promissory term notes, (iii)
the quarterly common stock cash dividends totaling $3.321 million payable by the
parent company to its common stock shareholders through September 30, 1998 and
(iv) the payment of $10.0 million related to the acquisition of AmerUs on July
31, 1998. The Bank will continue to pay dividends to the parent company,
pursuant to regulatory restrictions, to cover future principal and interest
payments on the parent company's debt and cash dividends on common stock when
and as declared by the parent company on a quarterly basis. A dividend totaling
$3.575 million was paid by the Bank to the parent company during the three
months ended September 30, 1997. The parent company also receives cash from the
exercise of stock options and the sale of common stock under its employee
benefit plans, as well as from the Bank for income tax benefits from operating
losses of the parent company as provided in the corporate tax sharing agreement.
The Corporation's primary sources of funds are (i) deposits, (ii) principal
repayments on loans, mortgage-backed and investment securities, (iii) advances
from the Federal Home Loan Bank (FHLB), (iv) cash generated from operations and
(v) securities sold under agreements to repurchase. As reflected in the
Consolidated Statement of Cash Flows, net cash flows provided by operating
activities totaled $37.1 million and $20.0 million, respectively, for the three
months ended September 30, 1998 and 1997. Amounts fluctuate from period to
period primarily as a result of mortgage banking activity relating to the
purchase and origination of loans for resale and the subsequent sale of such
loans.
Net cash flows provided by investing activities totaled $449.5 million for the
three months ended September 30, 1998, and net cash flows used by investing
activities totaled $118.5 million for the three months ended September 30, 1997.
Amounts fluctuate from period to period primarily as a result of (i) principal
repayments on loans and mortgage-backed securities and (ii) the purchase and
origination of loans, mortgage-backed and investment securities. The acquisition
of First Colorado ( consummated in the current fiscal year quarter) had no
material effect on liquidity, except for the cash outlays totaling $17.2 million
relating to nonrecurring merger related costs, since such transaction was
consummated in an exchange of common stock between the financial institutions.
The acquisition of AmerUs resulted in a cash outlay of approximately $53.3
million and the pending acquisition of Midland will result in a cash outlay of
approximately $83.0 million. The acquisition of AmerUs was financed by $40.0
million of one-year purchase notes from the seller bearing interest at 150 basis
points over the one-year Treasury bill rate, a $10.0 million capital
distribution from the Bank and, in part, by a $45.0 million term note borrowed
by the Corporation on July 30, 1998. This note is a five-year term note due July
31, 2003, unsecured, with quarterly principal payments of $1.25 million and
interest payable quarterly at 100 basis points below the lender's national base
rate. Management of the Corporation has not decided on how the acquisition of
Midland will be financed.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (Continued):
- --------------------------------------------
Net cash flows used by financing activities totaled $527.2 million for the three
months ended September 30, 1998, and net cash flows provided by financing
activities totaled $83.8 million for the three months ended September 30, 1997.
Advances from the FHLB, retail deposits and securities sold under agreements to
repurchase have been the primary sources to balance the Corporation's funding
needs during each of the periods presented. The Corporation experienced net
decreases in retail deposits of $234.1 million and $98.3 million, respectively,
for the three months ended September 30, 1998 and 1997, primarily due to
depositors leaving for higher interest rates. In addition, for the three months
ended September 30, 1998, First Colorado issued 1,400,000 shares of common stock
on August 14, 1998 prior to its merger with the Corporation. Such offering
resulted in the receipt of net proceeds totaling $32.5 million.
The Corporation will continue to grow its franchise through an ongoing program
of selective acquisitions of other financial institutions, as well as through
internal growth. The Corporation has considered and will continue to consider
possible mergers with and acquisitions of other selected financial institutions.
During the three months ended September 30, 1998, the Corporation consummated
the acquisitions of AmerUs and First Colorado, and entered into an agreement to
acquire Midland. See Notes B and D in the Notes to the Consolidated Financial
Statements for additional information on these completed and pending
acquisitions. Such acquisitions present the Corporation with the opportunity to
further expand its community banking retail network in its existing markets; and
to increase its earnings potential by increasing its mortgage, consumer and
commercial loan volumes funded primarily by deposits which generally bear lower
rates of interest than alternative sources of funds. Acquisition candidates are
selected based on the extent to which the candidate can enhance the
Corporation's retail presence in new or existing markets and complement the
Corporation's present retail network.
At September 30, 1998, the Corporation had issued commitments totaling
approximately $719.8 million to fund and purchase loans and mortgage-backed
securities as follows: $397.5 million of single-family fixed-rate mortgage
loans, $57.5 million of single-family adjustable-rate mortgage loans, $193.0
million of unused lines of credit for commercial and consumer use, $21.8 million
of commercial real estate loans and $50.0 million of mortgage-backed securities.
These outstanding loan commitments to extend credit in order to originate loans
or fund commercial and consumer loan lines of credit do not necessarily
represent future cash requirements since many of the commitments may expire
without being drawn. The Corporation expects to fund these commitments, as
necessary, from the sources of funds previously described. In addition, at
September 30, 1998, the Corporation had approximately $416.3 million in
mandatory forward delivery commitments to sell residential mortgage loans, $76.0
million in commitments to sell mortgage-backed securities and $4.0 million in
commitments to sell investment securities.
The maintenance of an appropriate level of liquid resources to meet not only
regulatory requirements but also to provide funding necessary to meet the
Corporation's current business activities and obligations is an integral element
in the management of the Corporation's assets. The Bank is required by federal
regulation to maintain a minimum average daily balance of cash and certain
qualifying liquid investments equal to 4.0% of the aggregate of the prior
month's daily average savings deposits and short-term borrowings. The Bank's
liquidity ratio was 7.68% at September 30, 1998. Liquidity levels will vary
depending upon savings flows, future loan fundings, cash operating needs,
collateral requirements and general prevailing economic conditions. The Bank
does not foresee any difficulty in meeting its liquidity requirements.
RESULTS OF OPERATIONS:
- ----------------------
Net income for the three months ended September 30, 1998, was $15.1 million, or
$.25 per diluted share ($.26 per basic share), compared to net income of $26.0
million, or $.46 per diluted share ($.47 per basic share) for the three months
ended September 30, 1997. The decrease in net income for the three months ended
September 30, 1998, compared to the three months ended September 30, 1997, is
primarily due to net increases of $15.8 million in merger expenses, $3.5 million
in general and administrative expenses and $1.5 million in amortization of
intangible assets. These decreases to net income were partially offset by
increases of $4.9 million in net interest income after provision for loan and
lease losses, a decrease of $1.1 million in provision for income taxes and an
increase of $3.9 million in total other income.
17
<PAGE>
RESULTS OF OPERATIONS (Continued):
- ----------------------------------
Net Interest Income:
- --------------------
Net interest income was $74.6 million for the three months ended September 30,
1998, compared to $67.6 million for the three months ended September 30, 1997,
resulting in an increase of $7.0 million, or 10.3%. The interest rate spread was
2.86% at September 30, 1998, compared to 2.61% at September 30, 1997, an
increase of 25 basis points. During the three months ended September 30, 1998
and 1997, interest rate spreads were 2.71% and 2.58%, respectively, an increase
of 13 basis points; and the yield on interest-earning assets was 2.89%, up six
basis points from 2.83% over the same respective periods of time. The average
balance of interest-earning assets increased $760.9 million for the three months
ended September 30, 1998 compared to the same period ended September 30, 1997,
while the average balance of interest-bearing liabilities increased $837.2
million over the same respective periods of time. The increases in these average
balances are due to the acquisitions of AmerUs on July 31, 1998 and First
National on January 30, 1998, and to internal growth. Net interest income
increased for the three months ended September 30, 1998 compared to 1997 due to
the increase in the average balances for loans and leases (even though average
rates declined) partially offset by increases in the average balances of savings
deposits and FHLB advances. The future trend in interest rate spreads and net
interest income will be dependent upon such factors as the composition and size
of the Corporation's interest-earning assets and interest-bearing liabilities,
the interest rate risk exposure of the Corporation and the maturity and
repricing activity of interest-sensitive assets and liabilities, as influenced
by changes in and levels of both short-term and long-term market interest rates.
The following table presents certain information concerning yields earned on
interest-earning assets and rates paid on interest-bearing liabilities during
and at the end of each of the periods presented:
- ----------------------------------------------------------------------
For the Three
Months Ended At
September 30, September 30,
-------------- -------------
1998 1997 1998 1997
- ----------------------------------------------------------------------
Weighted average yield on:
Loans and leases 8.00% 8.21% 8.04% 8.15%
Mortgage-backed securities 6.16 6.25 6.43 6.76
Investments 6.58 7.09 6.49 6.77
- ----------------------------------------------------------------------
Interest-earning assets 7.69 7.84 7.78 7.84
- ----------------------------------------------------------------------
Weighted average rate paid on:
Savings deposits 3.00 3.05 2.96 3.12
Other time deposits 5.59 5.79 5.62 5.76
Advances from FHLB 5.76 5.98 5.60 5.89
Securities sold under agreements
to repurchase 5.95 6.04 5.81 6.03
Other borrowings 8.90 10.31 7.90 8.71
- ----------------------------------------------------------------------
Interest-bearing liabilities 4.98 5.26 4.92 5.23
- ----------------------------------------------------------------------
Interest rate spread 2.71% 2.58% 2.86% 2.61%
- ----------------------------------------------------------------------
Net annualized yield on
interest-earning assets 2.89% 2.83% 3.02% 2.89%
- ----------------------------------------------------------------------
18
<PAGE>
Net Interest Income (Continued):
- --------------------------------
The table below presents average interest-earning assets and average
interest-bearing liabilities, interest income and interest expense, and average
yields and rates during the three months ended September 30, 1998. The following
table includes nonaccruing loans averaging $52.3 million for the three months
ended September 30, 1998, as interest-earning assets at a yield of zero percent:
- ----------------------------------------------------------------------
Three Months Ended
September 30, 1998
---------------------------------
Annualized
Average Yield/
Balance Interest Rate
- ----------------------------------------------------------------------
Interest-earning assets:
Loans and leases $ 8,412,507 $ 168,470 8.00%
Mortgage-backed securities 1,107,381 17,049 6.16
Investments 811,689 13,342 6.58
- --------------------------------------------------------------------
Interest-earning assets 10,331,577 198,861 7.69
- --------------------------------------------------------------------
Interest-bearing liabilities:
Savings deposits 2,732,680 20,685 3.00
Other time deposits 4,328,722 61,022 5.59
Advances from FHLB 2,351,273 34,109 5.76
Securities sold under
agreements to repurchase 326,414 4,961 5.95
Other borrowings 155,728 3,464 8.90
- --------------------------------------------------------------------
Interest-bearing liabilities 9,894,817 124,241 4.98
- --------------------------------------------------------------------
Net earnings balance $ 436,760
===========
Net interest income $ 74,620
=========
Interest rate spread 2.71%
- --------------------------------------------------------------------
Net annualized yield on
interest-earnings assets 2.89%
- --------------------------------------------------------------------
The net earnings balance (the difference between average interest-bearing
liabilities and average interest-earning assets) decreased by $76.3 million for
the three months ended September 30, 1998, compared to the three months ended
September 30, 1997. Such decrease is primarily due to the acquisition of AmerUs
which was financed by the $40.0 million one year notes, in part by the $45.0
million unsecured term note due July 31, 2003 and by the outlay of cash. In
addition, the average balance of mortgage-backed securities decreased $260.9
million over the same respective periods of time due to principal repayments and
sales.
19
<PAGE>
Net Interest Income (Continued):
- --------------------------------
The table below presents the dollar amount of changes in interest income and
expense for each major component of interest-earning assets and interest-bearing
liabilities, respectively, and the amount of change in each attributable to: (i)
changes in volume (change in volume multiplied by prior year rate), and (ii)
changes in rate (change in rate multiplied by prior year volume). The net change
attributable to change in both volume and rate, which cannot be segregated, has
been allocated proportionately to the change due to volume and the change due to
rate. The following table demonstrates the effect of the increased volume of
interest-earning assets and interest-bearing liabilities, the changes in
interest rates and the effect on the interest rate spreads previously discussed:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Three Months Ended
September 30, 1998 Compared
to September 30, 1997
--------------------------------
Increase (Decrease) Due to
- ------------------------------------------------------------------------------------
Volume Rate Net
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Loans and leases $ 20,158 $ (4,434) $ 15,724
Mortgage-backed securities (4,020) (312) (4,332)
Investments 662 (1,017) (355)
- ------------------------------------------------------------------------------------
Interest income 16,800 (5,763) 11,037
- ------------------------------------------------------------------------------------
Interest expense:
Savings deposits 4,098 141 4,239
Other time deposits (235) (2,118) (2,353)
Advances from FHLB 7,390 (1,046) 6,344
Securities sold under agreements to repurchase (4,278) (135) (4,413)
Other borrowings 732 (489) 243
- ------------------------------------------------------------------------------------
Interest expense 7,707 (3,647) 4,060
- ------------------------------------------------------------------------------------
Effect on net interest income $ 9,093 $ (2,116) $ 6,977
- ------------------------------------------------------------------------------------
</TABLE>
The net improvements due to changes in volume for the three months ended
September 30, 1998, compared to September 30, 1997, reflect the net growth the
Corporation has experienced, both internally and from acquisitions. The net
decreases due to changes in rates between the three month periods ended
September 30, 1998 and 1997, reflect the decreases in rates on all interest
earning assets, partially offset by decreases in rates on interest-bearing
liabilities, primarily other time deposits and FHLB advances.
Provision for Loan and Lease Losses and Real Estate Operations:
- ---------------------------------------------------------------
The Corporation recorded loan and lease loss provisions totaling $3.8 million,
for the three months ended September 30, 1998, compared to $1.7 million for the
three months ended September 30, 1997. The provision for the three months ended
September 30, 1998, is higher by $2.1 million compared to the three months ended
September 30, 1997, primarily due to additional nonrecurring loss reserves
totaling $1.0 million recorded to conform the reserve positions of First
Colorado to the policies of the Corporation and to the reserves recorded
pursuant to the net increase in loans and leases ($1.118 billion increase
comparing balances at September 30, 1998 to September 30, 1997). The allowance
for loan and lease losses is based upon management's continuous evaluation of
the collectibility of outstanding loans and leases, which takes into
consideration such factors as changes in the composition of the loan and lease
portfolios and economic conditions that may affect the borrower's ability to
pay, regular examinations by the Corporation's credit review group of specific
problem loans and leases and of the overall portfolio quality and real estate
market conditions in the Corporation's lending areas.
The Corporation recorded a net loss from real estate operations of $161,000 for
the three months ended September 30, 1998, compared to a net loss of $23,000 for
the three months ended September 30, 1997. Real estate operations reflect
provisions for real estate losses, net real estate operating activity, and gains
and losses on dispositions of real estate.
20
<PAGE>
Provision for Loan and Lease Losses and Real Estate Operations (Continued):
- ---------------------------------------------------------------------------
Nonperforming assets are monitored on a regular basis by the Corporation's
internal credit review and asset workout groups. Nonperforming assets increased
$9.9 million at September 30, 1998, compared to June 30, 1998, resulting from
net increases of $5.9 million in nonperforming loans and leases, $2.0 million in
real estate and $2.0 million in troubled debt restructurings. Nonperforming
assets as of the dates indicated are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
September 30, June 30,
1998 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Nonperforming loans and leases:
Residential real estate loans $48,168 $43,212
Commercial real estate loans 992 1,369
Consumer loans 3,934 2,651
Leases and other loans 2,202 2,134
- --------------------------------------------------------------------------------------
Total 55,296 49,366
- --------------------------------------------------------------------------------------
Real estate:
Commercial 6,891 8,891
Residential 12,892 8,874
- --------------------------------------------------------------------------------------
Total 19,783 17,765
- --------------------------------------------------------------------------------------
Troubled debt restructurings:
Commercial 5,529 3,524
Residential 727 778
- --------------------------------------------------------------------------------------
Total 6,256 4,302
- --------------------------------------------------------------------------------------
Total nonperforming assets $81,335 $71,433
- --------------------------------------------------------------------------------------
Nonperforming loans and leases to total loans and leases .63% .62%
Nonperforming assets to total assets .73% .69%
- --------------------------------------------------------------------------------------
Allowance for loan and lease losses:
Loans and leases (1) $64,617 $56,295
Bulk purchased loans (2) 7,899 8,462
- --------------------------------------------------------------------------------------
Total $72,516 $64,757
- --------------------------------------------------------------------------------------
Allowance for loan and lease losses to total loans and leases .82% .81%
Allowance for loan and lease losses to total nonperforming assets 89.16% 90.65%
- --------------------------------------------------------------------------------------
</TABLE>
(1) Includes $96,000 and $97,000 at September 30, 1998 and June 30, 1998,
respectively, in general allowance for losses established primarily to
cover risks associated with borrowers' delinquencies and defaults on
loans held for sale.
(2) Represents the allowance for loan losses for single-family residential
whole loans purchased between January 1991 and June 30, 1992 (bulk
purchased loans), which had been allocated from the amount of net
discounts associated with the Corporation's purchase of these loans to
provide for the credit risk associated with such bulk purchased loans.
These bulk purchased loans had principal balances of $361.9 million and
$388.5 million, respectively, at September 30, 1998 and June 30, 1998.
These allowances are available only to absorb losses associated with
respective bulk purchased loans and are not available to absorb losses
from other loans.
21
<PAGE>
Provision for Loan and Lease Losses and Real Estate Operations (Continued):
- ---------------------------------------------------------------------------
The ratio of nonperforming loans and leases to total loans and leases was .63%
at September 30, 1998, based on loan and lease balances of $8.796 billion,
compared to .62% at June 30, 1998 based on respective loan and lease balances
approximating $8.020 billion. The ratio of nonperforming assets to total assets
was .73% at September 30, 1998, compared to .69% at June 30, 1998. Ratios for
nonperforming loans and leases to total loans and leases increased compared to
June 30, 1998, due to increases in such nonperforming loans and leases,
primarily delinquent residential real estate loans and consumer loans, partially
offset by the net increase in loans and leases at September 30, 1998, compared
to June 30, 1998. Ratios for nonperforming assets to total assets increased
compared to June 30, 1998 due to increases in total nonperforming assets
partially offset by the net increase in total assets. The percentage of
allowance for loan and lease losses to total loans and leases increased slightly
compared to June 30, 1998, due primarily to the net increase in the loss
allowance partially offset by the net increase in loans and leases at September
30, 1998, compared to June 30, 1998. The allowance for loan and lease losses to
total nonperforming assets remained relatively unchanged at September 30, 1998,
compared to June 30, 1998.
Nonperforming loans and leases at September 30, 1998, increased by $5.9 million
compared to June 30, 1998, primarily due to net increases totaling $5.0 million
and $1.3 million, respectively, for delinquent residential real estate loans and
delinquent consumer loans. These increases were partially offset by a net
decrease of $377,000 in delinquent commercial real estate loans. The net
increase in real estate of $2.0 million at September 30, 1998, compared to June
30, 1998, is due primarily to the net increase in residential real estate
properties partially offset by the net dispositions of commercial real estate.
The net increase of $2.0 million in troubled debt restructurings at September
30, 1998, compared to June 30, 1998, is primarily attributable to a net increase
in commercial real estate loans of $2.0 million with the net decreases due
primarily to loan principal repayments.
Loan Servicing Fees:
- --------------------
Fees from loans serviced for other institutions totaled $8.4 million and $8.9
million, respectively, for the three months ended September 30, 1998 and 1997.
The decrease comparing the respective periods is primarily due to a net decrease
in loans serviced for other institutions comparing fiscal the year 1998 period
to the fiscal year 1997 period. At September 30, 1998 and 1997, the
Corporation's mortgage servicing portfolio approximated $7.321 billion and
$7.411 blion, respectively.
The value of the Corporation's loan servicing portfolio increases as mortgage
interest rates rise and loan prepayments decrease. It is expected that income
generated from the Corporation's loan servicing portfolio will increase in such
an environment. However, this positive effect on the Corporation's income is
offset, in part, by a decrease in additional servicing fee income attributable
to new loan originations, which historically decrease in periods of higher, or
increasing, mortgage interest rates, and by an increase in expenses from loan
production costs since a portion of such costs cannot be deferred due to lower
loan originations. Conversely, the value of the Corporation's loan servicing
portfolio will decrease as mortgage interest rates decline.
Retail Fees and Charges:
- ------------------------
Retail fees and charges totaled $9.4 million and $7.1 million, respectively, for
the three months ended September 30, 1998 and 1997. The net increase results
primarily from increases in certain checking account fees and related ancillary
fees for overdraft and insufficient funds charges attributable to a significant
increase in the number of retail checking accounts at September 30, 1998,
compared to September 30, 1997. The AmerUs and First National acquistions
contributed over $1.0 million in retail fees and charges for the three months
ended September 30, 1998.
Gain on Sales of Loans:
- -----------------------
The Corporation sold loans to third parties through its mortgage banking
operations resulting in net pre-tax gains of $1.9 million on loans sold totaling
$513.3 million for the three months ended September 30, 1998, compared to net
pre-tax gains of $579,000 on loans sold totaling $220.7 million for the three
months ended September 30, 1997. Mortgage loans are generally sold in the
secondary market with loan servicing retained and without recourse to the
Corporation. The net gains are attributable to the relatively stable interest
rate environments over the respective periods.
22
<PAGE>
Gain on Sales of Securities:
- ----------------------------
The Corporation sold securities available for sale resulting in net pre-tax
gains of $1.7 million for the three months ended September 30, 1998, on sales
totaling $78.5 million, compared to $23,000 for the three months ended September
30, 1997 on sales totaling $7.9 million.
Other Operating Income:
- -----------------------
Other operating income totaled $5.7 million for the three months ended September
30, 1998, compared to $6.4 million for the three months ended September 30,
1997. The major components of other operating income are brokerage commissions,
credit life and disability commissions, insurance commissions and leasing
operations. Such amounts were relatively stable comparing both periods. The net
decrease for the three months ended September 30, 1998, compared to 1997 is
primarily attributable to nonrecurring items recorded in the September 30, 1997
first quarter: $478,000 from excess trustee fees on debt payoff, $402,000 from
bankruptcy settlements and a net pre-tax gain of $355,000 from the sale of a
portion of loan servicing rights.
General and Administrative Expenses:
- ------------------------------------
General and administrative expenses totaled $65.9 million for the three months
ended September 30, 1998, compared to $46.7 million for the three months ended
September 30,1997.
The net increase of $19.2 million for the three months ended September 30, 1998,
compared to the three months ended September 30, 1997, is primarily due to net
increases in merger expenses of $15.8 million, occupancy and equipment of $1.6
million, compensation and benefits of $1.3 million and advertising of $486,000.
Such net increase comparing quarters is primarily due to the current fiscal year
merger expenses totaling $16.0 million primarily associated with the First
Colorado acquisition compared to $187,000 initially recorded in the first
quarter ended September 30, 1997 for the fiscal year 1998 acquisitions. The
other increases in general and administrative expenses are due to the AmerUs and
First National acquisitions which were accounted for under the purchase method
of accounting. These acquisitions result in increased personnel wages and
benefits and costs of operating additional branches, as well as other expenses
also incurred on an indirect basis attributable to these acquisitions.
23
<PAGE>
Amortization of Intangible Assets:
- ----------------------------------
Amortization of intangible assets totaled $3.3 million for the three months
ended September 30, 1998, compared to $1.7 million for the three months ended
September 30, 1997. The net increase for the three months ended September 30,
1998 compared to 1997 is due to the AmerUs acquisition and the First National
acquisition both of which were accounted for as purchases.
Provision for Income Taxes:
- ---------------------------
For the three months ended September 30, 1998, the provision for income taxes
totaled $13.4 million compared to $14.6 million for the three months ended
September 30, 1997. The effective income tax rates for the three months ended
September 30, 1998 and 1997, were 47.0% and 36.0%, respectively. The effective
tax rates for both periods vary from the applicable statutory rates primarily
due to the nondeductibility of amortization of intangible assets in relation to
the level of taxable income for the respective periods and to the
nondeductibility of certain merger-related expenses and other nonrecurring
charges.
Year 2000:
- ----------
The year 2000 poses an important business issue regarding how existing
application software programs and operating systems can accommodate this date
value. Many computer programs that can only distinguish the final two digits of
the year entered are expected to read entries for the year 2000 as the year
1900. Like most financial service providers, the Corporation may be
significantly affected by the Year 2000 issue due to the nature of financial
information. Software, hardware and equipment both within and outside the
Corporation's direct control and with whom the Corporation electronically or
operationally interfaces are likely to be affected. If computer systems are not
adequately changed to identify the Year 2000, many computer applications could
fail or create erroneous results. As a result, many calculations that rely on
the data field information, such as interest, payment or due dates and other
operating functions, may generate results that could be significantly misstated,
and the Corporation could experience a temporary inability to process
transactions and engage in normal business activities.
All of the significant computer programs of the Corporation that could be
affected by this issue are provided by major third party vendors. The
Corporation is in the process of replacing/upgrading most of its computer
systems and programs, as well as most equipment, in order to provide
cost-effective and efficient delivery of services to its customers, information
to management, and to provide additional capacity for processing information and
transactions due to acquisitions. The total cost of the Year 2000 project is
estimated to approximate $14.0 million which will be funded through cash flows
from operations. Most of the total project cost is expected to be capitalized
since it involves the purchase of computer systems, programs and equipment. In
addition, during fiscal year 1998 the Corporation expensed $4.3 million due to
accelerated amortization of certain computer systems and software necessitated
by Year 2000 compliance and the related planned systems conversions. The
adjusted carrying amount of these computer systems and software will continue to
be depreciated until their disposal at the date of conversion.
The third party vendors have advised the Corporation that all such computer
systems and programs either are or shortly will be Year 2000 compliant. The
Corporation tests all such systems before integration into its computer
environment. The Corporation has scheduled certain operations that were
converted in October 1998. This conversion allowed the corporation to resolve
application and conversion problems that arose and to do further testing to
enhance software programs and future conversions. Final conversions are
scheduled for completion early in calendar year 1999.
The Corporation has also initiated formal communications with non-mainframe
software and hardware vendors to determine the extent to which the Corporation's
interface systems may be vulnerable to those third parties' failure to remediate
their own Year 2000 issues. If the third party vendors are unable to resolve
Year 2000 issues in time, the conversion is delayed significantly or major
problems arise as a result of the conversion, the Corporation would likely
experience significant data processing delays, mistakes or failures. Theses
delays, mistakes or failures could have significant adverse impact on the
financial condition and results of operations of the Corporation. In addition,
there can be no assurance that the systems of other companies on which the
Corporation's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Corporation's systems, would not have a material adverse effect on the
Corporation. The Corporation has developed a Year 2000 contingency plan that
addresses, among other issues, critical operations and potential failures
thereof, and strategies for business continuation such as contracting with
alternative vendors and re-deployment of internal staff as needed in critical
areas. The Corporation is also evaluating non-technical systems that rely on
imbedded technology in their critical processes so that such systems will
continue to operate without interruption.
24
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
On August 14, 1998, the Corporation consummated its acquisition of
First Colorado which was accounted for as a pooling of interests. One
of the requirements of the transaction with First Colorado was the
issuance of 1,400,000 shares of First Colorado common stock immediately
prior to the consummation of the merger. Such requirement was necessary
to cure the taint on the treasury stock of First Colorado so this
transaction could be accounted for as a pooling of interests. These
shares offered directly by First Colorado (and placed by Merrill Lynch
& Co. and Fox-Pitt, Kelton Inc.) resulted in gross cash proceeds (prior
to any transaction costs) of $33,425,000 less the placement agent's
commission of $919,000, or net proceeds totaling $32,506,000.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
A Special Meeting of Stockholders was called on July 3, 1998, for
shareholders of record at May 14, 1998. The purpose of the meeting was
as follows:
(1) Approval of the First Colorado merger. In addition, an amendment to
the Corporation's Articles of Incorporation to increase the number
of shares authorized from 50,000,000 to 70,000,000 was required to
consummate the acquisition of First Colorado.
(2) Approval of an amendment to the Corporation's Articles of
Incorporation to further increase the number of authorized shares
from 70,000,000 to 120,000,000 shares. In the event the First
Colorado merger was not approved, this amendment would increase the
authorized shares from 50,000,000 to 100,000,000 shares. This
increase in the total number of authorized shares would allow the
Corporation to meet its future needs and provide greater
flexibility in responding to advantageous business opportunities
including possible future acquisition opportunities.
(3) Approval of an amendment to the Corporation's 1996 Stock Option and
Incentive Plan to increase the number of shares available for grant
by 2,400,000. The purpose for this amendment was to encourage stock
ownership and to attract, retain and motivate the best available
personnel and provide incentives for such individuals to promote
the success of the Corporation.
At the Special Meeting of Stockholders on July 3, 1998, the three
proposals were approved. The proposals approved were (i) the First
Colorado transaction and an amendment to the Corporation's Articles of
Incorporation to increase the number of authorized shares of common
stock from 50,000,000 to 70,000,000 shares, (ii) an amendment to
further increase the number of authorized shares from 70,000,000 to
120,000,000 shares and (iii) an amendment to the Corporation's 1996
Stock Option and Incentive Plan to increase the number of shares
available for grant by 2,400,000.
For the proposals to be approved, Proposal 1 required a minimum two-
thirds majority of the Corporation's common stock outstanding and
Proposals 2 and 3 required a minimun of 50% of the votes cost. Voting
results were as follows (based on 40,314,556 shares on record date
entitled to vote):
Proposal 1 - Approval of First Colorado Merger and Increase in
---------------------------------------------------------------
Authorized Shares
-----------------
Votes For Votes Against Abstentions or Broker Nonvotes
--------- ------------- ------------------------------
30,401,334 98,212 3,796,202
Proposal 2 - Approval to Further Increase Authorized Shares
-----------------------------------------------------------
Votes For Votes Against Abstentions or Broker Nonvotes
--------- ------------- ------------------------------
31,074,118 1,064,864 2,156,766
Proposal 3 - Approval to Amend 1996 Stock Option and Incentive Plan
-------------------------------------------------------------------
Votes For Votes Against Abstentions or Broker Nonvotes
--------- ------------- ------------------------------
23,589,479 6,784,607 3,921,662
* The Form 8-K dated July 3, 1998 to announce the results on the aforementioned
three proposals voted upon at the Special Meeting is incorporated herein by
reference.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a). Exhibits:
Exhibit 4.2 Shareholder Rights Agreement by and between
Registrant and Harris Trust and Savings Bank, as
amended.
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedules
(b). Reports on Form 8-K:
The Corporation filed a Current Report on Form 8-K dated July 3,
1998 to announce the results on the three proposals voted upon at
the Special Meeting held July 3, 1998. See Item 4 "Submission of
Matters to a Vote of Security Holders" for additional information.
The Corporation filed a Current Report on Form 8-K dated July 31,
1998, reporting that the Corporation had consummated the AmerUs
Bank acquisition. See Note B for additional information concerning
this acquisition.
The Corporation filed a Current Report on Form 8-K dated August
10, 1998 reporting that the Corporation and First Colorado
Bancorp, Inc. agreed to revise the exchange ratio of common stock
from .9677 to .9847. The Corporation also filed a Current Report
on Form 8-K dated August 14, 1998, reporting that the Corporation
had consummated the First Colorado acquisition. See Note B for
additional information concerning this acquisition.
Effective August 14, 1998 the Corporation entered into a
definitive agreement to acquire Midland First Financial
Corporation, parent company of Midland Bank located in Missouri. A
Current Report on Form 8-K was filed on August 19, 1998 by the
Corporation announcing such agreement. See Note D for additional
information regarding this pending acquisition.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements 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.
COMMERCIAL FEDERAL CORPORATION
----------------------------------------
(Registrant)
Date: November 12, 1998 /s/ James A. Laphen
----------------------------------------
James A. Laphen, President, Chief
Operating Officer and Chief
Financial Officer (Duly Authorized
and Principal Financial Officer)
Date: November 12, 1998 /s/ Gary L. Matter
----------------------------------------
Gary L. Matter, Senior Vice President,
Controller and Secretary
(Principal Accounting Officer)
27
<PAGE>
Exhibit 4.2
RIGHTS AGREEMENT
dated as of December 19, 1988
by and between
COMMERCIAL FEDERAL CORPORATION
and
MANUFACTURERS HANOVER TRUST COMPANY
as Rights Agent
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
------- ----
1 Certain Definitions......................................... 1
2 Appointment of Rights Agent................................. 9
3 Issuance of Right Certificates.............................. 10
4 Form of Right Certificates.................................. 11
5 Countersignature and Registration........................... 12
6 Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates.......................................... 12
7 Exercise of Primary Rights.................................. 13
8 Exercise of Secondary Rights................................ 14
9 Mechanics of Exercise....................................... 15
10 Cancellation and Destruction of Right Certificates.......... 16
11 Reservation and Availability of Capital Shares.............. 17
12 Securities Record Date...................................... 17
13 Adjustment of Number of Shares Issuable Upon Exercise
of Primary Rights........................................... 18
14 Adjustment of Secondary Right Exercise Price, Number
of Shares Issuable Upon Exercise of Secondary Rights
or Number of Secondary Rights............................... 19
15 Certificate of Adjusted Secondary Right Exercise Price
or Number of Shares Issuable Upon Exercise of Primary
Rights or Secondary Rights.................................. 25
16 Consolidation, Merger, or Sale or Transfer of Assets
or Earning Power............................................ 26
17 Fractional Rights and Fractional Shares..................... 28
18 Rights of Action............................................ 29
19 Agreement of Right Holders.................................. 29
20 Right Holder and Right Certificate Holder Not Deemed
a Stockholder............................................... 30
21 Concerning the Rights Agent................................. 30
22 Merger or Consolidation or Change of Name of Rights
Agent....................................................... 30
23 Duties of Rights Agent...................................... 31
24 Change of Rights Agent...................................... 33
25 Issuance of New Secondary Right Certificates................ 34
26 Redemption of Rights........................................ 34
27 Certain Cash Tender Offers.................................. 35
28 Notice of Certain Events.................................... 37
29 Notices..................................................... 37
30 Supplements and Amendments.................................. 38
31 Certain Covenants........................................... 39
32 Successors.................................................. 39
33 Benefits of this Agreement.................................. 39
34 Severability................................................ 39
35 Governing Law............................................... 40
36 Counterparts................................................ 40
37 Descriptive Headings........................................ 40
<PAGE>
TABLE OF EXHIBITS
-----------------
Exhibit A -- Form of Certificate of Designations
Exhibit B -- Form of Primary Right Certificate
Exhibit C -- Form of Secondary Right Certificate
Exhibit D -- Form of Summary of the Rights
<PAGE>
TABLE OF DEFINED TERMS
----------------------
Term Defined Page Section
- ------------ ---- -------
Adjustment Shares 14(a)(ii)
Affiliate 1(a)
Agreement Introduction
Associate 1(a)
Beneficially Own 1(b)
Beneficial Owner 1(b)
Business Day 1(c)
Cash Tender Offer Proposal 1(d)
Close of Business 1(e)
Closing Price 1(f)
Common Share 1(g)
Common Share Equivalent 14(a)(iii)
Company (Commercial Federal Corporation) Introduction
Company (following a Section 16(a) Event) 16(a)(iii)
Current Market Price 1(h)
Disclosure Statement 1(i)
Distribution Date 3(a)
Exchange Act 1(k)
Exercise Price 1(l)
Expiration Date 1(m)
Fair Offer 27(b)
Fairness Opinion 27(a)
Independent Director 1(o)
NASDAQ 1(f)
Person 1(p)
Preferred Share 1(q)
Preferred Share Equivalent 14(b)
Primary Right Recital
Primary Right Distribution Date 3(a)
Primary Right Exercise Price 7(c)
Primary Right Expiration Date 1(t)
Primary Right Redemption Date 1(u)
Primary Right Redemption Price 26(a)
Proposal Date 27(a)
Prospective Offeror 1(d)
Record Date Recital
Redemption Date 1(x)
Redemption Price 26(a)
Resolution 27(a)
Right Introduction
Rights Agent Introduction
Secondary Right Recital
Secondary Right Distribution Date 3(a)
Secondary Right Exercise Price 8(c)
Secondary Right Expiration Date 1(bb)
Secondary Right Redemption Date 1(cc)
Secondary Right Redemption Price 26(a)
Section 14(a)(ii) Event 14(a)(ii)
<PAGE>
TABLE OF DEFINED TERMS
----------------------
Term Defined Page Section
- ------------ ---- -------
Section 16(a) Event 16(a)
Securities Act 1(gg)
Special Meeting 27(a)
Subsidiary 1(hh)
Surviving Person 16(a)
Trading Day 1(ii)
Undertaking 1(jj)
Voting Share 1(kk)
15% Acquisition Date 1(ll)
15% Person 1(mm)
25% Acquisition Date 1(nn)
25% Person 1(oo)
<PAGE>
RIGHTS AGREEMENT
This Rights Agreement ("Agreement") is made and entered into as of the 19th
day of December, 1988 by and between Commercial Federal Corporation, a Nebraska
corporation (the "Company"), and Manufacturers Hanover Trust Company, a New York
corporation (the "Rights Agent").
WHEREAS, the Board of Directors of the Company has authorized and declared a
dividend of stock purchase rights (the "Rights") consisting of one common stock
purchase right (a "Primary Right") and one preferred stock purchase right (a
"Secondary Right") in respect of each Common Share (as hereinafter defined) of
the Company outstanding on December 30, 1988 (the "Record Date");
WHEREAS, the Board of Directors of the Company has further authorized and
directed the issuance of (A) one Primary Right with respect to each Common Share
that shall be issued by the Company at any time after the Record Date and prior
to the earliest of the Primary Right Expiration Date (as such terms are
hereinafter defined), and (B) one Secondary Right with respect to each Common
Share that shall be issued by the Company at any time after the Record Date and
prior to the earliest of the Secondary Right Distribution Date, the Secondary
Right Redemption Date or the Secondary Right Expiration Date (as such terms are
hereinafter defined); and
WHEREAS, in connection with the matters referred to herein, the Company
desires to appoint the Rights Agent to act on behalf of the Company for the
benefit of the holders of Rights, and the Rights Agent is willing so to act;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements set forth herein, and for the benefit of the holders of Primary
Rights and the holders of Secondary Rights, the parties hereto hereby agree as
follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meaning indicated:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act, as in
effect on the date hereof.
(b) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "Beneficially Own":
(i) any securities which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly, for
purposes of Section 13(d) of the Exchange Act or Rule 13d-3 promulgated
thereunder (or any comparable or successor law or regulation), in each
case as in effect on the date hereof;
(ii) any securities which such Person or any of such Person's
Affiliates or Associates has the right to acquire (whether such right is
exercisable immediately, or only after the passage of time,
-1-
<PAGE>
compliance with regulatory requirements, the fulfillment of a condition,
or otherwise) pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, exchange rights, rights (other
than the Rights), warrants or options, or otherwise, provided that a
Person shall not under this clause (b)(ii) be deemed the Beneficial Owner
of, or to Beneficially Own, securities tendered pursuant to a tender offer
or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange;
(iii) any securities which such Person or any such Person's
Affiliates or Associates has the right to vote, alone or in concert with
others, pursuant to any agreement, arrangement or understanding, provided
that a Person shall not under this clause (b)(iii) be deemed the
Beneficial Owner of, or to Beneficially Own, any security if the
agreement, arrangement or understanding to vote such security (A) arises
solely from a revocable proxy given to such Person or any of such Person's
Affiliates or Associates in response to a public proxy solicitation made
pursuant to and in accordance with the applicable rules and regulations of
the Exchange Act, and (B) is not also then reportable on Schedule 13D
under the Exchange Act (or any comparable or successor report);
(iv) any securities which are owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (other than voting pursuant to a revocable
proxy as described in the proviso to Section 1(b)(iii) hereof) or
disposing of any securities of the Company; and
(v) on any day on or after a Distribution Date, all Rights that
prior to such date were represented by certificates for Common Share that
such Person owns on such day.
(c) "Business Day" shall mean any day other than a Saturday, a Sunday or
a day on which banking institutions in the States of New York or Nebraska are
authorized or obligated by law or executive order to close.
(d) "Cash Tender Offer Proposal" shall mean a written proposal delivered
to the Company by any Person (a "Prospective Offeror"), which proposal:
(i) is for a tender offer for any and all of the outstanding Voting
Shares held by any Person other than such Prospective Offeror or its
Affiliates or Associates for cash at the same price;
(ii) states that such Prospective Offeror has obtained firm written
financing commitments from recognized institutional financing sources,
and/or has on hand cash or cash equivalents, for the full amount of all
financing necessary to consummate the acquisition of Voting Shares
described in such Cash Tender Offer Proposal and is accompanied by
reasonable evidence of the foregoing; and
-2-
<PAGE>
(iii) contains the written agreement of the Prospective Offeror to
pay (or share with any other Prospective Offeror) the Company's costs of
any Special Meeting (as such term if defined in Section 27 hereof), other
than the Company's costs of preparing and mailing proxy material for its
own solicitation.
(e) "Close of Business" on any given date shall mean 5:00 p.m., Omaha
time, on such date; provided, however, that if such date is not a Business
Day, it shall mean 5:00 p.m., Omaha time, on the next succeeding Business Day.
(f) "Closing Price" of a stock or other security on any day shall be the
last sale price, regular way, per share of such stock or unit of such other
security on such day or, in case no such sale takes place on such day, the
average of the closing bid and asked price, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if such stock or other security is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such stock or other
security is listed or admitted to trading or, if such stock or other security
is not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other system then in use or, if on any such date such stock or other
security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in such stock or other security selected by the Board of Directors of
the Company.
(g) "Common Share" shall mean one share of Common Stock, par value $0.01
per share, of the Company, unless used with reference to a Person other than
the Company, in which case it shall mean one share of the class of common
stock of such Person having the greatest voting power per share or, if such
Person is a Subsidiary of another Person, one Common Share of the Person which
ultimately controls such first-mentioned Person.
(h) "Current Market Price" per share of a stock or unit of any other
security on any date shall mean the average of the daily Closing Prices of
such stock or other security for the 30 consecutive Trading Days through and
including the Trading Day immediately preceding the date in question;
provided, however, that if the Company shall determine that any event shall
have caused the Closing Price on any Trading Day during such 30-day period not
to be fully comparable with the Closing Price on the date in question (or, if
no Closing Price is available on the date in question, on the Trading Day
immediately preceding the date in question), then each such noncomparable
Closing Price so used shall be appropriately adjusted in order to make the
Closing Price on each Trading Day during the period used for the determination
of the Current Market Price fully comparable with the Closing Price on such
date in question (or, if applicable, the immediately preceding Trading Day);
and provided further, however, that if
-3-
<PAGE>
such stock or other security is not publicly held or so listed or traded,
"Current Market Price" per share of such stock or unit of such other security
shall mean the fair value per share of such stock or unit of such other
security as determined in good faith by the Board of Directors of the Company
based upon such appraisals or valuation reports of such independent experts as
the Board of Directors shall in good faith determine appropriate, which
determination shall be described in a statement filed by the Company with the
Rights Agent.
(i) "Disclosure Statement" shall mean a written statement of any Person,
in form reasonably satisfactory to the Company, containing, in reasonable
detail, a statement of such Person's plans and intentions concerning the
Company and its securities, including, without limitation, the following
information:
(i) the total number of Voting Shares of which such Person intends
to acquire the Beneficial Ownership during the three-year period
commencing on the date thereof;
(ii) the maximum aggregate value of the consideration to be paid for
such acquisition of Voting Shares;
(iii) a description of the method or methods by which such
acquisition of Voting Shares will be effected;
(iv) the source or sources of financing for such acquisition of
Voting Shares, which must be cash or cash equivalents on hand (accompanied
by reasonable evidence thereof) or third-party financing pursuant to firm
written financing commitments from recognized financing sources (with a
copy of such commitments attached);
(v) the name and address of any Person to be nominated during such
three-year period by or on behalf of such Person as a director of the
Company, plus such information regarding such person as would be required
to be included in any proxy solicitation for the election of such person
in accordance with Regulation 14A under the Exchange Act; and
(vi) a description of each proposal or other action to be submitted
to the stockholders, or the Board of Directors or the management of the
Company, during such three-year period.
If such Person's plans or intentions are contingent, or may vary depending upon
the existence of facts or events beyond such Person's control, the Disclosure
Statement shall set forth, in reasonable detail, the nature of such
contingencies and the manner in which such facts or events may influence such
Person's plans or intentions. A listing of alternative courses of action which
may be pursued shall not constitute an adequate disclosure for the purposes of a
Disclosure Statement unless the circumstances in which each such alternative
would be relevant may reasonably be discerned from the disclosures provided.
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(j) "Distribution Date" shall have the meaning ascribed to it in Section
3 hereof.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Exercise Price" shall mean the price to be paid by the holder of a
Primary Right or a Secondary Right upon the exercise thereof, which price is
set forth in Section 7(c) hereof with respect to Primary Rights and Section
8(c) with respect to Secondary Rights.
(m) "Expiration Date" shall mean the Primary Right Expiration Date and
the Secondary Right Expiration Date.
(n) "Fair Offer" shall have the meaning ascribed to it in Section 27(b)
hereof.
(o) "Independent Director" shall mean a director of the Company who is
not (i) an officer or employee of the Company or its Subsidiaries, or a
relative of such officer or employee, or (ii) a 15% Person, a 25% Person, an
Affiliate or Associate of such 15% Person or 25% Person, an officer, director
or employee of any of the foregoing, or a relative or nominee of any of the
foregoing. For purposes of this subsection (o), a director shall be deemed to
be a "nominee" of a Person referred to in clause (ii) above if such director
was elected to the Board of Directors of the Company by a vote of stockholders
in which such director failed to receive the affirmative majority of the votes
cast by Persons other than such Person, or if such director was appointed by
the directors to fill a vacancy on the Board of Directors without the approval
of a majority of the Independent Directors then in office.
(p) "Person" shall mean any individual, firm, partnership, corporation,
association, group (as such term is used in Rule 13d-5 promulgated under the
Exchange Act) or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(q) "Preferred Share" shall mean one share of Series A Junior
Participating Cumulative Preferred Stock, $0.01 par value per share, of the
Company, which shall have the rights and preferences set forth in the form of
Certificate of Designations attached hereto as Exhibit A.
(r) "Primary Right Distribution Date" shall have the meaning ascribed to
it in Section 3(a) hereof.
(s) "Primary Right Exercise Price" shall have the meaning ascribed to it
in Section 7(c) hereof.
(t) "Primary Right Expiration Date" shall mean the earlier of (i)
December 19, 1998 or (ii) 60 days after the date upon which the Primary Rights
first become exercisable.
(u) "Primary Right Redemption Date" shall mean the date upon which the
Primary Rights are redeemed pursuant to Section 26 or 27 hereof.
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(v) "Primary Right Redemption Price" shall have the meaning ascribed to
it in Section 26(a) hereof.
(w) "Record Date" shall have the meaning ascribed to it in the recitals
hereto.
(x) "Redemption Date" shall mean the date upon which the Primary rights
and/or Secondary Rights are redeemed pursuant to Section 26 or 27 hereof.
(y) "Redemption Price" shall have the meaning ascribed to it in Section
26(a) hereof.
(z) "Secondary Right Distribution Date" shall have the meaning ascribed
to it in Section 3(a) hereof.
(aa) "Secondary Right Exercise Price" shall have the meaning ascribed to
it in Section 8(c) hereof.
(bb) "Secondary Right Expiration Date" shall mean December 19, 1998.
(cc) "Secondary Right Redemption Date" shall mean the date upon which the
Secondary Rights are redeemed pursuant to Section 26 or 27 hereof.
(dd) "Secondary Right Redemption Price" shall have the meaning ascribed
to it in Section 26(a) hereof.
(ee) "Section 14(a)(ii) Event" shall have the meaning ascribed to it in
Section 14(a)(ii) hereof.
(ff) "Section 16(a) Event" shall have the meaning ascribed to it in
Section 16(a) hereof.
(gg) "Securities Act" shall mean the Securities Act of 1933, as amended.
(hh) "Subsidiary" of any Person shall mean any corporation or other
entity of which equity securities or equity interests representing a majority
of the voting power are owned, directly or indirectly, or which is effectively
controlled, by such Person.
(ii) "Trading Day" shall mean, as to any stock or other security, a day
on which the principal national securities exchange or NASDAQ on which such
stock or other security is listed, quoted or admitted to trading is open for
the transaction of business or, if such stock or other security is not listed,
quoted or admitted to trading on any national securities exchange or NASDAQ, a
Business Day.
(jj) "Undertaking" shall mean a binding and enforceable written
undertaking to the Company of any Person, in form reasonably satisfactory to
the Company, containing the following provisions and covenants:
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(i) not to take any action to increase the number of Voting Shares
Beneficially Owned by such Person to 25% or more of the total Voting Shares of
the Company outstanding, except pursuant to a Fair Offer as described in
Section 27 hereof or in a transaction approved by a majority, but not less
than five, of the Independent Directors;
(ii) for a period of three years, not to take any action, including such
action as would increase the number of Voting Shares Beneficially Owned by
such Person, which would cause any statement made in the Disclosure Statement
of such Person to become untrue, cause there to be a material omission
therein, or otherwise be inconsistent with the information therein, provided
that such Person may subsequently execute and deliver to the Company a
supplemental Disclosure Statement which amends the information provided
pursuant to Section 1(i)(ii) and/or (iii) of this Agreement, in which case
(aa) such Person shall not, during the period commencing on the date of
delivery of such supplemental Disclosure Statement and ending on the twentieth
Business Day thereafter, take any action which would increase the number of
Voting Shares that are Beneficially Owned by such Person, and (bb) such
Undertaking shall apply to such supplemental Disclosure Statement to the same
extent that it applies to the original Disclosure Statement;
(iii) for a period of three years, not to nominate or take any action to
elect or cause to be elected or appointed to the Board of Directors of the
Company more than one person who is not first approved by a majority, but not
less than five, of the Independent Directors;
(iv) for a period of three years, not to propose, encourage or participate
in any transaction involving the Company and such Person or any of such
Person's Affiliates or Associates which, if such Person or such Affiliate or
Associate were a 25% Person at such time, would constitute a Section 14(a)(ii)
Event or a Section 16(a) Event, unless such transaction is approved in advance
by a majority, but not less than five, of the Independent Directors and, if
stockholder approval or ratification is required for the consummation of such
transaction, by the holders of a majority of the Voting Shares that are not
Beneficially Owned by such Person or such Affiliate or Associate, as the case
may be;
(v) for a period of three years, not to sell or otherwise transfer in any
manner, directly or indirectly, any Voting Shares or interest therein, or
enter into any agreement or undertaking with respect to the foregoing, except:
(1) sales of Voting Shares in a firm commitment underwritten public
offering registered under the Securities Act, so long as best efforts are
used, and the managing underwriter is instructed to use its best efforts,
to achieve a broad public distribution of the Voting Shares, with the
intention that no Person, together with its Affiliates or Associates, will
Beneficially Own in excess of 1% of a class of Voting Shares then
outstanding;
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<PAGE>
(2) sales of Voting Shares in any "brokers' transactions" (within in
the meaning of Rule 144 under the Securities Act) which do not exceed an
aggregate of 1% of a class of Voting Shares then outstanding in any
consecutive three-month period;
(3) sales of Voting Shares in any tender offer or exchange offer
either (A) by the Company or its Affiliates or (B) so long as not opposed
by a majority of the Independent Directors of the Company, by any third
party;
(4) conversions; exchange or exercise of Voting Shares in accordance
with their terms;
(5) sales or transfers of Voting Shares in a merger or consolidation
of the Company, or pursuant to a plan of liquidation of the Company; and
(vi) that in the event of a breach of any provision of the Undertaking,
the Company shall be entitled (in addition to any other remedy which may be
available to it) to injunctive relief.
(kk) "Voting Share" shall mean (i) a Common Share of the Company and (ii)
any other share of capital stock of the Company entitled to vote generally in
the election of directors or entitled to vote together with the Common Shares
in respect to any merger, consolidation, sale of all or substantially all of
the Company's assets, liquidation, dissolution or winding up.
(ll) "15% Acquisition Date" shall mean the first date, after the date
hereof, on which there is a public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) by the Company or a 15% Person that a
Person has become a 15% Person.
(mm) "15% Person" shall mean any Person which, together with all
Affiliates and Associates of such Person, Beneficially Owns 15% or more of the
Voting Shares of the Company then outstanding; provided, however, that the
term, "15% Person," shall not include: (i) the Company, any wholly-owned
Subsidiary of the Company, any employee benefit plan of the Company or of a
Subsidiary of the Company or any Person holding Voting Shares for or pursuant
to the terms of any such employee benefit plan; (ii) any Person if, at least
20 Business Days prior to the date upon which such Person would otherwise
become a 15% Person, such Person delivered to the Company a fully completed
and executed Disclosure Statement and a fully completed and executed
Undertaking; (iii) any Person which would not otherwise by a 15% Person but
for the acquisition of Voting Shares pursuant to a Fair Offer; (iv) Equitable
of Iowa Companies (unless Equitable of Iowa Companies' ownership position in
the Company subsequent to the date hereof is reduced to less than 15% of the
Voting Shares through sale of the Voting Shares (and not as a result of
dilution caused by issuance of additional Voting Shares by the Company) in
which event Equitable of Iowa Companies shall thereafter be eligible to be
included as a "15% Person"); and (v) PasoTex Corporation (provided that
PasoTex
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<PAGE>
Corporation's 15% or more ownership position results solely from the
acquisition of Voting Shares pursuant to the terms of an Exchange Agreement,
dated as of April 27, 1987, by and between the Company and PasoTex
Corporation). In calculating the percentage of the outstanding Voting Shares
that are Beneficially Owned by a Person for purposes of this subsection (mm),
Voting Shares which are Beneficially Owned by such Person shall be deemed
outstanding, and Voting Shares which are not Beneficially Owned by such Person
and which are subject to issuance upon the exercise or conversion of
outstanding conversion rights, rights (other than Primary Rights or Secondary
Rights), warrants or options shall not be deemed outstanding. Any
determination made by the Independent Directors as to whether any Person is or
is not a 15% Person shall be conclusive and binding upon the Rights Agent and
all holder of Rights.
(nn) "25% Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by
the Company or a 25% Person that a Person has become a 25% Person.
(oo) "25% Person" shall mean any Person which, together with all
Affiliates and Associates of such Person, Beneficially Owns 25% or more of the
Voting Shares of the Company then outstanding; provided, however, that the
term, "25% Person," shall not include: (i) the Company, any wholly-owned
Subsidiary of the Company, any employee benefit plan of the Company or of a
Subsidiary of the Company, or any Person holding Voting Shares for or pursuant
to the terms of any such employee benefit plan; (ii) any Person which would
not otherwise be a 25% Person but for the acquisition of Voting Shares
pursuant to a Fair Offer; and (iii) any Person which is not also a 15% Person
and which, together with all Affiliates and Associates of such Person,
Beneficially Owns less than 25% of the Voting Shares of the Company then
outstanding. In calculating the percentage of the outstanding Voting Shares
that are Beneficially Owned by a Person for purposes of this subsection (oo),
Voting Shares which are Beneficially Owned by such Person shall be deemed
outstanding, and Voting Shares which are not Beneficially Owned by such Person
and which are subject to issuance upon the exercise or conversion of
outstanding conversion rights, rights (other than Primary Rights or Secondary
Rights), warrants or options shall not be deemed outstanding. Any
determination made by the Independent Directors as to whether any Person is or
is not a 25% Person shall be conclusive and binding upon the Rights Agent, all
holders of Primary Rights and all holders of Secondary Rights.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company, in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. The Company shall provide 15 days prior notice to the
Rights Agent before appointing a Co-Rights Agent and, anything to the contrary
contained herein notwithstanding, the Rights Agent may resign during that 15 day
period, effective immediately.
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Section 3. Issuance of Right Certificates.
------------------------------
(a) The "Distribution Date" of the Primary Rights (the "Primary Rights
Distribution Date") shall be the date after the date hereof, which is a 10
Business Days (which may be extended by the Independent Directors as set forth
below) after the 15% Acquisition Date, except as described below. At any time
prior to the Distribution Date of the Primary Rights, a majority of the
Independent Directors may, at their option, determine that the Distribution Date
of the Primary Rights will not be in effect in accordance with this Section 3(a)
hereof if a person became a 15% Person as a result of purchasing Voting Shares
directly from the Company pursuant to a written agreement with the Company. The
"Distribution Date" of the Secondary Rights (the "Secondary Rights Distribution
Date") shall be the first Business Day after the (i) 25% Acquisition Date or,
(ii) the date of the commencement of (other than by the Company, any wholly-
owned Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person holding Common Shares for or
pursuant to the terms of any such employee benefit plan) a tender offer (other
than a Fair Offer) or exchange offer, the consummation of which would result in
the Beneficial Ownership by a Person, together with its Affiliates and
Associates, of 25% or more of the outstanding Common Shares.
(b) Until a Distribution Date, (i) the Rights shall be represented by
certificates for Common Shares (all of which certificates for Common Shares
shall be deemed to be Rights Certificates), and not be separate Rights
Certificates, (ii) the record holder the Common Shares represented by each of
such certificates shall be the record holder of the Rights represented thereby
and (iii) the Rights shall be transferable only in connection with the transfer
of Common Shares. Until the earliest of a Distribution Date, a Redemption Date
or an Expiration Date, the surrender for transfer of such certificates for
Common Shares shall also constitute the surrender for transfer of the Rights
represented thereby.
(c) As soon as practicable after a Distribution Date, and after
notification by the Company, the Rights Agent shall send by first-class,
insured, postage-prepaid mail to each record holder of Common Shares, as of the
Close of Business on such Distribution Date, at the address of such holder shown
on the records of the Company, a Primary Right Certificate substantially in the
Form of Exhibit B hereto or a Secondary Right Certificate substantially in the
form of Exhibit C hereto, as the case may be, representing one Primary Right or
one Secondary Right for each Common Shares so held. Notwithstanding the
foregoing, the Rights Agent shall not send Right Certificates representing
Primary Rights to any 15% Person or 25% Person or its Affiliates or Associates
which Person or Persons are identified by the Company as such or to any other
Person if the Common Shares held by such Person are Beneficially Owned by a 15%
Person or 25% Person or its Affiliates or Associates which person or persons are
identified by the Company as such. As of a Distribution Date, the Rights
distributed shall be represented solely by such Right Certificates and may only
be transferred to by the transfer of such Right Certificates, and the holders of
such Right Certificates as listed in the records of the Company or any transfer
agent or registrar for such Rights shall be the record
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<PAGE>
holders of such Rights. Any determination made by the Company's Board of
Directors as to whether any Common Shares are or were Beneficially Owned at any
time by a 15% Person, a 25% Person, or any of their respective Affiliates or
Associates shall be conclusive and binding upon the Rights Agent and all holders
of Rights.
(d) On the Record Date, or as soon as practicable thereafter, the Company
shall send a copy of a Summary of the Rights in substantially the form attached
hereto as Exhibit D by first-class, postage-prepaid mail to each record holder
of Common Shares as of the Close of Business on the Record Date at the address
of such holder shown on the records of the Company.
(e) Certificates for Common Shares issued at any time after the Record Date
and for so long as the Distribution Date for either the Primary Rights or the
Secondary Rights has not occurred, shall have impressed on, printed on, written
on or otherwise affixed to them the following legend:
This certificate also represents Rights which entitle the holder hereof
to certain rights as set forth in a Rights Agreement by and between
Commercial Federal Corporation and Manufacturers Hanover Trust Company
as Rights Agent, dated as of December 19, 1988 (the "Rights Agreement"),
the terms, conditions and limitations of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
executive offices of Commercial Federal Corporation. Under certain
circumstances specified in the Rights Agreement, such Rights will be
represented by separate certificates and will no longer be represented
by this certificate. Under certain circumstances specified in the
Rights Agreement, Rights beneficially owned by certain persons may
become null and void. Commercial Federal Corporation shall mail to the
record holder of this certificate a copy of the Rights Agreement without
charge promptly following receipt of a written request therefor.
Certificates for all other Common Shares shall have impressed on,
printed on, written on or otherwise affixed to them the following legend:
This certificate does not represent any Right issued pursuant to the
terms of a Rights Agreement by and between Commercial Federal
Corporation and Manufacturers Hanover Trust Company, as Rights Agent,
dated as of December 19, 1988.
Section 4. Form of Right Certificates. The Right Certificates (and the forms
--------------------------
of election to purchase Common Shares or Preferred Shares, as the case may be,
and of assignment to be printed on the reverse thereof), when, as and if issued,
(i) as to Primary Rights, shall be substantially the same as Exhibit B hereto,
and (ii) as to Secondary Rights, shall be substantially the same as Exhibit C
hereto, and may have such marks or identification or designation and such
legends, summaries or endorsements printed thereof as the
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Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any national securities exchange or NASDAQ on which the Rights or the securities
of the Company issuable upon exercise of the Rights may from time to time be
listed, admitted for trading or quoted, or to conform to usage. Subject to
Section 24 hereof with respect to Secondary Rights, the Rights Certificates,
whenever issued, which are issued in respect of Common Shares that were issued
and outstanding as of the Close of Business on the relevant Distribution Date,
shall be dated as of such Distribution Date.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its Vice Chairman of the Board, its President
or any Vice President, either manually or by facsimile signature, and have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by its Secretary or any Assistant Secretary, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
of the Right Certificates shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates may nevertheless be countersigned by
the Rights Agent and issued and delivered by the Company with the same
force and effect as though the Person who signed such Right Certificates
had not ceased to be such officer of the Company. Any Right Certificate may
be signed on behalf of the Company by any Person who at the actual date of
such execution shall be a proper officer of the Company to sign such Right
Certificate, even though such Person was not such an officer at the date of
the execution of this Agreement.
(b) Following a Distribution Date, the Rights Agent shall keep or
cause to be kept at its office books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number
of Rights represented on its face by each of the Right Certificates and the
date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Section 6(c), 7(d), 8(d) and 17
hereof, at any time after the Close of Business on a Distribution Date, and
so long as the Rights represented by separate Right Certificates remain
outstanding, Right Certificates representing such Rights may be
transferred, split up, combined or exchanged for one or more Right
Certificates representing the same aggregate number of Rights as the Right
Certificates surrendered. Any registered holder desiring to transfer, split
up, combine or exchange one or more Right Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the
Right Certificates to be transferred, split up, combined or exchanged
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<PAGE>
at the office of the Rights Agent with the form of assignment on the
reverse side thereof endorsed or with a written instrument of transfer in
form satisfactory to the Company and the Rights Agent enclosed with such
Right Certificates executed by the registered holder thereof or such
holder's attorney authorized in writing, and with such signature
guaranteed. Thereupon, the Rights Agent shall countersign and deliver to
the Person entitled thereto one or more Right Certificates, as so
requested. The Company may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agents of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them and,
at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of such Rights Certificate if mutilated, the
Company shall issue and deliver to the Rights Agent for delivery to the
record holder of such Right Certificate a new Right Certificate of like
tenor in lieu of such lost, stolen, destroyed or mutilated Right
Certificate.
(c) Notwithstanding anything to the contrary in this Section 6, the
Rights Agent shall not countersign and deliver a Right Certificate to any
Person if the Company notifies the Rights Agent that such Right Certificate
represents, or would represent when held by such Person, Rights that had
become or would become null and void pursuant to Sections 7(d) or 8(d)
hereof.
Section 7. Exercise of Primary Rights.
--------------------------
(a) Until the Primary Right Distribution Date, no Primary Right may
be exercised.
(b) Subject to Section 9(b) and the other provisions of this
Agreement, at any time after the Primary Right Distribution Date, the
registered holder of any Primary Right Certificate, other than a Primary
Right Certificate representing Primary Rights Beneficially Owned by a 15%
Person or its Affiliate or Associates at any time on or after the 15%
Acquisition Date, may exercise the Primary Rights represented thereby in
whole or in part upon surrender of such Primary Right Certificate, with the
form of election to purchase on the reverse side thereof duly executed
(with signatures duly guaranteed), to the Rights Agent at the office of the
Rights Agent at Manufactures Hanover Trust Company, 450 West Thirty-Third
Street, New York, New York 10001, Attention: Reorganization Department,
together with payment of the Primary Right Exercise Price with respect to
each Primary Right exercised, at or prior to the Close of Business on the
earlier of (i) the Primary Right Expiration Date or (ii) the Primary Right
Redemption Date.
(c) The number of Common Shares to be received upon the exercise of an
exercisable Primary Right and payment of the Primary Right Exercise
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Price shall be equal to a fraction, the numerator of which is 50% of the
number of Common Shares outstanding on the 15% Acquisition Date, and the
denominator of which is the number of Primary Rights outstanding on the 15%
Acquisition Date that are not Beneficially Owned by the 15% Person or its
Affiliates or Associates. The Primary Right Exercise Price for the exercise
of each Primary Right shall be equal to the product of (x) 20% of the
Current Market Price per Common Share on the 15% Acquisition Date,
multiplied by (y) the number of Common Shares to be received upon the
exercise of an exercisable Primary Right and payment of the Primary Right
Exercise Price. The Primary Right Exercise Price shall be payable in lawful
money of the United States of America in accordance with Section 9(a)
hereof.
(d) Notwithstanding anything in this Agreement to the contrary, on and
after the Primary Right Distribution Date, any Primary Rights that are or
were Beneficially Owned by a 15% Person or any of its Affiliates or
Associates at any time on or after such date shall become null and void and
any holder of such Primary Rights (whether or not such holder is a 15%
Person or its Affiliate or Associate) shall thereafter have no right to
exercise such Primary Rights under any provision of this Agreement.
(e) In lieu of issuing Common Shares in accordance with the foregoing
provisions of this Section 7, the Company may, if the Board of Directors
determines that such action is necessary or appropriate and not contrary to
the interests of holders of Primary Rights (and, in the event that the
number of Common Shares of the Company which are authorized by the
Company's Articles of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Primary Rights are
not sufficient to permit the exercise in full of the Primary Rights in
accordance with this Section 7, the Company shall), with respect to each
Primary Right, make adequate provision to substitute for all or a portion
of the Common Shares that would otherwise be issuable upon the exercise
thereof and payment of the Primary Right Exercise Price (i) cash, (ii)
other equity securities of the Company (including, without limitation,
preferred shares or units or preferred shares having the same value as
Common Shares, (iii) debt securities of the Company, (iv) other assets or
(v) any combination of the foregoing, in each case having an aggregate
value determined by the Company's Board of Directors to be equal to the
Common Shares for which substitution is made. Subject to Section 7(d)
hereof, in the event that the Company takes any action pursuant to this
Section 7, such action shall apply uniformly to all outstanding Primary
Rights.
Section 8. Exercise of Secondary Rights.
----------------------------
(a) Until the Secondary Right Distribution Date, no Secondary Right
may be exercised except as provided in Section 14 and 16 hereof.
(b) Subject to Section 9(b) and the other provisions of this
Agreement, the registered holder of any Secondary Right Certificate may
exercise the Secondary Rights represented thereby in whole or in part at
any time after the Secondary Right Distribution Date upon surrender of such
Secondary Right Certificate, with the form of election to purchase on
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the reverse side thereof duly executed (with signatures duly guaranteed),
to the Rights Agent at the office of the Rights Agent at Manufacturers
Hanover Trust Company, 450 West Thirty-Third Street, New York, New York
10001, Attention: Shareholder Services, together with payment of the
Secondary Right Exercise Price with respect to each Secondary Right
exercised, at or prior to the Close of Business on the earlier of (i) the
Secondary Right Expiration Date or (ii) the Secondary Right Redemption
Date.
(c) The Secondary Right Exercise Price for the exercise of each
Secondary Right shall initially be [$42.00] per one hundredth of a share of
Preferred Shares and shall be payable in lawful money of the United States
of America in accordance with Section 9(a) hereof. The Secondary Right
Exercise Price and the number of Preferred Shares (or, following the
occurrence of a Section 14(a)(ii) Event or a Section 16(a) Event, Common
Shares and/or other securities) to be acquired upon exercise of a Secondary
Right shall be subject to adjustment from time to time as provided in
Sections 14 and 16 thereof.
(d) Notwithstanding anything in this Agreement to the contrary, upon
the occurrence of a Section 14(a)(ii) Event or a Section 16(a) Event, any
Secondary Rights that are or were Beneficially Owned by a 25% Person or any
Affiliate or Associate of a 25% Person at any time on or after the
Secondary Right Distribution Date shall become null and void and any holder
of such Secondary Rights (whether or not such holder is a 25% Person or an
Affiliate or Associate of a 25% Person) shall thereafter have no right to
exercise such Secondary Rights under any provision of this Agreement. Any
Secondary Right Certificate issued pursuant to Section 3 hereof that
represents Secondary Rights Beneficially Owned by a 25% Person or any
Affiliate or Associate of a 25% Person, and any Secondary Right Certificate
issued at any time upon the transfer of any Secondary Rights to a 25%
Person or any Affiliate or Associate of a 25% Person or to any nominee of
the foregoing, and any Secondary Right Certificate issued pursuant to
Section 6 or Section 14 hereof upon the transfer, exchange, replacement or
adjustment of any other Secondary Right Certificate referred to in this
sentence, shall or shall be deemed to contain the following legend:
The Secondary Rights represented by this Secondary Right Certificate
were issued to a Person who was a 25% Person or an Affiliate or an
Associate of a 25% Person (as such terms are defined in the Rights
Agreement). This Secondary Right Certificate and the Secondary Rights
represented hereby may become void in the circumstances specified in
Sections 8(d), 14(a)(ii) and 16(a) of the Rights Agreement.
Any determination made by the Board of Directors as to whether a proposed
transaction is or is not a transaction described in Section 14(a)(ii)(A)(3)
or Section 14(a)(ii)(A)(5) hereof shall be conclusive and binding upon the
Rights Agent and all holders of Rights.
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<PAGE>
Section 9. Mechanics of Exercise.
---------------------
(a) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for each Right to be exercised and an amount
equal to any applicable tax or governmental charge required to be paid by
the holder of such Right Certificate in accordance with Section 11 hereof
by certified check or cashier's check payable to the order of the Company,
the Rights Agent shall thereupon promptly (i) requisition from any transfer
agent of the Common Shares, Preferred Shares and/or other securities,
certificates for the number of Common Shares, Preferred Shares and/or other
securities, as the case may be, to be purchased, and the Company hereby
irrevocably authorizes any such transfer agent to comply with all such
requests, and/or, as provided in Section 17 hereof with respect to
Preferred Shares, requisition from the depository agent described therein
depository receipts representing such number of one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the
transfer agent with such depositary agent) and the Company hereby directs
such depositary agent to comply with such request, (ii) when appropriate,
requisition from the Company the amount of cash to be paid pursuant to
Section 7(e) hereof or in lieu of issuance of fractional shares in
accordance with Section 17 hereof, (iii) after receipt of such certificates
or depositary receipts, cause the same to be delivered to or upon the order
of the registered holder of such Right Certificate, registered in such name
or names as may be designated by such holder and (iv) when appropriate,
after receipt thereof, deliver such cash to or upon the order of the
registered holder of such Right Certificate.
(b) Notwithstanding the foregoing provisions of this Section 9, the
exercisability of the Rights shall be suspended for such period as shall
reasonably be necessary for the Company to register or qualify under the
Securities Act and any applicable securities law of any jurisdiction the
Common Shares, Preferred Shares and/or other securities, as the case may
be, to be issued pursuant to the exercise of the Rights; provided, however,
that nothing contained in this Section 9 shall relieve the Company of its
obligations under Section 11(c) hereof. The Company shall notify the Rights
Agent of the commencement and termination of such suspension pursuant to
this Section 9(b).
(c) In case the registered holder of any Right Certificate shall
exercise less than all of the Rights represented thereby, a new Right
Certificate representing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to such holder's duly authorized assigns, subject
to the provisions of Section 17 hereof.
Section 10. Cancellation and Destruction of Right Certificates. All Right
--------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
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<PAGE>
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Company or shall, at the written
request of the Company, destroy such canceled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 11. Reservation and Availability of Capital Shares.
----------------------------------------------
(a) The Company covenants and agrees that it shall keep available out
of its authorized and unissued securities (or out of its authorized and
issued securities held in its treasury), the number of such securities as
will from time to time be sufficient to permit the exercise in full of all
outstanding Rights.
(b) In the event that any securities issuable upon the exercise of
Rights are listed on any national securities exchange or quoted on NASDAQ,
the Company shall use its best efforts, from and after such time as the
Rights become exercisable, to cause all such securities issued or reserved
for such issuance to be listed on such exchange or quoted on NASDAQ upon
official notice of issuance upon such exercise.
(c) If necessary to permit the issuance of securities pursuant to the
Rights, the Company shall use its best efforts, from and after a
Distribution Date, to register or qualify such securities under the
Securities Act and any applicable securities law and to keep such
registration effective until the earlier of the Redemption Date of the
Expiration Date.
(d) The Company covenants and agrees that it shall take all such
action as may be necessary to ensure that all securities delivered upon the
exercise of Rights shall, at the time of delivery of the certificates for
such securities (subject to payment of the Exercise Price), be duly and
validly authorized and issued and fully paid and nonassessable securities.
(e) The Company further covenants and agrees that it shall pay when
due and payable any and all federal and state taxes and governmental
charges which may be payable in respect of the issuance or delivery of the
Right Certificates or of any securities upon the exercise of Rights. The
Company shall not, however, be required to pay any tax or governmental
charge which may be payable in respect of any transfer or delivery of a
Right Certificate to a Person other than, or the issuance or delivery of a
certificate for securities in respect of a name other than that of, the
registered holder of the Right Certificate representing Rights surrendered
for exercise, or to issue or deliver any certificate for securities upon
the exercise of any Right until any such tax shall have been paid (any such
tax or governmental charge being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax or governmental charge is due.
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<PAGE>
(f) With respect to Common Shares and/or other securities issuable
following the occurrence of a Section 14(a)(ii) Event, the foregoing
covenants shall be applicable only following the occurrence of such Section
14(a)(ii) Event.
Section 12. Securities Record Date. Each Person in whose name any
----------------------
certificate for securities of the Company is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
securities represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate representing such Rights was duly surrendered
and payment of the Exercise Price (and any applicable taxes or governmental
charge) was made; provided, however, that if the date of such surrender and
payment is a date upon which the securities transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
securities on, and such certificate shall be dated, the next succeeding Business
Day on which the securities transfer books of the Company are open.
Section 13. Adjustment of Number of Shares Issuable Upon Exercise of
--------------------------------------------------------
Primary Rights.
- --------------
(a) In the event that, at any time after the Close of Business on the
Primary Right Distribution Date and prior to the Close of Business on the
earlier of the Primary Right Redemption Date or the Primary Right
Expiration Date, the Company shall (i) declare or pay any dividend on or
make any distribution with respect to the Common Shares, (ii) subdivide the
outstanding Common Shares, (iii) combine the outstanding Common Shares into
a smaller number of Common Shares, (iv) consolidate with or merge with or
into any other Person (whether or not the Company shall be the continuing
or surviving corporation in such merger) and, in connection with such
consolidation or merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any Person or cash or
any other property, or (v) issue any of its securities in a
reclassification of the Common Shares (including any such reclassification
in connection with a consolidation or merger), then and in each such event,
the number and kind of securities or other property, as the case may be,
issuable upon the exercise of a Primary Right on such date shall be
proportionately adjusted so that the holder of any Primary Right exercised
on or after such date shall be entitled to receive, upon the exercise
thereof and payment of the Primary Right Exercise Price, the aggregate
number and kind of securities or other property, as the case my be, which,
if such Primary Right had been exercised immediately prior to such date and
at a time when such Primary Right was exercisable and the transfer books of
the Company were open, such holder would have owned upon such exercise and
would have been entitled to receive by virtue of such event.
(b) If, as a result of an adjustment made pursuant to Section 13(a)
hereof, the holder of any Primary Right thereafter exercised shall become
entitled to receive any securities of the Company other than Common Shares,
the number of such other securities so receivable upon exercise of any
Primary Right shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
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<PAGE>
with respect to Common Shares, contained in this Section 13, and the
provisions of Sections 7, 11, and 12 hereof shall apply on like terms to
any such other securities.
(c) Before taking any action that would cause the product of the
number of Common Shares purchasable upon exercise of a Primary Right
multiplied by the then par value per Common Share to be less than the
Primary Right Exercise Price, the Company shall take any corporate action
which may, in the advice or opinion of its counsel, be necessary in order
that the Company may validly and legally issue such number of fully paid
and nonassessable securities upon payment of the Primary Right Exercise
Price.
(d) Anything in this Section 13 to the contrary notwithstanding, the
Company shall be entitled to make such further adjustments in the number of
securities that may be purchased upon exercise of one Primary Right, in
addition to those adjustments expressly required by this Section 13, as and
to the extent that it in its sole discretion shall determine to be
advisable in order that any (i) consolidation or subdivision of the Common
Shares, or (ii) dividends on Common Shares payable in Common Shares,
hereafter made by the Company to holders of its Common Shares shall not be
taxable to such stockholders.
Section 14. Adjustment of Secondary Right Exercise Price, Number of Shares
--------------------------------------------------------------
Issuable Upon Exercise of Secondary Rights or Number of Secondary Rights. The
- ------------------------------------------------------------------------
Secondary Right Exercise Price, the number and kind of securities which may be
purchased upon exercise of a Secondary Right and the number of Secondary Rights
outstanding are subject to adjustment from time to time as provided in this
Section 14.
(a)(i) In the event that the Company shall at any time after the
Close of Business on the Record Date and prior to the Close of Business on
the earlier of the Secondary Right Redemption Date or the Secondary Right
Expiration Date (A) declare or pay any dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred
Shares, (C) combine the outstanding Preferred Shares into a smaller number
of Preferred Shares or (D) issue any of its securities in a
reclassification or the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then and in each such
event, the Secondary Right Exercise Price in effect at the time of the
record date for such dividend or on the effective date of such subdivision,
combination or reclassification, and the number and kind of Preferred
Shares or other securities, as the case may be, issuable upon the exercise
of a Secondary Right on such date, shall be proportionately adjusted so
that the holder of any Secondary Right exercised on or after such date
shall be entitled to receive, upon the exercise thereof and payment of the
Secondary Right Exercise Price, the aggregate number and kind of Preferred
Shares or other securities or other property, as the case may be, which, if
such Secondary Right had been exercised immediately prior to such date and
at a time when such Secondary Right was exercisable and the transfer books
of the Company were open, such holder would have owned upon such exercise
and would have been entitled to receive by virtue
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<PAGE>
of such dividend, subdivision, combination or reclassification. If an event
occurs which would require an adjustment under both this Section 14(a)(i)
and Section 14(a)(ii) hereof, the adjustment provided for in this Section
14(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 14(a)(ii) hereof.
(ii) In the event (a "Section 14(a)(iii) Event") that, at any time
after the Close of Business on the Record Date and prior to the Close of
Business on the earlier of the Secondary Right Redemption Date or the
Secondary Right Expiration Date:
(A) any 25% Person or any Affiliate or Associate of any 25% Person
directly or indirectly, shall
(1) Merge into the Company or any of its Subsidiaries or
otherwise consolidate or combine with the Company or any of its
Subsidiaries, and the Company or such Subsidiary shall be the
continuing or surviving corporation of such merger, consolidation or
combination and the Common Shares of the Company shall remain
outstanding and unchanged,
(2) in one or more transactions, transfer any assets to the
Company or any of its Subsidiaries in exchange (in whole or in part)
for shares of any class of capital stock of the Company or any of
its Subsidiaries or for securities exercisable for or convertible
into shares of any class of capital stock of the Company or any of
its Subsidiaries or otherwise obtain from the Company or any of its
Subsidiaries, with or without consideration, any additional share of
any class of capital stock of the Company or any of its Subsidiaries
or securities exercisable for or convertible into shares of any
class of capital stock of the Company or any of its Subsidiaries
(other than as part of a pro rata distribution by the Company or any
of its Subsidiaries to all holders of such shares of any class of
capital stock),
(3) sell, purchase, lease, exchange, mortgage, pledge, transfer
or otherwise dispose (in one or more transactions), to, from, with
or of, as the case may be, the Company or any of its Subsidiaries,
assets, including securities, either (1) on terms and conditions
less favorable to the Company or such Subsidiary than the Company or
such Subsidiary would be able to obtain in arm's length negotiation
with an unaffiliated third party or (2) for reasons which are
otherwise not in the best interests of the Company,
(4) receive any compensation from the Company or any Subsidiary
of the Company other than compensation for employment, or fees for
serving as a director, at rates inconsistent with the past practices
of the Company (or its Subsidiaries), or
(5) receive the benefit, directly or indirectly (except
proportionately as a stockholder or upon terms and conditions not
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<PAGE>
less favorable than the Company or such Subsidiary would be able to
obtain in arm's length negotiation with an unaffiliated third party),
of any loans, advances, guarantees, pledges or other tax advantage
provided by the Company or any of its Subsidiaries;
(B) there shall be, during such time as there is a 25% Person, any
reclassification of securities (including any reverse stock split), or
recapitalization of the Company, or any merger or consolidation of the
Company with any of its Subsidiaries or any other transaction or series of
transactions (whether or not with or into or otherwise involving a 25%
Person) which has the effect, directly or indirectly, of increasing by more
than 1% the proportionate share of the outstanding shares of any class of
equity securities or of securities exercisable for or convertible into
securities of the Company or any of its Subsidiaries which is Beneficially
Owned by a 25% Person or any Affiliate or Associate of a 25% Person; or
(C) any Person (other than the Company, any wholly owned Subsidiary of
the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, or any Person holding Common Shares for or pursuant to the
terms of any such employee benefit plan), together with its Affiliates and
Associates, shall become the Beneficial Owner of 25% or more of the Common
Shares then outstanding (except pursuant to a transaction referred to in
Section 16(a) hereof);
then, and in each such case, proper provision shall be made so that except as
provided in Section 8(d) hereof, each holder of a Secondary Right shall
thereafter have the right to receive, upon the exercise thereof in accordance
with the terms of this Agreement and payment of the then current Secondary Right
Exercise Price, such number of Common Shares of the Company as shall equal the
result obtained by multiplying the then current Secondary Right Exercise Price
by the then number of one-hundredths of a Preferred Share for which a Secondary
Right was exercisable (or would have been exercisable if the Secondary Right
Distribution Date had occurred) immediately prior to the first occurrence of a
Section 14(a)(ii) Event, and dividing that product by 50% of the Current Market
Price (determined pursuant to Section 14(d) hereof) of a Common Share on the
date of occurrence of the relevant Section 14(a)(ii) Event (such number of
shares being hereinafter referred to as the "Adjustment Shares"). Successive
adjustments shall be made pursuant to this paragraph each time a Section
14(a)(ii) Event occurs.
(iii) In lieu of issuing Common Shares in accordance with Section 14(a)(ii)
hereof, the Company may, if the Board of Directors determines that such action
is necessary or appropriate and not contrary to the interests of holders of
Secondary Rights (and, in the event that the number of Common Shares which are
authorized by the Company's Articles of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Secondary
Rights are not sufficient to permit the exercise in full of the Secondary Rights
in accordance with Section 14(a)(ii) hereof, the Company shall), with respect to
each Secondary Right, make adequate provisions to substitute for all or a
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<PAGE>
portion of the Adjustment Shares which would otherwise be issuable upon the
exercise thereof and payment of the Secondary Right Exercise Price (A) cash, (B)
other equity securities of the Company (including, without limitation, preferred
shares or units of preferred shares having the same value as Common Shares
("Common Share Equivalents")), (C) debt securities of the Company, (D) other
assets or (E) any combination of the foregoing, in each case having an aggregate
value equal to the Adjustment Shares for which substitution is made. Subject to
Section 8(d) hereof, in the event that the Company takes any action pursuant to
this Section 14(a)(iii), such action shall apply uniformly to all outstanding
Secondary Rights.
(b) In the event that the Company shall, at any time after the Close of
Business on the Record Date and prior to the Close of Business on the earlier of
the Secondary Right Redemption Date or the Secondary Right Expiration Date, fix
a record date prior to the earlier of the Secondary Right Redemption Date or
Secondary Right Expiration Date for the issuance of rights, options or warrants
to all holders of Preferred Shares entitling them (for a period expiring within
45 calendar days after such record date) to subscribe for or purchase Preferred
Shares (or shares having the same rights, privileges and preferences as the
Preferred Shares ("Preferred Share Equivalents")) or securities convertible into
Preferred Shares or Preferred Share Equivalents, at a price per Preferred Share
or Preferred Share Equivalent (or having a conversion price per share, if a
security convertible into Preferred Shares or Preferred Share Equivalents) less
than the Current Market Price per Preferred Share on such record date, then the
Secondary Right Exercise price to be in effect after such record date shall be
determined by multiplying the Secondary Right Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be equal to the sum of the number of Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or Preferred Share Equivalents
to be so offered (and/or the aggregate initial conversion price of the
convertible securities to be so offered) would purchase at such Current Market
Price, and the denominator of which shall be equal to the number of Preferred
Shares outstanding on such record date plus the number of additional Preferred
Shares and/or Preferred Share Equivalents to be offered for subscription or
purchase (or into which the convertible securities to be so offered are
initially convertible). Preferred Shares owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment to the Secondary Right Exercise Price shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Secondary Right Exercise Price
shall be adjusted to the Secondary Right Exercise Price which would then be in
effect if such record date had not been fixed.
(c) In the event that the Company shall, at any time after the Close of
Business on the Record Date and prior to the Close of Business on the earlier of
the Secondary Right Redemption Date or the Secondary Right Expiration Date, fix
a record date for the making of a distribution to all holders of the Preferred
Shares (including any such distribution made in connection with a consolidation
or merger in which the Company is the
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<PAGE>
surviving corporation) of evidence of indebtedness or assets (other than a
regular quarterly cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 14(b)
hereof), the Secondary Right Exercise Price to be in effect after such record
date shall be determined by multiplying the Secondary Right Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be equal to the difference of the Current Market Price per Preferred
Share on such record date minus the fair market value of the portion of the
assets or evidences of indebtedness to be so distributed or of such subscription
rights or warrants applicable to one Preferred Share, and the denominator of
which shall be equal to such Current Market Price per Preferred Share. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such a distribution is not so made, the Secondary Right
Exercise Price shall be adjusted to be the Secondary Right Exercise Price which
would then be in effect if such record date had not been fixed.
(d) For the purpose of any computation under this Section 14, if the
Preferred Shares are not publicly held or so listed and traded, the "Current
Market Price" per Preferred Share shall be conclusively deemed to be the Current
Market Price per Common Share multiplied by one hundred.
(e) No adjustment in the Secondary Right Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Secondary Right Exercise Price; provided, however, that any adjustments
which by reason of this Section 14(e) are not required to be made shall be
cumulated and taken into account in any subsequent adjustment. All calculations
under this Section 14 shall be made to the nearest cent or to the nearest ten-
thousandth of a Common Share or other share of one-millionth of a Preferred
Share, as the case may be.
(f) If, as a result of an adjustment made pursuant to Section 14(a) hereof,
the holder of any Secondary Right thereafter exercised shall become entitled to
receive any securities of the Company other than Preferred Shares, the number of
such other securities so receivable upon exercise of any Secondary Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Preferred Shares
contained in this Section 14, and the provisions of Sections 8, 11, 12, and 16
hereof with respect to Preferred Shares shall apply on like terms to any such
other securities.
(g) All Secondary Rights originally issued by the Company subsequent to any
adjustment made to the Secondary Right Exercise Price hereunder shall represent
the right to purchase, at the adjusted Secondary Right Exercise Price, the
number of one-hundredths of a Preferred Share purchasable from time to time
hereunder upon exercise of the Secondary Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 14(i) below, upon each adjustment of the Secondary Right Exercise Price
as a result of the calculations made in Section 14(b) and
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<PAGE>
(c) hereof, each Secondary Right outstanding immediately prior to the making of
such adjustment shall thereafter represent the right to purchase, at the
adjusted Secondary Right Exercise Price, that number of one-hundredths of a
Preferred Share (calculated to the nearest one-millionth of a Preferred Share)
obtained by multiplying (i) the number of one-hundredths of a Preferred Share
purchasable upon the exercise of one Secondary Right immediately prior to such
adjustment of the Secondary Right Exercise Price by (ii) the Secondary Right
Exercise Price in effect immediately prior to such adjustment, and dividing the
product so obtained by the Secondary Right Exercise Price in effect immediately
after such adjustment.
(i) The Company may elect, on or after the date of any adjustment of the
Secondary Right Exercise Price, to adjust the number of Secondary Rights instead
of making any adjustment in the number of Preferred Shares purchasable upon the
exercise of a Secondary Right. Each of the Secondary Rights outstanding after
such adjustment of the number of Secondary Rights shall be exercisable for the
number of one-hundredths of a Preferred Share for which a Secondary Right was
exercisable immediately prior to such adjustment. Each Secondary Right held of
record prior to such adjustment of the number of Secondary Rights shall become
that number of Secondary Rights (calculated to the nearest one ten-thousands)
obtained by dividing the Secondary Right Exercise Price in effect immediately
prior to the adjustment of the Secondary Right Exercise Price by the Secondary
Right Exercise Price in effect immediately after such adjustment of the
Secondary Right Exercise Price. The Company shall make a public announcement of
its election to adjust the number of Secondary Rights pursuant to this Section
14(i), indicating the record date for the adjustment and, if known at the time,
the amount of the adjustment to be made. This record date may be the date on
which the Secondary Right Exercise Price is adjusted or any day thereafter, but,
if separate Secondary Right Certificates have been issued, it shall be at least
10 days after the date of such public announcement. If separate Secondary Right
Certificates have been issued, upon each adjustment of the number of Secondary
Rights pursuant to this Section 14(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Secondary Right
Certificates on such record date Secondary Right Certificates representing,
subject to Section 17 hereof, the additional Secondary Rights to which such
holders shall be entitled as a result of such adjustment or, at the option of
the Company, cause to be distributed to such holders of record in substitution
and replacement for the Secondary Right Certificates held by such holders prior
to the date of such adjustment, and upon surrender thereof if required by the
Company, new Secondary Right Certificates representing all the Secondary Rights
to which such holders shall be entitled after such adjustment. Secondary Right
Certificates to be so distributed shall be issued, executed and countersigned in
the manner provided for herein (and may bear, at the option of the Company, the
adjusted Secondary Right Exercise Price) and shall be registered in the names of
the holders of record of Secondary Right Certificates on the record date
specified in the public announcement.
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<PAGE>
(j) Irrespective of any adjustment or change in the Secondary Right
Exercise Price or the number of one-hundredths of a Preferred Share issuable
upon the exercise of one Secondary Right, the Secondary Right Certificates
theretofore and thereafter issued may continue to express the Secondary
Right Exercise Price per one one-hundredth of a Preferred Share and the
number of Preferred Shares issuable upon the exercise of one Secondary Right
which were expressed in the initial Secondary Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Secondary Right Exercise Price below one one-hundredth of the then par
value, if any, of the Preferred Shares issuable upon exercise of the
Secondary Rights, the Company shall take any corporate action which may, in
the advice or opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable one one-
hundredths of a Preferred Share at such adjusted Secondary Right Exercise
Price.
(l) In any case in which this Section 14 shall require that an
adjustment in the Secondary Right Exercise Price be made effective as of a
record date for a specified event, the Company may elect to defer, until the
occurrence of such event, the issuance to the holder of any Secondary Right
exercised after such record date of the number of one-hundredths of a
Preferred Share and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the number of one-hundredths
of a Preferred Share and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the Secondary Right
Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument representing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 14 to the contrary notwithstanding, the
Company shall be entitled to make such further adjustments in the number of
one-hundredths of a Preferred Share that may be purchased upon exercise of
one Secondary Right, and such further adjustments in the Secondary Right
Exercise Price, in addition to those adjustments expressly required by this
Section 14, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any (i) consolidation or subdivision
of the Preferred Shares, (ii) issuance wholly for cash of any Preferred
Shares at less than the Current Market Price thereof, (iii) issuance wholly
for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares, (iv) dividends on
Preferred Shares payable in Preferred Shares or (v) issuance of rights,
options or warrants referred to Section 14(b) hereof, hereafter made by the
Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
Section 15. Certificate of Adjusted Secondary Right Exercise Price or
---------------------------------------------------------
Number of Shares Issuable Upon Exercise of Primary Rights or Secondary Rights.
- -----------------------------------------------------------------------------
Whenever an adjustment is made as provided in Section 13, 14, or 16 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
-25-
<PAGE>
and a brief statement of the facts giving rise to such adjustment, (b) file with
the Rights Agent and with each transfer agent for the securities issuable upon
exercise of the Rights a copy of such certificate and (c) mail a brief summary
thereof to each holder of Right affected by such adjustment in accordance with
Section 29 hereof. Notwithstanding the foregoing sentence, the failure of the
Company to make such certification or to give such notice shall not affect the
validity or the force and effect of such adjustment. Any adjustment to be made
pursuant to Section 13, 14 or 16 hereof shall be effective as of the date of the
event giving rise to such adjustment. The Rights Agent may rely on absence of
notice as proof that no adjustment pursuant to this Section 15 has been made.
Section 16. Consolidation, Merger, or Sale or Transfer of Assets or Earning
---------------------------------------------------------------
Power.
- -----
(a) In the event (a "Section 16(a) Event") that, after the 25%
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than any employee
benefit plan of the Company, or any Person holding Common Shares for or
pursuant to the terms of any such employee benefit plan), and the Company
shall not be the continuing or surviving corporation in such consolidation
or merger, (y) any Person (other than any employee benefit plan of the
Company, or any Person holding Common Shares for or pursuant to the terms of
any such employee benefit plan) shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or
surviving corporation in such merger and, in connection with such merger,
all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any Person or cash or any other property, or
(z) the Company and/or any one or more of its Subsidiaries shall sell or
otherwise transfer, in one or more transactions (other than transactions in
the ordinary course of business), assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons other than the Company or one or
more of its wholly-owned Subsidiaries (such Persons, together with the
Persons described in clauses (x) and (y) above shall be collectively
referred to in this Section 16 as the "Surviving Person"), then, and in each
such case, proper provision shall be made so that:
(i) except as provided in Section 8(d) hereof, each holder of a
Secondary Right shall thereafter have the right to receive, upon the
exercise thereof in accordance with the terms of this Agreement and
payment of the then current Secondary Right Exercise Price, such number
of validly authorized and issued, fully paid and nonassessable Common
Shares of the Surviving Person as shall be equal to a fraction, the
numerator of which is the product of the then current Secondary Right
Exercise Price multiplied by the number of one-hundredths of a
Preferred Share purchasable upon the exercise of one Secondary Right
immediately prior to the first Section 14(a)(ii) Event (or, if a
Section 14(a)(ii) Event has occurred prior to the first Section 16(a)
Event, the product of the number of such one-hundredths of a Preferred
Share purchasable upon the exercise of a Secondary Right (or which
would have been so purchasable if the Secondary Right Distribution
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Date had occurred) immediately prior to the first Section 14(a)(ii)
Event, multiplied by the Secondary Right Exercise Price in effect
immediately prior to such Section 14(a)(ii) Event), and the denominator
of which is 50% of the Current Market Price per Common Share of the
Surviving Person on the date of consummation of such Section 14(a)(ii)
Event;
(ii) the Surviving Person shall thereafter be liable for and
shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties and the Company pursuant to
this Agreement;
(iii) the term, "Company," shall thereafter be deemed to refer to
the Surviving Person; and
(iv) the Surviving Person shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common
Shares in accordance with Section 11 hereof applicable to the
reservation of Common Shares) in connection with such consummation as
may be necessary to ensure that the provisions hereof shall thereafter
be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of Secondary
Rights.
(b) Notwithstanding the foregoing, if the Section 16(a) Event is the
sale or transfer of one or more transactions of assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole), but less than 100% thereof, then each
Person acquiring all or a portion thereof shall assume the obligations of
the Company as a fraction of each of the Secondary Rights equal to the
fraction of the assets of the Company and its Subsidiaries (taken as a
whole) acquired by such Person, and the obligations of the Company as to the
remaining fraction of each of the Secondary Rights shall continue to be the
obligations of the Company.
(c) The Company shall not consummate a Section 16(a) Event unless prior
thereto the Company and the Surviving Person shall have executed and
delivered to the Rights Agent a supplemental agreement confirming that such
Surviving Person shall, upon consummation of such Section 16(a) Event,
assume this Agreement in accordance with Section 16 hereof, and that all
rights of first refusal or preemptive rights in respect of the issuance of
Common Shares of such Surviving Person upon exercise of outstanding
Secondary Rights have been waived and that such Section 16(a) Event shall
not result in a default by such Surviving Person under this Agreement, and
further providing that, as soon as practicable after the date of
consummation of such Section 16(a) Event, such Surviving Person shall:
(i) prepare and file a registration statement under the Securities
Act with respect to the Secondary Rights and the securities purchasable
upon exercise of the Secondary Rights on an appropriate form, use its
best efforts to cause such registration statement to become effective
as soon as practicable after such filing, use its
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best efforts to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of the Secondary Right Redemption
Date or the Secondary Right Expiration Date, and similarly comply with
applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Secondary Rights and the securities purchasable upon exercise of
the Secondary Rights on a national securities exchange, or use its best
efforts cause the Secondary Rights and such securities to meet the
eligibility requirements for quotation on the NASDAQ; and
(iii) deliver to holders of the Secondary Rights historical
financial statements for such Surviving Person which comply in all
respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act.
(d) In the event that at any time after the occurrence of a Section
14(a)(ii) Event some or all of the Secondary Rights shall not have been
exercised pursuant to Section 14 hereof prior to the date of a Section 16(a)
Event, such Secondary Rights shall thereafter be exercisable only in the
manner described in Section 16(a) hereof (without taking into account any
prior adjustment required by Section 14(a)). In the event that a Section
14(a)(ii) Event occurs on or after the date of a Section 16(a) Event,
Secondary Rights shall thereafter be exercisable only in the manner
described in Section 16(a) hereof (without taking into account any prior
adjustment required by Section 14(a)). In the event that a Section 14(a)(ii)
Event occurs on or after the date of a Section 16(a) Event, Secondary Rights
shall not be exercisable pursuant to Section 14 hereof but shall instead be
exercisable pursuant to, and only pursuant to, this Section 16.
(e) The provisions of this Section 16 shall apply to each successive
merger, consolidation, sale or other transfer constituting a Section 16(a)
Event.
Section 17. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which represent fractional Rights. If the
Company shall determine not to issue such fractional Rights, the Company
shall pay to the registered holders of the Right Certificates with respect
to which such fractional Rights would otherwise be issuable, at the time
such Rights are exercised as provided herein, an amount in cash equal to the
same fraction of the Current Market Value of a whole Primary Right or
Secondary Right, as the case may be. For the purposes of this Section 17(a),
the Current Market Value of a whole Right shall be the Closing Price per
Right for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of Common
Shares or Preferred Shares (other than fractions which are integral
multiples or one one-hundredth of a Preferred Share) upon exercise of
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Rights, or to distribute certificates which represent fractional Common
Shares or Preferred Shares (other than fractions which are integral
multiples or one one-hundredth of a Preferred Share). Fractions of Preferred
Shares in integral multiples of one one-hundredth of a Preferred Share may,
at the election of the Company, be represented by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders
of such depositary receipts shall have the rights, privileges and
preferences to which they are entitled as beneficial owners of Preferred
Shares. If the Company shall determine not to issue fractional Common Shares
or Preferred Shares (or depositary receipts in lieu of Preferred Shares),
the Company shall pay to the registered holders of Right Certificates with
respect to which such fractional Common Shares or Preferred Shares would
otherwise be issuable, at the time such Rights are exercised as provided
herein, an amount in cash equal to the same fraction of the Current Market
Value of a whole Common Share or Preferred Share, as the case may be. For
purposes of this Section 17(b), the Current Market Value of a whole Common
Share or Preferred Share shall be the Closing Price per share for the
Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of such Right, expressly
waives such holder's right to receive any fractional Rights or any
fractional Common Shares or Preferred Shares upon exercise of such Right,
except as permitted by this Section 17.
Section 18. Rights of Action. All rights of action in respect of this
----------------
Agreement, except the rights of action given to the Rights Agent under Section
21 hereof, are vested in the respective registered holders of the Right
Certificates and certificates for Common Shares representing Rights, and any
registered holder of any Right Certificate and of such certificate for Common
Shares, without the consent of the Rights Agent or of the holder of any other
Right Certificate or any other certificate for Common Shares may, in such
holder's own behalf and for such holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder's right to exercise the
Rights represented by such Right Certificate or by such certificate for Common
Shares in the manner provided in such Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have any adequate
remedy at law for any breach by the Company of this Agreement and shall be
entitled to specific performance, and injunctive relief against actual or
threatened violations, of the obligations of the Company under this Agreement.
Section 19. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and every other holder of a Right that:
(a) prior to Distribution Date, the Rights shall be represented by
certificates for Common Shares, registered in the name of the holders of
such Common Shares (which certificates for Common Shares shall also
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constitute Right Certificates) and each Right shall be transferable only in
connection with the transfer of such Common Shares;
(b) after a Distribution Date, the Right Certificates shall only be
transferable on the registry books of the Rights Agent if surrendered at the
principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate is registered as the absolute owner thereof
and of the Rights represented thereby (notwithstanding any notations of
ownership or writing on the Right Certificate by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the
contrary.
Section 20. Right Holder and Right Certificate Holder Not Deemed a
------------------------------------------------------
Stockholder. No holder, as such, of any Right or Right Certificate shall be
- -----------
entitled to vote, receive dividends or be deemed for any purpose the holder of
the securities of the Company which may at any time be issuable upon the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
or Right Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 28 hereof), or to receive dividends
or subscription rights, or otherwise, until such Right or the Rights represented
by such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 21. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent as compensation for
all services rendered by it hereunder reasonable and customary fees and
expenses. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability.
(b) The Rights Agent is authorized to rely upon and shall be protected
and shall incur no liability for or in respect of any action taken, suffered
or omitted by it in connection with its administration of this Agreement in
reliance upon any Right Certificate or certificate for the Preferred Shares
or Common Shares or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the
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proper Person or Persons, or otherwise upon the advice of its counsel as
set forth in Section 23 hereof.
Section 22. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 24 hereof. If, at the time such
successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and if at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and
in all such cases such Right Certificates shall have the full force and
effect provided in such Right Certificates, and in this Agreement.
(b) If at any time the name of the Rights Agent shall be changed, and
at such time any of the Right Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under
its prior name and deliver Right Certificates so countersigned; and if at
that time any of the Right Certificates shall not have been countersigned,
the Rights Agent may countersign such Right Certificates either in its
prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in such Right Certificates
and in this Agreement.
Section 23. Duties of Rights Agent. The Registered Agent's duties are
----------------------
only as expressly set forth herein and no implied duties or obligations shall be
read into this agreement against the Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with such
advice or opinion.
(b) Whenever in the administration or performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking,
omitting or suffering any action hereunder, such fact or matter
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<PAGE>
(unless other evidence in respect thereof be herein specifically
prescribed) shall be conclusively proved and established by a certificate
signed by any one of the Chairman of the Board, the Vice Chairman of the
Board, the President, any Vice President, the Treasurer or the Secretary of
the Company and delivered to the Rights Agent; and any such certificate
shall be full authorization and protection to the Rights Agent and the
Rights Agent shall incur no liability for any action taken, suffered or
omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement, or in the
Right Certificates (except its countersignature thereof), or be required to
verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any liability or
responsibility in respect of the legality, enforceability or validity of
this Agreement or the execution and delivery hereof (except the due
authorization, execution and delivery hereof by the Rights Agent) or in
respect of the legality, enforceability or validity or execution of any
Right Certificate (except its countersignature thereof); nor shall it be
liable or responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor
shall it be liable or responsible for any change in the exercisability of
the Rights (including the Rights becoming null and void pursuant to
Sections 7(d) or 8(d)), or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections
9, 13, 14, 16 and 26 hereof, or the ascertaining of the existence of facts
that would require any such change or adjustment (except with respect to
the exercise of Rights represented by Right Certificates after actual
notice from the Company that such change or adjustment is required); nor
shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Common Shares of the
Company or Preferred Shares or other securities to be issued pursuant to
this Agreement or any, Right Certificate, or as to whether any Common
Shares of the Company or Preferred Shares or other securities will, when
issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions, directions or advice with respect to the administration or
performance of its duties hereunder from any one of the Chairman of the
Board, the Vice Chairman, the President, any Vice President, the Secretary,
any Assistant Secretary or the Treasurer of the Company, and to
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apply to such officers for advice, instructions, directions or advice in
connection with such administration of its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer, employee
agent, contractor or affiliate of the Rights Agent may buy, sell or deal in
any of the Rights of other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and
freely as though it were not the Rights Agent under this Agreement. Nothing
herein shall preclude the Rights Agent and any stockholder, director,
officer, employee, contractor or affiliate of the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided that reasonable care
was exercised in the selection and continued employment thereof.
Section 24. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder a Right Certificate (who shall, with
such notice, submit such holder's Right Certificate for inspection by the
Company), then the Company shall become the Rights Agent and the registered
holder of any Right Certificate or may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States so
long as such corporation is authorized to do business as a banding institution
in the State of Nebraska or New York), in good standing, having an office in the
States of Nebraska or New York, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as
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if it has been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to appoint a successor
Rights Agent or to give any notice provided in this Section 24, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 25. Issuance of New Secondary Right Certificates. Notwithstanding
--------------------------------------------
any of the provisions of this Agreement or of the Secondary Rights to the
contrary, the Company may, at its option, issue new Secondary Right Certificates
representing Secondary Rights in such form as may be approved by the Board of
Directors in order to reflect any adjustment or change in the Secondary Right
Exercise Price and the number or kind or class of shares or other securities or
property purchasable upon exercise of the Secondary Rights in accordance with
the provisions of this Agreement.
Section 26. Redemption of Rights.
--------------------
(a) Until the Rights become nonredeemable, as set forth below, a
majority of the Independent Directors may, at their option, redeem (i) all,
but not less than all, of the than outstanding Primary Rights at a
redemption price of $0.01 per Primary Right, (ii) all, but not less than
all, of the then outstanding Secondary Rights at a redemption price of
$0.01 per Secondary Right, or (iii) all, but not less than all, of then
outstanding Rights in their entirety (Primary Rights and Secondary Rights)
at a redemption price of $0.02 per unit of Primary and Secondary Rights as
such redemption prices may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date
hereof (such redemption prices being hereinafter referred to, respectively,
as the "Redemption Price"). The Primary Rights will become nonredeemable on
the Primary Right Distribution Date. The Secondary Rights will become
nonredeemable on the 25% Acquisition Date and the Company shall notify the
Rights Agent of such event.
(b) In the event that, following the occurrence of the 25%
Acquisition Date with respect to Secondary Rights under subparagraph (a) of
this Section 26, to the extent that the Secondary Rights have not been
exercised, but prior to any Section 14(a)(ii) Event or Section 16(a) Event,
(i) a Person who is a 25% Person shall have transferred or otherwise
disposed of a number of Common Shares in one transaction, or a series of
transactions (not directly or indirectly involving a purchase by the
Company or any of its Subsidiaries), which did not result in the occurrence
of a Section 14(a)(ii) Event or Section 16(a) Event, such that such Person
thereafter Beneficially Owns less than 15% of the outstanding Common Shares
of the Company, and (ii) there are no 25% Persons immediately following the
consummation of such transaction or transactions, then the right of
redemption provided in subparagraph (a) of
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this Section 26 with respect to Secondary Rights shall be reinstated, and
thereafter all outstanding Secondary Rights shall again be subject to the
provisions of this Section 26.
(c) Immediately upon the action of a majority of the Independent
Directors ordering the redemption of Rights pursuant to subsection (a) of
this Section 26, or at such time and date thereafter as they may specify,
and without any further action and without any notice, the right to
exercise such Rights will terminate and the only right thereafter of the
holders of such Rights shall be to received the applicable Redemption
Price. Within 10 Business Days after the action of a majority of the
Independent Directors ordering the redemption of Rights pursuant to
subsection (a) of this Section 26, the Company shall give notice of such
redemption to the Rights Agent and to the holders of such Rights by mailing
such notice to all such holders at their last addresses as they appear upon
the registry books of the Rights Agent, or if prior to the Distribution
Date for such Rights, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives such notice. Each
such notice of redemption shall state the method by which the payment of
the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any
Rights in any manner other than that specifically set forth in this Section
26, an other than in connection with the purchase of Common Shares prior to
both the Distribution Dates.
Section 27. Certain Cash Tender Offers.
--------------------------
(a) In the event that the Company shall at any time hereinafter
receive a Cash Tender Offer Proposal from any Prospective Offeror, the
Board of Directors of the Company shall, within 15 Business Days
thereafter, at its option, either (i) engage a nationally recognized
investment banking firm to render an opinion as to whether the price per
Voting Share in cash to be paid to the holders of Voting Shares pursuant to
such Cash Tender Offer Proposal is fair and adequate (the "Fairness
Opinion"), which Fairness Opinion shall be delivered to the Board of
Directors within 20 Business Days after such engagement, or (ii) call a
special meeting of stockholders (the "Special Meeting") for the purpose of
voting on a precatory resolution requesting the Board of Directors to
accept such Cash Tender Offer Proposal as such Cash Tender Offer Proposal
may be amended or revised by such Prospective Offeror from time to time to
increase the price per Voting Share in cash to be paid to the holders of
Voting Shares (the "Resolution"). The Special Meeting, if any, shall be
held on a date selected by the Board of Directors, which date shall be not
less than 90 nor more than 120 days after the later of the date such Cash
Tender Offer Proposal is received by the Company (the "Proposal Date") or
the date of any previously scheduled meeting of stockholders to be held
within 60 days after the Proposal Date; provided, however, that if (x)
such other meeting shall have been called for the purpose of voting on a
precatory resolution with respect to another Cash Tender Offer Proposal and
(y) the Proposal Date shall be not later than 15 days after the date such
other Cash Tender Offer Proposal was received by the Company, then both the
Resolution and such other resolution shall be voted on at such
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meeting and such meeting shall be deemed to be the Special Meeting. The
Board of Directors shall set a date for determining the stockholders of
record entitled to notice of and to vote at the Special Meeting, if any, in
accordance with the Company's Articles of Incorporation and Bylaws and with
applicable law. At the request of the Prospective Offeror, the Company
shall include in any proxy soliciting material prepared by it in connection
with the Special Meeting, if any, proxy soliciting material submitted by
the Prospective Offeror; provided, however, that the Prospective Offeror
shall by written agreement with the Company contained in or delivered with
such request have indemnified the Company against any and all liabilities
resulting from the misstatements, misleading statements and omissions
contained in the Prospective Offeror's proxy soliciting material and shall
have agreed to pay the Company's incremental costs incurred as a result of
including such material in the Company's proxy soliciting material.
(b) In the event that (x) the Fairness Opinion states that the price
per Voting Share to be paid in cash to the holders of Voting Shares
pursuant to the Cash Tender Offer Proposal is fair and adequate, or (y) at
the Special Meeting the Resolution receives the affirmative vote of the
majority of the Voting Shares outstanding as of the record date of the
Special Meeting and not Beneficially Owned on such day by the Prospective
Offeror or any of its Affiliates or Associates, then (i) proper provision
shall be made in order that upon the consummation of any tender offer
(provided that such tender offer is consummated prior to 60 date after the
date of such event) pursuant to which the Prospective Offeror or offers o
purchase and purchases any and all of the Voting Shares held by Persons
other than the Prospective Offeror or and its Affiliates and Associates at
a price per Voting Share in cash equal to or greater than the price per
Voting Share provided in the Cash Tender Offer Proposal (a "Fair Offer"),
each previously unexercised Right shall be redeemed in accordance with
Section 26 hereof, effective immediately prior thereto, and (ii) neither
the commencement of, nor the first public announcement of the intent of any
Person to commence, such tender offer shall be taken into account in
determining whether the Secondary Right Distribution Date has or has not
occurred, nor shall the acquisition of Common Shares pursuant to such
tender offer be taken into account in determining whether the 15%
Acquisition Date or the 25% Acquisition Date or a Section 14(a)(ii) Event
has or has not occurred. The redemption of Rights pursuant to this Section
27 shall not in any way affect the exercisability of such Rights prior to
the effective time of such redemption.
(c) Nothing contained in this Section 27 shall be deemed to be in
derogation of the obligation of the Board of Directors of the Company to
exercise its fiduciary duty. Without limiting the foregoing, nothing
contained herein shall be construed to suggest or imply that the Board of
Directors shall not be entitled to reject any Cash Tender Offer Proposal,
or to recommend that holders of Voting Shares reject any Cash Tender Offer
Proposal, or to take any other action (including, without limitation, the
commencement, prosecution, defense or settlement of any litigation or the
submission of additional or alternative Cash Tender Offer Proposals or
other proposals to the Special Meeting) with respect to any Cash Tender
-36-
<PAGE>
Offer Proposal or any tender offer that the Board of Directors believes is
necessary or appropriate in the exercise of such fiduciary duty.
(d) Nothing in this Section 27 shall be construed as limiting or
prohibiting the Company or any Prospective Offeror or from proposing or
engaging in any acquisition, disposition or other transfer of any
securities of the Company, any merger or consolidation involving the
Company, any sale or other transfer of assets of the Company, any
liquidation, dissolution or winding up of the Company, any other business
combination or other transaction, or any other action; provided, however,
that the holders of Rights shall have the rights set forth in this
Agreement with respect to any such acquisition, disposition, transfer,
merger, consolidation, sale, liquidation, dissolution, winding up, business
combination, transaction or action.
Section 28. Notice of Certain Events.
------------------------
(a) In the event that the Company shall propose (i) to declare or pay
any dividend payable on or make any distribution with respect to its Common
Shares or Preferred Shares (other than a regular quarterly cash dividend),
(ii) or offer to the holders of its Common Shares or Preferred Shares
options, Rights or warrants to subscribe for or to purchase any additional
shares thereof or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Common
Shares or Preferred Shares (other than a reclassification involving only
the subdivision of outstanding shares), (iv) to effect any consolidation or
merger with or into, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in
one or more transactions, of more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to, any other Person
or Persons, or (v) to effect the liquidation, dissolution or winding up of
the Company, then and in each case, the Company shall give to the Rights
Agent and to each holder of a Right Certificate, in accordance with Section
29 hereof, a notice of such proposed action, which shall specify the record
date for the purpose of such dividend or distribution, or the date upon
which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of record of the Common Shares or
Preferred Shares, if any such date is to be fixed, and such notice shall be
so given in the case of any action covered by clause (i) or (ii) above at
least 20 days prior to the record date for determining holders of the
Common Shares or Preferred Shares for purposes of such action, and in the
case of any such other action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares or Preferred Shares, whichever date shall be
the earlier. The failure to give the notice required by this Section 28 or
any defect therein shall not affect the legality or validity of the action
taken by the Company or the vote upon any such action.
(b) Upon the occurrence of each event causing an adjustment, pursuant
to Section 13, 14 or 16 hereof, in the number or type of Common Shares or
other securities or property purchasable upon the exercise of a Primary
-37-
<PAGE>
Right, (i) the Company shall as soon as practicable thereafter give to each
holder of a Primary Right Certificate, in accordance with Section 29
hereof, a notice of the occurrence of such event, specifying the event and
the consequences of the event to holders of Primary Rights under Section
13, 14 or 16 thereof.
(c) Upon the occurrence of each Section 14(a)(ii) Event and each
Section 16(a) Event, (i) the Company shall as soon as practicable
thereafter give to each holder of a Secondary Right Certificate, in
accordance with Section 29 hereof, a notice of the occurrence of such
event, specifying the event and the consequences of the event to holders of
Secondary Rights under Sections 14 or 16 hereof.
Section 29. Notices. Notices, communications or demands authorized by
-------
this Agreement to be given or made by the Rights Agent or by the holder of any
Right Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Commercial Federal Corporation
2120 South 72nd Street
Omaha, Nebraska 68101
Attention: Corporate Secretary
Subject to the provisions of Section 24 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) to the principal office of the Rights
Agent as follows:
Manufacturers Hanover Trust Company
450 West Thirty-Third Street
New York, New York, 10001
Attention: Vice President, Administration
Notices, communications or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Right Certificate
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 30. Supplements and Amendments.
--------------------------
(a) The Company may, and the Rights Agents shall if a majority of the
Independent Directors so direct, supplement or amend any provision of this
Agreement in any manner (i) if prior to the Close of Business on the
Primary Right Distribution Date, without the approval of any holders of
Primary Rights, and (ii) if prior to the Close of Business on the 25%
Acquisition Date, without the approval of any holders of Secondary Rights.
The Company may, and the Rights Agent shall if a majority of the
Independent Directors so direct, at any time and from time to time,
supplement or amend this Agreement without the approval of any holders of
-38-
<PAGE>
Rights in order to cure any ambiguity, correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provision contained herein, or change or supplement any other provision
contained herein, in any manner which the Company may deem necessary or
desirable, including, but not limited to, extending an Expiration Date, so
long as the interests of the holders of the Rights shall not be materially
and adversely affected thereby. The Rights Agent shall not be obligated to
execute any supplement or amendment if the Rights Agent's duties,
responsibilities or liabilities are materially increased.
(b) Any supplement or amendment of this Agreement which cannot be
effected pursuant to subsection (a) of this Section 30 may be effected if
approved by a majority of the Independent Directors and by holders of two-
thirds or more of the outstanding Rights, voting as one class.
(c) After the Close of Business on the 25% Acquisition Date and prior
to the earlier of the Secondary Right Redemption Date or the Secondary
Right Expiration Date, the Company shall not effect any amendment to the
Certificate of Designation for the Preferred Shares which would materially
and adversely affect the rights, privileges or preferences of the Preferred
Shares without the prior approval of the holders of two-thirds or more of
the then outstanding Secondary Rights.
Section 31. Certain Covenants. Subject to Section 30 and the other
-----------------
provisions of this Agreement:
(a) no adjustment to the number of Common Shares for which a Primary
Right is exercisable shall be made or be effective if such adjustment would
have the effect of reducing or limiting the benefits that the holders of
the Primary Rights would have had absent such adjustment, including,
without limitation, the benefits under Section 7 and 13 hereof, unless the
terms of this Agreement are deemed so as to preserve such benefits.
(b) no adjustment to the Secondary Right Exercise Price, the number
of Preferred Shares or Common Shares or other securities, as the case may
be (or fractions of a shares), for which a Secondary Right is exercisable
or the number of Secondary Rights outstanding shall be made or be effective
if such adjustment would have the effect of reducing or limiting the
benefits that the holders or the Secondary Rights would have had absent
such adjustment, including, without limitation, the benefits under Section
8, 14 and 16 hereof, unless the terms of this Agreement are amended so as
to preserve such benefits; and
(c) the Company shall not, during any time when there exists a 15%
Person or a 25% Person, (i) sell or issue, or permit any Subsidiary to sell
or issue, to a 15% Person or a 25% Person, or any Affiliate or Associate
thereof, any rights, options, warrants or convertible securities on terms
similar to, or which materially adversely affect the value of, the Rights,
or (ii) sell or issue to a 15% Person or a 25% Person, or any Affiliate or
Associate thereof, Preferred Shares, Common Shares or shares of any other
class of capital stock if such sale or issue is intended to or would
materially adversely affect the value of the Rights.
-39-
<PAGE>
Section 32. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefits of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 33. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any Person other than the Company, the Rights Agent, the
registered holders of the Right Certificates and the certificates for Common
Shares representing Rights any legal or equitable right, remedy or claim under
this Agreement, but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent, the registered holders of the Right
Certificates and, the certificates for Common Shares representing Rights.
Section 34. Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 35. Governing Law. This Agreement, and each Right Certificate
-------------
issued hereunder, shall be deemed to be a contract made under the laws of the
State of Nebraska and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts made and
performed entirely within such state, expect the laws of the State of New York
shall govern the rights and duties of the Rights Agent.
Section 36. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 37. Descriptive Headings. Descriptive headings of the several
--------------------
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested as of the date and year first above written.
Attest: COMMERCIAL FEDERAL CORPORATION
By /s/ By /s/
-------------------------------- ------------------------------
Title: Assistant Vice President Title: President
Attest: Manufacturers Hanover Trust Company
By /s/ By /s/
------------------------------- ------------------------------
Title: Title:
-40-
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATIONS OF SERIES OF JUNIOR
PARTICIPATING CUMULATIVE PREFERRED STOCK
No Par Value
of
COMMERCIAL FEDERAL CORPORATION
Pursuant to Sections 21-2014 and 21-2015 of the Nebraska
Business Corporation Act
We, [Name], [Title] and [Name], [Title], of Commercial Federal Corporation,
a corporation organized and existing under the Nebraska Business Corporation
Act, in accordance with the provisions of Sections 21-2053 and 21-2054 thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, the Board of Directors on December
19, 1988 adopted the following resolution creating a series of one hundred
thousand (100,000) shares of Preferred Stock designated as Series A Junior
Participating Cumulative Preferred Stock, $0.01 par value:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
this Corporation in accordance with the provisions of its Articles of
Incorporation a series of Preferred Stock of the Corporation be, and it hereby
is, created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as Series A Junior Participating Cumulative Preferred Stock, no par
value (the "Series A Preferred Stock") and the number of shares constituting
such series shall be one hundred thousand (100,000).
Section 2. Dividends and Distributions.
---------------------------
(A) The holders of shares of Series A Preferred Stock, in preference to the
holders of shares of Common Stock, $0.01 par value per share, of the Corporation
(the "Common Stock") and of any other junior stock of the Corporation which may
be outstanding, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the tenth day of January, April, July and October
in each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.25 per share ($5.00 per annum), or (b) subject to the provision for
adjustment hereinafter set forth, 100 times
<PAGE>
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock, or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event that the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then and in each such event, the amount
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event, and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (A) of this Section 2 immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, however, that in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $____ per share ($____
per annum) on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which cases such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
cumulate but shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 50 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
-------------
Stock shall have the following voting rights:
-2-
<PAGE>
(A) Each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes (and each one one-hundredth of a share of Series A Preferred Stock
shall entitle the holder thereof to one vote) on all matters submitted to a vote
of the stockholders of the Corporation. In the event that the Corporation shall
at any time declare or pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then and in each such event, the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided in the Certificate of Incorporation of the
Corporation, as amended, or herein or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock shall vote together as
one class on all matters submitted to a vote of stockholders of the Corporation.
(C) In addition, the holders of shares of Series A Preferred Stock shall
have the following special voting rights:
In the event that dividends on Series A Preferred Stock, whenever accrued,
shall not have been paid or declared and a sum sufficient for the payment
thereof set aside, in amount equivalent to six (6) quarterly dividends on
all shares of Series A Preferred Stock at the time outstanding, then and in
each such event, the holders of shares of Series A Preferred Stock and each
other series of preferred stock now or hereafter issued which shall be
accorded such class voting right by the Board of Directors and which shall
have the right to elect [two ( 2) ] directors as the result of a prior or
subsequent default in payment of dividends on such series (each such other
series being hereinafter called "Other Series of Preferred Stock"), voting
separately as a class without regard to series, shall be entitled to elect
[two (2)] directors, in addition to the directors to be elected by the
holders of all shares of the Corporation entitled to vote for the election
of directors, and the holders of all shares (including the Series A
Preferred Stock) otherwise entitled to vote for directors, voting separately
as a class, shall be entitled to elect the remaining members of the Board of
Directors. Such special voting right of the holders of shares of Series A
Preferred Stock may be exercised until all dividends in default on the
Series A Preferred Stock shall have been paid in full or declared and funds
sufficient therefor set aside, and when so paid or provided for, such
special voting right of the holders of shares of Series A Preferred Stock
shall cease, but subject always to the same provisions for the vesting of
such special voting rights in the event of any such future dividend default
or defaults. At anytime after such special voting rights shall have so
vested in the holders of shares of Series A Preferred Stock, the Secretary
of the Corporation may, and upon the written request of the holders of
record of ten percent (10%) or more
-3-
<PAGE>
in number of the shares of Series A Preferred Stock and each Other Series of
Preferred Stock then outstanding addressed to the Secretary at the principal
executive office of the Corporation shall, call a special meeting of the
holders of shares of Preferred Stock so entitled to vote, for the election
of the directors to be elected by them as herein provided, to be held within
sixty (50) days after such call and at the place and upon the notice
provided by law and in the Bylaws for the holding of meetings of
stockholders; provided, however, that the Secretary shall not be required to
call such special meeting in the case of any such request received less than
ninety (90) days before the date fixed for any annual meeting of
stockholders, and if in such case such special meeting is not called, the
holders of shares of Preferred Stock so entitled to vote shall be entitled
to exercise the special voting rights provided in this paragraph at such
annual meeting. If any such special meeting required to be called as above
provided shall not be called by the Secretary within thirty (30) days after
receipt of any such request, then the holders of record of ten percent (10%)
or more in number of the shares of Series A Preferred Stock and each Other
Series of Preferred Stock then outstanding may designate in writing one of
their number to call such meeting, and the person so designated may, at the
expense of the shares of Series A Preferred Stock may be exercised until all
dividends in default on the Series A Preferred Stock shall have been paid in
full or declared and funds sufficient therefor set aside and when so paid or
provided for, such special voting right of the holders of shares of Series A
Preferred Stock shall cease, but subject always to the same provisions for
the vesting of such special voting rights in the event of any such future
dividend default or defaults. At any time after such special voting rights
shall have so vested in the holders of shares of Series A Preferred Stock,
the Secretary of the Corporation may, and upon the written request of the
holders of record of ten percent (10%) or more in number of the shares of
Series A Preferred Stock and each Other Series of Preferred Stock then
outstanding addressed to the Secretary at the principal executive office of
the Corporation shall, call a special meeting of the holders of shares of
Preferred Stock so entitled to vote, for the election of the directors to be
elected by them as herein provided, to be held within sixty (50) days after
such call and at the place and upon the notice provided by law and in the
Bylaws for the holding of meetings of stockholders; provided, however, that
the Secretary shall not be required to call such special meeting in the case
of any such request received less than ninety (90) days before the date
fixed for any annual meeting of stockholders, and if in such case such
special meeting is not called, the holders of shares of Preferred Stock so
entitled to vote shall be entitled to exercise the special voting rights
provided in this paragraph at such annual meeting. If any such special
meeting required to be called as above provided shall not be called by the
Secretary within thirty (30) days after receipt of any such request, then
the holders of record of ten percent (10%) or more in number of the shares
of Series A Preferred Stock and each Other Series of Preferred Stock then
outstanding may designate in writing one of their number to call such
meeting, and the person so designated may, at the expense of the
Corporation, call such meeting to be held at the place and upon the notice
above provided, and for that purpose shall have access to the stock books of
the Corporation. No such special
-4-
<PAGE>
meeting and no adjournment thereof shall be held on a date later than sixty
(60) days before the annual meeting of stockholders or a special meeting
held in place thereof next succeeding the time when the holders of shares of
Series A Preferred Stock become entitled to elect directors as above
provided. If, at any meeting so called or at any annual meeting held while
the holders of shares of Series A Preferred Stock have the special voting
rights provided for in this paragraph, the holders of not less than forty
percent (40%) of the shares of Series A Preferred Stock and each Other
Series of Preferred Stock then outstanding are present in person or by proxy
which percentage shall be sufficient to constitute a quorum for the election
of additional directors as herein provided, the then authorized number of
directors of the Corporation shall be increased by [two (2)], as of the time
of such special meeting or the time of the first such annual meeting held
while such holders have said special voting rights and such quorum is
present, and the holders of shares of Series A Preferred Stock and each
Other Series of Preferred Stock, voting as a class, shall be entitled to
elect the additional directors so provided for.
If the directors of the Corporation are then divided into classes under
provisions of the Articles of incorporation of the Corporation or the
Bylaws, the [two (2)] additional directors shall be members of those
respective classes of directors in which a vacancy is created as a result of
such increase in the authorized number of directors. Upon the election at
such meeting by the holders of shares of Series A Preferred Stock and each
Other Series of Preferred Stock, voting as a class, of the [two (2)]
directors they are entitled so to elect, the persons so elected, together
with such persons as may be directors or as may have been elected as
directors by the holders of all shares (including Series A Preferred Stock)
otherwise entitled to vote for directors, shall constitute the duly elected
directors of the Corporation. The additional directors so elected by holders
of shares of Series A Preferred Stock shall serve until the next annual
meeting or until their respective successors shall be elected and qualified
or if any such director is a member of a class of directors under provisions
dividing the directors into classes as aforesaid, each such director shall
serve until the annual meeting at which the term of office of such
director's class shall expire or until such director's successor shall be
elected and shall qualify, and at each subsequent meeting of stockholders at
which the directorship of any director elected by the vote of holders of
shares of Series A Preferred Stock and each Other Series of Preferred Stock
under the special voting rights set forth in this paragraph is up for
election, said special voting rights shall apply in the re-election of such
director or in the election of such director's successor; provided, however,
that whenever the holders of shares of Series A Preferred Stock and each
Other Series of Preferred Stock shall be divested of the special rights to
elect [two (2)] directors as above provided, the terms of office of all
persons elected as directors by the holders of shares of Series A Preferred
Stock and each Other Series of Preferred Stock, voting as a class, or
elected to fill any vacancies resulting from the death, resignation, or
removal of directors so elected by the holders of shares of Series A
Preferred Stock and each Other Series of Preferred Stock, shall forthwith
terminate and the authorized number of
-5-
<PAGE>
directors shall be reduced accordingly. If, at any time after a special
meeting of stockholders or an annual meeting of stockholders at which the
holders of shares of Series A Preferred Stock and each Other Series of
Preferred Stock have elected additional directors as provided above, and
while the holders of shares of Series A Preferred Stock and each Other
Series of Preferred Stock shall be entitled to elect (two (2)] directors,
the number of directors who have been elected by the holders of shares of
Series A Preferred Stock and each Other Series of Preferred Stock (or who by
reason of one or more resignations, deaths or removals have succeeded any
directors so elected) shall by reason of resignation, death or removal be
less than [two (2)] but at least one (1), the vacancy in the directors
elected by the holders of shares of the Series A Preferred Stock and each
Other Series of Preferred Stock may be filled by the remaining director
elected by such holders, and in the event that such election shall not occur
within thirty (30) days after such vacancy arises, or in the event that
there shall not be incumbent at least one (1) director elected by such
holders, the Secretary of the Corporation may, and upon the written request
of the holders of record of ten percent (10%) or more in number of the
shares of Series A Preferred Stock and each Other Series of Preferred Stock
then outstanding addressed to the Secretary at the principal office of the
Corporation shall, call a special meeting of the holders of share of
Preferred Stock so entitled to vote, for an election to fill such vacancy or
vacancies, to be held within sixty (50) days after such call and at the
place and upon the notice provided by law and in the Bylaws for the holding
of meetings of stockholders; provided, however, that the Secretary shall not
be required to call such special meeting in the case of any such request
received less than ninety (90) days before the date fixed for any annual
meeting of stockholders, and if in such case such special meeting is not
called, the holders of shares of Preferred Stock so entitled to vote shall
be entitled to fill such vacancy or vacancies at such annual meeting. If any
such special meeting required to be called as above provided shall not be
called by the Secretary within thirty (30) days after receipt of any such
request, then the holders of record of ten percent (10%) or more in number
of the shares of Series A Preferred Stock and each Other Series of Preferred
Stock then outstanding may designate in writing one of their number to call
such meeting, and the person so designated may, at the expense of the
Corporation, call such meeting to be held at the place and upon the notice
above provided, and for that purpose shall have access to the stock books of
the Corporation; no such special meeting and no adjournment thereof shall be
held on a date later than sixty (60) days before the annual meeting of
stockholders or a special meeting held in place thereof next succeeding the
time when the holders of shares of Series A Preferred Stock and each Other
Series of Preferred Stock become entitled to elect directors as above
provided.
(D) Nothing herein shall prevent the directors or stockholders from taking
any action to increase the number of authorized shares of Series A Preferred
Stock, or increasing the number of authorized shares of Preferred Stock of the
same class as the Series A Preferred Stock or the number of authorized shares of
Common Stock, or changing the par value of the Common Stock, or issuing options,
warrants, or rights to any class of stock of the Corporation as
-6-
<PAGE>
authorized by the Articles of Incorporation of the Corporation, as currently in
effect or as it may hereafter be amended.
(E) Except as set forth herein, holders of shares of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote as set forth in the
Articles of Incorporation of the Corporation or by law) for taking any corporate
action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions payable
on the Series A Preferred Stock as provided in Section 2 hereof are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions with
respect to, shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions with
respect to, any shares of Stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on shares of the Series A Preferred
Stock and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of Stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
-7-
<PAGE>
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred Stock, without designation as to series, and may be reissued as part
of a new series of preferred stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Corporation, no distribution shall be made (A)
to the holders of the shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock
shall have received the greater of (i) $100 per share ($1 per one one-hundredth
of a share), plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, or
(ii) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of shares of Common Stock, nor shall any distribution be
made (B) to the holders of shares of Stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all other such parity Stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event that the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then and in each such event, the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event, and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In the event that the Corporation
--------------------------
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, or otherwise changed, then and in
each such event, the shares of Series A Preferred stock shall at the same time
be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event that the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then and in each such event, the amount
set forth in the preceding sentence with respect to the
-8-
<PAGE>
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event, and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall not
-------------
be redeemable. Notwithstanding the foregoing, the Corporation may acquire
shares of Series A Preferred Stock in any other manner permitted by law, the
Articles of Incorporation of the Corporation.
Section 9. Rank. Unless otherwise provided in the Articles of
----
Incorporation of the Corporation or a Certificate of Designations relating to a
subsequent series of preferred Stock of the Corporation, the Series A Preferred
Stock shall rank junior to all other series of the Corporation's preferred Stock
as to the payment of dividends and the distribution of assets on liquidation,
dissolution or winding up, and senior to the Common Stock of the Corporation.
Section 10. Amendment. The Articles of Incorporation of the Corporation
---------
shall not be amended in any manner that would materially and adversely alter or
change the powers, preferences or special rights of the Series A Preferred Stock
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting together as a single
series.
Section 11. Fractional Shares. Series A Preferred Stock may be issued in
-----------------
fractions of a share (in one one-hundredths (1/100) of a share and integral
multiples thereof) which shall entitle the holder thereof, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of shares of Series A Preferred Stock.
-9-
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this _____ day of
________, 1988.
-------------------------
[Name, Title]
Attest:
- -----------------------
[Name, Title]
-10-
<PAGE>
Exhibit B
---------
FORM OF
PRIMARY RIGHT CERTIFICATE
Certificate No. R- ___ Primary Rights
PRIMARY RIGHT EXERCISE PRICE PER PRIMARY RIGHT -- $________
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.01
PER SHARE, OF COMMERCIAL FEDERAL CORPORATION TO
BE RECEIVED UPON EXERCISE OF A PRIMARY RIGHT AND
PAYMENT OF THE PRIMARY RIGHT EXERCISE PRICE -- $________
NOT EXERCISABLE AFTER December 19, 1998 (THE
"PRIMARY RIGHT EXPIRATION DATE"). THE PRIMARY
RIGHTS ARE SUBJECT TO REDEMPTION AT $.Ol PER
PRIMARY RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. PRIMARY RIGHTS BENEFICIALLY OWNED BY
15% PERSON OR AN AFFILIATE OR ASSOCIATE OF A 15%
PERSON (AS THOSE TERMS ARE DEFINED IN SECTIONS
l(a), l(b) and 1(mm) OF THE RIGHTS AGREEMENT) OR
ANY SUBSEQUENT HOLDER OF SUCH PRIMARY RIGHTS ARE
NULL AND VOID.
Primary Right Certificate
COMMERCIAL FEDERAL CORPORATION
This certifies that ____________________________________, or registered
assigns, is the registered owner of the number of Primary Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement dated as of December 19, 1988
(the "Rights Agreement") by and between Commercial Federal Corporation, a
Nebraska corporation (the "Company"), and The Manufacturers Hanover Trust
Company, a New York corporation (the "Rights Agent"), to purchase from the
Company at any time prior to the Primary Right Expiration Date, at the office or
agency of the Rights Agent Manufacturer Hanover Trust Company, 450 West Thirty-
Third Street, New York, New York 10001 or at the office of its successors as
Rights Agent, the number of fully paid and nonassessable shares of Common Stock,
par value $0.01 per share, of the Company (the "Common Shares") indicated on the
face hereof, at the purchase price per such number of Common Shares (the
"Primary Right Exercise Price") indicated on the face hereof, upon presentation
and surrender of this Primary Right Certificate with the Form of Election to
Purchase duly executed.
As provided in the Rights Agreement the number of Common Shares which may be
purchased upon the exercise of the Primary Rights represented by the Primary
Right Certificate is subject to adjustment upon the occurrence of certain
events. This Primary Right Certificate is subject to all of the terms,
<PAGE>
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby, incorporated herein by reference and made a part hereof,
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Primary Right
Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company, and the above-mentioned offices of the Rights
Agent.
This Primary Right Certificate, with or without other Primary Right
Certificates, upon surrender at the office or agency of the Rights Agent at
Manufacturers Hanover Trust Company, 450 West Thirty-Third Street, New York, New
York, 10001 may be exchanged for another Primary Right Certificate or Primary
Right Certificates of like tenor and date representing Primary Rights entitling
the holder thereof to purchase a like aggregate number of Preferred Shares as
the Primary Rights represented by the Primary Right Certificate or the Primary
Right Certificates surrendered shall have entitled such holder to purchase. If
this Primary Right Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Primary Right Certificate or
Primary Right Certificates for the number of whole Primary Rights not exercised.
Subject to the provisions of the Rights Agreement, the Primary Rights
represented by this Primary Right Certificate may be redeemed by the Company, at
its option, at a redemption price of $.Ol per Primary Right.
No fractional Common Shares will be issued upon the exercise of any Primary
Right or Primary Rights represented hereby, but in lieu thereof, a cash payment
shall be made, as provided in the Rights Agreement.
No holder of this Primary Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the Common
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Primary Right or Primary Rights represented by
this Primary Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Primary Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
-2-
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ____________________.
Attest: COMMERCIAL FEDERAL CORPORATION
By: _________________________ By: ________________________
Title Title
Countersigned:
Manufacturers Hanover Trust Company
By: _________________________
Authorized Signatory
-3-
<PAGE>
Form of Reverse Side of Primary Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder desires to
transfer the Primary Right Certificate)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfer unto _________________________________________
_________________________________________________________________
(Please print name and address of transferee)
__________________________________________________________________
this Primary Right Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint ____________________
attorney, to transfer this Primary Right Certificate on the books of Commercial
Federal Corporation with full power of substitution.
Dated: ___________________, 19__ ______________________________
Signature
Signature Guaranteed:
Certificate
-----------
(To be completed, if true)
The undersigned hereby certifies that the Primary Rights represented by this
Primary Right Certificate are not Beneficially Owned by a 15% Person or an
Affiliate or Associate of a 15% Person (as such capitalized terms are defined in
the Rights Agreement).
Dated: ___________________, 19__ ______________________________
Signature Guaranteed:
-4-
<PAGE>
Form of Reverse Side of Primary Right Certificate --
continued
NOTICE
The signatures to the foregoing Assignment and the foregoing Certificate, if
applicable, must correspond to the name as written upon the face of this Primary
Right Certificate in every particular, with alteration or enlargement or any
change whatsoever, and must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company shall deem the Primary Rights represented by
this Primary Right Certificate to be Beneficially Owned by a 15% Person or an
Affiliate or Associate of a 15% Person (as such capitalized terms are defined in
the Rights Agreement), and shall not issue any Primary Right Certificate in
exchange for this Primary Right Certificate.
-5-
<PAGE>
Form of Reverse Side of Primary Right Certificate --
continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder if such holder
desires to exercise the Primary Right Certificate.)
TO COMMERCIAL FEDERAL CORPORATION
The undersigned hereby irrevocably elects to exercise _________________
Primary Rights represented by this Primary Right Certificate to purchase the
Common Shares issuable upon the exercise of such Primary Rights and requests
that certificates for such Common Shares be issued in the name of:
Please insert social security
or other identifying number
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
If such number of Primary Rights shall not be all the Primary rights
represented by this Primary Right Certificate, a new Primary Right Certificate
for the balance remaining of such Primary Rights shall be registered in the name
of and delivered to:
Please insert social security
or other identifying number
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
Dated: 19
------------------, -- -------------------------------
Signature
Signature Guaranteed:
-6-
<PAGE>
Form of Reverse Side of Primary Right Certificate --
continued
Certificate
-----------
(to be completed, if true)
The undersigned hereby certifies that the Primary Rights represented by this
Primary Right Certificate are not Beneficially Owned by a 15% Person or an
Affiliate or Associate of a 15% Person (as such capitalized terms are defined in
the Rights Agreement).
Dated: , 19
-------------- -- ---------------------------------
Signature
Signature Guaranteed:
NOTICE
The signatures to the foregoing Assignment and the foregoing Certificate, if
applicable, must correspond to the name as written upon the face of this Primary
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company shall deem the Primary Rights represented by
this Primary Right Certificate to be Beneficially Owned by a 15% person or an
Affiliate or Associate of a 15% Person (as such capitalized terms are defined in
the Rights Agreement), and shall not issue any certificate for Common Shares
upon the exercise of this Primary Right Certificate or any new Primary Right
Certificate for any remaining balance of unexercised Primary Rights represented
by this Primary Right Certificate.
-7-
<PAGE>
Exhibit C
---------
FORM OF
SECONDARY RIGHT CERTIFICATE
Certificate No. R- ______ Secondary Rights
NOT EXERCISABLE AFTER December 19, 1998 OR EARLIER IF REDEEMED. THE
SECONDARY RIGHTS ARE SUBJECT TO REDEMPTION AT $.Ol PER SECONDARY RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
SECONDARY RIGHTS BENEFICIALLY OWNED BY A 25% PERSON OR AN AFFILIATE OR
ASSOCIATE OF A 25% PERSON (AS THOSE TERMS ARE DEFINED IN SECTIONS l(a), l(b)
AND l(oo) OF THE RIGHTS AGREEMENT AND AS THOSE CIRCUMSTANCES ARE SPECIFIED
IN SECTION 8(d) OF THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH
SECONDARY RIGHTS MAY BECOME NULL AND VOID. [THE SECONDARY RIGHTS REPRESENTED
BY THIS SECONDARY RIGHT CERTIFICATE WERE ISSUED TO A PERSON WHO WAS A 25%
PERSON OR AN AFFILIATE OR AN ASSOCIATE OF A 25% PERSON. THIS SECONDARY
RIGHT CERTIFICATE AND THE SECONDARY RIGHTS REPRESENTED HEREBY MAY BECOME
NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 8(d) OF THE RIGHTS
AGREEMENT.]*
Secondary Right Certificate
COMMERCIAL FEDERAL CORPORATION
This certifies that _________________________, or registered assigns, is the
registered owner of the number of Secondary Rights set forth above, each of
which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of December 19, 1988 (the "Rights
Agreement") by and between Commercial Federal Corporation, a Nebraska
corporation (the "Company"), and Manufacturers Hanover Trust Company, a New York
corporation (the "Rights Agent"), to purchase from the Company at any time prior
to the earlier of the Secondary Right Redemption Date (as such term is defined
in the Rights Agreement) or 5:00 p.m., Omaha time, on December 19, 1998, at the
office or agency of the Rights Agent at Manufacturers Hanover Trust Company, a
New York corporation, 450 West Thirty-Third Street, New York, New York 10001, or
at the office of its successors as Rights Agent, one one-hundredth of a fully
paid and nonassessable share of Series A Junior Participating Cumulative
Preferred Stock, par value of $0.01 per share, of the Company (the "Preferred
Shares"), at a purchase price of $42.00 per one one-hundredth of a Preferred
Share (the "Secondary Right Exercise Price"), upon presentation and surrender of
this Secondary Right Certificate with the Form of Election to Purchase duly
executed. The number of Secondary Rights represented
- ------------
* The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.
<PAGE>
by this Secondary Right Certificate (and the number of Preferred Shares which
may be purchased upon exercise thereof) set forth above, and the Secondary Right
Exercise Price per share set forth above, are the number of Secondary Rights and
the Secondary Right Exercise Price as of December 19, 1988, based upon the
Preferred Shares as constituted at such date.
As provided in the Rights Agreement, the Secondary Right Exercise Price and
the number of Preferred Shares, or under certain circumstances as set forth in
the Rights Agreement, Common Shares, which may be purchased upon the exercise of
the Secondary Rights represented by this Secondary Right Certificate are subject
to modification and adjustment upon the occurrence of certain events. This
Secondary Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof, and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligation, duties and immunities hereunder of the Rights
Agent, the Company and the holders of the Secondary Right Certificates. Copies
of the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
This Secondary Right Certificate, with or without other Secondary Right
Certificates, upon surrender at the office or agency of the Rights Agent at
Manufacturers Hanover Trust Company, 450 West Thirty-Third Street, New York, New
York 10001 may be exchanged for another Secondary Right Certificate or Secondary
Right Certificates of like tenor and date representing Secondary Rights
entitling the holder thereof to purchase a like aggregate number of Preferred
Shares, or under certain circumstances as set forth in the Rights Agreement,
Common Shares, as the Secondary Rights represented by the Secondary Right
Certificate or the Secondary Right Certificates surrendered shall have entitled
such holder to purchase. If this Secondary Right Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Secondary Right Certificate or Secondary Right Certificates for the number of
whole Secondary Rights not exercised. Subject to the provisions of the Rights
Agreement, the Secondary Rights represented by this Secondary Right Certificate
may be redeemed by the Company, at its option, at a redemption price of $.Ol per
Secondary Right.
No fractional Preferred Shares will be issued upon the exercise of any
Secondary Right or Secondary Rights represented hereby (other than fractions
which are integral multiples of one-hundredth of a Preferred Share, which may,
at the option of the Company, be represented by depositary receipts), but in
lieu thereof, a cash payment shall be made, as provided in the Rights Agreement.
No holder of this Secondary Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Secondary Right or Secondary
<PAGE>
Rights represented by the Secondary Right Certificate shall have been exercised
as provided in the Rights Agreement.
This Secondary Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of .
-------------------
Attest: COMMERCIAL FEDERAL CORPORATION
By By
--------------------------- ------------------------
Title: Title:
Countersigned:
MANUFACTURERS HANOVER TRUST COMPANY
By
----------------------------
Authorized Signatory
<PAGE>
Form of Reverse Side of Secondary Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder desires to
transfer the Secondary Right Certificate)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfer unto _________________________________________
_________________________________________________________________
(Please print name and address of transferee)
__________________________________________________________________
this Secondary Right Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer this Secondary Right Certificate
on the book of Commercial Federal Corporation with full power of substitution.
Dated: 19
-------------------, -- ------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
(To be completed, if true)
The undersigned hereby certifies that the Secondary Rights represented by
this Secondary Right Certificate are not Beneficially Owned by a 25% Person or
an Affiliate or Associate of a 25% Person (as such capitalized terms are defined
in the Rights Agreement).
Dated: 19
-------------------, -- ------------------------------
Signature
Signature Guaranteed:
<PAGE>
Form of Reverse Side of Secondary Right Certificate --
continued
NOTICE
The signature to the foregoing Assignment and the foregoing Certificate, if
applicable, must correspond to the name as written upon the face of the
Secondary Right Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company shall deem the Secondary Rights represented by
this Secondary Right Certificate to be Beneficially Owned by a 25% Person or an
Affiliate or Associate of a 25% Person (as such capitalized terms are defined in
the Rights Agreement), and shall affix a legend to that effect on any Secondary
Rights Certificate issued in exchange for this Secondary Right Certificate.
<PAGE>
Form of Reverse Side of Secondary Right Certificate --
continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder if such holder
desires to exercise the Secondary Right Certificate.)
TO COMMERCIAL FEDERAL CORPORATION
The undersigned hereby irrevocably elects to exercise
--------------
Secondary Rights represented by this Secondary Right Certificate to purchase the
Common Shares issuable upon the exercise of such Primary Rights and requests
that certificates for such Common Shares be issued in the name of:
Please insert social security
or other identifying number
- -----------------------------------------------------------------
(Please print name and address)
If such number of Secondary Rights shall not be all the Secondary rights
represented by this Secondary Right Certificate, a new Secondary Right
Certificate for the balance remaining of such Secondary Rights shall be
registered in the name of and delivered to:
Please insert social security
or other identifying number
- -----------------------------------------------------------------
(Please print name and address)
- -----------------------------------------------------------------
Dated: 19
------------------, -- -------------------------------
Signature
Signature Guaranteed:
<PAGE>
Form of Reverse Side of Secondary Right Certificate --
continued
Certificate
-----------
(to be completed, if true)
The undersigned hereby certifies that the Secondary Rights represented by
this Secondary Right Certificate are not Beneficially owned by a 25% Person or
an Affiliate or Associate of a 25% Person (as such capitalized terms are defined
in the Rights Agreement).
Dated: 19
------------------, --- ------------------------
Signature
Signature Guaranteed:
NOTICE
The signatures to the foregoing Assignment and the foregoing Certificate, if
applicable, must correspond to the name as written upon the face of this
Secondary Right Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company shall deem the Secondary Rights represented by
this Secondary Right Certificate to be Beneficially Owned by a 25% Person or an
Affiliate or Associate of a 25% Person (as such capitalized terms are defined in
the Rights Agreement).
<PAGE>
EXHIBIT D
SUMMARY OF THE RIGHTS AGREEMENT
-------------------------------
On December 19, 1988, the Board of Directors of Commercial Federal
Corporation (the "Company") declared a distribution of stock purchase rights
(the "Rights") for each outstanding share of common stock, $0.01 par value, of
the Company (the "Common Shares"). The distribution will be payable on December
30, 1988 (the "Record Date") to the stockholders of record on that date and will
consist of one Primary Right and one Secondary Right for each Common Share
outstanding on the Record Date.
Initially, the Rights will not be exercisable. No certificates for the
Rights will be sent to stockholders. The Rights will be attached to and trade
only together with the Common Shares. Common Share certificates will represent
the Rights related thereto and Common Share certificates issued after December
30, 1988, will contain a notation incorporating the Rights Agreement by
reference. With certain exceptions, the Rights will expire December 19, 1998,
unless earlier redeemed by the Company.
Primary Rights Certificates will be issued and Primary Rights will become
exercisable 10 business days, subject to extension, after a public announcement
that any person (other than the two stockholders who beneficially owned more
than 15% of the Company's Common Shares on December 19, 1998 or any person who
purchases 15% of the Company's Common Shares directly from the Company) has
acquired, or obtained the right to acquire beneficial ownership of 15% or more
of the outstanding Common Shares, provided that such person has not complied
with the Fairness Procedure described below or has not provided a Fair Offer as
described below. Any such person is referred to as a "15% Person."
Secondary Right Certificates will be issued and Secondary Rights will
become exercisable upon the earlier of (a) one business day after a public
announcement that any person has acquired, or obtained the right to acquire
beneficial ownership of 25% or more of the outstanding Common Shares, which is
not deemed a Fair Offer as described below (such person is referred to as a "25%
Person"), or (b) one business day following the commencement of a tender offer
or exchange offer, the consummation of which would result in the beneficial
ownership of 25% or more of the outstanding Common Shares by any person other
than the Company or certain related entities.
The number of shares which may be purchased upon exercise of each Primary
Right, shall be determined by dividing (i) that number of shares which equals
50% of the outstanding Common Shares, as of the date such person became of 15%
Person, by (ii) the number of Primary Rights outstanding, exclusive of Primary
Rights beneficially owned by the 15% Person. The exercise price per Common Share
shall equal 20% of the Current Market Price of such shares, as of the date the
15% Person became such.
Primary Rights may not be exercised if a 15% Person, prior to becoming a
15% Person, fully complies with the "Fairness Procedure" which involves (i)
delivering to the Company a written disclosure statement (the "Disclosure
Statement") not less than 20 business days prior to becoming a 15% Person
containing certain specified information regarding such person and its plans;
and (ii) delivering to the Company, with the Disclosure Statement, its written
undertaking not to acquire 25% or more of the Common Shares, except with the
prior approval of the independent directors of the Company or in a cash tender
offer for all outstanding Common Shares made as set forth below and that, for a
period of 3 years from the date of such undertaking, such person will not, among
other things, (a) take any action, including the acquisition of additional
Common Shares, except in accordance with the Plans disclosed in the Disclosure
Statement, (b) engage in certain "self-dealing" transactions (including any
merger) with the Company, unless approved in advance by a majority of the
independent directors of the Company, or (c) nominate to take any action to
elect to the Company's Board of Directors more than one director.
Unless the Secondary Rights are earlier redeemed, in the event a person
becomes a 25% Person, each holder of a Secondary Right (other than Secondary
Rights beneficially owned by such 25% Person, which will thereafter be void)
will have the right to purchase one one-hundredth of a share of Preferred Shares
at a price of $42.00 per one one-hundredth of a share. Unless the Secondary
Rights are earlier redeemed, in the event that (a) the Company is the surviving
corporation in a merger with a 25% Person and the Common Shares are not changed
or exchanged in such merger, (b) a 25% Person engages in one of a number of
"self-dealing" transactions specified in the Rights Agreement including certain
preferential sales, transfers or exchanges of Company assets or securities,
special compensation or unfair loans, or (c) a person (other than the Company or
certain related entities) becomes the beneficial owner of 25% or more of the
outstanding Common Shares (other than pursuant
<PAGE>
to a cash tender offer) then each holder of a Secondary Right which has not
theretofore been exercised will thereafter have the right to receive, upon
exercise and payment of the Secondary Right Exercise Price, Common Shares having
a value equal to two times the Secondary Right Exercise Price.
If after there is a 25% Person, unless the Secondary Rights are earlier
redeemed, (a) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation or in which
the outstanding Common Shares are changed or exchanged for stock or assets of
another person, or (b) 50% or more of the Company's consolidated assets or
earning power are sold (other than in transactions in the ordinary course of
business), then each holder of a Secondary Right which has not theretofore been
exercised will thereafter have the right to receive, upon exercise and payment
of the Secondary Right to Exercise Price, shares of common stock of the
acquiring company having a value equal to two times the Secondary Right Exercise
Price.
The Preferred Shares will be nonredeemable and, unless otherwise provided
in connection with the creation of subsequent series of preferred shares, will
be subordinate to any other series of the Company's preferred shares, whether
issued before or after the issuance of the Preferred Shares. The Preferred
Shares may not be issued except upon exercise of Secondary Rights and will have
certain other rights as specified in the Rights Agreement.
In the event that any person notifies the Company of its intention to make
an all cash tender offer for all of the Common Shares, and complies with certain
procedural requirements including the delivery of evidence that all necessary
financing therefor is firmly committed or otherwise available and an undertaking
to pay the reasonable costs of any stockholders' meeting called as described in
(b) below, the Company will within 15 business days, at its option, either (1)
engage a nationally recognized investment banking firm to render an opinion as
to whether the tender offer purchase price is fair and adequate to the Company's
stockholders from a financial point of view, or (2) call a stockholders' meeting
at the earliest practicable date to vote upon such tender offer. In the event
that (a) the tender offer purchase price is determined by such investment
banking firm to be fair and adequate to the stockholders from a financial point
of view; or (b) the tender offer is approved by a majority of the shares voted
at such meeting and beneficially owned by persons other than the offeror; then,
neither the commencement of a tender offer nor the acquisition of Common Shares
pursuant thereto will trigger the distribution of Right Certificates.
A majority of the independent directors may authorize the redemption of
either or both of the Primary or Secondary Rights in whole, but not in part, at
a price of $0.01 per Primary or Secondary Right (the "Redemption Price") at any
time prior to the close of business on the 10th business day subject to
extension, following the date of a public announcement that any person has
become a 15% Person other than pursuant to a cash tender offer as described
above, and at any time prior to the public announcement that any person has
become a 25% Person other than pursuant to a cash tender offer as described
above. The Company's right of redemption with respect to the Secondary Rights
will be reinstated if each 25% Person reduces its beneficial ownership to less
than 15% of the Company's outstanding Common Shares in a transaction not
involving a purchase by the Company.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company (other than rights resulting from such
holder's ownership of Common Shares), including, without limitation, the right
to vote or to receive dividends.
-2-
<PAGE>
AMENDMENT TO RIGHTS AGREEMENT
-----------------------------
Pursuant to Section 30 of the Rights Agreement entered into as of December
19, 1988, between COMMERCIAL FEDERAL CORPORATION (the "Company") and
MANUFACTURERS HANOVER TRUST COMPANY, Sections 1(mm) and 1(oo) of the Agreement
are hereby amended as follows:
1. A new subsection (vi) shall be added to Section 1(mm) as follows:
any underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the Company
(specifically including Montgomery Securities in connection
the purchase of up to 4,025,000 shares of Common Stock
pursuant to an Underwriting Agreement entered into between the
Company and Montgomery Securities as of June 30, 1992);
provided, however, that upon completion of the sale or resale
of such securities, no such underwriter or member of such
selling group is a 15% Person
2. A new subsection (iv) shall be added to Section 1(oo) as follows:
any underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the
Company (specifically including Montgomery Securities in
connection with the purchase of up to 4,025,000 shares of
Common Shares pursuant to an Underwriting Agreement entered
into between the Company and Montgomery Securities as of
June 30, 1992); provided, however, that upon completion of
the sale or resale of such securities, no such underwriter
or member of such selling group is a 25% Person.
ATTEST: COMMERCIAL FEDERAL CORPORATION
/s/ By /s/
- --------------------------------- ---------------------------
Assistant Vice President James A. Laphen
Vice President
[S E A L] Date: July 7, 1992
ATTEST: MANUFACTURERS HANOVER
TRUST COMPANY
By /s/ By /s/
------------------------------- ---------------------------
Title Assistant Vice President Title Vice President
Date: July 7, 1992
------------------------
<PAGE>
COMMERCIAL FEDERAL CORPORATION
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
Pursuant to Section 30(a) of the Rights Agreement entered into as of
December 19, 1988, as amended on July 7, 1992, between COMMERCIAL FEDERAL
CORPORATION (the "Company") and MANUFACTURERS HANOVER TRUST COMPANY (the
"Agreement"), the Agreement is hereby amended as follows:
1. Pursuant to the provisions of Section 24 of the Agreement, Harris Trust
and Savings Bank, Chicago, Illinois, is hereby appointed as successor Rights
Agent for the Company and all references in the Agreement and exhibits and
attachments thereto to the Rights Agent or to Manufacturers Hanover Trust
Company shall be deemed to refer to Harris Trust and Savings Bank as Rights
Agent. Further, all references to the address of the Rights Agent or the
address of Manufacturers Hanover Trust Company shall be deemed to refer to
Harris Trust and Savings Bank at the address of 311 West Monroe Street, Chicago,
Illinois 60606, Attention: Corporate Trust.
2. Section 1(c) shall be amended to read as follows:
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in the States of Illinois
or Nebraska are authorized or obligated by law or executive order
to close.
3. Section 1(t) shall be amended to read as follows:
"Primary Right Expiration Date" shall mean the earlier of (i)
December 19, 2008 or (ii) 60 days after the date upon which the
Primary Rights first become exercisable.
4. Section 1(bb) shall be amended to read as follows:
"Secondary Right Expiration Date" shall mean December 19, 2008.
5. Subsections (iv) and (v) of the first sentence of Section 1(mm) shall
be deleted and subsection (vi) shall be renumbered subsection (iv) and
shall be amended to read as follows:
any underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the Company;
provided, however, that upon completion of the sale or resale of
such securities, no such underwriter or member of such selling
group is a 15% Person.
6. Subsection (iv) of the first sentence of Section 1(oo) shall be
amended to read as follows:
any underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the Company;
provided, however, that upon completion of the sale or resale of
<PAGE>
such securities, no such underwriter or member of such selling
group is a 25% Person.
7. (a) The legend appearing in the first paragraph of Section 3(e) shall
be amended in full to read as follows:
This certificate also represents Rights which entitle the holder
hereof to certain rights as set forth in a Rights Agreement by
and between Commercial Federal Corporation and Harris Trust and
Savings Bank as successor Rights Agent, dated as of December 19,
1988, as amended (the "Rights Agreement"), the terms, conditions
and limitations of which are hereby incorporated herein by
reference and a copy of which is on file at the principal
executive offices of Commercial Federal Corporation. Under
certain circumstances specified in the Rights Agreement, such
Rights will be represented by separate certificates and will no
longer be represented by this certificate. Under certain
circumstances specified in the Rights Agreement, Rights
beneficially owned by certain persons may become null and void.
Commercial Federal Corporation shall mail to the record holder
of this certificate a copy of the Rights Agreement without
charge promptly following receipt of a written request therefor.
(b) The legend appearing in the second paragraph of Section 3(e) shall
be amended in full to read as follows:
This certificate does not represent any Right issued pursuant to
the terms of a Rights Agreement by and between Commercial
Federal Corporation and Harris Trust and Savings Bank, as
successor Rights Agent, dated as of December 19, 1988, as
amended.
8. Section 7(b) shall be amended to replace the address of Manufacturers
Hanover Trust Company with the following address of Harris Trust and
Savings Bank:
311 West Monroe Street
Chicago, Illinois 60606
Attention: Corporate Trust, Ken Penn
9. Section 8(b) shall be amended to replace the address of Manufacturers
Hanover Trust Company with the following address of Harris Trust and
Savings Bank:
311 West Monroe Street
Chicago, Illinois 60606
Attention: Corporate Trust, Ken Penn
10. Section 15 shall be amended to add the following sentence at the end
of such section:
The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be
obligated or responsible for calculating any adjustment nor shall it
be deemed to have knowledge of such adjustment unless and until it
shall have received such certificate.
11. Section 21 shall be amended in its entirety to read as follows:
Section 21. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent as
compensation for all services rendered by it hereunder reasonable and
customary fees and expenses, and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder.
The Company also agrees to indemnify the Rights Agent for, and to hold
it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability.
The costs and expenses of enforcing this right of indemnification
shall also be paid by the Company. The indemnification provided for
hereunder shall survive the expiration of the Rights and the
termination of this Agreement.
(b) The Rights Agent may conclusively rely upon and shall be
protected and shall incur no liability for or in respect of any action
taken, suffered or omitted by it in connection with its administration
of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other
securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of its counsel as set forth in Section 23
hereof.
(c) Notwithstanding anything in this Agreement to the contrary,
in no event shall the Rights Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Rights Agent has been advised of
the likelihood of such loss or damage and regardless of the form of
the action.
12. (a) Section 23(a) shall be amended in its entirety to read as
follows:
(a) Before the Rights Agent refrains from acting, the Rights
Agent may consult with legal counsel (who may be legal counsel for the
Company), and the advice or opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with
such advice or opinion.
(b) Section 23(g) shall be amended to add the following sentence at
the end of such section:
Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent under
this Agreement and the date on or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not
be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or
after the date specified in such application (which date shall not be
less than ten Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any
such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to
such application subject to the proposed action or omission and/or
specifying the action to taken or omitted.
(c) Section 23 shall be further amended to add the following Sections
23(j) and (k):
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
(k) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including,
without limitation, any dates or events defined in this Agreement or
the designation of any Person as an Acquiring Person, Affiliate or
Associate) under this Agreement unless and until the Rights Agent
shall be specifically notified in writing by the Company of such fact,
event or determination.
13. Section 29 shall be amended to replace the name and address of
Manufacturers Hanover Trust Company with the following name and
address:
<PAGE>
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Attention: Corporate Trust, Ken Penn
14. Section 30(a) shall be amended by adding the following sentence at the
end of such section:
"Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment that changes the rights and duties of the
Rights Agent under this Agreement will be effective against the Rights
Agent without the execution of such supplement or amendment by the
Rights Agent."
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to the
Agreement to be duly executed and attested as of the date and year first above
written.
ATTEST: COMMERCIAL FEDERAL CORPORATION
________________________ By: ___________________________________
Title:
Date: _________________
ATTEST: HARRIS TRUST AND SAVINGS BANK, as
Rights Agent
________________________ By: ________________________________
Title:
Date: ________________
<PAGE>
Exhibit 11
COMMERCIAL FEDERAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Three Months Ended
September 30,
-------------------------
1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTATION OF INCOME PER BASIC AND DILUTED SHARES:
- ---------------------------------------------------
Net income $15,122,794 $25,955,000
=========== ==========
- ----------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
- -------------------------
Weighted average number of common shares
outstanding used in basic earnings per share calculation 58,605,879 55,247,359
=========== ==========
Net income $ .26 $ .47
=========== ==========
- ----------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
- ---------------------------
Weighted average number of common shares
outstanding used in basic earnings per share calculation 58,605,879 55,247,359
Add assumed exercise of outstanding stock options
as adjustments for dilutive securities 842,023 1,309,216
----------- ----------
Weighted average number of common shares
outstanding used in diluted earnings per share calculation 59,447,902 56,556,575
=========== ==========
Net income $ .25 $ .46
=========== ==========
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 111,788
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 82,883
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 490,506
<INVESTMENTS-CARRYING> 1,637,345
<INVESTMENTS-MARKET> 1,612,375
<LOANS> 6,573,631
<ALLOWANCE> 59,577
<TOTAL-ASSETS> 9,330,187
<DEPOSITS> 6,304,620
<SHORT-TERM> 1,140,600
<LIABILITIES-OTHER> 152,647
<LONG-TERM> 975,877
0
0
<COMMON> 431
<OTHER-SE> 756,012
<TOTAL-LIABILITIES-AND-EQUITY> 9,330,187
<INTEREST-LOAN> 514,699
<INTEREST-INVEST> 155,297
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 669,996
<INTEREST-DEPOSIT> 301,668
<INTEREST-EXPENSE> 437,443
<INTEREST-INCOME-NET> 232,553
<LOAN-LOSSES> 6,716
<SECURITIES-GAINS> (294)
<EXPENSE-OTHER> 181,091
<INCOME-PRETAX> 118,720
<INCOME-PRE-EXTRAORDINARY> 78,833
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,833
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.28
<YIELD-ACTUAL> 2.67
<LOANS-NON> 43,833
<LOANS-PAST> 144
<LOANS-TROUBLED> 15,585
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 59,163
<CHARGE-OFFS> 6,948
<RECOVERIES> 1,217
<ALLOWANCE-CLOSE> 59,577
<ALLOWANCE-DOMESTIC> 12,765
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 46,812
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 109,762
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 45,683
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 446,218
<INVESTMENTS-CARRYING> 1,709,286
<INVESTMENTS-MARKET> 1,694,582
<LOANS> 6,726,926
<ALLOWANCE> 60,201
<TOTAL-ASSETS> 9,472,951
<DEPOSITS> 6,350,677
<SHORT-TERM> 1,080,705
<LIABILITIES-OTHER> 193,274
<LONG-TERM> 1,135,951
0
0
<COMMON> 433
<OTHER-SE> 708,036
<TOTAL-LIABILITIES-AND-EQUITY> 9,472,951
<INTEREST-LOAN> 137,231
<INTEREST-INVEST> 35,260
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 172,491
<INTEREST-DEPOSIT> 87,135
<INTEREST-EXPENSE> 111,259
<INTEREST-INCOME-NET> 61,232
<LOAN-LOSSES> 2,434
<SECURITIES-GAINS> (10)
<EXPENSE-OTHER> 74,462
<INCOME-PRETAX> 3,946
<INCOME-PRE-EXTRAORDINARY> 2,514
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,514
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
<YIELD-ACTUAL> 2.71
<LOANS-NON> 45,167
<LOANS-PAST> 0
<LOANS-TROUBLED> 14,456
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 59,577
<CHARGE-OFFS> 2,225
<RECOVERIES> 587
<ALLOWANCE-CLOSE> 60,201
<ALLOWANCE-DOMESTIC> 12,197
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 47,945
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR SIX MONTHS ENDED DECEMBER
31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 122,835
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,168
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 452,202
<INVESTMENTS-CARRYING> 1,671,710
<INVESTMENTS-MARKET> 1,654,509
<LOANS> 6,966,702
<ALLOWANCE> 61,387
<TOTAL-ASSETS> 9,727,446
<DEPOSITS> 6,556,353
<SHORT-TERM> 1,194,863
<LIABILITIES-OTHER> 155,261
<LONG-TERM> 1,067,299
0
0
<COMMON> 389
<OTHER-SE> 753,281
<TOTAL-LIABILITIES-AND-EQUITY> 9,727,446
<INTEREST-LOAN> 277,816
<INTEREST-INVEST> 73,715
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 351,531
<INTEREST-DEPOSIT> 157,561
<INTEREST-EXPENSE> 225,255
<INTEREST-INCOME-NET> 126,276
<LOAN-LOSSES> 5,974
<SECURITIES-GAINS> 88
<EXPENSE-OTHER> 122,877
<INCOME-PRETAX> 42,512
<INCOME-PRE-EXTRAORDINARY> 24,281
<EXTRAORDINARY> (583)
<CHANGES> 0
<NET-INCOME> 23,698
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
<YIELD-ACTUAL> 2.71
<LOANS-NON> 46,227
<LOANS-PAST> 278
<LOANS-TROUBLED> 12,749
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 59,577
<CHARGE-OFFS> 5,796
<RECOVERIES> 965
<ALLOWANCE-CLOSE> 61,387
<ALLOWANCE-DOMESTIC> 11,733
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 49,654
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 146,362
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,302
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 390,354
<INVESTMENTS-CARRYING> 1,702,583
<INVESTMENTS-MARKET> 1,684,230
<LOANS> 7,128,106
<ALLOWANCE> 60,869
<TOTAL-ASSETS> 9,833,057
<DEPOSITS> 6,597,238
<SHORT-TERM> 1,319,851
<LIABILITIES-OTHER> 175,505
<LONG-TERM> 992,864
0
0
<COMMON> 461
<OTHER-SE> 750,339
<TOTAL-LIABILITIES-AND-EQUITY> 9,833,057
<INTEREST-LOAN> 420,277
<INTEREST-INVEST> 108,846
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 529,123
<INTEREST-DEPOSIT> 236,368
<INTEREST-EXPENSE> 337,327
<INTEREST-INCOME-NET> 191,796
<LOAN-LOSSES> 9,591
<SECURITIES-GAINS> 120
<EXPENSE-OTHER> 175,670
<INCOME-PRETAX> 68,088
<INCOME-PRE-EXTRAORDINARY> 44,149
<EXTRAORDINARY> (583)
<CHANGES> 0
<NET-INCOME> 43,566
<EPS-PRIMARY> .74
<EPS-DILUTED> .73
<YIELD-ACTUAL> 2.71
<LOANS-NON> 45,230
<LOANS-PAST> 545
<LOANS-TROUBLED> 12,697
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 59,577
<CHARGE-OFFS> 9,671
<RECOVERIES> 1,625
<ALLOWANCE-CLOSE> 60,869
<ALLOWANCE-DOMESTIC> 11,288
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 49,581
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 158,438
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 18,965
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 359,298
<INVESTMENTS-CARRYING> 1,670,668
<INVESTMENTS-MARKET> 1,663,331
<LOANS> 7,360,481
<ALLOWANCE> 60,929
<TOTAL-ASSETS> 10,040,596
<DEPOSITS> 6,589,395
<SHORT-TERM> 1,430,454
<LIABILITIES-OTHER> 166,686
<LONG-TERM> 1,089,995
0
0
<COMMON> 460
<OTHER-SE> 763,606
<TOTAL-LIABILITIES-AND-EQUITY> 10,040,596
<INTEREST-LOAN> 565,428
<INTEREST-INVEST> 146,804
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 712,232
<INTEREST-DEPOSIT> 315,603
<INTEREST-EXPENSE> 453,969
<INTEREST-INCOME-NET> 258,263
<LOAN-LOSSES> 13,427
<SECURITIES-GAINS> 510
<EXPENSE-OTHER> 224,648
<INCOME-PRETAX> 106,819
<INCOME-PRE-EXTRAORDINARY> 68,839
<EXTRAORDINARY> (583)
<CHANGES> 0
<NET-INCOME> 68,256
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 2.71
<LOANS-NON> 43,627
<LOANS-PAST> 894
<LOANS-TROUBLED> 10,615
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 59,577
<CHARGE-OFFS> 3,091
<RECOVERIES> 12,427
<ALLOWANCE-CLOSE> 60,929
<ALLOWANCE-DOMESTIC> 10,809
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 50,120
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 128,584
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 477,348
<INVESTMENTS-CARRYING> 1,559,242
<INVESTMENTS-MARKET> 1,556,116
<LOANS> 7,499,087
<ALLOWANCE> 61,658
<TOTAL-ASSETS> 10,170,945
<DEPOSITS> 6,511,511
<SHORT-TERM> 1,713,193
<LIABILITIES-OTHER> 180,538
<LONG-TERM> 999,622
0
0
<COMMON> 460
<OTHER-SE> 765,621
<TOTAL-LIABILITIES-AND-EQUITY> 10,170,945
<INTEREST-LOAN> 152,746
<INTEREST-INVEST> 35,078
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 187,824
<INTEREST-DEPOSIT> 79,821
<INTEREST-EXPENSE> 120,181
<INTEREST-INCOME-NET> 67,643
<LOAN-LOSSES> 1,688
<SECURITIES-GAINS> 23
<EXPENSE-OTHER> 48,402
<INCOME-PRETAX> 40,543
<INCOME-PRE-EXTRAORDINARY> 29,955
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,955
<EPS-PRIMARY> .47
<EPS-DILUTED> .46
<YIELD-ACTUAL> 2.83
<LOANS-NON> 46,816
<LOANS-PAST> 0
<LOANS-TROUBLED> 9,108
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 61,261
<CHARGE-OFFS> 3,335
<RECOVERIES> 1,917
<ALLOWANCE-CLOSE> 61,658
<ALLOWANCE-DOMESTIC> 10,197
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 51,461
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 131,611
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 415,536
<INVESTMENTS-CARRYING> 1,539,890
<INVESTMENTS-MARKET> 1,542,799
<LOANS> 7,605,706
<ALLOWANCE> 64,250
<TOTAL-ASSETS> 10,215,504
<DEPOSITS> 6,590,103
<SHORT-TERM> 1,555,336
<LIABILITIES-OTHER> 160,600
<LONG-TERM> 1,115,261
0
0
<COMMON> 574
<OTHER-SE> 793,630
<TOTAL-LIABILITIES-AND-EQUITY> 10,215,504
<INTEREST-LOAN> 307,229
<INTEREST-INVEST> 70,569
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 377,798
<INTEREST-DEPOSIT> 159,163
<INTEREST-EXPENSE> 241,537
<INTEREST-INCOME-NET> 136,261
<LOAN-LOSSES> 7,647
<SECURITIES-GAINS> 2,308
<EXPENSE-OTHER> 99,415
<INCOME-PRETAX> 80,476
<INCOME-PRE-EXTRAORDINARY> 51,410
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,410
<EPS-PRIMARY> .93
<EPS-DILUTED> .90
<YIELD-ACTUAL> 2.82
<LOANS-NON> 48,481
<LOANS-PAST> 0
<LOANS-TROUBLED> 5,891
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 61,261
<CHARGE-OFFS> 7,580
<RECOVERIES> 3,421
<ALLOWANCE-CLOSE> 64,250
<ALLOWANCE-DOMESTIC> 9,631
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 54,619
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED MARCH
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 129,621
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 30,602
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 414,365
<INVESTMENTS-CARRYING> 1,523,086
<INVESTMENTS-MARKET> 1,529,544
<LOANS> 7,853,635
<ALLOWANCE> 64,470
<TOTAL-ASSETS> 10,489,056
<DEPOSITS> 6,732,109
<SHORT-TERM> 1,256,258
<LIABILITIES-OTHER> 155,880
<LONG-TERM> 1,506,113
0
0
<COMMON> 585
<OTHER-SE> 838,111
<TOTAL-LIABILITIES-AND-EQUITY> 10,489,056
<INTEREST-LOAN> 462,027
<INTEREST-INVEST> 105,344
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 567,371
<INTEREST-DEPOSIT> 237,032
<INTEREST-EXPENSE> 359,647
<INTEREST-INCOME-NET> 207,724
<LOAN-LOSSES> 10,464
<SECURITIES-GAINS> 2,775
<EXPENSE-OTHER> 166,713
<INCOME-PRETAX> 103,752
<INCOME-PRE-EXTRAORDINARY> 65,038
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,038
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.13
<YIELD-ACTUAL> 2.85
<LOANS-NON> 49,895
<LOANS-PAST> 0
<LOANS-TROUBLED> 4,968
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 61,261
<CHARGE-OFFS> 10,737
<RECOVERIES> 3,905
<ALLOWANCE-CLOSE> 64,470
<ALLOWANCE-DOMESTIC> 9,075
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 55,395
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
RESTATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 154,126
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 62,886
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 312,509
<INVESTMENTS-CARRYING> 1,452,644
<INVESTMENTS-MARKET> 1,454,794
<LOANS> 7,857,958
<ALLOWANCE> 64,757
<TOTAL-ASSETS> 10,399,229
<DEPOSITS> 6,558,207
<SHORT-TERM> 1,034,509
<LIABILITIES-OTHER> 155,677
<LONG-TERM> 1,789,641
0
0
<COMMON> 587
<OTHER-SE> 860,608
<TOTAL-LIABILITIES-AND-EQUITY> 10,399,229
<INTEREST-LOAN> 619,851
<INTEREST-INVEST> 137,837
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 757,688
<INTEREST-DEPOSIT> 313,752
<INTEREST-EXPENSE> 477,389
<INTEREST-INCOME-NET> 280,299
<LOAN-LOSSES> 13,853
<SECURITIES-GAINS> 3,765
<EXPENSE-OTHER> 224,198
<INCOME-PRETAX> 139,769
<INCOME-PRE-EXTRAORDINARY> 87,413
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,413
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.52
<YIELD-ACTUAL> 2.88
<LOANS-NON> 49,366
<LOANS-PAST> 0
<LOANS-TROUBLED> 4,302
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 61,261
<CHARGE-OFFS> 14,339
<RECOVERIES> 3,282
<ALLOWANCE-CLOSE> 64,757
<ALLOWANCE-DOMESTIC> 8,462
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 56,295
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 158,570
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 17,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 288,786
<INVESTMENTS-CARRYING> 1,250,059
<INVESTMENTS-MARKET> 1,256,423
<LOANS> 8,616,935
<ALLOWANCE> 72,516
<TOTAL-ASSETS> 11,083,412
<DEPOSITS> 7,275,914
<SHORT-TERM> 892,000
<LIABILITIES-OTHER> 175,624
<LONG-TERM> 1,826,713
0
0
<COMMON> 604
<OTHER-SE> 912,557
<TOTAL-LIABILITIES-AND-EQUITY> 11,083,412
<INTEREST-LOAN> 168,470
<INTEREST-INVEST> 30,391
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 198,861
<INTEREST-DEPOSIT> 81,707
<INTEREST-EXPENSE> 124,241
<INTEREST-INCOME-NET> 74,620
<LOAN-LOSSES> 3,800
<SECURITIES-GAINS> 1,688
<EXPENSE-OTHER> 69,201
<INCOME-PRETAX> 28,553
<INCOME-PRE-EXTRAORDINARY> 15,123
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,123
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
<YIELD-ACTUAL> 2.89
<LOANS-NON> 55,296
<LOANS-PAST> 0
<LOANS-TROUBLED> 6,256
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 64,757
<CHARGE-OFFS> 3,218
<RECOVERIES> 602
<ALLOWANCE-CLOSE> 72,516
<ALLOWANCE-DOMESTIC> 7,899
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 64,617
</TABLE>
