As filed with the Securities and Exchange Commission on April 12, 1996
Registration No. 333-_____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
INTERVEST CORPORATION OF NEW YORK
(Exact name of registrant as specified in governing instruments)
-----------------
10 Rockefeller Plaza
Suite 1015
New York, New York 10020-1903
(212) 757-7300
-----------------
(Address and
telephone number
of registrant's principal
executive offices)
-----------------
LAWRENCE G. BERGMAN
VICE PRESIDENT
INTERVEST CORPORATION OF NEW YORK
10 ROCKEFELLER PLAZA (SUITE 1015)
NEW YORK, NEW YORK 10020-1903
(212) 757-7300
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the
public; as soon as practicable after the effective date
of this registration statement
-----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
Proposed Proposed
Title of each maximum maximum
class of Amount offering aggregate Amount of
securities to to be price per offering Registration
be registered registered debenture price Fee
- -------------------------------------------------------------------------------
Series / /
Registered
Floating
Rate Redeemable
Subordinated
Debentures $11,000,000 $10,000 $11,000,000 $3,793.10
- -------------------------------------------------------------------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement will become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
This Registration Statement contains __ pages. The Exhibit Index is on page ___.
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<PAGE>
INTERVEST CORPORATION OF NEW YORK
FORM S-11
-----------------
CROSS-REFERENCE SHEET
Item Number and Caption Heading in Prospectus
- ----------------------- --------------------------
1. Forepart of Registration Outside Front Cover Page of
Statement and Outside Front Prospectus
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Page and Back
Cover Pages of Prospectus Cover Page of Prospectus;
Available Information
3. Summary Information, Risk Summary; Risk Factors;
Factors and Ratio of Selected Financial Information
Earnings to Fixed Charges of the Company
4. Determination of Offering *
Price
5. Dilution *
6. Selling Security Holders *
7. Plan of Distribution Outside Front Cover Page of
Prospectus; Plan of Offering
8. Use of Proceeds Prospectus Summary; Use of
of Proceeds
9. Selected Financial Data Selected Financial Information
of the Company
10. Management's Discussion and Management's Discussion and
Analysis of Financial Condition Analysis of Financial Condition
and Results of Operations and Results of Operations
11. General Information as to History and Business
Registrant
12. Policy with Respect to History and Business
Certain Activities
13. Investment Policies of Registrant History and Business
- -----------
* Item inapplicable or answer thereto is negative and omitted
from Prospectus.
<PAGE>
Item Number and Caption Heading in Prospectus
- ----------------------- --------------------------
14. Description of Real Estate History and Business
15. Operating Data History and Business
16. Tax Treatment of Registrant Description of Debentures
and Its Security Holders
17. Market Price of and Dividends Stockholders
on the Registrant's Common Equity
and Related Stockholder Matters
18. Description of Registrant's Description of Debentures
Securities
19. Legal Proceedings History and Business
20. Security Ownership of Certain Stockholders
Beneficial Owners and Management
21. Directors and Executive Officers Management
22. Executive Compensation Management
23. Certain Relationships and Transactions with Management
Related Transactions
24. Selection, Management and Custody History and Business
of Registrant's Investments
25. Policies with Respect to History and Business
Certain Transactions
26. Limitations of Liability *
27. Financial Statements and Report of Independent Certified
Information Public Accountants; Financial
Statements
28. Interests of Named Experts *
and Counsel
29. Disclosure of Commission Position History and Business
on Indemnification for Securities
Act Liabilities
- ----------
* Item inapplicable or answer thereto is negative and omitted
from Prospectus.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 12, 1996
PROSPECTUS
- ----------
INTERVEST CORPORATION OF NEW YORK
Maximum $11,000,000
Minimum $5,000,000
Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debentures
$1,000,000 Series __/__/96 Due October 1, 1998
$10,000,000 Series __/__/96 Due April 1, 2005
Minimum Investment of $10,000 At Par
INTERVEST CORPORATION OF NEW YORK (the "Company") is offering $11,000,000
aggregate principal amount of its Series __/__/96 Registered Floating Rate
Redeemable Subordinated Debentures (the "Debentures"). As more fully described
under "Description of Debentures," the Debentures will be issued in two
maturities: $1,000,000 due October 1, 1998 and $10,000,000 due April 1, 2005.
Interest on the principal amount of Debentures maturing October 1, 1998
will accrue each calendar quarter at one percent over the prime rate of Chemical
Bank. Interest on the principal amount of Debentures maturing April 1, 2005,
will accrue each calendar quarter at two percent over the prime rate of Chemical
Bank. At the date of this Prospectus, the rate of interest on the Debentures
maturing October 1, 1998 is 9 1/4% and on the Debentures maturing April 1, 2005
is 10 1/4%.
In addition, interest will accrue each calendar quarter on the balance of
the accrued interest as of the last day of the preceding calendar quarter at the
prime rate of Chemical Bank. All accrued interest on the Debentures will be
payable at the maturity of the Debentures, whether by acceleration, redemption
or otherwise. Computations of interest are based on the prime rate of Chemical
Bank on the first day of the quarter for which interest is accruing. Interest on
principal, as well as interest on accrued interest is subject to a maximum
interest rate of 12%.
Holders of Debentures maturing April 1, 2005 will either receive quarterly
interest checks or have their interest accrue and be paid at maturity, depending
upon THE ELECTION OF THE DEBENTURE HOLDER made at the time of purchase, provided
that such Debenture Holders may, at the option of the Company, receive checks
for the quarterly payment of interest for up to the first two quarters after
closing. Holders of Debentures maturing April 1, 2005 who have elected to have
their interest accrue may AT ANY TIME convert from the accrual of interest to
the quarterly payment of interest and, at such time, receive payment of all of
the accrued interest.
The Debentures are redeemable by the Company at any time, in whole or in
part, at the redemption prices set forth herein. See "Description of Debentures
- --Redemption." There is currently no existing market for the Debentures and it
is not likely that such a market will develop. See "Risk Factors--Absence of
Public Market."
The Debentures will be subordinated to all Senior Indebtedness (as
defined). The Indenture (as defined), pursuant to which the Debentures will be
issued, does not limit or restrict the amount of Senior Indebtedness to which
the Debentures may be subordinated. At December 31, 1995, there was
approximately $1,218,000 of outstanding Senior Indebtedness. See "Description of
Debentures--Subordination."
---------------------------------
<PAGE>
THE DEBENTURES INVOLVE VARIOUS RISKS AS DESCRIBED HEREIN.
See "Risk Factors."
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------------------------
The Company intends to furnish to the holders of the Debentures annual
reports containing audited financial statements certified by independent
certified public accountants.
- ------------------------------------------------------------------------------
Price to Underwriting Fees Proceeds to
Public and Commissions(1) Company(1)(3)
----------- ------------------ ------------
Per Debenture $ 10,000 $ 900(4) $ 9,100
Minimum Offering(2) $ 5,000,000 $450,000(4) $ 4,550,000
Maximum Offering $11,000,000 $875,000(4) $10,125,000
- ------------------------------------------------------------------------------
(1) The Debentures are being offered on a "best efforts" basis by Sage, Rutty &
Co., Inc. (the "Underwriter"), and by other participating broker/dealers who are
members of the National Association of Securities Dealers, Inc.. Lowell S.
Dansker, an officer and director of the Company, is a registered representative
of a broker/dealer firm that may participate in the offering. The Company will
pay the Underwriter a commission of 8% of the purchase price of each Debenture
maturing April 1, 2005 and 2% of the purchase price of each Debenture maturing
October 1, 1998 which are sold by the Underwriter or participating
broker/dealers. In addition, the Company will pay the Underwriter a fee equal to
1% of the aggregate gross amount of Debentures maturing April 1, 2005 and 1/2 of
1% of the aggregate gross amount of Debentures maturing October 1, 1998, such
fee to be paid upon completion of the offering. The Company has agreed to
indemnify the Underwriter and participating broker/dealers against certain civil
liabilities, including certain liabilities under the Securities Act of 1933, as
amended. See "Plan of Offering."
(2) If at least $5,000,000 of Debentures, without regard to maturity, are not
sold within 75 days after the date this registration statement is declared
effective by the Securities and Exchange Commission (the "Offering Termination
Date"), all subscription documents and funds (together with any interest earned
thereon) will be promptly refunded to subscribers and the offering will
terminate. If at least $5,000,000 of Debentures, without regard to maturity, are
sold prior to the Offering Termination Date, the Company may close the offering
as to those subscribers and continue the offering of unsold Debentures for up to
150 additional days. Until such initial closing, all funds received from
subscribers will be held in escrow by Manufacturers and Traders Trust Company,
Rochester, New York for the benefit of subscribers. See "Plan of Offering."
(3) In addition to underwriting fees and commissions, expenses of the Offering
payable by the Company are estimated to be approximately $96,000. See "Use of
Proceeds."
(4) Includes the payment by the Company of the Underwriter's fee of: 1% of the
aggregate gross amount of Debentures maturing April 1, 2005 sold in the
offering; and 1/2 of 1% of the aggregate gross amount of Debentures maturing
October 1, 1998 sold in the offering.
---------------------------------
Sage, Rutty & Co., Inc.
The date of this Prospectus is _____________ __, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission. Reports and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60606-2511. Copies of such material can also be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
DC 20549, at prescribed rates.
A Registration Statement, including exhibits, relating to the Debentures
offered hereby on file with the Commission contains further information on the
Debentures and the Company.
WHO SHOULD INVEST
The purchase of the Debentures involves certain risks and, accordingly, is
suitable only for persons or entities of adequate means having no need for
liquidity in their investment. The Company has established a minimum suitability
standard which requires that an investor either (i) has a net worth of at least
$40,000 (exclusive of home, furnishings and automobiles) and had during his last
year or estimates that he will have during his current tax year an annual gross
income of at least $40,000, or (ii) has a net worth of at least $100,000
(exclusive of home, furnishings and automobiles), or (iii) that he is purchasing
in a fiduciary capacity for a person or entity meeting such conditions. In the
case of sales to fiduciary accounts, such conditions must be met by the
beneficiary of the account. Where the fiduciary is the donor of the funds for
investment, the fiduciary must meet the suitability standards.
3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
information included elsewhere in this Prospectus.
The Company. Intervest Corporation of New York is a New York corporation
which was incorporated in April, 1987. The Company presently owns mortgages on
real estate, and intends to acquire additional interests in real estate,
including the acquisition and origination of additional mortgages on real
estate. Substantially all of the mortgages of the Company are secured by
multi-family apartment buildings. The Company maintains its offices at 10
Rockefeller Plaza, Suite 1015, New York, New York 10020-1903, and its telephone
number is 212-757-7300.
Securities Offered. $11,000,000 principal amount of Series __/__/96
Registered Floating Rate Redeemable Subordinated Debentures, with maturity dates
as follows: $1,000,000 principal amount due October 1, 1998; and $10,000,000
principal amount due April 1, 2005. Interest on the principal amount of
Debentures will accrue each calendar quarter at one percent (1%) over the prime
rate of Chemical Bank on the Debentures maturing October 1, 1998, and at two
percent (2%) over the prime rate of Chemical Bank on the Debentures maturing
April 1, 2005. In addition, interest will accrue each calendar quarter on the
balance of the accrued interest as of the last day of the preceding calendar
quarter at the prime rate of Chemical Bank. All accrued interest on the
Debentures will be payable at maturity, whether by acceleration, redemption or
otherwise. Computations of interest are based on the prime rate on the first day
of the quarter for which interest is accruing, with a maximum interest rate of
twelve percent (12%). Debenture Holders may, at the election of the Company,
receive interest payments for the first two quarters after the closing. Holders
of Debentures maturing April 1, 2005 may elect, at any time, to convert from the
accrual of interest to the quarterly payment of interest and, at such time,
receive payment of all accrued interest. The Debentures will be unsecured
obligations of the Company, and will be subordinated to all Senior Indebtedness.
As of December 31, 1995, the Company had Senior Indebtedness of approximately
$1,218,000. There is no limitation on the amount of Senior Indebtedness which
may be issued by the Company. The Company may issue additional unsecured
indebtedness which is pari passu with the Debentures. The Debentures will be
redeemable, in whole or in part, at any time at the option of the Company. See
"Description of Debentures."
Use of Proceeds. The net proceeds from the sale of the Debentures, after
payment of expenses of the Offering, may be used to purchase additional
mortgages or interests in real estate in accordance with the mortgage investment
policy and real estate investment policies of the Company, or will be added to
the Company's working capital. See "Transactions with Management" and "Use of
Proceeds."
Summary Financial Information. The following summary financial information
is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus.
4
<PAGE>
BALANCE SHEET SUMMARY
December 31,
---------------------------------------------
1995 1994 1993
----------- ----------- -----------
Total Assets $77,579,000 $64,745,000 $54,650,000
Cash 17,670,000 3,476,000 3,801,000
Mortgages 55,146,000 56,666,000 41,521,000
Total Long Term
Obligations(1) 66,850,000 54,427,000 45,239,000
Stockholders' Equity 9,378,000 8,936,000 8,400,000
- ----------------
(1) Includes current portion of long-term obligations.
<TABLE>
INCOME STATEMENT SUMMARY
<CAPTION>
Year Ended December 31
----------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Interest
Income $1,757,000 $1,777,000 $922,000 $441,000 $718,000
Non-Interest
Income 414,000 300,000 820,000 755,000 378,000
Net Income 442,000 536,000 545,000 313,000 325,000
Ratio of Earnings
to Fixed Charges 1.1 1.2 1.3 1.2 1.2
</TABLE>
Risk Factors. An investment in the Debentures involves certain risks and
prospective investors should carefully consider the various risk factors. See
"Risk Factors."
5
<PAGE>
RISK FACTORS
THE PURCHASE OF THE DEBENTURES INVOLVES CERTAIN RISK FACTORS, INCLUDING THE
FOLLOWING:
Proceeds Not Committed to Specific Investments. None of the net proceeds of
the offering have yet been committed to specific investments by the Company.
Rather, the Company intends to use the proceeds to acquire mortgage interests in
conformity with its mortgage investment policies and its past practices. In
addition, the Company may acquire other interests in real properties in
accordance with its real estate investment policies. All determinations
concerning the use and investment of the proceeds will be made by management of
the Company. The specific characteristics of any such investments are presently
unknown and there is a greater degree of uncertainty concerning the return on
any such investments than would be the case if specific investments were
identified. The Holders of Debentures will not have the opportunity to evaluate
any mortgages or other real property interests that may be acquired with the
proceeds. See "Use of Proceeds."
Risks of Junior Mortgages and Wraparound Mortgages. The mortgages owned by
the Company, which currently generate its income, are junior mortgages, first
mortgages, and a wraparound mortgage. Substantially, all of the mortgages owned
by the Company are non-recourse and the wraparound mortgage is subordinate to
the lien of a senior underlying mortgage. If the owner of a mortgaged property
fails to make a payment due on a senior mortgage where the Company is the owner
of the junior mortgage, the holder of the senior mortgage may commence
foreclosure proceedings. There can be no assurance that the Company will have
funds available to cure a default on the senior mortgage in order to prevent
foreclosure on such senior mortgage. In the event of a foreclosure on the senior
mortgage, the Company as the owner of the junior mortgage will only be entitled
to share in the proceeds after satisfaction of the amounts due to senior
lienholders. The proceeds realized on such foreclosure may be insufficient to
pay all sums due on the senior mortgage, other senior liens and on the mortgage
held by the Company. It is also possible that in some cases a "due-on-sale"
clause included in a senior mortgage, which accelerates the amount due under the
senior mortgage in case of the sale of the property, may be deemed to apply to
the sale of the property upon foreclosure by the Company of its junior mortgage,
and may accordingly increase the risks to the Company in the event of a default
by the borrower on its junior mortgages.
One of the mortgages held by the Company is a "wraparound mortgage," under
which the outstanding principal balance of the wraparound mortgage includes the
outstanding principal balance of one mortgage owed to another party, with the
Company required to make any payments due on such senior underlying mortgage
from the payments received on the wraparound mortgage. Such mortgage may entail
a greater risk than if it were a first mortgage. If the owner of the mortgaged
property fails to make a payment on the wraparound mortgage owned by the Company
with the result that the Company in turn fails to make the corresponding payment
due on the senior underlying mortgage, the holder of the senior underlying
6
<PAGE>
mortgage may commence foreclosure proceedings. In such event, if the proceeds
realized on such foreclosure are insufficient to pay all sums due on the senior
underlying mortgage and on the mortgage held by the Company, the Company could
lose part or all of its investment. See "History and Business-Present Business"
and "History and Business-Certain Characteristics of the Company's Mortgage
Investments."
Risks of Non-Recourse Mortgages. Substantially all of the mortgages owned
by the Company (and those it expects to acquire in the future) are non-recourse.
Under the terms of non-recourse mortgages, the owner of the property subject to
the mortgage has no personal obligation to pay the mortgage note which the
mortgage secures. Thus, on default, the Company's ability to recover its
investment is dependent solely upon the value of the property which it sells in
foreclosure of its mortgage and the amount of prior mortgages and liens which
must be paid from the net proceeds. See "History and Business - Certain
Characteristics of the Company's Mortgage Investments."
Conflicts of Interest. Four of the mortgages presently owned by the Company
are liens on real estate owned by affiliates of the Company. In the case of the
wraparound mortgage, no underlying senior mortgage is held by an affiliate of
the Company. There are conflicts of interest inherent in all dealings between
the Company and such affiliates. These conflicts could include, among other
things, the acquisition by the Company of mortgages or other interests in real
property from affiliates of the Company; the retention of affiliates to perform
services, including real estate management services and mortgage servicing, for
the Company; and the pursuit of remedies that might be necessitated by a default
in any mortgage securing real property owned by an affiliate of the Company.
These conflicts will not be resolved by arm's-length bargaining. Matters
involving such a conflict of interest will be approved or ratified by a majority
vote of the Board of Directors, including a majority of the "independent"
directors of the Company (i.e. those directors who are neither officers nor
employees of the Company) in attendance at any meeting considering such matters.
No assurance can be given that they will be resolved in the manner most
favorable to Debenture holders, or that the Company will pursue any rights or
remedies which it may have against such affiliate. See "History and Business."
Subordination of Debentures. The Debentures will be unsecured obligations
of the Company, and will be subordinated to all Indebtedness of the Company
which (i) is secured, in whole or in part, by any asset or assets owned by the
Company or a Subsidiary, or (ii) arises from unsecured borrowings by the Company
from commercial banks, savings banks, savings and loan associations, insurance
companies, companies whose securities are traded in a national securities
market, or any wholly-owned subsidiary of any of the foregoing, or (iii) arises
from unsecured borrowings by the Company from any pension plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), or (iv) arises from borrowings by the Company which are evidenced by
commercial paper, or (v) is the Company's Series 1989 Registered Floating Rate
Redeemable Subordinated Debentures, (the "Senior Debentures"), and any other
Indebtedness which is permitted to be
7
<PAGE>
issued pari passu with the Senior Debentures or (vi) is a guarantee or
other liability of the Company of or with respect to Indebtedness of a
Subsidiary of the type described in clauses (ii), (iii) or (iv) above. As of
December 31, 1995, the Company had Senior Indebtedness of approximately
$1,218,000, including $1,200,000 aggregate principal amount of Senior
Debentures. There is no limitation or restriction in the Debentures or the
Indenture on the creation of Senior Indebtedness by the Company or on the amount
of such Senior Indebtedness to which the Debentures may be subordinated. There
is also no limitation on the creation of or the amount of Indebtedness which is
pari passu with (i.e. having no priority of payment over and not subordinated in
right of payment to) the Debentures ("Pari Passu Indebtedness"). As of December
31, 1995, the Company had $63,500,000 aggregate principal amount of Pari Passu
Indebtedness. Accordingly, upon any distribution of assets of the Company in
connection with any dissolution, winding up, liquidation or reorganization of
the Company, the holders of all Senior Indebtedness will first be entitled to
receive payment in full of the principal and premium, if any, thereof and any
interest due thereon, before the holders of the Debentures are entitled to
receive any payment upon the principal of or interest on the Debentures, and
thereafter payments to Debenture holders will be pro rata with payments to
holders of Pari Passu Indebtedness. See "Description of
Debentures-Subordination."
Best Efforts Offering. No commitment exists on the part of the Underwriter
to purchase all or any part of the Debentures offered hereby and, therefore, no
assurance can be given that any such Debentures will be sold. If at least
$5,000,000 of Debentures are not sold by the Offering Termination Date, all
subscription funds will be refunded to subscribers, with interest in proportion
to the amount paid and without regard to the date paid. See "Plan of Offering."
Absence of Public Market. Investors should be aware that there is no
existing market for the Debentures and it is not likely that such a market will
develop. No broker-dealer presently expects to make a market in the Debentures.
Accordingly, it may be difficult to resell the Debentures.
No Sinking Fund. There is no sinking fund for retirement of the Debentures
at or prior to their maturity. The Company anticipates that it will redeem the
Debentures at maturity, at par, from the Company's working capital, or from the
proceeds of a refinancing of the Debentures, but no assurance can be given that
the Company will have sufficient available funds to make such redemption.
Concentration Risks. A substantial portion of the Company's assets are
invested in mortgages secured by multi-family apartment buildings located in the
City of New York. The Company anticipates that a substantial portion of the real
property interests that the Company may acquire with the proceeds of this
offering are also likely to be geographically located in the New York
metropolitan area. Any resulting lack of diversity in the number, type or
location of investments made by the Company may increase the risk of loss to the
Company. See "History and Business."
8
<PAGE>
Percentage of Funds Invested in Mortgages. The success of the Company, in
large part, depends on its ability to keep its assets continuously invested in
mortgages and, to a lesser extent, real property. The Company may be unable to
keep the optimum percentage of its assets so invested, which may result in lower
rates of return from the investment of its assets in other investments. See
"History and Business."
Risk of Balloon Payments. Certain mortgage loans owned by the Company have
balloon payments due at the time of their maturity. The Company may purchase
additional mortgage loans that have balloon payments due at the time of their
maturity. Volatile interest rates and/or erratic credit conditions and supply of
mortgage funds at that time may cause refinancing by the borrowers to be
difficult or impossible, regardless of the market value of the collateral at the
time such balloon payments are due. See "General Risks of Financing on Real
Estate."
Competition. In connection with the making of investments, the Company may
experience significant competition from banks, insurance companies, savings and
loan associations, mortgage bankers, pension funds, real estate investment
trusts, limited partnerships and other lenders and investors engaged in
purchasing mortgages or making real property investments with investment
objectives similar in whole or in part to those of the Company including
competition with certain related entities. An increase in the general
availability of funds may increase competition in the making of investments in
mortgages and real property and may reduce the yields available therefrom.
Reliance on Management. All decisions with respect to the management of the
Company will be made exclusively by the officers and directors of the Company.
Holders of the Debentures have no right or power to take part in the management
of the Company. Accordingly, no person should purchase Debentures unless he is
willing to entrust all aspects of the management of the Company to the officers
and directors of the Company. Prospective investors will, therefore, be entirely
reliant on the officers and directors of the Company and will not be able to
evaluate for themselves the merits of proposed mortgage or other real estate
investments. Certain of the executive officers of the Company, moreover,
presently serve without compensation from the Company. Should the services of
any such officers be lost, the Company might be required to devote a portion of
its income to salary expense. See "Management."
General Risks of Financing on Real Estate. All mortgage loans are subject
to some degree of risk, including the risk of a default by the borrower on the
mortgage loans and the added responsibility on the part of the Company of
operating the property and/or foreclosing in order to protect its investment.
The borrower's ability to make payments due under a mortgage loan and the amount
the Company may realize after a default will be dependent upon the risks
generally associated with real estate investments, which are beyond the control
of the Company, including general or local economic conditions, neighborhood
values, interest rates, real estate tax rates, other operating expenses, the
supply of and demand for properties of the type involved, the inability of the
9
<PAGE>
borrower to obtain or maintain full occupancy of the property, zoning laws, rent
control laws, other governmental rules and fiscal policies and acts of God.
Default by Mortgagor and Foreclosure. In the event of a default on a
mortgage loan which requires the Company to foreclose upon the property or
otherwise pursue its remedies in order to protect its investment, the Company
may seek to obtain a purchaser for the property upon such terms as it deems
reasonable. However, there can be no assurance that the amount realized upon any
such sale of the underlying property will result in financial profit or prevent
loss to the Company.
Risks of Floating Rate Debt. Interest on the Debentures to be issued by the
Company is calculated at a floating rate. A portion of the mortgages held by the
Company pay interest at fixed rates. To the extent that rising interest rates
result in higher interest payments on the Debentures by the Company, the Company
will have to devote a higher percentage of the fixed interest payments it
receives to meet the interest payments due on the Debentures and may not have
sufficient funds to acquire additional mortgages or to repay its Debentures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation-Impact of Inflation."
Risks of Ownership of Real Property. The Company may also be subject to the
risks inherent in the ownership of interests in any commercial, industrial,
retail or residential properties which it acquires directly or in a foreclosure
process, including, without limitation, fluctuations in occupancy rates and
operating expenses, variations in rental schedules, the character of the tenancy
and the possible effect on the cash flow from a property if its tenants incur
financial difficulties. Such events may, in turn, be adversely affected by
general and local economic conditions, the supply of and demand for properties
of the type in which the Company invests, zoning laws, federal and local rent
controls, federal and local environmental protection laws, including, without
limitation, laws relating to the use and maintenance of asbestos, other laws and
regulations and real property tax rates. Certain expenditures associated with
real estate equity investments (principally real estate taxes and maintenance
costs) are not necessarily decreased by events adversely affecting the Company's
income from such investments. Thus, the cost of operating a real property may
exceed the rental income earned thereon, and the Company may have to advance
funds in order to protect its investment or may be required to dispose of the
real property at a loss. The Company's ability to meet its debt and other
obligations will depend in part on these factors, and for these and other
reasons, no assurance of profitable operation of a real property can be made.
Impact of Prevailing Economic Conditions. The real estate industry in
general and the kinds of investments which will be made by the Company in
particular may be affected by prevailing interest rates, the availability of
funds and the generally prevailing economic environment. During the past few
years, there have been wide fluctuations in money market conditions and interest
rates charged on loans, including real estate loans. The direction of future
interest rates and the willingness of financial institutions
10
<PAGE>
to make funds available for real estate financing in the future is
difficult to predict. The real property and the properties underlying any
mortgages that may be acquired with the proceeds of this Offering, and the
properties underlying the Company's present mortgage loans will also be affected
by prevailing economic conditions and the same factors noted in "Risks of
Ownership of Real Property" above, which may affect the Company's ability to
collect rent and the borrower's ability to repay, respectively. The Company is
unable to predict what effect, if any, the prevailing economic conditions will
have on its ability to make mortgage loans or on the operations of the
properties subject to its investments or its own real property.
Risk of Prepayment of Mortgages. While many of the Company's mortgage loans
include penalties for prepayment, fluctuating interest rates may give rise to
prepayments and there can be no assurance that the Company would be able to
reinvest the proceeds of such prepayments at the same or higher interest rates.
See "General Risks of Financing on Real Estate."
Availability of Working Capital. To the extent that reserves maintained by
the Company are not sufficient to defray expenses and carrying costs which
exceed the income of the Company, it will be necessary to attempt to borrow such
amounts. In the event financing is not available on acceptable terms, the
Company may be forced to liquidate certain investments on terms which may not be
favorable to it.
Hazardous Waste and Environmental Liens. Recent federal and state statutes
impose liability on property owners or operators for the clean-up or removal of
hazardous substances found on their property. Courts have extended this
liability to lenders who have obtained title to properties through foreclosure
or have become involved in managing properties prior to obtaining title.
Additionally, such statutes allow the government to place liens for such
liability against affected properties, which liens will be senior in priority to
other liens, including mortgages against the properties. Federal and state laws
in this area are constantly evolving. The Company intends to monitor such laws
and take commercially reasonable steps to protect itself from the impact
thereof; however, there can be no assurance that the Company will be fully
protected from the impact of such laws.
USE OF PROCEEDS
The net proceeds of the Offering, after payment of underwriting fees and
commissions, are estimated at $10,125,000 if the maximum amount ($11,000,000) of
the Debentures are sold, and are estimated at $4,550,000 if the minimum amount
($5,000,000) of the Debentures are sold. Such proceeds will be held in trust for
the benefit of the purchasers of Debentures, and only used for the purposes set
forth herein. After payment of other expenses of the Offering estimated at
$96,000, such net proceeds will become part of the working capital of the
Company and may be used to purchase mortgages or interests in real estate in
accordance with the mortgage and real estate investment policies of the Company
or otherwise used in the ordinary course of its business operations.
11
<PAGE>
Pending investment of the net proceeds as specified above, the Company
plans to invest such proceeds in highly liquid sources, such as interest-bearing
bank accounts, bank certificates of deposit or other short term money market
instruments. It is presently anticipated that such short term investments would
be for a period not in excess of six months, although such time could be
extended if appropriate mortgages or other interests in real estate are not
identified for reinvestment.
It is presently anticipated that specified mortgage and/or real estate
investments will be identified over the course of approximately six months after
the completion of the Offering. Selected investments will meet the criteria and
characteristics embodied in the Company's present investment policies. See
"History of Business - Real Estate Investment Policies and Mortgage Investment
Policy". It is not anticipated that any single investment will be in an amount
which exceeds ten percent (10%) of the total assets of the Company or that more
than twenty percent (20%) of the net proceeds will be invested in a single
mortgage or real estate investment. In no event, will more than ten percent
(10%) of the proceeds be used to acquire interests in unimproved and/or
non-income-producing property.
In the event that any real estate that may be acquired is subsequently
resold or refinanced, any proceeds received therefrom will become part of the
working capital of the Company and will be available for reinvestment. Any fees
or commissions paid, directly or indirectly, to the Company or its affiliates in
connection with any such resale or refinancing, will be on terms comparable with
those that would be paid to unaffiliated parties. See "Transactions with
Management."
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1995 and as adjusted to give effect to the sale of the Debentures
offered hereby:
As adjusted for the
Sale of the Debentures
------------------------
December 31, Minimum Maximum
1995 Offering Offering
----------- ----------- -----------
Long Term Debt:
Debenture Interest Payable
at Maturity $ 2,132,000 $ 2,132,000 $ 2,132,000
Mortgages Payable(1) 18,000 18,000 18,000
Outstanding Debentures 64,700,000 64,700,000 64,700,000
Debentures Offered -- 5,000,000 11,000,000
----------- ----------- -----------
$66,850,000 71,850,000 77,850,000
=========== =========== ===========
Stockholders' Equity:
Common Stock, No Par Value,
200 shares authorized,
31.84 shares issued and
outstanding $ 2,000,000 $ 2,000,000 $ 2,000,000
Additional Paid-in Capital 3,509,000 3,509,000 3,509,000
Retained Earnings 3,869,000 3,869,000 3,869,000
----------- ----------- -----------
Total Stockholders' Equity 9,378,000 9,378,000 9,378,000
----------- ----------- -----------
Total Capitalization $76,228,000 $81,228,000 $87,228,000
=========== =========== ===========
- -------------
(1) Includes current portion of long-term obligations.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company is engaged in the real estate business, including the
origination and purchase of real estate mortgage loans, consisting of first
mortgage, junior mortgage and wraparound mortgage loans. The Company's current
investment policy emphasizes the investment in mortgage loans on income
producing properties. The majority of the Company's loans are expected to mature
within approximately five years.
The Company's liquidity is managed to ensure that sufficient funds are
available to meet maturities of borrowings or to make other investments, taking
into account anticipated cash flows and available sources of funds. The
Company's principal sources of funds have consisted of borrowings (principally
through the issuance of its subordinated debentures), mortgage repayments and
cash flow from ongoing operations. Total stockholders' equity at December 31,
1995 was $9,378,000. Debentures in the principal amount of $500,000 matured and
were paid on April 1, 1996. In addition, the Company will, on May 1, 1996,
retire Debentures with an aggregate principal amount of $5,200,000, which have
scheduled maturities in July of 1996 ($2,000,000 principal amount) and January
of 1997 ($3,200,000 principal amount). The Company has funds available for those
purposes. The Company considers its current liquidity and additional sources of
funds sufficient to satisfy its outstanding commitments and its maturing
liabilities.
RESULTS OF OPERATIONS:
Year Ended December 31, 1995 and 1994
Interest income for 1995 was $7,984,000 as compared to $6,368,000 for 1994.
The increase of $1,616,000 resulted mainly from a higher level of mortgages
receivable, together with an increase in interest rates in 1995. Mortgages
receivable were: $56,666,000 at December 31, 1994, $59,612,000 at March 31,
1995, $59,457,000 at June 30, 1995, $56,145,000 at September 30, 1995 and
$55,146,000 at December 31, 1995. Interest paid by the Company on its
debentures, as well as the interest earned on many of its mortgages, is keyed to
the prime rate, which varied from time to time during 1995, from 8 1/2% at
December 31, 1994 to a high of 9% and then returning to 8 1/2% at December 31,
1995.
Interest expense for the 1995 period was $6,227,000 as compared to
$4,591,000 for the 1994 period. The increase of $1,636,000 resulted mainly from
an increase in long term obligations and an increase in interest rates in 1995.
General and administrative expenses for 1995 was $657,000 as compared to
$483,000 for 1994. The increase of $174,000 resulted mainly from an increase in
payroll and the payment of office rental expenses.
The provision for income taxes decreased from $403,000 in 1994 to $324,000
in 1995. These provisions represent 43% and 42% of pretax income for each
period.
14
<PAGE>
Year Ended December 31, 1994 and 1993
Interest income for 1994 was $6,368,000 as compared to $4,337,000 for 1993.
The increase of $2,031,000 resulted mainly from an increase in mortgages
receivable, together with an increase in interest rates in 1994. Mortgages
receivable were: $41,521,000 at December 31, 1993; $47,552,000 at March 31,
1994; $51,108,000 at June 30, 1994; $53,221,000 at September 30, 1994; and
$56,666,000 at December 31, 1994. Interest paid by the Company on its
debentures, as well as the interest earned on many of its mortgages, is keyed to
the prime rate, which increased from time to time during 1994, from 6% at
December 31, 1993 to 8 1/2% at December 31, 1994.
Interest expense for 1994 was $4,591,000 as compared to $3,415,000 for
1993. The increase of $1,176,000 resulted mainly from an increase in long term
obligations from $45,239,000 at December 31, 1993 to $54,427,000 at December 31,
1994, and an increase in interest rates in 1994.
General and administrative expense for 1994 was $483,000, as compared to
$188,000 for 1993. The increase of $295,000 resulted primarily from an increase
in the service fee charged from 1/4% to 1/2% of the face value of the Company's
mortgages receivable, as well as an increase in the size of the mortgage
portfolio.
The provisions for income taxes decreased from $480,000 in 1993 to $403,000
in 1994. These provisions represent 47% and 43% of pretax income for each
period.
Since the Company intends to continue to expand its asset base, including
its mortgage portfolio, it is anticipated that its interest income will continue
to grow. To the extent that such growth is funded in reliance upon long-term
obligations, such as the Debentures, interest expense will likewise increase.
The size of any such increase will, of course, depend upon the principal amounts
of the additional assets or liabilities, as well as interest rates.
Since the Company is engaged in the real estate business, its results of
operations are affected by general economic trends in real estate markets, as
well as by trends in the general economy and the movement of interest rates.
Since the properties underlying the Company's mortgages are concentrated in the
New York City area, the economic condition in that area can also have an impact
on the Company's operations.
The number of instances of prepayment of mortgage loans tends to increase
during periods of declining interest rates and tends to decrease during periods
of increasing interest rates. Certain of the Company's mortgages include
prepayment provisions, and others prohibit prepayment of indebtedness entirely.
In any event, the Company believes that it would be able to reinvest the
proceeds of any prepayments of mortgage loans in comparable mortgages so that
prepayments would not have any materially adverse effect on the Company's
business.
The rental housing market in New York City remains stable and the Company
expects that such properties will continue to appreciate in value with little or
no reduction in occupancy rates. The Company's mortgage portfolio is composed
predominantly of mortgages on multifamily residential properties, most of which
are subject to applicable
15
<PAGE>
rent control and rent stabilization statutes and regulations. In both
cases, any increases in rent are subject to specific limitations. As such,
properties of the nature of those constituting the most significant portion of
the Company's mortgage portfolio are not affected by the general movement of
real estate values in the same manner as other income-producing properties.
IMPACT OF INFLATION:
The Company may lend at fixed interest rates that exceed the rates
applicable, from time to time, to the Debentures payable by the Company. Under
such circumstances inflation has not had a material effect on the Company's
continuing operations. Should inflation result in rising interest rates, the
Company would have to devote a higher percentage of the interest payments it
receives from its fixed rate mortgages to meet the interest payments due on the
Debentures. The extent to which the Company may be required to allocate the
interest payments it receives to the payment of the interest due on the
Debentures as a result of increasing interest rates is limited because the
interest payable on both principal and accrued interest on the Debentures may
not exceed a certain maximum percent per annum. Should the Company be required
to pay the maximum interest payable on the Debentures, the Company may be
required to use its working capital for purposes of interest payments.
The Company's mortgages are generally acquired or originated for investment
and not for resale in the secondary market, and it is, in general, the Company's
intention to hold such mortgages to maturity. The Company's mortgage loans
generally do not meet the criteria set forth by relevant federal agencies, and
as a result are not readily marketable in the secondary market.
BUSINESS:
The Company is engaged in the real estate business and has historically
invested primarily in real estate mortgage loans secured by income producing
real property. It is anticipated that a substantial portion of the loans to be
made by the Company will be loans with terms of up to approximately five years.
Such transactions typically require an understanding of the underlying real
estate transaction and rapid processing and funding as a principal basis for
competing in the making of these loans. The Company does not finance new
construction.
At December 31, 1995, 79% of the outstanding principal amount of the
Company's loans (net of discounts) were secured by properties located in the
greater New York metropolitan area. The balance of the Company's loans are
secured by properties located in Georgia, New Jersey, Virginia and upstate New
York.
Certain of the Company's real estate mortgage loans bear interest at a
fixed rate. The balance of such loans bear interest at fluctuating rates. As of
December 31, 1995, approximately 25% of the Company's mortgage portfolio was
comprised of fixed rate mortgages. Interest on the loans is usually payable
monthly.
At December 31, 1995, the Company's portfolio consisted of 47 real estate
mortgage loans totaling $55,920,000 in the aggregate face principal amount
($55,146,000 in carrying amount for financial reporting purposes, the difference
representing unearned discounts). Of the
16
<PAGE>
principal amount of real estate loans outstanding at December 31, 1995, 1%
represent wraparound mortgage loans, 87% represent first mortgage loans and 12%
represent junior mortgage loans.
The Company may also, from time to time, acquire interests in real
property, including fee interests.
INVESTMENT POLICY-OPERATIONS:
The Company's current investment policy related to mortgages emphasizes
investments in short-term real estate mortgages secured by income producing real
property, located primarily in the greater New York metropolitan area.
The properties to be mortgaged are personally inspected by management and
mortgage loans are made only on those properties where management is
knowledgeable as to operating income and expense. The Company generally relies
upon its management in connection with the valuation of properties. From time to
time, however, it may engage independent appraisers and other agents to assist
in determining the value of income-producing properties underlying mortgages, in
which case the costs associated with such services are generally paid by the
mortgagor.
The Company's current investment policy related to real estate acquisitions
emphasizes investments in income-producing properties located primarily in the
New York metropolitan area.
CURRENT LOAN STATUS:
At December 31, 1995, the Company had 47 real estate mortgage loans in its
portfolio, totaling $55,920,000 (face amount) in aggregate principal amount.
Interest rates on the mortgage portfolio range between 6% and 16% per annum.
Certain mortgages have been discounted utilizing rates between 12% and 18% per
annum.
Certain information concerning the Company's mortgage loans outstanding at
December 31, 1995 is set forth below:
Carrying
Amount of
Mortgage Prior No. of
Loans Liens Loans
----------- ----------- ------
First Mortgage Loans $48,029,000 $ -0- 40
Junior Mortgages 6,788,000 15,454,000 6
Wraparound Mortgages 329,000 18,000 1
----------- ----------- --
TOTAL $55,146,000 $15,472,000 47
=========== =========== ==
The historical cost of the mortgage loans which originated in connection
with the sale of real estate includes a discount to reflect an appropriate
market interest rate at the date of origination.
17
<PAGE>
COMPETITION:
The Company competes for acceptable investments with real estate investment
trusts, commercial banks, insurance companies, savings and loan associations,
pension funds and mortgage banking firms, many of which have greater resources
with which to compete for desirable mortgage loans.
SELECTED FINANCIAL INFORMATION OF THE COMPANY
The following table presents certain historical financial data for the
Company. The data should be read in conjunction with the financial statements,
related notes and other financial information included herein.
18
<PAGE>
<TABLE>
INCOME STATEMENT DATA
=======================================================================================================
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue
Interest income ..................... $7,984,000 $6,368,000 $4,337,000 $3,345,000 $2,958,000
Other income ........................ 332,000 283,000 802,000 735,000 378,000
Gain on early repayment of
discounted mortgages receivable ... 82,000 17,000 18,000 20,000
---------- ---------- ---------- ---------- ----------
8,398,000 6,668,000 $5,157,000 $4,100,000 $3,336,000
---------- ---------- ---------- ---------- ----------
Expenses
Interest ............................ 6,227,000 4,591,000 3,415,000 2,904,000 2,240,000
General and administrative .......... 657,000 483,000 188,000 194,000 157,000
Amortization of deferred debenture
offering costs .................... 748,000 655,000 529,000 460,000 362,000
---------- ---------- ---------- ---------- ----------
7,632,000 5,729,000 $4,132,000 3,558,000 2,759,000
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes ........... 766,000 939,000 1,025,000 542,000 577,000
Provision for Income Taxes ........... 324,000 403,000 480,000 229,000 252,000
---------- ---------- ---------- ---------- ----------
Net Income .......................... $ 442,000 $ 536,000 $ 545,000 $ 313,000 $ 325,000
========== ========== ========== ========== ==========
Ratio of Earnings to Fixed Charges (1) 1.1 1.2 1.3 1.2 1.2
</TABLE>
- -------------
(1) The actual ratio of earnings to fixed charges has been computed by
dividing earnings (before state and federal taxes and fixed charges) by fixed
charges. Fixed charges consist of interest incurred during the period and
amortization of deferred debenture offering costs.
<TABLE>
BALANCE SHEET DATA
<CAPTION>
December 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Mortgages receivable .... $55,146,000 $56,666,000 $41,521,000 $32,493,000 $27,307,000
Total assets ............ 77,579,000 64,745,000 54,650,000 45,140,000 32,976,000
Long term obligations ... 66,850,000 54,427,000 45,239,000 36,584,000 25,484,000
Stockholders' equity .... 9,378,000 8,936,000 8,400,000 7,855,000 7,042,000
</TABLE>
19
<PAGE>
HISTORY AND BUSINESS
THE COMPANY
Intervest Corporation of New York (the "Company") was incorporated under
the laws of the State of New York in April, 1987. The Company was founded and
organized by Lowell S. Dansker, Lawrence G. Bergman and Helene D. Bergman (see
"Transactions with Management"), and is privately held. The principal offices of
the Company are located at 10 Rockefeller Plaza, Suite 1015, New York, New York
10020-1903, and its telephone number is 212-757-7300. The Company presently owns
mortgages on real estate, and intends to acquire and originate additional
mortgages on real estate. The proceeds of this offering will be used to acquire
or originate additional mortgages on real estate, to acquire and retain
interests in real property, or to otherwise be used in the course of its
business operations. The Company may in the future engage in any aspect of the
real estate and mortgage finance business.
The Company also has two wholly-owned subsidiaries. See "History and
Business-Subsidiaries."
PRESENT BUSINESS
The Company owns a portfolio of mortgages on improved real property. The
aggregate outstanding principal balance at December 31, 1995 due on such
mortgages is approximately $55,920,000 ($55,146,000 after adjusting for a
discount of $774,000), but since one of the mortgages is a "wraparound
mortgage," the Company's net equity (mortgages receivable less mortgages
payable) in its portfolio of mortgages is approximately $55,128,000. Under a
wraparound mortgage, the principal amount of and debt service on one or more
senior mortgages is included within the principal amount of and debt service on
the wraparound mortgage. The holder of the wraparound mortgage is required to
pay the obligations due under such senior mortgages from the payments which it
receives on the wraparound mortgage.
For financial statement reporting purposes, all mortgages contributed or
sold to the Company by affiliates have been recorded at the historical cost of
the affiliate. The historical cost of the mortgage loans which originated in
connection with the sale of real estate includes a discount to reflect an
appropriate market interest rate at the date of origination.
Five mortgages owned by the Company are senior mortgages on net leased,
free standing commercial properties, thirty-five are senior mortgages on
multifamily residential apartment buildings, six are junior mortgages on
multifamily residential apartment buildings, and one mortgage is a wraparound
mortgage on a multifamily residential apartment building. Five of the properties
are commercial properties which are located in various states, and
20
<PAGE>
each is leased by the respective owner to a single commercial tenant under a
long term net lease.
Thirty-four of the residential properties are located in New York City,
four are located in suburbs of New York City and four are located in the State
of New Jersey. Three of the residential properties are owned by cooperative
corporations (a form of owner-occupied apartment ownership in New York City).
Two of the mortgages on such properties are first mortgages and one is a
wraparound mortgage. Thirty-nine of the residential properties are rental
properties, nine of which have commercial space (stores) on the ground floor.
Thirty-three of the Company's mortgages on these properties are first mortgages,
and six are junior mortgages.
The wraparound mortgage owned by the Company, has an outstanding principal
balance of $329,000 at December 31, 1995, which principal amount includes the
outstanding principal balance under the senior mortgage of $18,000. The maturity
date of the wraparound mortgage is November 1, 1996; the monthly payment is
$3,200, including interest at 9% per annum. The maturity date of the senior
mortgage has passed and the Company continues to make regular payments of
principal and interest. The monthly payment of principal and interest due on the
senior mortgage is $1,800, including interest at 8.5% per annum. The equity in
the wraparound mortgage at December 31, 1995 was $311,000.
Table 1 below presents, as of December 31, 1995, certain information
regarding each of the Company's mortgages. Those mortgages marked with an
asterisk are on properties owned by affiliates of the Company.
The five mortgages listed as items 1 through 5 in Table 1 are liens on net
leased, free standing commercial properties. Each is leased by the respective
owner to a single commercial tenant under a long term net lease.
The forty-two mortgages listed as items 6 through 47 in Table 1 are liens
on multifamily residential apartment buildings. The properties listed as items
6, 7 and 8 are each owned by a cooperative corporation (a form of owner-occupied
apartment ownership in New York City). The other thirty-nine properties are
rental properties, nine of which (items 16, 21, 25, 28, 29, 30, 32, 35 and 43)
have commercial space (stores) on the ground floor. Where there are underlying
mortgages on these properties (item 8), they are held by unaffiliated parties.
21
<PAGE>
<TABLE>
TABLE 1
MORTGAGES RECEIVABLE
<CAPTION>
Outstanding
Principal
Mortgage Balance at Type of Effective Debt Service
Number Address 12/31/95 Mortgage Interest Rate Payments
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 104 Main Street $ 217,420.97 First 12.25% See Footnote 1
New City, New York
2 2860 Candler Road 270,691.06 First 13.00% See Footnote 2
Decatur, Georgia
3 6623 Tara Boulevard 233,769.47 First 13.00% See Footnote 3
Jonesboro, Georgia
4 Route 234 and 178,263.28 First 12.375% See Footnote 4
Coverstone Drive
Manassas, Virginia
5 850 Ridge Road East 276,428.99 First 12.50% See Footnote 5
Irondequoit, New York
6 168-70-72 East 90th Street 939,188.66 First 11.51% See Footnote 6
New York, New York
7 204-06-08 East 90th Street 850,000.00 First 11.51% See Footnote 7
New York, New York
8 126 East 12th Street 329,040.40 Wrap- 9.00% See Footnote 33
New York, New York Around
9 455 West 44th Street 1,314,000.00 First 11.00%(A) See Footnote 37
New York, New York
10 3133 Rochambeau Avenue 1,015,483.92 First 12.50%(A) See Footnote 8
Bronx, New York
11 3165 Decatur Avenue 2,850,000.00 First 13.11%(A) See Footnote 17
Bronx, New York
and
3341-45 Reservoir Oval West
Bronx, New York
<CAPTION>
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 104 Main Street 12/08/2010 Self-liquidating No prepayment penalty
New City, New York
2 2860 Candler Road 4/01/2013 Self-liquidating No prepayment penalty
Decatur, Georgia
3 6623 Tara Boulevard 4/01/2013 Self-liquidating No prepayment penalty
Jonesboro, Georgia
4 Route 234 and 12/01/2005 Self-liquidating .5% prepayment penalty
Coverstone Drive
Manassas, Virginia
5 850 Ridge Road East 12/01/2012 Self-liquidating 1% prepayment penalty
Irondequoit, New York
6 168-70-72 East 90th Street 10/31/1997 $ 927,006.37 No prepayment permitted
New York, New York
7 204-06-08 East 90th Street 7/31/1997 850,000.00 No prepayment permitted
New York, New York
8 126 East 12th Street 11/01/1996 321,466.30 No prepayment permitted
New York, New York
9 455 West 44th Street 5/01/2005 1,206,365.61 1% fee
New York, New York
10 3133 Rochambeau Avenue 8/01/2010 Self-liquidating Not prepayable until balance
Bronx, New York under $200,000
11 3165 Decatur Avenue 9/01/2011 Self-liquidating Not prepayable until 3/1/2004
Bronx, New York
and
3341-45 Reservoir Oval West
Bronx, New York
22
<PAGE>
<CAPTION>
Outstanding
Principal
Mortgage Balance at Type of Effective Debt Service
Number Address 12/31/95 Mortgage Interest Rate Payments
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12 2816 Heath Avenue 1,170,282.49 First 12.75%(A) See Footnote 18
Bronx, New York
13 134 East Mosholu 2,281,807.87 First 10.50%(A) See Footnote 9
Parkway South
Bronx, New York
and
2910 Grand Concourse
Bronx, New York
14 2979 Marion Avenue 900,000.00 First 12.38%(A) See Footnote 24
Bronx, New York
15 326 East 201st Street 608,265.16 First 13.50%(A) See Footnote 10
Bronx, New York
* 16 220 West 93rd Street 1,050,000.00 Second 12.00% See Footnote 7
New York, New York
17 2855 Claflin Avenue 819,205.62 First 9.00%(A) See Footnote 11
Bronx, New York
18 2847 Webb Avenue 649,646.42 First 13.50%(A) See Footnote 12
Bronx, New York
19 115-117 West 197th Street 1,957,754.76 First 13.75%(A) See Footnote 13
Bronx, New York
20 3006 Decatur Avenue 1,208,649.83 First 9.00%(A) See Footnote 14
Bronx, New York
* 21 222 West 83rd Street 3,300,000.00 Second 11.00% See Footnote 7
New York, New York
22 404-408-412 Audubon Avenue 759,831.92 First (B) See Footnote 36
New York, New York
23 2980 Valentine Avenue 1,837,372.91 First 12.75%(A) See Footnote 15
Bronx, New York
<CAPTION>
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 2816 Heath Avenue 1/01/2011 Self-liquidating No prepayment permitted
Bronx, New York
13 134 East Mosholu 11/01/2012 Self-liquidating Not prepayable until 2/2003
Parkway South
Bronx, New York
and
2910 Grand Concourse
Bronx, New York
14 2979 Marion Avenue 8/01/2012 Self-liquidating Not prepayable until balance
Bronx, New York under $200,000, 2% fee on
unpaid balance
15 326 East 201st Street 3/01/1997 592,000.00 No prepayment penalty
Bronx, New York
* 16 220 West 93rd Street 2/01/1999 1,050,000.00 No prepayment penalty
New York, New York
17 2855 Claflin Avenue 7/01/2006 Self-liquidating Not prepayable until 1/1/2000
Bronx, New York
18 2847 Webb Avenue 3/01/1997 634,000.00 No prepayment penalty
Bronx, New York
19 115-117 West 197th Street 6/01/2013 Self-liquidating No prepayment permitted
Bronx, New York
20 3006 Decatur Avenue 11/01/2015 Self-liquidating Not prepayable until 3/99
Bronx, New York
* 21 222 West 83rd Street 2/01/1997 3,300,000.00 No prepayment penalty
New York, New York
22 404-408-412 Audubon Avenue 01/31/1997 714,871.12 1% fee
New York, New York
23 2980 Valentine Avenue 11/01/2011 Self-liquidating Not prepayable until 1/1/2003
Bronx, New York
23
<PAGE>
<CAPTION>
Outstanding
Principal
Mortgage Balance at Type of Effective Debt Service
Number Address 12/31/95 Mortgage Interest Rate Payments
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
24 3154-3164 Grand Concourse 1,621,816.17 First 13.00%(A) See Footnote 19
Bronx, New York
25 796-798 Ninth Avenue 1,445,000.00 First 10.00% See Footnote 7
New York, New York
26 3150 Rochambeau Avenue 4,510,000.00 First 12.77%(A) See Footnote 25
Bronx, New York
27 22 West 77th Street 2,000,000.00 First 12.75%(A) See Footnote 7
New York, New York
* 28 203 West 90th Street 1,400,000.00 Second 11.00%(A) See Footnote 7
New York, New York
29 790 Ninth Avenue 425,000.00 First 10.00% See Footnote 7
New York, New York
30 801/803 Ninth Avenue 1,122,857.78 First 11.00%(A) See Footnote 38
New York, New York
* 31 650 Main Street 500,000.00 Second 11.50%(A) See Footnote 7
New Rochelle, New York
32 676 Ninth Avenue 265,000.00 First 10.00% See Footnote 7
New York, New York
33 40 Argyle Road 538,058.59 First (B) See Footnote 16
Brooklyn, New York
34 48-56 Beaver Street 2,377,383.33 First (B) See Footnote 20
New York, New York
35 805 Ninth Avenue 294,416.45 First 11.00%(A) See Footnote 21
New York, New York
36 200 Route 209 946,107.64 First (B) See Footnote 22
Ellenville, New York
37 116 Prospect Street 895,504.12 First (B) See Footnote 23
East Orange, New Jersey
<CAPTION>
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
24 3154-3164 Grand Concourse 1/01/2010 Self-liquidating Not prepayable until 10/1/2000
Bronx, New York
25 796-798 Ninth Avenue 10/01/2000 1,445,000.00 Not prepayable until 1/1/1997
New York, New York
26 3150 Rochambeau Avenue 11/01/2013 Self-liquidating No prepayment permitted
Bronx, New York
27 22 West 77th Street 10/01/1999 2,000,000.00 No prepayment penalty
New York, New York
* 28 203 West 90th Street 2/01/1998 1,400,000.00 No prepayment penalty
New York, New York
29 790 Ninth Avenue 10/01/2000 425,000.00 Not prepayable until 1/1/1997
New York, New York
30 801/803 Ninth Avenue 3/15/2010 Self-liquidating Not prepayable until 3/1/1996
New York, New York
* 31 650 Main Street 3/01/1996 500,000.00 No prepayment penalty
New Rochelle, New York
32 676 Ninth Avenue 10/01/2000 265,000.00 Not prepayable until 1/1/1997
New York, New York
33 40 Argyle Road 3/31/1996 535,104.89 No penalty if after 3/1/1996
Brooklyn, New York
34 48-56 Beaver Street 04/30/1997 2,284,589.31 Not prepayable until
New York, New York 11/8/1996; then 1% fee
35 805 Ninth Avenue 3/15/2010 Self-liquidating Not prepayable until 3/1/1996
New York, New York
36 200 Route 209 04/30/1997 847,283.76 Not prepayable until
Ellenville, New York 11/21/1996; then 1% fee
37 116 Prospect Street 12/01/1996 851,566.53 1% fee
East Orange, New Jersey
24
<PAGE>
<CAPTION>
Outstanding
Principal
Mortgage Balance at Type of Effective Debt Service
Number Address 12/31/95 Mortgage Interest Rate Payments
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
38 179 South Harrison Street 661,280.46 First (B) See Footnote 26
East Orange, New Jersey
39 143-147 North Avenue 4,750,000.00 First 11.00% See Footnote 27
New Rochelle, New York
40 1392-4 & 1396-8 Madison Avenue 523,317.62 First (B) See Footnote 28
New York, New York
41 3051-91 Pleasant Street 1,149,939.20 First (B) See Footnote 29
Camden, New Jersey
42 129 Duane Street 1,496,659.25 First (B) See Footnote 30
New York, New York
43 238-240 East 14th Street 1,100,000.00 First 10.00%(A) See Footnote 7
New York, New York
44 189 Sunrise Highway 298,400.48 Second (B) See Footnote 31
Rockville Centre, New York
45 190 Fordham Street 647,786.58 First (B) See Footnote 32
City Island, Bronx, New York
46 178-180 Fifth Avenue 357,863.43 Second (B) See Footnote 34
New York, New York
47 276-336 Eastern Parkway 1,576,825.70 First (B) See Footnote 35
Irvington, New Jersey
====================================================================================================================
<CAPTION>
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
38 179 South Harrison Street 12/1/1996 623,740.92 1% fee
East Orange, New Jersey
39 143-147 North Avenue 4/01/2005 4,114,082.85 1% fee
New Rochelle, New York
40 1392-4 & 1396-8 Madison Avenue 3/31/1996 511,553.69(c) 1% fee
New York, New York
41 3051-91 Pleasant Street 7/01/1997 928,811.72 1% fee
Camden, New Jersey
42 129 Duane Street 04/30/1997 1,437,811.06 1% fee
New York, New York
43 238-240 East 14th Street 03/01/1999 1,100,000.00 Not prepayable until 3/1/1996
New York, New York
44 189 Sunrise Highway 03/31/1997 285,081.62 1% fee
Rockville Centre, New York
45 190 Fordham Street 05/31/1996 646,974.50 1% fee (not required if after
City Island, Bronx, New York 5/1/1996)
46 178-180 Fifth Avenue 12/15/1996 344,028.77 2% fee if prior to 6/8/1996;
New York, New York afterwards 1% fee
47 276-336 Eastern Parkway 08/01/1997 1,371,963.18 Not prepayable until
Irvington, New Jersey 5/1/1997, then 1% fee
</TABLE>
================================================================================
* Owned by an affiliate of the Company
(A) The interest rates specified are the effective interest rates at December
31, 1995. These are floating rate mortgages and interest rates are adjusted
pursuant to the terms of the mortgage either at specified times and at
specified rates or based upon the prime rate or a specified increment over
the prime rate. The mortgages incorporate interest rate floors ranging from
6% to 13.75%.
(B) These are floating rate mortgages and the interest rate is the greater of
the then applicable rate or a specified increment over the prime rate, which
increment ranges from 5% to 7%.
(C) The full principal balance at December 31, 1995 was $1,773,317.62, including
a participation of $1,250,000 held by an unrelated third party. The full
balance at maturity is $1,761,553.69.
(See Additional Footnotes on Next Page)
25
<PAGE>
(1) $22,000.00 annually on December 15 each year, including annual interest in
advance.
(2) $2,509.75 per month, including interest.
(3) $2,167.50 per month, including interest.
(4) $24,287.16 annually on December 1 each year, including annual interest in
advance.
(5) $29,356.32 annually on December 1 each year, including annual interest in
advance.
(6) Debt service payments increase from $9,355 per month to $9,505 per month
over the life of the mortgage.
(7) Debt service payments are interest only.
(8) Debt service payments increase from $11,000 per month to $13,000 per month
over the life of the mortgage.
(9) Debt service payments increase from $21,000 per month to $25,000 per month
over the life of the mortgage.
(10) Debt service payments increase from $5,000 per month to $5,800 per month
over the life of the mortgage.
(11) Debt service payments increase from $10,000 to $11,750 over the life of the
mortgage.
(12) Debt service payments increase from $5,525 per month to $6,325 per month
over the life of the mortgage.
(13) Debt service payments increase from $23,000 per month to $24,500 per month
over the life of the mortgage.
(14) Debt service payments increase from $10,000 per month to $12,917 per month
over the life of the mortgage.
(15) Debt service payments increase from $18,000 per month to $24,000 per month
over the life of the mortgage.
(16) $7,590.58 per month including interest.
(17) Debt service payments increase from $31,000 per month to $44,000 per month
over the life of the mortgage.
(18) Debt service payments increase from $11,700 per month to $15,250 per month
over the life of the mortgage.
(19) Debt service payments increase from $17,500 per month to $24,000 per month
over the life of the mortgage.
(20) $36,500 per month including interest.
(21) Debt service payments increase from $3,100 per month to $3,350.52 per month
over the life of the mortgage.
26
<PAGE>
(22) Debt service payments increase from $17,400 per month to $18,400 per month
over the life of the mortgage.
(23) $14,819.25 per month, including interest.
(24) Debt service payments increase from $9,000 per month to $11,250 per month
over the life of the mortgage.
(25) Debt service payments increase from $48,000 per month (which are interest
payments only) to $80,000 per month (which includes payments of principal)
over the life of the mortgage.
(26) $11,391.10 per month including interest.
(27) Debt service payments increase from $39,583 per month to $44,000 per month
over the life of the mortgage.
(28) $25,000 per month including interest reduced by interest payment at 10.75%
on $1,250,000 to participants of the mortgage.
(29) Debt service payments increase from $24,000 per month to $25,250 per month
over the life of the mortgage.
(30) $22,000 per month, including interest.
(31) $4,533 per month including interest.
(32) $8,395.54 per month including interest.
(33) $3,200 per month, including interest.
(34) $5,550 per month, including interest.
(35) $31,335 per month, including interest.
(36) $12,700 per month, including interest.
(37) Debt service payments include $3,000 principal for the first 12 months and
then increase from $10,950 per month to $11,950 per month over the life of
the mortgage.
(38) Debt service payments vary from $12,500 per month to $12,212.60 per month
over the life of the mortgage.
27
<PAGE>
PROPERTY TO BE ACQUIRED FROM NET PROCEEDS OF OFFERING
The Company plans to apply the net cash proceeds of the offering to the
acquisition of additional mortgages and/or interests in real estate. See "Use of
Proceeds."
FUTURE BUSINESS OPERATIONS
The Company plans to continue to engage in the real estate business,
including the acquisition and origination of mortgages. Such mortgages may be
purchased from affiliates of the Company or from unaffiliated parties. It is
anticipated that such mortgages will be acquired or originated using the
proceeds of additional debenture offerings and/or internally generated funds.
The Company intends to continue to originate new mortgages, to acquire
existing mortgages, and to acquire equity interests in real property. The
Company does not presently own any equity interests in real property nor has it
acquired any equity interest in real property since the date it commenced
business. However, the proceeds from this offering may be applied to such an
acquisition and the Company may purchase additional equity interests in real
property in the future or it may acquire such an equity interest pursuant to a
foreclosure upon a mortgage held by it.
The Company's mortgage loans will include: (i) wraparound mortgage loans;
(ii) junior mortgage loans; and (iii) first mortgage loans.
The Company's mortgage loans will generally be secured by income-producing
properties. In determining whether to make mortgage loans, the Company will
analyze relevant real property and financial factors which may in certain cases
include such factors as the condition and use of the subject property, its
income-producing capacity and the quality, experience and creditworthiness of
the owner of the property. The Company's mortgage loans will generally not be
personal obligations of the borrower and will not be insured or guaranteed by
governmental agencies or otherwise.
The Company anticipates its mortgage loans will typically mature within
approximately five years. However, the Company may also invest in mortgage loans
with longer maturities or shorter maturities. The Company anticipates that
generally its mortgage loans will provide for balloon payments due at the time
of their maturity.
With respect to the acquisition of equity interests in real estate, the
Company may acquire and retain title to properties or, may, directly or through
a subsidiary, retain an interest in a partnership formed to acquire and hold
title to real property.
28
<PAGE>
While no such transactions are presently pending, the Company would, in
appropriate circumstances, consider the expansion of its business through
investments in or acquisitions of other companies engaged in real estate or
mortgage business activities.
The Company does not have any present intentions to issue senior
securities; to underwrite securities of other issuers; or to offer securities in
exchange for property. While no such transactions are currently contemplated,
the Company would, in appropriate circumstances and without the approval of the
Debenture Holders, consider the call or redemption of its outstanding debt
securities.
REAL ESTATE INVESTMENT POLICIES
While the Company has not previously made acquisitions of real property or
managed income-producing property, its management has had substantial experience
in the acquisition and management of properties and, in particular, multifamily
residential properties. The three executive officers of the Company have been
actively involved in such activities for many years. (See "Management").
Real property that may be acquired will be selected by management of the
Company. The Board of Directors of the Company has not adopted any formal
policies regarding the percentage of the Company's assets that may be invested
in any single property, or in any type of property, or regarding the geographic
location of properties that may be acquired. No vote of any securities holders
of the Company is necessary for any investment in real estate.
The Company anticipates that any equity interests it may acquire will be in
income-producing properties, primarily multifamily residential properties
located in the New York metropolitan area. The acquisition of real estate may be
financed in reliance upon working capital, mortgage financing or a combination
of both. It is anticipated that properties selected for acquisition would have
potential for appreciation in value. While such properties would typically
generate cash flow from rentals, it is anticipated that income from properties
will generally be reinvested in capital improvements to the properties.
While the Company would maintain close supervision over any properties that
it may own, independent managing agents may be engaged when deemed appropriate
by management. All such properties would, as a matter of policy, be covered by
property insurance in amounts deemed adequate in the opinion of management.
MORTGAGE INVESTMENT POLICY
Future investments in mortgages will be selected by management of the
Company. The Board of Directors of the Company has not adopted any formal policy
regarding the percentage of the Company's
29
<PAGE>
assets which may be invested in any single mortgage, or in any type of mortgage
investment, or regarding the geographic location of properties on which the
mortgages owned by the Company are liens. However, it is the present intention
of the management of the Company to maintain the diversification of the
portfolio of mortgages owned by the Company. No vote of any security holders of
the Company is necessary for any investment in a mortgage.
The Company anticipates that it will acquire or originate senior and junior
mortgages, primarily on multifamily residential properties located in the New
York metropolitan area. The Company anticipates that the amount of each mortgage
it may acquire in the future will not exceed 85% of the fair market value of the
property securing such mortgage. Such mortgages generally will not be insured by
the Federal Housing Administration or guaranteed by the Veterans Administration
or otherwise guaranteed or insured in any way. The Company requires that all
mortgaged properties be covered by property insurance in amounts deemed adequate
in the opinion of management. The Company may in the future acquire or originate
mortgages which are liens on other types of properties, including commercial and
office properties, and may resell mortgages.
TEMPORARY INVESTMENTS BY AFFILIATES ON BEHALF OF THE COMPANY
An affiliate of the Company may make a mortgage loan or purchase a mortgage
in its own name and temporarily hold such investment for the purpose of
facilitating the making of an investment of the Company, provided that any such
investment is acquired by the Company at a cost no greater than the cost of such
investment to the affiliate plus carrying costs and provided there is no other
benefit to the affiliate arising out of such transaction from compensation
otherwise than as permitted by this Prospectus.
CERTAIN CHARACTERISTICS OF THE COMPANY'S MORTGAGE INVESTMENTS
Mortgages typically provide for periodic payments of interest and, in some
cases, principal during the term of the mortgage, with the remaining principal
balance and any accrued interest due at the maturity date. The majority of the
mortgages owned by the Company provide for balloon payments at maturity, which
means that a substantial part or all of the original principal of the mortgage
is due in one lump sum payment at maturity. The property on which the mortgage
is a lien provides the security for the mortgage. If the net revenue from the
property is not sufficient to make all debt service payments due on mortgages on
the property, or if at maturity or the due date of any balloon payment the owner
of the property fails to raise the funds to make the payment (by refinancing,
sale or otherwise), the Company could sustain a loss on its investment in the
mortgage. To the extent that the aggregate net revenues from the Company's
mortgage investments are insufficient to provide funds equal to the payments due
under the
30
<PAGE>
Company's debt obligations, including the Debentures, then the Company would be
required to utilize its working capital for such purposes or otherwise obtain
the necessary funds from outside sources. No assurance can be given that such
funds would be available to the Company. A failure to make any payments due to
the holders of Debentures would give rise to those remedies set out in the
Indenture. (See "Description of Debentures").
With respect to any wraparound mortgages which may be originated by the
Company in the future, such wraparound mortgages are generally negotiated and
structured on an individual, case by case basis, and may be structured to
include any or all of the following provisions:
(i) The Company may lend money to a real property owner who would be
obligated to repay the senior underlying mortgage debt as well as the new
wraparound indebtedness owed to the Company.
(ii) The Company may legally assume the obligation to make the
payments due on the senior underlying mortgage debt.
(iii) The real property owner-debtor may agree to make payments to the
Company in satisfaction of both the senior underlying mortgage debt and the
new wraparound indebtedness owed to the Company.
(iv) The Company may receive a mortgage on the real property to secure
repayment of the total amount of indebtedness (wraparound indebtedness and
the senior underlying mortgage indebtedness).
The mortgages owned by the Company that are junior mortgages are
subordinate in right of payment to senior mortgages on the various properties.
The Company generally relies upon its management in connection with the
valuation of properties. From time to time, however, it may engage independent
appraisers and other agents to assist in determining the value of
income-producing properties underlying mortgages. In all cases, in the opinion
of management, the current value of the underlying property collateralizing the
mortgage loan is in excess of the stated amount of the mortgage loan. Therefore,
in the opinion of management of the Company, each property on which a mortgage
owned by the Company is a lien constitutes adequate collateral for the related
mortgage loan. Accordingly, in the event the owner of a property fails to make
required debt service payments, management believes that, based upon current
value, upon a foreclosure of the mortgage and sale of the property, the Company
would recover its entire investment. However, there can be no assurance that the
current value of the underlying property will be maintained.
31
<PAGE>
LOAN LOSS EXPERIENCE
For financial reporting purposes, the Company considers a loan as
delinquent or non-performing when it is contractually past due 90 days or more
as to principal or interest payments. To date, the Company has not experienced
any defaults or delinquencies in its mortgage portfolio. The Company evaluates
its portfolio of mortgage loans on an individual basis, comparing the amount at
which the investment is carried to its estimated net realizable value. Since the
Company has not experienced any defaults or delinquencies, no allowance for loan
losses is presently maintained.
TAX ACCOUNTING TREATMENT OF PAYMENTS RECEIVED ON MORTGAGES
The Company derives substantially all of its cash flow from debt service
payments which it receives on mortgages owned by it. The tax accounting
treatment of such debt service payments, as income or return of capital, depends
on the particular mortgage. In the case of mortgages which pay interest only,
the entire debt service payment prior to maturity received by the Company is
treated as income and the repayment of principal is generally considered a
return of capital. In the case of mortgages which include amortization of
principal in the debt service payment received by the Company, the amount
representing amortization of principal is generally treated as a return of
capital for tax accounting purposes. However, the Company will report $199,000
of additional taxable income upon the collection of $875,000 of principal
applicable to five mortgages due to deferrals of taxable income in connection
with prior real estate transactions.
FINANCIAL ACCOUNTING TREATMENT OF PAYMENTS RECEIVED ON MORTGAGES
For financial reporting purposes, the Company's basis in mortgages
originated in connection with real estate sale transactions is less than the
face amount outstanding. This difference is attributable to discounts recorded
by the Company to reflect a market rate of interest at the date the loans were
originated. These discounts will be amortized over the lives of the mortgages.
EFFECT OF GOVERNMENT REGULATION
Investment in mortgages on real properties presently may be impacted by
government regulation in several ways. Residential properties may be subject to
rent control and rent stabilization laws. As a consequence, the owner of the
property may be restricted in its ability to raise the rents on apartments. If
real estate taxes, fuel costs and maintenance of and repairs to the property
were to increase substantially, and such increases are not offset by increases
in rental income, the ability of the owner of
32
<PAGE>
the property to make the payments due on the mortgage as and when they are due
might be adversely affected.
Laws and regulations relating to asbestos have been adopted in many
jurisdictions, including New York City, which require that whenever any work is
undertaken in a property in an area in which asbestos is present, the asbestos
must be removed or encapsulated in accordance with such applicable local and
federal laws and regulations. The cost of asbestos removal or encapsulation may
be substantial, and if there were not sufficient cash flow from the property,
after debt service on mortgages, to fund the required work, and the owner of the
property fails to fund such work from other sources, the value of the property
could be adversely affected, with consequent impairment of the security for the
mortgage.
Laws regulating the storage, disposal and clean up of hazardous or toxic
substances at real property have been adopted at the federal, state and local
levels. Such laws may impose a lien on the real property superior to any
mortgages on the property. In the event such a lien were imposed on any property
which serves as security for a mortgage owned by the Company, the security for
such mortgage could be impaired.
INDEMNIFICATION
Pursuant to the bylaws of the Company, the Company is obligated to
indemnify officers and directors of the Company against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred by such officers or directors as a result of
any action or proceeding, or any appeal therein, to the extent such
indemnification is permitted under the laws of the State of New York (in which
the Company is incorporated). Insofar as indemnification for liabilities under
the Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
LITIGATION
The Company is not engaged in any litigation, nor does it presently know of
any threatened or pending litigation in which it is contemplated that the
Company will be made a party.
SUBSIDIARIES
The Company has two wholly-owned subsidiaries. Intervest Distribution
Corporation is a servicing agent for distributions to
33
<PAGE>
investors and performs distribution and record-keeping functions for the Company
and its affiliates. Intervest Realty Servicing Corporation is currently engaged
in real estate management and brokerage activities.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of the Company are as follows:
Lowell S. Dansker, age 45, serves as a Director, and as Co-Chairman,
President and Treasurer of the Company, and has served in such capacities since
the Company was organized. Mr. Dansker received a Bachelor of Science in
Business Administration from Babson College, a law degree from the University of
Akron School of Law, and is admitted to practice as an attorney in New York,
Ohio, Florida and the District of Columbia. Mr. Dansker is also Co-Chairman of
the Board of Directors, President and Treasurer of Intervest Bancshares
Corporation, an affiliated bank holding company and Co-Chairman of the Board of
Directors and a member of the Loan Committee of Intervest Bank, a Florida
state-chartered bank which is majority owned by Intervest Bancshares
Corporation.
Lawrence G. Bergman, age 51, serves as a Director, and as Co-Chairman, Vice
President and Secretary of the Company and has served in such capacities since
the Company was organized. Mr. Bergman received a Bachelor of Science degree and
a Master of Engineering (Electrical) degree from Cornell University, and a
Master of Science in Engineering and a Ph.D degree from The Johns Hopkins
University. Mr. Bergman is also Co-Chairman of the Board of Directors,
Vice-President and Secretary of Intervest Bancshares Corporation, and
Co-Chairman of the Board of Directors and a member of the Loan Committee of
Intervest Bank.
During the past five years, Mr. Dansker and Mr. Bergman have been actively
involved in the ownership and operation of real estate and mortgages primarily
through Capital Holding Company, a family partnership, as well as through other
family entities organized to hold title to and operate real property.
Michael A. Callen, age 55, serves as a Director of the Company, and has
served in such capacity since October, 1992. Mr. Callen received a Bachelor of
Arts degree from the University of Wisconsin in Economics and Russian. Mr.
Callen is Senior Advisor, The National Commercial Bank, Jeddah, Kingdom of Saudi
Arabia and prior to 1993 was a Director and Sector Executive at
Citicorp/Citibank, responsible for corporate banking activities in North
America, Europe and Japan. Mr. Callen is a Director of Intervest Bancshares
Corporation and a Director of AMBAC, Inc.
34
<PAGE>
Jerome Dansker, age 77, serves as a Director and as Executive Vice
President of the Company, and has served in such capacity since November, 1993.
Mr. Dansker received a Bachelor of Science degree from the New York University
School of Commerce, Accounts and Finance, a law degree from the New York
University School of Law, and is admitted to practice as an attorney in the
State of New York. Mr. Dansker is a Director, Chairman of Loan Policy and
Executive Vice President of Intervest Bancshares Corporation. He is also a
Director and Chairman of the Loan Committee of Intervest Bank. During the past
five years, Mr. Dansker has been actively involved in the ownership and
operation of real estate and mortgages.
Milton F. Gidge, age 66, serves as a Director of the Company, and has
served in such capacity since December, 1988. Mr. Gidge received a Bachelor of
Business Administration degree in Accounting from Adelphi University and a
Masters Degree in Banking and Finance from New York University. Mr. Gidge
retired in 1994 and, prior to his retirement, was a Director and Chairman-Credit
Policy of Lincoln Savings Bank, F.S.B. (headquartered in New York City). He is
also a Director of Intervest Bancshares Corporation, Interboro Mutual Indemnity
Insurance Company and Vicon Industries, Inc. Mr. Gidge was an officer of Lincoln
Savings Bank, F.S.B. for more than five years.
William F. Holly, age 67, serves as a Director of the Company and has
served in such capacity since December, 1990. Mr. Holly received a Bachelor of
Arts degree in Economics from Alfred University. Mr. Holly is Chairman of the
Board and Chief Executive Officer of Sage, Rutty & Co., Inc., members of the
Boston Stock Exchange, with offices in Rochester, New York and Canandaigua, New
York, and is also a Director of Intervest Bancshares Corporation and a Trustee
of Alfred University. Mr. Holly has been an officer and director of Sage, Rutty
& Co., Inc. for more than five years.
David J. Willmott, age 58, serves as a Director of the Company, and has
served in such capacity since June, 1989. Mr. Willmott is a graduate of Becker
Junior College and attended New York University Extension and Long Island
University Extension of Southampton College. Mr. Willmott is the Editor and
Publisher of Suffolk Life Newspapers, which he founded more than 25 years ago.
Mr. Willmott is also a Director of Intervest Bancshares Corporation.
Wesley T. Wood, age 53, serves as a Director of the Company, and has served
in such capacity since April, 1992. Mr. Wood received a Bachelor of Science
degree form New York University, School of Commerce. Mr. Wood is President of
Marketing Capital Corporation, an international marketing consulting and
investment firm which he founded in 1973. He is also a Director of Intervest
Bancshares Corporation, a Director of the Center of Direct Marketing at New York
University, a member of the Marketing
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Committee at Fairfield University in Connecticut, and a Trustee of St. Dominics
in Oyster Bay, New York.
All of the directors of the Company have been elected to serve as directors
until the next annual meeting of the Company's shareholders. Each of the
officers of the Company has been elected to serve as an officer until the next
annual meeting of the Company's directors.
Mr. Bergman's wife is the sister of Lowell S. Dansker and Jerome Dansker is
the father of Lowell S. Dansker and Mrs. Bergman.
In their capacities as general partners of Capital Holding Company, Messrs.
Dansker and Mr. Bergman are responsible for all aspects of that company's
operations and make all management decisions related to such operations. As a
result of their substantial experience in real estate activities, including the
ownership, acquisition and management of income-producing properties, for
affiliates of the Company, they have developed substantial expertise in the
valuation of such properties.
EXECUTIVE COMPENSATION
Prior to July 1, 1995, no compensation was paid to or accrued by the
Company for any executive officer or director of the Company (other than fees
paid to directors for attending Board meetings). Each of the directors receives
a fee of $250 for each meeting of the Board of Directors he attends. Effective
as of July 1, 1995, the Company entered into an employment agreement with Mr.
Jerome Dansker, its Executive Vice President. The agreement is for a term of ten
years and provides for the payment of an annual salary in the amount of
$125,000, which is subject to increase annually by six percent or by the
percentage increase in the consumer price index, if higher. The agreement also
provides for monthly expense account payments, the use of a car and medical
benefits. In the event of Mr. Dansker's death or disability, monthly payments of
one-half of the amount which otherwise would have been paid to Mr. Dansker will
continue until the greater of (i) the balance of the term of employment, and
(ii) three years.
TRANSACTIONS WITH MANAGEMENT
The Company has in the past and may in the future acquire mortgages from
affiliated parties, including Capital Holding Company and New York Properties
Trust. The three shareholders of the Company, together with Mr. Jerome Dansker,
are the sole partners of Capital Holding Company. Mr. Bergman and Mr. Lowell
Dansker are the sole trustees of New York Properties Trust and were the trustees
of Central Properties Trust, which ceased doing business in 1995. City
Properties Company was a sole proprietorship owned by Jerome Dansker. Because of
such affiliations, management of the Company may have a conflict of interest in
establishing a fair price for the purchase of the mortgages representing liens
on properties owned by affiliates.
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Nevertheless, in the opinion of management of the Company, the purchase prices
for such mortgages have been and will be at least as favorable to the Company as
if the respective properties were owned by unaffiliated third parties.
In addition, affiliates of the Company may enter into other transactions
with or render services for the benefit of the Company. For example an affiliate
of the Company provides mortgage servicing to the Company and a subsidiary of
the Company acts as servicing agent for distributions to investors and performs
distribution and record-keeping functions for the Company. Any future
transactions between the Company and any of its affiliates will be entered into
on terms at least as favorable as could be obtained from unaffiliated
independent third parties and will be subject to approval or ratification by a
majority of independent directors considering the transaction. To the extent
that the Company may, from time to time, make loans to its shareholders or other
affiliates, such loans will be: evidenced by notes; at interest rates comparable
to that charged by other lenders; repaid pursuant to amortization schedules
comparable to those used by other lenders for similar loans; made only if the
borrower is a satisfactory credit risk; and will be monitored in the same manner
as would be used by other lenders.
During 1993, Capital Holding Company, Central Properties Trust, City
Properties Company and New York Properties Trust sold to third parties eight
properties subject to mortgages held by the Company. In connection with those
sales, the Company purchased two junior mortgages from an unaffiliated party in
the aggregate principal amount of $350,000, each at a purchase price equal to
its then outstanding principal balance, and, the Company's mortgages were
refinanced and the Company acquired first mortgages totaling $11,675,000.
During 1993, the Company made mortgage loans in the amount of $550,000 on
properties owned by Capital Holding Company.
In May of 1993, the Company loaned a total of $3,500,000 to the
shareholders of the Company. The proceeds of the loan were contributed by the
shareholders to the capital of Intervest Bancshares Corporation, which
corporation acquired approximately 95% of the shares of capital stock of
Intervest Bank, a Florida state-chartered banking corporation. The shareholders
have repaid the loan in full.
During 1994, New York Investment Company and Central Properties Trust sold
to third parties two properties subject to mortgages held by the Company. In
connection with those sales, the Company purchased a junior mortgage from an
unaffiliated party in the amount of $100,000, at a purchase price equal to its
then outstanding principal balance, and, the Company's mortgages were
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refinanced and the Company acquired first mortgages totaling $5,610,000.
During 1994, the Company made mortgage loans in the amount of $2,400,000 on
properties owned by Capital Holding Company.
During 1995, Capital Holding Company, Central Properties Trust and New York
Properties Trust sold to third parties eight properties subject to mortgages
held by the Company. In connection with those sales the Company's mortgages were
refinanced and the Company acquired first mortgages totaling $9,670,000.
An annual mortgage servicing fee, based on the face value of its mortgages
receivable, is paid by the Company to Capital Holding Company, an affiliate of
the Company. The services provided to the Company by Capital Holding Company in
return for such mortgage servicing fee include (i) the collection of mortgages
receivable, (ii) the payment of mortgages payable, (iii) the payment of property
taxes for the mortgaged premises after receipt of such tax payments from
mortgagors and (iv) the payment of property insurance premiums for the mortgaged
properties after receipt of such insurance payments from mortgagors. For the
fiscal years ended December 31, 1993, 1994 and 1995, the mortgage servicing fees
paid by the Company to Capital Holding Company were $99,000, $354,000 and
$342,000 respectively. The fee is agreed to between Capital Holding Company and
the Company and is at a level deemed reasonable by the Company.
William F. Holly, who is a director of the Company, also serves as Chairman
of the Board and Chief Executive Officer of Sage, Rutty & Co., Inc., which firm
will act as Underwriter in connection with the offering and which firm has acted
as an underwriter in connection with the Company's prior offerings of
debentures.
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STOCKHOLDERS
The following table sets forth information concerning the ownership of the
outstanding common stock of the Company, all of which is beneficially owned by
the three persons listed below:
Amount and Nature
Name and Address of of Beneficial Percent
Beneficial Owner Ownership of Class
- ------------------- ------------------- --------
Lowell S. Dansker ............... 15.92 shares (1) 50.0%
360 West 55th Street
New York, N.Y. 10019
Lawrence G. Bergman ............. 3.79 shares 11.9%
201 East 62nd Street
New York, N.Y. 10021
Helene D. Bergman ............... 12.13 shares (2) 38.1%
201 East 62nd Street
New York, N.Y. 10021
Total Outstanding ............... 31.84 shares 100.0%
====================================
- ----------------
(1) Of the 15.92 shares beneficially owned by Mr. Dansker, 0.20 shares are
owned legally and of record by Mr. Dansker's wife, Randi O. Dansker, and
0.40 shares are owned by Mr. Dansker as custodian for his two children
under the Uniform Gifts to Minors Act of the State of New York.
(2) Of the 12.13 shares beneficially owned by Mrs. Bergman, 0.40 shares are
owned by her as custodian for her two children under the Uniform Gifts to
Minors Act of the State of New York.
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DESCRIPTION OF DEBENTURES
The Company will issue the Debentures under an Indenture to be dated as of
_______________ 1, 1996 (the "Indenture"), between the Company and The Bank of
New York, 101 Barclay Street, New York, New York 10286 (the "Trustee"). In the
summary which follows, parenthetical references to Articles and Sections are
references to the corresponding Articles and Sections in the Indenture, and
parenthetical references to paragraphs are references to the corresponding
paragraphs in the form of Debenture included in the Indenture. The terms and
provisions of the Debentures are stated in the Indenture. Such terms and
provisions also include certain provisions of the Trust Indenture Act of 1939
(as in effect on the date of the Indenture) which are incorporated by reference
into the Indenture. Debenture Holders are referred to the Indenture and the
Trust Indenture Act of 1939 for a more complete statement of such terms and
provisions. The following summary of certain provisions of the Indenture does
not purport to be complete, and where particular provisions of the Indenture are
referred to, such particular provisions are incorporated herein by reference,
and such summary is qualified in its entirety by such incorporated provisions.
The form of the Indenture is on file as an exhibit to the Registration
Statement.
The Debentures will be issued in two maturities as follows: $1,000,000 of
Series __/__/96 Registered Floating Rate Redeemable Subordinated Debentures due
October 1, 1998; and $10,000,000 of Series __/__/96 Registered Floating Rate
Redeemable Subordinated Debentures due April 1, 2005. All of the Debentures will
be issued in fully registered form without coupons. The Debentures will be
issued only in denominations of $10,000 and multiples thereof, and with a
minimum purchase of $10,000.
Interest on the Debentures will accrue during each quarter until maturity,
and, except as described below, there will be no periodic payments of interest.
Interest will accrue quarterly on January 1, April 1, July 1 and October 1 of
each year (each an "Accrual Date"). Interest on the principal amount of
Debentures maturing October 1, 1998 will accrue during each quarter at one
percentage point over the prime rate of Chemical Bank on the first day of the
calendar quarter for which interest is accruing, with a maximum interest rate of
12%. Interest on the principal amount of the Debentures maturing April 1, 2005,
will accrue each quarter at two percentage points over the prime rate of
Chemical Bank on the first day of the calendar quarter for which interest is
accruing, with a maximum interest rate of 12%. The current rate of interest on
the Debentures maturing October 1, 1998 is 9.25% and on the Debentures maturing
April 1, 2005 is 10.25%. In addition, interest will accrue each quarter on the
balance of the interest accrued as of and including the last day of the
immediately preceding calendar quarter at the prime rate of Chemical Bank with a
maximum interest rate of 12%. All accrued interest on the Debentures will be
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payable at the maturity of the Debentures, whether by acceleration, redemption
or otherwise.
At the time of the initial subscription for the Debentures or at any time
after issuance, the Holder of any Debenture due April 1, 2005 may elect to
receive quarterly payments of interest through the maturity of such Debentures,
provided, however, that all Debentures subscribed for after the fifteenth day of
the second month of the calendar quarter following the First Closing (as
defined), shall provide for the quarterly payment of interest. Each quarterly
interest payment would be equal to the amount of interest accrued on the
principal amount of such Debenture during the quarter prior to payment as set
forth above.
Once the Company has received orders for at least $5,000,000 of Debentures,
the Company may close as to those Debentures (the "First Closing"). With respect
to Debentures sold at the First Closing, interest on the Debentures for the
initial period will accrue from the fifth day preceding the First Closing. With
respect to Debentures sold after the First Closing, interest for the initial
period will accrue from the first day of the month of sale, if the Debenture is
sold on or before the fifteenth day of the month, and will accrue from the
sixteenth day of the month, if the Debenture is sold after the fifteenth day of
the month. The first payment of interest on any Debenture will be due on the
first day of the next calendar quarter, if the Debenture is sold on or before
the fifteenth day of the second month of the quarter, or the first day of the
second calendar quarter, if sold thereafter. Debentures sold after the First
Closing will be deemed sold on the date the Company (or the Underwriter on its
behalf) receives payment therefor. The accrual of interest during any quarter
will be computed based on the Prime Rate (as defined) in effect on the first day
of the quarter for which it is accruing, provided, however, that the interest
accruing prior to the next full quarter following the date of sale of any
Debenture shall accrue based upon the Prime Rate in effect on the first day of
the quarter preceding the date of interest payment. The "Prime Rate" shall mean
the interest rate that Chemical Bank publicly announces as its prime rate from
time to time at its principal office. In the event that Chemical Bank ceases to
designate any interest rate as its prime rate, there shall be substituted the
most nearly comparable interest rate for short term borrowings by corporate
borrowers which is publicly announced by such bank from time to time at its
principal office. (Par. 1). Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company will pay interest on the Debentures to the persons who are
registered holders of the Debentures ("Debenture Holder"). A determination of
the registered holders of the Debentures will be made at the close of business
on the tenth day of the second month of the calendar quarter preceding the
applicable interest payment date. (Par. 2). Principal and interest may be paid
by check.
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Payments of interest made by check may be mailed to a Debenture Holder at the
address shown on the records of the Company for such holder. Upon maturity of
the Debentures, or upon earlier redemption, Debenture Holders must surrender the
Debentures to any paying agent appointed by the Company (including itself), to
collect principal payments and payments of accrued interest on the Debentures.
(Par. 2). The Company will maintain an office or agency where the Debentures may
be presented for payment (the "Paying Agent") and an office or agency where the
Debentures may be presented for registration of transfer or for exchange (the
"Registrar"). The Company will act as the "Paying Agent."
Debentures of one Maturity may not be exchanged for Debentures of another
Maturity. The term "Maturity" is defined in the Indenture to mean either of the
two maturities of Debentures (October 1, 1998 or April 1, 2005) offered hereby
and issued pursuant to the Indenture. Debentures due April 1, 2005 that provide
for quarterly compounding of interest may be surrendered to the Registrar in
exchange for an equal principal amount of Debentures of the same Maturity, but
the terms of which provide for periodic payments of interest. To permit such an
exchange, the Debenture Holder must deliver the Debentures for surrender,
accompanied by a letter requesting the exchange, and such other written
instrument(s) as may be requested by the Registrar, all duly executed by the
registered owner or by his attorney duly authorized in writing. Upon delivery of
the Debentures for surrender, the letter requesting such exchange, and other
written instrument(s) that may be requested by the Registrar, the Company shall
execute and the Registrar shall authenticate Debentures to be issued upon the
effective date of such election. An exchange completed on or prior to the tenth
day of the second calendar month of a quarter shall be effective on the first
day of the next calendar quarter. An exchange completed after the tenth day of
the second month of a calendar quarter shall be effective on the first day of
the second succeeding calendar quarter. On the effective date of an election,
the Company shall pay to such Debenture Holder cash in the amount equal to any
accrued interest on the Debentures up to the effective date of such election,
and, thereafter, interest on the Debentures will be payable on the first day of
each calendar quarter in an amount equal to the interest accrued in such amount
as would otherwise accrue on the principal amount of such Debentures during the
quarter prior to payment. (Art. 2 Sec. 2.07(b)).
The Debentures are transferable on the books of the Company by the
registered holders thereof upon surrender of the Debentures to the Registrar
appointed by the Company and, if requested by the Registrar, shall be
accompanied by a written instrument of transfer in form satisfactory to the
registrar. The Company has appointed The Bank of New York as the "Registrar" for
the Debentures. The person in whose name any Debenture is registered shall be
treated as the absolute owner of the Debenture for all purposes, and shall
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not be affected by any notice to the contrary. Upon transfer, the Debentures
will be cancelled, and one or more new registered Debentures, in the same
aggregate principal amount, of the same maturity and with the same terms, will
be issued to the transferee in exchange therefor. (Art. 2, Sec. 2.07(a)).
The Indenture does not contain any covenants or provisions that may afford
the Debenture Holders protection in the event of highly leveraged transactions.
DUTIES OF THE TRUSTEE
The Indenture provides that in case an Event of Default (as defined) shall
occur and continue, the Trustee will be required to use the same degree of care
and skill as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs in the exercise of its power. While the Trustee
may pursue any available remedies to enforce any provision of the Indenture or
the Debentures, the holders of a majority in principal amount of all outstanding
Debentures may direct the time, method, and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the Debenture holders, unless they shall have offered
to the Trustee security and indemnity satisfactory to it.
AUTHENTICATION AND DELIVERY OF DEBENTURES
The Registrar shall authenticate Debentures for original issue in the
aggregate principal amount of up to $11,000,000 (but not more than $1,000,000 of
Debentures maturing October 1, 1998 or $10,000,000 of Debentures maturing April
1, 2005) upon receipt of a written order of the Company, specifying the amount
of Debentures to be authenticated and the date of authentication, which is
signed by two officers of the Company. (Art. 2, Sec. 2.02). Certificates
representing the Debentures will be delivered to the purchasers of the
Debentures promptly after Closing.
SUBORDINATION
The Debentures are general unsecured obligations of the Company limited to
$11,000,000 principal amount. The Debentures will be subordinated in payment of
principal and interest to all Senior Indebtedness. The term "Senior
Indebtedness" is defined in the Indenture to mean all Indebtedness of the
Company, whether outstanding on the date of the Indenture or thereafter created,
which (i) is secured, in whole or in part, by any asset or assets owned by the
Company or by a corporation, a majority of whose voting stock is owned by the
Company or a subsidiary of the Company ("Subsidiary"), or (ii) arises from
unsecured borrowings by the
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Company from commercial banks, savings banks, savings and loan associations,
insurance companies, companies whose securities are traded in a national
securities market, or any wholly-owned subsidiary of any of the foregoing, or
(iii) arises from unsecured borrowings by the Company from any pension plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended), or (iv) arises from borrowings by the Company which are evidenced
by commercial paper, or (v) is the Company's Series 1989 Registered Floating
Rate Redeemable Subordinated Debentures, (the "Senior Debentures") (including
any modification, amendment or supplement thereto permitted pursuant to the
terms of the trust indenture pursuant to which the Senior Debentures were
issued), and any other indebtedness which, under the terms of such trust
indenture, is permitted to be issued pari passu with the Senior Debentures
("Additional Senior Debentures") or (vi) is a guarantee or other liability of
the Company or of, or with respect to any indebtedness of, a Subsidiary of the
type described in clauses (ii), (iii) or (iv) above. (Art. 10, Sec. 10.01). The
trust indenture pursuant to which the Senior Debentures were issued permits the
Company to issue Additional Senior Debentures, provided that immediately after
the issuance of any Additional Senior Debentures, the total capital, surplus and
retained earnings of the Company exceeds the aggregate of the outstanding
principal amount of the Senior Debentures and all Additional Senior Debentures.
As of December 31, 1995, the Company had Senior Indebtedness of approximately
$1,218,000 including $1,200,000 aggregate principal amount of Senior Debentures,
and the Company's capital, surplus and retained earnings was approximately
$9,378,000. There is no limitation or restriction in the Debentures or the
Indenture on the creation of Senior Indebtedness by the Company or on the amount
of such Senior Indebtedness to which the Debentures may be subordinated. There
is also no limitation on the creation or amount of indebtedness which is pari
passu with (i.e. having no priority of payment over and not subordinated in
right of payment to) the Debentures ("Pari Passu Indebtedness"). The Company
presently has outstanding $4,000,000 aggregate principal amount of its Series
10/4/89 Registered Floating Rate Redeemable Subordinated Debentures, $4,000,000
aggregate principal amount of its Series 3/28/90 Registered Floating Rate
Redeemable Subordinated Debentures, $6,000,000 aggregate principal amount of its
Series 5/13/91 Registered Floating Rate Redeemable Subordinated Debentures,
$4,500,000 aggregate principal amount of its Series 2/20/92 Registered Floating
Rate Redeemable Subordinated Debentures, $7,000,000 aggregate principal amount
of its Series 6/29/92 Registered Floating Rate Redeemable Subordinated
Debentures, $8,000,000 aggregate principal amount of its Series 9/13/93
Registered Floating Rate Redeemable Subordinated Debentures, $5,000,000
aggregate principal amount of its Series 1/28/94 Registered Floating Rate
Redeemable Subordinated Debentures, $5,000,000 aggregate principal amount of its
Series 10/28/94 Registered Floating Rate Redeemable Subordinated Debentures,
$10,000,000 aggregate principal amount of its Series
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5/12/95 Registered Floating Rate Redeemable Subordinated Debentures, and
$10,000,000 of its Series 10/19/95 Registered Floating Rate Redeemable
Subordinated Debentures which are pari passu with the Debentures, (Art. 4,
Section 4.05).
Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, the
holders of all Senior Indebtedness will first be entitled to receive payment in
full of the principal and premium, if any, thereof and any interest due thereon,
before the holders of the Debentures are entitled to receive any payment upon
the principal of or interest on the Debentures, and thereafter payments to
Debenture holders will be pro rata with payments to holders of Pari Passu
Indebtedness. In the absence of any such events, the Company is obligated to pay
principal of and interest on the Debentures in accordance with their terms.
The Company will not maintain any sinking fund for the retirement of any of
the Debentures.
REDEMPTION
The Company may, at its option, at any time call all or any part of the
Debentures (including all or any part of the Debentures of any maturity) for
payment, and redeem the same at any time prior to the maturity thereof. The
redemption price for Debentures due October 1, 1998 will be the face amount. The
redemption price for Debentures due April 1, 2005 will be (i) face amount plus a
2% premium if the date of redemption is prior to January 1, 1998, (ii) face
amount plus a 1% premium if the date of redemption is on or after January 1,
1998 and prior to January 1, 1999, and (iii) face amount if the date of
redemption is on or after January 1, 1999. In all cases, the Debenture Holder
will also receive interest accrued to the date of redemption. Notice of
redemption must be sent by first class mail, postage prepaid, to the registered
holders of the Debentures not less than 30 days nor more than 90 days prior to
the date the redemption is to be made. In the event of a call for redemption, no
further interest shall accrue after the redemption date on any Debentures called
for redemption. (Art. 3, Section 3.03, Paragraph 5). Since the payment of
principal of, interest on, or any other amounts due on the Debentures is
subordinate in right of payment to the prior payment in full of all Senior
Indebtedness upon the dissolution, winding up, liquidation or reorganization of
the Company, no redemption will be permitted upon the happening of such an
event.
LIMITATION ON DIVIDENDS AND OTHER PAYMENTS
The Indenture will provide that the Company will not declare or pay any
dividend or make any distribution on its Capital Stock (i.e. any and all shares,
interests, participations, rights or other equivalents of the Company's stock)
or to its shareholders
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(other than dividends or distributions payable in Capital Stock), or purchase,
redeem or otherwise acquire or retire for value, or permit any Subsidiary to
purchase or otherwise acquire for value, Capital Stock of the Company, if at the
time of such payment, or after giving effect thereto, an Event of Default, as
hereinafter defined, shall have occurred and be continuing or a default shall
occur as a result thereof; provided, however, that the foregoing limitation
shall not prevent (A) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such payment complied
with the provisions of such limitation, or (B) the acquisition or retirement of
any shares of the Company's Capital Stock by exchange for, or out of the
proceeds of the sale of shares of, its Capital Stock. (Art. 4, Section 4.04).
DISCHARGE PRIOR TO REDEMPTION OR MATURITY
If the Company at any time deposits with the Trustee money or U.S.
Government Obligations sufficient to pay principal and interest on the
Debentures prior to their redemption or maturity, the Company will be discharged
from the Indenture, provided certain other conditions specified in the Indenture
are satisfied. In the event of such deposit, which is irrevocable, Debenture
Holders must look only to the deposited money and securities for payment. U.S.
Government Obligations are securities backed by the full faith and credit of the
United States. (Art. 8, Section 8.01(2)).
ACCESS OF INFORMATION TO SECURITY HOLDERS
Debenture Holders may obtain from the Trustee information necessary to
communicate with other Debenture Holders. Upon written application to the
Trustee by any three or more Debenture Holders stating that such Debenture
Holders desire to communicate with other Debenture Holders with respect to their
rights under the Indenture or under the Debentures, and upon providing the
Trustee with the form of proxy or other communication which the Debenture
Holders propose to transmit, and upon receipt by the Trustee from the Debenture
Holders of reasonable proof that each such Debenture Holder has owned a
Debenture for a period of at least six months preceding the date of such
application, the Trustee shall, within five business days after the receipt of
such information, either (a) provide the applicant Debenture Holders access to
all information in the Trustee's possession with respect to the names and
addresses of the Debenture Holders; or (b) provide the applicant Debenture
Holders with information as to the number of Debenture Holders and the
approximate cost of mailing to such Debenture Holders the form of proxy or other
communication, if any, specified in the applicant Debenture Holders'
application, and upon written request from such applicant Debenture Holders and
receipt of the material to be mailed and of payment, the Trustee shall mail to
all the Debenture Holders copies of the from of proxy or other communication so
specified in the request. (Art. 2, Section 2.08).
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COMPLIANCE WITH CONDITIONS AND COVENANTS
Upon any request by the Company to the Trustee to take any action under the
Indenture, the Company is required to furnish to the Trustee (i) an officers'
certificate of the Company stating that all conditions and covenants in the
Indenture relating to the proposed action have been complied with and (ii) an
opinion of counsel stating that, in the opinion of such counsel, all such
conditions and covenants have been complied with. (Art. 11, Sec. 11.03).
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented, and compliance by the Company with any provision of the
Indenture or the Debentures may be waived, with the consent of the holders of a
majority in principal amount of the Debentures outstanding. Without notice to or
consent of any holders of Debentures, the Company may amend or supplement the
Indenture or the Debentures to cure any ambiguity, omission, defect or
inconsistency, or to make any change that does not adversely affect the rights
of any holders of Debentures. However, without the consent of each holder of
Debentures affected, an amendment, supplement or waiver may not reduce the
amount of Debentures whose holders must consent to an amendment, supplement or
waiver, reduce the rate or extend the time for payment of interest on any
Debentures (except that the payment of interest on Debentures may be postponed
for a period not exceeding three years from its due date with the consent of
holders of not less than 75% in principal amount of Debentures at the time
outstanding, which consent shall be binding upon all holders), reduce the
principal of or extend the fixed maturity of any Debentures, make any Debentures
payable in money other than that stated in the Indenture, make any change in the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Debentures or waive a default in the payment of principal of or
interest on, or other redemption payment on any Debentures. (Art. 9, Sec. 9.02).
DEFAULTS AND REMEDIES
Each of the following is an "Event of Default" under the Indenture: (a)
failure by the Company to pay any principal on the Debentures when due; (b)
failure by the Company to pay any interest installment on the Debentures within
thirty days after the due date; (c) failure to perform any other covenant or
agreement of the Company made in the Indenture or the Debentures, continued for
sixty days after receipt of notice thereof from the Trustee or the holders of at
least 25% in principal amount of the Debentures; and (d) certain events of
bankruptcy, insolvency or reorganization. (Art. 6, Sec. 6.01). If an Event of
Default (other than those described in clause (d) above) occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the
47
<PAGE>
Debentures, by notice to the Company, may declare the principal of and accrued
interest on all of the Debentures to be due and payable immediately. If an Event
of Default of the type described in clause (d) above occurs, all unpaid
principal and accrued interest on the Debentures shall automatically become due
and payable without any declaration or other act on the part of the Trustee or
any holder. (Art. 6, Sec. 6.02). Holders of Debentures may not enforce the
Indenture or the Debentures except as provided in the Indenture. The Trustee may
refuse to enforce the Indenture or the Debentures unless it receives indemnity
and security satisfactory to it. Subject to certain limitations, the holders of
a majority in principal amount of the Debentures may direct the Trustee in its
exercise of any trust or power conferred on the Trustee, and may rescind an
acceleration of the Debentures. The Trustee may withhold from holders of
Debentures notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interest. (Art. 6, Secs. 6.05 and 6.06).
The Indenture requires the Company to furnish to the Trustee an annual
statement, signed by specified officers of the Company, stating whether or not
such officers have knowledge of any Default under the Indenture, and, if so,
specifying each such Default and the nature thereof. (Art. 4, Sec. 4.03).
FEDERAL INCOME TAX CONSEQUENCES
Interest payments, if any, received by Holders of Debentures for the first
two quarters after the closing of the Offering will be includible in the income
of such Debenture Holders for federal income tax purposes for the taxable year
in which the interest is received.
Holders of the Debentures will be required to include in their income for
federal income tax purposes all of the accrued but unpaid interest for each
taxable year, since such amounts constitute original issue discount within the
meaning of the applicable provisions of the Internal Revenue Code of 1986, as
amended to date (the "Code"). As a result, such Debenture Holders will be
required to pay taxes on interest which has accrued, although such interest will
not be paid until maturity of the Debenture.
Interest payments received by Holders of Debentures who have elected to
receive quarterly payments of interest will be includible in the income of such
Holders for federal income tax purposes for the taxable year in which the
interest was received, except with respect to the payment of accrued interest
that has been included in their income in prior years.
No gain or loss will be realized or recognized by a Holder of Debentures
providing for quarterly compounding of interest in
48
<PAGE>
connection with the exchange of such Debentures for Debentures of the same
Maturity but which provide for periodic payments of interest. Interest payments
received at the time of any such exchange will be includible in the income of
the Debenture Holder for the taxable year in which received, except to the
extent that such interest payment reflects accrued interest that was included in
his or her income in prior years.
Holders who hold the Debentures for investment purposes should treat all
reportable interest (whether actually received or constituting original issue
discount under the Code) as portfolio income under applicable Code provisions.
The Company's deposit of funds with the Trustee to effect the discharge of
the Company's obligations under the Debentures and the Indenture prior to
redemption or maturity of the Debentures, will have no effect on the amount of
income realized or recognized (gain or loss) by the Debenture Holders or the
timing of recognition of gain or loss for federal income tax purposes.
PLAN OF OFFERING
The Company has entered into an Underwriting Agreement with Sage, Rutty &
Co., Inc., a New York corporation (the "Underwriter"). Mr. William F. Holly, who
is a director of the Company, is the Chairman of the Board and Chief Executive
Officer of the Underwriter. Pursuant to the Underwriting Agreement, the
Underwriter will offer the Debentures for sale on a minimum ($5,000,000) and
maximum ($11,000,000) "best efforts" basis. Accordingly, the Underwriter will
not have any obligation to purchase any Debentures from the Company in the event
it is unable to effect the sale of part or all of the Debentures. Moreover, no
Debenture may be sold unless the Issuer has received orders for at least
$5,000,000 of Debentures. If, within 75 days after the Registration Statement is
declared effective by the Securities and Exchange Commission (the "Offering
Termination Date"), at least $5,000,000 of Debentures, without regard to
maturity, have been sold and subscriptions accepted by the Company, the Company
may close the Offering to those Debentures (the "First Closing"), and the
Underwriter may continue to offer the balance of the Debentures and
subscriptions will be accepted by the Company until 150 days after the minimum
has been sold. The Underwriter may enter into one or more Selected Dealer
Agreements with other broker/dealer firms which are members of the National
Association of Securities Dealers, Inc. (the "NASD"), pursuant to which such
other broker/dealers may offer part of the Debentures for sale.
Lowell S. Dansker, an officer and director of the Company, is a registered
representative of Strategic Brokerage Corp., a member of the NASD, which firm
may enter into a Selected Dealer Agreement and, if so, Mr. Dansker may
participate in his capacity as a registered representative of that firm. As
such, Mr. Dansker may
49
<PAGE>
be deemed to be an affiliate of Strategic Brokerage Corp. The offering is
therefore being conducted in compliance with the requirements of Schedule E to
the bylaws of the NASD and the Underwriter will be acting as a Qualified
Independent Underwriter within the meaning thereof. As such, the Underwriter is
assuming responsibility relating to the pricing of the offering and the
performance of due diligence.
The Underwriter is one of ten (10) defendants in a civil proceeding
commenced in November, 1990, in the U.S. District Court, Western District of New
York (Civ. 90-1140). The plaintiffs in the action were purchasers of
participation units in a limited partnership formed to hold a first mortgage on
property in Philadelphia, Pennsylvania. The ten (10) defendants include the
limited partnership, its general partner, promoters, appraisers, escrow agents
and certain broker/dealers that acted as placement agents. Plaintiffs allege
violation by the ten (10) defendants of various provisions of the federal
securities laws, as well as related breaches of common law duties. The
Underwriter filed a pre-answer motion requesting various forms of relief, as a
result of which all of the plaintiffs' causes of action except one were
dismissed. The Underwriter denies the allegations with respect to the
aforementioned violations and believes they are without merit. The plaintiffs
have filed an amended complaint as to which the Underwriter has filed its answer
and the case is in the early stages of discovery. The Underwriter intends to
vigorously defend this action. Neither the Company nor any of its affiliates is
a party to, or involved in any way with, this litigation.
The Company has agreed to indemnify the Underwriter and such broker/dealers
participating in the offering against certain civil liabilities, including
certain liabilities under the Securities Act of 1933, as amended.
The Company will pay to the Underwriter a commission equal to 8% of the
purchase price of Debentures due April 1, 2005 and 2% of the purchase price of
Debentures due October 1, 1998 which are sold by the Underwriter or
participating broker/dealers. In addition, the Company will pay the Underwriter
a fee equal to 1% of the aggregate gross amount of Debentures due April 1, 2005
sold in the offering and 1/2 of 1% of Debentures due October 1, 1998 sold in the
offering, and will pay the fee of Underwriter's counsel. Pursuant to the
Selected Dealer Agreements, the Underwriter will reallow to each of the other
broker/dealers referred to above a commission equal to 8% or 2%, as the case may
be, of the price of each Debenture sold by such broker/dealer. No additional
discounts or commissions are to be allowed or paid to such other broker/dealers.
Certain officers of the Company may also offer the debentures for sale and no
commissions or compensation shall be paid to such officers in connection with
Debentures sold by such officers.
50
<PAGE>
Until the First Closing, subscription payments for Debentures should be
made payable to "M&T Bank as Escrow Agent for Intervest Corporation of New
York." After the First Closing, subscription payments for the Debentures should
be made payable to the Company. Payments received by the Underwriter or
participating broker/dealers will be promptly transmitted to Manufacturers and
Traders Trust Company where they will be held for subscribers in a segregated
escrow account until acceptable subscriptions for at least $5,000,000 of
Debentures have been received. At the First Closing, the funds in the escrow
account (including interest earned thereon but after deducting commissions due
to the Underwriter) will be delivered to the Company. If, on the Offering
Termination Date, at least $5,000,000 of Debentures have not been sold and
subscriptions accepted by the Company, subscription documents and funds will be
promptly refunded to subscribers and the Offering will terminate. With respect
to interest earned on the escrow account, such interest will, in the event of
such termination, be distributed to subscribers in proportion to the amount paid
by each subscriber without regard to the date when such subscription funds were
paid by the subscriber. It shall be a condition to the refund of subscription
funds that the subscriber furnish an executed IRS Form W-9 so that any interest
earned and distributed to such subscriber may be properly reported. Once the
Escrow Agent has received a minimum of $5,000,000 in subscriptions for
Debentures which have been accepted by the Company, the Company may close the
Offering as to those subscribers, and the Underwriter may continue to offer the
balance of the Debentures and subscriptions will be accepted by the Company
until 150 days after such minimum has been sold.
LEGAL OPINIONS
The legality of the issuance of the Debentures offered herewith has been
passed upon for the Company by Harris Beach & Wilcox, LLP, 130 East Main Street,
Rochester, New York 14604. Certain legal matters will be passed upon for the
Underwriter by Harter Secrest & Emery, 700 Midtown Tower, Rochester, New York
14604.
EXPERTS
The financial statements of the Company included in this Prospectus and
Registration Statement have been audited by Richard A. Eisner & Company, LLP,
independent auditors, for the periods indicated in their reports thereon which
appear elsewhere herein and in the Registration Statement. The financial
statements and schedules audited by Richard A. Eisner & Company, LLP, have been
included in reliance on their reports given on the authority of said firm as
experts in accounting and auditing.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF THE COMPANY
Report of Independent Auditors-- 1995 and 1994........................... F-1
Balance Sheets as of December 31, 1995 and 1994.......................... F-2
Statements of Operations and Retained Earnings for the
Periods Ended December 31, 1995, 1994 and 1993......................... F-3
Statements of Cash Flows for the Periods
Ended December 31, 1995, 1994 and 1993................................. F-4
Notes to Financial Statements ........................................... F-5
Schedule IV--Mortgage Loans on Real Estate--
December 31, 1995 ..................................................... F-11
Other financial statement schedules and inapplicable periods with respect to
schedules listed above are omitted because the conditions requiring their filing
do not exist or the information required thereby is included in the financial
statements filed, including the notes thereto.
52
<PAGE>
[RICHARD A. EISNER & COMPANY, LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Intervest Corporation of New York
New York, New York
We have audited the accompanying consolidated balance sheets of Intervest
Corporation of New York and subsidiaries as at December 31, 1995 and December
31, 1994, and the related consolidated statements of operations and retained
earnings and cash flows for each of the years in the three-year period ended
December 31, 1995 and Schedule IV. These financial statements and related
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and related schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and related schedule
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the consolidated financial position of Intervest
Corporation of New York and subsidiaries at December 31, 1995 and December 31,
1994, and the consolidated results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1995 in conformity
with generally accepted accounting principles. Further, it is our opinion that
the schedule referred to above presents fairly, in all material respects, the
information set forth therein in compliance with the applicable accounting
regulation of the Securities and Exchange Commission.
Richard A. Eisner & Company, LLP
New York, New York
January 19, 1996
F-1
<PAGE>
<TABLE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
-------------------------
A S S E T S 1995 1994
----------- ----------- -----------
<S> <C> <C>
Cash and cash equivalents ................................. $17,670,000 $ 3,476,000
Governmental obligations at cost, which approximates
market ................................................. 985,000
Mortgages receivable, including due from affiliates of
$6,250,000 and $11,100,000 (Notes 2, 4, 5 and 6) ....... 55,146,000 56,666,000
Deferred debenture offering costs, net of accumulated
amortization of $2,343,000 and $2,039,000 (Note 2) ..... 3,865,000 2,829,000
Other assets (Note 8) ..................................... 898,000 789,000
----------- -----------
T O T A L ....................................... $77,579,000 $64,745,000
=========== ===========
L I A B I L I T I E S
Accounts payable and accrued expenses ..................... $ 64,000 $ 60,000
Mortgage escrow deposits .................................. 1,021,000 1,010,000
Mortgage payable (Note 5) ................................. 18,000 39,000
Subordinated debentures payable (Note 3) ................. 64,700,000 50,900,000
Debenture interest payable at maturity (Note 3) ........... 2,132,000 3,488,000
Deferred mortgage interest and fees ....................... 266,000 312,000
----------- -----------
Total liabilities ............................... 68,201,000 55,809,000
----------- -----------
Commitments and other matters (Notes 6 and 7)
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized 200 shares; issued
and outstanding 32 shares .............................. 2,000,000 2,000,000
Additional paid-in capital ................................ 3,509,000 3,509,000
Retained earnings ......................................... 3,869,000 3,427,000
----------- -----------
Total stockholders' equity ...................... 9,378,000 8,936,000
----------- -----------
T O T A L ....................................... $77,579,000 $64,745,000
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
<TABLE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
<CAPTION>
Year Ended December 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Interest income:
Affiliates ................................. $ 985,000 $1,262,000 $1,633,000
Others ..................................... 6,999,000 5,106,000 2,704,000
---------- ---------- ----------
T o t a l ............................. 7,984,000 6,368,000 4,337,000
Other income (Note 6) ........................ 332,000 283,000 802,000
Gain on early repayment of discounted
mortgages receivable (Note 4) .............. 82,000 17,000 18,000
---------- ---------- ----------
8,398,000 6,668,000 5,157,000
---------- ---------- ----------
Expenses:
Interest ..................................... 6,227,000 4,591,000 3,415,000
General and administrative (Note 6) .......... 657,000 483,000 188,000
Amortization of deferred debenture
offering costs (Note 2) .................... 748,000 655,000 529,000
---------- ---------- ----------
7,632,000 5,729,000 4,132,000
---------- ---------- ----------
Income before income taxes ...................... 766,000 939,000 1,025,000
Provision for income taxes (Note 8) ............ 324,000 403,000 480,000
---------- ---------- ----------
NET INCOME ...................................... 442,000 536,000 545,000
Retained earnings -- beginning of year .......... 3,427,000 2,891,000 2,346,000
---------- ---------- ----------
RETAINED EARNINGS -- END OF YEAR ................ $3,869,000 $3,427,000 $2,891,000
========== ========== ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................................. $ 442,000 $ 536,000 $ 545,000
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Amortization of discount on mortgages receivable ........................ (255,000) (210,000) (99,000)
Amortization of deferred debenture offering costs ....................... 748,000 655,000 529,000
Amortization of premium on municipal bonds .............................. 13,000 30,000
Gain on early repayment of discounted mortgages ......................... (82,000) (17,000) (18,000)
Changes in operating assets and liabilities:
(Increase) decrease in other assets ................................... (109,000) (167,000) 109,000
Increase (decrease) in accounts payable and accrued expenses .......... 4,000 (171,000) 211,000
Increase in mortgage escrow deposits .................................. 11,000 544,000 188,000
(Decrease) increase in debenture interest payable at maturity ......... (1,356,000) 1,004,000 871,000
(Decrease) in deferred mortgage interest and fees ..................... (46,000) (2,000) (89,000)
------------ ------------ ------------
Net cash (used in) provided by operating activities ............... (643,000) 2,185,000 2,277,000
------------ ------------ ------------
Cash flows from investing activities:
Collection of mortgages receivable .......................................... 18,981,000 3,762,000 955,000
Mortgages receivable acquired:
Properties owned by affiliates ............................................ (2,500,000) (900,000)
Properties owned by others ................................................ (17,124,000) (16,180,000) (8,966,000)
Loans to stockholders ....................................................... (3,500,000)
Collection of loans to stockholders ......................................... 3,500,000
Principal payments of mortgages payable ..................................... (21,000) (16,000) (16,000)
Redemption of governmental obligations ...................................... 985,000 2,655,000 1,422,000
Purchase of governmental obligations ........................................ (985,000) (2,173,000)
------------ ------------ ------------
Net cash provided by (used in) investing activities ............... 2,821,000 (9,764,000) (13,178,000)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from subordinated debenture offerings .............................. 20,000,000 10,000,000 9,000,000
Payment of debenture offering costs ......................................... (1,784,000) (946,000) (872,000)
Redemption of subordinated debentures ....................................... (6,200,000) (1,800,000) (1,200,000)
------------ ------------ ------------
Net cash provided by financing activities ......................... 12,016,000 7,254,000 6,928,000
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................... 14,194,000 (325,000) (3,973,000)
Cash and cash equivalents at beginning of period ............................... 3,476,000 3,801,000 7,774,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................................... $ 17,670,000 $ 3,476,000 $ 3,801,000
============ ============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 1) -- The Company:
Intervest Corporation of New York (the "Company") was formed by Lowell S.
Dansker, Lawrence G. Bergman and Helene D. Bergman for the purpose of engaging
in the real estate business, including the acquisition and purchase of real
estate mortgage loans.
(NOTE 2) -- Significant Accounting Policies:
[a] Consolidation policy:
The financial statements include the accounts of all subsidiaries. Material
intercompany items are eliminated in consolidation.
[b] Unearned discount:
Unearned discount is amortized over the life of the related receivables
using the constant interest method.
[c] Allowance for possible losses:
Mortgages receivable are valued at the lower of cost or net realizable
value on an individual basis. The Company will recognize an impairment loss if
it determines that the net realizable value of the mortgage receivable is below
cost. This determination is made based upon the mortgagor's continuing
compliance with the terms of the mortgage and management's ability to assess the
operation of the underlying properties and the rental housing market where such
properties are located. For financial reporting purposes mortgages are deemed to
be delinquent when payment of either principal or interest is more than 90 days
past due.
[d] Deferred debenture offering costs:
Costs relating to offerings of debentures are amortized over the terms of
the debentures based on serial maturities. Deferred debenture offering costs
consist primarily of underwriters' commissions.
[e] Statement of cash flows:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with an original maturity of three months or
less to be cash equivalents. Interest and income taxes were paid as follows:
Year Ended
December 31, Interest Income Taxes
------------ ---------- ------------
1995 ............................. $7,584,000 $331,000
1994 ............................. 3,586,000 318,000
1993 ............................. 2,544,000 300,000
[f] Concentration of credit risk:
[1] The Company places its temporary cash investments with higher
credit-quality financial institutions and in governmental obligations. Such
investments are generally in excess of the FDIC insurance limit. The Company has
not experienced any losses from such investments.
(continued)
F-5
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 2) -- Significant Accounting Policies: (continued)
[f] Concentration of credit risk: (continued)
[2] The Company's mortgage portfolio is composed predominantly of mortgages
on multi-family residential properties in the New York City area, most of which
are subject to applicable rent control and rent stabilization statutes and
regulations. In both cases, any increases in rent are subject to specific
limitations. As such, properties of the nature of those constituting the most
significant portion of the Company's mortgage portfolio are not affected by the
general movement of real estate values in the same manner as other
income-producing properties. The rental housing market in New York City remains
stable and the Company expects that such properties will continue to appreciate
in value with little or no reduction in occupancy rates.
(NOTE 3) -- Subordinated Debentures Payable:
The Company's Registered Floating Rate Redeemable Debentures consist of the
following:
December 31,
---------------------------
1995 1994
----------- -----------
Series 1989, interest at 2% above prime ........ $ 1,200,000 $ 2,400,000
Series 10/4/89, interest at 1% above prime ..... 4,000,000 6,000,000
Series 3/28/90, interest at 1% above prime ..... 4,000,000 6,000,000
Series 5/13/91, interest at 2% above prime ..... 6,000,000 6,000,000
Series 2/20/92, interest at 2% above prime ..... 4,500,000 4,500,000
Series 6/29/92, interest at 2% above prime ..... 7,000,000 7,000,000
Series 9/13/93, interest at 1% above prime ..... 1,000,000
Series 9/13/93, interest at 2% above prime ..... 8,000,000 8,000,000
Series 1/28/94, interest at 1% above prime ..... 500,000 500,000
Series 1/28/94, interest at 2% above prime ..... 4,500,000 4,500,000
Series 10/28/94, interest at 1% above prime .... 500,000 500,000
Series 10/28/94, interest at 2% above prime .... 4,500,000 4,500,000
Series 5/12/95, interest at 1% above prime ..... 1,000,000
Series 5/12/95, interest at 2% above prime ..... 9,000,000
Series 10/19/95, interest at 1% above prime .... 1,000,000
Series 10/19/95, interest at 2% above prime .... 9,000,000
----------- -----------
$64,700,000 $50,900,000
=========== ===========
"Prime" refers to the prime rate of Chemical Bank.
(continued)
F-6
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 3) -- Subordinated Debentures Payable: (continued)
Prime was 8 1/2% on December 31, 1995. Minimum interest is 9 1/2% and
maximum interest is 15% on Series 1989, 10/4/89, 3/28/90 and 5/13/91. Series
2/20/92 has minimum interest of 8% and maximum interest of 14%, Series 6/29/92
has maximum interest of 14% and Series 9/13/93, 1/28/94, 10/28/94, 5/12/95 and
10/19/95 have maximum interest of 12%.
Payment of interest on an aggregate of $12,870,000 of debentures is
deferred until maturity and earns interest at prime. Any debenture holder who
has deferred receipt of interest may at any time elect to receive the deferred
interest and subsequently receive regular payments of interest.
The debentures may be redeemed, in whole or in part, at any time at the
option of the Company. For debentures issued after 1993, redemption would
generally be at a premium of 1% or 2% if the redemption is prior to 1997.
The debentures are unsecured and subordinate to all present and future
senior indebtedness, as defined. In addition, all other series of debentures are
subordinate to the Series 1989 debentures.
Maturities of debentures are summarized as follows:
Year Ending
December 31,
------------
1996 ................................................. $ 2,500,000
1997 ................................................. 6,700,000
1998 ................................................. 3,000,000
1999 ................................................. 10,500,000
2000 ................................................. 7,000,000
Thereafter until 2004 ................................ 35,000,000
-----------
T o t a l .......................................... $64,700,000
===========
(NOTE 4) - Mortgages Receivable:
Information as to mortgages receivable is summarized as follows:
December 31,
---------------------------
1995 1994
----------- -----------
First mortgages ........................ $48,685,000 $49,314,000
Junior mortgages ....................... 6,906,000 7,573,000
Wraparound mortgage .................... 329,000 337,000
----------- -----------
55,920,000 57,224,000
Less unearned discount ................. 774,000 558,000
----------- -----------
T o t a l ............................ $55,146,000 $56,666,000
=========== ===========
Interest rates on certain mortgages are equivalent to the prime rate of
Chemical Bank plus 2% with a floor of from 10 1/2% to 11 1/2% and a ceiling of
14%. Interest rates on the balance of the mortgages range from 6% to 16%.
Certain mortgages have been discounted utilizing rates ranging from 12% to 18%.
(continued)
F-7
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 4) -- Mortgages Receivable: (continued)
During 1993, 1994 and 1995 certain mortgages were paid in full prior to
their maturity date. This resulted in the recognition of a gain, which
represents the balance of the unamortized discount applicable to these
mortgages.
Maturities of mortgages receivable are summarized as follows:
Year Ending
December 31,
------------
1996 ................................................ $ 5,260,000
1997 ................................................ 14,783,000
1998 ................................................ 1,861,000
1999 ................................................ 4,735,000
2000 ................................................ 2,839,000
Thereafter until 2015 ............................... 26,442,000
-----------
T o t a l ....................................... $55,920,000
===========
The Company evaluates its portfolio of mortgage loans on an individual
basis, comparing the amount at which the investment is carried to its estimated
net realizable value. At the respective balance sheet dates, no allowances were
required.
(NOTE 5) -- Mortgage Payable:
The mortgage payable relates to the Company's wraparound mortgage
receivable, bears interest at 8.5% and is self-liquidating.
(NOTE 6) -- Related Party Transactions:
During 1995, 1994 and 1993 affiliates sold, to unrelated third parties,
properties subject to mortgages held by the Company. In connection with those
sales, the Company's mortgages in the original aggregate amounts of $6,958,000,
$4,000,000 and $8,800,000, respectively, were refinanced and the Company
received new first mortgages totaling $9,670,000, $5,610,000 and $11,675,000,
respectively.
During 1994 and 1993 mortgages aggregating $100,000 and $350,000,
respectively, representing liens on properties owned by affiliated companies,
were acquired from third parties. These mortgages were recorded at cost. In
addition, during 1994 and 1993 the Company made mortgage loans of $2,400,000 and
$550,000, respectively, on properties owned by affiliated companies.
Interest income -- others includes $120,000 and $168,000 earned on notes
receivable from stockholders in 1994 and 1993, respectively.
Other income includes the following amounts from affiliates:
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
Real estate sales commissions ...... $135,000 $405,000
Mortgage modification fees ......... $ 42,000 121,000 261,000
Property management fees ........... 119,000
-------- -------- --------
T o t a l ...................... $ 42,000 $256,000 $785,000
======== ======== ========
(continued)
F-8
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 6) -- Related Party Transactions: (continued)
The Company utilizes personnel and other facilities of affiliated entities
and until September 30, 1994 operated from the offices of an affiliate. (See
Note 7.) The Company is charged service fees for general and administrative
expenses for placing mortgages, servicing mortgages and distributing debenture
interest checks. Such fees amounted to $342,000, $354,000 and $99,000 in 1995,
1994 and 1993, respectively. Management believes these service fees are
reasonable.
(NOTE 7) -- Commitments:
[a] Office lease:
In May 1994 the Company entered into a lease for office space previously
leased to an affiliate. The lease commenced on October 1, 1994 and terminates on
September 30, 2004. In addition to minimum rents the Company is required to pay
its proportionate share of increases in the building's real estate taxes and
costs of operation and maintenance.
Future minimum rents under the lease are as follows:
1996 .................................................... $ 152,334
1997 .................................................... 157,976
1998 .................................................... 174,902
1999 .................................................... 174,902
2000 .................................................... 179,133
Thereafter .............................................. 719,355
----------
T o t a l ........................................... $1,558,602
==========
The Company shares this space with affiliates and received $4,000 per month
from an affiliate for the period from October 1, 1994 to December 31, 1994,
subsequently, the charge to the affiliate is 50% of the actual rent expense
incurred for the use of this space.
[b] Employment agreement:
Effective as of July 1, 1995, the Company entered into an employment
agreement with its Executive Vice President for a term of ten years at an annual
salary of $125,000, which is subject to increase annually by six percent or by
the percentage increase in the consumer price index, if higher. In the event of
the executive's death or disability, one-half of this amount will continue to be
paid for a term as defined in the agreement.
(NOTE 8) -- Income Taxes:
The Company has provided for income taxes in the periods presented based on
the federal, state and city tax rates in effect for these periods.
(continued)
F-9
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 8) -- Income Taxes: (continued)
The provision for income taxes consists of the following components:
Year Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
Current taxes:
Federal ............................... $143,000 $202,000 $202,000
State and local ....................... 102,000 164,000 173,000
Deferred taxes:
Federal ............................... 46,000 22,000 62,000
State and local ....................... 33,000 15,000 43,000
-------- -------- --------
Total tax provision ................. $324,000 $403,000 $480,000
======== ======== ========
Temporary differences exist between financial accounting and tax reporting
which result in a net deferred tax asset, included in other assets, as follows:
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
Debenture underwriting commissions ...... $ 32,000 $ 51,000 $ 70,000
Deferred fees ........................... 68,000 110,000 111,000
Discount on mortgages receivable ........ (49,000) (31,000) (14,000)
-------- -------- --------
T o t a l ........................... $ 51,000 $130,000 $167,000
======== ======== ========
The amounts of income taxes provided varied from the amounts which would
be "expected" to be provided at the statutory federal income tax rates in effect
for the following reasons:
December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
Tax computed based upon the
statutory federal tax rate ............ $260,000 $319,000 $348,000
State and local income tax,
net of federal income tax benefit ...... 98,000 118,000 143,000
Nontaxable income ........................ (10,000) (23,000) (29,000)
Other .................................... (24,000) (11,000) 18,000
-------- -------- --------
T o t a l ............................ $324,000 $403,000 $480,000
======== ======== ========
F-10
<PAGE>
<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
EFFECTIVE ACTUAL FINAL
INTEREST INTEREST MATURITY
DESCRIPTION RATE RATE DATE PERIODIC PAYMENT TERMS
----------- --------- -------- -------- ----------------------
<S> <C> <C> <C> <C>
COMMERCIAL FIRST MORTGAGES,
RESTAURANTS:
MANASSAS, VIRGINIA 12.375% 6.50% 12/01/05 PRINCIPAL AND INTEREST ANNUALLY
IRONDEQUOIT, NEW YORK 12.50 7.20 12/01/12 PRINCIPAL AND INTEREST ANNUALLY
DECATOR AND JONESBORO, GEORGIA 13.00% 8.50% 04/01/13 (C)
COMMERCIAL FIRST MORTGAGE,
SAVINGS BANK:
NEW YORK, NEW YORK 12.25 6.20 12/08/10 PRINCIPAL AND INTEREST ANNUALLY
RESIDENTIAL WRAPAROUND MORTGAGE,
CO-OPERATIVE APARTMENT BUILDINGS:
NEW YORK, NEW YORK 9.00 9.00 11/01/96 (C)
RESIDENTIAL FIRST MORTGAGES,
CO-OPERATIVE APARTMENT BUILDINGS:
NEW YORK, NEW YORK 11.51 11.51 10/31/97 (C)
NEW YORK, NEW YORK 11.51 11.51 07/31/97 (D)
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK 9.00 9.00 07/01/06 (C)
BRONX, NEW YORK 10.50 10.50 11/01/12 (C)
BRONX, NEW YORK 12.38 12.38(A) 08/01/12 (C)
NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
NEW ROCHELLE, NEW YORK 11.00 10.00 04/01/05 (C)
NEW YORK, NEW YORK 16.00 14.00 03/31/96 (C)
NEW YORK, NEW YORK 11.00 11.00 05/01/05 (C)
BRONX, NEW YORK 13.11 13.11(A) 06/01/11 (C)
BRONX, NEW YORK 12.75 12.75 01/01/11 (C)
BRONX, NEW YORK 12.50 12.50 08/01/10 (C)
BRONX, NEW YORK 13.50 9.53(A) 03/01/97 (C)
BRONX, NEW YORK 13.50 9.57(A) 03/01/97 (C)
BRONX, NEW YORK 13.75 13.75 06/01/13 (C)
BRONX, NEW YORK 9.00 9.00 11/01/15 (C)
BRONX, NEW YORK 13.00 13.00 01/01/10 (C)
NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
BRONX, NEW YORK 12.75 12.75 11/01/11 (C)
NEW YORK, NEW YORK 11.00 10.00 03/15/10 (C)
NEW YORK, NEW YORK 11.00 10.00 03/15/10 (C)
BRONX, NEW YORK 12.77 12.77(A) 11/01/13 (C)
NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
NEW YORK, NEW YORK 12.75 12.75 10/01/99 (D)
NEW YORK, NEW YORK 10.00 10.00 03/01/99 (D)
CITY ISLAND, BRONX, NEW YORK 16.72 15.00 05/31/96 (C)
BROOKLYN, NEW YORK 16.28 14.50 03/31/96 (C)
ORIGINAL
FACE CARRYING
PRIOR AMOUNT OF AMOUNT OF PREPAYMENT PENALTY/
DESCRIPTION LIENS MORTGAGES MORTGAGES OTHER FEES
----------- ----------- ----------- ----------- -------------------
COMMERCIAL FIRST MORTGAGES,
RESTAURANTS:
MANASSAS, VIRGINIA $ 300,000 $ 137,000 0.5%
IRONDEQUOIT, NEW YORK 340,000 201,000 1%
DECATOR AND JONESBORO, GEORGIA 583,000 386,000 (F)
COMMERCIAL FIRST MORTGAGE,
SAVINGS BANK:
NEW YORK, NEW YORK 300,000 151,000 (F)
RESIDENTIAL WRAPAROUND MORTGAGE,
CO-OPERATIVE APARTMENT BUILDINGS:
NEW YORK, NEW YORK $ 18,000 367,000 329,000 (E)
RESIDENTIAL FIRST MORTGAGES,
CO-OPERATIVE APARTMENT BUILDINGS:
NEW YORK, NEW YORK 950,000 939,000 (E)
NEW YORK, NEW YORK 850,000 850,000 (E)
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK 895,000 819,000 NOT PREPAYABLE UNTIL 1/1/2000.
BRONX, NEW YORK 2,445,000 2,282,000 NOT PREPAYABLE UNTIL 2/2003.
BRONX, NEW YORK 900,000 900,000 NOT PREPAYABLE UNTIL BALANCE
UNDER $200,000, 2% FEE ON
UNPAID BALANCE.
NEW YORK, NEW YORK 265,000 265,000 NOT PREPAYABLE UNTIL 1/1/1997.
NEW ROCHELLE, NEW YORK 4,750,000 4,591,000 1% FEE
NEW YORK, NEW YORK 1,800,000(G) 479,000 1% FEE
NEW YORK, NEW YORK 1,335,000 1,314,000 1% FEE
BRONX, NEW YORK 2,850,000 2,850,000 NOT PREPAYABLE UNTIL 3/1/2004.
BRONX, NEW YORK 1,175,000 1,170,000 (E)
BRONX, NEW YORK 1,045,000 1,015,000 NOT PREPAYABLE UNTIL BALANCE
UNDER $200,000.
BRONX, NEW YORK 625,000 581,000 (F)
BRONX, NEW YORK 670,000 622,000 (F)
BRONX, NEW YORK 2,000,000 1,958,000 (E)
BRONX, NEW YORK 1,260,000 1,209,000 NOT PREPAYABLE UNTIL 3/1999.
BRONX, NEW YORK 1,650,000 1,622,000 NOT PREPAYABLE UNTIL 10/1/2000.
NEW YORK, NEW YORK 1,445,000 1,445,000 NOT PREPAYABLE UNTIL 1/1/1997.
BRONX, NEW YORK 1,850,000 1,837,000 NOT PREPAYABLE UNTIL 1/1/2003.
NEW YORK, NEW YORK 1,150,000 1,088,000 NOT PREPAYABLE UNTIL 3/1/1996,
THEN PREPAYMENT PREMIUM NEEDED.
NEW YORK, NEW YORK 300,000 285,000 NOT PREPAYABLE UNTIL 3/1/1996,
THEN PREPAYMENT PREMIUM NEEDED.
BRONX, NEW YORK 4,510,000 4,510,000 (E)
NEW YORK, NEW YORK 425,000 425,000 NOT PREPAYABLE UNTIL 1/1/1997.
NEW YORK, NEW YORK 2,000,000 2,000,000 (F)
NEW YORK, NEW YORK 1,100,000 1,100,000 NOT PREPAYABLE UNTIL 3/1/1996.
CITY ISLAND, BRONX, NEW YORK 650,000 644,000 NO PENALTY IF AFTER 5/1/1996.
BROOKLYN, NEW YORK 550,000 536,000 NO PENALTY IF AFTER 3/1/1996.
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
EFFECTIVE ACTUAL FINAL
INTEREST INTEREST MATURITY
DESCRIPTION RATE RATE DATE PERIODIC PAYMENT TERMS
----------- --------- -------- -------- ----------------------
<S> <C> <C> <C> <C>
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS: (CONTINUED)
EAST ORANGE, NEW JERSEY 14.50% 14.50% 12.01/96 (C)
EAST ORANGE, NEW JERSEY 14.50 14.50 12/01/96 (C)
CAMDEN, NEW JERSEY 15.83 14.00 07/01/97 (C)
IRVINGTON, NEW JERSEY 17.80 16.00 08/01/97 (C)
NEW YORK, NEW YORK 16.43 14.75 04/30/97 (C)
NEW YORK, NEW YORK 16.58 15.00 01/31/97 (C)
NEW YORK, NEW YORK 16.50 14.75 04/30/97 (C)
ELLENVILLE, NEW YORK 16.62 14.75 04/30/97 (C)
RESIDENTIAL SECOND MORTGAGES,
RESIDENTIAL APARTMENT BUILDINGS:
NEW YORK, NEW YORK 12.00 12.00 02/01/99 (D)
NEW YORK, NEW YORK 11.00 11.00 02/01/97 (D)
NEW YORK, NEW YORK 10.75 10.75(B) 02/01/98 (D)
NEW YORK, NEW YORK 16.50 14.75 12/15/96 (C)
NEW ROCHELLE, NEW YORK 11.50 11.50(B) 03/01/96 (D)
ROCKVILLE CENTRE, NEW YORK 16.50 14.75 03/31/97 (C)
ORIGINAL
FACE CARRYING
PRIOR AMOUNT OF AMOUNT OF PREPAYMENT PENALTY/
DESCRIPTION LIENS MORTGAGES MORTGAGES OTHER FEES
----------- ----------- ----------- ----------- -------------------
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS: (CONTINUED)
EAST ORANGE, NEW JERSEY $ 930,000 $ 896,000 1% FEE.
EAST ORANGE, NEW JERSEY 690,000 661,000 1% FEE.
CAMDEN, NEW JERSEY 1,200,000 1,128,000 1% FEE.
IRVINGTON, NEW JERSEY 1,600,000 1,545,000 NOT PREPAYABLE PRIOR TO 5/1/1995;
THEN 1% FEE.
NEW YORK, NEW YORK 1,500,000 1,470,000 1% FEE.
NEW YORK, NEW YORK 763,000 748,000 1% FEE.
NEW YORK, NEW YORK 2,400,000 2,334,000 NOT PREPAYABLE PRIOR TO 11/8/1996;
THEN 1% FEE.
ELLENVILLE, NEW YORK 950,000 928,000 NOT PREPAYABLE PRIOR TO 11/21/1996;
THEN 1% FEE.
RESIDENTIAL SECOND MORTGAGES,
RESIDENTIAL APARTMENT BUILDINGS:
NEW YORK, NEW YORK $ 4,904,000 800,000 1,050,000 (F)
NEW YORK, NEW YORK 5,732,000 1,500,000 3,300,000 (F)
NEW YORK, NEW YORK 2,325,000 800,000 1,400,000 (F)
NEW YORK, NEW YORK 596,000 360,000 353,000 2% FEE IF PRIOR TO 6/8/1996;
OTHERWISE 1% FEE.
NEW ROCHELLE, NEW YORK 1,300,000 500,000 500,000 (F)
ROCKVILLE CENTRE, NEW YORK 597,000 300,000 293,000 1% FEE.
----------- ----------- -----------
$15,472,000 $55,628,000 $55,146,000
=========== =========== ===========
</TABLE>
(A) INTEREST PAYMENTS ARE FIXED. INTEREST RATE SHOWN IS APPROXIMATE.
(B) INTEREST AT FLUCTUATING BANK RATE PLUS 2%, WITH A FLOOR AND A CEILING.
(C) PRINCIPAL AND INTEREST MONTHLY.
(D) INTEREST ONLY, PRINCIPAL AT MATURITY.
(E) NO PREPAYMENT PERMITTED.
(F) NONE
(G) $1,250,000 OF PARTICIPATION OF MORTGAGE WAS SOLD IN 1995.
(H) NO MORTGAGE LOAN IS DELINQUENT AS TO PRINCIPAL AND/OR INTEREST.
F-12
<PAGE>
INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE -- Continued
The following summary reconciles mortgages receivable at their carrying values:
Year Ended December 31
---------------------------------------
1995 1994 1993
----------- ----------- -----------
Balance at beginning of period ....... $56,666,000 $41,521,000 $32,493,000
Additions during period:
Mortgages acquired ................. 17,124,000 18,680,000 9,866,000
----------- ----------- -----------
73,790,000 60,201,000 42,359,000
Deductions during period:
Collections of principal, net
of amortization of discounts ....... 18,644,000 3,535,000 838,000
----------- ----------- -----------
BALANCE AT CLOSE OF PERIOD ... $55,146,000 $56,666,000 $41,521,000
=========== =========== ===========
F-13
<PAGE>
(BACK COVER PAGE)
No person has been authorized by the Company or by the Underwriter to give
any information or to make any representations other than those contained in
this Prospectus in connection with the Offering of the Debentures made hereby,
and, if given or made, such information or representations must not be relied
upon as having been authorized. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the
Debentures, nor does it constitute an offer to sell or a solicitation of an
offer to buy any of the Debentures in any jurisdiction to any person to whom it
is unlawful to make such offer or solicitation in such jurisdiction.
----------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information...................................................... 3
Who Should Invest.......................................................... 3
Summary.................................................................... 4
Risk Factors............................................................... 6
Use of Proceeds........................................................... 13
Capitalization............................................................. 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................................................. 15
Selected Financial Information of the Company.............................. 19
History and Business....................................................... 21
Management................................................................. 35
Transactions with Management............................................... 37
Stockholders............................................................... 40
Description of Debentures.................................................. 42
Plan of Offering........................................................... 51
Legal Opinions............................................................. 53
Experts.................................................................... 53
Index to Financial Statements.............................................. 54
Table 1 -- Mortgages Receivable............................................ 20
<PAGE>
UNTIL __________________, 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
INTERVEST CORPORATION OF NEW YORK
$11,000,000
SERIES __/__/96 REGISTERED FLOATING RATE
REDEEMABLE SUBORDINATED DEBENTURES
$1,000,000 Series __/__/96 Due October 1, 1998
$10,000,000 Series __/__/96 Due April 1, 2005
PROSPECTUS
-------------------------
Sage, Rutty & Co., Inc.
The date of this Prospectus is ____________, 1996.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 30. Other Expenses of Issuance and Distribution.
The following statement sets forth the amounts of expenses in connection
with the offering of the Debentures pursuant to this registration statement, all
of which shall be borne by the Company.
Amount
-----------
Securities and Exchange Commission
Registration Fee................................... $ 3,793.10
EDGAR Expenses....................................... $ 2,000.00*
Printing and Engraving Expenses...................... 5,500.00*
Accounting Fees and Expenses......................... 5,000.00*
Legal Fees and Expenses.............................. 40,000.00*
Blue Sky Fees and Expenses........................... 30,000.00*
Trustees' Fees and Expenses.......................... 5,500.00*
Miscellaneous........................................ 5,000.00*
----------
Total................................................ $96,793.10*
==========
- ------------
*Estimated amounts of expenses.
Item 31. Sales to Special Parties.
Not applicable.
Item 32. Recent Sales of Unregistered Securities.
Not applicable.
Item 33. Indemnification of Directors and Officers.
Sections 721-726 of the New York Business Corporation Law provide that a
corporation may indemnify its officers and directors (or persons who have
served, at the corporation's request, as officers or directors of another
corporation) against the reasonable expenses, including attorneys' fees,
actually and reasonably incurred by them in connection with the defense of any
action by reason of being or having been directors or officers, if such person
shall have acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, except that if such
action shall be in the right of the corporation, no such indemnification shall
be provided as to any claim, issue or matter as to which such person shall have
been adjudged to have been liable to the corporation unless and only to the
extent that the court in which the action was brought, or, if no action was
brought, any court of competent jurisdiction determines upon application that,
in view of all of the circumstances of the case, the person is fairly and
reasonably entitled to indemnification.
II-1
<PAGE>
The Company's By-laws provide that the Company will indemnify the officers
and directors of the Company to the fullest extent permitted under the laws of
New York State. In that regard, the Company is obligated to indemnify officers
and directors of the Company from and against any and all judgments, fines,
amounts paid in settlement, and reasonable expenses, including attorneys' fees,
actually and necessarily incurred by an officer or director as a result of any
action or proceeding, or any appeal therein, to the extent such amounts may be
indemnified under the laws of New York State; and to pay any officer or director
of the Company, in advance of the final disposition of any civil or criminal
proceeding, the expenses incurred by such officer or director in defending such
action or proceeding. The Company's obligation to indemnify its officers and
directors continues to individuals who have ceased to be officers or directors
of the Company and to the heirs and personal representatives of former officers
and directors of the Company. The form of Underwriting Agreement included as an
exhibit to this Registration Statement provides for indemnification of the
Company, its officers and directors, against certain liabilities.
Item 34. Treatment of Proceeds from Stock Being Registered.
Not applicable.
Item 35. Financial Statements and Exhibits.
(a) Financial Statements:
See Index to Financial Statements of the Company.
(b) The following exhibits are filed as part of this Registration
Statement:
Exhibit No.
- -----------
1.1 Form of Underwriting Agreement between the Company and Sage, Rutty & Co.,
Inc. (the "Underwriter").
1.2 Form of Selected Dealer Agreement.
3.1 Certificate of Incorporation of the Company.(1)
3.2 By-laws of the Company.(2)
4.1 Form of Indenture between the Company and The Bank of New York, as
Trustee (the "Trustee").
5.1 Opinion of Harris Beach & Wilcox.
10.1 Form of Escrow Agreement between the Company, the Underwriter and
Manufacturers and Traders Trust Company.
II - 2
<PAGE>
10.2 Form of Employment Agreement between the Company and Jerome Dansker.(3)
12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries.
23.1 Consent of Harris Beach & Wilcox is included in the opinion of Harris
Beach & Wilcox, filed as Exhibit 5.1.
23.2 Consent of Richard A. Eisner & Company, LLP
25.1 Statement of Eligibility and Qualification under Trust Indenture Act of
1939 on Form T-1 for The Bank of New York.
- ----------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-18 (File No. 33-27404-NY), declared effective on May 12, 1989.
(2) Incorporated by reference to Registrant's Registration Statement on Form
S-11 (File No. 33-39971), declared effective on May 13, 1991.
(3) Incorporated by reference to Registrant's Registration Statement on Form
S-11 (File No. 33-96662), declared effective on October 18, 1996.
Item 36. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II - 3
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II - 4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on April 8, 1996.
INTERVEST CORPORATION OF NEW YORK
By: /s/ LOWELL S. DANSKER
----------------------------
Name: Lowell S. Dansker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on April 8, 1996.
Signature Capacity
- --------- --------
/s/ LOWELL S. DANSKER Co-Chairman, President
- --------------------------- (Principal Executive Officer),
(Lowell S. Dansker) Treasurer (Principal Financial
Officer and Principal Accounting
Officer) and Director
/s/ LAWRENCE G. BERGMAN Co-Chairman, Vice President,
- --------------------------- Secretary and Director
(Lawrence G. Bergman)
/s/ JEROME DANSKER Director, Executive Vice President
- ---------------------------
(Jerome Dansker)
- ---------------------------
(Michael A. Callen)
Director
- ---------------------------
(Milton F. Gidge)
/s/ WILLIAM F. HOLLY Director
- ---------------------------
(William F. Holly)
Director
- ---------------------------
(David J. Willmott)
/s/ WESLEY T. WOOD Director
- ---------------------------
(Wesley T. Wood)
II - 5
<PAGE>
EXHIBIT INDEX
Number Exhibit
- ------ -------
1.1 Form of Underwriting Agreement between the Company and Sage, Rutty & Co.,
Inc. (the "Underwriter").
1.2 Form of Selected Dealer Agreement.
3.1 Certificate of Incorporation of the Company.(1)
3.2 By-laws of the Company.(2)
4.1 Form of Indenture between the Company and The Bank of New York, as
Trustee (the "Trustee").
5.1 Opinion of Harris Beach & Wilcox.
10.1 Form of Escrow Agreement between the Company, the Underwriter and
Manufacturers and Traders Trust Company.
10.2 Form of Employmehnt Agreement between the Company and Jerome Dansker.(3)
12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries.
23.1 Consent of Harris Beach & Wilcox is included in the opinion of Harris
Beach & Wilcox, filed as Exhibit 5.1.
23.2 Consent of Richard A. Eisner & Company, LLP
25.1 Statement of Eligibility and Qualification under Trust Indenture Act of
1939 on Form T-1 for The Bank of New York.
- ------------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-18 (File No. 33-27404-NY), declared effective on May 12, 1989.
(2) Incorporated by reference to Registrant's Registration Statement on Form
S-11 (File No. 33-39971), declared effective on May 13, 1991.
(3) Incorporated by reference to Registrant's Registration Statement on Form
S-11 (File No. 33-96662), declared effective on October 18, 1995.
INTERVEST CORPORATION OF NEW YORK
10 Rockefeller Plaza
Suite 1015
New York, New York 10020-1903
, 1996
Sage, Rutty & Co., Inc.
183 East Main Street, 4th Floor
Rochester, New York 14604
Dear Sirs:
Intervest Corporation of New York, a New York corporation (the "Company"),
hereby confirms its agreement with you (sometimes herein called the
"Underwriter") as follows:
1. Introductory
The Company proposes to issue and offer, through the Underwriter acting as
agent for the Company, $11,000,000 aggregate principal amount of its Series
__/__/96 Registered Floating Rate Redeemable Subordinated Debentures (the
"Debentures"'), in two maturities as follows: $1,000,000 with a maturity date of
October 1, 1998, and $10,000,000 with a maturity date of April 1, 2005. If at
least $5,000,000 of Debentures, without regard to maturity, are not sold within
75 days after the date the Registration Statement (as defined below) is declared
effective by the Securities and Exchange Commission, all subscription documents
and funds (together with any net interest thereon) will be returned to
subscribers and the offering will terminate. The Debentures will be issued
pursuant to the provisions of an Indenture, dated as of ___________ 1, 1996 (the
"Indenture"), between the Company and The Bank of New York, as Trustee (the
"Trustee"). The Debentures will be sold in denominations of $10,000 with a
minimum purchase of $10,000, and are more fully described in the Prospectus
referred to below. The Company hereby appoints the Underwriter as its exclusive
agent to sell the Debentures, subject to the terms and provisions of this
Agreement, on a "best efforts" basis with at least $5,000,000 of the Debentures,
without regard to maturity, required to be sold within 75 days after the date
the Registration Statement (as defined below) is declared effective by the
Securities and Exchange Commission (the "Termination Date"). If at least
$5,000,000 of the Debentures, without regard to maturity, are sold prior to the
Termination Date, any remaining Debentures may continue to be sold until 150
days after the minimum amount has been sold.
2. Representations and Warranties of the Company
The Company hereby represents and warrants to, and agrees with, the
Underwriter as follows:
(a) A registration statement on Form S-11 (File No. 33-________) (the
"Registration Statement") with respect to the Debentures, including the related
Prospectus (the "Prospectus"), and any amendments thereto, copies of which have
heretofore been delivered by the Company to you, has been prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act") and the published rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Act, and has been filed with the Commission under the Act. The Company may
file on or prior to the Effective Date (as defined in Section 3(a)) additional
amendments to said Registration Statement, including the final Prospectus.
<PAGE>
(b) The Registration Statement and the Prospectus (other than the financial
statements and other financial data and schedules which are or should be
contained therein) conform as to form in all material respects to the
requirements of the Act and the Rules and Regulations and do not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and no event has
occurred which should have been set forth in the Registration Statement or the
Prospectus which has not been so set forth therein; provided, however, the
Company makes no representation or warranty as to statements or omissions made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriter expressly for use in the Registration
Statement, the Prospectus, or any amendment or supplement thereto.
(c) Neither the Commission nor the "blue sky" or state securities authority
of any jurisdiction has issued an order (a "Stop Order") suspending the
effectiveness of the Registration Statement, preventing or suspending the use of
the Prospectus, the Registration Statement or any amendment or supplement
thereto, refusing to permit the effectiveness of the Registration Statement or
suspending the registration of the Debentures, nor have any of such authorities
instituted or threatened to institute any proceedings with respect to a Stop
Order.
(d) The Company and each of the subsidiaries of the Company described in
the Prospectus (the "Subsidiaries"), are corporations duly organized, validly
existing and in good standing under the laws of the State of New York, with full
power and authority to conduct its own business and own or lease its properties
as described in the Prospectus, and is duly qualified and in good standing as a
foreign corporation in each jurisdiction where the conduct of its business or
its ownership or leasing of property requires it to be qualified, except where
the failure so to qualify would not have a material adverse effect on the
Company or the Subsidiaries.
(e) The authorized capital stock of the Company consists of 200 shares of
common stock, no par value (the "Common Stock"). There are 31.84 shares of
Common stock outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable. The Company owns all of the outstanding shares of
the Subsidiaries, free and clear of any liens or encumbrances and all such
shares are duly authorized, validly issued, fully paid and nonassessable.
(f) The financial statements of the Company together with related schedules
and notes as set forth in the Registration Statement and the Prospectus fairly
present the financial condition of the Company and the results of its operations
and the changes in its financial position as of the dates and for the periods
therein specified and such financial statements have been prepared in conformity
with generally accepted accounting principles consistently applied throughout
the periods involved.
(g) Except as reflected in or contemplated by the Registration Statement or
the Prospectus, since the date as of which information is given in the
Registration Statement or the Prospectus, there has not been any material
adverse change in the condition, financial or otherwise, of the Company or the
Subsidiaries. Since the date as of which information is given in the
Registration Statement or the Prospectus, neither the Company nor the
Subsidiaries have entered into any transaction, other than transactions in the
ordinary course of business.
(h) There are no actions, suits or proceedings pending, or to the knowledge
of the Company threatened, against or with respect to the Company or its
business or assets, or the Subsidiaries, or their business or assets, at law or
in equity, or before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign, in which
an adverse decision might have a material adverse effect on the business or
assets of the Company or the business or assets of the Subsidiaries.
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<PAGE>
(i) The Company and the Subsidiaries have good title to all properties and
assets which the Prospectus indicates are owned by them, free and clear of all
liens, security interests, pledges, charges, encumbrances and mortgages (except
as may be described in the Prospectus or such as in the aggregate will not have
a material adverse effect upon the business or assets of the Company or the
Subsidiaries).
(j) The Company and the Subsidiaries are not in default in any material
respect under, and no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a material default under, any
contract, agreement, instrument, lease or license to which the Company or the
Subsidiaries is a party or by which any of them are bound, except as may be
properly described in the Prospectus or such as in the aggregate will not have a
material adverse effect on the business or assets of the Company or on the
business or assets of the Subsidiaries. The Company and the Subsidiaries are not
in violation of their certificates of incorporation or bylaws.
(k) The Company has all requisite power and authority to execute, deliver
and carry out the terms and provisions of this Agreement and the Indenture, and
to issue, sell and deliver the Debentures in accordance with and upon the terms
and conditions set forth in this Agreement and the Indenture. All necessary
corporate proceedings of the Company have been duly taken to authorize the
execution, delivery and performance by the Company of this Agreement and the
Indenture, and the issuance, sale and delivery of the Debentures. This Agreement
has been duly authorized, executed and delivered by the Company, is the legal,
valid and binding obligation of the Company, and is enforceable as to the
Company in accordance with its terms, except as rights to indemnity and
contribution hereunder may be limited by federal or state securities laws, court
decisions or public policy. The Indenture has been duly authorized by the
Company and, when the Indenture has been executed and delivered, will constitute
the legal, valid and binding obligation of the Company, and will be enforceable
as to the Company in accordance with its terms. The Debentures have been duly
authorized by the Company and, when the Debentures have been executed and
authenticated in the manner set forth in the Indenture and issued, sold and
delivered against payment therefor in accordance with this Agreement, will
constitute the legal, valid and binding obligations of the Company, will be
enforceable as to the Company in accordance with their terms and the terms of
the Indenture and the holders of the Debentures will be entitled to the benefits
provided by the Indenture. The Debentures and the Indenture conform to the
description thereof in the section entitled "DESCRIPTION OF DEBENTURES" in the
Prospectus. The enforceability of this Agreement, the Indenture, and the
Debentures is subject in each case to (i) applicable bankruptcy, moratorium,
insolvency, reorganization and similar laws relating to or affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
such principles are considered in a proceeding in equity or at law).
(l) No consent, authorization, approval, order, license, certificate or
permit of or from, or declaration or filing with, any federal, state, local or
other governmental authority or any court or other tribunal is required for the
execution, delivery or performance by the Company of this Agreement or the
Indenture, or the execution, authentication, issuance, sale or delivery of the
Debentures (except (i) registration under the Act and (ii) registration or
qualification under "blue sky" or state securities laws).
(m) No consent of any party to any contract, agreement, instrument, lease
or license to which the Company or its Subsidiaries is a party, or to which any
of the Company's or its Subsidiaries' properties or assets are subject, is
required for the execution, delivery or performance of this Agreement, the
Indenture, or the execution, authentication, issuance, sale and delivery of the
Debentures; and the execution, delivery and performance of this Agreement and
the Indenture, and the execution, authentication, issuance, sale and delivery of
the Debentures, will not violate, result in a material breach of, conflict with
or (with or without the giving of notice or the passage of time or both)
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<PAGE>
result in a default under any such contract, agreement, instrument, lease or
license, or violate the certificate of incorporation or bylaws of the Company or
the Subsidiaries, or violate or conflict with any law, rule, regulation, order,
judgment or decree binding on the Company or its Subsidiaries or to which any of
the Company's or the Subsidiaries' properties or assets are subject or result in
the creation or imposition of any lien, charge or encumbrance upon any assets of
the Company or its Subsidiaries pursuant to the terms of any contract,
agreement, instrument, lease or license to which the Company or its Subsidiaries
is a party or to which any of their properties or assets are subject.
(n) The Company knows of no outstanding claims for services in the nature
of a finder's fee or origination fee with respect to the sale of the Debentures
hereunder resulting from its acts for which the Underwriter may be responsible.
(o) The Company and the Subsidiaries have filed all federal and state tax
returns which were required to be filed by them and have paid all taxes shown on
such returns and all assessments received by them, to the extent such taxes or
returns have become due (after giving effect to applicable grace periods or
extensions, if any).
3. Employment of Underwriter
(a) Subject to the terms and conditions herein set forth, the effective
date of this Agreement commences on the effective date under the Act of the
Registration Statement (the "Effective Date"), and the Company hereby appoints
the Underwriter as its exclusive agent as of the Effective Date, for the purpose
of offering the Debentures as provided in this Agreement on a "best efforts"
basis with at least $5,000,000 of the Debentures required to be sold within 75
days after the Effective Date if any Debentures are sold. The Underwriter agrees
to use its best efforts to sell the Debentures as agent for the Company. It is
understood and agreed that there is no firm commitment on the part of the
Underwriter to purchase any of the Debentures.
(b) The Underwriter will offer the Debentures hereunder at a price of
$10,000 per Debenture. The Underwriter will be entitled to a commission of two
percent (2%) of the purchase price on each Debenture maturing October 1, 1998
and eight percent (8%) of the purchase price on each Debenture maturing April 1,
2005 sold in the offering by the Underwriter or any of its selected dealers. In
addition, the Company will pay the Underwriter a fee in an amount equal to one
percent (1%) of the aggregate gross amount of Debentures maturing April 1, 2005
and one-half of one percent (1/2%) of the aggregate gross amount of Debentures
maturing October 1, 1998, in each case sold in the offering, such fee to be paid
upon completion of the offering. The Underwriter shall have the right to
associate with other dealers selected by the Underwriter who are members of the
National Association of Securities Dealers, Inc., pursuant to a written Selected
Dealer Agreement, and to offer a part of the Debentures to such selected dealers
for sale by them at the offering price. In no event shall sales be made to
accounts over which the Underwriter or any dealer may exercise discretionary
authority without the written approval of the customer and the Underwriter prior
to the execution of any order, and the Selected Dealer Agreement will include
provisions so as to assure compliance with this restriction. The Selected Dealer
Agreement will provide that if a Debenture is sold through any such selected
dealer, the Underwriter will allow to such selected dealer the entire commission
paid by the Company for such Debenture. If a Debenture is sold directly by the
Underwriter, the Underwriter will retain the entire commission paid by the
Company for such Debenture. The Underwriter shall take such steps as it deems
appropriate to assure that purchasers of Debentures meet the suitability
standards set forth in the Prospectus or otherwise imposed by the Company and
will maintain for a period of at least four (4) years a record of the
information obtained to indicate that such standards have been met.
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<PAGE>
(c) The obligation of the Underwriter to offer the Debentures is subject to
receipt by the Underwriter of a copy of written advice from the Commission that
the Registration Statement is effective. It is also subject to the Debentures
being qualified for offering under applicable state securities laws.
(d) (i) A special interest-bearing account (the "Escrow Account"') will be
opened and maintained at Manufacturers and Traders Trust Company (the "Bank") in
Rochester, New York, for the purpose of holding subscription funds in escrow
until the First Closing Date (as hereinafter defined). The title of the Escrow
Account will be "Intervest Corporation of New York Escrow Account". All
subscription funds shall be in the form of wire transfers of immediately
available funds, or checks, and all checks should be made payable to "M&T Bank,
as Escrow Agent for Intervest Corporation of New York." After the First Closing
Date all checks for subscriptions of Debentures shall be made payable to
"Intervest Corporation of New York", the Company. The Company, the Underwriter
and the Bank will, prior to the beginning of the offering of the Debentures,
enter into an escrow agreement with respect to the Escrow Account in form
satisfactory to the parties. The parties hereto agree to faithfully perform
their obligations under such escrow agreement. Except to the extent that
interest earned on the funds in the Escrow Account may be applied to pay escrow
expenses in the event the offering is terminated prior to the First Closing
Date, all costs, expenses, and charges incurred in connection with the Escrow
Account shall be paid by the Company.
(ii) Until the First Closing Date all funds received from subscribers by
any selected dealer shall be promptly transmitted to the Bank (for deposit in
the Escrow Account), but in any event such funds shall be so transmitted by noon
of the next business day following the day such funds are received from the
subscriber by the selected dealer. The Underwriter shall promptly transmit to
the Bank all funds received by it from subscribers for deposit in the Escrow
Account in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended, but in any event such funds shall be so transmitted for
deposit by noon of the next business day following the day such funds are
received. After the First Closing Date all funds received from subscribers by
any selected dealer shall be promptly transmitted to the Underwriter for
distribution to the Company, but in any event such funds shall be transmitted by
noon of the next business day following the day such funds are received by the
selected dealer.
(iii) The first closing of the offering will take place at the offices of
counsel to the Company on a date (the "First Closing Date") which is within ten
business days after the date on which acceptable subscriptions have been
received in cleared, collected funds for at least $5,000,000 of Debentures.
(iv) On the First Closing Date the Underwriter will cause the Bank to
distribute the funds on deposit in the Escrow Account to the Company, selected
dealers and the Underwriter, as their interests may appear. The Underwriter will
be entitled to cause the Bank to distribute to the Underwriter from the Escrow
Account an amount sufficient to pay all of the commissions on the Debentures
sold to which the Underwriter and selected dealers are entitled under the
provisions of Section 3(b) hereof. Debentures may continue to be offered and
sold for up to 150 days after the First Closing Date. After the First Closing
Date, the Underwriter will distribute the checks for subscriptions of Debentures
directly to the Company within one business day of receipt by the Underwriter.
The Company shall, not less frequently than twice in each calendar month, remit
to the Underwriter commissions on the Debentures sold to which the Underwriter
and selected dealers are entitled under the provisions of Section 3(b) hereof.
(v) In the event the offering pursuant to the Prospectus is terminated
prior to the First Closing Date for any reason whatsoever, the Underwriter shall
promptly cause the Bank to
5
<PAGE>
refund to the subscribers of the Debentures all funds which have been received
from them by the Underwriter. Interest earned on funds in the Escrow Account
shall be applied to pay escrow expenses, with the balance of interest, if any,
to be paid to subscribers in proportion to the amount of funds paid by each
subscriber on subscription and without regard to the date when such subscription
funds were paid by the subscriber.
(e) In the event the offering is terminated prior to the First Closing
Date, this Agreement shall terminate, and upon the payments and refunds to
subscribers being made as provided in Section 3(d)(v), neither party hereto
shall have any further liability to the other hereunder.
(f) The Company shall pay all costs and expenses incident to the
performance of the obligations of the Company hereunder, including the fees and
expenses of the Company's counsel and accountants, registration fees, the costs
and expenses incident to the preparation, printing and shipping of the
Registration Statement, each preliminary prospectus, if any, the final
Prospectus and all amendments and supplements thereto and this Agreement and
related documents, filing fees required to be paid to the National Association
of Securities Dealers, Inc., the costs incurred in connection with the
qualification of the Debentures under applicable state securities laws and the
fee of Underwriter's legal counsel. The Underwriter shall pay all other costs
incurred or to be incurred by it, or by its personnel, in connection with the
offering of the Debentures.
4. Covenants of the Company
(a) The Company will furnish to the Underwriter, without charge, as soon as
the Registration Statement or any amendment thereto becomes effective or a
supplement is filed, two signed copies of the Registration Statement and each
amendment thereto, including all financial statements and exhibits, and two
copies of any supplement thereto. The Company will also furnish to the
Underwriter such number of conformed copies of the Registration Statement and of
each amendment thereto, including all financial statements but excluding
exhibits, and of each supplement thereto, and of the Indenture as the
Underwriter may reasonably request.
(b) The Company will furnish to the Underwriter as soon as possible after
the Effective Date and thereafter during the period required by law for the
Prospectus to be delivered in connection with sales of the Debentures, as many
copies of the Prospectus (and of any amended or supplemented Prospectus) as the
Underwriter may reasonably request. If during such period any event occurs as a
result of which the Registration Statement or the Prospectus, as then amended or
supplemented, would include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in the
light of the circumstances in which they were made, not misleading, or it shall
be necessary to amend or supplement the Registration Statement or the Prospectus
to comply with the Act or the Rules and Regulations, the Company will forthwith
notify the Underwriter thereof and prepare and furnish to the Underwriter and
dealers selected by the Underwriter, in such quantity as the Underwriter and
such dealers may reasonably request, an amendment or supplement which will
correct such statement or omission or cause the Registration Statement and the
Prospectus to comply with the Act and the Rules and Regulations. The Company
will not at any time prior to the expiration of such period, whether before or
after the Effective Date, file any amendment to the Registration Statement of
which the Underwriter will not have been advised and furnished with a copy, or
which is not in compliance with the Act and the Rules and Regulations.
(c) The Company will use its best efforts to cause the Registration
Statement to become effective and will promptly advise the Underwriter and will
confirm such advice in writing, of the following: (i) when the Registration
Statement or any post-effective amendment thereto shall have become effective,
and when any amendment of or supplement to the Prospectus is filed with the
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<PAGE>
Commission; (ii) when the Commission shall make a request or suggestion for any
amendment to the Registration Statement or the Prospectus or for additional
information and the nature and substance thereof; and (iii) the issuance by the
Commission of a stop order suspending the effectiveness of the Registration
Statement or the suspension of the qualification of the Debentures for sale in
any jurisdiction, or of the initiation of any proceeding for that purpose.
(d) The Company will take all action necessary to permit the offering of
the Debentures as contemplated hereby under the "blue sky" or securities laws of
the states in which it determines that Debentures shall be sold; provided,
however, that the Company shall not be required to qualify as a foreign
corporation or to file a consent to service of process in any state in any
action other than one arising out of the offering or sale of the Debentures. The
Company shall furnish the Underwriter with written notice as to the states in
which the Debentures are to be offered, together with such reasonable
documentation as may be requested by the Underwriter to establish that the
Debentures have been duly registered for offer and sale in those states or are
exempt from the registration requirements of such states, including, among other
things, "blue sky" memoranda or surveys prepared by the Company's counsel with
respect to those states in which the Company has determined that the Debentures
are to be offered. Notwithstanding the foregoing, nothing in this agreement
shall be construed as obligating the Underwriter or any selected dealers engaged
in the offering of the Debentures to offer Debentures in any states in which the
Underwriter or selected dealer, as the case may be, is not registered as a
broker-dealer.
(e) The Company will make generally available (within the meaning of
Section 11(a) of the Act and the Rules and Regulations) to its security holders,
within 120 days of the first day of the fiscal year of the Company, an earnings
statement of the Company (which will be in reasonable detail and will comply
with the requirements of Section 11 (a) of the Act, but need not be audited)
covering the prior fiscal year of the Company, commencing with the fiscal year
of the Company during which this Agreement is executed.
(f) For a period of five years after the termination of the Offering, the
Company will furnish the Underwriter without charge, within 90 days after the
end of each fiscal year, a copy of its financial statements certified by
independent certified public accountants.
(g) The Company will apply the net proceeds received by it from the
offering in the manner set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will furnish to the Underwriter as early as practicable
prior to the First Closing Date, but no less than two full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company which have been read by the Company's independent certified
public accountants, as stated in their letters to be furnished pursuant to
Section 5(f).
(i) The Company will comply with all registration, filing, and reporting
requirements of the Securities Exchange Act of 1934, which may from time to time
be applicable to the Company, and, for a period of three years after the
termination of the Offering, the Company will furnish the Underwriter, without
charge, with copies of all filings made with the Commission pursuant to the
Securities Exchange Act of 1934.
(j) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
(k) Offers and sales of Debentures by the Company shall only be made by
persons who meet the safe harbor provisions of Rule 3a4-1 under the Securities
Exchange Act of 1934.
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<PAGE>
5. Conditions of Underwriter's Obligations
The obligations of the Underwriter as provided herein shall be subject to
the continuing accuracy of the representations and warranties of the Company
herein contained as of the date hereof and through and including the date of
termination of the offering, to the performance by the Company of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Registration Statement shall have become effective at the time
of any sale of Debentures hereunder, no Stop Order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission or be pending.
(b) The Company shall not have sustained after the date hereof any
material loss or interference with its business from any calamity, whether
or not covered by insurance, which in your reasonable judgment makes it
impracticable or inadvisable to sell the Debentures as contemplated hereby.
(c) All corporate proceedings and related matters in connection with
the organization of the Company and the registration, authorization,
issuance, sale and delivery of the Debentures, and in connection with this
Agreement, shall be reasonably satisfactory to you and you shall have been
furnished with such papers and information as you may reasonably have
requested in this connection.
(d) Between the date hereof and the First Closing Date, there shall
have been no litigation instituted or threatened against the Company and
there shall have been no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign,
wherein an unfavorable ruling, decision or finding would materially
adversely affect the business, operations or financial condition or income
of the Company.
(e) At the time of the execution of this Agreement, and at the First
Closing Date, counsel for the Company shall provide to the Underwriter its
written opinion, in form and substance satisfactory to counsel for the
Underwriter, with respect to the following matters:
(i) The matters set forth in Paragraph 2(d).
(ii) The matters set forth in Paragraph 2(e).
(iii) The matters set forth in Paragraph 2(k).
(iv) To the best of counsel's knowledge, the matters set forth in
Paragraphs 2(l) and (m).
(v) To the best of counsel's knowledge, the matters set forth in
paragraph 2(h).
(vi) That the Registration Statement has become effective and to
the best of counsel's knowledge, the matters set forth in Paragraph
2(c).
(vii) The matters set forth in paragraph 2(b).
(viii) To the best of counsel's knowledge, there are no
contracts, agreements, or other understandings required to be
described in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement which are not so described
or filed.
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(f) At the First Closing Date, Richard A. Eisner & Company shall have
furnished a letter addressed to you and dated as of the date it is required
to be delivered in form and substance reasonably satisfactory to you, to
the effect that: (i) with respect to the Company they are, and during the
period covered by their reports included in the Registration Statement and
the Prospectus they were, independent public accountants within the meaning
of the Act and the Rules and Regulations, and the response to Item 509 of
Regulation S-K as reflected by the Registration Statement is correct
insofar as it relates to them; (ii) in their opinion, the financial
statements of the Company examined by them at all dates and for all periods
referred to in their opinion and included in the Registration Statement and
Prospectus, comply in all material respects with the applicable accounting
requirements of the Act and Rules and Regulations; (iii) on the basis of
certain indicated procedures (but not an examination in accordance with
generally accepted accounting principles), including, but not limited to, a
reading of the latest available interim unaudited financial statements of
the Company, whether or not appearing in the Prospectus, inquiries of the
officers of the Company or other persons responsible for its financial and
accounting matters and a reading of the minute book of the Company, nothing
has come to their attention which would cause them to believe that (A)
there has been any change in the capital stock or other securities of the
Company or any payment or declaration of any dividend or other distribution
in respect thereof or exchange therefor from that shown on its audited
balance sheets or a change in the debt of the Company from that shown or
contemplated under "Capitalization" in the Registration Statement other
than as set forth in or contemplated by the Registration Statement, (B)
there has been any material adverse change in the financial condition of
the Company except as set forth in or contemplated by the Registration
Statement, or (C) the unaudited financial statements and schedules of the
Company included in the Registration Statement and Prospectus do not comply
in form in all material respects with the applicable accounting
requirements of the Act and Rules and Regulations, or are not fairly
presented in conformity with generally accepted accounting principles
applied on a consistent basis; and (iv) they have compared specific
numerical data and financial information pertaining to the Company set
forth in the Registration Statement and Prospectus, which have been
specified by the Underwriter prior to the date of this Agreement, to the
extent that such data and information may be derived from the general
accounting records of the Company, and found them to be in agreement.
(g) The Company shall have furnished or caused to be furnished to you
a certificate by the President of the Company, dated as of the First
Closing Date and at the termination of the offering, to the effect that (i)
the representations and warranties of the Company herein are true and
correct as of each such date, and the Company has complied with all the
agreements and has satisfied all the conditions on its part to be performed
or satisfied at or prior to each such date; (ii) the Registration Statement
has become effective and no order suspending the effectiveness of the
Registration Statement has been issued and to the best knowledge of the
signer, no proceeding for that purpose has been initiated or threatened by
the Commission; and (iii) except as set forth in the Registration Statement
and Prospectus, since the respective dates as of which and the periods for
which information is given in the Registration Statement and Prospectus and
prior to the date of such certificate (A) there has not been any
substantial adverse change, financial or otherwise, in the affairs or
condition of the Company or the Subsidiaries and (B) neither the Company
nor the Subsidiaries have incurred any liabilities, direct or contingent,
or entered into any transactions, otherwise than in the ordinary course of
business.
6. Indemnification
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless you and each person, if any, who controls you within
the meaning of Section 15 of the Act, against any and all loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all
expense and counsel fees reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), and any and all amounts paid in settlement of any claim or
litigation, arising out of, based upon or in connection with (i) any untrue
9
<PAGE>
or alleged untrue statement of a material fact contained in (A) any preliminary
prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented) or (B) any application or other document (in this
Section 6(a) called "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Debentures under the "blue sky" or
securities laws thereof; (ii) the omission or alleged omission from any
preliminary prospectus, the Registration Statement, the Prospectus (as from time
to time amended and supplemented) or any application of a material fact required
to be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to you by or on
behalf of you expressly for use in any preliminary prospectus, the Registration
Statement or Prospectus or any amendment or supplement thereof or in any
application, as the case may be; or (iii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this Agreement.
This indemnity shall not apply to amounts paid in settlement of any such
litigation if such settlement is effected without the consent of the Company.
If any action is brought against you or any of your officers, directors,
partners, employees, agents or counsel, or any controlling persons of you (an
"indemnified party") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties
shall promptly notify the Company in writing of the institution of such action
(but the failure so to notify shall not relieve the Company from any liability
it may have other than pursuant to this Section 6(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action, in either of which events
such fees and expenses shall be borne by the Company and the Company shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties. Anything in this paragraph to the contrary notwithstanding,
the Company shall not be liable for any settlement of any such claim or action
effected without its written consent. The Company agrees promptly to notify you
of the commencement of any litigation or proceedings against the Company or any
of its officers or directors in connection with the sale of the Debentures, any
preliminary prospectus, the Registration Statement, the Prospectus, any
amendment or supplement thereto or any application. With respect to any untrue
statement or alleged untrue statement made in, or omission or alleged omission
from, any preliminary prospectus or the Prospectus, the indemnity agreement
contained in this Section 6(a) with respect to such preliminary prospectus or
Prospectus, to the extent it is based on the claim of a person who purchased
Debentures directly from you, shall not inure to your benefit (or, to the
benefit of any of your officers, directors, partners, employees, agents or
counsel, or any person controlling you), if the Prospectus (or the Prospectus as
amended or supplemented if the Company shall have filed with the Commission any
amendment or supplement thereto) which shall have been furnished to you prior to
the time you sent written confirmation of such sale to such person does not
contain such statement, alleged statement, omission or alleged omission and a
copy of the Prospectus (or the Prospectus as amended or supplemented if the
Company shall have filed with the Commission any amendment or supplement
thereto) shall not have been sent or given to such person and such person shall
not otherwise have received a copy thereof at or prior to the time of the
written confirmation of such sale to such person.
(b) You agree to indemnify and hold harmless the Company and each of the
officers and directors of the Company and each other person, if any, who
controls the Company within the meaning of Section 15 of the Act against any and
all such losses, liabilities, claims, damages and
10
<PAGE>
expenses as are indemnified by the Company under Section 6(a) above, provided,
however, that such indemnification by you hereunder shall only be with respect
to statements or omissions, if any, made in any preliminary prospectus, the
Registration Statement, the Prospectus, any amendment or supplement thereof or
any application, in reliance upon, and in conformity with, written information
furnished by or on behalf of you expressly for use in any preliminary
prospectus, the Registration Statement, the Prospectus, any amendment or
supplement thereof or in any of said applications. In case any action shall be
brought against the Company or any other person so indemnified based on any
preliminary prospectus, the Registration Statement, the Prospectus, any
amendment or supplement thereof or any such application and in respect of which
indemnity may be sought against you, you shall have the rights and duties given
to the Company, and the Company and each other person so indemnified shall have
the rights and duties given to you by the provisions of Section 6(a) above.
7. Underwriter's Representations and Warranties
(a) The Underwriter represents and warrants to and agrees with the Company
that: (i) the Underwriter is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York; (ii) it is duly
authorized to execute this Agreement and to perform its duties hereunder, and
the execution and delivery by it of this Agreement and the consummation of the
transactions herein contemplated will not result in any violation of, be in
conflict with or constitute a default under, any agreement or instrument to
which the Underwriter is a party or by which it is bound, or any judgment,
decree, order, or, to its knowledge, any statute, rule or regulation applicable
to it; (iii) the Underwriter is registered as a broker/dealer with the
Commission and is registered as a broker/dealer in all states in which it
conducts business and is a member in good standing of the National Association
of Securities Dealers, Inc.; and (iv) there is not now pending or threatened
against the Underwriter any action or proceeding of which it has been advised,
in any court of competent jurisdiction or before the Commission or any state
securities commission concerning its activities as a broker/dealer, which would
materially impair the Underwriter's ability to act as such pursuant to this
Agreement.
(b) The Underwriter will deliver a certificate dated as of the First
Closing Date and at the termination of the offering, and signed by the president
of the Underwriter stating that the representations of the Underwriter set forth
herein are true and correct in all material respects as of each such date.
(c) The Underwriter covenants that promptly after the First Closing Date,
and until such time as the earlier of: $11,000,000 in Debentures are sold, or
the offering is terminated pursuant to Section 8 hereof, it will supply the
Company with such information as the Company may reasonably request to be
supplied to the securities commissions of such states in which the Debentures
have been qualified for sale.
8. Effectiveness and Termination
(a) This Agreement shall become effective at 9:00 A.M. on the first full
business day after the Effective Date unless prior to such time you shall have
received notice from the Company that it elects that this Agreement shall not
become effective.
(b) This Agreement may be terminated by you by written notice to the
Company in the event that the Company shall have failed or been unable to comply
with any of the terms, conditions or provisions of this Agreement on the part of
the Company to be performed, complied with or fulfilled within the respective
times herein provided for, unless compliance therewith or performance or
satisfaction thereof shall have been expressly waived by you in writing.
11
<PAGE>
(c) This Agreement may be terminated by you by written notice to the
Company if you believe in your reasonable judgment that a material adverse
change has occurred in the management of the Company, that a material adverse
change has occurred in the financial condition or obligations of the Company, or
if the Company shall have sustained a loss by strike, fire, flood, accident or
other calamity of such a character as, in your reasonable judgment, may
interfere materially with the conduct of the Company's business and operations
regardless of whether or not such loss shall have been insured.
(d) This Agreement may be terminated by you by written notice to the
Company at any time if, in your reasonable judgment, the payment for and
delivery of the Debentures is rendered impracticable or inadvisable because (i)
additional material governmental restrictions not in force and effect on the
date hereof shall have been imposed upon the registration and/or sale of
securities generally, or (ii) there shall be a material outbreak of hostilities
or a material escalation of existing hostilities between the United States and
any foreign power or a formal declaration of war by the United States shall have
occurred, or (iii) substantial and material changes in the condition of the
market (either generally or with reference to the sale of the Debentures to be
offered hereby) beyond normal fluctuations are such that it would be
undesirable, impracticable or inadvisable in your reasonable judgment to proceed
with this Agreement or with the offering of the Debentures.
(e) This Agreement may be terminated by either party by written notice to
the other at any time before it becomes effective as hereinabove provided.
(f) In the event, at any time prior to the First Closing Date, any action
or proceeding shall be instituted or threatened against you in any court of
competent jurisdiction, before the Commission or any state securities commission
or in any court pursuant to any federal, state, local or municipal statute,
concerning your activities as a broker or dealer that would materially impair
your ability to act as Underwriter pursuant to this Agreement, or a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of your assets is filed or if you make a assignment for the
benefit of creditors, the Company shall have the right on three days' written
notice to you to terminate this Agreement without any liability to you of any
kind.
(g) This Agreement shall terminate if at least $5,000,000 of the
Debentures, without regard to maturity, are not sold within 75 days after the
date the Registration Statement is declared effective by the Commission.
(h) Any termination of this Agreement pursuant to this Section 8 shall be
without liability (including, but not limited to, loss of anticipated profits or
consequential damages) on the part of any party hereto, except that the Company
shall nevertheless be obligated to pay to the Underwriter its accountable
out-of-pocket expenses pursuant to Paragraph 3(f), unless the Agreement is
terminated pursuant to Section 8(f), and further provided that Paragraph 9(b)
shall survive the termination of this Agreement.
9. Miscellaneous
(a) Whenever notice is required by the provisions of this Agreement to be
given to the parties hereto, such notice shall be in writing and shall be sent
by certified or registered mail, return receipt requested, postage prepaid, and
shall be deemed delivered two days after mailing, and shall be addressed to the
party to whom such notice is directed at the address set forth above or at such
other address as a party has designated by like notice.
(b) The respective indemnities, agreements, representations, warranties and
other statements of you and the Company hereunder, as set forth in this
Agreement or made pursuant to this
12
<PAGE>
Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of you, the Company, or any officers,
directors or controlling person of you or the Company, and shall survive
delivery of and payment for the Debentures.
(c) This Agreement shall be binding upon and inure solely to the benefit of
you and the Company and, to the extent provided in Section 6 hereof, the
officers and directors of the Company and any person who controls you, the
Company and their respective successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Debentures shall be construed a successor or assign by reason merely
of such purchase.
(d) This Agreement shall be construed and governed by the laws of the State
of New York. This Agreement cannot be changed or terminated orally.
(e) This Agreement may be executed in any number of counterparts, each of
which may be deemed an original and all of which together will constitute one
and the same instrument.
Please confirm that the foregoing sets forth the Agreement between you and
the Company by signing and returning to us the enclosed copy of this letter.
Very truly yours,
INTERVEST CORPORATION OF NEW YORK
By: ______________________________________
Name:
Title:
WE HEREBY CONFIRM AS OF THE DATE
HEREOF THAT THE ABOVE LETTER SETS
FORTH THE AGREEMENT BETWEEN THE
COMPANY AND UNDERSIGNED.
SAGE, RUTTY & CO., INC.
By: ___________________________________
Name:
Title:
13
SAGE, RUTTY & CO., INC.
183 East Main Street
4th Floor
Rochester, New York 14604
Date: __________, 1996
SELECTED DEALER AGREEMENT
Dear Sirs:
Sage, Rutty & Co., Inc., the underwriter (the "Underwriter") named in the
Prospectus (as hereinafter defined) has agreed, subject to the terms and
conditions of that certain underwriting agreement (the "Underwriting Agreement")
dated ___________, 1996, between the Underwriter and Intervest Corporation of
New York (the "Issuer"), to act as exclusive agent for the Issuer and to use its
best efforts to sell an aggregate of $11,000,000 principal amount of Series
__/__/96 Registered Floating Rate Redeemable Subordinated Debentures (the
"Debentures") of the Issuer, in two maturities as follows: $1,000,000 with a
maturity date of October 1, 1998; and $10,000,000 with a maturity date of April
1, 2005. The Debentures are more particularly described in the enclosed
prospectus (the "Prospectus"), additional copies of which will be supplied in
reasonable quantities upon request.
The Underwriter is offering a part of the Debentures for sale by selected
dealers (the "Selected Dealers"), including yourself, who are registered with
the Securities and Exchange Commission (the "SEC") as broker-dealers under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and who are
members in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"), on a "best efforts" basis.
The offering is subject to the delivery of the Debentures, and the
acceptance of the offering by the Underwriter, the approval of all legal matters
by counsel, and the terms and conditions herein set forth.
Subject to the foregoing, the Underwriter confirms its agreement with you
(sometimes herein called the "Dealer"') as follows:
1. Non-Exclusive Right to Offer and Sell. Underwriter hereby grants to you
the non-exclusive right to offer and sell the Debentures in such face amounts
and upon such terms as the Underwriter shall from time to time determine and as
set forth in the then effective Prospectus relating to such Debentures. The
amount and maturity of Debentures which the Underwriter has initially determined
to permit you to offer and sell is set forth at the end of this letter, although
the Underwriter reserves the right to change such allotment. You agree (a) upon
our request, to advise us of the number of Debentures allotted to you which
remain unsold; and (b) at our request, to stop offering any such Debentures
remaining unsold.
2. Compliance with Laws. A registration statement on Form S-11 (the
"Registration Statement") with respect to the Debentures has been filed with the
SEC and has become effective. You agree to comply with the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"), the
1934 Act and any applicable rules and regulations issued under said Acts. No
person is authorized by the Issuer or by the Underwriter to give any information
or to make any representation other than those contained in the Prospectus in
connection with the sale of the Debentures.
3. Dealer Representations. Dealer represents that it is a member in good
standing of the NASD and agrees to abide by all of the NASD rules and
regulations, and any interpretations thereof, including, without limitation, the
NASD interpretation with respect to Free-Riding and Withholding and
<PAGE>
Sections 8-24, 25 and 36 of Article III of the NASD Rules of Fair Practice.
Dealer also agrees to comply with the requirements of all applicable Federal and
State Laws and all rules and regulations thereunder, and interpretations
thereof, promulgated by any regulatory agency having jurisdiction.
In the event that a domestic or foreign Dealer should sell or offer for
sale the Debentures in any jurisdiction outside the United States, Dealer also
agrees to comply with the laws, rules and regulations of any governmental or
regulatory body applicable within such foreign jurisdiction.
4. State Registrations. You will be informed by the Underwriter as to the
states in which we have been advised by counsel that the Debentures have been
qualified or registered for sale or are exempt under the respective securities
or "blue sky" laws of such states, but we have not assumed and will not assume
any obligation or responsibility as to the accuracy of such information or as to
the eligibility or right of any Selected Dealer to offer or sell the Debentures
in any state.
5. Underwriter Authority and Liability. The Underwriter shall have full
authority to take such action as it may deem advisable in respect of all matters
pertaining to the offering or arising thereunder. The Underwriter shall not be
under any liability to you with respect to any matter, except such as may be
incurred under the 1933 Act and the rules and regulations thereunder, except for
lack of good faith and except for obligations assumed by us in this Agreement,
and no obligation on our part shall be implied or inferred herefrom.
6. Payment and Procedures. All subscriptions for investments shall be
confirmed on forms of a type acceptable under the rules and regulations of the
NASD and in accordance with Rule 15c2-8 of the 1934 Act. If at least $5,000,000
in collected funds (as defined in the Escrow Agreement) have been received and
such subscriptions accepted by the Issuer by _______________, 1996, the Issuer
may close the Offering as to those subscribers (the "First Closing Date"). Until
the First Closing Date, you shall promptly, upon receipt of any and all checks,
drafts, and money orders received from prospective purchasers of the Debentures,
transmit, in accordance with Rule 15c2-4(b) of the 1934 Act, such items to
Manufacturers and Traders Trust Company, Rochester, New York, as Escrow Agent,
for deposit into an account entitled "Intervest Corporation of New York Escrow
Account", but in any event such transmittal to the Escrow Agent shall be made by
noon of the next business day after your receipt of such funds. Any Debentures
remaining unsold after the First Closing Date may continue to be offered and
sold for up to 150 days after the First Closing Date. After the First Closing
Date, you shall promptly transmit any and all checks, drafts, and money orders
received from prospective purchasers of the Debentures to the Underwriter by
noon of the next business day after you receive such funds. At the same time you
deliver funds received to the Escrow Agent, or directly to the Underwriter, you
shall also deliver to Underwriter, a written account of each purchaser which
sets forth, among other things, the name, address and tax identification number
of the purchaser, the number of Debentures purchased, the maturity thereof, and
the amount paid therefor which shall be accompanied by a copy of the check and
any transmittal letter to the Escrow Agent.
You agree to be bound by the terms of the Escrow Agreement executed by
Underwriter and the Issuer and acknowledge that you have received a copy of such
Escrow Agreement.
Until the First Closing Date, checks shall be made payable to "M&T Bank, as
Escrow Agent for Intervest Corporation of New York". After the First Closing
Date, checks shall be made payable to "Intervest Corporation of New York", the
Issuer. Until the First Closing Date, any checks received by the Escrow Agent
which are made payable to any party other than the Escrow Agent, shall be
returned by the Escrow Agent to the purchaser who submitted the check and shall
not be accepted.
2
<PAGE>
All Debentures shall be registered and issued as designated by Dealer after
the Closing Dates specified in the Prospectus.
The Issuer reserves the right to reject any subscription, and in such case,
the Issuer will instruct the Escrow Agent or Underwriter, as may be the case, to
return, in full, any payment made in connection therewith.
If at least $5,000,000 in collected funds (as defined in the Escrow
Agreement) have not been received and such subscriptions accepted by the Issuer
by ____________, 1996, subscription documents and funds shall be promptly
returned to subscribers. Interest earned on funds in the Escrow Account shall be
applied to pay escrow expenses, with the balance of interest, if any, to be paid
to subscribers in proportion to the amount of funds paid by each such subscriber
without regard to the date when such subscription funds were paid. It shall be a
condition of making any such refund to a subscriber, however, that there be
delivered to the Escrow Agent a Form W-9 executed by such subscriber.
7. Delivery of Prospectus. You shall solicit subscriptions for the
Debentures only in accordance with the then current Prospectus, shall deliver a
current Prospectus to each prospective investor, shall utilize as solicitation
material only the Prospectus and such supplemental sales literature as shall be
identified as such and furnished or authorized in writing by the Issuer, and
shall make no representations other than those contained in such Prospectus and
supplemental literature. You shall also be responsible for the servicing of
investors, including responding to inquiries by, and maintaining periodic
contacts with, the investor.
8. Restrictions on Sales and Purchases of Debentures. During the term of
this Agreement, you will not, directly or indirectly, buy, sell, or induce
others to buy or sell, the Debentures except (a) pursuant to this Agreement, (b)
as expressly authorized by the Underwriter in writing, or (c) in the ordinary
course of business as broker or agent for a customer pursuant to an unsolicited
order. You represent that you have not participated in any transaction
prohibited by the preceding sentence and that you have at all times complied
with the provisions of Rule 10b-6 of the 1934 Act applicable to this offering.
You will take such steps as you deem necessary to assure that purchasers of the
Debentures meet the suitability standards set forth in the Prospectus or
otherwise imposed by the Issuer and will maintain for a period of at least four
(4) years a record of the information obtained to indicate that such standards
have been met.
9. Commissions. You will be entitled to receive commissions in the amount
of $200 on each Debenture maturing October 1, 1998 and commissions in the amount
of $800 on each Debenture maturing April 1, 2005 sold by you under this
Agreement, provided, however, that the offering will be terminated and no
commissions will be payable unless an aggregate of at least $5,000,000 of the
Debentures, without regard to maturity, are sold by ____________, 1996.
10. Dealer Responsibility for Training and Representatives. You undertake
full responsibility for adequate training of your salesmen in all features of
the Debentures offered, with special emphasis on the responsibilities of such
salesmen for full disclosure to prospective investors and the necessity of
delivering a Prospectus to each investor. You will accept subscriptions only
from persons whose investment objectives, to the best of your knowledge and
belief, are consistent with those of the Debentures offered.
11. Sales in Discretionary Accounts. You agree that, without the written
approval of the customer and the Underwriter prior to the execution of any
order, you will not sell to any account over which you exercise discretionary
authority any of the Debentures which you have been allotted and which are
subject to the terms of this Agreement.
3
<PAGE>
12. Advertisements. It is expected that public advertisement of this issue
will be made on or about the effective date of the Registration Statement. After
the date of appearance of such advertisement, but not before, you are free to
advertise over your own name and at your own expense and risk, subject, however,
to our prior review and approval of any advertisement.
13. Termination of Agreement. This Agreement may be terminated by either
party at any time by written or telegraphic notice to the other, but the
Agreement shall not be valid for more than six (6) months from the date of
execution or beyond completion of the offering, whichever is earlier, except
when extended by the Underwriter to complete the offering of the Debentures.
Such termination shall not affect your obligation to comply with this Agreement
nor your right to commissions, as set forth in Paragraph 9 of this Agreement on
subscriptions confirmed by the Issuer by the time of such termination.
14. Relationship of Parties. Nothing in this Agreement shall be construed
to constitute Dealer a partner, employee or agent of the Underwriter or Issuer,
and neither Underwriter, Issuer or Dealer shall be liable for any obligation,
act or omission of the other to third parties. However, in the event such a
claim is made, you agree to bear your share of any liability arising out of such
claim.
15. Dealer Expenses. All expenses incurred by Dealer in connection with its
activities under this Agreement shall be borne by Dealer, except that
Underwriter will furnish, without charge, a reasonable quantity of Prospectuses
and supplemental literature as issued.
16. Miscellaneous. This Agreement supersedes all previous agreements,
whether oral or written, between Underwriter and Dealer relating to the
Debentures and may not be modified except in writing. All previous agreements,
if any, whether oral or written, between Underwriter and dealer are hereby
canceled. Neither party hereto assumes any liability or obligation toward the
other under this or any previous agreement, except as may be specifically set
forth in this Agreement, nor is any such liability or obligation to be inferred
or implied hereunder.
All communications from you shall be addressed to the Underwriter at the
address set forth above. All communications from the Underwriter to you shall be
directed to the address to which this letter is mailed.
This Agreement shall be construed in accordance with the laws of the State
of New York.
Please confirm that the foregoing sets forth the Agreement between you and
the Underwriter by signing and returning to us the enclosed copy of this letter.
Very truly yours,
SAGE, RUTTY & CO., INC.
By: __________________________________
______________________________________
(Title)
4
<PAGE>
WE HEREBY CONFIRM AS OF THE DATE HEREOF
THAT THE ABOVE LETTER SETS FORTH THE
AGREEMENT BETWEEN THE UNDERWRITER AND
THE UNDERSIGNED
AMOUNT AND MATURITY OF
DEBENTURES TO BE OFFERED
FOR SALE BY DEALER:
_________________________________
(Dealer)
$ ___________________________
October 1, 1998
By:______________________________
_________________________________
(Title) $ ____________________________
April 1, 2005
5
=========================================================
INTERVEST CORPORATION OF NEW YORK
AND
THE BANK OF NEW YORK
as Trustee
------------
INDENTURE
Dated as of ___________, 1996
------------
$11,000,000
Series __/__/96 Registered Floating Rate
Redeemable Subordinated Debentures
------------
$1,000,000 due October 1, 1998
$10,000,000 due April 1, 2005
=========================================================
<PAGE>
CROSS REFERENCE TABLE
TIA Section Indenture Section
- ----------- -----------------
310(a)(1) and (2)............................ 7.10
310(a)(3) and (4)............................ N.A.
310(b)....................................... 7.08, 7.10, 11.02
310(c)....................................... N.A.
311(a) and (b)............................... 7.11
311(c)....................................... N.A.
312(a)....................................... 2.05
312(b) and (c)............................... 2.06
313(a)....................................... 7.06
313(b)(1).................................... N.A.
313(b)(2).................................... 7.06
313(c)....................................... 7.06, 11.02
313(d)....................................... 7.06
314(a)....................................... 4.02, 11.02
314(b)....................................... N.A.
314(c)(1) and (c)(2)......................... 11.03
314(c)(3) and (d)............................ N.A.
314(e)....................................... 11.04
314(f)....................................... N.A.
315(a), (c) and (d).......................... 7.01
315(b)....................................... 7.05, 11.02
315(e)....................................... 6.11
316(a)(1)(A)................................. 6.05
316(a)(1)(B)................................. 6.04
316(a)(2).................................... 9.02
316(a) Last Paragraph........................ 2.10, 11.05
316(b)....................................... 6.07
317(a)....................................... 6.08, 6.09
317(b)....................................... 2.04
318(a)....................................... 11.01
- ------------------
N.A. means Not Applicable.
NOTE: This cross reference table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
1.01. Definitions............................................... 1
1.02. Other Definitions......................................... 3
1.03. Incorporation by Reference of Trust Indenture Act......... 3
1.04. Acts of Holders........................................... 3
1.05. Rules of Construction..................................... 4
ARTICLE TWO
THE DEBENTURES
2.01. Form and Dating........................................... 4
2.02. Execution and Authentication.............................. 5
2.03. Registrar and Paying Agent................................ 5
2.04. Paying Agent to Hold Money in Trust....................... 6
2.05. Debentureholder Lists..................................... 6
2.06. Access of Information to Debentureholders ................ 6
2.07. Transfer and Exchange..................................... 7
2.08. Replacement Debentures.................................... 7
2.09. Outstanding Debentures.................................... 8
2.10. Treasury Debentures....................................... 8
2.11. Temporary Debentures...................................... 8
2.12. Cancellation.............................................. 8
2.13. Defaulted Interest........................................ 8
2.14. CUSIP Numbers............................................. 9
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ARTICLE THREE
REDEMPTION
3.01. Notices to Trustee........................................ 9
3.02. Selection of Debentures to be Redeemed.................... 9
3.03. Notice of Redemption...................................... 9
3.04. Effect of Notice of Redemption............................ 10
3.05. Deposit of Redemption Price............................... 10
3.06. Debentures Redeemed in Part............................... 10
ARTICLE FOUR
COVENANTS
4.01. Payment of Debentures..................................... 10
4.02. SEC Reports............................................... 10
4.03. Compliance Certificate.................................... 10
4.04. Limitation on Dividends and Stock Purchases............... 11
4.05. Pari Passu and Other Indebtedness......................... 11
ARTICLE FIVE
SUCCESSOR CORPORATION
5.01. When the Company May Merge, etc........................... 12
ARTICLE SIX
DEFAULTS AND REMEDIES
6.01. Events of Default......................................... 12
6.02. Acceleration.............................................. 13
6.03. Other Remedies............................................ 13
6.04. Waiver of Past Defaults................................... 13
6.05. Control by Majority....................................... 13
6.06. Limitation of Suits....................................... 14
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6.07. Rights of Holders to Receive Payment...................... 14
6.08. Collection Suit by Trustee................................ 14
6.09. Trustee May File Proof of Claim........................... 14
6.10. Priorities................................................ 15
6.11. Undertaking for Costs..................................... 15
ARTICLE SEVEN
TRUSTEE
7.01. Duties of Trustee......................................... 15
7.02. Rights of Trustee......................................... 16
7.03. Individual Rights of Trustee.............................. 17
7.04. Trustee's Disclaimer...................................... 17
7.05. Notice of Defaults........................................ 17
7.06. Reports by Trustees to Holders............................ 17
7.07. Compensation and Indemnity................................ 17
7.08. Replacement of Trustee.................................... 18
7.09. Successor Trustee by Merger, etc.......................... 18
7.10. Eligibility; Disqualification............................. 19
7.11. Preferential Collection of Claims Against the Company..... 19
7.12. Paying Agents............................................. 19
ARTICLE EIGHT
DISCHARGE OF INDENTURE
8.01. Termination of the Company's Obligations.................. 19
8.02. Application of Trust Money................................ 20
8.03. Repayment to the Company.................................. 20
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01. Without Consent of Holders................................ 21
9.02. With Consent of Holders................................... 21
9.03. Execution of Supplemental Indentures...................... 22
9.04. Compliance with Trust Indenture Act....................... 22
9.05. Revocation and Effect of Consents......................... 22
9.06. Notation on or Exchange of Debentures..................... 22
9.07. Trustee to Sign Amendments, etc........................... 23
ARTICLE TEN
SUBORDINATION
10.01. Agreement to Subordinate................................ 23
10.02. Debentures Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of the Company.......... 24
10.03. Debentureholders to be Subrogated to Rights
of Holders of Senior Indebtedness..................... 24
10.04. Obligation of the Company Unconditional................. 25
10.05. Knowledge of Trustee.................................... 25
10.06. Application by Trustee of Monies Deposited With It...... 25
10.07. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of
Senior Indebtedness.................................... 26
10.08. Debentureholders Authorize Trustee to Effectuate
Subordination of Debentures .......................... 26
10.09. Right of Trustee to Hold Senior Indebtedness............ 26
10.10. Article Ten Not to Prevent Events of Default............ 26
10.11. No Fiduciary Duty Created to Holders of
Senior Indebtedness.................................... 26
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10.12. Trustee's Compensation Not Prejudiced.................... 27
ARTICLE ELEVEN
MISCELLANEOUS
11.01. Trust Indenture Act Controls............................. 27
11.02. Notices.................................................. 27
11.03. Certificate and Opinion as to Conditions Precedent....... 28
11.04. Statements Required in Certificate or Opinion............ 28
11.05. Rules by Trustee and Agents.............................. 28
11.06. Legal Holidays........................................... 28
11.07. Governing Law............................................ 28
11.08. No Recourse Against Others............................... 28
11.09. Successors............................................... 28
11.10. Duplicate Originals...................................... 28
11.11. Separability............................................. 28
<PAGE>
INDENTURE, dated as of _________ 1, 1996, between INTERVEST CORPORATION
OF NEW YORK, a New York corporation (the "Company"), and THE BANK OF NEW YORK, a
New York banking corporation, as trustee (the "Trustee").
Intending to be legally bound hereby, each party agrees as follows for
the benefit of the other party and for the equal and ratable benefit of the
Holders of the Company's Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debentures.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Subsidiary. For purposes of this definition, "control" when used with respect to
any person means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Board of Directors" means the Board of Directors of the Company or any
committee of that Board duly authorized to act for it hereunder.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"Company" means the party named as such in this Indenture until a successor
replaces it pursuant to the applicable provisions hereof and thereafter means
any such successor.
"Debentures" means the Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debentures, issued under this Indenture, in two maturities as
follows: October 1, 1998 and April 1, 2005, as amended or supplemented from time
to time pursuant to the terms of this Indenture; "Debenture" means any one of
such Debentures.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Holder" or "Debentureholder" means the person in whose name a Debenture is
registered on the Registrar's books.
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"Indebtedness" means, with respect to any person: (i)(A) all indebtedness
of such person for borrowed money, (B) all indebtedness of such person which is
evidenced by a note, debenture, bond or other similar instrument (including
capitalized lease and purchase money obligations), and (C) all indebtedness
(including capitalized lease obligations) incurred, assumed or given in the
acquisition (whether by way of purchase, merger or otherwise) of any business,
real property or other assets (except assets acquired in the ordinary course of
the acquiror's business); (ii) any indebtedness of others described in the
preceding clause (i) which such person has guaranteed or for which it is
otherwise liable; and (iii) any amendment, renewal, extension or refunding of
any indebtedness referred to in clauses (i) and (ii) above.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Maturity" means either of the two maturities of Debentures issued under
this Indenture.
"Officer" means the Chairman or co-Chairman of the Board, the Vice Chairman
of the Board, the President, any Vice President, the Treasurer or the Secretary
of the Company.
"Officers' Certificate" means a certificate signed by two Officers or by an
Officer and an Assistant Treasurer or an Assistant Secretary of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who may be
counsel for the Company or other counsel who is acceptable to the Trustee.
"person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"principal" of a debt security means the principal of the security plus the
premium, if any, on the security.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee assigned by the Trustee to administer its corporate trust
business.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means a corporation, a majority of whose voting stock is owned
by the Company or a Subsidiary. Voting stock is Capital Stock having voting
power under ordinary circumstances to elect directors.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date this Indenture was executed, except as
provided in Section 9.04.
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"Trustee" means the party named as such in this Indenture until a successor
replaces it and thereafter means the successor.
"United States" means the United State of America.
SECTION 1.02. Other Definitions.
Term Defined in Section
---- ------------------
"Bankruptcy Law" 6.01
"Custodian" 6.01
"Event of Default" 6.01
"Legal Holiday" 11.06
"Paying Agent" 2.03
"Registrar" 2.03
"Restricted Payments" 4.04
"Senior Indebtedness" 10.01
"U.S. Government Obligations" 8.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Debentures.
"indenture security holder" means a Debentureholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Debentures.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rules have the
meanings assigned to them.
SECTION 1.04. Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as
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herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The ownership of Debentures shall be proved by the registration of the
books of the Registrar.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Debenture shall bind every future Holder of
the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debenture.
(e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other Act may be
given before or after such record date, but only the Holders of record at the
close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Debentures have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Debentures shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after the
record date.
SECTION 1.05. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it; (ii) an accounting term not otherwise
defined has the
4
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meaning assigned to it in accordance with generally accepted accounting
principles; (iii) "or" is not exclusive; and (iv) words in the singular include
the plural, and words in the plural include the singular.
ARTICLE TWO
THE DEBENTURES
SECTION 2.01. Form and Dating. The Debentures and the Trustee's certificate
of authentication shall be substantially in the forms set forth in Exhibits A, B
and C, which are incorporated in and form a part of this Indenture. The
Debentures may have notations, legends or endorsements required by law,
securities exchange rule or usage. The Company shall approve the form of the
Debentures and any notation, legend or endorsement on them and its execution
shall constitute conclusive evidence of its approval. Each Debenture shall be
dated the date of its authentication. The terms and provisions contained in the
forms of Debenture annexed hereto as Exhibits A, B, C and D shall constitute,
and are hereby expressly made, a part of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall execute the
Debentures for the Company by manual or facsimile signature. The Company's seal
shall be affixed or reproduced on the Debentures.
If an Officer whose signature is on a Debenture no longer holds that office
at the time the Registrar, as hereinafter defined, authenticates the Debenture,
the Debenture shall be valid nevertheless.
A Debenture shall not be valid until the Registrar manually signs the
certificate of authentication on the Debenture. The signature shall be
conclusive evidence that the Debenture has been authenticated under this
Indenture.
The Registrar shall authenticate Debentures for original issue in the
aggregate principal amount of up to $11,000,000 (but not more than $1,000,000 of
Debentures maturing October 1, 1998 or $10,000,000 of Debentures maturing April
1, 2005) upon a written order of the Company signed by two Officers or by an
Officer and an Assistant Treasurer of the Company. The order shall specify the
amount and Maturity of Debentures to be authenticated, whether interest on the
Debentures will accrue or will be paid quarterly, and the date on which the
original issue of Debentures is to be authenticated. The aggregate principal
amount of Debentures outstanding at any time may not exceed the amount set forth
above except as provided in Sections 2.08 and 2.09.
The Registrar may appoint an authenticating agent acceptable to the Company
to authenticate Debentures. Unless limited by the terms of said appointment, an
authenticating agent may authenticate Debentures whenever the Registrar may do
so. Each reference in this Indenture to authentication by the Registrar includes
authentication by such authenticating agent.
5
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An authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate.
The Debentures shall be issuable only in registered form without coupons
and only in denominations of $10,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an
office or agency where Debentures may be presented for registration of transfer
or for exchange ("Registrar") and an office or agency where Debentures may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Debentures and of their transfer and exchange. The Company may have one or
more co-Registrars and one or more additional Paying Agents. The term "Paying
Agent" includes any additional paying agent. The Company or any of its
Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent and shall incorporate the provisions of
the TIA. The Company shall notify the Trustee of the name and address of any
such Agent. If the Company fails to maintain a Registrar or Paying Agent, upon
notification and delivery of necessary records, the Trustee shall act as such
and shall be entitled to appropriate compensation in accordance with the
provisions of Section 7.07.
The Company initially appoints THE BANK OF NEW YORK, a New York banking
corporation, as Registrar. The Company shall initially act as Paying Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent to agree in writing to hold in trust for the benefit
of the Debentureholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Debentures, and the Company and
the Paying Agent shall each notify the Trustee of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate the money and
hold it as a separate trust fund. The Company at any time may require a Paying
Agent to pay all money held by it to the Trustee. Upon such payment to the
Trustee the Paying Agent shall have no further liability for the money delivered
to the Trustee.
SECTION 2.05. Debentureholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Debentureholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee at least every six months
and at such other times as the Trustee may request in writing, a list, in such
form and as of such date as the Trustee may reasonably require, of the names and
addresses of Debentureholders.
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SECTION 2.06. Access of Information to Debentureholders. Within five
business days after the receipt by the Trustee of a written application by any
three or more Debentureholders stating that the applicants desire to communicate
with other Debentureholders with respect to their rights under the Indenture or
under the Debentures, and accompanied by a form of proxy or other communication
which such applicants proposed to transmit, and by reasonable proof that each
such applicant has owned a Debenture for a period of at least six months
preceding the date of such application, the Trustee shall, at its election,
either:
(a) afford to such applicants access to all information in the
possession of the Trustee as to the names and addresses of the
Debentureholders; or
(b) inform such applicants as to the approximate number of
Debentureholders according to the most recent information so furnished or
received by the Trustee, and as to the approximate cost of mailing to such
Debentureholders the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to all the Debentureholders copies of the form of proxy or other
communication which is specified in the request, with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of such mailing, unless
within five days after such tender, the Trustee shall mail to such applicants,
and file with the SEC together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of the Debentureholders or would
be in violation of applicable law. Such written statement shall specify the
basis of such opinion.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA ss.312.
SECTION 2.07. Transfer and Exchange. (a) Where a Debenture is presented to
the Registrar or a co-Registrar with a request to register a transfer, the
Registrar shall register the transfer as requested if its requirements for such
transaction are met. Where Debentures of one Maturity are presented to the
Registrar or a co-Registrar with a request to exchange them for an equal
principal amount of Debentures of other denominations of the same Maturity, the
Registrar shall make the exchange as requested if its requirements for such
transaction are met. Debentures of one Maturity may not be exchanged for
Debentures of another Maturity. To permit transfers and exchanges, upon
surrender of any Debenture for registration of transfer at the office or agency
maintained pursuant to Section 2.03, the Company shall execute and the Registrar
shall authenticate Debentures to be issued upon transfer or exchange. If so
requested by the Registrar, all Debentures presented for exchange, registration
of transfer, redemption or payment shall be accompanied by a written instrument
of transfer in form satisfactory to the Registrar, duly executed by the
registered owner or by his attorney duly authorized in writing. Any exchange or
transfer shall be without charge to the Debentureholder, except that the Company
may require payment from the Debentureholder of a sum sufficient to cover any
tax
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or other governmental charge that may be imposed in relation thereto. The
Registrar shall not transfer or exchange any Debenture or portion of a Debenture
selected for redemption, or transfer or exchange any Debentures for a period of
15 days before a selection of Debentures to be redeemed.
(b) Holders of Debentures in the form of Exhibit B may elect to surrender
such Debentures in exchange for Debentures in the form of Exhibit C. The
Registrar shall make the exchange as requested if the Registrar's requirements
for such transaction are met. To permit such an exchange, the Debentureholder
shall deliver the Debentures for surrender, accompanied by a letter requesting
the exchange, and such other written instrument(s) as may be requested by the
Registrar, all duly executed by the registered owner or by his attorney duly
authorized in writing. Upon delivery of the Debentures for surrender, the letter
requesting such exchange, and other written instrument(s) that may be requested
by the Registrar, the Company shall execute and the Registrar shall authenticate
Debentures to be issued upon the effective date of such exchange. An exchange
made on or prior to the tenth day of the second month of a calendar quarter
shall be effective on the first day of the next calendar quarter. An exchange
made after the tenth day of the second month of a calendar quarter shall be
effective on the first day of the second succeeding calendar quarter. On the
effective date of an exchange, the Company shall pay to the exchanging
Debentureholder cash in the amount equal to any accrued interest on the
Debentures up to the effective date of such exchange. Such exchange shall be
without charge to the Debentureholder, except that the Company may require
payment from the Debentureholder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto. The Registrar shall
not exchange any Debenture or portion of a Debenture selected for redemption, or
exchange any Debentures for a period of 15 days before a selection of Debentures
to be redeemed.
SECTION 2.08. Replacement Debentures. If a mutilated Debenture is
surrendered to the Registrar or if the Holder of a Debenture claims that the
Debenture has been lost, destroyed or wrongfully taken, the Company shall issue
and the Registrar shall authenticate a replacement Debenture if the requirements
of the Company or the Registrar for such transaction are met. The Registrar may
require an indemnity bond which shall be sufficient in the judgment of the
Registrar and the Company to protect the Company, the Trustee, the Registrar,
any Agent or any authenticating agent from any loss which any of them may suffer
if a Debenture is replaced, destroyed, lost or wrongfully taken. The Company may
charge such Holder for its expenses in replacing such Debenture. Every
replacement Debenture is an additional obligation of the Company.
SECTION 2.09. Outstanding Debentures. Debentures outstanding at any time
are all Debentures authenticated by the Registrar except for those canceled by
it, those delivered to it for cancellation, and those described in this Section
2.09. A Debenture does not cease to be outstanding because the Company or one of
its Subsidiaries holds the Debenture.
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If a Debenture is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee or the Registrar receives proof satisfactory to
it that the replaced Debenture is held by a bona fide purchaser.
If the Paying Agent (other than the Company or a Subsidiary) holds on a
redemption date or maturity date money sufficient to pay Debentures payable on
that date, then on and after that date such Debentures shall be deemed to be no
longer outstanding and interest on them shall cease to accrue.
SECTION 2.10. Treasury Debentures. In determining whether the Holders of
the required amount of Debentures have concurred in any direction, waiver or
consent, and for the purpose of calculating and making payments of interest and
selecting Debentures for redemption, Debentures owned by the Company or an
Affiliate shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any direction, waiver or
consent, only Debentures the Trustee actually knows are so owned shall be so
disregarded.
SECTION 2.11. Temporary Debentures. Until definitive Debentures are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Debentures. Temporary Debentures shall be substantially in the form of
definitive Debentures but may have variations that the Company considers
appropriate for temporary Debentures. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Debentures in
exchange for temporary Debentures. Until such exchange, temporary Debentures
shall be entitled to the same rights, benefits and privileges as definitive
Debentures.
SECTION 2.12. Cancellation. The Company at any time may deliver Debentures
to the Trustee or the Registrar for cancellation. The Registrar and Paying Agent
shall forward to the Trustee any Debentures surrendered to them for transfer,
exchange or payment. The Trustee or the Registrar and no one else shall cancel
and may destroy any Debentures surrendered for transfer, exchange, payment or
cancellation and deliver a certificate of any such destruction to the Company
unless the Company instructs the Trustee or the Registrar in writing to deliver
the Debentures to the Company. The Company may not issue new Debentures to
replace, or reissue or recall Debentures that it has (i) paid or redeemed or
(ii) purchased or otherwise acquired and delivered to the Trustee or the
Registrar for cancellation.
SECTION 2.13. Defaulted Interest. If the Company defaults in a payment of
interest on the Debentures, it shall pay the defaulted interest to the persons
who are Debentureholders on a subsequent special record date. The Company shall
fix the special payment date and special record date. The special record date
shall be at least 15 days prior to the special payment date. At least 15 days
before such special record date, the Company shall mail to each Debentureholder
a notice that states such special record date, the special payment date and the
amount of defaulted interest to be paid. The Company may pay defaulted interest
in any other lawful manner. Pursuant to Section 4.01, the Company shall pay
interest on overdue installments of interest, to the extent lawful.
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SECTION 2.14. CUSIP Numbers. The Company in issuing the Debentures may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Debentures or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debentures, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. The Debentures may be redeemed at any
time in whole or in part, at the redemption price(s) set forth in section 5 of
the Debentures. The Registrar may select for redemption portions of the
principal amount of Debentures that have denominations larger than $10,000.
Debentures and portions of them it selects shall be in amounts of $10,000 or
integral multiples of $10,000. If the Company elects to redeem Debentures, it
shall notify the Registrar in writing of the redemption date, the Maturity or
Maturities to be redeemed, and the principal amount of each Maturity of
Debentures to be redeemed. In the case of any such redemption, the Company shall
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the provisions for redemption contained herein and in the
Debentures.
The Company shall give each notice provided for in this Section 3.01 at
least 45 days before the redemption date (except that the Trustee may in its
sole discretion waive such notice period at any time).
SECTION 3.02. Selection of Debentures to be Redeemed. If less than all the
Debentures of any Maturity are to be redeemed, the Registrar shall select the
Debentures to be redeemed by such method as the Registrar shall deem fair and
appropriate or if the Debentures are listed on a national securities exchange,
in accordance with the rules of such exchange. The Registrar shall make the
selection from Debentures outstanding and not previously called for redemption.
Provisions of this Indenture that apply to Debentures called for redemption also
apply to portions of Debentures called for redemption.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than 90
days before a redemption date, the Company shall mail a notice of redemption by
first-class mail to each Holder of Debentures to be redeemed. The notice shall
identify the Debentures to be redeemed and shall state: (i) the redemption date;
(ii) the redemption price and accrued interest, if any; (iii) the name and
address of the Paying Agent; (iv) that Debentures called for redemption must be
surrendered to the Paying Agent to collect the redemption price and accrued
interest, if any; (v) that, unless the Company defaults in making the redemption
payments, interest on Debentures called for redemption ceases to accrue on and
after the redemption date and the only remaining right of the Holders is to
receive payment of the redemption price upon
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surrender to the Paying Agent of the Debentures; (vi) if any Debenture is being
redeemed in part, the portion of the principal amount of such Debenture to be
redeemed and (vii) the CUSIP number, if any. At the Company's request and
expense, the Trustee shall give the notice of redemption in the Company's name.
SECTION 3.04. Effect of Notice of Redemption. Once a notice of redemption
is mailed, Debentures called for redemption become due and payable on the
redemption date and at the redemption price. Upon surrender to the Paying Agent,
such Debentures shall be paid at the redemption price, plus accrued interest to
the redemption date, but interest installments for which the interest payment
date is on or prior to such redemption date will be payable to the Holders of
record at the close of business on the relevant record dates referred to in the
Debentures.
SECTION 3.05. Deposit of Redemption Price. At least one Business Day prior
to the redemption date, the Company shall deposit with the Paying Agent (or if
the Company is its own Paying Agent, shall segregate and hold in trust)
immediately available funds sufficient to pay the redemption price of, and
accrued interest on, all Debentures to be redeemed on that date.
SECTION 3.06. Debentures Redeemed in Part. Upon surrender of a Debenture
that is redeemed in part, the Registrar shall authenticate for the Holder, at
the expense of the Company, a new Debenture of the same Maturity equal in
principal amount to the unredeemed portion of the Debenture surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Debentures. The Company shall pay the principal of
and interest on the Debentures on the dates and in the manner provided in the
Debentures. An installment of principal or interest shall be considered paid on
the date due if the Paying Agent (other than the Company or a Subsidiary) holds
on that date money designated for and sufficient to pay the installment. The
Company shall deposit with the Paying Agent immediately available funds
sufficient to pay the principal of or interest on the Debentures at least one
Business Day prior to the dates provided in the Debentures.
The Company shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Debentures.
SECTION 4.02. SEC Reports. Within 5 days after the Company files with the
SEC copies of its annual reports and other information, documents and reports
(or copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which it is required to file with the SEC pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company shall
file the same with the Trustee. The Company also shall comply with the other
provisions of TIA ss. 314(a).
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SECTION 4.03. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that a review of the activities of the Company has
been made under the supervision of the signing Officers with a view to
determining whether a Default or Event of Default has occurred and whether or
not the signers know of any Default by the Company in performing any of its
obligations under this Indenture. If they do know of such a Default, the
certificate shall describe all such Events of Default or Defaults, their status
and what action the Company is taking or proposes to take with respect thereto.
Upon becoming aware of any Default or Event of Default, the Company shall
deliver an Officers' Certificate to the Trustee specifying the Default or Event
of Default, its status and the action the Company proposes to take with respect
thereto.
SECTION 4.04. Limitation on Dividends and Stock Purchases. The Company
shall not declare or pay any dividend or make any distribution on its Capital
Stock or to its shareholders (other than dividends or distributions payable in
its Capital Stock) or purchase, redeem or otherwise acquire or retire for value,
or permit any Subsidiary to purchase or otherwise acquire for value, any Capital
Stock of the Company (collectively, "Restricted Payments") if, at the time of
such Restricted Payment, or after giving effect thereto, (i) an Event of Default
shall have occurred and be continuing, or (ii) a Default shall occur as a result
thereof; provided, however, that the provisions of this limitation on dividends
shall not prevent (A) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such payment complied
with the provisions of this limitation on dividends, or (B) the acquisition or
retirement of any shares of the Company's Capital Stock by exchange for, or out
of the proceeds of the sale of shares of, its Capital Stock.
SECTION 4.05. Pari Passu Indebtedness. There shall be no restriction on the
amount or type of Indebtedness of the Company which may be pari passu with (i.e.
having no priority of payment over and not subordinated in right of payment to)
or subordinate to the Debentures. The Company presently has outstanding the
following Debentures which rank pari passu with the Debentures: $4,000,000
aggregate principal amount of its Series 10/4/89 Registered Floating Rate
Redeemable Subordinated Debentures (the "Series 10/4/89 Debentures"), which were
issued pursuant to an Indenture dated as of October 15, 1989, by and between the
Company and the First American Bank of Georgia, N.A., $4,000,000 aggregate
principal amount of its Series 3/28/90 Registered Floating Rate Redeemable
Subordinated Debentures (the "Series 3/28/90 Debentures"), which were issued
pursuant to an Indenture dated as of April 15, 1990, by and between the Company
and the First American Bank of Georgia, N.A., $6,000,000 aggregate principal
amount of its Series 5/13/91 Registered Floating Rate Redeemable Subordinated
Debentures (the "Series 5/13/91 Debentures") which were issued pursuant to an
Indenture dated as of June 1, 1991, by and between the Company and the First
American Bank of Georgia, N.A., $4,500,000 aggregate principal amount of its
Series 2/20/92 Registered Floating Rate Redeemable Subordinated Debentures (the
"Series 2/20/92 Debentures") which were issued pursuant to an Indenture dated as
of March 1, 1992, by and between the Company and The Bank of New York,
$7,000,000 aggregate principal amount of its Series 6/29/92 Registered Floating
Rate Redeemable Subordinated Debentures (the "Series 6/29/92 Debentures") which
were issued pursuant to an Indenture dated as of July 1, 1992 by and between the
Company and the Bank
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of New York, $8,000,000 aggregate principal amount of its Series 9/13/93
Registered Floating Rate Redeemable Subordinated Debentures (the "Series 9/13/93
Debentures") which were issued pursuant to an Indenture dated as of September
15, 1993 by and between the Company and the Bank of New York, $4,500,000
aggregate principal amount of its Series 1/28/94 Registered Floating Rate
Redeemable Subordinated Debentures (the "Series 1/28/94 Debentures") which were
issued pursuant to an Indenture dated as of February 1, 1994 by and between the
Company and the Bank of New York, $5,000,000 aggregate principal amount of its
Series 10/28/94 Registered Floating Rate Redeemable Subordinated Debentures (the
"Series 10/28/94 Debentures") which were issued pursuant to an Indenture dated
as of November 1, 1994 by and between the Company and the Bank of New York,
$10,000,000 aggregate principal amount of its 5/12/95 Registered Floating Rate
Redeemable Subordinated Debentures (the "Series 5/12/95 Debentures") which were
issued pursuant to an Indenture dated as of June 1, 1995 by and between the
Company and the Bank of New York, and $10,000,000 aggregate principal amount of
its 10/19/95 Registered Floating Rate Redeemable subordinated Debentures (the
"Series 10/19/95 Debentures") which were issued pursuant to an Indenture dated
as of November 1, 1995 by and between the Company and the Bank of New York. The
Bank of New York, the Trustee herein named, presently serves as trustee for all
of the debentures which rank pari passu with the Debentures, including, the
Series 10/4/89 Debentures, the Series 3/28/90 Debentures, and the Series 5/13/91
Debentures.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When the Company May Merge, etc. The Company shall not
consolidate with or merge with or into, or transfer all or substantially all of
its assets to, any other person unless (i) such other person is a corporation
organized or existing under the laws of the United States or a state thereof,
(ii) such surviving person (other than the Company) expressly assumes by
supplemental indenture all the obligations of the Company under the Debentures,
this Indenture and the other agreements related thereto, (iii) immediately after
such transaction no Default or Event of Default exists, and (iv) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or transfer and such supplemental
indenture comply with this Article and that all conditions precedent herein
provided for have been complied with. Thereafter all such obligations of the
predecessor corporation shall terminate.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
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(1) the Company defaults in the payment of interest on any Debenture
when the same becomes due and payable and the default continues for a
period of 30 days, whether or not such payment shall be prohibited by the
provisions of Article Ten;
(2) the Company defaults in the payment of principal of any Debenture
when the same becomes due and payable at maturity, upon redemption or
otherwise, whether or not such payment shall be prohibited by the
provisions of Article Ten;
(3) the Company fails to comply with any of its other agreements in
the Debentures or this Indenture and the default continues for the period
and after the notice specified below;
(4) the Company pursuant to or within the meaning of any Bankruptcy
Law: (A) commences a voluntary case or proceeding, (B) consents to the
entry of an order for relief against it in an involuntary case or
proceeding, (C) consents to the appointment of a Custodian (as defined
herein) of it or for all or substantially all of its property, or (D) makes
a general assignment for the benefit of its creditors;
(5) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (A) is for relief against the Company in an
involuntary case or proceeding, (B) appoints a Custodian of the Company or
for all or substantially all of its property, or (C) orders the liquidation
of the Company, and in each case the order or decree remains unstayed and
in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
A default under clause (3) is not an Event of Default until the Trustee or
the Holders of at least 25% in principal amount of the then outstanding
Debentures notify the Company of the default and the Company does not cure the
default within 60 days after receipt of the notice. The notice must specify the
default, demand that it be remedied and state that the notice is a "Notice of
Default". If the Holders of 25% in principal amount of the outstanding
Debentures request the Trustee to give such notice on their behalf, the Trustee
shall do so.
SECTION 6.02. Acceleration. If any Event of Default (other than an Event of
Default specified in Section 6.01(4) or (5)) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the outstanding Debentures by notice to the Company and the Trustee,
may (but shall not be obligated to) declare the principal of and all accrued
interest on all the Debentures to be due and payable immediately. Upon such
declaration such principal and interest shall be due and payable immediately. If
an Event of Default specified in Section 6.01(4) or (5) occurs, all unpaid
principal and accrued interest on the Debentures then outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Debentureholder. The
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Holders of a majority in principal amount of the outstanding Debentures by
notice to the Trustee may rescind an acceleration and its consequences if all
existing Events of Default have been cured or waived, except nonpayment of
principal or interest that has become due solely because of the acceleration,
and if the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on the Debentures
or to enforce the performance of any provision of the Debentures or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Debentureholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.07 and 9.02,
the Holders of a majority in principal amount of the outstanding Debentures by
notice to the Trustee may waive a past Default and its consequences, except a
Default under Section 6.01(1) or (2). When a Default is so waived, it shall be
deemed cured and ceases.
SECTION 6.05. Control by Majority. The Holders of a majority in principal
amount of outstanding Debentures may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, however: (i) such
direction shall not be in conflict with any rule of law or with this Indenture;
(ii) the Trustee shall not determine that the action so directed would be
unjustly prejudicial to the rights of any Holder not taking part in such
direction; (iii) the Trustee shall have the right to decline to follow any such
direction if the Trustee, being advised by counsel, determines that the action
so directed may not lawfully be taken or if the Trustee in good faith shall
determine that the proceedings so directed would involve it in personal
liability; or (iv) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction. In the event that the
Trustee takes any action or follows any direction pursuant to this Indenture,
the Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all risk, loss or expense caused by taking such action or
following such direction.
SECTION 6.06. Limitation of Suits. A Debentureholder may not pursue any
remedy with respect to this Indenture or the Debentures unless: (i) the Holder
gives to the Trustee written notice of a continuing Event of Default; (ii) the
Holders of at least 25% in principal amount of the outstanding Debentures make a
written request to the Trustee to pursue the remedy; (iii) such Holder or
Holders offer and, if requested, provide to the Trustee indemnity and security
satisfactory to the Trustee against any loss, liability or expense; (iv) the
Trustee does not comply with the request within 60 days after receipt of the
request and the offer and,
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if requested, provision of indemnity and security; and (v) during such 60-day
period the Holders of a majority in principal amount of the Debentures do not
give the Trustee a direction inconsistent with such request.
A Debentureholder may not use this Indenture to prejudice the rights of
another Debentureholder or to obtain a preference or priority over another
Debentureholder.
SECTION 6.07. Rights of Holders to Receive Payment. Subject to Article Ten
and notwithstanding any other provisions of this Indenture, the right of any
Holder of a Debenture to receive payment of principal of and interest on the
Debenture, on or after the respective due dates expressed in the Debenture, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder, except as to a postponement of an interest payment consented to as
provided in clause (ii) of Section 9.02.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment
of interest or principal specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount of principal and
interest remaining unpaid, together with interest on overdue principal and, to
the extent that the payment of such interest is lawful, interest on overdue
installments of interest.
SECTION 6.09. Trustee May File Proof of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and any predecessor Trustee and the Debentureholders allowed in any
judicial proceedings relative to the Company, its creditors or its property.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Debentureholder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Debentureholder in any such proceedings.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order: (i) first,
to the Trustee and any predecessor Trustee for costs and expenses of collection
of such monies and for compensation payable to the Trustee or its agents and
counsel and all other expenses, liabilities, advances and other amounts
incurred, made or due under Section 7.07; (ii) second, to holders of Senior
Indebtedness of the Company to the extent required by Article Ten; (iii) third,
to Debentureholders for amounts due and unpaid on the Debentures for principal
and interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Debentures for principal and interest,
respectively; and (iv) fourth, to the Company. The Trustee may fix a record date
and payment date for any payment to Debentureholders pursuant to this Section.
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SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard for the merits and good faith of the claims or defenses made
by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the outstanding Debentures.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default; (i) the Trustee
need perform only those duties that are specifically set forth in this Indenture
and no others; and (ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; the Trustee,
however, shall examine the certificates and opinions submitted in accordance
with Section 11.03 to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that: (i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01; (ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee
shall not be liable with respect to any action it takes or omits to take in good
faith in accordance with a direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right or
power or risk its own funds or otherwise incur any financial liability unless it
receives indemnity satisfactory to it against any and all loss, liability or
expense.
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(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree with Company.
(g) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform with
the provisions of Section 11.04. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advise or
opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders of the Debentures, pursuant to the
provisions of this Indenture, unless such Holders shall have offered to the
Trustee security and indemnity, satisfactory to the Trustee in its sole
discretion, against all costs, expenses and liabilities which might be
incurred by the Trustee therein or thereby.
(g) The Trustee shall not be obligated to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or any other paper or document; provided, however, the
Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit. Nothing contained in this
Indenture shall create any liability to the Trustee in the event it elects
to make or not to make a further inquiry or investigation to which it is
entitled as aforesaid.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Debentures and may
otherwise deal with the
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Company or its Affiliates with the same rights it would have if it were not the
Trustee. Any Agent may do the same with like rights. The Trustee, however, must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Debentures; it shall not be accountable for the Company's use of the
proceeds from the Debentures; and, subject to any liabilities which may be found
to exist under the provisions of the Federal securities laws, shall not be
responsible for any statement of the Company in this Indenture or any document
issued in connection with the sale of the Debentures or any statement in the
Debentures other than its certificate of authentication or in any prospectus
used in connection with the sale of such Debentures, other than statements
provided in writing by the Trustee for use in such prospectus.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to each Debentureholder
notice of the Default within 90 days after it occurs, or if it becomes known to
the Trustee after such 90 days, as soon as practicable after it becomes known to
the Trustee. Except in the case of a Default in payment of principal of or
interest on any Debenture or any amounts due on redemption, the Trustee may
withhold the notice if and so long as the board of directors of the Trustee, the
executive or any trust committee of such board and/or Responsible Officers of
the Trustee in good faith determine(s) that withholding the notice is in the
interest of Debentureholders.
SECTION 7.06. Reports by Trustees to Holders. Within 60 days after each May
15, beginning with May 15, 1996, the Trustee shall mail to each Debentureholder
a brief report dated as of such May 15 that complies with TIA ss. 313(a). The
Trustee also shall comply with TIA ss. 313(b), (c) and (d).
A copy of each such report at the time of its mailing to Debentureholders
shall be filed by the Company with the SEC and each stock exchange on which the
Debentures are listed. The Trustee shall furnish the Company with copies of such
reports sufficiently in advance of its mailing to Debentureholders to permit the
Company to make such filings in a timely manner. The Company shall notify the
Trustee when the Debentures are listed on any stock exchange.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee such compensation for its services as the Company and the Trustee shall
from time to time agree in writing. The Trustee's compensation hereunder shall
not be limited by any law on compensation relating to the trustee of an express
trust. The Company shall reimburse the Trustee upon request for reasonable
disbursements, advances and expenses incurred or made by it in connection with
its duties hereunder. The Company shall indemnify each of the Trustee and any
predecessor Trustee against any loss or liability incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder, including the reasonable expenses and attorneys' fees of defending
itself against any claim of liability arising hereunder. The Company shall
defend any claim against the Trustee of which the Company has notice. The
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Trustee may have separate counsel, and if it does, the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not reimburse any
expenses or indemnify against any loss or liability incurred by the Trustee
through the Trustee's negligence or bad faith.
The obligations of the Company under this Section 7.07 to indemnify and
compensate the Trustee to pay or reimburse the Trustee for such expenses,
disbursements, and advances shall constitute Indebtedness. To secure the
Company's payment obligations in this Section, the Trustee shall have a lien
prior to the Debentures on all money or property held or collected by the
Trustee, except that held in trust to pay principal of or interest on particular
Debentures.
When the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in Section 6.01(4) or (5), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
SECTION 7.08. Replacement of Trustee. A resignation or removal of the
Trustee and the appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section. The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Debentures may remove the
Trustee by so notifying the Trustee and the Company, and may appoint a successor
Trustee with the Company's consent. The Company may remove the Trustee if: (i)
the Trustee fails to comply with Section 7.10; (ii) the Trustee is adjudged a
bankrupt or an insolvent; (iii) a receiver or other public officer takes charge
of the Trustee or its property; or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately thereafter, the retiring
Trustee shall transfer all property held by it as Trustee to the successor
Trustee (subject to the lien provided for in Section 7.07), the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Debentureholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Debentures may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
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If the Trustee fails to comply with Section 7.10, any Debentureholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee, provided, however, that if the Trustee
shall fail to comply with TIA ss. 310(b)(i), only a Debentureholder who has been
a bona fide holder of the Debentures for at least six months and has requested
the Trustee in writing to comply with such provision may so petition such court.
SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates
with, merges or converts into or transfers all or substantially all of its
corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification. There shall at all times be a
trustee hereunder which shall be a corporation organized and doing business
under the laws of the United States or of any state thereof authorized under
such laws to exercise corporate trust powers, shall be subject to supervision or
examination by Federal or state authority and shall at all times have a combined
capital and surplus of at least $1,000,000. If such trustee publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervisory or examining authority, then for the purposes of this Section 7.10,
the combined capital and surplus of such trustee shall be deemed to be its
combined capital and surplus as set forth in its most recent published annual
report of condition.
This Indenture shall always have a trustee who satisfies the requirements
of TIA ss. 310(a)(1) and (2). The Trustee shall comply with TIA ss. 310(b) and,
for purposes of TIA ss.310(b)(1), the following indentures satisfy the
requirements for such exclusion set forth in TIA ss. 310(b)(1)(i): the Indenture
dated as of October 15, 1989 by and between the Company and First American Bank
of Georgia, N.A., as Trustee, the Indenture dated as of April 15, 1990 by and
between the Company and First American Bank of Georgia, N.A., as Trustee, the
Indenture dated as of June 1, 1991 by and between the Company and First American
Bank of Georgia, N.A., as Trustee, the Indenture dated as of March 1, 1992, by
and between the Company and The Bank of New York, as Trustee, the Indenture
dated as of July 1, 1992, by and between the Company and the Bank of New York,
as Trustee, the Indenture dated as of September 15, 1993, by and between the
Company and the Bank of New York, as Trustee, the Indenture dated as of February
1, 1994, by and between the Company and the Bank of New York, as Trustee, the
Indenture dated as of November 1, 1994, by and between the Company and the Bank
of New York, as Trustee, the Indenture dated as of June 1, 1995, by and between
the Company and The Bank of New York, as Trustee, and the Indenture dated as of
November 1, 1995, by and between the Company and The Bank of New York, as
Trustee. The Bank of New York presently serves as trustee under each such
indenture.
SECTION 7.11. Preferential Collection of Claims Against the Company. The
Trustee shall be subject to TIA ss. 311(a), excluding any creditor relationship
arising as provided in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
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SECTION 7.12. Paying Agents. The Company shall cause each Paying Agent
other than the Trustee to execute and deliver to it and the Trustee an
instrument in which such Agent shall agree with the Trustee, subject to the
provisions of this Section 7.12; (i) that it will hold sums held by it as Agent
for the payment of principal of or interest on the Debentures (whether such sums
have been paid to it by the Company or by any obligor on the Debentures) in
trust for the benefit of Holders of the Debentures; (ii) that it will at any
time during the continuance of any Event of Default, upon written request from
the Trustee, deliver to the Trustee all sums so held in trust by it; (iii) that
it will give the Trustee written notice within three Business Days of any
failure of the Company (or by any obligor on the Debentures) in the payment of
any installment of the principal of or interest on the Debentures when the same
shall be due and payable; and (iv) that it will comply with the provisions of
the TIA applicable to it.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of the Company's Obligations. The Company may
terminate all of its obligations under the Debentures and this Indenture if all
Debentures previously authenticated and delivered (other than destroyed, lost or
stolen Debentures which have been replaced or paid) have been delivered to the
Trustee for cancellation or if:
(1) the Debentures mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption;
(2) the Company irrevocably deposits in trust with the Trustee money
or direct non-callable obligations of, or non-callable obligations
guaranteed by, the United States for the payment of which guarantee or
obligation the full faith and credit of the United States is pledged ("U.S.
Government Obligations"), sufficient to pay principal of and interest on
the outstanding Debentures to maturity or redemption, as the case may be,
and immediately after making the deposit, the Company shall give notice of
such event to the Debentureholders; provided, however, that if such
irrevocable deposit in trust with the Trustee of cash or U.S. Government
Obligations is made, the Company shall have delivered to the Trustee either
an Opinion of Counsel with no material qualifications in form and substance
satisfactory to the Trustee to the effect that Holders of the Debentures
(i) will not recognize income, gain or loss for Federal income tax purposes
as a result of such deposit (and the defeasance contemplated in connection
therewith) and (ii) will be subject to Federal income tax on the same
amounts and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred, or an applicable
favorable ruling to that effect is received from or published by the
Internal Revenue Service;
(3) the Company has paid or caused to be paid all sums then payable by
the Company to the Trustee hereunder as of the date of such deposit; and
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(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with. The Company's obligations in paragraph 9
of the Debentures and in Sections 2.03, 2.04, 2.05, 2.07, 2.08, 4.01, 7.07
and 8.03, however, shall survive until the Debentures are no longer
outstanding. Thereafter, the Company's obligations in such paragraph 9 and
in Sections 7.07 and 8.03 shall survive.
After such irrevocable deposit and delivery of an Officers' Certificate and
Opinion of Counsel pursuant to this Section 8.01, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Debentures and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. Application of Trust Money. The Trustee shall hold in trust
money and U.S. Government Obligations deposited with it pursuant to Section
8.01. It shall apply the deposited money through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
Debentures. Money and U.S. Government Obligations so held in trust shall not be
subject to Article Ten.
SECTION 8.03. Repayment to the Company. Subject to Section 7.07, the
Trustee and the Paying Agent shall promptly pay to the Company upon request any
excess money or securities held by them at any time. The Trustee and the Paying
Agent shall pay to the Company upon request any money held by them for the
payment of principal or interest that remains unclaimed for two years, provided
such request is made by the Company within one year after the expiration of such
two year period that such money remains unclaimed. Thereafter, the Company shall
have no right to request repayment of unclaimed money, and such unclaimed money
shall be held and disposed of by the Trustee in accordance with applicable law.
The Trustee and the Paying Agent shall have no right to request or require that
the Company accept repayment of any unclaimed money.
The Trustee or the Paying Agent, before being required to make any
repayment to the Company of unclaimed money, may at the expense of the Company
mail to each Holder who has failed to claim a payment of interest or principal
which is due, notice that such money remains unclaimed and that, after a date
specified therein (which shall not be less than 30 days from the date of such
mailing), any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company, Debentureholders entitled to such
money must look to the Company for payment as general creditors unless
applicable abandoned property law designates another person, and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, with the consent of
Trustee, may amend or supplement this Indenture or the Debentures without notice
to or consent of any Debentureholder: (i) to cure any ambiguity, omission,
defect or inconsistency; (ii) to
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comply with Section 5.01; or (iii) to make any change that does not adversely
affect the rights of any Debentureholder. The Trustee shall not be obligated to
enter into any supplemental indenture which affects its own rights, duties or
immunities under this Indenture.
SECTION 9.02. With Consent of Holders. The Company, with the consent of the
Trustee, may amend or supplement this Indenture or the Debentures without notice
to any Debentureholder, but with the written consent of the Holders of at least
a majority in principal amount of the outstanding Debentures. The Holders of a
majority in principal amount of the outstanding Debentures may waive compliance
by the Company with any provision of this Indenture or the Debentures without
notice to any Debentureholder. Without the consent of each Debentureholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not: (i) reduce the amount of Debentures whose
Holders must consent to an amendment, supplement or waiver; (ii) reduce the rate
of or extend the time for payment of interest on any Debenture (except that
Holders of not less than 75% in principal amount of all outstanding Debentures
may consent, on behalf of the Holders of all of the outstanding Debentures, to
the postponement of any interest payment for a period not exceeding three years
from its due date); (iii) reduce the principal of or extend the fixed maturity
of any Debenture; (iv) waive a default in the payment of the principal of or
interest on, or other redemption payment with respect to, any Debenture, (v)
make any Debenture payable in money other than that stated in the Debenture;
(vi) make any change in Article Ten that adversely affects the rights of any
Debentureholder; or (vii) make any change in Section 6.04, 6.07 or the third
sentence of this Section 9.02.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders a notice briefly describing the
amendment.
It shall not be necessary for the consent of the Holders under this section
to approve the particular form of any proposed amendment or supplement, but it
shall be sufficient if such consent approved the substance thereof.
Upon the request of the Company, accompanied by a resolution of the Board
of Directors or any duly authorized committee thereof, authorizing the execution
of any such supplemental indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Debentureholders as
aforesaid, the Trustee shall join with the Company in execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
accepting the additional trust created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
7.01) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.
SECTION 9.04. Compliance with Trust Indenture Act. Every amendment to or
supplement of this Indenture or the Debentures shall comply with the TIA as then
in effect.
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SECTION 9.05. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to an amendment, supplement or
waiver by a Holder of a Debenture is a continuing consent by the Holder and
every subsequent Holder of that Debenture or portion of that Debenture that
evidences the same debt as the consenting Holder's Debenture, even if notation
of the consent is not made on any Debenture. Any such Holder or subsequent
Holder, however, may revoke the consent as to his Debenture or portion of a
Debenture. Such revocation shall be effective only if the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Debentures.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated proxies, and only such persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date which is six months after such record date, any such consent
previously given shall automatically and without further action by any Holder be
cancelled and of no further effect.
After an amendment, supplement or waiver becomes effective, it shall bind
every Debentureholder unless it makes a change described in any of clauses (i)
through (vii) of Section 9.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Debenture who has consented to it and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture (except that an amendment,
supplement or wavier postponing any interest payment for a period not exceeding
three years from its due date shall, as provided in clause (ii) of Section 9.02,
bind all Debentureholders upon the consent of Holders of not less than 75% in
principal amount of all outstanding Debentures).
SECTION 9.06. Notation on or Exchange of Debentures. If an amendment,
supplement or waiver changes the terms of a Debenture, the Trustee may require
the Holder of the Debenture to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Debenture about the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Debenture shall issue and the Trustee shall
authenticate a new Debenture that reflects the changed terms. Failure to make
the appropriate notation or issue a new Debenture shall not affect the validity
and effect of such amendment, supplement or waiver.
SECTION 9.07. Trustee to Sign Amendments, etc. The Trustee may but need not
sign any amendment, supplement or waiver authorized pursuant to this Article if
the amendment, supplement or waiver adversely affects the rights of the Trustee.
The Trustee shall be entitled to request and receive an indemnity satisfactory
to it before signing any amendment, supplement or waiver.
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ARTICLE TEN
SUBORDINATION
SECTION 10.01. Agreement to Subordinate. The Company, for itself and its
successors, and each Holder, by his acceptance of Debentures, agrees that the
payment of the principal of, interest on or any other amounts due on the
Debentures is subordinated in right of payment, to the extent and in the manner
stated in this Article Ten, to the prior payment in full of all Senior
Indebtedness. Each Holder by his acceptance of the Debentures authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Indebtedness and
such Holder, the subordination provided in this Article Ten and appoints the
Trustee his attorney-in-fact for such purpose.
This Article Ten shall constitute a continuing offer to all persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions of this Article Ten are made for the benefit
of the holders of Senior Indebtedness, and such holders are made obligees under
this Article Ten and they and/or each of them may enforce such provisions of
this Article Ten. The Trustee has no fiduciary duties or obligations to holders
of Senior Indebtedness.
"Senior Indebtedness" means Indebtedness of the Company outstanding at any
time, whether outstanding on the date hereof or hereafter created, which (i) is
secured, in whole or in part, by any asset or assets owned by the Company or a
Subsidiary, or (ii) arises from unsecured borrowings by the Company from a
commercial bank, a savings bank, a savings and loan association, an insurance
company, a company whose securities are traded in a national securities market,
or any wholly-owned subsidiary of any of the foregoing, or (iii) arises from
unsecured borrowings by the Company from any pension plan (as defined in
ss.3(2) of the Employee Retirement Income Security Act of 1974, as amended), or
(iv) arises from borrowings by the Company which are evidenced by commercial
paper, or (v) is the Company's Series 1989 Registered Floating Rate Redeemable
Subordinated Debentures (the "1989 Series") (including any modification,
amendment or supplement thereto permitted pursuant to the terms of the trust
indenture pursuant to which the 1989 Series was issued, and any other
Indebtedness which, under the terms of such trust indenture, is permitted to be
issued pari passu with the 1989 Series), or (vi) is a guarantee or other
liability of the Company of or with respect to Indebtedness of a Subsidiary of a
type described in any of clause (ii), (iii) or (iv) above.
SECTION 10.02. Debentures Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of the Company. Upon
any distribution of assets of the Company in any dissolution, winding up,
liquidation or reorganization of the Company (whether in bankruptcy, insolvency
or receivership proceedings or upon an assignment for the benefit of creditors
or otherwise);
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payment in full of all principal thereof, interest due thereon and other
amounts due thereon before the Holders of the Debentures are entitled to receive
any payment on account of the principal of or interest on the Debentures;
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(b) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the
Debentures or the Trustee on behalf of the Holders of the Debentures would be
entitled except for the provisions of this Article Ten, including any such
payment or distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being subordinated or the
payment of the Debentures, shall be paid by the liquidating trustee or agent or
other person making such payment or distribution directly to the holders of the
Senior Indebtedness or their representative (pro rata as to each such holder or
representative on the basis of the respective amounts of unpaid Senior
Indebtedness held or represented by each), to the extent necessary to make
payment in full of all Senior Indebtedness remaining unpaid, after giving effect
to any concurrent payment or distribution or provision therefor to the holders
of such Senior Indebtedness, except that Holders of the Debentures shall be
entitled to receive securities that are subordinated to Senior Indebtedness to
at least the same extent as the Debentures; and
(c) in the event that notwithstanding the foregoing provisions of this
Section 10.02, any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, including any such
payment or distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being subordinated to the
payment of the Debentures, shall be received by the Trustee or the Holders of
the Debentures on account of principal of or interest on the Debentures before
all Senior Indebtedness is paid in full, or effective provision made for its
payment, such payment or distribution (subject to the provisions of Sections
10.05 and 10.06) shall be received and held in trust for and shall be paid over
to the holders of the Senior Indebtedness remaining unpaid or unprovided for or
their representative (pro rata as provided in subsection (b) above), for
application to the payment of such Senior Indebtedness until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent
payment or distribution or provision therefor to the holders of such Senior
Indebtedness, except that Holders of the Debentures shall be entitled to receive
securities that are subordinated to Senior Indebtedness to at least the same
extent as the Debentures.
The Company shall give prompt written notice to the Trustee of any dissolution,
winding up, liquidation or reorganization of the Company and of any fact known
to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Debentures.
SECTION 10.03. Debentureholders to be Subrogated to Rights of Holders of
Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness
pursuant to this Article Ten, the Holders of the Debentures shall be subrogated
equally and ratably to the right of the holders of the Senior Indebtedness to
receive payments or distributions of assets of the Company applicable to the
Senior Indebtedness until all amounts owing on the Debentures shall be paid in
full, and for the purpose of such subrogation no payments or distributions to
the holders of the Senior Indebtedness by or on behalf of the Company or by or
on behalf of the Holders of the Debentures by virtue of this Article Ten which
otherwise would have been made to the Holders of the Debentures shall, as among
the Company, its creditors other than holders of the Senior Indebtedness and the
Holders of the Debentures, be deemed to be payment by the Company to or on
account of the Senior Indebtedness, it being understood that the provisions of
this Article Ten are intended solely for the purpose of defining the relative
rights of the Holders of the Debentures, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.
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SECTION 10.04. Obligation of the Company Unconditional. Nothing contained
in this Article Ten or elsewhere in this Indenture or in any Debenture is
intended to or shall impair, as between the Company, its creditors other than
Holders of Senior Indebtedness and the Holders of the Debentures, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders of
the Debentures the principal of and interest on the Debentures as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders of the Debentures and
creditors of the Company, other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article Ten of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy. Upon
any distribution of assets of the Company referred to in this Article Ten, the
Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders of
the Debentures shall be entitled to rely upon any order or decree made by any
court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other person making any distribution to the
Trustee or the Holders of the Debentures, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Ten.
Nothing contained in this Article Ten or elsewhere in this Indenture or in
any Debenture is intended to or shall affect the obligation of the Company to
make or prevent the Company from making, at any time except during the pendency
of any dissolution, winding-up, liquidation or reorganization proceeding,
payments at any time of the principal of or interest on the Debentures.
SECTION 10.05. Knowledge of Trustee. Notwithstanding any provisions of this
Indenture, the Trustee shall not be charged with actual knowledge of the
existence of any facts which would prohibit the making of any payment of monies
to or by the Trustee, or the taking or not taking of any other action by the
Trustee, until two Business Days after the Trustee through a Responsible Officer
shall have received written notice thereon from the Company, any Debentureholder
or any Paying Agent or the holder or representative of any class of Senior
Indebtedness.
SECTION 10.06. Application by Trustee of Monies Deposited With It. If at
least two Business Days prior to the date on which by the terms of this
Indenture any monies deposited with the Trustee or any Paying Agent may become
payable for any purpose (including, without limitation, the payment of either
the principal of or the interest on any Debenture) the Trustee shall not have
received with respect to such monies the notice provided for in Section 10.05,
then the Trustee shall have full power and authority to receive such monies and
to apply the same to the purpose for which they were received and shall not be
affected by any notice to the contrary which may be received by it on or after
such date. This Section shall be construed solely for the benefit of the Trustee
and Paying Agent and shall not otherwise affect the rights of holders of Senior
Indebtedness.
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SECTION 10.07. Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Indebtedness. No right of any present or future
holders of any Senior Indebtedness to enforce subordination as provided herein
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms of
this Indenture, regardless of any knowledge thereof which any such holder may
have or be otherwise charged with. The holders of Senior Indebtedness may
extend, renew, modify or amend the terms of the Senior Indebtedness or any
security therefor and release, sell or exchange such security and otherwise deal
freely with the Company, all without affecting the liabilities and obligations
of the parties to the Indenture or the Holders. No provision in any supplemental
indenture which affects the superior position of the holders of any then
existing Senior Indebtedness shall be effective against the holders of the
Senior Indebtedness who have not consented thereto.
SECTION 10.08. Debentureholders Authorize Trustee to Effectuate
Subordination of Debentures. Each Holder of the Debentures by acceptance thereof
authorizes and expressly directs the Trustee on its, his or her behalf to take
such action as may be necessary or appropriate in the sole discretion of the
Trustee to effectuate the subordination provided in this Article Ten and
appoints the Trustee its, his or her attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or otherwise),
the immediate filing of a claim for the unpaid balance of its, his or her
Debentures in the form required in said proceedings and cause said claim to be
approved; provided, however, that the Trustee shall not be liable for any action
or failure to act in accordance with this Article Ten. If the Trustee does not
file a proper claim or proof of debt in the form required in such proceeding
prior to 30 days before the expiration of the time to file such claim or claims,
then the holders of Senior Indebtedness have the right to file and are hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Debentures.
SECTION 10.09. Right of Trustee to Hold Senior Indebtedness. The Trustee
shall be entitled to all of the rights set forth in this Article Ten in respect
of any Senior Indebtedness at any time held by it to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall be
construed to deprive the Trustee of any of its rights as such holder.
SECTION 10.10. Article Ten Not to Prevent Events of Default. The failure to
make a payment on account of principal shall not be construed as preventing the
occurrence of an Event of Default under Section 6.01.
SECTION 10.11. No Fiduciary Duty Created to Holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness by virtue of the
provisions of this Article Ten.
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SECTION 10.12. Trustee's Compensation Not Prejudiced. Nothing in this
Article Ten shall apply to amounts due to the Trustee pursuant to Section 7.07.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. Any notice or communication shall be sufficiently
given if in writing and delivered or mailed as follows:
(a) Notices or communications to the Company or the Trustee shall be
given only by hand delivery or by certified or registered first class mail,
return receipt requested, or by facsimile transmission promptly followed by
hand delivery or certified or registered first class mail, return receipt
requested, as follows:
If to the Company, addressed to:
INTERVEST CORPORATION OF NEW YORK
10 Rockefeller Plaza, Suite 1015
New York, New York 10020-1903
If to the Trustee, addressed to:
THE BANK OF NEW YORK
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust Department
Any notice or communication to the Company or the Trustee shall be deemed
given on the day delivered and receipted for if delivered by hand, or on the day
the return receipt card is signed on behalf of the Company or the Trustee if
sent by certified or registered mail. The Company or the Trustee by notice to
the other and to Debentureholders may designate additional or different
addresses for subsequent notices or communications.
(b) Notices or communications to a Debentureholder shall be mailed by first
class mail to such Debentureholder at the address which appears on the
registration books of the Registrar and shall be sufficiently given to such
Debentureholder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed to a Debentureholder in
the manner provided in this paragraph (b), it is duly given, whether or not the
addressee receives it. If the Company mails a notice or communication to
30
<PAGE>
Debentureholders it shall mail a copy of such notice to the Trustee and each
Agent at the same time.
SECTION 11.03. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take any action under
this Indenture, the Company shall furnish to the Trustee: (i) an Officers'
Certificate in form and substance satisfactory to the Trustee stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed actions have been complied with; and (ii) an Opinion of Counsel in form
and substance satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (i) a statement that the person
making such certificate or opinion has read such covenant or condition; (ii) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (iii) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (iv) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 11.05. Rules by Trustee and Agents. The Trustee may make reasonable
rules for action by, or at a meeting of, Debentureholders. The Registrar or
Paying Agent may make reasonable rules for its functions.
SECTION 11.06. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or
a day on which banking institutions are not required to be open in the City of
New York, in the State of New York, or in the city in which the Trustee
administers its corporate trust business. If a payment date is a Legal Holiday
at a place of payment, payment may be made at such place on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 11.07. Governing Law. The laws of the State of New York, without
regard to the principles of conflicts of law, shall govern this Indenture and
the Debentures.
SECTION 11.08. No Recourse Against Others. Liabilities of directors,
officers, employees and stockholders, as such, of the Company are waived and
released as provided in paragraph 14 of the Debentures.
SECTION 11.09. Successors. All agreements of the Company in this Indenture
and the Debentures shall bind its successors. All agreements of the Trustee in
this Indenture shall bind its successors.
SECTION 11.10. Duplicate Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 11.11. Separability. In case any provision in this Indenture or in
the Debentures shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of
31
<PAGE>
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim against any party hereto.
SIGNATURES
Dated as of __________1, 1996 INTERVEST CORPORATION
OF NEW YORK
By: ___________________________
Name: Lowell S. Dansker
Title: President
Attest:
- --------------------------------
Name: Lawrence G. Bergman
Title: Secretary
THE BANK OF NEW YORK
as Trustee
By: ___________________________
Name: __________________________
Title: __________________________
Attest:
- --------------------------------
Name: _________________________
Title: _________________________
32
<PAGE>
Exhibit A
---------
(FORM OF ACCRUAL DEBENTURE MATURING October 1, 1998)
Number R(______/98)A $
INTERVEST CORPORATION OF NEW YORK
Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debenture due October 1, 1998
INTERVEST CORPORATION OF NEW YORK, a corporation duly organized and
existing under the laws of the State of New York (the "Company"), promises to
pay to or registered assigns the principal sum of ______________________________
Dollars on October 1, 1998, together with interest accruing on principal at one
percentage point above the Prime Rate (but not in excess of 12% per annum), plus
interest accruing each calendar quarter on the balance of interest accrued as of
(and including) the last day of the preceding calendar quarter at the Prime Rate
(but not in excess of 12% per annum), and with all accrued interest payable with
the principal sum on October 1, 1998. The provisions on the back of this
certificate are incorporated as if set forth on the face of the certificate.
Record Dates:
The tenth day of the second month of the
calendar quarter
DATED:
Authenticated to be one of the
Debentures described in the
Indenture referred to herein:
THE BANK OF NEW YORK, as INTERVEST CORPORATION OF NEW YORK
Registrar
By: _______________________ (Seal) By: ___________________________
Authorized Signatory President
By: __________________________
Secretary
A-1
<PAGE>
(REVERSE OF DEBENTURE)
Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debenture due October 1, 1998
1. Interest. The Company promises to pay interest on the principal amount
of this Debenture at the rate shown above. With respect to Debentures sold on
the date $5,000,000 or more of Debentures are first approved for issuance (the
"First Closing Date"), interest will accrue on principal from the fifth day
preceding the First Closing Date. With respect to Debentures sold after the
First Closing Date, interest will accrue on principal commencing on the first
day of the month of sale, if the Debenture is sold on or before the fifteenth
day of the month, or commencing on the sixteenth day of the month of sale, if
the Debenture is sold after the fifteenth day of the month. Debentures sold
after the First Closing Date shall be deemed sold on the date the Company (or an
underwriter on its behalf) receives payment therefor. Interest accrued prior to
the first day of the second calendar quarter following the First Closing Date,
or such earlier date selected by the Company without requirement of notice (the
"Accrual Commencement Date"), will, through the Accrual Commencement Date, be
paid quarterly on the first day of each calendar quarter, provided that if the
Debenture is sold on or before the fifteenth day of the second month of a
calendar quarter, the first interest payment shall be made on the first day of
the next calendar quarter and if the Debenture is sold after the fifteenth day
of the second month of the calendar quarter, the first interest payment shall be
made on the first day of the second full calendar quarter following the date of
sale. The last payment of interest is due on the Accrual Commencement Date,
covering interest accrued through the Accrual Commencement Date. From and after
the Accrual Commencement Date, all interest will accrue quarterly but not be
paid until maturity, at which time all unpaid accrued interest will be payable
together with the principal amount. Interest on unpaid accrued interest will
accrue each calendar quarter based on the balance of unpaid accrued interest as
of (and including) the last day of the preceding calendar quarter. Interest will
be credited on the first day of the calendar quarter following the calendar
quarter in which it accrued. The first date on which interest will accrue on the
balance of unpaid accrued interest shall be the first day of the first calendar
quarter after the Accrual Commencement Date. Interest will be computed on the
basis of a 360-day year consisting of twelve 30-day months. The first date on
which interest will be credited on unpaid accrued interest will be the first day
of the second calendar quarter after the Accrual Commencement Date. For purposes
of the computation of accrued interest "Prime Rate" shall mean the prime rate of
Chemical Bank from time to time in effect as announced by Chemical Bank at its
principal office in New York. The accrual of interest during any calendar
quarter will be computed based on the Prime Rate in effect on the first day of
such calendar quarter, provided, however, that interest accruing prior to the
first date on which interest is paid shall accrue based upon the Prime Rate in
effect on the first day of the calendar quarter preceding the date of payment.
In the event that Chemical Bank ceases to designate any interest rate as its
Prime Rate, there shall be substituted the most nearly comparable interest rate
for short term borrowings by corporate borrowers which is publicly announced by
such bank from time to time at its principal office in New York. For purposes
hereof, January 1, April 1, July 1 and October 1 shall be the first days of the
calendar quarters.
A-2
<PAGE>
2. Method of Payment. Prior to and on the Accrual Commencement Date the
Company will pay interest on the Debentures (except defaulted interest) to the
original registered holder or, if different, the persons who are registered
holders of the Debentures at the close of business on the 10th day of the second
month of the calendar quarter next preceding the applicable interest payment
date. From and after the Accrual Commencement Date, until maturity, the Company
will accrue interest on the Debentures in each calendar quarter and reflect such
accrued interest in its records for the account of the persons who are
registered holders of Debentures at the close of business on the tenth day of
the second month of the calendar quarter in which such interest is accruing.
Holders must surrender Debentures to a Paying Agent to collect accrued interest
and principal payments. The Company will pay principal and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. The Company may, however, pay principal and interest
by its check payable in such money.
3. Paying Agent and Registrar. Initially, the Company will act as Paying
Agent. The Bank of New York, a New York banking corporation will act as
Registrar and will authenticate the Debentures. The Company may change any
Paying Agent, Registrar or co-Registrar without notice.
4. Indenture. This Debenture is one of a duly authorized series of
Debentures issued by the Company under an Indenture dated as of _________ 1,
1996 (the "Indenture") between the Company and The Bank of New York, as trustee
(the "Trustee"). The term "Debentures" being used herein refers to all
Maturities of Debentures issued under the Indenture. Capitalized terms herein
are used as defined in the Indenture unless otherwise indicated. Reference is
hereby made to the Indenture for a description of the rights, obligations,
duties and immunities of the Trustee and the Debentureholders and for the terms
and conditions upon which the Debentures are and are to be issued. The
Debentures are general unsecured obligations of the Company limited to the
aggregate principal amount of $11,000,000 of which a maximum of $1,000,000 will
have a maturity date of October 1, 1998 and a maximum of $10,000,000 will have a
maturity date of April 1, 2005.
5. Optional Redemption. The Company may at its option redeem the Debentures
of any Maturity in whole or in part at any time. The redemption price will be
equal to the face amount of the Debentures to be redeemed.
6. Selection and Notice of Redemption. If less than all of the Debentures
of any Maturity are to be redeemed, the Registrar shall select the Debentures to
be redeemed by such method as the Registrar shall deem fair and appropriate, or
if the Debentures are listed on a national securities exchange, in accordance
with the rules of such exchange. The Registrar shall make the selection from the
Debentures outstanding and not previously called for redemption. The Registrar
may select for redemption portions (equal to $10,000 or any integral multiple
thereof) of the principal amount of Debentures that have denominations larger
than $10,000. Provisions of the Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption. Notice of
redemption will be mailed at least 30 days but not more than 90 days before the
redemption date to each holder of Debentures to be redeemed at his registered
address. On and after the redemption date, interest ceases to accrue on
Debentures or portions thereof called for redemption.
A-3
<PAGE>
7. Denominations, Transfer, Exchange. The Debentures are issuable in
registered form without coupons in denominations of $10,000 and integral
multiples of $10,000. A holder may transfer or exchange Debentures in accordance
with the Indenture. A Debenture of one Maturity may not be exchanged for a
Debenture of another Maturity. The Registrar may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not transfer or exchange any Debenture or portion of a Debenture selected
for redemption, or transfer or exchange any Debentures for a period of 15 days
before a selection of Debentures to be redeemed.
8. Persons Deemed Owners. The registered holder of a Debenture may be
treated as the owner of it for all purposes.
9. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Company, if the Company requests such repayment within one year
after such two year period that such money remains unclaimed. If such unclaimed
money is so paid back to the Company, thereafter, holders entitled to the money
must look to the Company for payment as general creditors, unless an applicable
abandoned property law designates another person. If such unclaimed money is not
so paid back to the Company, it may be disposed of by the Trustee in accordance
with applicable law.
10. Amendment, Supplement, Waiver. Subject to certain exceptions, the
Indenture or the Debentures may be amended or supplemented, and any past default
or compliance with any provision may be waived, with the consent of the holders
of a majority in principal amount of the outstanding Debentures. Without the
consent of any Debentureholder, the Company may amend or supplement the
Indenture or the Debentures to cure any ambiguity, omission, defect or
inconsistency, to comply with Article Five of the Indenture (providing for the
assumption of the obligations of the Company under the Indenture by a successor
corporation), or to make any change that does not adversely affect the rights of
any Debentureholder.
11. Defaults and Remedies. The Indenture provides that the Trustee will
give the Debentureholders notice of an uncured Default known to it, within 90
days after the occurrence of an Event of Default (as defined in the Indenture),
or as soon as practicable after it learns of an Event of Default which occurred
more than 90 days beforehand; provided that, except in the case of Default in
the payment of principal of or interest on any of the Debentures or any amount
due on redemption, the Trustee may withhold such notice if it in good faith
determines that the withholding of such notice is in the interest of the
Debentureholders. In case an Event of Default occurs and is continuing, the
Trustee or the holders of not less than 25% of aggregate principal amount of the
Debentures then outstanding, by notice in writing to the Company (and to the
Trustee if given by the Debentureholders), may declare the principal of and all
accrued interest on all the Debentures to be due and payable immediately. Such
declaration may be rescinded by holders of a majority in principal amount of the
Debentures if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived and if the rescission would not conflict with any judgment or decree.
The Indenture requires the Company to file periodic reports with the Trustee as
to the absence of defaults.
A-4
<PAGE>
12. Subordination. The indebtedness evidenced by all of the Debentures is,
to the extent provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness, and this
Debenture is issued subject to such provisions of the Indenture, and each holder
of this Debenture by accepting same, agrees to and shall be bound by such
provisions. "Senior Indebtedness" means Indebtedness of the Company outstanding
at any time, whether outstanding on the date hereof or hereafter created, which
(i) is secured, in whole or in part, by any asset or assets owned by the Company
or a Subsidiary, or (ii) arises from unsecured borrowings by the Company from a
commercial bank, a savings bank, a savings and loan association, an insurance
company, a company whose securities are traded in a national securities market,
or any wholly-owned subsidiary of any of the foregoing, or (iii) arises from
unsecured borrowings by the Company from any pension plan (as defined in ss.
3(2) of the Employee Retirement Income Security Act of 1974, as amended), or
(iv) arises from borrowings by the Company which are evidenced by commercial
paper or (v) is the Company's Series 1989 Registered Floating Rate Redeemable
Subordinated Debentures (the "1989 Series"), (including any modification,
amendment or supplement thereto permitted pursuant to the terms of the trust
indenture pursuant to which the 1989 Series was issued, and any other
Indebtedness which, under the terms of such trust indenture, is permitted to be
issued pari passu with the 1989 Series), or (vi) is a guarantee or other
liability of the Company of or with respect to Indebtedness of a Subsidiary of a
type described in any of clauses (ii), (iii) or (iv) above.
13. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Debentures or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Debentureholder by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Debentures.
15. Authentication. This Debenture shall not be valid until the Registrar
signs the certificate of authentication on the other side of this Debenture.
16. Abbreviations. Customary abbreviations may be used in the name of the
Debentureholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by entirety), JT TEN (=joint tenants with right of survivorship and
not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
The Company will furnish to any Debentureholder upon written request and
without charge a copy of the Indenture. Requests may be made to Intervest
Corporation of New York, 10 Rockefeller Plaza, Suite 1015, New York, New York
10020-1903.
A-5
<PAGE>
ASSIGNMENT
If you want to assign this Debenture, fill in the form below and have your
signature guaranteed by a commercial bank or trust company or a member firm of
any national securities exchange registered under the Securities Exchange Act of
1934.
I or we assign and transfer this Debenture to
- ----------------------------------------------------------------------
(Please insert assignee's social security or tax identification number)
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint__________________________________________ agent to
transfer this Debenture on the books of the Company. The agent may substitute
another to act for him.
Date: ___________________ Your signature: ______________________________
-----------------------------------
(Sign exactly as your name appears
on the other side of this Debenture)
Signature Guarantee: ___________________________
A-6
<PAGE>
Exhibit B
---------
(FORM OF ACCRUAL DEBENTURE MATURING April 1, 2005) Number
R(__/___/2005)A $
INTERVEST CORPORATION OF NEW YORK
Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debenture due April 1, 2005
INTERVEST CORPORATION OF NEW YORK, a corporation duly organized and
existing under the laws of the State of New York (the "Company"), promises to
pay to or registered assigns the principal sum of _______________ Dollars on
April 1, 2005, together with interest accruing on principal at two percentage
points above the Prime Rate (but not in excess of 12% per annum), plus interest
accruing each calendar quarter on the balance of interest accrued as of (and
including) the last day of the preceding calendar quarter at the Prime Rate (but
not in excess of 12% per annum), and with all accrued interest payable with the
principal sum on April 1, 2005. The provisions on the back of this certificate
are incorporated as if set forth on the face of the certificate.
Record Dates:
The tenth day of the second month of the
calendar quarter
DATED:
Authenticated to be one of the
Debentures described in the
Indenture referred to herein:
THE BANK OF NEW YORK, as INTERVEST CORPORATION OF NEW YORK
Registrar
By: _________________________ (Seal) By:_______________________________
Authorized Signatory President
By:_______________________________
Secretary
B-1
<PAGE>
(REVERSE OF DEBENTURE)
Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debenture due April 1, 2005
1. Interest. The Company promises to pay interest on the principal amount
of this Debenture at the rate shown above. With respect to Debentures sold on
the date $5,000,000 or more of Debentures are first approved for issuance (the
"First Closing Date"), interest will accrue on principal from the fifth day
preceding the First Closing Date. With respect to Debentures sold after the
First Closing Date, interest will accrue on principal commencing on the first
day of the month of sale, if the Debenture is sold on or before the fifteenth
day of the month, or commencing on the sixteenth day of the month of sale, if
the Debenture is sold after the fifteenth day of the month. Debentures sold
after the First Closing Date shall be deemed sold on the date the Company (or an
underwriter on its behalf) receives payment therefor. Interest accrued prior to
the first day of the second calendar quarter following the First Closing Date,
or such earlier date selected by the Company without requirement of notice (the
"Accrual Commencement Date"), will, through the Accrual Commencement Date, be
paid quarterly on the first day of each calendar quarter, provided that if the
Debenture is sold on or before the fifteenth day of the second month of a
calendar quarter, the first interest payment shall be made on the first day of
the next calendar quarter and if the Debenture is sold after the fifteenth day
of the second month of a calendar quarter, the first interest payment shall be
made on the first day of the second full calendar quarter following the date of
sale. The last payment of interest is due on the Accrual Commencement Date,
covering interest accrued through the Accrual Commencement Date. From and after
the Accrual Commencement Date, all interest will accrue quarterly but not be
paid until maturity, at which time all unpaid accrued interest will be payable
together with the principal amount. Interest on unpaid accrued interest will
accrue each calendar quarter based on the balance of unpaid accrued interest as
of (and including) the last day of the preceding calendar quarter. Interest will
be credited on the first day of the calendar quarter following the calendar
quarter in which it accrued. The first date on which interest will accrue on the
balance of unpaid accrued interest shall be the first day of the first calendar
quarter after the Accrual Commencement Date. Interest will be computed on the
basis of a 360-day year consisting of twelve 30-day months. The first date on
which interest will be credited on unpaid accrued interest will be the first day
of the second calendar quarter after the Accrual Commencement Date. For purposes
of the computation of accrued interest "Prime Rate" shall mean the prime rate of
Chemical Bank from time to time in effect as announced by Chemical Bank at its
principal office in New York. The accrual of interest during any calendar
quarter will be computed based on the Prime Rate in effect on the first day of
such calendar quarter, provided, however, that interest accruing prior to the
first date on which interest is paid shall accrue based upon the Prime Rate in
effect on the first day of the calendar quarter preceding the date of payment.
In the event that Chemical Bank ceases to designate any interest rate as its
Prime Rate, there shall be substituted the most nearly comparable interest rate
for short term borrowings by corporate borrowers which is publicly announced by
such bank from time to time at its principal office in New York. For purposes
hereof, January 1, April 1, July 1 and October 1 shall be the first days of the
calendar quarters.
2. Method of Payment. Prior to and on the Accrual Commencement Date the
Company will pay interest on the Debentures (except defaulted interest) to the
original
B-2
<PAGE>
registered holder or, if different, the persons who are registered holders of
the Debentures at the close of business on the 10th day of the second month of
the calendar quarter next preceding the applicable interest payment date. From
and after the Accrual Commencement Date, until maturity, the Company will accrue
interest on the Debentures in each calendar quarter and reflect such accrued
interest in its records for the account of the persons who are registered
holders of Debentures at the close of business on the tenth day of the second
month of the calendar quarter in which such interest is accruing. Holders must
surrender Debentures to a Paying Agent to collect accrued interest and principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. The Company may, however, pay principal and interest by its check
payable in such money.
3. Paying Agent and Registrar. Initially, the Company will act as Paying
Agent. The Bank of New York, a New York banking corporation will act as
Registrar and will authenticate the Debentures. The Company may change any
Paying Agent, Registrar or co-Registrar without notice.
4. Indenture. This Debenture is one of a duly authorized series of
Debentures issued by the Company under an Indenture dated as of ________ 1, 1996
(the "Indenture") between the Company and The Bank of New York, as trustee (the
"Trustee"). The term "Debentures" being used herein refers to all Maturities of
Debentures issued under the Indenture. Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. Reference is hereby made to
the Indenture for a description of the rights, obligations, duties and
immunities of the Trustee and the Debentureholders and for the terms and
conditions upon which the Debentures are and are to be issued. The Debentures
are general unsecured obligations of the Company limited to the aggregate
principal amount of $11,000,000 of which a maximum of $1,000,000 will have a
maturity date of October 1, 1998 and a maximum of $10,000,000 will have a
maturity date of April 1, 2005.
5. Optional Redemption. The Company may at its option redeem the Debentures
of any Maturity in whole or in part at any time. The redemption price will be
equal to (i) the face amount of the Debentures to be redeemed plus a 2% premium
if the date of redemption is prior to January 1, 1998, (ii) the face amount of
the Debentures to be redeemed plus a 1% premium if the date of redemption is on
or after January 1, 1998 and prior to January 1, 1999, and (iii) the face amount
of the Debentures to be redeemed if the date of redemption is on or after
January 1, 1999.
6. Selection and Notice of Redemption. If less than all of the Debentures
of any Maturity are to be redeemed, the Registrar shall select the Debentures to
be redeemed by such method as the Registrar shall deem fair and appropriate, or
if the Debentures are listed on a national securities exchange, in accordance
with the rules of such exchange. The Registrar shall make the selection from the
Debentures outstanding and not previously called for redemption. The Registrar
may select for redemption portions (equal to $10,000 or any integral multiple
thereof) of the principal amount of Debentures that have denominations larger
than $10,000. Provisions of the Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption. Notice of
redemption will be mailed at least 30 days but not more than 90 days before the
redemption date to each holder of Debentures to
B-3
<PAGE>
be redeemed at his registered address. On and after the redemption date,
interest ceases to accrue on Debentures or portions thereof called for
redemption.
7. Denominations, Transfer, Exchange. The Debentures are issuable in
registered form without coupons in denominations of $10,000 and integral
multiples of $10,000. A holder may transfer or exchange Debentures in accordance
with the Indenture. A Debenture of one Maturity may not be exchanged for a
Debenture of another Maturity. The Registrar may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not transfer or exchange any Debenture or portion of a Debenture selected
for redemption, or transfer or exchange any Debentures for a period of 15 days
before a selection of Debentures to be redeemed.
8. Election. In accordance with the terms of the Indenture, at any time
after issuance of this Debenture a holder may elect to surrender this Debenture
in exchange for a Debenture of the same maturity that provides for quarterly
payments of interest on the principal amount of such Debenture at the same
interest rate as set forth on the face hereof and otherwise identical with all
other applicable terms. The Registrar may require a holder to furnish a letter
making such an election and appropriate endorsements for surrender and
cancellation of this Debenture. If such exchange is made on or prior to the
tenth day of the second month of a calendar quarter, it will be effective as of
the first day of the next calendar quarter. If such exchange is made after the
tenth day of the second month of a calendar quarter, it will be effective as of
the first day of the second succeeding calendar quarter. On the effective date
of the exchange, the Company will pay all unpaid accrued interest on this
Debenture up to the effective date. Exchanges may be made in integrals of
$10,000 and Debentures issued in connection with an exchange will be issued in
denominations of $10,000 and integral multiples of $10,000.
9. Persons Deemed Owners. The registered holder of a Debenture may be
treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Company, if the Company requests such repayment within one year
after such two year period that such money remains unclaimed. If such unclaimed
money is so paid back to the Company, thereafter, holders entitled to the money
must look to the Company for payment as general creditors, unless an applicable
abandoned property law designates another person. If such unclaimed money is not
so paid back to the Company, it may be disposed of by the Trustee in accordance
with applicable law.
11. Amendment, Supplement, Waiver. Subject to certain exceptions, the
Indenture or the Debentures may be amended or supplemented, and any past default
or compliance with any provision may be waived, with the consent of the holders
of a majority in principal amount of the outstanding Debentures. Without the
consent of any Debentureholder, the Company may amend or supplement the
Indenture or the Debentures to cure any ambiguity, omission, defect or
inconsistency, to comply with Article Five of the Indenture (providing for the
assumption of the obligations of the Company under the Indenture by a successor
B-4
<PAGE>
corporation), or to make any change that does not adversely affect the rights of
any Debentureholder.
12. Defaults and Remedies. The Indenture provides that the Trustee will
give the Debentureholders notice of an uncured Default known to it, within 90
days after the occurrence of an Event of Default (as defined in the Indenture),
or as soon as practicable after it learns of an Event of Default which occurred
more than 90 days beforehand; provided that, except in the case of Default in
the payment of principal of or interest on any of the Debentures or any amount
due on redemption, the Trustee may withhold such notice if it in good faith
determines that the withholding of such notice is in the interest of the
Debentureholders. In case an Event of Default occurs and is continuing, the
Trustee or the holders of not less than 25% of aggregate principal amount of the
Debentures then outstanding, by notice in writing to the Company (and to the
Trustee if given by the Debentureholders), may declare the principal of and all
accrued interest on all the Debentures to be due and payable immediately. Such
declaration may be rescinded by holders of a majority in principal amount of the
Debentures if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived and if the rescission would not conflict with any judgment or decree.
The Indenture requires the Company to file periodic reports with the Trustee as
to the absence of defaults.
13. Subordination. The indebtedness evidenced by all of the Debentures is,
to the extent provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness, and this
Debenture is issued subject to such provisions of the Indenture, and each holder
of this Debenture by accepting same, agrees to and shall be bound by such
provisions. "Senior Indebtedness" means Indebtedness of the Company outstanding
at any time, whether outstanding on the date hereof or hereafter created, which
(i) is secured, in whole or in part, by any asset or assets owned by the Company
or a Subsidiary, or (ii) arises from unsecured borrowings by the Company from a
commercial bank, a savings bank, a savings and loan association, an insurance
company, a company whose securities are traded in a national securities market,
or any wholly-owned subsidiary of any of the foregoing, or (iii) arises from
unsecured borrowings by the Company from any pension plan (as defined in ss.
3(2) of the Employee Retirement Income Security Act of 1974, as amended), or
(iv) arises from borrowings by the Company which are evidenced by commercial
paper or (v) is the Company's Series 1989 Registered Floating Rate Redeemable
Subordinated Debentures (the "1989 Series"), (including any modification,
amendment or supplement thereto permitted pursuant to the terms of the trust
indenture pursuant to which the 1989 Series was issued, and any other
Indebtedness which, under the terms of such trust indenture, is permitted to be
issued pari passu with the 1989 Series), or (vi) is a guarantee or other
liability of the Company of or with respect to Indebtedness of a Subsidiary of a
type described in any of clauses (ii), (iii) or (iv) above.
14. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
B-5
<PAGE>
15. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Debentures or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Debentureholder by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Debentures.
16. Authentication. This Debenture shall not be valid until the Registrar
signs the certificate of authentication on the other side of this Debenture.
17. Abbreviations. Customary abbreviations may be used in the name of the
Debentureholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by entirety), JT TEN (=joint tenants with right of survivorship and
not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
The Company will furnish to any Debentureholder upon written request and
without charge a copy of the Indenture. Requests may be made to Intervest
Corporation of New York, 10 Rockefeller Plaza, Suite 1015, New York, New York
10020-1903.
B-6
<PAGE>
ASSIGNMENT
If you want to assign this Debenture, fill in the form below and have your
signature guaranteed by a commercial bank or trust company or a member firm of
any national securities exchange registered under the Securities Exchange Act of
1934.
I or we assign and transfer this Debenture to
- ---------------------------------------------------------
(Please insert assignee's social security or tax identification number)
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________________ agent to
transfer this Debenture on the books of the Company. The agent may substitute
another to act for him.
Date: ___________________ Your signature: _________________________________
_________________________________
(Sign exactly as your name appears
on the other side of this Debenture)
Signature Guarantee: _________________________________
B-7
<PAGE>
Exhibit C
(FORM OF QUARTERLY PAYMENT DEBENTURE MATURING APRIL 1, 2005)
Number R(__/___/2005) $
INTERVEST CORPORATION OF NEW YORK
Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debenture due April 1, 2005
INTERVEST CORPORATION OF NEW YORK, a corporation duly organized and
existing under the laws of the State of New York (the "Company"), promises to
pay to or registered assigns the principal sum of
____________________________________ Dollars on April 1, 2005, together with
interest at two percentage points above the Prime Rate (but not in excess of 12%
per annum). The provisions on the back of this certificate are incorporated as
if set forth on the face of the certificate.
Interest Payment Dates:
The first day of each calendar quarter
Record Dates:
The tenth day of the second month of the
calendar quarter
DATED:
Authenticated to be one of the
Debentures described in the
Indenture referred to herein:
THE BANK OF NEW YORK, as INTERVEST CORPORATION OF NEW YORK
Registrar
__________________ By:__________________________________
Authorized Signatory President
By:__________________________________
Secretary
C-1
<PAGE>
(REVERSE OF DEBENTURE)
Series __/__/96 Registered Floating Rate Redeemable
Subordinated Debenture due April 1, 2005
1. Interest. The Company promises to pay interest on the principal amount
of this Debenture at the rate per annum shown above. The Company will pay
interest quarterly on January 1, April 1, July 1 and October 1 of each year.
With respect to Debentures sold by the Company on the date $5,000,000 or
more of Debentures are first approved for issuance (the "First Closing Date"),
interest will accrue from the fifth day preceding the First Closing Date. With
respect to Debentures sold by the Company after the First Closing Date, interest
will accrue commencing on the first day of the month of sale, if the Debenture
is sold on or before the fifteenth day of the month, or commencing on the
sixteenth day of the month of sale, if the Debenture is sold after the fifteenth
day of the month. Debentures sold after the First Closing Date shall be deemed
sold on the date the Company (or an underwriter on its behalf) receives payment
therefor. With respect to Debentures sold on or before the fifteenth day of the
second month of the calendar quarter, the first payment of interest on
Debentures sold by the Company shall be due on the first day of the next
calendar quarter following the date of sale of the Debenture. With respect to
Debentures sold after the fifteenth day of the second month of a calendar
quarter, the first payment of interest shall be due on the first day of the
second calendar quarter following the date of sale of the Debenture.
With respect to Debentures issued in exchange for other Debentures pursuant
to Section 2.07(b) of the Indenture (as defined below), interest will accrue
from the effective date of such exchange, and the first payment of interest
shall be due on the first day of the next calendar quarter following the
effective date of such exchange. The rate of interest for such interest payment
date shall be computed based on the Prime Rate in effect on the effective date
of such exchange.
After the first payment date, interest on the Debenture will accrue from
the most recent date to which interest has been paid. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months. For purposes
of the payment of interest "Prime Rate" shall mean the prime rate of Chemical
Bank from time to time in effect as announced by Chemical Bank at its principal
office in New York. The quarterly payment of interest due on the first day of
each calendar quarter will be computed based on the Prime Rate in effect on the
first day of the immediately preceding calendar quarter, provided, however, that
interest accruing prior to the first payment date shall accrue based upon the
Prime Rate in effect on the first day of the calendar quarter preceding the date
of payment. In the event that Chemical Bank ceases to designate any interest
rate as its Prime Rate, there shall be substituted the most nearly comparable
interest rate for short term borrowings by corporate borrowers which is publicly
announced by such bank from time to time at its principal office in New York.
2. Method of Payment. The Company will pay interest on the Debentures
(except defaulted interest) to the persons who are registered holders of
Debentures at the close
C-2
<PAGE>
of business on the 10th day of the second month of the calendar quarter next
preceding the applicable interest payment date. Holders must surrender
Debentures to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. The Company may,
however, pay principal and interest by its check payable in such money. It may
mail an interest check to a holder's registered address.
3. Paying Agent and Registrar. Initially, the Company will act as Paying
Agent. The Bank of New York, a New York banking corporation, will act as
Registrar and will authenticate the Debentures. The Company may change any
Paying Agent, Registrar or co-Registrar without notice.
4. Indenture. This Debenture is one of a duly authorized series of
Debentures issued by the Company under an Indenture dated as of __________ 1,
1996 (the "Indenture") between the Company and The Bank of New York, as trustee
(the "Trustee"). The term "Debentures" being used herein refers to all
Maturities of Debentures issued under the Indenture. Capitalized terms herein
are used as defined in the Indenture unless otherwise indicated. Reference is
hereby made to the Indenture for a description of the rights, obligations,
duties and immunities of the Trustee and the Debentureholders and for the terms
and conditions upon which the Debentures are and are to be issued. The
Debentures are general unsecured obligations of the Company limited to the
aggregate principal amount of $11,000,000 of which a maximum of $1,000,000 will
have a maturity date of October 1, 1998, and a maximum of $10,000,000 will have
a maturity date of April 1, 2005.
5. Optional Redemption. The Company may at its option redeem the Debentures
of any Maturity in whole or in part at any time. The redemption price will be
equal to (i) the face amount of the Debentures to be redeemed plus a 2% premium
if the date of redemption is prior to January 1, 1998, (ii) the face amount of
the Debentures to be redeemed plus a 1% premium if the date of redemption is on
or after January 1, 1998 and prior to January 1, 1999, and (iii) the face amount
of the Debentures to be redeemed if the redemption is on or after January 1,
1999.
6. Selection and Notice of Redemption. If less than all of the Debentures
of any Maturity are to be redeemed, the Registrar shall select the Debentures to
be redeemed by such method as the Registrar shall deem fair and appropriate, or
if the Debentures are listed on a national securities exchange, in accordance
with the rules of such exchange. The Registrar shall make the selection from the
Debentures outstanding and not previously called for redemption. The Registrar
may select for redemption portions (equal to $10,000 or any integral multiple
thereof) of the principal amount of Debentures that have denominations larger
than $10,000. Provisions of the Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption. Notice of
redemption will be mailed at least 30 days but not more than 90 days before the
redemption date to each holder of Debentures to be redeemed at his registered
address. On and after the redemption date, interest ceases to accrue on
Debentures or portions thereof called for redemption.
C-3
<PAGE>
7. Denominations, Transfer, Exchange. The Debentures are issuable in
registered form without coupons in denominations of $10,000 and integral
multiples of $10,000. A holder may transfer or exchange Debentures in accordance
with the Indenture. A Debenture of one Maturity may not be exchanged for a
Debenture of another Maturity. The Registrar may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not transfer or exchange any Debenture or portion of a Debenture selected
for redemption, or transfer or exchange any Debentures for a period of 15 days
before a selection of Debentures to be redeemed.
8. Persons Deemed Owners. The registered holder of a Debenture may be
treated as the owner of it for all purposes.
9. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Company, if the Company requests such repayment within one year
after such two year period that such money remains unclaimed. If such unclaimed
money is so paid back to the Company, thereafter, holders entitled to the money
must look to the Company for payment as general creditors, unless an applicable
abandoned property law designates another person. If such unclaimed money is not
so paid back to the Company, it may be disposed of by the Trustee in accordance
with applicable law.
10. Amendment, Supplement, Waiver. Subject to certain exceptions, the
Indenture or the Debentures may be amended or supplemented, and any past default
or compliance with any provision may be waived, with the consent of the holders
of a majority in principal amount of the outstanding Debentures. Without the
consent of any Debentureholder, the Company may amend or supplement the
Indenture or the Debentures to cure any ambiguity, omission, defect or
inconsistency, to comply with Article Five of the Indenture (providing for the
assumption of the obligations of the Company under the Indenture by a successor
corporation), or to make any change that does not adversely affect the rights of
any Debentureholder.
11. Defaults and Remedies. The Indenture provides that the Trustee will
give the Debentureholders notice of an uncured Default known to it, within 90
days after the occurrence of an Event of Default (as defined in the Indenture),
or as soon as practicable after it learns of an Event of Default which occurred
more than 90 days beforehand; provided that, except in the case of Default in
the payment of principal of or interest on any of the Debentures or any amount
due on redemption, the Trustee may withhold such notice if it in good faith
determines that the withholding of such notice is in the interest of the
Debentureholders. In case an Event of Default occurs and is continuing, the
Trustee or the holders of not less than 25% of aggregate principal amount of the
Debentures then outstanding, by notice in writing to the Company (and to the
Trustee if given by the Debentureholders), may declare the principal of and all
accrued interest on all the Debentures to be due and payable immediately. Such
declaration may be rescinded by holders of a majority in principal amount of the
Debentures if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived and if the rescission would not conflict with any judgment or decree.
The Indenture requires the Company to file periodic reports with the Trustee as
to the absence of defaults.
C-4
<PAGE>
12. Subordination. The indebtedness evidenced by all of the Debentures is,
to the extent provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness, and this
Debenture is issued subject to such provisions of the Indenture, and each holder
of this Debenture by accepting same, agrees to and shall be bound by such
provisions. "Senior Indebtedness" means Indebtedness of the Company outstanding
at any time, whether outstanding on the date hereof or hereafter created, which
(i) is secured, in whole or in part, by any asset or assets owned by the Company
or a Subsidiary, or (ii) arises from unsecured borrowings by the Company from a
commercial bank, a savings bank, a savings and loan association, an insurance
company, a company whose securities are traded in a national securities market,
or any wholly-owned subsidiary of any of the foregoing, or (iii) arises from
unsecured borrowings by the Company from any pension plan (as defined in ss.
3(2) of the Employee Retirement Income Security Act of 1974, as amended), or
(iv) arises from borrowings by the Company which are evidenced by commercial
paper or (v) is the Company's Series 1989 Registered Floating Rate Redeemable
Subordinated Debentures (the "1989 Series"), (including any modification,
amendment or supplement thereto permitted pursuant to the terms of the trust
indenture pursuant to which the 1989 Series was issued, and any other
Indebtedness which, under the terms of such trust indenture, is permitted to be
issued pari passu with the 1989 Series), or (vi) is a guarantee or other
liability of the Company of or with respect to Indebtedness of a Subsidiary of a
type described in any of clauses (ii), (iii) or (iv) above.
13. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Debentures or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Debentureholder by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Debentures.
15. Authentication. This Debenture shall not be valid until the Registrar
signs the certificate of authentication on the other side of this Debenture.
16. Abbreviations. Customary abbreviations may be used in the name of the
Debentureholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by entirety), JT TEN (=joint tenants with right of survivorship and
not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
The Company will furnish to any Debentureholder upon written request and
without charge a copy of the Indenture. Requests may be made to Intervest
Corporation of New York, 10 Rockefeller Plaza, Suite 1015, New York, New York
10020-1903.
C-5
<PAGE>
ASSIGNMENT
If you want to assign this Debenture, fill in the form below and have your
signature guaranteed by a commercial bank or trust company or a member firm of
any national securities exchange registered under the Securities Exchange Act of
1934.
I or we assign and transfer this Debenture to
- -----------------------------------------------------------------------
(Please insert assignee's social security or tax identification number)
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________________________ agent to
transfer this Debenture on the books of the Company. The agent may substitute
another to act for him.
Date:___________________________ Your signature:______________________________
_____________________________________________
(Sign exactly as your name appears on the other
side of this Debenture)
Signature Guarantee: _______________________________
C-6
HARRIS
BEACH &
WILCOX
A LIMITED LIABILITY PARTNERSHIP
ATTORNEYS AT LAW
THE GRANITE BUILDING
130 EAST MAIN STREET
ROCHESTER, N.Y. 14604-1687
(716) 232-4440
April 5, 1996
Intervest Corporation of New York
10 Rockefeller Plaza
Suite 1015
New York, New York 10020-1903
Re: Intervest Corporation of New York
----------------------------------
Registration Statement on Form S-11
-----------------------------------
Ladies and Gentlemen:
You have requested our opinion in connection with the Registration
Statement on Form S-11 (the "Registration Statement") filed by Intervest
Corporation of New York (the "Company") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), in
connection with the proposed offering of up to $11,000,000 aggregate principal
amount of the Company's Registered Floating Rate Redeemable Subordinated
Debentures (the "Debentures"). Capitalized terms, unless otherwise defined
herein, shall have the meanings set forth in the Registration Statement.
In connection with this opinion, we have examined the Registration
Statement, the Certificate of Incorporation of the Company, the By-Laws of the
Company, certificates of public officials and officers of the Company and such
other documents and records as we have deemed necessary or appropriate for
purposes of our opinion.
Based on the foregoing, and subject to the qualifications and assumptions
referred to herein, we are of the opinion that:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of New York.
(b) The Debentures, when executed and authenticated in the manner set
forth in the Indenture and issued, sold and delivered against payment
therefor in accordance with the Underwriting Agreement, will constitute the
legal, valid and binding obligations of the Company, enforceable as to the
Company in accordance with their terms, subject to (i) applicable
bankruptcy, moratorium, insolvency, reorganization and similar laws
relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such principles are considered
in a proceeding in equity or at law).
- -------------AFFILIATES ------ WASHINGTON, DC --------- NEW YORK ----------
COPENHAGEN LIVORNO PARIS STAMFORD, CT ALBANY ITHACA ROCHESTER
KRISTIANSUND LONDON OSLO HACKENSACK, NJ BUFFALO NEW YORK CITY SYRACUSE
<PAGE>
Intervest Corporation of New York HARRIS
April 5, 1996 BEACH &
Page 2 WILCOX
The opinions set forth above are subject to the following qualifications
and assumptions:
We have assumed the authenticity of all documents submitted to us as
originals, the conformity to the original documents of all documents submitted
to us as copies, and the truth of all facts recited in all relevant documents.
The opinions set forth above are limited to the laws of the State of New
York and the federal law of the United States.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to this firm in the Registration
Statement under the caption "Legal Opinions."
Very truly yours,
HARRIS BEACH & WILCOX LLP
By /s/ THOMAS E. WILLETT
------------------------------
Thomas E. Willett
s:\interves\1996.01\opin.ltr
INTERVEST CORPORATION OF NEW YORK
ESCROW AGREEMENT
THIS ESCROW AGREEMENT made as of this ____ day of _________, 1996, by and
among Intervest Corporation of New York, a New York corporation with its
principal offices at 10 Rockefeller Plaza, Suite 1015, New York, New York
10020-1903 ("Corporation"); Sage, Rutty & Co., Inc., a New York corporation with
its principal offices at 183 East Main Street, 4th Floor, Rochester, New York
14604 ("Underwriter"); and Manufacturers and Traders Trust Company, a New York
banking corporation with an office at 44 Exchange Street, Rochester, New York
14614 ("Escrow Agent").
R E C I T A L S:
WHEREAS, the Corporation has filed a Form S-11 Registration Statement under
the Securities Act of 1933 with the Securities and Exchange Commission
("Registration Statement") covering a proposed offering of a minimum of
$5,000,000 and maximum of $11,000,000 aggregate principal amount of its Series
__/__/96 Registered Floating Rate Redeemable Subordinated Debentures
("Debentures"); and
WHEREAS, the Underwriter intends to sell the Debentures as the
Corporation's agent on a best efforts basis; and
WHEREAS, certain officers of the Corporation may also sell Debentures; and
WHEREAS, under the terms of the offering, subscription funds received on
the sale of Debentures will be deposited in an escrow account until certain
terms and conditions have been met; and
WHEREAS, the Corporation desires that the subscription funds be held in
escrow by the Escrow Agent on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. Establishment and Custody of Escrow Fund.
(a) On or prior to the date of the commencement of the offering of the
Debentures, the parties shall establish an interest-bearing escrow account with
the Escrow Agent. The Corporation will notify the Escrow Agent in writing of the
effective date of the Registration Statement. The escrow account shall be
entitled "Intervest Corporation of New York Escrow Account." The Corporation
shall, prior to the establishment of such account, furnish to the Escrow Agent a
completed IRS Form W-9.
(b) On the next Business Day following receipt by the Corporation or the
Underwriter from an investor desiring to purchase Debentures ("Subscriber(s)")
or from any participating selected dealer, of any subscription documents and
payment of the subscription price (in the minimum of $10,000) for Debentures to
be purchased, it will promptly transmit to the Escrow Agent the following:
<PAGE>
(i) Checks, bank drafts or money orders payable to "M&T Bank, as
Escrow Agent for Intervest Corporation of New York" or wire transfers to
the escrow account (such sums as held by Escrow Agent in collected funds,
as increased or decreased by any investments, reinvestments or
distributions made in respect thereof and any interest thereon as held from
time to time by the Escrow Agent pursuant to the terms of this Escrow
Agreement, being hereafter collectively referred to as the "Escrow Fund").
Such funds shall be delivered to Manufacturers and Traders Trust Company,
44 Exchange Street, Rochester, New York 14614 Attention: Sharon Greisberger
for deposit in accordance with Section 2; and
(ii) With each deposit to the Escrow Fund, a statement containing the
name, address and tax identification number of each Subscriber.
(c) Checks or other forms of payment not made payable to the Escrow Agent
shall be returned by the Escrow Agent to the purchaser who submitted the check.
(d) For purposes of this Escrow Agreement, a "Business Day" is a day upon
which the Trust Department of the Escrow Agent is open for the conduct of
business.
(e) The Escrow Agent will acknowledge receipt of the Escrow Fund and will
hold the Escrow Funds subject to the terms and conditions of this Escrow
Agreement.
(f) The Escrow Agent shall notify the Corporation when the total amount of
subscription funds in the Escrow Fund, less the amount of any such checks
returned for insufficient funds, equals at least $5,000,000 (the "Minimum
Funds"). No investment profits or losses and no interest earned on any
investment of the Escrow Fund shall be considered for purposes of this
calculation.
(g) During the term of this Escrow Agreement, the Corporation understands
that it is not entitled to any funds received into escrow and no amounts
deposited shall become the property of the Corporation or any other entity, or
be subject to the debts of the Corporation or any other entity.
2. Investment of Escrow Fund. Moneys held in the Escrow Fund shall be
invested and reinvested by the Escrow Agent in its money market account. Moneys
held in the Escrow Fund will in any event, be invested only in investments
permissible under Rule 15c2-4 under the Securities Exchange Act of 1934.
3. Duties of Escrow Agent. Acceptance by the Escrow Agent of its duties
under this Escrow Agreement is subject to the following terms and conditions,
which all parties to this Escrow Agreement agree shall govern and control with
respect to the rights, duties, liabilities and immunities of the Escrow Agent.
(a) The duties and responsibilities of the Escrow Agent shall be limited to
those expressly set forth in this Escrow Agreement and the Escrow Agent shall
not be subject to, nor obligated to recognize, any other agreements between the
Corporation, Underwriter and any Subscriber.
2
<PAGE>
(b) The duties of the Escrow Agent are only such as are herein specifically
provided and such duties are purely ministerial in nature. The Escrow Agent's
primary duty shall be to keep custody of and safeguard the Escrow Fund during
the period of the escrow, to invest monies held in the Escrow Fund in accordance
with Section 2 hereof and to make disbursements from the Escrow Fund in
accordance with Section 4 hereof.
(c) The Escrow Agent shall be under no obligations in respect of the Escrow
Fund other than to faithfully follow the instructions herein contained or
delivered to the Escrow Agent in accordance with this Escrow Agreement. The
Escrow Agent may rely and act upon any written notice, instruction, direction,
request, waiver, consent, receipt or other paper or document which it in good
faith believes to be genuine and what it purports to be and the Escrow Agent
shall be subject to no liability with respect to the form, execution or validity
thereof. If, in the opinion of the Escrow Agent, the instructions it receives
are ambiguous, uncertain or in conflict with any previous instructions or this
Escrow Agreement, then the Escrow Agent is authorized to hold and preserve
intact the Escrow Fund pending the settlement of any such controversy by final
adjudication of a court or courts of proper jurisdiction.
(d) The Escrow Agent shall not be liable for any error of judgment or for
any act done or step taken or omitted by it, in good faith, or for any mistake
of fact or law, or for anything which it may in good faith do or refrain from
doing in connection herewith, unless caused by its willful misconduct or gross
negligence. The Corporation shall indemnify and hold the Escrow Agent harmless
from and against any and all claims, losses, damages, liabilities and expenses,
including reasonable attorneys' fees, which may be imposed upon the Escrow Agent
or incurred by the Escrow Agent in connection with its acceptance of the
appointment as Escrow Agent hereunder or the performance of its duties
hereunder, unless the Escrow Agent is determined to have committed an
intentional wrongful act or to have been grossly negligent with respect to its
duties under this Escrow Agreement.
(e) The Escrow Agent shall return to the Corporation any sums delivered to
the Escrow Agent pursuant to this Escrow Agreement for which the Escrow Agent
has not received release instructions pursuant to Section 4 hereof, and as to
which four years have passed since delivery.
(f) The Escrow Agent may consult with, and obtain advice from, legal
counsel (which may not be counsel to the Corporation) in the event of any
dispute or questions as to the construction of any of the provisions hereof or
its duties hereunder, and it shall incur no liability in acting in good faith in
accordance with the written opinion and instructions of such counsel. The fees
for consultation with such counsel shall be paid by the Corporation.
(g) Reference in this Escrow Agreement to the Registration Statement is for
identification purposes only, and its terms and conditions are not thereby
incorporated herein.
4. Distribution and Release of Funds.
(a) For purposes of this Escrow Agreement, the term "Termination Date"
shall mean the earlier of:
3
<PAGE>
(i) ____________ __, 1996, or such later date set forth in a written
notice purportedly executed by the Corporation and delivered to the Escrow
Agent at least five (5) Business Days prior to _____________ __, 1996, or
(ii) The date, if any, upon which the Escrow Agent receives a written
notice purportedly executed by the Corporation stating that the offering
has been terminated, or such later date set forth in such notice as the
effective date of such termination; or
(iii) Any date specified by the Corporation in writing, after the date
the Escrow Agent has confirmed that it has received in the Escrow Fund at
least the Minimum Funds in good, collected funds.
(b) On the Termination Date, the Escrow Agent shall certify to the
Corporation in writing the total amount of collected funds in the Escrow Fund.
(c) The Escrow Agent shall return the funds deposited with it to the
Subscribers if, on the Termination Date, the Escrow Fund does not consist of
collected funds totaling at least the Minimum Funds. The Escrow Agent shall have
fully discharged this obligation to return Subscribers' funds if it has mailed
to each Subscriber, at the address furnished to it by the Corporation, the
Underwriter or any selected dealer, by registered or certified mail, return
receipt requested, a bank check made payable to each Subscriber for the amount
originally deposited by that Subscriber, plus the Subscriber's pro rata share of
net interest (defined below) earned without regard to the date the Subscriber's
funds were deposited. For purposes of this Escrow Agreement, "net interest"
shall mean the interest earned on the Escrow Fund, less any fees or expenses of
the Escrow Agent paid from the Escrow Fund pursuant to Section 5.
(d) At such time as (i) the total amount of collected funds in the Escrow
Fund equals at least the Minimum Funds, and (ii) the Escrow Agent has received,
on or before the Termination Date, written instructions executed by the
Underwriter and the Corporation, the Escrow Agent shall distribute the entire
Escrow Fund, less commissions, fees and expense reimbursement due to the
Underwriter and any selected dealers, pursuant to such instructions. The
commissions, fees and expense reimbursement due to the Underwriter and selected
broker-dealers shall be set forth in the written instructions, and the Escrow
Agent shall distribute the commissions, fees and expense reimbursement due to
the Underwriter and selected dealers directly to the Underwriter. Subject to the
foregoing, distributions may be made to third parties at the direction of the
Corporation. Net interest earned on the Escrow Fund shall be paid to the
Corporation.
(e) If the Corporation rejects a subscription for which the Escrow Agent
has already collected funds, the Escrow Agent shall promptly issue a refund
check to the rejected Subscriber. Otherwise, the Escrow Agent shall promptly
remit the rejected Subscriber's check directly to the Subscriber. Any check
returned unpaid to the Escrow Agent will be returned to the Underwriter or
selected dealer that submitted the check. Any check or other form of payment
received by the Escrow Agent not payable to "M&T Bank, as Escrow Agent for
Intervest Corporation of New York" shall be returned to the Subscriber by the
Escrow Agent.
4
<PAGE>
(f) For purposes hereof, "collected funds" shall mean all funds received by
the Escrow Agent which have cleared normal banking channels and are in the form
of cash. Furthermore, a check which is not (i) a certified check or (ii) a bank
draft or a cashiers check drawn on a bank reasonably acceptable to the Escrow
Agent, shall constitute "collected funds" only if it has not been returned for
insufficient funds within ten (10) Business Days after its receipt by the Escrow
Agent. No investment profits or losses and no interest earned on any investments
of the Escrow Fund shall be considered for purposes of the above calculation.
(g) It shall be a condition to the return of funds to any subscriber
hereunder that such subscriber shall have delivered to the Escrow Agent a
completed IRS Form W-9. The Corporation shall include in the Prospectus which is
part of the Registration Statement and/or in the subscription forms to be
executed by subscribers, notice of the requirement for delivery of such IRS Form
W-9 as a condition to the return of funds deposited in the Escrow Account.
(h) This Escrow Agreement shall terminate on the final distribution of the
Escrow Fund, at which time the Escrow Agent shall be forever and irrevocably
released and discharged from any and all further responsibility or liability
with respect to the Escrow Fund.
5. Compensation. The Corporation agrees to pay the Escrow Agent a fee of
$300 as compensation for its services in connection with establishing the Escrow
Fund, payable at the time this Escrow Agreement is executed, whether or not any
Debentures are sold. In addition, the Corporation shall pay an annual
maintenance fee of $100, prorated for the number of months the Escrow Account is
open, payable whether or not any Debentures are sold. The Corporation shall pay,
in addition to the foregoing fees, the following charges:
$700.00 Handling and processing fees.
$ 7.50 Per check disbursed.
$ 10.00 Per prorated net interest computation if funds are returned to
investors.
$ 10.00 Per Form 1099 required to be transmitted by the Escrow Agent.
$ 25.00 Per check returned for insufficient funds.
Except for the set-up fee due upon execution of this Escrow Agreement, the fees
and charges shall be paid by the Corporation on the date(s) the Escrow Fund is
distributed pursuant to Section 4. The Escrow Agent shall have the right to
cause any fees due hereunder to be paid out of the interest earned on the Escrow
Account.
6. Termination. This Escrow Agreement shall terminate no later than the
Termination Date, or on such earlier date as the Escrow Agent shall have paid
out a total of at least $5,000,000 in collected funds in accordance with the
provisions of this Escrow Agreement.
7. Resignation and Removal of Escrow Agent. The Escrow Agent may at any
time resign and be discharged of the duties and obligations created by this
Escrow Agreement by giving at least sixty (60) days' written notice to the
Corporation and the Underwriter; the Escrow Agent may be removed at any time
upon sixty (60) days' notice by an instrument purportedly signed by an
authorized person of the Corporation and the Underwriter. Any successor Escrow
Agent shall be appointed and approved by the Corporation and the Underwriter.
Any such successor Escrow Agent shall deliver to the former Escrow Agent a
5
<PAGE>
written instrument, acknowledged by the Corporation and the Underwriter,
accepting such appointment hereunder and thereupon it shall take delivery of the
Escrow Fund to hold and distribute in accordance with the terms hereof. If no
successor Escrow Agent shall have been appointed within thirty (30) days after
the Corporation and the Underwriter are notified of the Escrow Agent's
resignation, the Escrow Agent shall return the Escrow Fund to the Subscribers in
accordance with the procedure set forth in Section 4(c). Upon the delivery of
the Escrow Fund in accordance with this Section 7, the Escrow Agent shall be
discharged from any further duties hereunder.
8. Binding Effect. This Escrow Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns.
9. Headings. The headings contained in this Escrow Agreement are intended
for convenience and shall not in any way determine the rights of the parties to
this Escrow Agreement.
10. Waiver. Waiver of any terms or conditions of this Escrow Agreement by
any party shall not be construed as (a) a waiver of a subsequent breach or
failure of the same term or condition, or (b) a waiver of any other term or
condition of this Escrow Agreement.
11. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Escrow Agreement to produce or account for
more than one such counterpart.
12. Modification. This Escrow Agreement constitutes the entire agreement
between the parties as to the escrow of Subscribers' funds, and shall not be
modified except in writing signed and
acknowledged by all the parties.
13. Notices. All notices and communications hereunder shall be in writing
and shall be deemed to be duly given on the date delivered by the United States
Mail, registered or certified mail, return receipt requested, postage prepaid to
the address of the Corporation and Underwriter as first above written, and to
the Escrow Agent at Manufacturers and Traders Trust Company, Attention: Sharon
Greisberger, provided, however, that notices may be given by telex, cable,
telecopier, courier service, telephone, personal delivery or otherwise,
effective the date of such communication, provided that notices given by such
means of communications are confirmed by mail as aforesaid, postmarked within
one business day after such other form of communication.
14. Governing Law. This Escrow Agreement shall be construed and enforced in
accordance with the laws of the State of New York. The parties consent to the
personal jurisdiction of all courts of the State of New York, and agree that
such jurisdiction shall be exclusive.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Escrow
Agreement as of the date and year first above written.
CORPORATION: INTERVEST CORPORATION OF NEW YORK
By: ________________________________________
Its: ________________________________________
ESCROW AGENT: MANUFACTURERS AND TRADERS TRUST COMPANY
By: _______________________________________
Its: _______________________________________
UNDERWRITER: SAGE, RUTTY & CO., INC.
By: ______________________________________
Its: ______________________________________
7
<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK
STATEMENT SETTING FORTH COMPUTATIONS SHOWING
THE RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income ........... $ 442,000 $ 536,000 $ 545,000 $ 313,000 $ 325,000 $ 356,000
Add:
Interest expense (1) 6,975,000 5,246,000 3,944,000 3,364,000 2,602,000 2,253,000
Provision for
income taxes ....... 324,000 403,000 480,000 229,000 252,000 125,000
---------- ---------- ---------- ---------- ---------- ----------
EARNINGS ............. $4,741,000 $6,185,000 $4,969,000 $3,906,000 $3,179,000 $2,734,000
========== ========== ========== ========== ========== ==========
FIXED CHARGES
INTEREST INCURRED .... $6,975,000 $5,246,000 $3,944,000 $3,364,000 $2,602,000 $2,253,000
========== ========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges ...... 1.1 1.2 1.3 1.2 1.2 1.2
========== ========== ========== ========== ========== ==========
</TABLE>
(1) Includes amortization of deferred debenture offering costs as follows:
Year Ended
December 31,
------------
1995 $748,000
1994 $655,000
1993 $529,000
SUBSIDIARIES
Name State of Incorporation
---- ----------------------
1. Intervest Distribution Corporation New York
2. Intervest Realty Servicing Corporation New York
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement on Form S-11, by
Intervest Corporation of New York of our report dated January 19, 1996 on the
financial statements and schedule IV of Intervest Corporation of New York as at
December 31, 1995 and December 31, 1994 and for each of the years in the
three-year period ending December 31, 1995 and to the reference to our firm,
appearing under the heading "Experts" in the Prospectus.
New York, New York
April 8, 1996
CONFORMED COPY
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
THE BANK OF NEW YORK
---------------------------------------------------
(Exact name of trustee as specified in its charter)
New York 13-5160382
---------------------------- -------------------
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
INTERVEST CORPORATION OF NEW YORK
---------------------------------------------------
(Exact name of obligor as specified in its charter)
New York 13-3415815
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10 Rockefeller Plaza
Suite 1015
New York, New York 10020-1903
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
--------------------
Series / / Registered Floating Rate Redeemable Subordinated Debentures
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State 2 Rector Street, New York,
of New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29
UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
l. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust powers.
(Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration
Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed
with Registration Statement No. 33-31019.)
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6
to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee polished pursuant to
law or to the requirements of its supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 14th day of March, 1996.
THE BANK OF NEW YORK
By: /s/ PAUL J. SCHMALZEL
------------------------------------
Name: PAUL J. SCHMALZEL
Title: ASSISTANT TREASURER
Q:\USER\TEW\INTERBAN\FORMT-1.WPD
April 5, 1996
