As filed with the Securities and Exchange Commission on March 11, 1997
Registration No. 333-______________
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 be to be price per offering Registration
registered registered debenture price Fee
- --------------------------------------------------------------------------------
Series / /
Registered
Floating
Rate Redeemable
Subordinated $8,500,000 $10,000 $8,500,000 $2,575.75
Debentures
- --------------------------------------------------------------------------------
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 .
<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.
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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 MARCH ___, 1997
PROSPECTUS
- ----------
INTERVEST CORPORATION OF NEW YORK
Maximum $8,500,000
Minimum $5,000,000
Series __/__/97 Registered Floating Rate Redeemable
Subordinated Debentures
$500,000 Series __/__/97 - ___% - Due July 1, 1999
$8,000,000 Series __/__/97 - Floating Rate - Due October 1, 2005
Minimum Investment of $10,000 At Par
INTERVEST CORPORATION OF NEW YORK (the "Company") is offering
$8,500,000 aggregate principal amount of its Series __/__/97 Registered Floating
Rate Redeemable Subordinated Debentures (the "Debentures"). As more fully
described under "Description of Debentures," the Debentures will be issued in
two maturities: $500,000 due July 1, 1999 and $7,000,000 due October 1, 2005. Of
the $8,000,000 principal amount of Debentures maturing October 1, 2005,
$1,000,000 principal amount will be offered and sold after July 1, 1997.
Interest on the Debentures maturing July 1, 1999 will accrue each
calendar quarter at ___%, reflecting one-half of one percent over the prime rate
of Chase Manhattan Bank on the date of this prospectus. 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 same interest rate of ___%
per annum. All accrued interest on the Debentures maturing July 1, 1999 will be
payable at the maturity of the Debentures, whether by acceleration, redemption
or otherwise.
Interest on the principal amount of Debentures maturing October 1,
2005, will be payable quarterly on the first day of each calendar quarter at one
percent over the prime rate of Chase Manhattan Bank, with a maximum interest
rate of 12%. At the date of this Prospectus, the rate of interest on the
Debentures maturing October 1, 2005 is ___%. Computations of interest are based
on the prime rate of Chase Manhattan Bank on the first day of the quarter for
which interest is accruing.
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 have not been rated by any
rating agency.
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, 1996, there was no
outstanding Senior Indebtedness. See "Description of Debentures -
Subordination."
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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 $ 8,500,000 $ 732,500(4) $7,767,500
- ------------------------------------------------------------------------------
(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.. The Company
will pay the Underwriter a commission of 8% of the purchase price of each
Debenture maturing October 1, 2005 and 2% of the purchase price of each
Debenture maturing July 1, 1999 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 October
1, 2005 and 1/2 of 1% of the aggregate gross amount of Debentures maturing July
1, 1999, 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 Intervest Bank, Clearwater, Florida 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 October 1, 2005 sold in the
offering; and 1/2 of 1% of the aggregate gross amount of Debentures maturing
July 1, 1999 sold in the offering.
-----------------------
Sage, Rutty & Co., Inc.
The date of this Prospectus is March 11, 1997
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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. The Commission maintains a Website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of that
site is: http://www.sec.gov
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.
Purchasers of Debentures will be furnished annual financial statements
of the Company, including a balance sheet and statement of profit and loss,
accompanied by a report of its independent accountants stating that (i) an audit
of such financial statements has been made in accordance with generally accepted
auditing principles, and (ii) the opinion of the accountants with respect to the
financial statements and the accounting principles and practices reflected
therein and as to the consistency of the application of the accounting
principles, and identifying any matters to which the accountants take exception
and stating, to the extent practicable, the effect of each such exception on the
financial statements.
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
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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. $8,500,000 principal amount of Series __/__/97
Registered Floating Rate Redeemable Subordinated Debentures, with maturity dates
as follows: $500,000 principal amount due July 1, 1999; and $8,000,000 principal
amount due October 1, 2005. $1,000,000 principal amount of Debentures with a
maturity date of October 1, 2005 will be offered and sold after July 1, 1997.
Interest on the principal amount of the Debentures maturing July 1, 1999 will
accrue each calendar quarter at ___%, reflecting one-half of one percent over
the prime rate of Chase Manhattan Bank on the date of this prospectus. In
addition, interest will accrue each calendar quarter on the balance of the
accrued interest at the same interest rate of ___% per annum. All accrued
interest is payable at maturity. Interest on the principal amount of Debentures
maturing October 1, 2005 will be paid on the first day of each calendar quarter
at one percent (1%) over the prime rate of Chase Manhattan Bank, with a maximum
interest rate of twelve percent (12%). The Debentures will be unsecured
obligations of the Company, and will be subordinated to all Senior Indebtedness.
As of December 31, 1996, the Company had no Senior Indebtedness. 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, will 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. 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.
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Balance Sheet Summary
December 31,
------------
1996 1995
Total Assets $92,223,000 $77,579,000
Cash 16,911,000 17,670,000
Mortgages 69,699,000 55,146,000
Total Long Term
Obligations(1) 79,006,000 66,850,000
Stockholders' Equity 10,075,000 9,378,000
- ---------------------
(1)Includes current portion of long-term obligations.
Income Statement Summary
Year Ended December 31
1996 1995 1994 1993 1992
--------------------------------------------------------
Net Interest
Income $2,444,000 $1,757,000 $1,777,000 $922,000 $441,000
Non-Interest
Income 654,000 414,000 300,000 820,000 755,000
Net Income 697,000 442,000 536,000 545,000 313,000
Ratio of
Earnings to
Fixed Charges 1.2 1.1 1.2 1.3 1.2
Risk Factors. An investment in the Debentures involves certain risks
and prospective investors should carefully consider the various risk factors.
See "Risk Factors."
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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. This is customarily referred to as a blind pool. 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 first mortgages and
junior mortgages. Substantially, all of the mortgages owned by the Company are
non-recourse. 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.
The Company has in the past and may in the future own "wraparound
mortgages" under which the outstanding principal balance of the wraparound
mortgage includes the outstanding principal balance of a 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
a 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
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of the senior underlying 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. 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." Intervest Bank, a
Florida state-chartered bank which is a member bank in the Federal Reserve
System, will act as escrow agent for the Company and will hold funds received
from subscribers. Intervest Bank is affiliated with the Company since the
directors of the Company also serve as directors of Intervest Bancshares
Corporation, a holding company which owns more than 95% of the shares of
Intervest Bank and the shareholders of the Company own a controlling interest in
Intervest Bancshares Corporation.
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
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(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) other unsecured borrowings by the Company which are
subordinate to Indebtedness of a type described in clauses (i), (ii) or (iv)
above if, immediately after the issuance thereof, the total capital, surplus and
retained earnings of the Company exceed the aggregate of the outstanding
principal amount of such indebtedness, 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, 1996, the
Company had no Senior Indebtedness. 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, 1996, the Company had $75,500,000 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. Many of the properties, moreover, are subject to rent control
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and rent stabilization laws imposed 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" and
"Management's Discussion and Analysis--Results of Operations."
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
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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
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 maturing
October 1, 2005 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
10
<PAGE>
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 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
11
<PAGE>
and commissions, are estimated at $7,767,500 if the maximum amount ($8,500,000)
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 will be used to purchase mortgages or interests in real
estate in accordance with the mortgage and real estate investment policies of
the Company.
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, 1996 and as adjusted to give effect to the sale of the Debentures
offered hereby:
As adjusted for the
Sale of the Debentures
Minimum Maximum
Offering Offering
Long Term Debt:
Debenture Interest Payable
at Maturity $ 3,506,000 $ 3,506,000
----------- -----------
Outstanding Debentures 75,500,000 75,500,000
----------- -----------
Debentures Offered 5,000,000 8,500,000
----------- -----------
84,006,000 87,506,000
=========== ===========
Stockholders' Equity:
Common Stock, No Par Value,
200 shares authorized,
31.84 shares issued and
outstanding $ 2,000,000 $ 2,000,000
----------- -----------
Additional Paid-in Capital 3,509,000 3,509,000
----------- -----------
Retained Earnings 4,566,000 4,566,000
----------- -----------
Total Stockholders' Equity 10,075,000 10,075,000
----------- -----------
Total Capitalization $94,081,000 $97,581,000
=========== ===========
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,
1996 was $10,075,000. 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, 1996 and 1995
-------------------------------------
Interest Income for 1996 was $9,497,000 as compared to $7,984,000 for
1995. The increase of $1,513,000 resulted mainly from an increase in mortgages
receivable, offset in part by a decrease in interest rates subsequent to July
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 was 8 1/2% at
December 31, 1995, and decreased to 8 1/4% on February 1, 1996.
Interest expense for the 1996 period was $7,053,000 as compared to
$6,227,000 for the 1995 period. The increase of $826,000 resulted mainly from an
increase in long term obligations, offset in part by a decrease in interest
rates subsequent to July 1995.
General and administrative expenses for 1996 was $948,000 as compared
to $657,000 for 1995. The increase of $291,000 resulted mainly from the payment
of an officer's salary and increased advertising expenses.
The provision for income taxes are $584,000 and $324,000 for 1996 and
1995, respectively. These provisions represent 46% and 42% of pretax income for
each period.
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
14
<PAGE>
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.
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 multi-family residential properties, 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.
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
15
<PAGE>
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, 1996, 60% 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 Florida, Georgia, New Jersey, upstate New York,
Pennsylvania and Virginia.
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, 1996, approximately 35% of the Company's mortgage portfolio was
comprised of fixed rate mortgages. Interest on the loans is usually payable
monthly.
At December 31, 1996, the Company's portfolio consisted of 52 real
estate mortgage loans totaling $70,601,000 in the aggregate face principal
amount ($69,699,000 in carrying amount for financial reporting purposes, the
difference representing unearned discounts). Of the principal amount of real
estate loans outstanding at December 31, 1996, 89% represent first mortgage
loans and 11% 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.
16
<PAGE>
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, 1996, the Company had 52 real estate mortgage loans in
its portfolio, totaling $70,601,000 (face amount) in aggregate principal amount.
Interest rates on the mortgage portfolio range between 6% and 24% 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, 1996 is set forth below:
Carrying
Amount of
Mortgage Prior No. of
Loans Liens Loans
----- ----- -----
First Mortgage Loans $62,013,000 $ 0 46
Junior Mortgages 7,686,000 20,983,000 6
----------- ----------- --
TOTAL $69,699,000 $20,983,000 52
=========== =========== ==
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.
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.
17
<PAGE>
<TABLE>
<CAPTION>
Income Statement Data
===================================================================================================================================
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
Interest income $ 9,497,000 $ 7,984,000 $ 6,368,000 $ 4,337,000 $ 3,345,000
Other income 372,000 332,000 283,000 802,000 735,000
Gain on early repayment of
discounted mortgages receivable 282,000 82,000 17,000 18,000 20,000
----------- ----------- ----------- ----------- -----------
10,151,000 8,398,000 6,668,000 $ 5,157,000 $ 4,100,000
----------- ----------- ----------- ----------- -----------
Expenses
Interest............................7,053,000 6,227,000 4,591,000 3,415,000 2,904,000
General and administrative 948,000 657,000 483,000 188,000 194,000
Amortization of deferred debenture
offering costs 869,000 748,000 655,000 529,000 460,000
----------- ----------- ----------- ----------- -----------
8,870,000 7,632,000 5,729,000 $ 4,132,000 3,558,000
----------- ----------- ----------- ----------- -----------
Income Before Income Taxes 1,281,000 766,000 939,000 1,025,000 542,000
Provision for Income Taxes 584,000 324,000 403,000 480,000 229,000
----------- ----------- ----------- ----------- -----------
Net Income $ 697,000 $ 442,000 $ 536,000 $ 545,000 $ 313,000
=========== =========== =========== =========== ===========
Ratio of Earnings to Fixed Charges1 1.2 1.1 1.2 1.3 1.2
- --------------------
(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.
Balance Sheet Data
December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Mortgages receivable $69,699,000 $55,146,000 $56,666,000 $41,521,000 $32,493,000
Total assets 92,223,000 77,579,000 64,745,000 54,650,000 45,140,000
Long term obligations 79,006,000 66,850,000 54,427,000 45,239,000 36,584,000
Stockholders' equity 10,075,000 9,378,000 8,936,000 8,400,000 7,855,000
18
</TABLE>
<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, 1996 due on such
mortgages is approximately $70,601,000 ($69,699,000 after adjusting for a
discount of $902,000).
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, one is a senior mortgage on land,
two are senior mortgages on office buildings and three are participations in
first mortgages on commercial properties. Five of the properties are commercial
properties which are located in various states, and each is leased by the
respective owner to a single commercial tenant under a long term net lease.
Thirty-one of the residential properties are located in New York City,
four are located in suburbs of New York City, five are located in the State of
New Jersey and one is located in the State of Pennsylvania. One of the Company's
mortgages is a blanket mortgage covering several residential properties located
in Philadelphia, Pennsylvania. Three of the residential properties are owned by
19
<PAGE>
cooperative corporations (a form of owner-occupied apartment ownership in New
York City). Thirty-eight of the residential properties are rental properties,
nine of which have commercial space (stores) on the ground floor. Thirty-two of
the Company's mortgages on these properties are first mortgages, and six are
junior mortgages. Three of the mortgages are participations in first mortgages
on commercial properties in Florida. One of the mortgages is a first mortgage on
land located in the State of Florida.
Table 1 below presents, as of December 31, 1996, certain information
regarding each of the Company's mortgages. As of the date of this prospectus,
only one of the mortgages listed in Table 1 (item 51) was delinquent as to
payment of principal or interest. 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-one mortgages listed as items 6 through 39, 41 through 45, 47
and 49 in Table 1 are liens on multifamily residential apartment buildings. Item
51 is a mortgage on land and items 50 and 52 are mortgages on office 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
mortgages listed as items 40, 46 and 48 are participation interests in first
mortgages on commercial properties. The property listed as item 27 is a
condominium complex. The other thirty-seven 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.
20
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
MORTGAGES RECEIVABLE
Outstanding
Principal Effective
Mortgage Balance at Type of Interest Debt Service
Number Address 12/31/96 Mortgage Rate Paymentss
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 104 Main Street
New City, New York $209,088.00 First 12.25% See Footnote 1
2 2860 Candler Road
Decatur, Georgia 263,011.00 First 13.00% See Footnote 2
3 6623 Tara Boulevard
Jonesboro, Georgia 227,136.00 First 13.00% See Footnote 3
4 Route 234 and
Coverstone Drive
Manassas, Virginia 165,724.00 First 12.375% See Footnote 4
5 850 Ridge Road East
Irondequoit, New York 267,252.00 First 12.50% See Footnote 5
6 168-70-72 East 90th Street
New York, New York 932,924.00 First 11.51% See Footnote 6
7 204-06-08 East 90th Street
New York, New York 850,000.00 First 11.51% See Footnote 7
8 126 East 12th Street
New York, New York 319,663.00 First 9.00% See Footnote 33
9 455 West 44th Street
New York, New York 1,298,103.00 First 10.00%(A) See Footnote 37
10 3133 Rochambeau Avenue
Bronx, New York 994,815.00 First 12.50%(A) See Footnote 8
11 3165 Decatur Avenue
Bronx, New York
and
3341-45 Reservoir Oval West
Bronx, New York 2,850,000.00 First 13.05%(A) See Footnote 17
12 2816 Heath Avenue
Bronx, New York 1,156,820.00 First 12.75%(A) See Footnote 18
<PAGE>
TABLE 1
MORTGAGES RECEIVABLE
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 104 Main Street
New City, New York 12/08/2010 Self-liquidating No prepayment penalty
2 2860 Candler Road
Decatur, Georgia 4/01/2013 Self-liquidating No prepayment penalty
3 6623 Tara Boulevard
Jonesboro, Georgia 4/01/2013 Self-liquidating No prepayment penalty
4 Route 234 and
Coverstone Drive
Manassas, Virginia 12/01/2005 Self-liquidating .5% prepayment penalty
5 850 Ridge Road East
Irondequoit, New York 12/01/2012 Self-liquidating 1% prepayment penalty
6 168-70-72 East 90th Street
New York, New York 10/31/1997 927,006.37 No prepayment permitted
7 204-06-08 East 90th Street
New York, New York 7/31/1997 850,000.00 No prepayment permitted
8 126 East 12th Street
New York, New York 11/01/1999 269,221.35 No prepayment permitted
9 455 West 44th Street
New York, New York 5/01/2005 1,206,365.61 1% fee
10 3133 Rochambeau Avenue
Bronx, New York 8/01/2010 Self-liquidating Not prepayable until
balance under $200,000
11 3165 Decatur Avenue
Bronx, New York
and
3341-45 Reservoir Oval West
Bronx, New York 9/01/2011 Self-liquidating Not prepayable until
3/1/2004
12 2816 Heath Avenue
Bronx, New York 1/01/2011 Self-liquidating No prepayment permitted
<PAGE>
TABLE 1
MORTGAGES RECEIVABLE
Outstanding
Principal Effective
Mortgage Balance at Type of Interest Debt Service
Number Address 12/31/96 Mortgage Rate Paymentss
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13 134 East Mosholu
Parkway South
Bronx, New York
and
2910 Grand Concourse
Bronx, New York 2,237,296.00 First 10.50%(A) See Footnote 9
14 2979 Marion Avenue
Bronx, New York 900,000.00 First 12.27%(A) See Footnote 24
15 326 East 201st Street
Bronx, New York 595,133.00 First 13.50%(A) See Footnote 10
*16 220 West 93rd Street
New York, New York 1,050,000.00 Second 12.00% See Footnote 7
17 2855 Claflin Avenue
Bronx, New York 784,837.00 First 9.00%(A) See Footnote 11
18 2847 Webb Avenue
Bronx, New York 637,242.00 First 13.50%(A) See Footnote 12
19 115-117 West 197th Street
Bronx, New York 1,934,057.00 First 13.75%(A) See Footnote 13
20 3006 Decatur Avenue
Bronx, New York 1,188,373.00 First 9.00%(A) See Footnote 14
* 21 222 West 83rd Street
New York, New York 3,300,000.00 Second 11.00% See Footnote 7
22 219-221 East 23rd Street
New York, New York 1,272,258.00 First (B) See Footnote 36
23 2980 Valentine Avenue
Bronx, New York 1,831,291.00 First 12.75%(A) See Footnote 15
24 3154-3164 Grand Concourse
Bronx, New York 1,602,582.00 First 13.00%(A) See Footnote 19
25 796-798 Ninth Avenue
New York, New York 1,445,000.00 First 10.00% See Footnote 7
<PAGE>
TABLE 1
MORTGAGES RECEIVABLE
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
13 134 East Mosholu
Parkway South
Bronx, New York
and
2910 Grand Concourse
Bronx, New York 11/01/2012 Self-liquidating Not prepayable until 2/2003
14 2979 Marion Avenue
Bronx, New York 8/01/2012 Self-liquidating Not prepayable until
balance under $200,000,
2% fee on unpaid balance
15 326 East 201st Street
Bronx, New York 3/01/1997 592,000.00 No prepayment penalty
*16 220 West 93rd Street
New York, New York 2/01/1999 1,050,000.00 No prepayment penalty
17 2855 Claflin Avenue
Bronx, New York 7/01/2006 Self-liquidating Not prepayable until 1/1/2000
18 2847 Webb Avenue
Bronx, New York 3/01/1997 634,000.00 No prepayment penalty
19 115-117 West 197th Street
Bronx, New York 6/01/2013 Self-liquidating No prepayment permitted
20 3006 Decatur Avenue
Bronx, New York 11/01/2015 Self-liquidating Not prepayable until 3/99
* 21 222 West 83rd Street
New York, New York 2/01/1997 3,300,000.00 No prepayment penalty
22 219-221 East 23rd Street
New York, New York 2/28/1997 1,265,398.27 1% fee
23 2980 Valentine Avenue
Bronx, New York 11/01/2011 Self-liquidating Not prepayable until 1/1/2003
24 3154-3164 Grand Concourse
Bronx, New York 1/01/2010 Self-liquidating Not prepayable until 10/1/2000
25 796-798 Ninth Avenue
New York, New York 10/01/2000 1,445,000.00 Not prepayable until 1/1/1997
<PAGE>
TABLE 1
MORTGAGES RECEIVABLE
Outstanding
Principal Effective
Mortgage Balance at Type of Interest Debt Service
Number Address 12/31/96 Mortgage Rate Paymentss
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
26 3150 Rochambeau Avenue
Bronx, New York 4,510,000.00 First 12.77%(A) See Footnote 25
27 Hyde Park Condo., Rt. 9
Hyde Park, New York 1,811,917.00 First (B) See Footnote 39
* 28 203 West 90th Street
New York, New York 1,400,000.00 Second 10.50%(A) See Footnote 7
29 790 Ninth Avenue
New York, New York 425,000.00 First 10.00% See Footnote 7
30 801/803 Ninth Avenue
New York, New York 1,083,366.00 First 11.00%(A) See Footnote 38
* 31 650 Main Street
New Rochelle, New York 500,000.00 Second 11.50%(A) See Footnote 7
32 676 Ninth Avenue
New York, New York 265,000.00 First 10.00% See Footnote 7
33 158 South Harrison Street
East Orange, New Jersey 736,546.00 First (B) See Footnote 16
34 48-56 Beaver Street
New York, New York 1,556,966.00 First (B) See Footnote 20
35
35 805 Ninth Avenue
New York, New York 286,292.00 First 11.00%(A) See Footnote 21
36 200 Route 209
Ellenville, New York 877,307.00 First (B) See Footnote 22
37 21-14/21-70 Crescent Street
Astoria, New York 1,149,028.00 Second (B) See Footnote 23
38 379 Princeton-Hightstown Road
East Windsor, New Jersey 1,200,000.00 First (B) See Footnote 32
39 80 Nassau Street
New York, New York 2,683,336.00 First (B) See Footnote 27
40 Carrell Corners
Ft. Myers, Florida 348,712.00 (E) 8.75% See Footnote 28
<PAGE>
TABLE 1
MORTGAGES RECEIVABLE
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
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<S> <C> <C> <C>
26 3150 Rochambeau Avenue
Bronx, New York 11/01/2013 Self-liquidating No prepayment permitted
27 Hyde Park Condo., Rt. 9
Hyde Park, New York 3/31/1997 1,764,329.14 1% fee
* 28 203 West 90th Street
New York, New York 2/01/1998 1,400,000.00 No prepayment penalty
29 790 Ninth Avenue
New York, New York 10/01/2000 425,000.00 Not prepayable until 1/1/1997
30 801/803 Ninth Avenue
New York, New York 3/15/2010 Self-liquidating No prepayment penalty
* 31 650 Main Street
New Rochelle, New York 3/01/1996 500,000.00 No prepayment penalty
32 676 Ninth Avenue
New York, New York 10/01/2000 265,000.00 Not prepayable until 1/1/1997
33 158 South Harrison Street
East Orange, New Jersey 4/15/1998 693,103.08 Not prepayable until 7/15/1997, then 1% fee
34 48-56 Beaver Street
New York, New York 4/30/1997 1,534,589.31(C) 1% fee
35 805 Ninth Avenue
New York, New York 3/15/2010 Self-liquidating No prepayment penalty
36 200 Route 209
Ellenville, New York 4/30/1997 847,283.76 1% fee
37 21-14/21-70 Crescent Street
Astoria, New York 1/17/1999 1,066,217.42 One month's interest
38 379 Princeton-Hightstown Road
East Windsor, New Jersey 12/29/1997 1,184,741.43 One month's interest
39 80 Nassau Street
New York, New York 9/25/1998 2,555,850.38 Not prepayable until 6/26/1997,
then one month's interest
40 Carrell Corners
Ft. Myers, Florida 9/24/2006 Self-liquidating sNo prepayment penalty
<PAGE>
TABLE 1
MORTGAGES RECEIVABLE
Outstanding
Principal Effective
Mortgage Balance at Type of Interest Debt Service
Number Address 12/31/96 Mortgage Rate Paymentss
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<S> <C> <C> <C> <C>
41 3051-91 Pleasant Street
Camden, New Jersey 1,010,661.00 First (B) See Footnote 29
42 320 West Branch Avenue
Pine Hill, New Jersey 7,266,265.00 First (B) See Footnote 30
43 238-240 East 14th Street
New York, New York 1,100,000.00 First 11.00% See Footnote 7
44 189 Sunrise Highway
Rockville Centre, New York 287,910.00 Second (B) See Footnote 31
45 190 Fordham Street
City Island, Bronx, New York 346,395.00 First 24.00% See Footnote 7
46 5125 Adanson Street
Orlando, Florida 125,000.00 (E) 8.5% See Footnote 28
47 276-336 Eastern Parkway
Irvington, New Jersey 242,396.00 First (B) See Footnote 3
48 1512 E. Broward Blvd.
Ft. Lauderdale, Florida 325,000.00 (E) 8.75% See Footnote 28
49 Blanket Mortgage - Apartment
Buildings
Philadelphia, Pennsylvania 3,782,152.00 First (B) See Footnote 40
50 4250 Veterans Highway
Bohemia, New York 3,579,336.00 First (B) See Footnote 26
51 Triple R Ranch
Kissimmee, Florida 1,583,700.00 First (B) See Footnote 41
52 Meridian Center
Two Industrial Way West
Eatontown, New Jersey 3,806,064.00 First (B) See Footnote 42
<PAGE>
TABLE 1
MORTGAGES RECEIVABLE
Mortgage Maturity Principal Balance
Number Address Date Due at Maturity Prepayment Provisions
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
41 3051-91 Pleasant Street
Camden, New Jersey 7/01/1997 928,811.72 1% fee
42 320 West Branch Avenue
Pine Hill, New Jersey 5/1/1999 6,266,296.82 Not prepayable until
11/2/1997, then 1% fee
43 238-240 East 14th Street
New York, New York 3/01/1999 1,100,000.00 No prepayment penalty
44 189 Sunrise Highway
Rockville Centre, New York 3/31/1997 285,081.62 1% fee
45 190 Fordham Street
City Island, Bronx, New York 9/30/1996 646,974.50 No prepayment penalty
46 5125 Adanson Street
Orlando, Florida 11/18/2011 Self-liquidating No prepayment penalty
47 276-336 Eastern Parkway
Irvington, New Jersey 8/01/1997 197,821.89(D) Not prepayable until 5/1/1997, then 1% fee
48 1512 E. Broward Blvd.
Ft. Lauderdale, Florida See Footnote 28 See Footnote 34 No prepayment penalty
49 Blanket Mortgage - Apartment
Buildings
Philadelphia, Pennsylvania 6/12/1999 3,292,797.15 Not prepayable until
6/12/1997; then 1% fee
50 4250 Veterans Highway
Bohemia, New York 8/06/98 3,423,787.96 One month's interest
51 Triple R Ranch
Kissimmee, Florida 7/10/1997 1,563,597.70 1% fee
52 Meridian Center
Two Industrial Way West
Eatontown, New Jersey 4/26/1997 3,797,877.79 1% fee
* Owned by an affiliate of the Company
</TABLE>
<PAGE>
(A) The interest rates specified are the effective interest rates at
December 31, 1996. 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, 1996 was $2,306,966,
including a participation of $750,000 held by an unrelated third party.
The full balance at maturity is $2,284,589.31.
(D) The full principal balance at December 31, 1996 was $1,492,396,
including a participation of $1,250,000 held by an unrelated third
party. The full balance at maturity is $1,447,821.89.
(E) Participation interest in first mortgage loan held by an affiliated
bank.
(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) $9,505 per month, including interest.
(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) $11,200 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.
(See Additional Footnotes on Next Page)
<PAGE>
(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, reduced by interest payment at
10.75% on $750,000 to participants of the mortgage.
(21) Debt service payments increase from $3,100 per month to $3,350.52 per
month over the life of the mortgage.
(22) Debt service payments increase from $17,400 per month to $18,400 per
month over the life of the mortgage.
(23) $16,700 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) $50,000 per month, including interest.
(27) $38,000 per month, including interest.
(28) Monthly debt service payments include 100% principal and participation
interest.
(29) Debt service payments increase from $24,000 per month to $25,250 per
month over the life of the mortgage.
(30) Debt service payments increase from $50,000 per month to $104,000 per
month over the life of the mortgage.
(31) $4,533 per month including interest.
(32) $15,725 per month, including interest.
(33) Debt service payments increase from $3,500 per month to $4,000 per
month, including interest.
(34) $319,580 principal amount received in January 1997, and the
participation was fully paid.
(35) $27,335 per month, including interest, reduced by interest payment at
10.25% on $1,250,000 to participants of the mortgage.
(36) $18,200 per month, including interest.
(37) Debt service payments 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.
(See Additional Footnotes on Next Page)
<PAGE>
(39) $37,900 per month, including interest.
(40) Debt service payments increase from $50,000 per month to $65,000 per
month over the life of the mortgage.
(41) $21,500 per month, including interest.
(42) Debt service payments decrease from $83,200 per month to $48,200 per
month over the life of the mortgage.
<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 may 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. Three of the 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 multi-family 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
29
<PAGE>
regarding the percentage of the Company's 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. 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 also acquires or originates mortgages which
are liens on other types of properties, including land and 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
30
<PAGE>
to the payments due under the 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 only experienced
a single default or delinquency in its mortgage portfolio. It is pursuing
foreclosure proceedings with respect to a single mortgage, the principal balance
of which mortgage is $1,583,700. 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 experienced
only a single default or delinquency, 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
32
<PAGE>
in rental income, the ability of the owner of 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
Except with respect to foreclosure proceedings related to one of its
mortgages, 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.
33
<PAGE>
Subsidiaries
The Company has two wholly-owned subsidiaries. Intervest Distribution
Corporation is a servicing agent for distributions to 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:
Lawrence G. Bergman, age 52, serves as a Director, and as 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 a Director, 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. Bergman has been actively involved in the ownership and operation of real
estate and mortgages through certain family-owned entities.
Michael A. Callen, age 56, 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.
Jean Dansker, age 75, serves as Vice President of the Company and has
served in such capacity since June, 1996. Mrs. Dansker received a Bachelor of
Arts degree from Brooklyn College in Economics. Mrs. Dansker has been an active
investor in real estate and mortgages for more than five years.
Jerome Dansker, age 78, serves as a Director and as Executive Vice
President of the Company, and has served in such capacity since November, 1993.
Mr. Dansker became Chairman of the Board of Directors in June, 1996. 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
34
<PAGE>
of Law, and is admitted to practice as an attorney in the State of New York. Mr.
Dansker is a Director, Chairman of the Board 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
through certain family-owned entities.
Lowell S. Dansker, age 46, serves as a Director, and as 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 a Director, 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. During the past five years, Mr.
Dansker has been actively involved in the ownership and operation of real estate
and mortgages through certain family-owned entities.
Milton F. Gidge, age 67, 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 68, 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.
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Mr. Willmott is also a Director of Intervest Bancshares Corporation.
Wesley T. Wood, age 54, 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 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. Jean Dansker is the
wife of Jerome Dansker and the mother 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 present amount of
$132,500, 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.
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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. 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 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 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
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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, 1994, 1995 and 1996, the
mortgage servicing fees paid by the Company to Capital Holding Company were
$354,000, $342,000 and $367,000 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, 0.20 shares are
owned by her as custodian for one of her children under the Uniform Gifts to
Minors Act of the State of New York, and 0.20 shares are owned by an adult
child.
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DESCRIPTION OF DEBENTURES
The Company will issue the Debentures under an Indenture to be dated as
of ___________, 1997 (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: $500,000 of
Series __/__/97 Registered Floating Rate Redeemable Subordinated Debentures due
July 1, 1999; and $8,000,000 of Series __/__/97 Registered Floating Rate
Redeemable Subordinated Debentures due October 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 maturing July 1, 1999 will accrue each
calendar quarter at ___%, reflecting one-half of one percent over the prime rate
of Chase Manhattan Bank on the date of this prospectus. 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 same interest rate of ___%
per annum. All accrued interest on the Debentures maturing July 1, 1999 will be
payable at the maturity of the Debentures, whether by acceleration, redemption
or otherwise.
Interest on the Debentures maturing October 1, 2005 will be paid on the
first day of each calendar quarter at an annual rate equal to one percentage
point over the prime rate of Chase Manhattan 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, 2005 is
_________%. An aggregate of $1,000,000 principal amount of the Debentures
maturing October 1, 2005 will be offered and sold after July 1, 1997.
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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. Debentures sold after the First Closing will be
deemed sold on the date the Company (or the Underwriter on its behalf) receives
payment therefor. Notwithstanding the foregoing, with respect to the $1,000,000
principal amount of Debentures maturing October 1, 2005 offered and sold after
July 1, 1997, interest will accrue from the fifth day preceding the closing of
such Debentures. 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, or such
earlier date selected by the Company without requirement of notice. 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 all interest accruing 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 the first interest payment. The "Prime Rate"
shall mean the interest rate that Chase Manhattan Bank publicly announces as its
prime rate from time to time at its principal office. In the event that Chase
Manhattan 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. 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
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exchange (the "Registrar"). The Company has appointed The Bank of New York 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 (July 1, 1999 or October 1, 2005) offered
hereby and issued pursuant to the Indenture.
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 not
be affected by any notice to the contrary. Upon transfer, the Debentures will be
canceled, 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 $7,500,000 (but not more than $500,000 of
Debentures maturing July 1, 1999 or $8,000,000 of Debentures maturing October 1,
2005) upon receipt of a written order of the Company, specifying the amount of
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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 $8,500,000 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 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) other unsecured
borrowings by the Company which are subordinate to Indebtedness of a type
described in clauses (i), (ii) or (iv) above if, immediately after the issuance
thereof, the total capital, surplus and retained earnings of the Company exceed
the aggregate of the outstanding principal amount of such indebtedness, 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). As of December 31, 1996, the Company had no
Senior Indebtedness and the Company's capital, surplus and retained earnings was
approximately $10,075,000. 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"). As of December 31, 1996, the Company had outstanding $2,000,000
aggregate principal amount of its Series 10/4/89 Registered Floating Rate
Redeemable Subordinated Debentures, $2,000,000 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
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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, $4,500,000 aggregate principal amount of its
Series 1/28/94 Registered Floating Rate Redeemable Subordinated Debentures,
$4,500,000 aggregate principal amount of its Series 10/28/94 Registered Floating
Rate Redeemable Subordinated Debentures, $10,000,000 aggregate principal amount
of its Series 5/12/95 Registered Floating Rate Redeemable Subordinated
Debentures, $10,000,000 aggregate principal amount of its Series 10/19/95
Registered Floating Rate Redeemable Subordinated Debentures, $11,000,000
aggregate principal amount of its Series 5/10/96 Registered Floating Rate
Redeemable Subordinated Debentures, and $6,000,000 aggregate principal amount of
its Series 10/15/96 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 July 1, 1999 will be the face amount. The
redemption price for Debentures due October 1, 2005 will be (i) face amount plus
a 2% premium if the date of redemption is prior to January 1, 1999, (ii) face
amount plus a 1% premium if the date of redemption is on or after January 1,
1999 and prior to January 1, 2000, and (iii) face amount if the date of
redemption is on or after January 1, 2000. 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
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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 (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
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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).
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)
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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 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 received by Holders of Debentures 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 who hold the Debentures
for investment purposes should treat all reportable interest 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,
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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 ($8,500,000) "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. Of the Debentures maturing October 1, 2005, $1,000,000 in
aggregate principal amount will be offered and sold after July 1, 1997. 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.
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 denies all of the material allegations therein. 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 October 1, 2005 and 2% of the purchase price of
Debentures due July 1, 1999 which are sold by the Underwriter or participating
broker/dealers. In addition, the Company will pay the Underwriter a fee equal to
48
<PAGE>
1% of the aggregate gross amount of Debentures due October 1, 2005 sold in the
offering and 1/2 of 1% of Debentures due July 1, 1999 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.
Until the First Closing, subscription payments for Debentures should be
made payable to "Intervest 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 Intervest Bank
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.
49
<PAGE>
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.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF THE COMPANY
Report of Independent Auditors-- 1996 and 1995.............. F- 1
Balance Sheets as of December 31, 1996 and 1995.............. F- 2
Statements of Operations and Retained Earnings for
the Periods Ended December 31, 1996, 1995 and 1994......... F- 3
Statements of Cash Flows for the Periods
Ended December 31, 1996, 1995 and 1994.................... F- 4
Notes to Financial Statements .............................. F- 5
Schedule IV--Mortgage Loans on Real Estate--
December 31, 1996 .......................................... F-12
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.
51
<PAGE>
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, 1996 and
December 31, 1995, 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, 1996 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, 1996 and
December 31, 1995, and the consolidated results of their operations and their
consolidated cash flows for each of the years in the three-year period ended
December 31, 1996 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 22, 1997
F-1
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
------------
December 31,
------------
1996 1995
---- ----
Cash and cash equivalents $16,911,000 $17,670,000
Mortgages receivable, including
due from affiliates of
$6,250,000 in 1996 and 1995
(Notes 2, 4 and 5) 69,699,000 55,146,000
Deferred debenture offering costs,
net of accumulated amortization
of $2,262,000 and $2,343,000 (Note 2) 4,475,000 3,865,000
Other assets (Note 7) 1,138,000 898,000
------------ -----------
T O T A L $92,223,000 $77,579,000
============ ===========
L I A B I L I T I E S
Accounts payable and accrued expenses $ 406,000 $ 64,000
Mortgage escrow deposits 2,356,000 1,021,000
Mortgage payable 18,000
Subordinated debentures payable
(Note 3) 75,500,000 64,700,000
Debenture interest payable at maturity
(Note 3) 3,506,000 2,132,000
Deferred mortgage interest and fees 380,000 266,000
------------ -----------
Total liabilities 82,148,000 68,201,000
------------ -----------
Commitments and other matters (Note 6)
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 4,566,000 3,869,000
------------ -----------
Total stockholders' equity 10,075,000 9,378,000
------------ -----------
T O T A L $92,223,000 $77,579,000
============ ===========
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
-----------------------
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue:
Interest income:
Affiliates . . . . . . . . . . . . . . . $ 693,000 $ 985,000 $ 1,262,000
Others . . . . . . . . . . . . . . . . . 8,804,000 6,999,000 5,106,000
----------- ----------- -----------
T o t a l . . . . . . . . . . . . . 9,497,000 7,984,000 6,368,000
Other income (Note 5) . . . . . . . . . . . 372,000 332,000 283,000
Gain on early repayment of discounted
mortgages receivable (Note 4) . . . . . . 282,000 82,000 17,000
----------- ----------- -----------
10,151,000 8,398,000 6,668,000
----------- ----------- -----------
Expenses:
Interest . . . . . . . . . . . . . . . . . 7,053,000 6,227,000 4,591,000
General and administrative (Note 5) . . . . 948,000 657,000 483,000
Amortization of deferred debenture
offering costs (Note 2) . . . . . . . . . 869,000 748,000 655,000
----------- ----------- -----------
8,870,000 7,632,000 5,729,000
----------- ----------- -----------
Income before income taxes . . . . . . . . . . 1,281,000 766,000 939,000
Provision for income taxes (Note 7) . . . . . 584,000 324,000 403,000
----------- ----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . 697,000 442,000 536,000
Retained earnings - beginning of year . . . . 3,869,000 3,427,000 2,891,000
----------- ----------- -----------
RETAINED EARNINGS - END OF YEAR . . . . . . . $ 4,566,000 $ 3,869,000 $ 3,427,000
=========== =========== ===========
See notes to financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
------------------------
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . $ 697,000 $ 442,000 $ 536,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Amortization of discount on
mortgages receivable . . . . . . (421,000) (255,000) (210,000)
Amortization of deferred debenture
offering costs . . . . . . . . . 869,000 748,000 655,000
Amortization of premium on
municipal bonds . . . . . . . . 13,000
Gain on early repayment of
discounted mortgages . . . . . . (282,000) (82,000) (17,000)
Changes in operating assets and
liabilities:
(Increase) in other assets . . (240,000) (109,000) (167,000)
Increase (decrease) in
accounts payable and accrued
expenses . . . . . . . . . . 342,000 4,000 (171,000)
Increase in mortgage escrow
deposits . . . . . . . . . . 1,335,000 11,000 544,000
Increase (decrease) in
debenture interest payable
at maturity . . . . . . . . 1,374,000 (1,356,000) 1,004,000
Increase (decrease) in
deferred mortgage
interest and fees . . . . . 114,000 (46,000) (2,000)
------------ ------------ ------------
Net cash provided by (used
in) operating activities . 3,788,000 (643,000) 2,185,000
------------ ------------ ------------
Cash flows from investing activities:
Collection of mortgages receivable . . 20,924,000 18,981,000 3,762,000
Mortgages receivable acquired:
Properties owned by affiliates . . . (2,500,000)
Properties owned by others . . . . . (34,774,000) (17,124,000) (16,180,000)
Collection of loans to stockholders . 3,500,000
Principal payments of mortgages
payable . . . . . . . . . . . . . . (18,000) (21,000) (16,000)
Redemption of governmental obligations 985,000 2,655,000
Purchase of governmental obligations . (985,000)
------------ ------------ ------------
Net cash (used in) provided
by investing activities . (13,868,000) 2,821,000 (9,764,000)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from subordinated debenture
offerings . . . . . . . . . . . . . 17,000,000 20,000,000 10,000,000
Payment of debenture offering costs . (1,479,000) (1,784,000) (946,000)
Redemption of subordinated debentures (6,200,000) (6,200,000) (1,800,000)
------------ ------------ ------------
Net cash provided by
financing activities . . . 9,321,000 12,016,000 7,254,000
------------ ------------ ------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . (759,000) 14,194,000 (325,000)
Cash and cash equivalents at beginning of
year . . . . . . . . . . . . . . . . . 17,670,000 3,476,000 3,801,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,911,000 $ 17,670,000 $ 3,476,000
============ ============ ============
</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
------------ -------- ------------
1996 . . . . . . . . $5,679,000 $196,000
1995 . . . . . . . . 7,584,000 331,000
1994 . . . . . . . . 3,586,000 318,000
[f] Estimated fair value of financial instruments:
The Company considers the carrying amounts presented for
mortgages receivable and subordinated debentures payable on the consolidated
balance sheets to be reasonable approximations of fair value. The Company's
variable or floating interest rates on large portions of its receivables and
payables approximate those which would prevail in current market transactions.
Considerable judgement is necessarily required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market transaction.
(continued)
F-5
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 2) - Significant Accounting Policies: (continued)
[g] Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[h] 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.
[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.
(continued)
F-6
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 3) - Subordinated Debentures Payable:
The Company's Registered Floating Rate Redeemable Debentures consist of
the following:
December 31,
------------
1996 1995
---- ----
Series 1989, interest at 2% above prime . . $ 1,200,000
Series 10/4/89, interest at 1% above prime. $ 2,000,000 4,000,000
Series 3/28/90, interest at 1% above prime. 2,000,000 4,000,000
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 2% above prime. 8,000,000 8,000,000
Series 1/28/94, interest at 1% above prime. 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
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 1,000,000
Series 5/12/95, interest at 2% above prime. 9,000,000 9,000,000
Series 10/19/95, interest at 1% above prime 1,000,000 1,000,000
Series 10/19/95, interest at 2% above prime 9,000,000 9,000,000
Series 5/10/96, interest at 1% above prime. 1,000,000
Series 5/10/96, interest at 2% above prime. 10,000,000
Series 10/15/96, interest at 1% above prime 500,000
Series 10/15/96, interest at 2% above prime 5,500,000
----------- -----------
$75,500,000 $64,700,000
=========== ===========
"Prime" refers to the prime rate of Chase Manhattan Bank.
Prime was 8 1/4% on December 31, 1996. Minimum interest is 9 1/2% and
maximum interest is 15% on Series 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,
10/19/95, 5/10/96 and 10/15/96 have maximum interest of 12%.
Payment of interest on an aggregate of $14,930,000 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 1994, redemption would
generally be at a premium of 1% or 2% if the redemption is prior to 1998.
(continued)
F-7
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 3) - Subordinated Debentures Payable: (continued)
The debentures are unsecured and subordinate to all present and future
senior indebtedness, as defined.
Maturities of debentures are summarized as follows:
Year Ending
December 31,
------------
1997. . . . . . . . . . . . . . . . . . . $ 3,000,000
1998. . . . . . . . . . . . . . . . . . . 4,000,000
1999. . . . . . . . . . . . . . . . . . . 11,000,000
2000. . . . . . . . . . . . . . . . . . . 7,000,000
2001. . . . . . . . . . . . . . . . . . . 8,000,000
Thereafter until 2005 . . . . . . . . . . 42,500,000
-----------
T o t a l . . . . . . . . . . . $75,500,000
===========
(NOTE 4) - Mortgages Receivable:
Information as to mortgages receivable is summarized as follows:
December 31,
------------
1996 1995
---- ----
First mortgages . . . . . . . . $62,914,000 $48,685,000
Junior mortgages. . . . . . . . 7,687,000 6,906,000
Wraparound mortgage . . . . . . 329,000
------------ -----------
70,601,000 55,920,000
Less unearned discount. . . . . 902,000 774,000
------------ -----------
T o t a l . . . . . . . $69,699,000 $55,146,000
============ ===========
Interest rates on mortgages range from 6% to 24%. Certain mortgages have
been discounted utilizing rates ranging from 12% to 18%.
During 1994, 1995 and 1996 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,
1997. . . . . . . . . . . . . . . . . $22,472,000
1998. . . . . . . . . . . . . . . . . 9,144,000
1999. . . . . . . . . . . . . . . . . 14,292,000
2000. . . . . . . . . . . . . . . . . 2,767,000
2001. . . . . . . . . . . . . . . . . 766,000
Thereafter until 2015 . . . . . . . . 21,160,000
-----------
T o t a l . . . . . . . . . $70,601,000
===========
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.
(continued)
F-8
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 5) - Related Party Transactions:
During 1995 and 1994 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
and $4,000,000, respectively, were refinanced and the Company received new first
mortgages totaling $9,670,000 and $5,610,000, respectively.
During 1994 a mortgage of $100,000, representing a lien on property
owned by an affiliated company, was acquired from a third party. This mortgage
was recorded at cost. In addition, during 1994 the Company made mortgage loans
of $2,400,000 on properties owned by affiliated companies.
Interest income - others includes $120,000 earned on notes receivable
from stockholders in 1994.
Other income includes the following amounts from affiliates:
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
Real estate sales commissions . . . . $135,000
Mortgage modification fees . . . . . $ 8,000 $ 42,000 121,000
-------- -------- --------
T o t a l . . . . . . . . . $ 8,000 $ 42,000 $256,000
======== ======== ========
The Company utilizes personnel and other facilities of affiliated
entities and is charged service fees for general and administrative expenses for
placing mortgages, servicing mortgages and distributing debenture interest
checks. Such fees amounted to $367,000, $342,000 and $354,000 in 1996, 1995 and
1994, respectively. Management believes these service fees are reasonable.
(NOTE 6) - Commitments:
[a] Office lease:
The Company occupies its office space under a lease which
commenced 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 as additional rent. Rent expense amounted to $180,000, $177,000 and
$44,000 for 1996, 1995 and 1994, respectively.
Future minimum rents under the lease are as follows:
1997. . . . . . . . . . . . . . . . . . . $ 157,976
1998. . . . . . . . . . . . . . . . . . . 174,902
1999. . . . . . . . . . . . . . . . . . . 174,902
2000. . . . . . . . . . . . . . . . . . . 179,133
2001. . . . . . . . . . . . . . . . . . . 191,828
Thereafter. . . . . . . . . . . . . . . . 527,527
----------
T o t a l . . . . . . . . . . . $1,406,268
==========
The Company shares this space with affiliates who were charged
rent of $63,000, $77,000 and $12,000 in 1996, 1995 and 1994, respectively.
(continued)
F-9
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 6) - Commitments: (continued)
[b] Employment agreement:
Effective as of July 1, 1995, the Company entered into an
employment agreement with its Executive Vice President, who is related to the
stockholders, 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 7) - 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.
The provision for income taxes consists of the following components:
Year Ended December 31,
1996 1995 1994
Current taxes:
Federal . . . . . . . . . . . . . $324,000 $143,000 $202,000
State and local . . . . . . . . . 216,000 102,000 164,000
Deferred taxes:
Federal . . . . . . . . . . . . . 26,000 46,000 22,000
State and local . . . . . . . . . 18,000 33,000 15,000
--------- --------- --------
Total tax provision. . . . $584,000 $324,000 $403,000
========= ========= ========
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,
1996 1995 1994
Debenture underwriting commissions . . . . $ 19,000 $ 32,000 $ 51,000
Deferred fees and interest . . . . . . . . 58,000 68,000 110,000
Discount on mortgages receivable . . . . . (70,000) (49,000) (31,000)
--------- --------- ---------
T o t a l. . . . . . . . . . . . $ 7,000 $ 51,000 $130,000
========= ========= ========
(continued)
F-10
<PAGE>
INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 7) - Income Taxes: (continued)
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,
------------
1996 1995 1994
---- ---- ----
Tax computed based upon the
statutory federal tax rate. . . . . . . $435,000 $260,000 $319,000
State and local income tax,
net of federal income tax
benefit . . . . . . . . . . . . . . . . 158,000 98,000 118,000
Nontaxable income . . . . . . . . . . . (9,000) (10,000) (23,000)
Other. . . . . . . . . . . . . . . . . (24,000) (11,000)
--------- --------- ---------
T o t a l. . . . . . . . . . $584,000 $324,000 $403,000
========= ========= ========
F-11
<PAGE>
<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996
OUTSTANDING BALANCE OF MORTGAGE
EFFECTIVE ACTUAL FINAL
INTEREST INTEREST MATURITY PRIOR
DESCRIPTION RATE RATE DATE PERIODIC PAYMENT TERMS LIENS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL FIRST MORTGAGES:
OFFICE BUILDINGS:
NEW CITY, NEW YORK 12.25 6.20 12/08/10 PRINCIPAL AND INTEREST ANNUALLY
EATONTOWN, NEW JERSEY 16.10 14.25 (B) 04/26/97 (C)
BOHEMIA, NEW YORK 16.00 14.25 (B) 08/66/98 (C)
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
DECATUR AND JONESBORO, GEORGIA 13.00 8.50 04/01/13 (C)
PARTICIPATIONS:
FT. MYERS, FLORIDA 8.75 8.75 09/24/06
ORLANDO, FLORIDA 8.50 8.50 11/18/11
FT. LAUDERDALE, FLORIDA 8.75 8.75 (I)
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)
NEW YORK, NEW YORK 9.00 9.00 11/01/99 (C)
RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK 9.00 9.00 (A) 07/01/06 (C)
BRONX, NEW YORK 10.50 10.50 (A) 11/01/12 (C)
BRONX, NEW YORK 12.53 12.53 (A) 08/01/12 (C)
NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
NEW YORK, NEW YORK 10.00 10.00 (A) 05/01/05 (C)
BRONX, NEW YORK 13.37 13.37 (A) 09/01/11 (C)
BRONX, NEW YORK 12.75 12.75 (A) 01/01/11 (C)
BRONX, NEW YORK 12.50 12.50 (A) 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 (A) 06/01/13 (C)
BRONX, NEW YORK 9.00 9.00 (A) 11/01/15 (C)
BRONX, NEW YORK 13.00 13.00 (A) 01/01/10 (C)
NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
BRONX, NEW YORK 12.75 12.75 (A) 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 11.00 11.00 03/01/99 (D)
CITY ISLAND, BRONX, NEW YORK 24.00 24.00 09/30/96 (D)
NEW YORK, NEW YORK 13.50 13.50 (B) 02/28/97 (C)
HYDE PARK, NEW YORK 16.35 14.50 (B) 03/31/97 (C)
<PAGE>
INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996
OUTSTANDING BALANCE OF MORTGAGE
EFFECTIVE ACTUAL FINAL
INTEREST INTEREST MATURITY PRIOR
DESCRIPTION RATE RATE DATE PERIODIC PAYMENT TERMS LIENS
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS: (CONTINUED)
EAST ORANGE, NEW JERSEY 15.65 14.25 (B) 04/15/98 (C)
CAMDEN, NEW JERSEY 15.83 14.00 (B) 07/01/97 (C)
IRVINGTON, NEW JERSEY 17.80 16.00 (B) 08/01/97 (C)
PINE HILL, NEW JERSEY 16.00 14.25 (B) 05/01/99 (C)
PHILADELPHIA, PENNSYLVANIA 16.00 14.25 (B 06/12/99 (C)
NEW YORK, NEW YORK 16.50 14.75 (B) 04/30/97 (C)
ELLENVILLE, NEW YORK 16.62 14.75 (B) 04/30/97 (C)
NEW YORK, NEW YORK 16.10 14.25 (B) 09/25/98 (C)
EAST WINDSOR, NEW JERSEY 16.60 14.25 (B) 12/29/97 (C)
FIRST MORTGAGES ON LAND:
OSCEOLA COUNTY, FLORIDA 16.20 14.25 (B) 07/10/97 (C)
RESIDENTIAL SECOND MORTGAGES,
RENTAL APARTMENT BUILDINGS:
NEW YORK, NEW YORK 12.00 12.00 02/01/99 (D) 4,832,000
NEW YORK, NEW YORK 11.00 11.00 02/01/97 (D) 5,666,000
NEW YORK, NEW YORK 10.50 10.50 (B) 02/01/98 (D) 2,320,000
ASTORIA, NEW YORK 14.25 14.25 (B) 01/17/99 (C) 6,289,000
NEW ROCHELLE, NEW YORK 11.50 11.50 (B) 03/01/96 (D) 1,300,000
ROCKVILLE CENTRE, NEW YORK 16.50 14.75 (B) 03/31/97 (C) 576,000
------------
$20,983,000
===========
(A) INTEREST PAYMENTS ARE FIXED. INTEREST RATE SHOWN IS APPROXIMATE.
(B) INTEREST AT FLUCTUATING RATE BASED ON BANK PRIME RATE.
(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 1996.
(H) $750,000 OF PARTICIPATION OF MORTGAGE WAS SOLD IN 1996.
(I) THE PARTICIPATING INTEREST WAS PAID IN FULL IN JANUARY 1997.
(J) THE CARRYING AMOUNT OF MORTGAGES APPROXIMATES COST FOR INCOME TAX PURPOSES.
<PAGE>
INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996
OUTSTANDING BALANCE OF MORTGAGE
FACE CARRYING
AMOUNT OF AMOUNT OF PREPAYMENT PENALTY/
DESCRIPTION MORTGAGES MORTGAGES OTHER FEES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL FIRST MORTGAGES:
OFFICE BUILDINGS:
NEW CITY, NEW YORK 300,000 147,000 (F)
EATONTOWN, NEW JERSEY 3,925,000 3,754,000 1% FEE.
BOHEMIA, NEW YORK 3,600,000 3,506,000 ONE MONTH'S INTEREST
RESTAURANTS:
MANASSAS, VIRGINIA $300,000 $130,000 0.5%
IRONDEQUOIT, NEW YORK 340,000 197,000 1%
DECATUR AND JONESBORO, GEORGIA 583,000 379,000 (F)
PARTICIPATIONS:
FT. MYERS, FLORIDA 350,000 348,000 (F)
ORLANDO, FLORIDA 125,000 125,000 (F)
FT. LAUDERDALE, FLORIDA 325,000 325,000 (F)
RESIDENTIAL FIRST MORTGAGES:
CO-OPERATIVE APARTMENT BUILDINGS:
NEW YORK, NEW YORK 950,000 933,000 (E)
NEW YORK, NEW YORK 850,000 850,000 (E)
NEW YORK, NEW YORK 367,000 320,000 (E)
RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK 895,000 785,000 NOT PREPAYABLE UNTIL 1/1/2000.
BRONX, NEW YORK 2,445,000 2,237,000 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 YORK, NEW YORK 1,335,000 1,298,000 1% FEE
BRONX, NEW YORK 2,850,000 2,850,000 NOT PREPAYABLE UNTIL 3/1/2004.
BRONX, NEW YORK 1,175,000 1,157,000 (E)
BRONX, NEW YORK 1,045,000 995,000 NOT PREPAYABLE UNTIL BALANCE UNDER $200,000.
BRONX, NEW YORK 625,000 591,000 (F)
BRONX, NEW YORK 670,000 633,000 (F)
BRONX, NEW YORK 2,000,000 1,934,000 (E)
BRONX, NEW YORK 1,260,000 1,188,000 NOT PREPAYABLE UNTIL 3/1999.
BRONX, NEW YORK 1,650,000 1,603,000 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 1,831,000 NOT PREPAYABLE UNTIL 1/1/2003.
NEW YORK, NEW YORK 1,150,000 1,056,000 (F)
NEW YORK, NEW YORK 300,000 279,000 (F)
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 1,100,000 1,100,000 (F)
CITY ISLAND, BRONX, NEW YORK 650,000 346,000 (F)
NEW YORK, NEW YORK 1,300,000 1,272,000 1%FEE
HYDE PARK, NEW YORK 1,931,000 1,805,000 1% FEE.
<PAGE>
INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996
OUTSTANDING BALANCE OF MORTGAGE
FACE CARRYING
AMOUNT OF AMOUNT OF PREPAYMENT PENALTY/
DESCRIPTION MORTGAGES MORTGAGES OTHER FEES
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS: (CONTINUED)
EAST ORANGE, NEW JERSEY 750,000 727,000 NOT PREPAYABLE PRIOR TO 7/15/1997; THEN 1% FEE.
CAMDEN, NEW JERSEY 1,200,000 1,003,000 1% FEE.
IRVINGTON, NEW JERSEY 1,600,000 (G) 230,000 NOT PREPAYABLE PRIOR TO 5/1/1997; THEN 1% FEE.
PINE HILL, NEW JERSEY 7,200,000 7,063,000 NOT PREPAYABLE PRIOR TO 11/12/1997; THEN 1% FEE.
PHILADELPHIA, PENNSYLVANIA 3,800,000 3,670,000 NOT PREPAYABLE PRIOR TO 6/12/1997; THEN 1% FEE.
NEW YORK, NEW YORK 2,400,000 (H) 1,545,000 1% FEE.
ELLENVILLE, NEW YORK 950,000 873,000 1% FEE.
NEW YORK, NEW YORK 2,700,000 2,617,000 NOT PREPAYABLE PRIOR TO 6/26/1997;
THEN ONE MONTH'S INTEREST.
EAST WINDSOR, NEW JERSEY 1,200,000 1,194,000 ONE MONTH'S INTEREST
FIRST MORTGAGES ON LAND:
OSCEOLA COUNTY, FLORIDA 1,600,000 1,571,000 1% FEE.
RESIDENTIAL SECOND MORTGAGES,
RENTAL APARTMENT BUILDINGS:
NEW YORK, NEW YORK 1,050,000 1,050,000 (F)
NEW YORK, NEW YORK 3,300,000 3,300,000 (F)
NEW YORK, NEW YORK 1,400,000 1,400,000 (F)
ASTORIA, NEW YORK 1,160,000 1,149,000 ONE MONTH'S INTEREST
NEW ROCHELLE, NEW YORK 500,000 500,000 (F)
ROCKVILLE CENTRE, NEW YORK 300,000 288,000 1% FEE
----------- -----------
$74,901,000 $69,699,000
=========== ===========
(A) INTEREST PAYMENTS ARE FIXED. INTEREST RATE SHOWN IS APPROXIMATE.
(B) INTEREST AT FLUCTUATING RATE BASED ON BANK PRIME RATE.
(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 1996.
(H) $750,000 OF PARTICIPATION OF MORTGAGE WAS SOLD IN 1996.
(I) THE PARTICIPATING INTEREST WAS PAID IN FULL IN JANUARY 1997.
(J) THE CARRYING AMOUNT OF MORTGAGES APPROXIMATES COST FOR INCOME TAX PURPOSES.
</TABLE>
<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
1996 1995 1994
---------- ---------- ----------
Balance at beginning of period $55,146,000 $56,666,000 $41,521,000
Additions during period:
Mortgages acquired 34,774,000 17,124,000 18,680,000
---------- ---------- ----------
89,920,000 73,790,000 60,201,000
Deductions during period:
Collections of principal, net
of amortization of discounts 20,221,000 18,644,000 3,535,000
---------- ---------- ---------
BALANCE AT CLOSE OF PERIOD $69,699,000 $55,146,000 $56,666,000
=========== =========== ===========
<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>
INTERVEST CORPORATION OF NEW YORK
$8,500,000
SERIES __/__/97 REGISTERED FLOATING RATE
REDEEMABLE SUBORDINATED DEBENTURES
$500,000 Series __/__/97 - ___% Due July 1,
1999 $8,000,000 Series __/__/97 Floating Rate - Due
October 1, 2005
PROSPECTUS
Sage, Rutty & Co., Inc.
The date of this Prospectus is __________, 1997.
<PAGE>
TABLE OF CONTENTS
Page
Available Information....................................... 3
Who Should Invest........................................... 3
Summary..................................................... 4
Risk Factors................................................ 6
Use of Proceeds............................................. 11
Capitalization.............................................. 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................... 14
Selected Financial Information of the Company............... 18
History and Business........................................ 20
Management.................................................. 34
Transactions with Management................................ 37
Stockholders................................................ 39
Description of Debentures................................... 40
Plan of Offering............................................ 47
Legal Opinions.............................................. 50
Experts..................................................... 50
Index to Financial Statements............................... 51
Table 1 -- Mortgages Receivable............................. 22
<PAGE>
UNTIL ___________, 1997 (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>
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.................................... $ 2,575.75
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................................................ $95,575.75*
*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.
<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 Intervest Bank.
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 March 5, 1997.
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 as of March 5, 1997.
Signature Capacity
- --------- --------
/s/ Lowell S. Dansker
- -------------------------- President (Principal Executive
(Lowell S. Dansker) Officer),Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
and Director
/s/ Lawrence G. Bergman
- -------------------------- Vice President, Secretary
(Lawrence G. Bergman) and Director
/s/ Jerome Dansker
- -------------------------- Chairman, Executive Vice
(Jerome Dansker) President and Director
Director
- --------------------------
(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>
EXHIBITS
TO REGISTRATION STATEMENT
ON
FORM S-11
INTERVEST CORPORATION
OF NEW YORK
II - 6
<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 Intervest Bank.
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,
1995.
II - 7
<PAGE>
INTERVEST CORPORATION OF NEW YORK
10 Rockefeller Plaza
Suite 1015
New York, New York 10020-1903
_____________, 1997
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: $8,500,000 aggregate principal amount of its Series
__/__/97 Registered Floating Rate Redeemable Subordinated Debentures in two
maturities as follows: $500,000 with a maturity date of July 1, 1999, and
$8,000,000 with a maturity date of October 1, 2005. All of the foregoing
debentures are referred to as the "Debentures." 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, 1997 (the "Indenture"),
between the Company and The Bank of New York, as Trustee (the "Trustee"). Of the
Debentures maturing October 1, 2005, a total of $1,000,000 in aggregate
principal amount will be offered or sold after July 1, 1997. 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.
333-______) (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.
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(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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(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
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passage of time or both) 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. It is also understood
and agreed that $1,000,000 of the Debentures maturing October 1, 2005 will be
offered or sold after July 1, 1997.
(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 July 1,
1999 and eight percent (8%) of the purchase price on each Debenture maturing
October 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
October 1, 2005 and one-half of one percent (1/2%) of the aggregate gross amount
of Debentures maturing July 1, 1999, 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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(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 Intervest Bank (the "Bank") in
Clearwater, Florida, 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 "Intervest
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
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whatsoever, the Underwriter shall promptly cause the Bank to 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
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filed with the 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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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
9
<PAGE>
litigation, arising out of, based upon or in connection with (i) any untrue 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
10
<PAGE>
and all such losses, liabilities, claims, damages and 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: $8,500,000 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
12
<PAGE>
in this Agreement or made pursuant to this 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 ofo 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:
13
<PAGE>
SAGE, RUTTY & CO., INC.
183 East Main Street
4th Floor
Rochester, New York 14604
Date: ________, 1997
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 ___________, 1997, 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 $8,500,000 principal amount of Series
__/__/97 Registered Floating Rate Redeemable Subordinated Debentures (the
"Debentures") of the Issuer, in two maturities as follows: $500,000 with a
maturity date of July 1, 1999; and $8,000,000 with a maturity date of October 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 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.
<PAGE>
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 ___________, 1997, 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
Intervest Bank, Clearwater, Florida, 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
"Intervest 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.
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 _________, 1997, 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
2
<PAGE>
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 July 1, 1999 and commissions in the
amount of $800 on each Debenture maturing October 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 _____________, 1997.
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.
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
3
<PAGE>
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)
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)
$-----------------------------
July 1, 1999
By: ______________________________
- -------------------------------------
(Title) $_____________________________
October 1, 2005
4
<PAGE>
=========================================================
INTERVEST CORPORATION OF NEW YORK
AND
THE BANK OF NEW YORK
as Trustee
INDENTURE
Dated as of _________ 1, 1997
$8,500,000
Series __/__/97 Registered Floating Rate
Redeemable Subordinated Debentures
$500,000 - ___% - due July 1, 1999
$8,000,000 - Floating Rate - due October 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 5
2.02. Execution and Authentication 5
2.03. Registrar and Paying Agent 6
2.04. Paying Agent to Hold Money in Trust 6
2.05. Debentureholder Lists 6
2.06. Access of Information to Debentureholders 7
2.07. Transfer and Exchange 7
2.08. Replacement Debentures 8
2.09. Outstanding Debentures 8
2.10. Treasury Debentures 8
2.11. Temporary Debentures 8
2.12. Cancellation 9
2.13. Defaulted Interest 9
2.14. CUSIP Numbers 9
<PAGE>
ARTICLE THREE
REDEMPTION
3.01. Notices to Trustee 9
3.02. Selection of Debentures to be Redeemed 10
3.03. Notice of Redemption 10
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 11
4.02. SEC Reports 11
4.03. Compliance Certificate 11
4.04. Limitation on Dividends and Stock Purchases 11
4.05. Pari Passu and Other Indebtedness 12
ARTICLE FIVE
SUCCESSOR CORPORATION
5.01. When the Company May Merge, etc 13
ARTICLE SIX
DEFAULTS AND REMEDIES
6.01. Events of Default 13
6.02. Acceleration 14
6.03. Other Remedies 14
6.04. Waiver of Past Defaults 15
6.05. Control by Majority 15
6.06. Limitation of Suits 15
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6.07. Rights of Holders to Receive Payment 15
6.08. Collection Suit by Trustee 15
6.09. Trustee May File Proof of Claim 16
6.10. Priorities 16
6.11. Undertaking for Costs 16
ARTICLE SEVEN
TRUSTEE
7.01. Duties of Trustee 17
7.02. Rights of Trustee 17
7.03. Individual Rights of Trustee 18
7.04. Trustee's Disclaimer 18
7.05. Notice of Defaults 19
7.06. Reports by Trustees to Holders 19
7.07. Compensation and Indemnity 19
7.08. Replacement of Trustee 20
7.09. Successor Trustee by Merger, etc 20
7.10. Eligibility; Disqualification 21
7.11. Preferential Collection of Claims Against the Company 21
7.12. Paying Agents 21
ARTICLE EIGHT
DISCHARGE OF INDENTURE
8.01. Termination of the Company's Obligations 22
8.02. Application of Trust Money 23
8.03. Repayment to the Company 23
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01. Without Consent of Holders 23
9.02. With Consent of Holders 23
9.03. Execution of Supplemental Indentures 24
9.04. Compliance with Trust Indenture Act 24
9.05. Revocation and Effect of Consents 24
9.06. Notation on or Exchange of Debentures 25
9.07. Trustee to Sign Amendments, etc 25
ARTICLE TEN
SUBORDINATION
10.01. Agreement to Subordinate 25
10.02. Debentures Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of the Company 26
10.03. Debentureholders to be Subrogated to
Rights of Holders of Senior Indebtedness 27
10.04. Obligation of the Company Unconditional 27
10.05. Knowledge of Trustee 28
10.06. Application by Trustee of Monies Deposited With It 28
10.07. Subordination Rights Not Impaired by
Acts or Omissions of the Company or
Holders of Senior Indebtedness 28
10.08. Debentureholders Authorize Trustee to Effectuate
Subordination of Debentures 29
10.09. Right of Trustee to Hold Senior Indebtedness 29
10.10. Article Ten Not to Prevent Events of Default 29
10.11. No Fiduciary Duty Created to Holders
of Senior Indebtedness 29
10.12. Trustee's Compensation Not Prejudiced 29
<PAGE>
ARTICLE ELEVEN
MISCELLANEOUS
11.01. Trust Indenture Act Controls 29
11.02. Notices 29
11.03. Certificate and Opinion as
to Conditions Precedent 30
11.04. Statements Required in Certificate or Opinion 30
11.05. Rules by Trustee and Agents 31
11.06. Legal Holidays 31
11.07. Governing Law 31
11.08. No Recourse Against Others 31
11.09. Successors 31
11.10. Duplicate Originals 31
11.11. Separability 32
<PAGE>
INDENTURE, dated as of _________ 1, 1997, 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 __/__/97 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 __/__/97 Registered Floating Rate
Redeemable Subordinated Debentures, issued under this Indenture, in two
maturities as follows: July 1, 1999 and October 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
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instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as 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.
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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 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 and C shall constitute, and
are hereby expressly made, a part of this Indenture. The form of Debenture set
out in Exhibit C will be used for those Debentures maturing October 1, 2005 that
are first offered and sold after July 1, 1997.
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 $8,500,000 (but not more than $500,000 of
Debentures maturing July 1, 1999 or $8,000,000 of Debentures maturing October 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.
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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. 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 and 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
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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.
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. 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
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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 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.
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.
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
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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.
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
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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 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.
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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).
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
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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. At December 31, 1996, the Company
had outstanding the following Debentures which rank pari passu with the
Debentures: $2,000,000 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.,
$2,000,000 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 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 Series 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,$10,000,000 aggregate principal amount of its Series 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,
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1995 by and between the Company and the Bank of New York, $11,000,000 aggregate
principal amount of its Series 5/10/96 Registered Floating Rate Redeemable
Subordinated Debentures (the "Series 5/10/96 Debentures") which were issued
pursuant to an Indenture dated as of June 1, 1996 by and between the Company and
the Bank of New York, and $11,000,000 aggregate principal amount of its Series
10/15/96 Registered Floating Rate Redeemable Subordinated Debentures (the
"Series 10/15/96 Debentures") which were issued pursuant to an Indenture dated
as of November 1, 1996 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:
(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;
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(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
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.
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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, 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
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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.
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.
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ARTICLE SEVEN
TRUSTEE
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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.
(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.
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(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 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
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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
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.
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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.
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.
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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, the Indenture
dated as of November 1, 1995, by and between the Company and The Bank of New
York, as Trustee, the Indenture dated as of June 1, 1996, by and between the
Company and The Bank of New York, as Trustee, and the Indenture dated as of
November 1, 1996, 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.
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
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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
(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
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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 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.
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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.
SECTION 9.05. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to an amendment, supplement or
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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.
ARTICLE TEN
SUBORDINATION
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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) other unsecured borrowings by the Company which are subordinate to
Indebtedness of a type described in clauses (i), (ii) or (iv) above if,
immediately after the issuance thereof, the total capital, surplus and retained
earnings of the Company exceed the aggregate of the outstanding principal amount
of such indebtedness, 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;
(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
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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.
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
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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.
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
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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.
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
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29
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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
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
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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.
31
<PAGE>
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 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, 1997 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 July 1, 1999)
Number RA(__________/99)- $
INTERVEST CORPORATION OF NEW YORK
Series __/__/97 ___% Registered Redeemable
Subordinated Debenture due July 1, 1999
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 July 1, 1999, together with
interest accruing on principal at _______ percent (___%) 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 _________
percent (___%) per annum, and with all accrued interest payable with the
principal sum on July 1, 1999. 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 __/__/97 ____% Registered Redeemable
Subordinated Debenture due July 1, 1999
1. Interest. The Company promises to pay interest on the
principal amount of this Debenture at the rate per annum shown above.
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 on principal 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 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.
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. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. 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. 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 Bank of New York
will act as Paying Agent. The Bank of New York, a New York banking corporation,
will also 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, 1997 (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,
A-2
<PAGE>
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 $8,500,000 of which a maximum of $500,000 will
have a maturity date of July 1, 1999 and a maximum of $8,000,000 will have a
maturity date of October 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.
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.
A-3
<PAGE>
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.
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) other unsecured borrowings by the Company which are subordinate to
Indebtedness of a type described in clauses (i), (ii) or (iv) above if,
immediately after the issuance thereof, the total capital, surplus and retained
earnings of the Company exceed the aggregate of the outstanding principal amount
of such indebtedness, 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.
A-4
<PAGE>
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 QUARTERLY PAYMENT DEBENTURE MATURING OCTOBER 1, 2005)
Number R(__________/2005)- $
INTERVEST CORPORATION OF NEW YORK
Series __/__/97 Registered Floating Rate Redeemable
Subordinated Debenture due October 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 October 1, 2005, together with
interest at one percentage point 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: _____________________________ By: ______________________________________
Authorized Signatory President
By:_______________________________________
Secretary
<PAGE>
(REVERSE OF DEBENTURE)
Series __/__/97 Registered Floating Rate Redeemable
Subordinated Debenture due October 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. 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, or such earlier date selected by the Company without requirement of
notice.
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 Chase Manhattan Bank from time to time in effect as announced by Chase
Manhattan 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 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 Chase Manhattan 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 of business on the tenth 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 Bank of New York
will act as Paying Agent. The Bank of New York, a New York banking corporation,
will also act as Registrar and will authenticate the Debentures. The Company may
change any Paying Agent, Registrar or co-Registrar without notice.
B-2
<PAGE>
4. Indenture. This Debenture is one of a duly authorized
series of Debentures issued by the Company under an Indenture dated as of
__________ 1, 1997 (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 $8,500,000 of which a maximum of $500,000 will
have a maturity date of July 1, 1999, and a maximum of $8,000,000 will have a
maturity date of October 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, 1999, (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, 1999 and prior to January 1, 2000, and
(iii) the face amount of the Debentures to be redeemed if the redemption is on
or after January 1, 2000.
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.
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.
B-3
<PAGE>
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.
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
B-4
<PAGE>
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) other unsecured borrowings by the Company which are subordinate to
Indebtedness of a type described in clauses (i), (ii) or (iv) above if,
immediately after the issuance thereof, the total capital, surplus and retained
earnings of the Company exceed the aggregate of the outstanding principal amount
of such indebtedness, 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.
B-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: _______________________________
B-6
<PAGE>
Exhibit C
(FORM OF QUARTERLY PAYMENT DEBENTURE MATURING OCTOBER 1, 2005)
Number R(__________/2005)- $
INTERVEST CORPORATION OF NEW YORK
Series __/__/97 Registered Floating Rate Redeemable
Subordinated Debenture due October 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 October 1, 2005, together with
interest at one percentage point 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: _____________________________ By: ______________________________________
Authorized Signatory President
By: ______________________________________
Secretary
C-1
<PAGE>
(REVERSE OF DEBENTURE)
Series __/__/97 Registered Floating Rate Redeemable
Subordinated Debenture due October 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.
Interest will accrue from the fifth day preceding the date of
closing with respect to these Debentures. 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, or such earlier date selected by the Company without
requirement of notice.
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 Chase Manhattan Bank from time to time in effect as announced by Chase
Manhattan 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 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 Chase Manhattan 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 of business on the tenth 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 Bank of New York
will act as Paying Agent. The Bank of New York, a New York banking corporation,
will also 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, 1997 (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.
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<PAGE>
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 $8,500,000 of which a maximum of $500,000 will
have a maturity date of July 1, 1999, and a maximum of $8,000,000 will have a
maturity date of October 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, 1999, (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, 1999 and prior to January 1, 2000, and
(iii) the face amount of the Debentures to be redeemed if the redemption is on
or after January 1, 2000.
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.
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.
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<PAGE>
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.
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) other unsecured borrowings by the Company which are subordinate to
Indebtedness of a type described in clauses (i), (ii) or (iv) above if,
immediately after the issuance thereof, the total capital, surplus and retained
earnings of the Company exceed the aggregate of the outstanding principal amount
of such indebtedness, 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.
C-4
<PAGE>
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
<PAGE>
HARRIS
BEACH &
Intervest Corporation of New York
March 5, 1997
Page 1
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
March 5, 1997
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 $8,500,000 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).
<PAGE>
HARRIS
BEACH &
Intervest Corporation of New York
March 5, 1997
Page 2
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
<PAGE>
INTERVEST CORPORATION OF NEW YORK
ESCROW AGREEMENT
THIS ESCROW AGREEMENT made as of this ____ day of _________1997, 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 Intervest Bank, a Florida banking corporation with an
office at 1875 Belcher Road North, Clearwater, Florida 34625 ("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 $8,500,000 aggregate principal amount of its Series
__/__/97 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:
(i) Checks, bank drafts or money orders payable to
"Intervest 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 Intervest Bank, 1875 Belcher Road North, Clearwater, Florida
Attention: Keith A. Olsen, President, 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.
<PAGE>
(d) For purposes of this Escrow Agreement, a "Business Day" is
a day upon which 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.
(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.
2
<PAGE>
(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:
(i) ____________, 1997, 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 _____________, 1997.
(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
3
<PAGE>
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 "Intervest Bank, as Escrow Agent for
Intervest Corporation of New York" shall be returned to the Subscriber by the
Escrow Agent.
(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
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
4
<PAGE>
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 Intervest Bank, 1875 Belcher Road North,
Clearwater, Florida 34625, Attention: Keith A. Olsen, President, 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.
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: INTERVEST BANK
By: ________________________________________
Its: ________________________________________
UNDERWRITER: SAGE, RUTTY & CO., INC.
By: ________________________________________
Its: ________________________________________
5
<PAGE>
INTERVEST CORPORATION OF NEW YORK
STATEMENT SETTING FORTH COMPUTATIONS
SHOWING THE RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net income $ 697,000 $ 442,000 $ 536,000 $ 545,000 $ 313,000
Add:
Interest expense (1) 7,922,000 6,975,000 5,246,000 3,944,000 3,364,000
Provision for
income taxes 584,000 324,000 403,000 480,000 229,000
------- ------- ------- ------- -------
Earnings $9,203,000 $7,741,000 $6,185,000 $4,969,000 $3,906,000
========== ========== ========== ========== ==========
FIXED CHARGES
INTEREST INCURRED $7,922,000 $6,975,000 $5,246,000 $3,944,000 $3,364,000
========== ========== ========== ========== ==========
Ratio of eanrings to
fixed charges 1.2 1.1 1.2 1.3 1.2
========== ========== ========== ========== ==========
(1) Includes amortization of deferred debenture offering costs as follows:
Year Ended
December 31,
------------
1996 $869,000
1995 $748,000
1994 $655,000
</TABLE>
SUBSIDIARIES
Name State of Incorporation
---- ----------------------
1. Intervest Distribution Corporation New York
2. Intervest Realty Servicing Corporation New York
<PAGE>
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 22, 1997 on the
financial statements and schedule IV of Intervest Corporation of New York as at
December 31, 1996 and December 31, 1995 and for each of the years in the
three-year period ended December 31, 1996 and to the reference to our firm,
appearing under the heading "Experts" in the Prospectus.
Richard A. Eisner & Company, LLP
New York, New York
March 4, 1997
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
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 of 2 Rector Street, New York,
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 10005
(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.
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.
1. 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.)
-2-
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
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
published pursuant to law or to the requirements of its
supervising or examining authority.
- 3 -
<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 19th day of February, 1997.
THE BANK OF NEW YORK
By: /s/ STEPHEN J. GIURLANDO
Name: STEPHEN J. GIURLANDO
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
September 30, 1996, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal Reserve
Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin $ 4,404,522
Interest-bearing balances 732,833
Securities:
Held-to-maturity securities 789,964
Available-for-sale securities 2,005,509
Federal funds sold in domestic offices of the bank:
Federal funds sold 3,364,838
Loans and lease financing
receivables:
Loans and leases, net of unearned
income 28,728,602
LESS: Allowance for loan and
lease losses 584,525
LESS: Allocated transfer risk
reserve 429
Loans and leases, net of unearned
income, allowance, and reserve 28,143,648
Assets held in trading accounts 1,004,242
Premises and fixed assets (including
capitalized leases) 605,668
Other real estate owned 41,238
Investments in unconsolidated
subsidiaries and associated
companies 205,031
Customers' liability to this bank on
acceptances outstanding 949,154
Intangible assets 490,524
Other assets 1,305,839
-----------
Total assets $44,043,010
===========
LIABILITIES
Deposits:
In domestic offices $20,441,318
Noninterest-bearing 8,158,472
Interest-bearing 12,282,846
In foreign offices, Edge and
Agreement subsidiaries, and IBFs 11,710,903
Noninterest-bearing 46,182
<PAGE>
Interest-bearing 11,664,721
Federal funds purchased in
domestic offices of the
bank:
Federal funds purchased 1,565,288
Demand notes issued to the U.S.
Treasury 293,186
Trading liabilities 826,856
Other borrowed money:
With original maturity of one year
or less 2,103,443
With original maturity of more than
one year 20,766
Bank's liability on acceptances exe-
cuted and outstanding 951,116
Subordinated notes and debentures 1,020,400
Other liabilities 1,522,884
-----------
Total liabilities 40,456,160
-----------
EQUITY CAPITAL
Common stock 942,284
Surplus 525,666
Undivided profits and capital
reserves 2,129,376
Net unrealized holding gains
(losses) on available-for-sale
securities ( 2,073)
Cumulative foreign currency transla-
tion adjustments ( 8,403)
-----------
Total equity capital 3,586,850
-----------
Total liabilities and equity
capital $44,043,010
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
----
J. Carter Bacot |
Thomas A. Renyi | --- Directors
Alan R. Griffith |
----
<PAGE>
