As filed with the Securities and Exchange Commission on March 27, 1997
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
BANKUNITED FINANCIAL CORPORATION BANKUNITED CAPITAL
- --------------------------------------------------------- ---------------------------------------------------------
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
FLORIDA 6035 65-0377773 DELAWARE 6035 APPLIED FOR
- ---------------- ----------------- ------------------- ---------------- ----------------- -------------------
(State or other (Primary Standard (I.R.S. Employer (State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.) jurisdiction of Industrial Identification No.)
incorporation or Classification incorporation or Classification
organization) Code Number) organization) Code Number)
</TABLE>
<TABLE>
<S> <C>
255 ALHAMBRA CIRCLE 255 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134 CORAL GABLES, FLORIDA 33134
(305) 569-2000 (305) 569-2000
-------------------------------------------- --------------------------------------------
(Address, including ZIP Code, and telephone (Address, including ZIP Code, and telephone
number, including area code, of registrant's number, including area code, of registrant's
principal executive offices) principal executive offices)
</TABLE>
ALFRED R. CAMNER
CHAIRMAN OF THE BOARD
BANKUNITED FINANCIAL CORPORATION
255 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
(305) 569-2000
---------------------------------------------------------
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
Copies to:
Marsha D. Bilzin, Esq.
Stuzin and Camner,
Professional Association
550 Biltmore Way, Suite 700
Coral Gables, Florida 33134
(305) 442-4994
----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [ ].
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
OF SECURITY TO BE REGISTERED REGISTERED PER SHARE (1) PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Preferred Securities, Series A of BankUnited Capital 70,000 98.5%(1) 68,950,000 $20,893.94
Junior Subordinated Deferrable Interest Debentures of N/A
BankUnited Financial Corporation (2)
BankUnited Financial Corporation Guarantee with respect to N/A
Trust Preferred Securities, Series A (3)
Total. . . . . . . . . . . . . . . . . . . . . . . . . __________ 98.5% _________ $____
============================================================================================================================
<FN>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(f)(1). Based on the market price as of March 25, 1997.
(2) The Junior Subordinated Deferrable Interest Debentures (the "Series A
Subordinated Debentures") were originally purchased by BankUnited Capital
with the proceeds of the sale of the Trust Preferred Securities, Series A
(the "Series A Preferred Securities"). No separate consideration will be
received for the Series A Subordinated Debentures distributed upon any
liquidation of BankUnited Capital.
(3) No separate consideration will be received for the BankUnited Financial
Corporation Guarantee (the "Series A Guarantee").
(4) This Registration Statement is deemed to cover the Series A Subordinated
Debentures of BankUnited Financial Corporation under the Indenture, the
rights of holders of Series A Preferred Securities of BankUnited Capital
under a trust agreement, the rights of holders of the Series A Preferred
Securities under the Series A Guarantee, the Expense Agreement entered into
by BankUnited Financial Corporation and certain backup undertakings as
described herein.
</FN>
</TABLE>
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 27, 1997
PROSPECTUS BANKUNITED CAPITAL
[LOGO]
OFFER BY BANKUNITED CAPITAL TO EXCHANGE 10 1/4% TRUST PREFERRED
SECURITIES, SERIES A, WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING
10 1/4% TRUST PREFERRED SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER TRUST PREFERRED SECURITY, SERIES A)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
BANKUNITED FINANCIAL CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON June 28, 1997, UNLESS EXTENDED.
BankUnited Capital, a trust created under the laws of the State of
Delaware (the "Series A Issuer"), hereby offers, upon the terms and subject to
the conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying Letter
of Transmittal and related documents (which together constitute the "Exchange
Offer"), to exchange up to $70,000,000 aggregate Liquidation Amount (as defined
herein) of its 10 1/4% Trust Preferred Securities, Series A (the "New Series A
Preferred Securities"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
(as defined herein) of which this Prospectus constitutes a part, for a like
Liquidation Amount of its outstanding 10 1/4% Trust Preferred Securities, Series
A (the "Old Series A Preferred Securities"), of which $70,000,000 aggregate
Liquidation Amount is outstanding. Pursuant to the Exchange Offer, BankUnited
Financial Corporation, a Florida corporation (the "Company"), is also exchanging
a guarantee (the "New Series A Guarantee) of the payment of Distributions (as
defined herein) and payments on liquidation or redemption of the New Series A
Preferred Securities and new 10 1/4% Junior Subordinated Deferrable Interest
Debentures (the "New Series A Subordinated Debentures"), for its guarantee (the
"Old Series A Guarantee") of the payment of distributions and payment on
liquidation of or redemption of its Old Series A Preferred Securities and its
outstanding 10 1/4% Junior Subordinated Deferrable Interest Debentures (the "Old
Series A Subordinated Debentures"), of which
<PAGE>
$72,800,000 aggregate principal amount is outstanding, and is exchanging a
like aggregate principal of New Series A Subordinated Debentures for the Old
Series A Subordinated Debentures. The New Series A Guarantee and the New Series
A Subordinated Debentures also have been registered under the Securities Act.
(The Old Series A Preferred Securities, the Old Series A Guarantee and the Old
Series A Subordinated Debentures are collectively referred to herein as the "Old
Securities" and the New Series A Preferred Securities, the New Series A
Guarantee and the New Series A Subordinated Debentures are collectively referred
to herein as the "New Securities.")
The terms of the New Securities are identical in all material respects
to the respective terms of the Old Securities, except that (i) the New Series A
Preferred Securities have been registered under the Securities Act and therefore
will not be subject to certain restrictions on transfer applicable to the Old
Series A Preferred Securities, (ii) the New Series A Preferred Securities and
the New Series A Subordinated Debentures will not provide for any increase in
the Distribution rate thereon or the interest rate thereon, respectively, since
the Old Securities provided for such increases only in the event that the Old
Securities were not registered under the Securities Act within the period
specified in the terms of the Old Securities. (See "Description of the New
Securities" and "Description of the Old Securities.") The New Series A Preferred
Securities are being offered for exchange in order to satisfy certain
obligations of the Series A Issuer under the registration rights agreements
dated as of December 30, 1996 and March 24, 1997 (together, the
"Registration Rights Agreements") among the Company, the Series A Issuer and the
Initial Purchasers (as defined herein). In the event that the Exchange Offer is
consummated, any Old Series A Preferred Securities which remain outstanding
after consummation of the Exchange Offer and the New Series A Preferred
Securities issued in the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Trust Agreement (as defined herein).
---------------------
SEE "RISK FACTORS" COMMENCING ON PAGE __ FOR CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER OLD SERIES A PREFERRED
SECURITIES IN THE EXCHANGE OFFER.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March __, 1997.
<PAGE>
The New Series A Preferred Securities and the Old Series A Preferred
Securities (together, the "Series A Preferred Securities" represent undivided
beneficial interests in the assets of the Series A Issuer. The Company is the
owner of all of the beneficial interests represented by common securities of the
Series A Issuer (the "Common Securities" and, collectively with the Series A
Preferred Securities, the "Series A Issuer Securities"). The Bank of New York is
the Property Trustee of the Series A Issuer. The Series A Issuer exists for the
sole purpose of issuing the Series A Issuer Securities and investing the
proceeds thereof in the Series A Subordinated Debentures first, by acquiring the
Old Series A Subordinated Debentures which will be exchanged for the New Series
A Subordinated Debentures (together, the "Series A Subordinated Debentures").
The Series A Subordinated Debentures will mature on December 31, 2026 (the
"Stated Maturity"). The Series A Preferred Securities will have a preference
under certain circumstances with respect to cash distributions and amounts
payable on liquidation, redemption or otherwise over the Common Securities. The
amount payable on the Series A Preferred Securities in the event of any
liquidation of the Series A Issuer is $1,000 per Series A Preferred Security
("Liquidation Amount"), plus accumulated and unpaid Distributions. (See
"Description of the New Securities--Series A--Description of Series A Preferred
Securities--Subordination of Series A Common Securities.")
As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture dated as of December 30, 1996, as supplemented by the Supplemental
Indenture dated as of March 24, 1997 between the Company and The Bank of New
York, as trustee (the "Debenture Trustee"), (ii) the "Trust Agreement" means the
Amended and Restated Trust Agreement dated as of March 24, 1997, relating to the
Trust among the Company, as Depositor, The Bank of New York, as Property Trustee
(the "Property Trustee"), The Bank of New York (Delaware), as Delaware Trustee
(the "Delaware Trustee"), the Administrative Agents named therein (collectively,
with the Property Trustee and Delaware Trustee, the "Issuer Trustees") and the
holders from time to time of the undivided beneficial interests in the assets of
the Series A Issuer, (iii) the "Series A Guarantee Agreement" means the Amended
Guarantee Agreement dated as of March 24, 1997, between the Company and The Bank
of New York, as trustee (the "Guarantee Trustee") relating to the Old Series A
Guarantee and the New Series A Guarantee (together, the "Series A Guarantee"),
and (iv) the "Expense Agreement" means the Expense Agreement dated as of
December 30, 1996, between the Company and the Series A Issuer.
Holders of the Series A Preferred Securities are entitled to receive
preferential cumulative cash distributions accumulating from December 30, 1996
and payable semi-annually in arrears on June 30 and December 31 of each year
("Distribution Date") , commencing June 30, 1997, at the annual rate of 10 1/4%
of the Liquidation Amount of $1,000 per Series A Preferred Security
("Distributions"). Subject to certain exceptions, the Company has the right to
defer payment of interest on the Series A Subordinated Debentures at any time or
from time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each deferral period (each, an "Extension Period"), provided
that no Extension Period may extend beyond the Stated Maturity of the Series A
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon at the rate of 10 1/4%, compounded semi-annually, to the extent
permitted by applicable law), the Company may elect to begin a new Extension
Period subject to the requirements set forth herein. If interest payments on the
Series A Subordinated Debentures are so deferred, Distributions on the Series A
Preferred Securities will also be deferred, and the Company will not be
permitted, subject to certain exceptions described herein, to declare or pay any
cash distributions with respect to the capital stock of the Company or debt
2
<PAGE>
securities of the Company that rank PARI PASSU with or junior to the Series A
Subordinated Debentures. During an Extension Period, interest on the Series A
Subordinated Debentures will continue to accrue (and the amount of Distributions
to which holders of the Series A Preferred Securities are entitled will
accumulate) at the rate of 10 1/4% per annum, compounded semi-annually, and
holders of the Series A Preferred Securities will be required to accrue interest
income for United States federal income tax purposes. (See "Description of the
New Securities--Description of Series A Subordinated Debentures--Right to Defer
Interest Payment Obligation" and "Certain Federal Income Tax
Consequences--Original Issue Discount.")
The Company has, through the Series A Guarantee, the Trust Agreement,
the Series A Subordinated Debentures, the Indenture and the Expense Agreement
(each as defined herein), taken together, fully, irrevocably and unconditionally
guaranteed all of the Series A Issuer's obligations under the Series A Preferred
Securities. (See "Relationship Among the Series A Preferred Securities, the
Series A Subordinated Debentures, the Expense Agreement and the Series A
Guarantee--Full and Unconditional Guarantee.") No single document standing alone
or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Series A Issuer's obligations under the Series A Preferred Securities.
The Series A Guarantee of the Company guarantees the payment of Distributions
and payments on liquidation or redemption of the Series A Preferred Securities,
but only in each case to the extent of funds held by the Series A Issuer, as
described herein. (See "Description of the New Securities--Description of the
Series A Guarantee.") If the Company does not make interest payments on the
Series A Subordinated Debentures held by the Series A Issuer, the Series A
Issuer will have insufficient funds to pay Distributions on the Series A
Preferred Securities. The Series A Guarantee does not cover payment of
Distributions when the Series A Issuer does not have sufficient funds to pay
such Distributions. In such event, a holder of the Series A Preferred Securities
may institute a legal proceeding directly against the Company to enforce payment
of such Distributions to such holder. (See "Description of the New
Securities--Description of Series A Subordinated Debentures--Enforcement of
Certain Rights by Holders of the Series A Preferred Securities.") The
obligations of the Company under the Series A Guarantee and the Series A
Subordinated Debentures are subordinate and junior in right of payment to all
Senior Debt of the Company (as defined in "Description of the New
Secfurities-Description of Series A Subordinated Debentures--Subordination").
The Series A Preferred Securities are subject to mandatory redemption,
in whole or in part, upon repayment of the Series A Subordinated Debentures at
their Stated Maturity or their earlier redemption. The Series A Subordinated
Debentures are redeemable prior to their Stated Maturity at the option of the
Company (i) on or after December 31, 2006, in whole at any time or in part from
time to time at a redemption price (the "Optional Redemption Price") equal to
105.125% of the principal amount thereof on December 31, 2006, declining ratably
on each December 31 thereafter to 100% on or after December 31, 2016, plus
accrued interest thereon to the date of redemption, or (ii) at any time, in
whole (but not in part), upon the occurrence and continuation of a Tax Event (as
defined herein) at a redemption price (the "Tax Event Redemption Price") equal
to the Make-Whole Amount (as defined herein) plus accrued and unpaid interest on
the Series A Subordinated Debentures to the date fixed for redemption. (See
"Description of the New Securities--Description of Series A Subordinated
Debentures--Optional Redemption" and "Description of the New
Securities--Description of Series A Subordinated Debentures--Tax Event
Redemption.")
3
<PAGE>
In the event of a termination of the Series A Issuer, including upon
the exercise by the Company at any time of its right to terminate the Series A
Issuer, after satisfaction of creditors of the Series A Issuer, if any, as
provided by applicable law, an amount of Series A Subordinated Debentures
equivalent to a Liquidation Amount of $1,000 per Series A Preferred Security
plus accumulated and unpaid Distributions thereon to the date of distribution
will be distributed to the holders of the Series A Preferred Securities in
exchange therefor upon liquidation of the Series A Issuer, subject to certain
exceptions. (See "Description of the New Securities--Description of Series A
Preferred Securities--Liquidation of the Series A Issuer and Distribution of the
Series A Subordinated Debentures to Holders,--Liquidation Distribution upon
Termination."
The Series A Subordinated Debentures will be unsecured and subordinated
to all Senior Debt of the Company. At March 24, 1997, the Company had no
outstanding Senior Debt. (See "Description of the New Securities--Description of
Series A Subordinated Debentures-- Subordination.")
THE SERIES A PREFERRED SECURITIES WILL BE ISSUED, AND MAY BE
TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000 (100 SERIES A PREFERRED SECURITIES). ANY TRANSFER, SALE OR OTHER
DISPOSITION OF SERIES A PREFERRED SECURITIES IN A BLOCK HAVING A LIQUIDATION
AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH
SERIES A PREFERRED SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE
RECEIPT OF DISTRIBUTIONS ON SUCH SERIES A PREFERRED SECURITIES, AND SUCH
TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SERIES A
PREFERRED SECURITIES.
Based upon certain interpretive letters issued by the staff of the
United States Securities and Exchange Commission (the "Commission") to third
parties in unrelated transactions, the Company is of the view that holders of
Old Series A Preferred Securities (other than any holder who is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) who
exchange their Old Series A Preferred Securities for New Series A Preferred
Securities pursuant to the Exchange Offer generally may offer such New Series A
Preferred Securities for resale, resell such New Series A Preferred Securities,
and otherwise transfer such New Series A Preferred Securities without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided such New Series A Preferred Securities are acquired in the ordinary
course of the holder's business and such holder has no arrangement with any
person to participate in a distribution of such New Series A Preferred
Securities. Each broker-dealer that receives New Series A Preferred Securities
for its own account in exchange for Old Series A Preferred Securities must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Series A Preferred Securities. (See "Plan of Distribution.") In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Series A Preferred Securities may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
in compliance with an available exemption from registration or qualification.
The Company has agreed, pursuant to the Registration Rights Agreements and
subject to certain specified limitations therein, to register or qualify the New
Series A Preferred Securities for offer or sale under the securities or blue sky
laws of such jurisdictions as any holder of the Series A Preferred Securities
reasonably requests in writing. If a holder of Old Series A Preferred Securities
does not exchange such Old Series A Preferred Securities for New Series A
Preferred Securities pursuant to the Exchange Offer, such Old Series A Preferred
4
<PAGE>
Securities will continue to be subject to the restrictions on transfer contained
in the legend thereon. In general, the Old Series A Preferred Securities may not
be offered or sold unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Holders of Old Series A Preferred Securities
do not have any appraisal or dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange Offer. (See Risk
Factors--Consequences of a Failure to Exchange Old Series A Preferred
Securities; "The Exchange Offer--Resales of New Series A Preferred Securities.")
Each holder of Old Series A Preferred Securities who wishes to exchange
Old Series A Preferred Securities for New Series A Preferred Securities in the
Exchange Offer will be required to represent that (i) it is not an "affiliate"
of the Company or the Series A Issuer, (ii) any New Series A Preferred
Securities to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Series A Preferred Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Series A
Preferred Securities. In addition, the Company and the Series A Issuer may
require such holder, as a condition to such holder's eligibility to participate
in the Exchange Offer, to furnish to the Company and the Series A Issuer (or an
agent thereof) in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) on behalf of whom such holder holds the Series A Preferred Securities
to be exchanged in the Exchange Offer. Each broker-dealer that receives New
Series A Preferred Securities for its own account pursuant to the Exchange Offer
must acknowledge that it acquired the Old Series A Preferred Securities for its
own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Series A Preferred Securities. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based upon the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Company and the Series A Issuer believe that broker-dealers who acquired Old
Series A Preferred Securities for their own accounts, as a result of
market-making activities or other trading activities ("Participating
Broker-Dealers"), may fulfill their prospectus delivery requirements with
respect to the New Series A Preferred Securities received upon exchange of such
Old Series A Preferred Securities with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for the Exchange Offer
so long as it contains a description of the plan of distribution with respect to
the resale of such New Series A Preferred Securities. Accordingly, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer during the period referred to below in
connection with resales of New Series A Preferred Securities received in
exchange for Old Series A Preferred Securities where such Old Series A Preferred
Securities were acquired by such Participating Broker-Dealer for its own account
as a result of market-making or other trading activities. Subject to certain
provisions set forth in the Registration Rights Agreements, the Company and the
Series A Issuer have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Series A Preferred Securities until June 28,
1997 or, if earlier, when all such New Series A Preferred Securities have been
disposed of by such Participating Broker-Dealer. (See "Plan of Distribution.")
Any Participating Broker-Dealer who is an "affiliate" of the Company or the
Series A Issuer must comply
5
<PAGE>
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. (See "The Exchange Offer--Resales of
New Series A Preferred Securities.")
In that regard, each Participating Broker-Dealer who surrenders Old
Series A Preferred Securities pursuant to the Exchange Offer will be deemed to
have agreed, by execution of the Letter of Transmittal or delivery of an Agent's
Message (as defined herein), that, upon receipt of notice from the Company or
the Series A Issuer of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreements, such Participating
Broker-Dealer will suspend the sale of New Series A Preferred Securities (or the
New Series A Subordinated Debentures, as applicable) pursuant to this Prospectus
until the Company or the Series A Issuer has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Series A Issuer has given notice that the sale of the New
Series A Preferred Securities (or the New Series A Guarantee or the New Series A
Subordinated Debentures, as applicable) may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Old Series A Preferred Securities. The New
Series A Preferred Securities will be a new issue of securities for which there
currently is no market. Although Friedman, Billings, Ramsey & Co., Inc. and
Raymond James & Associates, Inc. (the "Initial Purchasers") have informed the
Company and the Series A Issuer that they currently intend to make a market in
the New Series A Preferred Securities, they are not obligated to do so, and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the New Series A Preferred Securities. Neither the Company nor the Series A
Issuer currently intends to apply for listing of the New Series A Preferred
Securities on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
Any Old Series A Preferred Securities not tendered and accepted in the
Exchange Offer will remain outstanding and will be entitled to all the same
rights and will be subject to the same limitations applicable thereto under the
Trust Agreement (except for those rights which terminate upon consummation of
the Exchange Offer). Following consummation of the Exchange Offer, the holders
of Old Series A Preferred Securities will continue to be subject to all of the
existing restrictions upon transfer thereof and neither the Company nor the
Series A Issuer will have any further obligation to such holders (other than
under certain limited circumstances) to provide for registration under the
Securities Act of the Old Series A Preferred Securities held by them. To the
extent that Old Series A Preferred Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Series A Preferred
Securities could be adversely affected. (See "Risk Factors--Consequences of a
Failure to Exchange Old Series A Preferred Securities.")
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD SERIES A PREFERRED SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD SERIES A PREFERRED SECURITIES PURSUANT TO THE
EXCHANGE OFFER.
6
<PAGE>
Old Series A Preferred Securities may be tendered for exchange on or
prior to 5:00 p.m., New York City time, on June 28, 1997 (such time on such
date being hereinafter called the "Expiration Date"), unless the Exchange Offer
is extended by the Company and the Series A Issuer (in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended). Tenders of Old Series A Preferred Securities may be
withdrawn at any time on or prior to the Expiration Date. The Exchange Offer is
not conditioned upon any minimum Liquidation Amount of Old Series A Preferred
Securities being tendered for exchange. However, the Exchange Offer is subject
to certain events and conditions which may be waived by the Company or the
Series A Issuer and to the terms and provisions of the Registration Rights
Agreements. Old Series A Preferred Securities may be tendered in whole or in
part in a Liquidation Amount of not less than $100,000 (100 Series A Preferred
Securities) and or any integral multiple of $1,000 Liquidation Amount (1 Series
A Preferred Security) in excess thereof. The Company has agreed to pay all
expenses of the Exchange Offer. (See "The Exchange Offer--Fees and Expenses.")
Each New Series A Preferred Security will pay cumulative Distributions from the
most recent Distribution Date for the Old Series A Preferred Securities
surrendered in exchange for such New Series A Preferred Securities or, if no
Distributions have been paid on such Old Series A Preferred Securities, from
December 30, 1996. Holders of the Old Series A Preferred Securities whose Old
Series A Preferred Securities are accepted for exchange will not receive
accumulated Distributions on such Old Series A Preferred Securities for any
period from and after the last Distribution Date for such Old Series A Preferred
Securities of the New Series A Preferred Securities or, if no such Distributions
have been paid, will not receive any accumulated Distributions on such Old
Series A Preferred Securities, and will be deemed to have waived the right to
receive any Distributions on such Old Series A Preferred Securities accumulated
from and after such Distribution Date or, if no such Distributions have been
paid or duly provided for, from and after December 30, 1996. This Prospectus,
together with the Letter of Transmittal, is being sent to all registered holders
of Old Series A Preferred Securities as of March __, 1997.
Neither the Company nor the Series A Issuer will receive any cash
proceeds from the issuance of the New Series A Preferred Securities offered
hereby. No dealer-manager is being used in connection with this Exchange Offer.
(See "Use of Proceeds From Sale of Old Series A Preferred Securities" and "Plan
of Distribution.")
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE SERIES A ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN
OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE AFFAIRS OF THE COMPANY OR THE SERIES A ISSUER SINCE THE DATE HEREOF.
---------------------
7
<PAGE>
TABLE OF CONTENTS
PAGE
----
Available Information..............................................
Certain Documents Included as Appendices and Incorporoated
by Reference................................................
Summary............................................................
Risk Factors.......................................................
Ratio of Earnings to Fixed Charges.................................
Use of Proceeds from Sale of Old Series A Preferred Securities.....
The Series A Issuer ...............................................
BankUnited Financial Corporation...................................
Capitalization.....................................................
Accounting Treatment...............................................
The Exchange Offer.................................................
Description of the New Securities..................................
Description of the Old Securities..................................
Relationship Among the Series A Preferred Securities, the Series A
Subordinated Debentures and the Series A Guarantee...........
Certain Federal Income Tax Consequences............................
ERISA Considerations...............................................
Plan of Distribution...............................................
Validity of the New Securities.....................................
Experts............................................................
Appendix A -
1996 Annual Report on Form 10-K/A for BankUnited Financial Corporation.
Appendix B -
Form 10-Q for the Quarter Ended December 31, 1996 for BankUnited Financial
Corporation.
Appendix C -
1996 Annual Report on Form 10-K of Suncoast Savings and Loan Association, FSA.
Appendix D -
Form 10-Q for the Quarter Ended September 30, 1996 for Suncoast Savings and Loan
Association, FSA.
Appendix E -
Current Report on Form 8-K dated December 30, 1996 for BankUnited Financial
Corporation.
Appendix F -
Current Report on Form 8-K dated February 21, 1997 for BankUnited Financial
Corporation.
Appendix G -
Current Report on Form 8-K dated March 24, 1997 for BankUnited Financial
Corporation.
8
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W.,Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov. Reports, proxy statements and other
information filed by Suncoast Savings and Loan Association, FSA ("Suncoast"),
pursuant to the informational requirements of the Exchange Act prior to its
acquisition by the Company can be inspected and copied at the public reference
facilities maintained by the OTS at 1700 G Street, N.W., Washington, D.C. 20552
or at the OTS Southeast Regional Office, 1475 Peachtree Street, N.E., Atlanta,
Georgia 30309.
No separate financial statements of the Series A Issuer have been
included herein. The Company and the Series A Issuer do not consider that such
financial statements would be material to holders of the Series A Preferred
Securities because the Series A Issuer is a newly-formed special purpose entity,
has no operating history or independent operations and is not engaged in and
does not propose to engage in any activity other than holding as trust assets
the Series A Subordinated Debentures and issuing the Series A Securities. (See
"Description of the New Securities--Description of Series A Preferred
Securities," "--Description of Series A Subordinated Debentures" and
"--Description of Series A Guarantee.")
CERTAIN DOCUMENTS INCLUDED AS APPENDICES AND
INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K/A for the fiscal year ended
September 30, 1996, the Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996, the Current Report on Form 8-K dated December 30, 1996, the
Current Report on Form 8-K dated February 21, 1997, and the Current Report on
Form 8-K dated March 24, 1997, as well as Suncoast's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 appear as appendices hereto and are
incorporated in and made a constituent part of this Prospectus by reference.
Any statements contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this offering to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus constitutes a part of a registration statement on Form
S-4 (the "Registration Statement") filed by the Company and the Series A Issuer
with the Commission under the Securities Act. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission,
9
<PAGE>
and reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the New
Securities. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
As used herein, the terms "Prospectus" and "herein" mean this
Prospectus, including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein do not purport to
be complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document. Upon oral
or written request, the Company will provide without charge a copy of any
document incorporated in this Prospectus, exclusive of exhibits, to each person
to whom this Prospectus is delivered. Requests for such documents should be
directed to Ms. Nancy Ashton at the corporate headquarters of the Company, 255
Alhambra Circle, Coral Gables, Florida 33134 (telephone no. (305) 569-2000).
10
<PAGE>
SUMMARY
This summary is qualified by the more detailed information and
financial statements in the Company's Annual Report on Form 10-K/A for the
fiscal year ended September 30, 1996 and Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996, and Suncoast's Annual Report on Form 10-K for
the fiscal year ended June 30, 1996 and Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, which are included as appendices to and
incorporated by reference in this Prospectus. As used herein, (i) the
"Indenture" means the Junior Subordinated Indenture dated as of December 30,
1996, as supplemented by the Supplemental Indenture dated as of March 24, 1997,
between the Company and The Bank of New York, as trustee (the "Debenture
Trustee"), and (ii) the "Trust Agreement" means the Amended and Restated Trust
Agreement dated as of March 24, 1997 relating to the Series A Issuer among the
Company, as depositor, The Bank of New York, as Property Trustee (the "Property
Trustee"), The Bank of New York (Delaware), as Delaware Trustee (the "Delaware
Trustee"), the Administrative Trustees name therein (collectively with the
Property Trustee and Delaware Trustee, the "Issuer Trustees"), and the holders
from time to time of the undivided beneficial interests in the assets of the
Series A Issuer.
BANKUNITED FINANCIAL CORPORATION
GENERAL
The Company is a Florida corporation organized in December 1992 for the
purpose of becoming the savings and loan holding company for BankUnited, FSB
(the "Bank"). This holding company reorganization, together with BankUnited's
conversion from a Florida-chartered stock savings bank to a federally chartered
stock savings bank, became effective on March 5, 1993.
The Company currently has fifteen branch offices in Dade, Broward and
Palm Beach counties, Florida ("South Florida") and anticipates opening three or
more additional branches there during the next 18 months. The Company's business
has traditionally consisted of attracting deposits from the general public and
using those deposits, together with borrowings and other funds, to purchase
nationwide and to originate in its market area single-family residential
mortgage loans, and to a lesser extent, to purchase and originate commercial
real estate, commercial business and consumer loans. The Company's revenues are
derived principally from interest earned on loans, mortgage-backed securities
and investments. The Company's primary expenses arise from interest paid on
savings deposits and borrowings and overhead expenses incurred in its
operations.
The Company's operating plan emphasizes (i) concentrating lending
activities on the origination of single-family residential mortgage loans and
purchasing such loans as favorable market opportunities arise; (ii) expanding
the Company's deposit base by providing convenience, competitive rates and
personalized service in its market area; (iii) continuing expansion of the
Company's branch network through de novo branching or the acquisition of
branches of, and mergers with, existing financial institutions, although there
are no current plans, arrangements, understandings, or agreements regarding such
acquisitions; (iv) expanding the Company's commercial and multi-family real
estate, commercial business, and real estate construction lending; and (v)
managing exposure to interest rate risk, while optimizing operating results
through effective asset/liability management and investment policies.
In 1995, the Company redefined its strategy to increase its emphasis on
strategic product niches which management believes are being underserved as
South Florida's banking market
11
<PAGE>
consolidates. These products include commercial business and commercial real
estate lending and deposit services for small to mid-size businesses. The
Company has also focused on attracting depositors who are seeking convenience,
competitive rates and personalized service. To accomplish this strategy, the
Company has attracted management with expertise in developing and managing its
new product lines.
The Bank is a member of the Federal Home Loan Bank system and is
subject to comprehensive regulation, examination and supervision by the Office
of Thrift Supervision (the "OTS") and the Federal Deposit Insurance Corporation
(the "FDIC"). Deposits at the Bank are insured by the Savings Association
Insurance Fund of the FDIC (the "SAIF") for up to $100,000 for each insured
account holder, which is the maximum permitted by law.
The Company's executive offices are located at 255 Alhambra Circle,
Coral Gables, Florida 33134, telephone (305) 569-2000.
SUNCOAST ACQUISITION
As part of the Company's plan to expand within South Florida, on
November 15, 1996, the Company completed the purchase of Suncoast Savings and
Loan Association, FSA ("Suncoast"), a federally chartered savings association
with assets of $409.0 million at September 30, 1996 and merged Suncoast into the
Bank (the "Merger"). Suncoast had six branch offices in the South Florida market
of which five will continue to operate and one will be consolidated with an
existing Bank branch office. In addition, as of September 30, 1996, Suncoast
serviced or subserviced approximately $1.2 billion in loans for others. The
Company has sold $300 million of Suncoast's servicing portfolio and is
considering discontinuing certain of Suncoast's subservicing activities. Such
actions will substantially reduce the income derived from servicing as well as
the related expenses from the income and expenses previously reported by
Suncoast.
For additional information, see Note 4 of the December 31, 1996
Condensed Notes to Consolidated Financial Statements in Appendix B of this
Prospectus. (See "Unaudited Pro Forma Condensed Combined Financial Statements"
and Note 18 to Notes to the September 30, 1996 Consolidated Financial Statements
contained in Appendix A to the December 31, 1996 Prospectus.)
MARKET AREA AND COMPETITION
The Company conducts operations in South Florida, which at June 30,
1996 had a total of approximately $73 billion in deposits in commercial banks,
savings institutions, and credit unions (41% of the total of $178 billion of
deposits in Florida). The Company intends to continue to establish or acquire
branches in its market area where the Company can service its customer base.
In 1995, the Company sold its three branches on the west coast of
Florida, including their deposits which totaled $130 million at the date of
sale. The sale was part of a shift in growth strategy to focus on South Florida
and take advantage of consolidation trends in banking there. Also, as part of
this strategy, the Company opened branches in Boca Raton, Florida in December
1995, Delray Beach, Florida in June 1996 and West Palm Beach, Florida in
September 1996. On March 29, 1996, the Company acquired the Bank of Florida with
total assets of $28.1 million which was merged into the Company's South Miami
branch. Then, as discussed above, the Company acquired Suncoast on November 15,
1996.
12
<PAGE>
The Company encounters strong competition in attracting deposits and in
its lending activities. Its most direct competition for deposits historically
has been from commercial banks, brokerage houses, other savings associations,
and credit unions located in the Company's market area, and the Company expects
continued strong competition from such financial institutions in the foreseeable
future. Within the Company's market areas are branches of several commercial
banks and savings associations that are substantially larger and that have more
extensive operations than does the Company. In addition, many financial
institutions based in South Florida have recently been acquired by larger
institutions based in other parts of the state or based out of state. The
Company's goal is to compete for savings and other deposits by offering
depositors a higher level of personal service and expertise, together with a
wide range of financial services offered at competitive rates. The Company
believes that this strategy will enable it to attract depositors as the number
of local institutions remaining declines and depositors who desire more personal
service, particularly retirees, relocate their accounts.
The competition in originating real estate and other loans comes
principally from commercial banks, mortgage banking companies and other savings
associations. The Company competes for loan originations primarily through the
interest rates and loan fees it charges, the type of loans it offers, and the
efficiency and quality of services it provides. The Company purchases
residential first mortgage loans in the existing secondary mortgage market and
competes with other mortgage purchasers in the secondary market primarily on the
basis of price. While the Company has been, and intends to continue to be,
primarily a residential lender, the Company has recently placed more emphasis on
commercial real estate, construction and commercial lending, as discussed more
fully below. Factors that affect competition in lending include general and
local economic conditions, current interest rates and volatility of the mortgage
markets. As with its deposit products, the Company's strategy is to promote its
greater level of personal service and to position itself as a
small-to-middle-market lender to businesses left underserved by larger
institutions.
Management's strategy has included and continues to include evaluation
of market needs and offering products to meet those needs. The Company will
continue to offer products and services that will allow it to control the growth
of its assets and liabilities. These new products and services will allow the
Company to properly position itself to its customers as a community bank.
THE SERIES A ISSUER
The Series A Issuer is a statutory business trust created under
Delaware law pursuant to (i) the Trust Agreement executed by the Company, as
depositor, The Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and the Administrative Trustees named therein
and (ii) the filing of a certificate of trust with the Delaware Secretary of
State on December 13, 1996. The Trust Agreement has been amended and restated in
its entirety as of March 24, 1997. All of the Series A Common Securities issued
by the Series A Issuer, having an aggregate Liquidation Amount equal to 4% of
the total capital of the Series A Issuer, are owned by the Company. The Series A
Issuer was created for the exclusive purposes of (i) issuing and selling the
Series A Preferred Securities, (ii) using the proceeds from the sale of the
Series A Preferred Securities to acquire the Series A Subordinated Debentures
issued by the Company and (iii) engaging in only those other activities
necessary, advisable or incidental thereto (such as registering the New Series A
Preferred Securities). Accordingly, the Series A Subordinated Debentures will
continue to be the sole assets of the Series A Issuer, and payments under the
Series A Subordinated Debentures will continue to be the sole revenue of the
Series A Issuer. The principal executive office of the Series A Issuer is 255
Alhambra Circle, Coral Gables, Florida 33134 and its telephone number is (305)
569-2000.
13
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.................... Up to $70,000,000 aggregate Liquidation
Amount of New Series A Preferred
Securities are being offered in exchange
for a like aggregate Liquidation Amount
of Old Series A Preferred Securities. Old
Series A Preferred Securities may be
tendered for exchange in whole or in part
in a Liquidation Amount of not less than
$100,000 (100 Series A Preferred
Securities) or any integral multiple of
$1,000 in excess thereof. The Company and
the Series A Issuer are making the
Exchange Offer in order to satisfy their
obligations under the Registration Rights
Agreements relating to the Old Series A
Preferred Securities.
(For a description of the procedures for
tendering Old Series A Preferred
Securities, see "The Exchange
Offer--Procedures for Tendering Old
Series A Preferred Securities.")
Expiration Date....................... 5:00 p.m., New York City time, on June
28, 1997 (such time on such date being
hereinafter called the "Expiration Date")
unless the Exchange Offer is extended by
the Company and the Series A Issuer (in
which case the term "Expiration Date"
shall mean the latest date and time to
which the Exchange Offer is extended).
(See "The Exchange Offer--Expiration
Date; Extensions; Amendments.")
Conditions to the Exchange Offer...... The Exchange Offer is subject to certain
conditions, which may be waived by the
Company and the Series A Issuer in their
sole discretion. The Exchange Offer is
not conditioned upon any minimum
Liquidation Amount of Old Series A
Preferred Securities being tendered. (See
"The Exchange Offer--Conditions to the
Exchange Offer.")
The Company and the Series A Issuer
reserve the right in their sole and
absolute discretion, subject to
applicable law, at any time and from time
to time, (i) to delay the acceptance of
the Old Series A Preferred Securities for
exchange, (ii) to terminate the Exchange
Offer if certain specified conditions
have not been satisfied, (iii) to extend
the Expiration Date of the Exchange Offer
and retain all Old Series A Preferred
Securities tendered pursuant to the
Exchange Offer, subject, however, to the
right of holders of Old Series A
Preferred Securities to withdraw their
tendered Old Series A Preferred
Securities, or (iv) to
14
<PAGE>
waive any condition or otherwise amend
the terms of the Exchange Offer in any
respect. (See "The Exchange
Offer--Expiration Date; Extensions;
Amendments.")
Withdrawal Rights..................... Tenders of Old Series A Preferred
Securities may be withdrawn at any time
on or prior to the Expiration Date by
delivering a written notice of such
withdrawal to the Exchange Agent (as
defined hereafter) in conformity with
certain procedures set forth below under
"The Exchange Offer--Withdrawal Rights."
Procedures for Tendering Old
Series A Preferred Securities........ Tendering holders of Old Series A
Preferred Securities must complete and
sign a Letter of Transmittal in
accordance with the instructions
contained herein and forward the same by
mail, facsimile or hand delivery,
together with any other required
documents, to the Exchange Agent, either
with the Old Series A Preferred
Securities to be tendered or in
compliance with the specified procedures
for guaranteed delivery of Old Series A
Preferred Securities. Certain brokers,
dealers, commercial banks, the Series A
Issuer and other nominees may also effect
tenders by book-entry transfer, including
an Agent's message in lieu of the Letter
of Transmittal. Holders of Old Series A
Preferred Securities registered in the
name of a broker, dealer, commercial
bank, trust company or other nominee are
urged to contact such person promptly if
they wish to tender Old Series A
Preferred Securities pursuant to the
Exchange Offer. (See "The Exchange
Offer--Procedures for Tendering Old
Series A Preferred Securities.") Letters
of Transmittal and certificates
representing Old Series A Preferred
Securities should not be sent to the
Company or the Series A Issuer. Such
documents should only be sent to the
Exchange Agent. Questions regarding how
to tender and requests for information
should be directed to the Exchange Agent.
See "The Exchange Offer--Exchange Agent."
Sales of New Series A Preferred
Securities........................... The Company and the Series A Issuer
believe that New Series A Preferred
Securities issued pursuant to this
Exchange Offer in exchange for Old Series
A Preferred Securities may be offered for
resale, resold and otherwise transferred
by a holder thereof (other than a holder
who is a broker-dealer) without further
compliance with the registration and
prospectus
15
<PAGE>
delivery requirements of the Securities
Act, provided that such New Series A
Preferred Securities are acquired in the
ordinary course of such holder's business
and that such holder is not
participating, and has no arrangement or
understanding with any person to
participate, in a distribution (within
the meaning of the Securities Act) of
such New Series A Preferred Securities.
However, any holder of Old Series A
Preferred Securities who is an
"affiliate" of the Company or the Series
A Issuer or who intends to participate in
the Exchange Offer for the purpose of
distributing the New Series A Preferred
Securities, or any broker-dealer who
purchased the Old Series A Preferred
Securities from the Series A Issuer to
resell pursuant to Rule 144A or any other
available exemption under the Securities
Act, (a) will not be permitted or
entitled to tender such old series a
preferred securities in the exchange
offer and (b) must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any sale or other
transfer of such Old Series A Preferred
Securities unless such sale is made
pursuant to an exemption from such
requirements. In addition, as described
below, if any broker-dealer holds Old
Series A Preferred Securities acquired
for its own account as a result of
market-making or other trading activities
("Participating Broker-Dealers") and
exchanges such Old Series A Preferred
Securities for New Series A Preferred
Securities, then such broker-dealer must
deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resales of such New
Series A Preferred Securities.
Each holder of Old Series A Preferred
Securities who wishes to exchange Old
Series A Preferred Securities for New
Series A Preferred Securities in the
Exchange Offer will be required to
represent that (i) it is not an
"affiliate" of the Company or the Series
A Issuer, (ii) any New Series A Preferred
Securities to be received by it are being
acquired in the ordinary course of its
business, (iii) it has no arrangement or
understanding with any person to
participate in a distribution (within the
meaning of the Securities Act) of such
New Series A Preferred Securities, and
(iv) if such holder is not a
broker-dealer, such holder is not engaged
in, and does not intend to engage in, a
distribution (within the meaning of the
Securities Act) of such New Series A
Preferred Securities. Each broker-dealer
that receives New Series A Preferred
16
<PAGE>
Securities for its own account pursuant
to the Exchange Offer must acknowledge
that it acquired the Old Series A
Preferred Securities for its own account
as the result of market-making activities
or other trading activities and must
agree that it will deliver a prospectus
meeting the requirements of the
Securities Act in connection with any
resale of such New Series A Preferred
Securities. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. Participating
Broker-Dealers may fulfill their
prospectus delivery requirements with
respect to the New Series A Preferred
Securities received upon exchange of such
Old Series A Preferred Securities with a
Prospectus meeting the requirements of
the Securities Act, which may be this
Prospectus, as it may be amended or
supplemented from time to time, for a
period ending 90 days after the
Expiration Date or, if earlier, when all
such New Series A Preferred Securities
have been disposed of by such
Participating Broker-Dealer. (See "Plan
of Distribution.") Any Participating
Broker-Dealer who is an "affiliate" of
the Company or the Series A Issuer and
any Participating Broker who purchased
the Old Series A Preferred Securities
from the Series A Issuer to resell the
Old Series A Preferred Securities must
comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any
resale transaction. (See "The Exchange
Offer--Resales of New Series A Preferred
Securities.")
Exchange Agent........................ The exchange agent with respect to the
Exchange Offer is The Bank of New York
(the "Exchange Agent"). The addresses,
and telephone and facsimile numbers of
the Exchange Agent are set forth in "The
Exchange Offer--Exchange Agent" and in
the Letter of Transmittal.
Use of Proceeds....................... Neither the Company nor the Series A
Issuer will receive any cash proceeds
from the issuance of the New Series A
Preferred Securities offered hereby. (See
"Use of Proceeds From Sale of Old Series
A Preferred Securities.")
17
<PAGE>
Certain United States Federal Income
Tax Considerations; ERISA
Considerations....................... Holders of Old Series A Preferred
Securities should review the information
set forth under "Certain Federal Income
Tax Consequences" and "ERISA
Considerations" prior to tendering Old
Series A Preferred Securities in the
Exchange Offer.
18
<PAGE>
THE NEW SERIES A PREFERRED SECURITIES
Securities Offered.................... Up to $70,000,000 aggregate Liquidation
Amount of the Series A Issuer's 10 1/4%
Series A Preferred Securities which have
been registered under the Securities Act
(Liquidation Amount $1,000 per Series A
Preferred Security). The New Series A
Preferred Securities will be issued and
the Old Series A Preferred Securities
were issued under the Trust Agreement.
The New Series A Preferred Securities and
any Old Series A Preferred Securities
which remain outstanding after
consummation of the Exchange Offer will
constitute a single series of Series A
Preferred Securities under the Trust
Agreement and, accordingly, will vote
together as a single class for purposes
of determining whether holders of the
requisite percentage in outstanding
Liquidation Amount thereof have taken
certain actions or exercised certain
rights under the Trust Agreement. (See
"Description of the New
Securities--Description of Series A
Preferred Securities--General.") The
terms of the New Series A Preferred
Securities are identical in all material
respects to the terms of the Old Series A
Preferred Securities, except that the New
Series A Preferred Securities have been
registered under the Securities Act and
therefore are not subject to certain
restrictions on transfer applicable to
the Old Series A Preferred Securities and
will not provide for any increase in the
Distribution rate thereon. The Old
Securities provided for such increase if
they were not registered under the
Securities Act within the time period
specified by the Old Securities. (See
"The Exchange Offer--Purpose of the
Exchange Offer," "Description of the New
Securities" and "Description of the Old
Securities.")
Distribution Dates.................... June 30 and December 31 of each year,
commencing on the first such date
following the original issuance of the
New Series A Preferred Securities.
Extension Periods..................... Distributions on the New Series A
Preferred Securities will be deferred for
the duration of any Extension Period
elected by the Company with respect to
the payment of interest on the Series A
Subordinated Debentures. No Extension
Period will exceed 10 consecutive
semi-annual periods or extend beyond the
19
<PAGE>
Stated Maturity. (See "Description of the
New Securities--Description of Series A
Subordinated Debentures--Right to Defer
Interest Payment Obligation" and "Certain
Federal Income Tax Consequences--Original
Issue Discount.")
Ranking............................... The New Series A Preferred Securities
will rank pari passu, and payments
thereon will be made pro rata with the
Common Securities, except as described
under "Description of the New
Securities--Description of Series A
Preferred Securities--Subordination of
Common Securities." The Series A
Subordinated Debentures will rank pari
passu with all of the other junior
subordinated debentures that may be
issued by the Company pursuant to the
Indenture (as hereinafter defined)
("Other Debentures"), which will be
issued and sold (if at all) to other
trusts to be established by the Company
(if any), in each case similar to the
Series A Issuer ("Other Issuers"), and
will be unsecured, subordinate and junior
in right of payment to the extent and in
the manner set forth in the Indenture to
all Senior and Subordinated Debt (as
defined herein). (See "Description of the
New Securities--Description of Series A
Subordinated Debentures.") The Series A
Guarantee will rank PARI PASSU with all
of the other guarantees (if any), that
may be issued by the Company with respect
to other preferred securities (if any),
that may be issued by Other Issuers
("Other Guarantees") and will constitute
an unsecured obligation of the Company
and will rank subordinate and junior in
right of payment to the extent and in the
manner set forth in the Series A
Guarantee Agreement to all Senior and
Subordinated Debt. (See "Description of
the New Securities--Description of
Series A Guarantee.")
Redemption............................ The Series A Preferred Securities are
subject to mandatory redemption in whole
but not in part (i) at the Stated
Maturity upon repayment of the Series A
Subordinated Debentures, (ii) at any time
contemporaneously with the prepayment of
the Series A Subordinated Debentures upon
the occurrence and continuation of a Tax
Event at the Optional Redemption Price
and (iii) at any time on or after
December 30, 2006 contemporaneously with
the optional prepayment by the Company of
the Series A
20
<PAGE>
Subordinated Debentures at the Tax Event
Redemption Price. (See "Description of
the New Securities--Description of
Series A Preferred Securities--
Redemption.")
Rating ............................. The New Series A Preferred Securities are
expected to be rated "b2" by Moody's
Investors Services, Inc. and "BB-" by
Thompson's Bank Watch, which are the
ratings of the Old Series A Preferred
Securities.
Absence of Market for the New
Series A Preferred Securities........ The New Series A Preferred Securities
will be a new issue of securities for
which there currently is no market.
Although Friedman, Billings, Ramsey &
Co., and Raymond James & Associates,
Inc., the initial purchasers of the Old
Series A Preferred Securities (the
"Initial Purchasers"), have informed the
Company and the Series A Issuer that they
each currently intend to make a market in
the New Series A Preferred Securities,
they are not obligated to do so, and any
such market making may be discontinued at
any time without notice. Accordingly,
there can be no assurance as to the
development of any market or liquidity
for the New Series A Preferred
Securities. The Series A Issuer and the
Company do not intend to apply for
listing of the New Series A Preferred
Securities on any securities exchange or
for quotation through the National
Association of Securities Dealers
Automated Quotation System.
RISK FACTORS
Holders tendering Old Series A Preferred Securities in the Exchange
Offer should carefully consider the matters set forth under "Risk Factors."
For further information regarding the New Series A Preferred
Securities, see "Description of the New Securities--Description of Series A
Preferred Securities."
21
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the New Series A Preferred
Securities before deciding whether to accept the Exchange Offer. The risk
factors set forth below are generally applicable to the Old Series A Preferred
Securities as well as the New Series A Preferred Securities.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE SERIES
A SUBORDINATED DEBENTURES
The obligations of the Company under the Series A Guarantee issued by
the Company for the benefit of the holders of the Series A Preferred Securities
are unsecured and rank subordinate and junior in right of payment to all Senior
Debt of the Company, which is generally defined to include all other current and
future indebtedness of the Company (except trade and other liabilities arising
in the ordinary course of business), unless such other indebtedness expressly
provides that it is not superior in right of payment to the Series A
Subordinated Debentures. The obligations of the Company under the Series A
Subordinated Debentures are subordinate and junior in right of payment to all of
such Senior Debt of the Company. At December 31, 1996, the Company had no
outstanding Senior Debt. Because the Company is a holding company, the right of
the Company to participate in any distribution of assets of any subsidiary,
including the Bank, upon such subsidiary's liquidation or reorganization or
otherwise (and thus the ability of holders of the Series A Preferred Securities
to benefit indirectly from such distribution), is subject to the prior claims of
creditors of that subsidiary, except to the extent that the Company may itself
be recognized as a creditor of that subsidiary. Accordingly, the Series A
Subordinated Debentures and the Series A Guarantee are effectively subordinated
to all existing and future liabilities of the Company's subsidiaries and holders
of the Series A Subordinated Debentures should look only to the assets of the
Company for payments on the Series A Subordinated Debentures. (See "The
Company.") None of the Indenture, the Series A Guarantee, the Expense Agreement
or the Trust Agreement places any limitation on the amount of secured or
unsecured debt, including Senior Debt, that may be incurred by the Company. (See
"Description of the New Securities--Description of Series A Guarantee--Status of
the Series A Guarantee" and "Description of the New Securities--Description of
Series A Subordinated Debentures--Subordination."
The ability of the Series A Issuer to pay amounts due on the Series A
Preferred Securities is solely dependent upon the Company making payments on the
Series A Subordinated Debentures as and when required.
COMPANY LIQUIDITY
As a savings and loan holding company, the Company conducts its
operations principally through its subsidiaries and, therefore, its principal
source of cash, other than its investing and financing activities, is the
receipt of dividends from the Bank. However, there are legal limitations on the
source and amount of dividends that a savings bank such as the Bank is permitted
to pay. The current Office of Thrift Supervision (the "OTS") regulation
applicable to the payment of dividends
22
<PAGE>
or other capital distributions by savings institutions imposes limits on capital
distributions based upon an institution's regulatory capital levels and net
income. An institution that meets or exceeds all of its fully phased-in capital
requirements (both before and after giving effect to the distribution) and is
not in need of more than normal supervision would be a "Tier 1 association." A
Tier 1 association may make capital distributions during a calendar year of up
to the greater of (i) 100% of net income for the current calendar year plus 50%
of its capital surplus or (ii) 75% of its net income over the most recent four
quarters. Any additional capital distributions would require prior regulatory
approval. The Bank currently exceeds its fully phased-in capital requirements
and qualifies as a Tier 1 association under the regulation.
An institution that meets the minimum regulatory capital requirements
but does not meet the fully phased-in capital requirements would be a "Tier 2
association," which may make capital distributions of between 25% and 75% of its
net income over the most recent four-quarter period, depending upon the
institution's risk-based capital level. A "Tier 3 association" is defined as an
institution that does not meet all of the minimum regulatory capital
requirements and therefore may not make any capital distributions without the
prior approval of the OTS.
Savings institutions must provide the OTS with at least 30 days written
notice before making any capital distributions. All such capital distributions
are also subject to the OTS' right to object to a distribution on safety and
soundness grounds.
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no event of default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture to defer the payment
of interest on the Series A Subordinated Debentures, at any time or from time to
time, for a period not exceeding 10 consecutive semi-annual periods with respect
to each Extension Period, provided that no Extension Period may extend beyond
the Stated Maturity of the Series A Subordinated Debentures. As a consequence of
any such deferral, semi-annual Distributions on the Series A Preferred
Securities by the Series A Issuer will also be deferred (and the amount of
Distributions to which holders of the Series A Preferred Securities are entitled
will accumulate at the rate of 10 1/4% per annum, compounded semi-annually from
the relevant payment date for such Distributions) during any such Extension
Period. During any such Extension Period, the Company may not, and may not
permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock, (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank PARI PASSU with or junior in interest
to the Series A Subordinated Debentures or (iii) make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks PARI PASSU with or junior in
interest to the Series A Subordinated Debentures (other than (a) dividends or
distributions in common stock of the Company, (b) any declaration of a dividend
in connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Series A
Guarantee and (d) purchases of common stock related to the issuance of common
stock or rights under any of the Company's benefit plans for its directors,
officers or employees). Prior to the
23
<PAGE>
termination of any such Extension Period, the Company may further defer the
payment of interest, provided that no Extension Period may exceed 10 consecutive
semi-annual periods or extend beyond the Stated Maturity of the Series A
Subordinated Debentures. Upon the termination of any Extension Period and the
payment of all interest then accrued and unpaid on the Series A Subordinated
Debentures (together with interest thereon at the annual rate of 10 1/4%,
compounded semi-annually from the relevant payment date for such interest, to
the extent permitted by applicable law), the Company may elect to begin a new
Extension Period subject to the above requirements. There is no limitation on
the number of times that the Company may elect to begin an Extension Period.
(See "Description of the New Securities--Description of Series A Preferred
Securities--Distributions" and "Description of the New Securities--Description
of Series A Subordinated Debentures--Right to Defer Interest Payment
Obligation.")
Should an Extension Period occur, a holder of the Series A Preferred
Securities will continue to accrue income (in the form of original issue
discount) in respect of its PRO RATA share of the Series A Subordinated
Debentures held by the Series A Issuer for United States federal income tax
purposes. As a result, a holder of the Series A Preferred Securities will be
required to include such income in gross income for United States federal income
tax purposes in advance of the receipt of cash and will not receive the cash
related to such income from the Series A Issuer if the holder disposes of the
Series A Preferred Securities prior to the record date for the payment of
Distributions. (See "Certain Federal Income Tax Consequences--Original Issue
Discount" and "--Sales or Redemption of the Series A Preferred Securities.")
The Company has no current intention of exercising its right to defer
payments of interest on the Series A Subordinated Debentures. However, should
the Company elect to exercise such right in the future, the market price of the
Series A Preferred Securities is likely to be affected. A holder that disposes
of its Series A Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Series A Preferred Securities. In addition, as a result of the
existence of the Company's right to defer interest payments, the market price of
the Series A Preferred Securities may be more volatile than the market prices of
other securities on which original issue discount accrues and that are not
subject to such deferrals.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The general provisions of the Indenture do not afford holders of Series
A Subordinated Debentures protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect the holders of the Series A
Subordinated Debentures. Moreover, since the sole assets of the Series A Issuer
are the Series A Subordinated Debentures, any adverse effect on the Series A
Issuer would have a corresponding adverse effect on the holders of the New
Series A Preferred Securities.
TAX EVENT--REDEMPTION
Upon the occurrence and continuation of a Tax Event (whether occurring
before or after December 31, 2006), the Company has the right to redeem the
Series A Subordinated Debentures in
24
<PAGE>
whole (but not in part) within 90 days following the occurrence of such Tax
Event and therefore cause a mandatory redemption of the Series A Preferred
Securities. (See "Description of the New Securities--Description of Series A
Debentures--Tax Event Redemption.")
A "Tax Event" means the receipt by the Series A Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after the date of issuance of
the Series A Preferred Securities under the Trust Agreement, there is more than
an insubstantial risk that (i) the Series A Issuer is, or will be within 90 days
of the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Series A Subordinated Debentures,
(ii) interest payable by the Company on the Series A Subordinated Debentures is
not, or within 90 days of the date of such opinion will not be, deductible by
the Company, in whole or in part, for United States federal income tax purposes
or (iii) the Series A Issuer is, or will be within 90 days of the date of such
opinion, subject to more than a DE MINIMIS amount of other taxes, duties or
other governmental charges. (See "Description of the New
Secuurities--Description of Series A Subordinated Debentures--Tax Event
Redemption.")
(See "Certain Federal Income Tax Consequences--Possible Tax Law
Changes" for a discussion of certain legislative proposals that, if adopted,
could give rise to a Tax Event, which would permit the Company to cause a
redemption of the Series A Preferred Securities prior to December 31, 2006.)
LIQUIDATION OF THE SERIES A ISSUER AND DISTRIBUTION OF THE SERIES A SUBORDINATED
DEBENTURES TO HOLDERS
The Company will have the right at any time to terminate the Series A
Issuer and, after satisfaction of liabilities to creditors of the Series A
Issuer as required by applicable law, cause the Series A Subordinated Debentures
to be distributed to the holders of the Series A Preferred Securities in
exchange therefor in liquidation of the Series A Issuer. (See "Description of
the New Securities--Description of Series A Preferred Securities--Liquidation of
the Series A Issuer and Distribution of the Series A Subordinated Debentures to
Holders.")
RIGHTS UNDER THE SERIES A GUARANTEE
The Series A Guarantee guarantees to the holders of the Series A
Preferred Securities the following payments, to the extent not paid by the
Series A Issuer: (i) any accumulated and unpaid Distributions required to be
paid on the Series A Preferred Securities, to the extent that the Series A
Issuer has funds on hand available therefor at such time, (ii) the redemption
price with respect to any Series A Preferred Securities called for redemption,
to the extent that the Series A Issuer has funds on hand available therefor at
such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Series A Issuer (unless the Series A Subordinated Debentures
are distributed to holders of the Series A Preferred Securities in exchange
therefor), the lesser of (a) the
25
<PAGE>
aggregate of the Liquidation Amount and all accumulated and unpaid Distributions
to the date of payment, to the extent that the Series A Issuer has funds on hand
available therefor at such time, and (b) the amount of assets of the Series A
Issuer remaining available for distribution to holders of the Series A Preferred
Securities after payment of creditors of the Series A Issuer as required by
applicable law.
If the Company were to default on its obligation to pay amounts payable
under the Series A Subordinated Debentures, the Series A Issuer would lack funds
for the payment of Distributions or amounts payable on redemption of the Series
A Preferred Securities or otherwise, and, in such event, holders of the Series A
Preferred Securities would not be able to rely upon the Series A Guarantee for
payment of such amounts. The holders of not less than a majority in aggregate
Liquidation Amount of the Series A Preferred Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee in respect of the Series A Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Series A Guarantee. Any holder of the Series A Preferred Securities may
institute a legal proceeding directly against the Company to enforce its rights
under the Series A Guarantee without first instituting a legal proceeding
against the Series A Issuer, the Guarantee Trustee or any other person or
entity. Instead, in the event that an event of default under the Indenture shall
have occurred and be continuing and such event is attributable to the failure of
the Company to pay interest on or principal of the Series A Subordinated
Debentures on the applicable payment date, a holder of the Series A Preferred
Securities may institute a legal proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on such
Series A Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Series A Preferred Securities of such holder
(a "Direct Action"). In connection with such Direct Action, the Company will
have a right of set-off under the Indenture to the extent of any payment made by
the Company to such holder of the Series A Preferred Securities in the Direct
Action. Except as described herein, holders of the Series A Preferred Securities
will not be able to exercise directly any other remedy available to the holders
of the Series A Subordinated Debentures or assert directly any other rights in
respect of the Series A Subordinated Debentures. The Bank of New York will act
as the guarantee trustee under the Series A Guarantee (the "Guarantee Trustee")
and will hold the Series A Guarantee for the benefit of the holders of the
Series A Preferred Securities. The Bank of New York will also act as Debenture
Trustee for the Series A Subordinated Debentures and as Property Trustee, and
The Bank of New York (Delaware) will act as Delaware Trustee under the Trust
Agreement. (See "Description of the New Securities--Description of Series A
Subordinated Debentures--Enforcement of Certain Rights by Holders of the Series
A Preferred Securities," "Description of the New Securities--Description of
Series A Subordinated Debentures--Debenture Events of Default" and "Description
of the New Securities--Description of Series A Guarantee.") The Trust
Agreement provides that each holder of the Series A Preferred Securities by
acceptance thereof agrees to the provisions of the Series A Guarantee and the
Indenture.
LIMITED VOTING RIGHTS
Holders of the Series A Preferred Securities will generally have
limited voting rights relating only to the modification of the Series A
Preferred Securities and the exercise of the Series A Issuer's rights as holder
of the Series A Subordinated Debentures and the Series A Guarantee. Holders of
the
26
<PAGE>
Series A Preferred Securities will not be entitled to vote to appoint, remove or
replace the Property Trustee, the Delaware Trustee or the Administrative
Trustees, and such voting rights are vested exclusively in the holder of the
Series A Common Securities except, with respect to the Property Trustee and the
Delaware Trustee, upon the occurrence of certain events described herein. The
Property Trustee, the Administrative Trustees and the Company may amend the
Trust Agreement without the consent of holders of the Series A Preferred
Securities to ensure that the Series A Issuer will be classified for United
States federal income tax purposes as a grantor trust even if such action
adversely affects the interests of such holders. (See "Description of the New
Securities--Description of Series A Preferred Securities--Voting Rights;
Amendment of the Trust Agreement" and "--Removal of the Series A Issuer
Trustees.")
POSSIBLE TAX LAW CHANGES AFFECTING THE SERIES A PREFERRED SECURITIES
On February 6, 1997, as a part of President Clinton's Fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would treat as equity for United States
federal income tax purposes certain debt instruments with a maximum term of more
than 15 years. The Proposed Legislation is proposed to be effective for debt
instruments issued on or after the date on which the first congressional
committee action is taken.
It is expected that, if the Proposed Legislation is enacted as
currently proposed, such legislation will not apply to the Old Series A
Subordinated Debentures since they were issued prior to the date of any
committee action. Moreover, if the Proposed Legislation is enacted with
effective-date provisions that are identical in all material respects (except
for the actual effective date) to the effective-date provisions for an earlier
version of the Proposed Legislation contained in the Revenue Reconciliation Bill
of 1996 (the "1996 Bill"), then, even if the Exchange Offer is consummated after
the actual effective date of such legislation, the exchange of the Old
Securities for the New Securities will not cause the New Series A Subordinated
Debentures to be subject to such legislation. However, there can be no
assurances that the effective date guidance contained in the Proposed
Legislation and the 1996 Bill will be incorporated in the legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the tax treatment of the Series A Subordinated
Debentures or the Series A Preferred Securities.
If the Proposed Legislation were enacted and applied to all or a
portion of the Series A Subordinated Debentures, the Company would be unable to
fully deduct the interest on the Series A Subordinated Debentures. Such a change
could give rise to a Tax Event, which would permit the Company to cause a
redemption of the Series A Preferred Securities before, as well as after,
December 31, 2006. See "Description of the New Securities--Description of Series
A Subordinated Debentures--Redemption" and "Description of the New
Securities--Series A Preferred Securities--Redemption." In addition, the income
with respect to the Series A Preferred Securities would be treated as consisting
entirely or partly of distributions with respect to stock, which would
constitute dividends to the extent that they did not exceed the current and
accumulated earnings and profits of the Company. Dividends paid by a United
States corporation to foreign persons are generally subject to United States
federal withholding tax. (See "Certain Federal Income Tax Consequences--Possible
Tax Law Changes.")
27
<PAGE>
COMPOSITION OF RESIDENTIAL AND COMMERCIAL REAL ESTATE LOAN PORTFOLIO
GEOGRAPHIC CONCENTRATION. The loans in the Company's portfolio are
predominantly secured by real estate. At December 31, 1996, 52.3% of the
Company's gross loans receivable were secured by properties located in Florida,
15.2% by properties located in California and the balance secured by properties
located throughout the country. Conditions in the real estate markets in which
the collateral for the Company's mortgage loans are located strongly influence
the level of the Company's non-performing loans and its results of operations.
Real estate values are affected by, among other things, changes in general or
local economic conditions, changes in governmental rules or policies, the
availability of loans to potential purchasers, and acts of nature. Although the
Company's underwriting standards are intended to protect the Company against
adverse local real estate trends, declines in real estate markets could
negatively impact the value of the collateral securing the Company's loans and
its results of operations. In this regard, as a result of the downturn in the
California real estate market in 1993, the Company believes that certain of its
loans secured by real estate in California have current loan to value ratios
that are higher than those when the loans were originated. (See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Credit Quality" and "Business of BankUnited
Financial Corporation--Lending Activities--Loan Portfolio" in the Company's
Annual Report on Form 10-K/A for the year ended September 30, 1996, contained in
Appendix A to this Prospectus.)
DIVERSIFIED LENDING RISKS. The Company's recent operating strategy has
included an increased emphasis on originating and/or purchasing commercial real
estate (including multi-family residential), real estate construction, and
commercial business loans. These lending categories are generally considered to
involve a higher degree of risk than that for traditional single-family
residential lending, because, among other factors, such loans involve larger
loan balances to a single borrower or groups of related borrowers. In addition,
some loans will default despite the Company's policies and procedures for loan
underwriting. At December 31, 1996, the Company had a balance of $122.9 million
in commercial real estate loans, $7.0 million in commercial business loans and
$11.9 million in real estate construction loans. (See "Business of BankUnited
Financial Corporation--Commercial Real Estate Lending," "--Real Estate
Construction Lending," and "--Commercial Business Lending" in the Company's
Annual Report on Form 10-K/A for the year ended September 30, 1996, contained in
Appendix A to this Prospectus.)
COMPETITION
The Company faces substantial competition in purchasing and originating real
estate loans and in attracting deposits. The Company's competition in
originating real estate loans is principally from banks, other thrifts, mortgage
banking companies, real estate financing conduits, and small insurance
companies. In purchasing real estate loans, the Company competes with other
participants in the secondary mortgage market. Many entities competing with the
Company enjoy competitive advantages over the Company relative to a potential
borrower or seller in terms of a prior business relationship, wide geographic
presence or more accessible branch office locations, the ability to offer
additional services or more favorable pricing alternatives, a lower origination
and operating cost structure, and other relevant items. The Company does not
have a significant market share of the real
28
<PAGE>
estate lending activities in the areas in which it conducts operations, and
increased competition in those areas from traditional competitors or new sources
could result in a decrease in the origination or purchase of mortgage loans and
could adversely affect the Company's results of operations. In its deposit
gathering activities, the Company competes with insured depository institutions
such as thrifts, credit unions, and banks, as well as uninsured investment
alternatives including money market funds. These competitors may offer higher
rates than the Company which either could result in the Company either
attracting fewer deposits or could require the Company to increase the rates it
pays to attract deposits. Increased deposit competition could adversely affect
the Company's ability to generate the funds necessary for its lending operations
and could adversely affect the Company's results of operations. (See "Business
of BankUnited Financial Corporation--Market Area and Competition" in the
Company's Annual Report on Form 10-K/A for the year ended September 30, 1996,
contained in Appendix A to this Prospectus.)
MARKET PRICES
There can be no assurance as to the market prices that may develop for
Series A Preferred Securities or Series A Subordinated Debentures that may be
distributed in exchange for Series A Preferred Securities if a termination of
the Series A Issuer occurs. Accordingly, the Series A Preferred Securities, or
the Series A Subordinated Debentures that a holder of Series A Preferred
Securities may receive in liquidation of the Series A Issuer, may trade at a
discount from the price that the investor paid to purchase the Series A
Preferred Securities.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD SERIES A PREFERRED SECURITIES
The Old Series A Preferred Securities have not been registered under
the Securities Act or any state securities laws and therefore may not be
offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act and any other applicable
securities laws, or pursuant to an exemption therefrom or in a transaction not
subject thereto, and in each case in compliance with certain other conditions
and restrictions. Old Series A Preferred Securities which remain outstanding
after consummation of the Exchange Offer will continue to bear a legend
reflecting such restrictions on transfer. In addition, upon consummation of the
Exchange Offer, holders of Old Series A Preferred Securities which remain
outstanding will not be entitled to any rights to have such Old Series A
Preferred Securities registered under the Securities Act or to any similar
rights under the Registration Rights Agreements (subject to certain limited
exceptions). The Company and the Series A Issuer do not intend to register under
the Securities Act any Old Series A Preferred Securities which remain
outstanding after consummation of the Exchange Offer (subject to limited
exceptions, if applicable).
A holder's ability to sell untendered Old Series A Preferred Securities
could be adversely affected. In addition, although the Old Series A Preferred
Securities have been designated for trading in the Private Offerings, Resale and
Trading through Automatic Linkages ("PORTAL") market, to the extent that Old
Series A Preferred Securities are tendered and accepted in connection with the
Exchange Offer, any trading market for Old Series A Preferred Securities which
remain outstanding after the Exchange Offer could be adversely affected.
29
<PAGE>
The New Series A Preferred Securities and any Old Series A Preferred
Securities which remain outstanding after consummation of the Exchange Offer
will constitute a single series of Series A Preferred Securities under the Trust
Agreement and, accordingly, will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement. (See "Description of the New
Securities--Description of Series A Preferred Securities--General.")
The Old Series A Preferred Securities provide that, if the Exchange
Offer is not consummated by June 28, 1997, the Distribution rate borne by the
Old Series A Preferred Securities will increase by 0.25% per annum (not to
exceed in the aggregate 0.50%) commencing on June 29, 1997, until the Exchange
Offer is consummated. (See "Description of the Old Securities.") Following
consummation of the Exchange Offer, the Old Series A Preferred Securities will
not be entitled to any increase in the Distribution rate thereon. The New Series
A Preferred Securities will not be entitled to any such increase in the
Distribution rate thereon.
ABSENCE OF PUBLIC MARKET; TRADING CHARACTERISTICS OF THE SERIES A PREFERRED
SECURITIES
The Old Series A Preferred Securities were issued to, and the Company
believes are currently owned by, a relatively small number of beneficial owners.
The Old Series A Preferred Securities have not been registered under the
Securities Act and will be subject to restrictions on transferability to the
extent that they are not exchanged for the New Series A Preferred Securities.
Although the New Series A Preferred Securities will generally be permitted to be
resold or otherwise transferred by the holders (who are not affiliates of the
Company or the Series A Issuer) without compliance with the registration
requirements under the Securities Act, they will constitute a new issue of
securities with no established trading market. Series A Preferred Securities may
be transferred by the holders thereof only in blocks having a Liquidation Amount
of not less than $100,000 (100 Series A Preferred Securities). The Company and
the Series A Issuer have been advised by the Initial Purchasers that the Initial
Purchasers presently intend to make a market in the New Series A Preferred
Securities. However, the Initial Purchasers are not obligated to do so and any
market-making activity with respect to the New Series A Preferred Securities may
be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Series A Preferred Securities or as to the liquidity of or the trading
market for the New Series A Preferred Securities. If an active public market
does not develop, the market price and liquidity of the New Series A Preferred
Securities may be adversely affected.
The Company does not intend to have the Series A Preferred Securities
quoted on the NASDAQ National Market System or listed on any securities
exchange. The Series A Preferred Securities may trade at prices that do not
fully reflect the value of accrued but unpaid interest with respect to the
underlying Series A Subordinated Debentures. A holder of the Series A Preferred
Securities that disposes of its Series A Preferred Securities between record
dates for payments of Distributions (and consequently does not receive a
Distribution from the Series A Issuer for the period
30
<PAGE>
prior to such disposition) will nevertheless be required to include accrued but
unpaid interest on the Series A Subordinated Debentures through the date of
disposition in income as ordinary income and to add such amount to its adjusted
tax basis in the Series A Preferred Securities that it sold. Such holder will
recognize a capital loss to the extent the selling price (which may not fully
reflect the value of accrued but unpaid interest) is less than its adjusted tax
basis (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. (See "Certain Federal Income Tax
Consequences--Sales or Redemption of the Series A Preferred Securities.")
If a public trading market develops for the New Series A Preferred
Securities, future trading prices of such securities will depend upon many
factors, including, among other things, prevailing interest rates, the Company's
results of operations and the market for similar securities. Depending upon
prevailing interest rates, the market for similar securities and other factors,
including the financial condition of the Company, the New Series A Preferred
Securities may trade at a discount.
Notwithstanding the registration of the New Series A Preferred
Securities in the Exchange Offer, holders who are "affiliates" (as defined under
Rule 405 of the Securities Act) of the Company or the Trust may publicly offer
for sale or resell the New Series A Preferred Securities only in compliance with
the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives New Series A Preferred Securities for
its own account in exchange for Old Series A Preferred Securities, where such
Old Series A Preferred Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Series A Preferred Securities. (See "Plan of Distribution.")
EXCHANGE OFFER PROCEDURES
Issuance of the New Series A Preferred Securities in exchange for Old
Series A Preferred Securities pursuant to the Exchange Offer will be made only
after a timely receipt by the Series A Issuer of such Old Series A Preferred
Securities, a properly completed and duly executed Letter of Transmittal or
Agent's Message in lieu thereof, and all other required documents. Therefore,
holders of the Old Series A Preferred Securities desiring to tender such Old
Series A Preferred Securities in exchange for New Series A Preferred Securities
should allow sufficient time to ensure timely delivery. Neither the Company, the
Series A Issuer, nor the Exchange Agent is under any duty to give notification
of defects or irregularities with respect to the tenders of Old Series A
Preferred Securities for exchange.
31
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
of the Company for the respective periods indicated (unaudited).
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FOR THE YEARS ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------- ------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits............ 1.83 1.87 1.07 1.52 1.05 1.13 1.33
Including interest on deposits............ 1.18 1.27 1.03 1.21 1.02 1.07 1.12
</TABLE>
For purposes of computing these ratios, earnings represent income
before income taxes and cumulative effect of changes in accounting principles
and fixed charges (excluding capitalized interest). Fixed charges, excluding
interest on deposits, include interest (other than on deposits but including
capitalized interest) and the portion deemed representative of the interest
factor of rents. Fixed charges, including interest on deposits, include all
interest (including capitalized interest) and the portion deemed representative
of the interest factor of rents.
USE OF PROCEEDS FROM SALE OF OLD SERIES A PREFERRED SECURITIES
Neither the Company nor the Series A Issuer will receive any cash
proceeds from the issuance of the New Series A Preferred Securities offered
hereby. In consideration for issuing the New Series A Preferred Securities in
exchange for Old Series A Preferred Securities as described in this Prospectus,
the Series A Issuer will receive Old Series A Preferred Securities in like
Liquidation Amount. The Old Series A Preferred Securities surrendered in
exchange for the New Series A Preferred Securities will be retired and
cancelled.
The net proceeds to the Series A Issuer from the offering of the Old
Series A Preferred Securities was approximately $69,700,000 million (before
deducting expenses associated with the offering). All of the proceeds from the
sale of the Old Series A Preferred Securities were invested by the Series A
Issuer in the Old Series A Subordinated Debentures. The Company intends to use
the proceeds from the sale of the Series A Subordinated Debentures for general
corporate purposes, including, but not limited to, capital contributions to the
Bank.
32
<PAGE>
THE SERIES A ISSUER
BANKUNITED CAPITAL
BankUnited Capital is a statutory business trust created under Delaware
law pursuant to (i) the Trust Agreement executed by the Company, as depositor,
The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and the Administrative Trustees named therein and (ii) the
filing of a certificate of trust with the Delaware Secretary of State on
December 13, 1996. The Trust Agreement was amended and restated in its entirety
as of December 30, 1996 and as of March 24, 1997 (as so amended and restated,
the "Trust Agreement"). The Series A Issuer was formed for the exclusive
purposes of (i) issuing and selling the Series A Preferred Securities, (ii)
using the proceeds from the sale of the Series A Preferred Securities to acquire
Series A Subordinated Debentures issued by the Company and (iii) engaging in
only those other activities necessary, advisable or incidental thereto (such as
registering the New Series A Preferred Securities). Accordingly, the Series A
Subordinated Debentures are the sole assets of the Series A Issuer, and payments
under the Series A Subordinated Debentures are the sole revenue of the Series A
Issuer.
All of the Series A Common Securities are owned by the Company. The
Series A Common Securities rank PARI PASSU, and payments will be made thereon
PRO RATA, with the Series A Preferred Securities, except that upon the
occurrence and continuance of an event of default under the Trust Agreement
resulting from an Event of Default under the Indenture, the rights of the
Company as holder of the Series A Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Series A Preferred Securities.
(See "Description of the New Securities--Description of Series A Preferred
Securities--Subordination of the Series A Common Securities.") The Company has
acquired the Series A Common Securities in an aggregate Liquidation Amount equal
to 4% of the total capital of the Series A Issuer. The Series A Issuer has a
term of 55 years, but may terminate earlier as provided in the Trust Agreement.
The Series A Issuer's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Series A Common Securities. The
trustees for the Series A Issuer are The Bank of New York, as the Property
Trustee (the "Property Trustee"), The Bank of New York (Delaware), as the
Delaware Trustee (the "Delaware Trustee"), and two individual trustees (the
"Administrative Trustees") who are employees or officers of or affiliated with
the Company (collectively, the "Series A Issuer Trustees"). The Bank of New
York, as Property Trustee, will act as sole indenture trustee under the Trust
Agreement for purposes of compliance with the Trust Indenture Act. The Bank of
New York will also act as guarantee trustee under the Series A Guarantee and the
Indenture. (See "Description of the New Securities--Description of the Series A
Guarantee" and "Description of the New Securities--Description of the Series A
Subordinated Debentures.") The holder of the Series A Common Securities, or the
holders of a majority in Liquidation Amount of the Series A Preferred Securities
if an event of default under the Trust Agreement resulting from an event of
default under the Indenture has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee. In
no event will the holders of the Series A Preferred Securities have the right to
vote to appoint, remove or replace the Administrative Trustees; such voting
rights are vested exclusively in the holder of the Series A Common Securities.
The duties and obligations of the Series A Issuer Trustees are governed by the
Trust Agreement. The Company pays all fees and expenses related to the Series A
Issuer and the offering of the Series A Preferred Securities and pays, directly
or indirectly, all ongoing costs, expenses and liabilities of the Series A
Issuer pursuant to the Expense Agreement.
33
<PAGE>
BANKUNITED FINANCIAL CORPORATION
The Company is a Florida corporation which is the savings and loan
holding company for BankUnited, FSB (the "Bank"). The Company became the holding
company for the Bank, which was originally chartered in 1984 as a Florida
savings association, in a reorganization which occurred in 1993, when the Bank
converted to a federally chartered stock savings bank. On November 15, 1996, the
Company completed its acquisition of Suncoast Savings and Loan Association, FSA
("Suncoast"), a federally chartered stock savings association headquartered in
Hollywood, Florida, which was merged into the Bank.
The Company's acquisition of Suncoast has resulted in the Company
becoming the fourth largest publicly held financial institution headquartered in
South Florida with over $1.3 billion in assets. The merger has increased the
Company's market share, particularly in Broward County, Florida, has allowed the
Company to achieve economies associated with an in-market merger, and enables
the Company to compete more effectively with larger financial institutions in
South Florida.
The Company currently has fifteen branch offices in South Florida, six
of which were acquired with Suncoast. The Company's business has traditionally
consisted of attracting deposits from the general public and using those
deposits, together with borrowings and other funds, to purchase and originate
single-family residential mortgage loans and to a lesser extent commercial real
estate, commercial business, and consumer loans. The Company also invests in tax
certificates and other permitted investments. As a result of the Suncoast
acquisition, the Company has greatly expanded its mortgage loan servicing
activities to include processing loan payments, remitting principal and interest
to investors, administering escrow funds and providing other services in the
administration of mortgage loans. The Company is an approved seller/servicer for
GNMA, the Federal Home Loan Mortgage Corporation ("FHLMC") and Fannie Mae. The
Company also services loans under contracts with the FDIC and other financial
institutions.
The Company's current strategy emphasizes strategic product niches
which the Company believes are being underserved as South Florida's banking
market consolidates. These products include commercial business and commercial
real estate lending and deposit services for small to mid-sized businesses. The
Company also focuses on attracting depositors that are seeking convenience,
competitive rates and personalized service.
The Company's executive offices are located at 255 Alhambra Circle,
Coral Gables, Florida 33134, telephone (305) 569-2000.
34
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996 as adjusted to give effect to the consummation
of the sale of $20 million of the Old Series A Preferred Securities after
December 31, 1996 and the application of the proceeds thereof. The following
data should be read in conjunction with the consolidated financial statements
and notes thereto of the Company incorporated by reference herein and deemed to
be a part of this Prospectus. The issuance of the New Series A Preferred
Securities will have no effect on the capitalization of the Company.
<TABLE>
<CAPTION>
December 31, 1996
AS
ACTUAL ADJUSTED
------ --------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Deposits......................................................................... $ 878,166 $ 878,166
FHLB advances.................................................................... 288,484 288,484
Subordinated notes............................................................... 775 775
----------- -----------
Total deposits and borrowed funds........................................... 1,167,425 1,167,425
----------- -----------
Company Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Company (1)................................................. 50,000 70,000
----------- -----------
Stockholders' equity:
Preferred Stock, Series B, C, C-II, 8% Convertible and 9% Perpetual,
$.01 par value; authorized--10,000,000 shares; issued and outstanding--
3,584,547 shares(2)(3)........................................................ 36 36
Class A Common Stock, $.01 par value; authorized--15,000,000 shares;
issued and outstanding--7,656,953 shares (3).................................. 76 76
Class B Common Stock, $.01 par value; authorized--3,000,000 shares,
issued and outstanding--251,515 shares........................................ 3 3
Additional paid-in capital...................................................... 89,860 89,860
Retained earnings............................................................... 8,206 8,206
Net unrealized losses on securities available for sale, net of tax.............. (26) (26)
------------ -----------
Total stockholders' equity................................................... 98,155 98,155
----------- -----------
Total deposits, borrowed funds and stockholders' equity...................... $ 1,315,580 $ 1,335,580
=========== ===========
<FN>
- ----------
(1) As described herein, the sole asset of the Series A Issuer as of December 31, 1996 is the $52 million of
Series A Subordinated Debentures the Series A Issuer acquired from the Company. After completion of
the sale of the additional Series A Preferred Securities, the only asset of the Series A Issuer will be $72.8
million aggregate principal amount of the Series A Subordinated Debentures issued by the Company to the
Series A Issuer. The Series A Subordinated Debentures bear interest at the annual rate of 10-1/4% of the
principal amount thereof, payable in arrears on June 30 and December 31 of each year and will mature on
December 31, 2026. The Company owns all of the Common Securities of the Series A Issuer.
(2) Such shares had an aggregate liquidation preference of $38.1 million at December 31, 1996.
(3) The above table does not reflect the February 13, 1997 conversion of all outstanding shares of the
Series C and Series C-II preferred stock into 822,889 shares of Class A Common Stock. The annual dividend on
the Series C and C-II Preferred Stock was $378,000.
</FN>
</TABLE>
35
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series A Issuer will be treated
as a subsidiary of the Company and, accordingly, the accounts of the Series A
Issuer will be included in the consolidated financial statements of the Company.
The New Series A Preferred Securities will be presented as part of a separate
line item in the consolidated statements of financial condition of the Company
under the caption "Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Company," and appropriate disclosures about the New Series A
Preferred Securities, will be included in the notes to the consolidated
financial statements. For financial reporting purposes, the Company will record
distributions payable on the Series A Preferred Securities as an expense in the
consolidated statements of operations.
The Company has agreed that future financial reports of the Company
will: (i) present the New Series A Preferred Securities on the Company's
statements of financial condition as a separate line item entitled "Company
Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust
Holding Solely Junior Subordinated Deferrable Interest Debentures of the
Company" (ii) include in a footnote to the financial statements disclosure that
the sole assets of the Series A Issuer are the New Series A Subordinated
Debentures specifying the principal amount, interest rate and maturity date of
New Series A Subordinated Debentures held; and (iii) if Staff Accounting
Bulletin No. 53 treatment is sought, include, in an audited footnote to the
financial statements, disclosure that (a) the Series A Issuer is wholly owned,
(b) the sole assets of the Series A Issuer are its New Series A Subordinated
Debentures, (c) the obligations of the Company under the New Series A
Subordinated Debentures, the Indenture, the Trust Agreement and the Guarantee,
in the aggregate constitute a full and unconditional guarantee by the Company of
the Series A Issuer's obligations under the New Series A Preferred Securities.
36
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Series A Preferred Securities,
the Company and the Series A Issuer entered into the Registration Rights
Agreements with the Initial Purchasers, pursuant to which the Company and the
Series A Issuer agreed, among other things, to file and to use their best
reasonable efforts to cause to become effective on or before April 29, 1997 with
the Commission a registration statement with respect to the exchange of the New
Series A Preferred Securities, with terms identical in all material respects to
the terms of the Old Series A Preferred Securities, for the Old Series A
Preferred Securities. Copies of the Registration Rights Agreements have been
filed as Exhibits to the Registration Statement of which this Prospectus is a
part.
The Exchange Offer is being made to satisfy the contractual obligations
of the Company and the Series A Issuer under the Registration Rights Agreements.
The form and terms of the New Series A Preferred Securities are the same as the
form and terms of the Old Series A Preferred Securities except that the New
Series A Preferred Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Old Series A Preferred Securities and will not provide for any increase in
the Distribution rate thereon. In that regard, the Old Series A Preferred
Securities provide, among other things, that, if the Exchange Offer Registration
Statement is not declared effective by April 29, 1997, or the Exchange Offer is
not completed by June 28, 1997, the Distribution rate borne by the Old Series A
Preferred Securities commencing on the day after such date will increase by
0.25% per annum (not to exceed in the aggregate 0.50%) until the Exchange Offer
Registration Statement is declared effective or the Exchange Offer is completed,
as applicable. Upon consummation of the Exchange Offer, holders of Old Series A
Preferred Securities will not be entitled to any increase in the Distribution
rate thereon or any further registration rights under the Registration Rights
Agreements, except under limited circumstances. (See "--Resales of New Series A
Preferred Securities," "Risk Factors--Consequences of a Failure to Exchange Old
Series A Preferred Securities" and "Description of the Old Securities.")
In the event that any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Series A Issuer to effect the
Exchange Offer, if it is determined that the Exchange Offer would give rise to a
Tax Event, if for any other reason the Exchange Offer is not consummated on or
before June 28, 1997, or upon the request of an Initial Purchaser (under certain
circumstances), the Company and the Series A Issuer will, at the Company's
expense, (i) as promptly as practicable, file a Shelf Registration Statement
covering resales of the Series A Preferred Securities, (ii) use its best efforts
to cause the Shelf Registration Statement to be declared effective under the
Securities Act as promptly as practicable and (iii) use its best efforts to keep
effective the Shelf Registration Statement, with certain exceptions set forth in
the Registration Rights Agreements, until three years after its effective date
or such earlier date as all Series A Preferred Securities shall have been
disposed of or on which all Series A Preferred Securities held by persons that
are not affiliates of the Company or the Series A Issuer may be resold without
registration pursuant to Rule 144 under the Securities Act or as a result of any
changes in the existing registration requirements under the Securities Act which
eliminate the holders' need for the Shelf Registration Statement or upon receipt
of an opinion of counsel satisfactory to the Initial Purchasers which provides
that all Series A
37
<PAGE>
Preferred Securities may be resold without registration in a transaction that
would result in the Series A Preferred Securities being freely tradable,
provided however, that the purchaser is not an affiliate of the Series A Issuer
or the Company (the "Effectiveness Period"). In the event of the filing of a
Shelf Registration Statement, the Company will provide to each holder of Series
A Preferred Securities copies of the prospectus which is a part of the Shelf
Registration Statement, notify each holder when the Shelf Registration Statement
has become effective and take certain other actions as are required to permit
unrestricted resales of the Series A Preferred Securities. A holder of Series A
Preferred Securities that sells such Series A Preferred Securities pursuant to
the Shelf Registration Statement will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement, including certain
indemnification obligations.
The Exchange Offer is not being made to, nor will the Company or the
Series A Issuer accept tenders for exchange from, holders of Old Series A
Preferred Securities in any jurisdiction in which the Exchange Offer or the
acceptance thereof would not be in compliance with the securities or blue sky
laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Old Series A Preferred
Securities are registered on the books of the Series A Issuer, or any person
whose Old Series A Preferred Securities are held of record by The Depository
Trust Company who desires to deliver such Old Series A Preferred Securities by
book-entry transfer at The Depository Trust Company.
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Old Series A Guarantee for the New Series
A Guarantee and all of the Old Series A Subordinated Debentures, of which
$72,800,000 aggregate principal amount is outstanding, for like aggregate
principal of the New Series A Subordinated Debentures. The New Series A
Guarantee and New Series A Subordinated Debentures have been registered under
the Securities Act.
TERMS OF THE EXCHANGE
The Company and the Series A Issuer hereby offer, upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal, to exchange up to $70,000,000 aggregate Liquidation
Amount of New Series A Preferred Securities for a like aggregate Liquidation
Amount of Old Series A Preferred Securities properly tendered on or prior to the
Expiration Date (as defined below) and not properly withdrawn in accordance with
the procedures described below. The Series A Issuer will issue, promptly after
the Expiration Date, an aggregate Liquidation Amount of up to $70,000,000 of
New Series A Preferred Securities in exchange for a like principal amount of
outstanding Old Series A Preferred Securities tendered and accepted in
connection with the Exchange Offer. Holders may tender their Old Series A
Preferred Securities in whole or in part in a Liquidation Amount of not less
than $100,000 or any integral multiple of $1,000 in excess thereof.
38
<PAGE>
The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Old Series A Preferred Securities being tendered, but in no case less
than $100,000 Liquidation Amount of Old Series A Preferred Securities. As of the
date of this Prospectus $70,000,000 aggregate Liquidation Amount of the Old
Series A Preferred Securities is outstanding.
Holders of the Old Series A Preferred Securities do not have any
appraisal or dissenters' rights in connection with the Exchange Offer. Old
Series A Preferred Securities which are not tendered for or are tendered but not
accepted in connection with the Exchange Offer will remain outstanding and be
entitled to the benefits of the Trust Agreement, but will not be entitled to any
further registration rights under the Registration Rights Agreements, except
under limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Old Series A Preferred Securities" and "Description of the Old
Securities."
If any tendered Old Series A Preferred Securities are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Old Series A
Preferred Securities will be returned, without expense, to the tendering holder
thereof promptly after the Expiration Date.
Holders who tender Old Series A Preferred Securities in connection with
the Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of the Old Series A Preferred Securities in connection
with the Exchange Offer. The Company will pay all charges and expenses, other
than certain applicable taxes described below, in connection with the Exchange
Offer. (See "--Fees and Expenses.")
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE TRUSTEE OF THE
SERIES A ISSUER MAKES ANY RECOMMENDATION TO HOLDERS OF OLD SERIES A PREFERRED
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD SERIES A PREFERRED SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN
ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF
OLD SERIES A PREFERRED SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER
PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD SERIES A
PREFERRED SECURITIES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
June 28, 1997 unless the Exchange Offer is extended by the Company and the
Series A Issuer (in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended).
39
<PAGE>
The Company and the Series A Issuer expressly reserve the right in
their sole and absolute discretion, subject to applicable law, at any time and
from time to time, (i) to delay the acceptance of the Old Series A Preferred
Securities for exchange, (ii) to terminate the Exchange Offer (whether or not
any of the Old Series A Preferred Securities have theretofore been accepted for
exchange) if the Company and the Series A Issuer determine, in their sole and
absolute discretion, that any of the events or conditions referred to under
"--Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain
all of the Old Series A Preferred Securities tendered pursuant to the Exchange
Offer, subject, however, to the right of holders of the Old Series A Preferred
Securities to withdraw their tendered Old Series A Preferred Securities as
described under "--Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect. If the Exchange
Offer is amended in a manner determined by the Company and the Series A Issuer
to constitute a material change, or if the Company and the Series A Issuer waive
a material condition of the Exchange Offer, the Company or the Series A Issuer
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders of the Old Series A Preferred
Securities, and the Company and the Series A Issuer will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company or the Series A Issuer may choose to make any
public announcement and subject to applicable law, neither the Company nor the
Series A Issuer shall have any obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW SERIES A PREFERRED SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company and the Series A Issuer will exchange, and will issue to the Exchange
Agent, the New Series A Preferred Securities for the Old Series A Preferred
Securities validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "--Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of the New Series A Preferred Securities in
exchange for the Old Series A Preferred Securities tendered and accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) the Old Series A Preferred Securities or a
book-entry confirmation of a book-entry transfer of the Old Series A Preferred
Securities into the Exchange Agent's account at The Depository Trust Company
("DTC"), including an Agent's Message if the tendering holder has not delivered
a Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) any other documents required by the Letter of
Transmittal.
40
<PAGE>
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of the Old Series A Preferred Securities into the Exchange
Agent's account at DTC. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgement from
the tendering participant, which acknowledgement states that such participant
has received and agreed to be bound by the Letter of Transmittal and that the
Series A Issuer and the Company may enforce such Letter of Transmittal against
such a participant.
Subject to the terms and conditions of the Exchange Offer, the Company
and the Series A Issuer will be deemed to have accepted for exchange, and
thereby exchanged, the Old Series A Preferred Securities validly tendered and
not withdrawn as, if and when the Company or the Series A Issuer gives oral or
written notice to the Exchange Agent of the Company's and the Series A Issuer's
acceptance of such Old Series A Preferred Securities for exchange pursuant to
the Exchange Offer. The Exchange Agent will act as agent for the Company and the
Series A Issuer for the purpose of receiving tenders of the Old Series A
Preferred Securities, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving the Old Series A Preferred
Securities, Letters of Transmittal and related documents and transmitting the
New Series A Preferred Securities to validly tendering holders. Such exchange
will be made promptly after the Expiration Date. If for any reason whatsoever,
acceptance for exchange or the exchange of any Old Series A Preferred Securities
tendered pursuant to the Exchange Offer is delayed (whether before or after the
Company's and the Series A Issuer's acceptance for exchange of the Old Series A
Preferred Securities) or the Company or the Series A Issuer extends the Exchange
Offer or is unable to accept for exchange or exchange the Old Series A Preferred
Securities tendered pursuant to the Exchange Offer, then, without prejudice to
the Company or the Series A Issuer's rights set forth herein, the Exchange Agent
may, nevertheless, on behalf of the Company and the Series A Issuer and subject
to Rule 14e-1(c) under the Exchange Act, retain tendered Old Series A Preferred
Securities and such Old Series A Preferred Securities may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal, or Agent's Message in lieu
thereof, a holder of the Old Series A Preferred Securities will warrant and
agree in the Letter of Transmittal that it has full power and authority to
tender, exchange, sell, assign and transfer the Old Series A Preferred
Securities, that the Series A Issuer will acquire good, marketable and
unencumbered title to the tendered Old Series A Preferred Securities, free and
clear of all liens, restrictions, charges and encumbrances, and the Old Series A
Preferred Securities tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Company, the Series A
Issuer or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment, and transfer of the Old Series A Preferred
Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD SERIES A PREFERRED SECURITIES
VALID TENDER. Except as set forth below, in order for the Old Series A
Preferred Securities to be validly tendered pursuant to the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or, in the case of a
book-
41
<PAGE>
entry tender, an Agent's Message in lieu of the Letter of Transmittal, and
any other required documents, must be received by the Exchange Agent at one of
its addresses set forth under "--Exchange Agent," and either (i) tendered Old
Series A Preferred Securities must be received by the Exchange Agent, or (ii)
such Old Series A Preferred Securities must be tendered pursuant to the
procedures for book-entry transfer set forth below and a book-entry
confirmation, including an Agent's Message of the tendering holder has not
delivered a Letter of Transmittal, must be received by the Exchange Agent, in
each case on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth below must be complied with.
If less than all of the Old Series A Preferred Securities are tendered,
but in no case less than $100,000 Liquidation Amount of Old Series A Preferred
Securities, a tendering holder should fill in the amount of the Old Series A
Preferred Securities being tendered in the appropriate box on the Letter of
Transmittal. The entire amount of the Old Series A Preferred Securities
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK ENTRY TRANSFER. The Exchange Agent will establish an account with
respect to the Old Series A Preferred Securities at DTC for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of the Old Series A Preferred
Securities by causing DTC to transfer such Old Series A Preferred Securities
into the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfers. However, although delivery of Old Series A Preferred Securities may
be effected through book-entry transfer into the Exchange Agent's account at
DTC, the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message in
lieu of the Letter of Transmittal, and any other required documents, must in any
case be delivered to and received by the Exchange Agent at its address set forth
under "--Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for the Old Series A Preferred
Securities need not be endorsed and signature guarantees on the Letter of
Transmittal are unnecessary unless (a) a certificate for the Old Series A
Preferred Securities is registered in a name other than that of the person
surrendering the certificate or (b) such registered holder completes the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Old Series A Preferred Securities must be duly endorsed or accompanied by a
properly executed bond power, with the endorsement or signature on the bond
power and on the
42
<PAGE>
Letter of Transmittal guaranteed by a firm or other entity identified in Rule
17Ad-15 under the Exchange Act as an "eligible guarantor institution," including
(as such terms are defined therein): (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Series A
Preferred Securities pursuant to the Exchange Offer and the certificates for
such Old Series A Preferred Securities are not immediately available or time
will not permit all required documents to reach the Exchange Agent on or before
the Expiration Date, or the procedures for book-entry transfer cannot be
completed on a timely basis, such Old Series A Preferred Securities may
nevertheless be tendered, provided that all of the following guaranteed delivery
procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of
Transmittal, is received by the Exchange Agent, as provided
below, on or prior to Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing
all tendered Old Series A Preferred Securities, in proper form
for transfer, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof or
Agent's Message in lieu thereof), with any required signature
guarantees and any other documents required by the Letter of
Transmittal, are received by the Exchange Agent within five
New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail, to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of the New
Series A Preferred Securities in exchange for the Old Series A Preferred
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will in all cases be made only after timely receipt by the Exchange Agent of the
Old Series A Preferred Securities, or of a book-entry confirmation with respect
to such Old Series A Preferred Securities, and a properly completed and duly
executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
the New Series A Preferred Securities might not be made to all tendering holders
at the same time, and will depend upon when the Old Series A Preferred
Securities, book-entry confirmations with respect to the Old Series A Preferred
Securities and other required documents are received by the Exchange Agent.
43
<PAGE>
The Series A Issuer's acceptance for exchange of the Old Series A
Preferred Securities tendered pursuant to any of the procedures described above
will constitute a binding agreement between the tendering holder, the Company
and the Series A Issuer upon the terms and subject to the conditions of the
Exchange Offer.
All questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tendered Old
Series A Preferred Securities will be determined by the Series A Issuer, in its
sole discretion, whose determination shall be final and binding on all parties.
The Company and the Series A Issuer reserve the absolute right, in their sole
and absolute discretion, to reject any and all tenders determined by them not to
be in proper form or the acceptance of which, or exchange for, may, in the view
of counsel to the Company and the Series A Issuer, be unlawful. The Company and
the Series A Issuer also reserve the absolute right, subject to applicable law,
to waive any of the conditions of the Exchange Offer as set forth under
"--Conditions to the Exchange Offer" or any condition or irregularity in any
tender of the Old Series A Preferred Securities of any particular holder whether
or not similar conditions or irregularities are waived in the case of other
holders.
The Company's and the Series A Issuer's interpretation of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of the Old Series A
Preferred Securities will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. Neither
the Company, the Series A Issuer, any affiliates or assigns of the Company, the
Series A Issuer, the Exchange Agent nor any other person shall be under any duty
to give any notification of any irregularities in tenders or incur any liability
for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company or
the Series A Issuer, proper evidence satisfactory to the Company or the Series A
Issuer, in its sole discretion, of such person's authority to so act must be
submitted.
A beneficial owner of the Old Series A Preferred Securities that are
held by or registered in the name of a broker, dealer, commercial bank, trust
company or other nominee or custodian is urged to contact such entity promptly
if such beneficial holder wishes to participate in the Exchange Offer.
RESALES OF NEW SERIES A PREFERRED SECURITIES
The Series A Issuer is making the Exchange Offer for the Series A
Preferred Securities in reliance upon the position of the staff of the Division
of Corporation Finance of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, neither the
Company nor the Series A Issuer sought its own interpretive letter and there can
be no assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based upon these
interpretations by the staff of the Division of Corporation Finance, and
44
<PAGE>
subject to the two immediately following sentences, the Company and the Series A
Issuer believe that New Series A Preferred Securities issued pursuant to this
Exchange Offer in exchange for Old Series A Preferred Securities may be offered
for resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Series A Preferred Securities are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Series A Preferred
Securities. However, any holder of Old Series A Preferred Securities who is an
"affiliate" of the Company or the Series A Issuer or who intends to participate
in the Exchange Offer for the purpose of distributing New Series A Preferred
Securities, or any broker-dealer who purchased Old Series A Preferred Securities
from the Series A Issuer to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not be permitted or entitled to
tender such old series a preferred securities in the exchange offer and (b)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old Series
A Preferred Securities unless such sale is made pursuant to an exemption from
such requirements. In addition, as described below, if any broker-dealer holds
Old Series A Preferred Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Series A
Preferred Securities for New Series A Preferred Securities, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Series A Preferred
Securities.
Each holder of Old Series A Preferred Securities who wishes to exchange
Old Series A Preferred Securities for New Series A Preferred Securities in the
Exchange Offer will be required to represent that (i) it is not an "affiliate"
of the Company or the Series A Issuer, (ii) any New Series A Preferred
Securities to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Series A Preferred Securities, and (iv) if such holder is not a broker-
dealer, such holder is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such New Series A
Preferred Securities. In addition, the Company and the Series A Issuer may
require such holder, as a condition to participate in the Exchange Offer, to
furnish to the Company and the Series A Issuer (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Exchange Act) on behalf of whom such holder holds the Series A
Preferred Securities to be exchanged in the Exchange Offer. Each broker-dealer
that receives New Series A Preferred Securities for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Series A Preferred
Securities for its own account as the result of market-making activities or
other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Series A Preferred Securities. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. Broker-dealers who acquired Old Series A Preferred Securities for their own
accounts as a result of market-making activities or other trading activities
("Participating Broker-Dealers") may fulfill their prospectus delivery
requirements with respect to the New Series A Preferred Securities received upon
exchange of such Old Series A Preferred Securities with a prospectus meeting the
requirements of the Securities Act, which may be this Prospectus, as it may be
amended or supplemented from time
45
<PAGE>
to time for a period ending 90 days after the Expiration Date or, if earlier,
when all such New Series A Preferred Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the Company or the Series A Issuer and
any Participating Broker-Dealer who purchased the Old Series A Preferred
Securities from the Series A Issuer to resell the Old Series A Preferred
Securities may not use this Prospectus and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old
Series A Preferred Securities pursuant to the Exchange Offer will be deemed to
have agreed, by execution of the Letter of Transmittal, or delivery of an
Agent's Message in lieu thereof, that, upon receipt of notice from the Company
or the Series A Issuer of the occurrence of any event or the discovery of any
fact which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreements, such Participating
Broker-Dealer will suspend the sale of the New Series A Preferred Securities (or
the New Guarantee or the New Series A Subordinated Debentures, as applicable)
pursuant to this Prospectus until the Company or the Series A Issuer has amended
or supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company or the Series A Issuer has given notice that the
sale of the New Series A Preferred Securities (or the New Series A Guarantee or
the New Series A Subordinated Debentures, as applicable) may be resumed, as the
case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of the Old Series A
Preferred Securities may be withdrawn at any time on or prior to the Expiration
Date.
In order for a withdrawal to be effective, a written, or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Series A Preferred Securities to be
withdrawn, the aggregate principal amount of the Old Series A Preferred
Securities to be withdrawn, and, if certificates for such Old Series A Preferred
Securities have been tendered, the name of the registered holder of the Old
Series A Preferred Securities as set forth on the Old Series A Preferred
Securities, if different from that of the person who tendered such Old Series A
Preferred Securities. If the Old Series A Preferred Securities have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Old Series A Preferred Securities, the tendering holder
must submit the serial numbers shown on the particular Old Series A Preferred
Securities to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Series A
Preferred Securities tendered for the account of an Eligible Institution. If the
Old Series A Preferred Securities have been tendered pursuant to the procedures
for book-entry transfer set forth in "--Procedures for Tendering Old Series A
Preferred Securities," the notice of
46
<PAGE>
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of the Old Series A Preferred Securities, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written or facsimile transmission. Withdrawals of tenders of the Old Series A
Preferred Securities may not be rescinded. Old Series A Preferred Securities
properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under
"--Procedures for Tendering Old Series A Preferred Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company and the
Series A Issuer, in their sole discretion, whose determination shall be final
and binding on all parties. Neither the Company, the Series A Issuer, any
affiliates or assigns of the Company, the Series A Issuer, the Exchange Agent
nor any other person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Old Series A Preferred Securities which have
been tendered but which are withdrawn will be returned to the holder thereof
promptly after withdrawal.
DISTRIBUTIONS ON THE NEW SERIES A PREFERRED SECURITIES
Holders of Old Series A Preferred Securities whose Old Series A
Preferred Securities are accepted for exchange will not receive accumulated
Distributions on such Old Series A Preferred Securities for any period from and
after the last Distribution Date with respect to such Old Series A Preferred
Securities prior to the original issue date of the New Series A Preferred
Securities or, if no such Distributions have been made, will not receive any
accumulated Distributions on such Old Series A Preferred Securities, and will be
deemed to have waived the right to receive any Distributions on such Old Series
A Preferred Securities accumulated from and after such Distribution Date or, if
no such Distributions have been paid or duly provided for, from and after
December 30, 1996. However, because Distributions on the New Series A Preferred
Securities will accumulate from December 30, 1996, the amount of the
Distributions received by holders whose Old Series A Preferred Securities are
accepted for exchange will not be affected by the exchange.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Series A Issuer will not be required to
accept for exchange, or to exchange, any Old Series A Preferred Securities for
any New Series A Preferred Securities, and, as described below, may terminate
the Exchange Offer (whether or not any Old Series A Preferred Securities have
theretofore been accepted for exchange) or may waive any conditions to or amend
the Exchange Offer, if any of the following conditions have occurred or exists
or have not been satisfied:
(a) there shall occur a change in the current interpretation by
the staff of the Commission which permits the New Series A
Preferred Securities issued pursuant to the Exchange Offer in
exchange for Old Series A Preferred Securities to be offered
for resale, resold
47
<PAGE>
and otherwise transferred by holders thereof (other than
broker-dealers and any such holder which is an "affiliate" of
the Company or the Series A Issuer within the meaning of Rule
405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the
Securities Act provided that such New Series A Preferred
Securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or
understanding with any person to participate in the
distribution of such New Series A Preferred Securities; or
(b) any action or proceeding shall have been instituted or
threatened in any court or by or before any governmental
agency or body with respect to the Exchange Offer which, in
the Company's and the Series A Issuer's judgment, would
reasonably be expected to impair the ability of the Company or
the Series A Issuer to proceed with the Exchange Offer;
(c) any law, statute, rule or regulation shall have been adopted
or enacted which, in the Company's and the Series A Issuer's
judgment, would reasonably be expected to impair the ability
of the Company or the Series A Issuer to proceed with the
Exchange Offer;
(d) a banking moratorium shall have been declared by United States
federal or Florida or New York State authorities which, in the
Company's and the Series A Issuer's judgment, would reasonably
be expected to impair the ability of the Company or the Series
A Issuer to proceed with the Exchange Offer;
(e) trading in the United States over-the-counter market shall
have been suspended by order of the Commission or any other
governmental authority which, in the Company's and the Series
A Issuer's judgment, would reasonably be expected to impair
the ability of the Company or the Series A Issuer to proceed
with the Exchange Offer; or
(f) a stop order shall have been issued by the Commission or any
state securities authority suspending the effectiveness of the
Registration Statement or proceedings shall have been
initiated or, to the knowledge of the Company or the Series A
Issuer, threatened for that purpose any governmental approval
has not been obtained, which approval the Series A Issuer
shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby; or
(g) any change, or any development involving a prospective change,
in the business or financial affairs of the Company or the
Series A Issuer or any of their subsidiaries have occurred
which, in the sole judgment of the Company and the Series A
Issuer, might materially impair the ability of the Company or
the Series A Issuer to proceed with the Exchange Offer.
If the Company and the Series A Issuer determine in their sole and
absolute discretion that any of the foregoing events or conditions has occurred
or exists or has not been satisfied, the Company and the Series A Issuer may,
subject to applicable law, terminate the Exchange Offer
48
<PAGE>
(whether or not any Old Series A Preferred Securities have theretofore been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Company and the Series
A Issuer will promptly disclose such waiver by means of a prospectus supplement
that will be distributed to the registered holders of the Old Series A Preferred
Securities, and the Company and the Series A Issuer will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
The Bank of New York
101 Barclay Street
Floor 7E
New York, New York 10286
Attention: Reorganization Section, Jodi Smith
Telephone: (212) 815-2742
Facsimile: (212) 571-3080
Delivery to other than the above address or facsimile number will not constitute
a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Series A Preferred
Securities, and in handling or tendering for their customers.
Holders who tender their Old Series A Preferred Securities for exchange
will not be obligated to pay any transfer taxes in connection therewith. If,
however, New Series A Preferred Securities are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the Old
Series A Preferred Securities tendered, or if a transfer tax is imposed for any
reason other than the exchange of Old Series A Preferred Securities in
connection with the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
49
<PAGE>
Neither the Company nor the Series A Issuer will make any payment to
brokers, dealers or others soliciting acceptances of the Exchange Offer.
DESCRIPTION OF THE NEW SECURITIES
DESCRIPTION OF SERIES A PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement, the Issuer Trustees have
issued the Old Series A Preferred Securities and the Common Securities and will
issue the New Series A Preferred Securities. The New Series A Preferred
Securities will represent preferred undivided beneficial interests in the assets
of the Series A Issuer and the holders thereof will be entitled to a preference
in certain circumstances with respect to Distributions and amounts payable on
redemption of the Trust Securities or liquidation of the Series A Issuer over
the Common Securities. See "--Subordination of Series A Common Securities."
The Trust Agreement has been qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). This summary of certain provisions of the
Series A Preferred Securities, the Common Securities and the Trust Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Trust Agreement, including
the definitions therein of certain terms.
DISTRIBUTIONS
The Series A Preferred Securities represent undivided beneficial
interests in the assets of the Series A Issuer. Distributions on such Series A
Preferred Securities will be payable at the annual rate of 10 1/4% of the stated
Liquidation Amount of $1,000, payable semi-annually in arrears on June 30, and
December 31 of each year, to the holders of the Series A Preferred Securities on
the relevant record dates. The record dates will be, for so long as the Series A
Preferred Securities remain in book-entry form, one Business Day (as defined
below) prior to the relevant Distribution payment date and, in the event the
Series A Preferred Securities are not in book-entry form, the 15th day of the
month in which the relevant Distribution payment date occurs. Subject to any
applicable laws and regulations and the provisions of the Trust Agreement, each
such payment will be made as described under "Book-Entry Issuance."
Distributions will accumulate from December 30, 1996. The first Distribution
payment date for the Series A Preferred Securities will be June 30, 1997. The
amount of Distributions payable for any period will be computed on the basis of
a 360-day year of twelve 30-day months. In the event that any date on which
Distributions are payable on the Series A Preferred Securities is not a Business
Day, then payment of the Distributions payable on such date will be made on the
next succeeding day that is a Business Day (and without any additional
Distributions or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on the date such payment was originally payable (each date
on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a Saturday
or a Sunday, or a day on which banking institutions in the City of New York are
authorized or required by law or
50
<PAGE>
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Debenture Trustee is closed for business.
So long as no "Event of Default" under the Indenture has occurred and
is continuing, the Company has the right under the Indenture to defer the
payment of interest on the Series A Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Series A Subordinated Debentures. As a
consequence of any such deferral of interest, semi-annual Distributions on the
Series A Preferred Securities by the Series A Issuer will also be deferred
during any such Extension Period. Distributions to which holders of the Series A
Preferred Securities are entitled will accumulate additional Distributions
thereon at the rate per annum of 10 1/4% thereof, compounded semi-annually from
the relevant payment date for such Distributions. The term "Distributions" as
used herein shall include any such additional Distributions. During any such
Extension Period, the Company may not, and may not permit any subsidiary of the
Company to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock, (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank PARI PASSU with or junior in interest to the Series A
Subordinated Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks PARI PASSU with or junior in interest to the Series A
Subordinated Debentures (other than (a) dividends or distributions in common
stock of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Series A Guarantee and (d) purchases of
common stock related to the issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers or employees). Prior to the
termination of any such Extension Period, the Company may further defer the
payment of interest on the Series A Subordinated Debentures, provided that no
Extension Period may exceed 10 consecutive semi-annual periods or extend beyond
the Stated Maturity of the Series A Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the rate of 10 1/4%,
compounded semi-annually, to the extent permitted by applicable law), the
Company may elect to begin a new Extension Period. There is no limitation on the
number of times that the Company may elect to begin an Extension Period. (See
"Description of the New Securities--Description of Series A Subordinated
Debentures--Right to Defer Interest Payment Obligation" and "Certain Federal
Income Tax Consequences--Original Issue Discount.")
The revenue of the Series A Issuer available for distribution to
holders of its Series A Preferred Securities will be limited to payments under
the Series A Subordinated Debentures in which the Series A Issuer will invest
the proceeds from the issuance and sale of its Series A Securities. ( See
"Description of the New Securities--Description of Series A Subordinated
Debentures.") If the Company does not make interest payments on the Series A
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Series A Preferred Securities. The payment of
Distributions (if and to the extent the Series A Issuer has funds legally
available for the payment of such Distributions and cash sufficient to make such
payments) is guaranteed by the Company on a limited basis as set forth herein
under "Description of New Securities--Description of Series A Guarantee."
51
<PAGE>
The Company has no current intention of exercising its right to defer
payments of interest on the Series A Subordinated Debentures.
SUBORDINATION OF THE SERIES A COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Series A
Preferred Securities and Series A Common Securities, as applicable, shall be
made PRO RATA based on the Liquidation Amount of the Series A Preferred
Securities and the Series A Common Securities; PROVIDED, HOWEVER, that if on any
Distribution Date or Redemption Date an "Event of Default" under the Indenture
shall have occurred and be continuing, no payment of any Distribution on, or
Redemption Price of, any of the Series A Common Securities, and no other payment
on account of the redemption, liquidation or other acquisition of such Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all of the outstanding Series A Preferred Securities for
all Distribution periods terminating on or prior thereto, or, in the case of
payment of the Redemption Price, the full amount of such Redemption Price on all
of the outstanding Series A Preferred Securities then called for redemption
shall have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Series A Preferred Securities then
due and payable.
In the case of any "Event of Default" under the Trust Agreement
resulting from an Event of Default under the Indenture, the Company as holder of
the Series A Common Securities will be deemed to have waived any right to act
with respect to any such Event of Default under the Trust Agreement until the
effect of all such Events of Default with respect to the Series A Preferred
Securities shall have been cured, waived or otherwise eliminated. Until any such
Events of Default under the Trust Agreement shall have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the Series A Preferred Securities and not on behalf of the Company as
holder of the Series A Common Securities, and only the holders of the Series A
Preferred Securities will have the right to direct the Property Trustee to act
on their behalf.
REDEMPTION
The Series A Preferred Securities are subject to mandatory redemption,
in whole or in part, upon repayment of the Series A Subordinated Debentures at
their Stated Maturity or earlier redemption as provided in the Indenture. The
proceeds from such repayment or redemption shall be applied by the Property
Trustee to redeem a Like Amount (as defined below) of the Series A Preferred
Securities, upon not less than 30 nor more than 60 days notice prior to the date
fixed for repayment or redemption, at a redemption price equal to the aggregate
Liquidation Amount of such Series A Preferred Securities plus accumulated and
unpaid Distributions thereon to the date of redemption (the "Redemption Date"),
plus the related amount of the premium, if any, paid by the Company upon the
concurrent redemption of such Series A Subordinated Debentures (the "Redemption
Price"). For a description of the Stated Maturity and redemption provisions of
the Series A Subordinated Debentures, see "Description of the New
Securities--Description of Series A Subordinated Debentures--General,"
"--Optional Redemption" and "--Tax Event Redemption."
52
<PAGE>
The Company has the option to redeem the Series A Subordinated
Debentures prior to maturity on or after December 31, 2006, in whole at any time
or in part from time to time, at the Optional Redemption Price and thereby cause
a mandatory redemption of a Like Amount (as defined below) of the Series A
Preferred Securities. (See "Description of the New Securities--Description of
Series A Subordinated Debentures--Optional Redemption.") If a Tax Event (as
defined below) shall occur and be continuing, the Company has the right to
redeem the Series A Subordinated Debentures in whole (but not in part) at the
Tax Event Redemption Price and thereby cause a mandatory redemption of the
Series A Preferred Securities in whole (but not in part). (See "Description of
the New Securities--Description of Series A Subordinated Debentures--Tax Event
Redemption.")
REDEMPTION PROCEDURES
Series A Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of a Like Amount of the Series A Subordinated
Debentures. Redemptions of the Series A Preferred Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Series A Issuer has funds on hand available for the payment of such
Redemption Price. (See also "--Subordination of the Series A Common
Securities.")
If the Series A Issuer gives a notice of redemption in respect of the
Series A Preferred Securities, then, by 10:00 a.m., New York City time, on the
Redemption Date, to the extent funds are available, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price and will give DTC irrevocable instructions and authority to pay the
Redemption Price to the holders of such Series A Preferred Securities. See
"Book-Entry Issuance." If such Series A Preferred Securities are no longer in
book-entry form, the Property Trustee, to the extent funds are available, will
irrevocably deposit with the paying agent for the Series A Preferred Securities
funds sufficient to pay the applicable Redemption Price and will give such
paying agent irrevocable instructions and authority to pay the Redemption Price
to the holders thereof upon surrender of their certificates evidencing such
Series A Preferred Securities. Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date for the Series A Preferred Securities
called for redemption shall be payable to the holders of the Series A Preferred
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required,
then, upon the date of such deposit, all rights of the holders of such Series A
Preferred Securities so called for redemption will cease, except the right of
the holders of such Series A Preferred Securities to receive the Redemption
Price, but without interest on such Redemption Price, and such Series A
Preferred Securities will cease to be outstanding.
In the event that any date fixed for redemption of the Series A
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day. In the event that
payment of the Redemption Price in respect of the Series A Preferred Securities
called for redemption is improperly withheld or refused and not paid either by
the Series A Issuer or by the Company pursuant to the Series A Guarantee as
described under "Description of the New Securities--Description of Series A
Guarantee," Distributions on such Series A
53
<PAGE>
Preferred Securities will continue to accrue at the then applicable rate, from
the Redemption Date originally established by the Series A Issuer for such
Series A Preferred Securities to the date such Redemption Price is actually
paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Series A Preferred Securities by private
agreement.
Payment of the Redemption Price on the Series A Preferred Securities
and any distribution of the Series A Subordinated Debentures to holders of the
Series A Preferred Securities shall be made to the applicable recordholders
thereof as they appear on the register for the Series A Preferred Securities on
the relevant record date, which shall be one Business Day prior to the relevant
Redemption Date or liquidation date, as applicable; PROVIDED, HOWEVER, that in
the event that any Series A Preferred Securities are not in book-entry form, the
relevant record date for the Series A Preferred Securities shall be a date at
least 15 days prior to the Redemption Date or liquidation date, as applicable.
If less than all of the Series A Preferred Securities and Series A
Common Securities issued by the Series A Issuer are to be redeemed on a
Redemption Date, then the aggregate Liquidation Amount of the Series A Preferred
Securities and Series A Common Securities to be redeemed shall be allocated PRO
RATA to the Series A Preferred Securities and the Series A Common Securities
based upon the relative Liquidation Amounts of such classes. The particular
Series A Preferred Securities to be redeemed shall be selected not more than 60
days prior to the Redemption Date by the Property Trustee from the outstanding
Series A Preferred Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $1,000 or an
integral multiple of $1,000 in excess thereof) of the Liquidation Amount of the
Series A Preferred Securities of a denomination larger than $1,000. The Property
Trustee shall promptly notify the trust registrar in writing of the Series A
Preferred Securities selected for redemption and, in the case of the Series A
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of the Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of the
Series A Preferred Securities shall relate, in the case of the Series A
Preferred Securities redeemed or to be redeemed only in part, to the portion of
the aggregate Liquidation Amount of the Series A Preferred Securities which has
been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of the Series A Preferred
Securities to be redeemed at its registered address. Unless the Company defaults
in payment of the Redemption Price on the Series A Subordinated Debentures, on
and after the Redemption Date interest will cease to accrue on the Series A
Subordinated Debentures or portions thereof called for redemption.
54
<PAGE>
LIQUIDATION OF THE SERIES A ISSUER AND DISTRIBUTION OF THE SERIES A SUBORDINATED
DEBENTURES TO HOLDERS
The Company has the right at any time to terminate the Series A Issuer
and, after satisfaction of the liabilities of creditors of the Series A Issuer
as provided by applicable law, cause Series A Subordinated Debentures to be
distributed to the holders of the Series A Preferred Securities and Series A
Common Securities in exchange therefor upon liquidation of the Series A Issuer.
After the liquidation date fixed for any distribution of the Series A
Subordinated Debentures for Series A Preferred Securities (i) such Series A
Preferred Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Series A Preferred Securities, will receive
a registered global certificate or certificates representing the Series A
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing such Series A Preferred Securities not held by DTC or
its nominee will be deemed to represent Series A Subordinated Debentures having
a principal amount equal to the stated Liquidation Amount of such Series A
Preferred Securities, and bearing accrued and unpaid interest in an amount equal
to the accumulated and unpaid Distributions on such series of the Series A
Preferred Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
Under current United States federal income tax law and interpretations,
a distribution of the Series A Subordinated Debentures should not be a taxable
event to holders of the Series A Preferred Securities. Should there be a change
in law, a change in legal interpretation, a Tax Event or other circumstances,
however, the distribution could be a taxable event to holders of the Series A
Preferred Securities. (See "Certain Federal Income Tax
Consequences--Distribution of the Series A Subordinated Debentures to Holders of
the Series A Preferred Securities.")
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Trust Agreement, the Series A Issuer shall
automatically terminate upon expiration of its term and shall terminate on the
first to occur of: (i) certain events of bankruptcy, dissolution or liquidation
of the Company, subject in certain instances to any such event remaining in
effect for a period of 60 consecutive days; (ii) the distribution of a Like
Amount of the Series A Subordinated Debentures to the holders of its Series A
Preferred Securities, if the Company, as depositor, has given written direction
to the Property Trustee to terminate the Series A Issuer (which direction is
optional and wholly within the discretion of the Company, as depositor); (iii)
redemption of all of the Series A Preferred Securities as described under
"Description of the Series A Preferred Securities-- Redemption"; and (iv) the
entry of an order for the dissolution of the Series A Issuer by a court of
competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Series A Issuer shall be liquidated by the Series A Issuer Trustees
as expeditiously as the Series A Issuer Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Series A
Issuer, if any, as provided by applicable law, to the holders of the Series A
Preferred Securities a Like Amount of the Series A Subordinated Debentures,
unless such distribution is determined by the Property Trustee not to be
practical, in which event such holders will be entitled to receive out of the
assets of the Series A Issuer available for distribution to holders, after
satisfaction of liabilities to
55
<PAGE>
creditors of the Series A Issuer, if any, as provided by applicable law, an
amount equal to, in the case of holders of the Series A Preferred Securities,
the aggregate of the Liquidation Amount plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Series A Issuer has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Series A Issuer on Series A Preferred Securities shall be paid on a PRO RATa
basis. The holder(s) of the Series A Common Securities will be entitled to
receive distributions upon any such liquidation pro rata with the holders of the
Series A Preferred Securities, except that if an event of default under the
Indenture has occurred and is continuing, the Series A Preferred Securities
shall have a priority over the Series A Common Securities with respect to any
such distributions.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
the Trust Agreement (an "Event of Default") with respect to the Series A
Preferred Securities issued thereunder (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) the occurrence of an event of default under the
Indenture (see "Description of the Series A Subordinated
Debentures--Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any
Redemption Price of any Series A Preferred Security when it becomes due
and payable; or
(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Series A Issuer Trustees in
the Trust Agreement (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause
(ii) or (iii) above), and continuation of such default or breach for a
period of 60 days after there has been given, by registered or
certified mail, to the defaulting Series A Issuer Trustee or Trustees
by the holders of at least 25% in aggregate Liquidation Amount
preference of the outstanding Series A Preferred Securities, a written
notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under
the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee and the failure by the
Company to appoint a successor Property Trustee within 60 days thereof.
Within 90 days after the occurrence of any Event of Default actually
known to the Property Trustee, the Property Trustee shall transmit notice of
such Event of Default to the holders of the Series A Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such
56
<PAGE>
Event of Default shall have been cured or waived. The Company, as depositor, and
the Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If an event of default under the Indenture has occurred and is
continuing, the Series A Preferred Securities shall have a preference over the
Series A Common Securities as described above. See "--Subordination of the
Series A Common Securities" and "--Liquidation Distribution Upon Termination."
The existence of an event of default does not entitle the holders of the Series
A Preferred Securities to accelerate the maturity thereof.
REMOVAL OF THE SERIES A ISSUER TRUSTEES
Unless an event of default under the Indenture shall have occurred and
be continuing, any Series A Issuer Trustee may be removed at any time by the
holder of the Series A Common Securities. If an event of default under the
Indenture has occurred and is continuing, the Property Trustee and the Delaware
Trustee may be removed at such time by the holders of a majority in Liquidation
Amount of the outstanding Series A Preferred Securities. In no event will the
holders of the Series A Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees, which voting rights are vested
exclusively in the Company as the holder of the Series A Common Securities. No
resignation or removal of any Series A Issuer Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act, if applicable, or of any jurisdiction in which any part of
the Trust Property may at the time be located, the Company, as the holder of the
Series A Common Securities, and the Administrative Trustees shall have power to
appoint one or more persons either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such person or persons
in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. In the event an
event of default under the Indenture has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF THE SERIES A ISSUER TRUSTEES
Any entity into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Trustee shall be a party or any entity
succeeding to all or substantially all the corporate trust business
57
<PAGE>
of such Trustee, shall be the successor of such Trustee under the Trust
Agreement, provided such corporation shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE SERIES A ISSUER
The Series A Issuer may not merge with or into, consolidate,
amalgamate, be replaced by, convey, transfer or lease its properties and assets
substantially as an entirety to any entity or other Person, except as described
below or as otherwise described in the Trust Agreement. The Series A Issuer may,
at the request of the Company, with the consent of the Administrative Trustees
and without the consent of the holders of the Series A Preferred Securities or
any other trustee merge with or into, consolidate, amalgamate, be replaced by,
convey, transfer or lease its properties and assets substantially as an entirety
to, a trust organized as such under the laws of any State: PROVIDED, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Series A Issuer with respect to the Series A Preferred Securities or (b)
substitutes for the Series A Preferred Securities other securities having
substantially the same terms as the Series A Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Series A Preferred Securities in priority with respect to Distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Series A Subordinated
Debentures, (iii) the Successor Securities are registered or listed, or any
Successor Securities will be registered or listed upon notification of issuance,
with DTC or on any national securities exchange or other organization on which
the Series A Preferred Securities are then registered or listed, if any, (iv)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Series A Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Series A Preferred Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose substantially identical to that of the Series A Issuer, (vii)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Company has received an opinion from independent counsel
to the Series A Issuer experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Series A Preferred Securities (including any Successor Securities) in any
material respect and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Series A Issuer nor such
successor entity will be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act") and
(viii) the Company or any permitted successor or assignee owns all of the Series
A Common Securities or its equivalent of such successor entity and guarantees
the obligations of such successor entity under the Successor Securities at least
to the extent provided by the Series A Guarantee. Notwithstanding the foregoing,
the Series A Issuer shall not, except with the consent of holders of 100% in
Liquidation Amount of the Series A Preferred Securities, consolidate,
amalgamate, merge with or into or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement,
58
<PAGE>
conveyance, transfer or lease would cause the Series A Issuer or the successor
entity to be classified as an association taxable as a corporation for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the New
Securities--Description of Series A Guarantee--Amendments and Assignment" and as
otherwise required by law and the Trust Agreement, the holders of the Series A
Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Series A Preferred Securities, to (i) cure any ambiguity, correct
or supplement any provisions in the Trust Agreement that may be inconsistent
with any other provision or to make any other provisions with respect to matters
or questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement or (ii) modify, eliminate or
add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that the Series A Issuer will be classified for United
States federal income tax purposes as a grantor trust at all times that the
Series A Preferred Securities are outstanding or to ensure that the Series A
Issuer will not be required to register as an "investment company" under the
Investment Company Act; provided, however, that in the case of clause (i), such
action shall not adversely affect in any material respect the interests of any
holder of the Series A Preferred Securities, and any amendments of the Trust
Agreement shall become effective when notice thereof is given to the holders of
the Series A Preferred Securities. The Trust Agreement may be amended by the
Series A Issuer Trustees and the Company with (i) the consent of holders
representing not less than a majority (based upon Liquidation Amounts) of the
outstanding Series A Preferred Securities and (ii) receipt by the Series A
Issuer Trustees of an opinion of counsel to the effect that such amendment or
the exercise of any power granted to the Series A Issuer Trustees in accordance
with such amendment will not affect the Series A Issuer's status as a grantor
trust for United States federal income tax purposes or the Series A Issuer's
exemption from status as an "investment company" under the Investment Company
Act, provided that without the consent of each holder of the Series A Preferred
Securities, the Trust Agreement may not be amended to (a) change the amount or
timing of any Distribution on the Series A Preferred Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Series A Preferred Securities as of a specified date or (b) restrict the
right of a holder of the Series A Preferred Securities to institute suit for the
enforcement of any such payment on or after such date.
So long as the Series A Subordinated Debentures are held by the
Property Trustee, the Series A Issuer Trustees shall not (i) direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee or executing any trust or power conferred on the Property
Trustee with respect to the Series A Subordinated Debentures, (ii) waive any
past default that is available under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Series A
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Series A
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Series A Preferred Securities; provided,
however, that where a consent under the Indenture would require the consent
59
<PAGE>
of each holder of the Series A Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior consent of each
holder of the Series A Preferred Securities. The Series A Issuer Trustees shall
not revoke any action previously authorized or approved by a vote of the holders
of the Series A Preferred Securities except by subsequent vote of the holders of
the Series A Preferred Securities. The Property Trustee shall notify each holder
of the Series A Preferred Securities of any notice of default with respect to
the Series A Subordinated Debentures. In addition to obtaining the foregoing
approvals of the holders of the Series A Preferred Securities, prior to taking
any of the foregoing actions, the Series A Issuer Trustees shall obtain an
opinion of counsel experienced in such matters to the effect that the Series A
Issuer will not be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such action.
Any required approval of holders of the Series A Preferred Securities
may be given at a meeting of holders of the Series A Preferred Securities
convened for such purpose or pursuant to written consent. The Property Trustee
will cause a notice of any meeting at which holders of the Series A Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be given to each holder of record of
the Series A Preferred Securities in the manner as set forth in the Trust
Agreement.
No vote or consent of the holders of the Series A Preferred Securities
will be required for the Series A Issuer to redeem and cancel the Series A
Preferred Securities in accordance with the Trust Agreement.
Notwithstanding that holders of the Series A Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Series A Preferred Securities that are owned by the Company, the Series A
Issuer Trustees or any affiliate of the Company or the Series A Issuer Trustees
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
LIQUIDATION VALUE
The amount payable on the Series A Preferred Securities in the event of
any liquidation of the Series A Issuer is $1,000 per Series A Preferred Security
plus accumulated and unpaid Distributions, which may be in the form of a
distribution of such amount in Series A Subordinated Debentures, subject to
certain exceptions. See "--Liquidation Distribution Upon Termination."
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
In the event that Series A Preferred Securities are issued in
certificated form, such Series A Preferred Securities will be in blocks having a
Liquidation Amount of not less than $100,000 (100 Series A Preferred Securities)
and may be transferred or exchanged in such blocks in the manner and at the
offices described below.
60
<PAGE>
The New Series A Preferred Securities initially will be represented by
one or more Series A Preferred Securities in registered, global form
(collectively, the "Global Series A Preferred Securities"). The Global Series A
Preferred Securities will be deposited upon issuance with the Property Trustee
as custodian for The Depository Trust Company ("DTC"), in New York, New York,
and registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Series A Preferred Securities may
be transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Series A
Preferred Securities may not be exchanged for Series A Preferred Securities in
certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Series A Preferred Securities for Certificated Series
A Preferred Securities."
DEPOSITARY PROCEDURES
DTC has advised the Series A Issuer and the Company that DTC is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Series A Issuer and the Company that, pursuant
to procedures established by it, (i) upon deposit of the Global Series A
Preferred Securities, DTC will credit the accounts of Participants designated by
the Initial Purchasers with portions of the principal amount of the Global
Series A Preferred Securities and (ii) ownership of such interests in the Global
Series A Preferred Securities will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Series A Preferred
Securities).
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL SERIES A
PREFERRED SECURITIES WILL NOT HAVE SERIES A PREFERRED SECURITIES REGISTERED IN
THEIR NAME, WILL NOT RECEIVE PHYSICAL DELIVERY OF SERIES A PREFERRED SECURITIES
IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE TRUST AGREEMENT FOR ANY PURPOSE.
61
<PAGE>
Payments in respect of the Global Series A Preferred Security
registered in the name of DTC or its nominee will be payable by the Property
Trustee to DTC in its capacity as the registered holder under the Trust
Agreement. Under the terms of the Trust Agreement, the Property Trustee will
treat the persons in whose names the Series A Preferred Securities, including
the Global Series A Preferred Securities, are registered as the owners thereof
for the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Property Trustee nor any agent thereof has
or will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Series A
Preferred Securities, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Series A Preferred Securities or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Series A Issuer and
the Company that its current practice, upon receipt of any payment in respect of
securities such as the Series A Preferred Securities, is to credit the accounts
of the relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in Liquidation Amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of
Series A Preferred Securities will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Property
Trustee or the Series A Issuer. Neither the Series A Issuer nor the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Series A Preferred Securities, and the
Series A Issuer and the Property Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Interests in the Global Series A Preferred Securities will trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity in
such interests will therefore settle in immediately available funds, subject in
all cases to the rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds.
DTC has advised the Series A Issuer and the Company that it will take
any action permitted to be taken by a holder of Series A Preferred Securities
only at the direction of one or more Participants to whose account with DTC
interests in the Global Series A Preferred Securities are credited and only in
respect of such portion of the aggregate Liquidation Amount of the Series A
Preferred Securities as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default under the Trust
Agreement, DTC reserves the right to exchange the Global Series A Preferred
Securities for legended Series A Preferred Securities in certificated form and
to distribute such Series A Preferred Securities to its Participants.
62
<PAGE>
RATING
The Series A Preferred Securities are expected to be rated "b2" by
Moody's Investor Services, Inc. and "BB-" by Thompson's Bank Watch, which are
the ratings of the Old Series A Preferred Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Series A Preferred Securities shall be made
to DTC, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if the Series A Preferred Securities are not
held by DTC, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Register. The paying
agent (the "Paying Agent") shall initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Property Trustee and
the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Series A Preferred Securities.
Registration of transfers of the Series A Preferred Securities will be
effected without charge by or on behalf of the Series A Issuer, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The Series A Issuer will not be required to register
or cause to be registered the transfer of the Series A Preferred Securities
after the Series A Preferred Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after such Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of the
Series A Preferred Securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby. If no Event
of Default has occurred and is continuing and the Property Trustee is required
to decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of the Series A
Preferred Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall
63
<PAGE>
take such action as is directed by the Company and if not so directed, shall
take such action as it deems advisable and in the best interests of the holders
of the Trust Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Series A Issuer in such a way that the Series A
Issuer will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or classified as an association
taxable as a corporation for United States federal income tax purposes and so
that the Series A Subordinated Debentures will be treated as indebtedness of the
Company for United States federal income tax purposes. In this connection, the
Company and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Series A Preferred Securities.
Holders of the Series A Preferred Securities have no preemptive or
similar rights.
The Series A Issuer may not borrow money or issue debt or mortgage or
pledge any of its assets.
DESCRIPTION OF SERIES A SUBORDINATED DEBENTURES
The Old Series A Subordinated Debentures were issued and the New Series
A Subordinated Debentures will be issued as a separate series under the
Indenture entered into by the Company and The Bank of New York, as trustee (the
"Debenture Trustee"). The Indenture has been qualified under the Trust Indenture
Act. This summary of certain terms and provisions of the Series A Subordinated
Debentures and the Indenture does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, some of which are not otherwise
defined herein, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture by the
Trust Indenture Act.
GENERAL
Concurrently with the issuance of the Series A Preferred Securities,
the Series A Issuer will invest the proceeds thereof, together with the
consideration paid by the Company for the Series A Common Securities, in the
Series A Subordinated Debentures issued by the Company. The Series A
Subordinated Debentures will bear interest at the annual rate of 10 1/4% of the
principal amount thereof, payable semi-annually in arrears on June 30 and
December 31 of each year (each, an "Interest Payment Date"), commencing June 30,
1997, to the person in whose name each Series A Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of the Series A Issuer, the Series A Subordinated
Debentures will be held in the name of the
64
<PAGE>
Property Trustee in trust for the benefit of the holders of the Series A
Preferred Securities. The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Series A Subordinated
Debentures is not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on the date such payment was originally payable. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of 10 1/4% thereof, compounded semi-annually from the
relevant Interest Payment Date. The term "interest" as used herein shall include
semi-annual interest payments, interest on semi-annual interest payments not
paid on the applicable Interest Payment Date and Additional Sums, as applicable.
The Series A Subordinated Debentures will mature on December 31, 2026
(the "Stated Maturity").
The Series A Subordinated Debentures will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Debt of the Company.
Because the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary, including the Bank,
upon such subsidiary's liquidation or reorganization or otherwise, is subject to
the prior claims of creditors of that subsidiary, except to the extent that the
Company may itself be recognized as a creditor of that subsidiary. Accordingly,
the Series A Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, and holders of
the Series A Subordinated Debentures should look only to the assets of the
Company for payments on the Series A Subordinated Debentures. The Indenture does
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Debt, whether under the Indenture or any existing or
other indenture that the Company may enter into in the future or otherwise.
The Company is a legal entity separate and distinct from the Bank. A
major portion of the Company's revenues results from amounts paid as dividends
to the Company by the Bank. Savings institutions must provide the OTS with at
least 30 days written notice before making any capital distributions. All such
capital distributions are also subject to the OTS' right to object to a
distribution on safety and soundness grounds.
In addition, the Company and the Bank are subject to various general
regulatory policies and requirements relating to the payment of dividends,
including requirements to maintain adequate capital above regulatory minimums.
The current OTS regulation applicable to the payment of dividends or other
capital distributions by savings institutions imposes limits on capital
distributions based on an institution's regulatory capital levels and net
income. An institution that meets or exceeds all of its fully phased-in capital
requirements (both before and after giving effect to the distribution) and is
not in need of more than normal supervision would be a "Tier 1 association." A
Tier 1 association may make capital distributions during a calendar year of up
to the greater of (i) 100% of net income for the current calendar year plus 50%
of its capital surplus or (ii) 75% of its net income over the most recent four
quarters. Any additional capital distributions would require prior regulatory
approval.
65
<PAGE>
The Bank currently exceeds its fully phased-in capital requirements and
qualifies as a Tier 1 association under the regulation.
An institution that meets the minimum regulatory capital requirements
but does not meet the fully phased-in capital requirements would be a "Tier 2
association," which may make capital distributions of between 25% and 75% of its
net income over the most recent four-quarter period, depending on the
institution's risk-based capital level. A "Tier 3 association" is defined as an
institution that does not meet all of the minimum regulatory capital
requirements and therefore may not make any capital distributions without the
prior approval of the OTS.
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION
So long as no event of default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture at any time or from
time to time during the term of the Series A Subordinated Debentures to defer
the payment of interest on the Series A Subordinated Debentures for a period not
exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated Maturity
of the Series A Subordinated Debentures. At the end of such Extension Period,
the Company must pay all interest then accrued and unpaid on the Series A
Subordinate Debentures (together with interest on such unpaid interest at the
annual rate of 10 1/4%, compounded semi-annually from the relevant Interest
Payment Date, to the extent permitted by applicable law). During an Extension
Period, interest will continue to accrue and holders of the Series A
Subordinated Debentures (or holders of the Series A Preferred Securities while
outstanding) will be required to accrue interest income for United States
federal income tax purposes. See "Certain Federal Income Tax
Consequences--Original Issue Discount."
During any such Extension Period, the Company may not, and may not
permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank PARI PASSU with or junior in interest
to the Series A Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks PARI PASSU with or junior in interest to
the Series A Subordinated Debentures (other than (a) dividends or distributions
in common stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, the issuance of stock
under any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Series A Guarantee and (d)
purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans for its directors, officers or
employees). Prior to the termination of any such Extension Period, the Company
may further defer the payment of interest, provided that no Extension Period may
exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity
of the Series A Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of 10 1/4%, compounded
semi-annually, to the extent permitted by applicable law), the Company may elect
to begin a new Extension Period subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company must give the Property Trustee, the Administrative Trustees and the
Debenture Trustee notice of its election of such Extension Period at least one
Business Day prior to the earlier of (i) the date interest on the Series A
Subordinated Debentures would have been payable except for the election to begin
such Extension Period or (ii) the date the Administrative Trustees are required
to
66
<PAGE>
give notice to DTC or other applicable self-regulatory organization or to
holders of the Series A Preferred Securities as of the record date or the date
such Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Debenture Trustee shall give notice of the
Company's election to begin a new Extension Period to the holders of the Series
A Preferred Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
ADDITIONAL SUMS
If the Series A Issuer is required to pay any additional taxes, duties
or other governmental charges as a result of a Tax Event, the Company will pay
as additional amounts on the Series A Subordinated Debentures such amounts as
shall be required so that the Distributions payable by the Series A Issuer shall
not be reduced as a result of any such additional taxes, duties or other
governmental charges.
OPTIONAL REDEMPTION
The Series A Subordinated Debentures will be redeemable, in whole at
any time or in part from time to time, at the option of the Company on or after
December 31, 2006, at a redemption price (the "Optional Redemption Price") equal
to the percentage of the outstanding principal amount of the Series A
Subordinated Debentures specified below, plus, in each case, accrued interest
thereon to the date of redemption, if redeemed during the 12-month period
beginning December 31, in the year indicated:
OPTIONAL
REDEMPTION
DATE PRICE
---- -----
2006................................................... 105.125%
2007................................................... 104.613%
2008................................................... 104.100%
2009................................................... 103.588%
2010................................................... 103.075%
2011................................................... 102.563%
2012................................................... 102.050%
2013................................................... 101.538%
2014................................................... 101.025%
2015................................................... 100.513%
2016 and thereafter.................................... 100.000%
67
<PAGE>
TAX EVENT REDEMPTION
If a Tax Event (as defined below) shall occur and be continuing, the
Company may, at its option, redeem the Series A Subordinated Debentures in whole
(but not in part) at any time within 90 days following the occurrence of such
Tax Event, at a redemption price (the "Tax Event Redemption Price") equal to the
Make-Whole Amount plus accrued and unpaid interest on the Series A Subordinated
Debentures to the date fixed for redemption. The "Make-Whole Amount" shall be
equal to the greater of (i) 100% of the principal amount of the Series A
Subordinated Debentures or (ii) as determined by Friedman, Billings, Ramsey &
Co., Inc. (in this capacity, the "Quotation Agent"), the sum of the present
values of the principal amount and premium payable as part of the Redemption
Price with respect to an optional redemption of such Series A Subordinated
Debentures on December 31, 2006, together with scheduled payments of interest
from the redemption date to December 31, 2006 (the "Remaining Life"), discounted
to the redemption date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate.
"Adjusted Treasury Rate" means, with respect to any redemption date,
the Treasury Rate plus (i) 1.40% if such redemption date occurs on or before
December 31, 1997 or (ii) 0.80% if such redemption date occurs after December
31, 1997.
"Treasury Rate" means (i) the yield, under the heading which
represents the average for the immediately prior week, appearing in the most
recently published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate shall be calculated on the third
Business Day preceding the redemption date.
"Comparable Treasury Issue" means with respect to any redemption date
the United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after December 31, 2006, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Comparable Treasury Price" means (A) the average of five Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest such Reference Treasury
68
<PAGE>
Dealer Quotations, or (B) if the Debenture Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such redemption date.
"Tax Event" means the receipt by the Series A Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Series A Preferred Securities under the Trust Agreement, there is more than
an insubstantial risk that (i) the Series A Issuer is, or will be within 90 days
of the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Series A Subordinated Debentures,
(ii) interest payable by the Company on the Series A Subordinated Debentures is
not, or within 90 days of the date of such opinion will not be, deductible by
the Company, in whole or in part, for United States federal income tax purposes
or (iii) the Series A Issuer is, or will be within 90 days of the date of such
opinion, subject to more than a DE MINIMIS amount of other taxes, duties or
other governmental charges.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Series A
Issuer on the outstanding Series A Preferred Securities and Series A Common
Securities shall not be reduced as a result of any additional taxes, duties and
other governmental charges to which the Series A Issuer has become subject as a
result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of the Series A
Preferred Securities, Series A Preferred Securities having a Liquidation Amount
equal to that portion of the principal amount of the Series A Subordinated
Debentures to be contemporaneously redeemed in accordance with the Indenture,
allocated to the Series A Common Securities and to the Series A Preferred
Securities PRO RATA based upon the relative Liquidation Amounts of such
Securities and the proceeds of which will be used to pay the Redemption Price of
such Series A Preferred Securities and (ii) with respect to a distribution of
the Series A Subordinated Debentures to holders of the Series A Preferred
Securities in exchange therefor in connection with a dissolution or liquidation
of the Series A, Issuer, Series A Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Series A Preferred Securities of
the holder to whom such Series A Subordinated Debentures would be distributed.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of the Series A
Subordinated Debentures to be redeemed at its registered address. Unless the
Company defaults in payment of the redemption price, on and after
69
<PAGE>
the redemption date interest ceases to accrue on the Series A Subordinated
Debentures or portions thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Company will also covenant, as to the Series A Subordinated
Debentures, that it will not, and will not permit any subsidiary of the Company
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock, (ii) make any payment of principal, interest or premium, if any,
on or repay or repurchase or redeem any debt securities of the Company that rank
PARI PASSU with or junior in interest to the Series A Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any subsidiary of the Company if such guarantee ranks
PARI PASSU with or junior in interest to the Series A Subordinated Debentures
(other than (a) dividends or distributions in common stock of the Company, (b)
any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, the issuance of stock under any such plan in the
future or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Series A Guarantee and (d) purchases of common stock related
to the issuance of common stock or rights under any of the Company's benefit
plans for its directors, officers or employees), if at such time (i) there shall
have occurred any event of which the Company has actual knowledge (a) that with
the giving of notice or the lapse of time, or both, would constitute an event of
default under the Indenture with respect to the Series A Subordinated Debentures
and (b) in respect of which the Company shall not have taken reasonable steps to
cure, (ii) if the Series A Subordinated Debentures are held by a Series A
Issuer, the Company shall be in default with respect to its payment of any
obligations under the Series A Guarantee relating to such Series A Preferred
Securities or (iii) the Company shall have given notice of its selection of an
Extension Period as provided in the Indenture with respect to the Series A
Subordinated Debentures and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without
the consent of the holders of the Series A Subordinated Debentures, amend, waive
or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, provided that any such
action does not materially adversely affect the interest of the holders of the
Series A Subordinated Debentures or the ability to qualify, or maintain the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Company and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of the
Series A Subordinated Debentures affected, to modify the Indenture in a manner
affecting the rights of the holders of the Series A Subordinated Debentures,
provided that no such modification may, without the consent of the holder of
each outstanding Series A Subordinated Debenture so affected, (i) change the
Stated Maturity of the Series A Subordinated Debentures, reduce the principal
amount thereof or reduce the rate or extend the time of payment of interest
thereon or (ii) reduce the percentage of principal amount of the Series A
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture.
70
<PAGE>
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Series A Subordinated Debentures that has occurred
and is continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay interest on the Series A
Subordinated Debentures when due (subject to the deferral of any due
date in the case of an Extension Period); or
(ii) failure to pay any principal on the Series A Subordinated
Debentures when due, whether at maturity, upon redemption by
declaration or otherwise; or
(iii) failure to observe or perform in any material respect
certain other covenants contained in the Indenture for 90 days after
written notice to the Company from the Debenture Trustee or the holders
of at least 25% in aggregate outstanding principal amount of the
outstanding Series A Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Company, subject in certain instances to any such
event remaining in effect for a period of 60 consecutive days.
The holders of a majority in aggregate outstanding principal amount of
the Series A Subordinated Debentures have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Series A Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Series A
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Series A
Subordinated Debentures which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
the Series A Subordinated Debentures affected thereby may, on behalf of the
holders of all the Series A Subordinated Debentures, waive any past default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Series A Subordinated Debenture. The Company is
required to file annually with the Debenture Trustee a certificate as to whether
or not the Company is in compliance with all the conditions and covenants
applicable to it under the Indenture.
71
<PAGE>
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE SERIES A PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Series A Subordinated Debentures on the date such interest or principal
is otherwise payable, a holder of the Series A Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on the Series A
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Series A Preferred Securities of such holder (a
"Direct Action"). The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
the holders of all of the Series A Preferred Securities. If the right to bring a
Direct Action is removed, the Series A Issuer may become subject to the
reporting obligations under the Exchange Act. The Company shall have the right
under the Indenture to set-off any payment made to such holder of the Series A
Preferred Securities by the Company in connection with a Direct Action.
The holders of the Series A Preferred Securities will not be able to
exercise directly any remedies other than those set forth in the preceding
paragraph available to the holders of the Series A Subordinated Debentures. See
"Description of the Series A Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or
merge into any other entity or convey, transfer or lease its properties and
assets substantially as an entirety to any entity, and no entity shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless: (i)
in the event the Company consolidates with or merges into another entity or
conveys or transfers its properties and assets substantially as an entirety to
any entity, the successor entity is organized under the laws of the United
States or any state or the District of Columbia, and such successor entity
expressly assumes the Company's obligations on the Series A Subordinated
Debentures issued under the Indenture; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions as prescribed by
the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Series A Subordinated Debentures protection in the event of a highly leveraged
reorganization, restructuring, merger or other similar transaction involving the
Company that may adversely affect holders of the Series A Subordinated
Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all of the Series
A Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and the
72
<PAGE>
Company deposits or causes to be deposited with the Debenture Trustee funds, in
trust, for the purpose and in an amount in the currency or currencies in which
the Series A Subordinated Debentures are payable sufficient to pay and discharge
the entire indebtedness on the Series A Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal and
interest to the date of the deposit or to the Stated Maturity, as the case may
be, then the Indenture will cease to be of further effect (except as to the
Company's obligations to pay all other sums due pursuant to the Indenture and to
provide the officers' certificates and opinions of counsel described therein),
and the Company will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that the Series
A Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Debt will first be
entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of the Series A
Subordinated Debentures, or the Property Trustee on behalf of the holders, will
be entitled to receive or retain any payment in respect of the principal of or
interest, if any, on the Series A Subordinated Debentures.
In the event of the acceleration of the maturity of any of the Series A
Subordinated Debentures, the holders of all Senior Debt outstanding at the time
of such acceleration will first be entitled to receive payment in full of all
amounts due thereon (including any amounts due upon acceleration) before the
holders of the Series A Subordinated Debentures will be entitled to receive or
retain any payment in respect of the principal of or interest, if any, on the
Series A Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of
the Series A Subordinated Debentures may be made if there shall have occurred
and be continuing a default in any payment with respect to Senior Debt or an
event of default with respect to any Senior Debt resulting in the acceleration
of the maturity thereof, or if any judicial proceeding shall be pending with
respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or
73
<PAGE>
prior to the date of the Indenture or thereafter incurred, for claims in respect
of derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Series A Subordinated Debentures or to other
Debt which is PARI PASSU with, or subordinated to, the Series A Subordinated
Debentures; provided, however, that Senior Debt shall not be deemed to include:
(i) any Debt of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (ii) any Debt of the Company to
any of its subsidiaries and (iii) Debt to any employee of the Company.
The Indenture places no limitation on the amount of Senior Debt or
subordinated debt which is PARI PASSU with the Series A Subordinated Indentures,
that may be incurred by the Company. The Company expects from time to time to
incur additional indebtedness constituting Senior Debt.
GOVERNING LAW
The Indenture and the Series A Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of the Series A Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
DISTRIBUTION OF THE SERIES A SUBORDINATED DEBENTURES
As described under "Description of the Series A Preferred
Securities--Liquidation of the Series A Issuer and Distribution of the Series A
Subordinated Debentures to Holders," under certain circumstances involving the
termination of the Series A Issuer, Series A Subordinated Debentures
74
<PAGE>
may be distributed to the holders of the Series A Preferred Securities in
exchange therefor upon liquidation of the Series A Issuer, after satisfaction of
liabilities to creditors of the Series A Issuer as provided by applicable law.
If distributed to holders of the Series A Preferred Securities in liquidation,
the Series A Subordinated Debentures will initially be issued in the form of one
or more global securities and DTC, or any successor depositary for the Series A
Preferred Securities, will act as depositary for the Series A Subordinated
Debentures. It is anticipated that the depositary arrangements for the Series A
Subordinated Debentures would be substantially identical to those in effect for
the Series A Preferred Securities. If the Series A Subordinated Debentures are
distributed to the holders of the Series A Preferred Securities upon the
liquidation of the Series A Issuer, the Company will use its best efforts to
register or list the Series A Subordinated Debentures with DTC or such other
trading facilities, if any, on which the Series A Preferred Securities are then
listed. There can be no assurance as to the market price of any Series A
Subordinated Debentures that may be distributed to the holders of the Series A
Preferred Securities.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Series A Subordinated
Debentures will be made at the offices of the Debenture Trustee in the city of
New York or at the offices of such Paying Agent or Paying Agents as the Company
may designate from time to time, except that at the option of the Company
payment of any interest may be made (i) except in the case of Global Series A
Subordinated Debentures, by check mailed to the address of the Person entitled
thereto as such address shall appear in the Securities Register or (ii) by
transfer to an account maintained by the Person entitled thereto as specified in
the Securities Register, provided that proper transfer instructions have been
received by the Regular Record Date. Payment of any interest on the Series A
Subordinated Debentures will be made to the Person in whose name the Series A
Subordinated Debenture is registered at the close of business on the Regular
Record Date for such interest, except in the case of Defaulted Interest. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent; however, the Company will at all times be
required to maintain a Paying Agent in each Place of Payment for the Series A
Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of or
interest on the Series A Subordinated Debentures and remaining unclaimed for two
years after such principal or interest has become due and payable shall, at the
written request of the Company, be repaid to the Company and the holders of the
Series A Subordinated Debentures shall thereafter look, as general unsecured
creditors, only to the Company for payment thereof.
DESCRIPTION OF SERIES A GUARANTEE
The Old Series A Guarantee was executed and delivered by the Company
concurrently with the issuance by the Series A Issuer of the Old Series A
Preferred Securities for the benefit of the holders from time to time of the
Series A Preferred Securities. As soon as practicable after the date hereof, the
Old Series A Guarantee will be exchanged by the Company for the New Series A
Guarantee. The Series A Guarantee Agreement has been qualified under the Trust
Indenture Act.
75
<PAGE>
This summary of certain terms and provisions of the Series A Guarantee Agreement
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the terms and provisions of the Series A Guarantee
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. The Series A Guarantee Trustee will hold the Series A Guarantee
for the benefit of the holders of the Series A Preferred Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Series A Preferred Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that the Issuer may have or
assert other than the defense of payment. The following payments with respect to
the Series A Preferred Securities, to the extent not paid by or on behalf of the
Series A Issuer (the "Guarantee Payments"), will be subject to the Series A
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
the Series A Preferred Securities, to the extent that the Series A Issuer has
funds on hand available therefor at such time, (ii) the Redemption Price with
respect to the Series A Preferred Securities called for redemption, to the
extent that the Series A Issuer has funds on hand available therefor at such
time, or (iii) upon a voluntary or involuntary dissolution, winding up or
liquidation of the Series A Issuer (unless the Series A Subordinated Debentures
are distributed to holders of the Series A Preferred Securities), the lesser of
(a) the Liquidation Distribution and (b) the amount of assets of the Series A
Issuer remaining available for distribution to holders of the Series A Preferred
Securities after satisfaction of liabilities to creditors of the Series A Issuer
as required by applicable law. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of the Series A Preferred Securities or by causing the
Issuer to pay such amounts to such holders.
The Series A Guarantee will be an irrevocable guarantee on a
subordinated basis of the Series A Issuer's obligations under the Series A
Preferred Securities, but will apply only to the extent that the Series A Issuer
has funds sufficient to make such payments, and is not a guarantee of
collection.
If the Company does not make interest payments on the Series A
Subordinated Debentures held by the Series A Issuer, the Series A Issuer will
not be able to pay Distributions on the Series A Preferred Securities and will
not have funds legally available therefor. The Series A Guarantee will rank
subordinate and junior in right of payment to all Senior Debt of the Company.
(See "--Status of the Series A Guarantee.") Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that subsidiary, except
to the extent the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, the Company's obligations under the Guarantee will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, and claimants should look only to the assets of the Company for
payments thereunder. The Series A Guarantee does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, including Senior
Debt, whether under the Indenture, any other indenture that the Company may
enter into in the future, or otherwise.
76
<PAGE>
The Company has, through the Series A Guarantee, the Trust Agreement,
the Series A Subordinated Debentures, the Indenture and the Expense Agreement,
taken together, fully, irrevocably and unconditionally guaranteed all of the
Issuer's obligations under the Series A Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Series A Issuer's obligations under the Series A Preferred
Securities. See "Relationship Among the Series A Preferred Securities, the
Series A Subordinated Debentures, the Expense Agreement and the Series A
Guarantee."
STATUS OF THE SERIES A GUARANTEE
The Series A Guarantee will constitute an unsecured obligation of the
Company and will rank subordinate and junior in right of payment to all Senior
Debt of the Company in the same manner as the Series A Subordinated Debentures.
The Series A Guarantee will constitute a guarantee of payment and not
of collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against any other person
or entity). The Series A Guarantee will be held for the benefit of the holders
of the Series A Preferred Securities. The Series A Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent not
paid by the Series A Issuer or upon distribution to the holders of the Series A
Preferred Securities of the Series A Subordinated Debentures. The Series A
Guarantee does not place a limitation on the amount of additional Senior Debt
that may be incurred by the Company. The Company expects from time to time to
incur additional indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Series A Preferred Securities (in which case
no vote will be required), the Series A Guarantee may not be amended without the
prior approval of the holders of not less than a majority of the aggregate
Liquidation Amount of such outstanding Series A Preferred Securities. The manner
of obtaining any such approval will be as set forth under "Description of the
New Securities--Description of Series A Preferred Securities--Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained in
the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Series A Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Series A Guarantee will occur upon the
failure of the Company to perform any of its payments or other obligations
thereunder. The holders of not less than a
77
<PAGE>
majority in aggregate Liquidation Amount of the Series A Preferred Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of such Guarantee
or to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under such Guarantee.
Any holder of the Series A Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against the Series A
Issuer, the Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Series A Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in the performance of the Series A Guarantee,
undertakes to perform only such duties as are specifically set forth in the
Series A Guarantee and, after default with respect to the Series A Guarantee,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Series A Guarantee at the request of any holder of
the Series A Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE SERIES A GUARANTEE
The Series A Guarantee will terminate and be of no further force and
effect upon full payment of the Redemption Price of the Series A Preferred
Securities, upon full payment of the amounts payable upon liquidation of the
Series A Issuer or upon distribution of the Series A Subordinated Debentures to
the holders of the Series A Preferred Securities in exchange therefor. The
Series A Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of the Series A Preferred Securities must
restore payment of any sums paid under the Series A Preferred Securities or the
Series A Guarantee.
GOVERNING LAW
The Series A Guarantee will be governed by and construed in accordance
with the laws of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Company under the
Trust Agreement (the "Expense Agreement"), the Company will irrevocably and
unconditionally guarantee to each
78
<PAGE>
person or entity to whom the Series A Issuer becomes indebted or liable, the
full payment of any costs, expenses or liabilities of the Series A Issuer, other
than obligations of the Series A Issuer to pay to the holders of the Series A
Preferred Securities the amounts due such holders pursuant to the terms of the
Series A Preferred Securities.
DESCRIPTION OF THE OLD SECURITIES
The terms of the Old Securities are identical in all material respects
to the New Securities, except that (i) the Old Securities have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the applicable Registration
Rights Agreement (which rights will terminate upon consummation of the Exchange
Offer, except under limited circumstances); (ii) the New Series A Preferred
Securities will not provide for any increase in the Distribution rate thereon;
and (iii) the New Series A Subordinated Debentures will not provide for any
increase in the interest rate thereon. The Old Securities provide that, in the
event that the Exchange Offer Registration Statement is not declared effective
on or prior to April 29, 1997, or, in certain limited circumstances, in the
event the Exchange Offer is not consummated or a shelf registration statement
(the "Shelf Registration Statement") with respect to the resale of the Old
Series A Preferred Securities is not declared effective on or prior to June 28,
1997, then interest will accrue (in addition to the stated interest rate on the
Series A Subordinated Debentures) at the rate per annum equal to an additional
one-quarter of one percent (0.25%) per Registration Default (not to exceed in
the aggregate 0.50%) of the principal amount, or the Liquidation Amount, as
applicable. The New Securities are not, and upon consummation of the Exchange
Offer the Old Securities will not be, entitled to any such additional interest
or Distributions. Accordingly, holders of Old Series A Preferred Securities
should review the information set forth under "Risk Factors--Certain
Consequences of a Failure to Exchange Old Series A Preferred Securities" and
"Description of the New Securities."
RELATIONSHIP AMONG THE SERIES A PREFERRED SECURITIES,
THE SERIES A SUBORDINATED DEBENTURES, THE EXPENSE
AGREEMENT AND THE SERIES A GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Series A
Preferred Securities (to the extent the Series A Issuer has funds available for
the payment of such Distributions) are irrevocably guaranteed by the Company as
and to the extent set forth under "Description of the Series A Guarantee." Taken
together, the Company's obligations under the Series A Subordinated Debentures,
the Indenture, the Trust Agreement, the Expense Agreement and the Series A
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the Series A
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Series A Issuer's obligations under the Series A Preferred Securities. If and to
the extent that the Company does not make payments on the Series A Subordinated
79
<PAGE>
Debentures, the Series A Issuer will not pay Distributions or other amounts due
on its Series A Preferred Securities. The Series A Guarantee does not cover
payment of Distributions when the Series A Issuer does not have sufficient funds
to pay such Distributions. In such event, the remedy of a holder of the Series A
Preferred Securities is to institute a Direct Action against the Company for
enforcement of payment of such Distributions to such holder. The obligations of
the Company under the Series A Guarantee are subordinate and junior in right of
payment to all Senior Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the Series A Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Series A Preferred Securities,
primarily because: (i) the aggregate principal amount of the Series A
Subordinated Debentures will be equal to the sum of the aggregate stated
Liquidation Amount of the Series A Preferred Securities and Series A Common
Securities; (ii) the interest rate and interest and other payment dates on the
Series A Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the Series A Preferred Securities;
(iii) the Company shall pay for all and any costs, expenses and liabilities of
the Series A Issuer except the Series A Issuer's obligations to holders of its
Series A Preferred Securities; and (iv) the Trust Agreement further provides
that the Series A Issuer will not engage in any activity that is not consistent
with the limited purposes of the Series A Issuer.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of making such payment, a payment under the Series A Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE SERIES A PREFERRED SECURITIES
A holder of a Series A Preferred Security may institute a legal
proceeding directly against the Company to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Series A Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Company
would not constitute a default or Event of Default under the Indenture. However,
in the event of payment defaults under, or acceleration of, Senior Debt of the
Company, the subordination provisions of the Indenture provide that no payments
may be made in respect of the Series A Subordinated Debentures until such Senior
Debt has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on the Series A Subordinated
Debentures would constitute an event of default under the Indenture.
LIMITED PURPOSE OF THE SERIES A ISSUER
The Series A Preferred Securities evidence a beneficial interest in the
Series A Issuer, and the Series A Issuer exists for the sole purpose of issuing
its Series A Preferred Securities and Series A Common Securities and investing
the proceeds thereof in Series A Subordinated Debentures. A
80
<PAGE>
principal difference between the rights of a holder of a Series A Preferred
Security and a holder of a Series A Subordinated Debenture is that a holder of a
Series A Subordinated Debenture is entitled to receive from the Company the
principal amount of and interest accrued on Series A Subordinated Debentures
held, while a holder of the Series A Preferred Securities is entitled to receive
Distributions from the Series A Issuer (or from the Company under the Series A
Guarantee) if, and to the extent, the Series A Issuer has funds available for
the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or
liquidation of the Series A Issuer involving the liquidation of the Series A
Subordinated Debentures, after satisfaction of liabilities to creditors of the
Series A Issuer, if any, as provided by applicable law, the holders of the
Series A Preferred Securities will be entitled to receive, out of assets held by
the Series A Issuer, the Liquidation Distribution in cash. See "Description of
the Series A Preferred Securities--Liquidation Distribution Upon Termination."
Upon any voluntary or involuntary liquidation or bankruptcy of the Company, the
Property Trustee, as holder of the Series A Subordinated Debentures, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Senior Debt as set forth in the Indenture, but entitled to receive payment in
full of principal and interest, before any stockholders of the Company receive
payments or distributions. Since the Company is the guarantor under the Series A
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Series A Issuer (other than the Series A Issuer's obligations to the holders of
its Series A Preferred Securities), the positions of a holder of such Preferred
Securities and a holder of the Series A Subordinated Debentures relative to
other creditors and to stockholders of the Company in the event of liquidation
or bankruptcy of the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the Series
A Preferred Securities. This summary does not address the tax consequences to
persons that may be subject to special treatment under United States federal
income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations, dealers in securities or currencies, persons that hold Series A
Preferred Securities as part of a position in a "straddle" or as part of a
"hedging," "conversion" or other integrated investment transaction for federal
income tax purposes, persons whose functional currency is not the United States
dollar or persons that do not hold Series A Preferred Securities as capital
assets.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Kronish, Lieb, Weiner & Hellman LLP ("Kronish Lieb"),
special tax counsel to the Company and the Series A Issuer. This summary is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to change at any time. Such
changes may be applied retroactively in a manner that could cause the tax
consequences to vary substantially from the consequences described below,
possibly adversely affecting a beneficial owner of the Series A Preferred
Securities. In particular, legislation has been proposed that could adversely
affect the
81
<PAGE>
Company's ability to deduct interest on the Series A Subordinated Debentures,
which would in turn permit the Company to cause a redemption of the Series A
Preferred Securities. (See "--Possible Tax Law Changes.") The authorities on
which this summary is based are subject to various interpretations, and it is
therefore possible that the federal income tax treatment of the purchase,
ownership and disposition of the Series A Preferred Securities may differ from
the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES A
PREFERRED SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
EXCHANGE OF SERIES A PREFERRED SECURITIES
The exchange of Old Securities for New Securities will not be a taxable
event to beneficial owners of Series A Preferred Securities ("Securityholders")
for federal income tax purposes. The exchange of Old Securities for New
Securities pursuant to the Exchange Offer will not be treated as an "exchange"
for federal income tax purposes because the New Securities will not differ
materially in kind or extent from the Old Securities and because the exchange
will occur by operation of the terms of the Old Securities. Accordingly, the New
Series A Subordinated Debentures will have the same issue date and issue price
as the Old Series A Subordinated Debenture, and a Securityholder will have the
same adjusted tax basis and holding period in the New Series A Preferred
Securities as the Securityholder had in the Old Series A Preferred Securities
immediately before the exchange.
CLASSIFICATION OF THE SERIES A ISSUER
In the opinion of Kronish Lieb, under current law, the Series A Issuer
will not be classified as an association taxable as a corporation for United
States federal income tax purposes. As a result, each Securityholder will be
required to include in its gross income its PRO RATA share of the original issue
discount accrued with respect to the Series A Subordinated Debentures whether or
not cash is actually distributed to the Securityholders. (See "--Original Issue
Discount.") Under current law, no amount included in income with respect to the
Series A Preferred Securities will be eligible for the dividends-received
deduction.
ORIGINAL ISSUE DISCOUNT
Under the Indenture, the Company has the right to defer the payment of
interest on the Series A Subordinated Debentures at any time or from time to
time for a period not exceeding 10 consecutive semi-annual periods with respect
to each Extension Period, provided that no Extension Period may extend beyond
the Stated Maturity of the Series A Subordinated Debentures. Because of this
option, all interest payable on the Series A Subordinated Debentures will be
treated as "original issue discount" ("OID") for federal income tax purposes.
Accordingly, a Securityholder will recognize income (in the form of OID) on a
daily basis under a constant yield method over the term of the Series A
Subordinated Debentures (including during any Extension Period), regardless of
the
82
<PAGE>
receipt of cash with respect to the period to which such income is attributable.
(Subsequent uses of the term "interest" in this summary include income in the
form of OID.) The amount of OID that accrues in any semi-annual period (other
than during an Extension Period) will equal approximately the amount of the
interest that accrues on the Series A Subordinated Debentures in that
semi-annual period at the stated interest rate. Securityholders that did not
acquire Series A Preferred Securities on their original issue at their original
offering price will be required to determine for themselves the amount of OID
they must include in gross income for federal income tax purposes.
In the event that the interest payment period is extended,
Securityholders will include interest in gross income in advance of the receipt
of cash, and any Securityholders that dispose of the Series A Preferred
Securities prior to the record date for the payment of Distributions following
such Extension Period will include interest in gross income but will not receive
any cash related thereto from the Series A Issuer. Any amount of OID included in
a Securityholder's gross income (whether or not during an Extension Period) will
increase such Securityholder's tax basis in its Series A Preferred Securities,
and the amount of Distributions received by a Securityholder will reduce such
Securityholder's tax basis in its Series A Preferred Securities.
DISTRIBUTION OF THE SERIES A SUBORDINATED DEBENTURES TO HOLDERS OF THE SERIES A
PREFERRED SECURITIES
Under current law, a distribution by the Series A Issuer of the Series
A Subordinated Debentures as described under the caption "Description of the New
Securities--Description of Series A Preferred Securities--Liquidation of the
Series A Issuer and Distribution of the Series A Subordinated Debentures to
Holders" will be non-taxable and will result in a Securityholder's receiving
directly its PRO RATA share of the Series A Subordinated Debentures previously
held indirectly through the Series A Issuer, with a holding period and aggregate
tax basis equal to the holding period and aggregate tax basis such
Securityholder had in its Series A Preferred Securities before such
distribution. A Securityholder will accrue interest in respect of the Series A
Subordinated Debentures received from the Series A Issuer in the manner
described above under "--Original Issue Discount."
SALES OR REDEMPTION OF THE SERIES A PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of the
Series A Preferred Securities (including a redemption for cash) in an amount
equal to the difference between the amount realized and the Securityholder's
adjusted tax basis in the Series A Preferred Securities sold or so redeemed.
Gain or loss recognized by a Securityholder on Series A Preferred Securities
held for more than one year will generally be taxable as long-term capital gain
or loss.
The Series A Preferred Securities may trade at a price that does not
fully reflect the value of accrued but unpaid interest with respect to the
underlying Series A Subordinated Debentures. A Securityholder that disposes of
its Series A Preferred Securities between record dates for payments of
Distributions (and consequently does not receive a Distribution from the Series
A Issuer for the period prior to such disposition) will nevertheless be required
to include in income as ordinary income accrued but unpaid interest on the
Series A Subordinated Debentures through the date of disposition and to add such
amount to its adjusted tax basis in its Series A Preferred Securities disposed
of. Such
83
<PAGE>
Securityholder will recognize a capital loss on the disposition of its Series A
Preferred Securities to the extent the selling price (which may not fully
reflect the value of accrued but unpaid interest) is less than the
Securityholder's adjusted tax basis in the Series A Preferred Securities (which
will include accrued but unpaid interest). Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
federal income tax purposes.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would treat as equity for federal income
tax purposes a corporate debt instrument with a term of more than 15 years
issued to a related party (other than a corporation), where the instrument is
not shown on the issuer's balance sheet because the holder is consolidated with
the issuer on such balance sheet and the holder or some other related party
issues a related instrument not shown as indebtedness on such balance sheet. The
Proposed Legislation is proposed to be effective for instruments issued on or
after the date on which the first congressional committee action is taken.
It is expected that, if the Proposed Legislation is enacted as
currently proposed, such legislation will not apply to the Old Series A
Subordinated Debentures since they were issued prior to the date of any
committee action. Moreover, if the Proposed Legislation is enacted with
effective-date provisions that are identical in all material respects (except
for the actual effective date) to the effective-date provisions for an earlier
version of the Proposed Legislation contained in the Revenue Reconciliation Bill
of 1996 (the "1996 Bill"), then, even if the Exchange Offer is consummated after
the actual effective date of such legislation, the exchange of the Old
Securities for the New Securities will not cause the New Series A Subordinated
Debentures to be subject to such legislation. However, there can be no
assurances that the effective date guidance contained in the Proposed
Legislation and the 1996 Bill will be incorporated in the legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the tax treatment of the Series A Subordinated
Debentures or the Series A Preferred Securities.
If the Proposed Legislation were enacted and applied to all or a
portion of the Series A Subordinated Debentures, the Company would be unable to
fully deduct the interest on the Series A Subordinated Debentures. Such a change
could give rise to a Tax Event, which would permit the Company to cause a
redemption of the Series A Preferred Securities, as described more fully under
"Description of the New Securities--Description of Series A Preferred
Securities--Redemption." In addition, the income with respect to the Series A
Preferred Securities would be treated as consisting entirely or partly of
distributions with respect to stock, which would constitute dividends to the
extent they did not exceed the current and accumulated earnings and profits of
the Company. Dividends paid by a United States corporation to foreign persons
are generally subject to United States federal withholding tax.
UNITED STATES ALIEN HOLDERS
84
<PAGE>
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments by the
Series A Issuer or any of its paying agents to any Securityholder who or which
is a United States Alien Holder will not be subject to United States federal
withholding tax; provided, that (a) the Securityholder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote, (b) the Securityholder is not a
controlled foreign corporation that is related to the Company through stock
ownership and (c) either (A) the Securityholder certifies to the Series A Issuer
or its agent, under penalties of perjury, that it is not a United States holder
and provides its name and address or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution") certifies
to the Series A Issuer or its agent, under penalties of perjury, that such
statement has been received from the Securityholder by it or by a Financial
Institution holding such security for the Securityholder and furnishes the
Series A Issuer or its agent with a copy thereof; and (ii) a United States Alien
Holder of a Series A Preferred Security will not be subject to United States
federal withholding tax on any gain realized upon the sale or other disposition
of a Series A Preferred Security.
Proposed Treasury regulations (the "Proposed Regulations") would
provide alternative methods for satisfying the certification requirement
described in clause (i)(c) above. The Proposed Regulations also would require,
in the case of Series A Preferred Securities held by a foreign partnership, that
(x) the certification described in clause (i)(c) above be provided by the
partners rather than by the foreign partnership and (y) the partnership provide
certain information, including a United States taxpayer identification number. A
look-through rule would apply in the case of tiered partnerships. The Proposed
Regulations are proposed to be effective for payments made after December 31,
1997. There can be no assurance that the Proposed Regulations will be adopted or
as to the provisions that they will include if and when adopted in temporary or
final form.
INFORMATION REPORTING TO SECURITYHOLDERS
Generally, income on the Series A Preferred Securities will be reported
to Securityholders on Forms 1099, which should be mailed to Securityholders by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Series A Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the
Securityholder complies with certain certification requirements. Any withheld
amounts will be allowed as a credit against the Securityholder's United States
federal income tax, provided the required information is provided to the
Internal Revenue Service on a timely basis.
85
<PAGE>
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements on those employee benefit plans to which
it applies ("Plans") and on those persons who are fiduciaries with respect to
such Plans. In accordance with ERISA's general fiduciary standards, before
purchasing the Series A Preferred Securities a Plan fiduciary should determine
whether such an investment is permitted under the governing Plan instruments and
is appropriate for the Plan in view of its overall investment policy and the
composition and diversification of its portfolio. Other provisions of ERISA and
the Code require that certain reporting and disclosure be made with respect to
plan assets and investments, and still other provisions of ERISA and the Code
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan ("parties in interest" within
the meaning of ERISA or "disqualified persons" within the meaning of the Code).
Thus, a Plan fiduciary considering an investment in the Series A Preferred
Securities should consult with its legal counsel concerning the legal
implications of investing in the Series A Preferred Securities, especially the
issues discussed in the immediately succeeding paragraphs.
An investment in Series A Preferred Securities by a Plan might result
in the Series A Subordinated Debentures and any other assets of the Series A
Issuer being deemed to constitute in whole or in part Plan assets, which in turn
would mean that such assets would be subject to the reporting and disclosure
rules of ERISA and the Code, might mean that the Plan fiduciary who decided to
invest in the Series A Preferred Securities had delegated asset management
responsibility and might mean that the purchase and certain underlying aspects
of such investment, including the operation of the Series A Issuer, might be
deemed prohibited transactions under ERISA and the Code. Neither ERISA nor the
Code defines "plan assets." The U.S. Department of Labor has published
regulations (the "Plan Asset Regulations") concerning whether or not a Plan's
assets would be deemed to include an interest in the underlying assets of an
entity (such as a trust) for purposes of ERISA and the Code, if the Plan
acquires an "equity interest" in such entity (such as by acquiring the Series A
Preferred Securities). Under the Plan Asset Regulations the underlying assets of
an entity will not be considered "plan assets" if, immediately after the most
recent acquisition of any equity interest in the entity, whether or not from the
issuer or an underwriter, less than 25% of the value of each class of equity
interest is held by "benefit plan investors," which are defined as Plans,
individual retirement accounts and certain employee benefit plans not subject to
ERISA (for example, non-U.S. or governmental plans). Neither the initial sales
of the Series A Preferred Securities nor any subsequent transfers thereof will
be monitored to insure that the investment by "benefit plan investors" is below
the 25% limit described above and, accordingly, an investing Plan's assets may
be deemed to include the assets of the Trust.
Also under the Plan Asset Regulations, the underlying assets of an
entity will not be considered "plan assets" if the Plan's interest in the entity
qualified as "publicly offered securities" when the Plan acquired its interest.
The New Series A Preferred Securities may qualify as "publicly offered
securities" if at the time of the consummation of the Exchange Offer they are
"widely held" and "freely transferable." Under the Plan Asset Regulations, a
class of securities is "widely held" only if it is a class of securities that is
owned by 100 or more investors independent of the issuer and of one another.
Since it will not be possible to determine whether the New Series A Preferred
Securities are "widely held," it will not be possible to determine whether the
New Series A Preferred Securities qualify as "publicly offered securities."
86
<PAGE>
In light of the possibility of prohibited transactions, Plans cannot
purchase the Series A Preferred Securities unless (i) they are represented in
this regard by a "qualified professional asset manager" ("QPAM") as that term is
defined in U.S. Department of Labor Prohibited Transaction Exemption ("PTE")
84-14, and other conditions to the applicability of PTE 84-14 to the purchase
and holding of the Series A Preferred Securities are satisfied, or (ii) the
conditions to the applicability of (a) PTE 90-1 (for insurance company pooled
separate accounts), (b) PTE 91-38 (for bank collective funds), (c) PTE 95-60
(for insurance company general accounts) or (d) PTE 96-23 (for in-house asset
managers) to the purchase and holding of the Series A Preferred Securities are
satisfied. By purchasing the Series A Preferred Securities, the investing Plan
is deemed to represent and agree that it is so represented and that such
conditions are satisfied.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) are not subject to ERISA requirements but may be subject
to somewhat similar provisions of other applicable federal or state law or legal
restrictions on their ability to invest in the Series A Preferred Securities.
Accordingly, governmental plans should consult with legal counsel prior to
making an investment.
THE SALE OF INVESTMENTS TO PLANS IS IN NO RESPECT A REPRESENTATION BY
THE INITIAL PURCHASERS, THE SERIES A ISSUER, THE COMPANY, THE PROPERTY TRUSTEE
OR ANY OTHER PERSON ASSOCIATED WITH THE SALE OF THE SERIES A PREFERRED
SECURITIES THAT SUCH INVESTMENTS MEET ALL RELEVANT LEGAL REQUIREMENTS WITH
RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH
INVESTMENTS ARE OTHERWISE APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR
PLAN.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Series A Preferred Securities for
its own account in connection with the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such New Series A
Preferred Securities. This Prospectus, as it may be amended or supplemented from
time to time, may be used by Participating Broker-Dealers during the period
referred to below in connection with resales of New Series A Preferred
Securities received in exchange for Old Series A Preferred Securities if such
Old Series A Preferred Securities were acquired by such Participating
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities. The Company has agreed that this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New Series A Preferred
Securities for a period ending 90 days after the Expiration Date (subject to
extension under certain limited circumstances described herein) or, if earlier,
when all such New Series A Preferred Securities have been disposed of by such
Participating Broker-Dealer. See "The Exchange Offer--Resales of New Series A
Preferred Securities." Neither the Company nor the Trust will receive any cash
proceeds from the issuance of the New Series A Preferred Securities offered
hereby. New Series A Preferred Securities received by broker-dealers for their
own accounts in connection with the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Series A Preferred
Securities or a combination of such
87
<PAGE>
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Series A Preferred
Securities. Any broker-dealer that resells New Series A Preferred Securities
that were received by it for its own account in connection with the Exchange
Offer and any broker or dealer that participates in a distribution of such New
Series A Preferred Securities may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any such resale of New Series A
Preferred Securities and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
VALIDITY OF THE NEW SECURITIES
Certain matters of Delaware law relating to the validity of the New
Series A Preferred Securities, the enforceability of the Trust Agreement and the
formation of the Series A Issuer will be passed upon by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Company and
the Series A Issuer. The validity of the Series A Guarantee and the Series A
Subordinated Debentures will be passed upon for the Company by Stuzin and
Camner, P.A., and for the Initial Purchasers by Silver, Freedman & Taff, L.L.P.
who will rely on the opinion of Richards, Layton & Finger as to matters of
Delaware law. Alfred R. Camner, Chairman of the Board, Chief Executive Officer,
President, and a director of the Company is the senior managing director and a
shareholder of Stuzin and Camner, P.A. and Mark Lipsitz, a director of the
Company, is the managing director of Stuzin and Camner, P.A. Certain matters
relating to United States federal income tax considerations will be passed upon
for the Company by Kronish, Lieb, Weiner & Hellman LLP.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K/A of BankUnited Financial Corporation for the
year ended September 30, 1996 have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent certified public accountants, given
on the authority of said firm as experts in auditing and accounting.
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K of Suncoast Savings and Loan Association, FSA
for the year ended June 30, 1996 have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent certified public accountants,
given on the authority of said firm as experts in auditing and accounting.
88
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21850
BANKUNITED FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-037773
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ZIP CODE
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 569-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
CLASS A COMMON STOCK, $.01 PAR VALUE
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1996
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ ]
The aggregate market value of the Class A Common Stock held by
non-affiliates of the Registrant, based upon the average price on December
11, 1996, was $68,776,342.* The other voting securities of the Registrant are
not publicly traded.
The shares of the Registrant's common stock outstanding as of December 11,
1996 were as follows:
CLASS NUMBER OF SHARES
----- ----------------
Class A Common Stock, $.01 par value 7,675,931
Class B Common Stock, $.01 par value 251,515
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive Proxy Statement for its 1997 Annual Meeting of
Stockholders will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this Form
10-K pursuant to Rule G(3) of the General Instructions for Form 10-K.
Information from such Definitive Proxy Statement will be incorporated by
reference into Part III, Items 10, 11, 12 and 13 hereof.
1
<PAGE>
- -----------------------------------------------------------------------------
* Based on reported beneficial ownership of all directors and executive
officers of the Registrant; this determination does not, however,
constitute an admission of affiliated status for any of these individual
stockholders.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1
<PAGE>
PART I
ITEM 1. BUSINESS
BUSINESS OF BANKUNITED FINANCIAL CORPORATION
BankUnited Financial Corporation (the "Company" or "BankUnited") is a
Florida corporation organized in December 1992 for the purpose of becoming
the savings and loan holding company for BankUnited, FSB (the "Bank"). This
holding company reorganization, together with BankUnited's conversion from a
Florida-chartered stock savings bank to a federally chartered stock savings
bank, became effective in March 1993. Unless the context requires otherwise,
all references herein to the Company include the Company, the Bank and their
subsidiaries on a consolidated basis, and before March 15, 1993, include the
Bank and its subsidiaries only.
The Company currently has 15 branch offices in Dade, Broward and Palm
Beach counties, Florida ("South Florida") and anticipates opening three or
more additional branches there in the next 18 months. The Company's business
has traditionally consisted of attracting deposits from the general public
and using those deposits, together with borrowings and other funds, to
purchase nationwide and to originate in its market area single-family
residential mortgage loans, and to a lesser extent, to purchase and originate
commercial real estate, commercial business and consumer loans. The Company's
revenues are derived principally from interest earned on loans,
mortgage-backed securities and investments. The Company's primary expenses
arise from interest paid on savings deposits and borrowings and overhead
expenses incurred in its operations.
The Company's operating plan emphasizes (i) concentrating lending
activities on the origination of single-family residential mortgage loans and
purchasing such loans as favorable market opportunities arise; (ii) expanding
the Company's deposit base by providing convenience, competitive rates and
personalized service in its market area; (iii) continuing expansion of the
Company's branch network through de novo branching or the acquisition of
branches of, and mergers with, existing financial institutions, although
there are no current plans, arrangements, understandings, or agreements
regarding such acquisitions; (iv) expanding the Company's commercial and
multi-family real estate, commercial business, and real estate construction
lending; and (v) managing exposure to interest rate risk, while optimizing
operating results through effective asset/liability management and investment
policies.
In 1995, the Company redefined its strategy to increase its emphasis on
strategic product niches which management believes are being underserved as
South Florida's banking market consolidates. These products include
commercial business and commercial real estate lending and deposit services
for small to mid-size businesses. The Company has also focused on attracting
depositors who are seeking convenience, competitive rates and personalized
service. In order to accomplish this strategy, the Company has attracted
management with expertise in developing and managing its new product lines.
The Bank is a member of the Federal Home Loan Bank ("FHLB") system and is
subject to comprehensive regulation, examination and supervision by the
Office of Thrift Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). Deposits at the Bank are insured by the Savings
Association Insurance Fund of the FDIC (the "SAIF") for up to $100,000 for
each insured account holder, which is the maximum permitted by law.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-K or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", "believe" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
2
<PAGE>
Securities Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made, and to advise readers that various
factors, including regional and national economic conditions, changes in
levels of market interest rates, credit risks of lending activities, and
competitive and regulatory factors, could affect the Company's financial
performance and could cause the Company's actual results for future periods
to differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
SUNCOAST ACQUISITION
As part of the Company's plan to expand within South Florida, on November
15, 1996, the Company completed the purchase of Suncoast Savings & Loan
Association, FSA ("Suncoast"), a federally chartered savings association with
assets of $409.0 million at September 30, 1996 and merged Suncoast into the
Bank (the "Merger"). Suncoast had six branch offices in the South Florida
market of which at least five will continue to operate and one may be
consolidated with an existing Bank branch office. In addition, as of
September 30, 1996, Suncoast serviced or subserviced approximately $1.2
billion in loans for others. The Company is currently exploring the
possibility of selling a portion of Suncoast's servicing portfolio and
discontinuing certain of Suncoast's subservicing activities. Such actions
could substantially reduce the income derived from servicing as well as the
related expenses from the income and expenses previously reported by
Suncoast.
For additional information, see "Unaudited Pro Forma Condensed Combined
Financial Statements" and Note 18 of Notes to the Consolidated Financial
Statements.
MARKET AREA AND COMPETITION
The Company conducts operations in South Florida, which at June 30, 1996
had a total of approximately $73 billion in deposits in commercial banks,
savings institutions, and credit unions (41% of the total of $178 billion of
deposits in Florida). The Company intends to continue to establish or acquire
branches in its market area where the Company can service its customer base.
In 1995, the Company sold its three branches on the west coast of Florida,
including their deposits which totaled $130 million at the date of sale. The
sale was part of a shift in growth strategy to focus on South Florida and
take advantage of consolidation trends in banking there. Also, as part of
this strategy, the Company opened branches in Boca Raton, Florida in December
1995, Delray Beach, Florida in June 1996 and West Palm Beach, Florida in
September 1996. On March 29, 1996, the Company acquired the Bank of Florida
with total assets of $28.1 million which was merged into the Company's South
Miami Branch. Then on November 15, 1996, as discussed above, the Company
acquired Suncoast.
The Company encounters strong competition in attracting deposits and in
its lending activities. Its most direct competition for deposits historically
has been from commercial banks, brokerage houses, other savings associations,
and credit unions located in the Company's market area, and the Company
expects continued strong competition from such financial institutions in the
foreseeable future. Within the Company's market area are branches of several
commercial banks and savings associations that are substantially larger and
that have more extensive operations than does the Company. In addition, many
financial institutions based in South Florida have recently been acquired by
larger institutions based in other parts of the state or based out of state.
The Company's goal is to compete for savings and other deposits by offering
depositors a higher level of personal service and expertise, together with a
wide range of financial services offered at competitive rates. The Company
believes that this strategy will enable it to attract depositors as the
number of local institutions remaining declines and depositors who desire
more personal service, particularly retirees, relocate their accounts.
The competition in originating real estate and other loans comes
principally from commercial banks, mortgage banking companies and other
savings associations. The Company competes for loan
3
<PAGE>
originations primarily through the interest rates and loan fees it charges,
the type of loans it offers, and the efficiency and quality of service it
provides. The Company purchases residential first mortgage loans in the
existing secondary mortgage market and competes with other mortgage
purchasers in the secondary market primarily on the basis of price. While the
Company has been, and intends to continue to be, primarily a residential
lender, the Company has recently placed more emphasis on commercial real
estate, construction and commercial lending, as discussed more fully below.
Factors that affect competition in lending include general and local economic
conditions, current interest rates and volatility of the mortgage markets. As
with its deposit products, the Company's strategy is to promote its greater
level of personal service and to position itself as a small-to-middle-market
lender to businesses left underserved by larger institutions.
Management's strategy has included and continues to include evaluation of
market needs and offering products to meet those needs. The Company will
continue to offer products and services that will allow it to control the
growth of its assets and liabilities. These new products and services will
allow the Company to properly position itself to its customers as a community
bank.
FACTORS AFFECTING EARNINGS
The results of the Company's operations are affected by many factors
beyond the Company's control, including general economic conditions and the
related monetary and fiscal policies of the federal government. Lending
activities are affected by the demand for mortgage financing and other types
of loans, which is in turn affected by the interest rates at which such
financing may be offered, and other factors affecting the supply of housing
and the availability of funds. Deposit flows and costs of funds are
influenced by yields available on competing investments and by general market
rates of interest.
ASSET AND LIABILITY MANAGEMENT. The Company's net earnings depend
primarily on its net interest income, which is the difference between
interest income received on its interest-earning assets (principally loans,
short-term and long-term investments, and mortgage-backed securities) and
interest expense paid on its interest-bearing liabilities (principally
deposits and FHLB advances). The Company's net interest income is
significantly affected by (i) the difference (the "interest rate spread")
between yields received on its interest-earning assets and the rates paid on
its interest-bearing liabilities and (ii) the relative amounts of its
interest-earning assets and interest-bearing liabilities. When
interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The more
such liabilities exceed such assets, the greater the positive interest rate
spread and/or non-interest income must be in order to produce net income.
Non-interest sources of income and non-interest expenses also affect the
Company's net income. The higher non-interest expenses are, the greater the
positive interest rate spread and/or non-interest sources of income must be
to produce net income.
To reduce the adverse impact of rapid increases in market interest rates
on the Company's net interest income, the Company has emphasized the
origination and purchase of adjustable-rate mortgage loans. At September 30,
1996, 69.8% of the Company's net loans receivable and mortgage-backed
securities carried adjustable interest rates. The Company has from time to
time acquired longer term fixed-rate mortgage loans when the yields on these
interest-earning assets have been deemed advantageous by management. As a
part of its asset and liability management program, and as market conditions
permit, the Company attempts to lengthen the maturities of its
interest-bearing liabilities (i) with longer term deposits or (ii) when
advantageous, with borrowed funds. The Company's ability to manage interest
rate risk in its loan and investment portfolios depends upon a number of
factors, such as competition for loans and deposits in its market area and
conditions prevailing in the secondary mortgage market.
The Company has rate-sensitive (due or subject to repricing within one
year) liabilities that exceed its rate-sensitive assets, resulting in a
negative cumulative one-year gap position of 6.4% of total assets as of
September 30, 1996. This imbalance, when coupled with the deregulation of the
restrictions
4
<PAGE>
previously imposed on the types of savings products that financial
institutions are permitted to offer, subjects the Company's earnings to
change based on fluctuations in interest rates and affects the ability of the
Company to maintain adequate liquidity levels. The Company constantly
attempts to reduce the sensitivity of its earnings to fluctuations in
interest rates by adjusting the average maturities of its interest-bearing
liabilities and interest-earning assets. There can be no assurance, however,
of the degree to which the Company will be able to effectively maintain the
balance of its short-term interest-earning assets as compared to its
short-term interest-bearing liabilities and manage the risks to liquidity
associated therewith.
5
<PAGE>
GAP TABLE. The following table sets forth the amount of interest-earning
assets and interest-bearing liabilities outstanding at September 30, 1996,
which are expected to reprice or mature in each of the future time periods
shown.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
INTEREST SENSITIVITY
PERIOD(1)
--------------------------
OVER
6 MONTHS 6 MONTHS
OR LESS -1 YEAR
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Interest-earning assets:
Investments, tax certificates,
Federal funds sold, FHLB overnight
deposits and other interest earning
assets, at cost .................... $ 62,988 $ 20,892
Mortgage-backed securities ........... 10,738 7,491
Loans:
Adjustable-rate mortgages ............ 383,997 61,532
Fixed-rate mortgages ................. 14,207 9,428
Commercial and consumer loans ....... 6,995 547
---------- -----------
Total loans ......................... 405,199 71,507
---------- -----------
Total interest-earning assets ...... 478,925 99,890
Total non-interest-earning assets .. -- --
---------- -----------
Total assets ........................ $478,925 $ 99,890
========== ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ...... $ 33,821 $ --
Passbook accounts ................... 73,780 --
Certificate accounts ................ 229,225 87,337
---------- -----------
Total customer deposits ............... 336,826 87,337
Borrowings:
FHLB advances ........................ 162,000 45,000
Other borrowings ..................... -- --
---------- -----------
Total borrowings .................... 162,000 45,000
---------- -----------
Total interest-bearing liabilities . 498,826 132,337
---------- -----------
Total non-interest-bearing liabilities -- --
Stockholders' equity .................. -- --
---------- -----------
Total liabilities and stockholders'
equity ............................ $498,826 $132,337
========== ===========
Total interest-earning assets less
interest-bearing liabilities ("GAP") $(19,901) $(32,447)
========== ===========
Ratio of GAP to total assets .......... -2.41% -3.94%
========== ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities ........ $(19,901) $(52,348)
========== ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities, as a
percentage of total assets .......... -2.41% -6.35%
========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NON-
OVER 1 - OVER 5 - OVER 10 - INTEREST
5 YEARS 10 YEARS YEARS EARNING TOTAL
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Investments, tax certificates,
Federal funds sold, FHLB overnight
deposits and other interest earning
assets, at cost .................... $ 3,782 $ -- $ -- $ -- $ 87,662
Mortgage-backed securities ........... 36,734 10,353 4,849 -- 70,165
Loans:
Adjustable-rate mortgages ............ 45,940 -- -- 4,600 496,069
Fixed-rate mortgages ................. 56,630 30,949 32,466 324 144,004
Commercial and consumer loans ....... 897 16 -- 15 8,470
---------- ---------- ----------- ------------ -----------
Total loans ......................... 103,467 30,965 32,466 4,939 648,543
6
<PAGE>
NON-
OVER 1 - OVER 5 - OVER 10 - INTEREST
5 YEARS 10 YEARS YEARS EARNING TOTAL
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Total interest-earning assets ...... 143,983 41,318 37,315 4,939 806,370
Total non-interest-earning assets .. -- -- -- 17,990 17,990
---------- ---------- ----------- ------------ -----------
Total assets ........................ $143,983 $41,318 $37,315 $ 22,929 $824,360
========== ========== =========== ============ ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ...... $ -- $ -- $ -- $ 7,301 $ 41,122
Passbook accounts ................... -- -- -- -- 73,780
Certificate accounts ................ 74,642 -- -- -- 391,204
---------- ---------- ----------- ------------ -----------
Total customer deposits ............... 74,642 -- -- 7,301 506,106
Borrowings:
FHLB advances ........................ 30,000 -- -- -- 237,000
Other borrowings ..................... -- 460 315 -- 775
---------- ---------- ----------- ------------ -----------
Total borrowings .................... 30,000 460 315 -- 237,775
---------- ---------- ----------- ------------ -----------
Total interest-bearing liabilities . 104,642 460 315 7,301 743,881
---------- ---------- ----------- ------------ -----------
Total non-interest-bearing liabilities -- -- -- 11,368 11,368
Stockholders' equity .................. -- -- -- 69,111 69,111
---------- ---------- ----------- ------------ -----------
Total liabilities and stockholders'
equity ............................ $104,642 $ 460 $ 315 $ 87,780 $824,360
========== ========== =========== ============ ===========
Total interest-earning assets less
interest-bearing liabilities ("GAP") $ 39,341 $40,858 $37,000 $(64,851) $ --
========== ========== =========== ============ ===========
Ratio of GAP to total assets .......... 4.77% 4.96% 4.49% -7.87% --
========== ========== =========== ============ ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities ........ $(13,007) $27,851 $64,851 $ -- $ --
========== ========== =========== ============ ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities, as a
percentage of total assets .......... -1.58% 3.38% 7.87% -- --
========== ========== =========== ============ ===========
</TABLE>
- -----------------------------------------------------------------------------
(1) In preparing the table above, certain assumptions have been made with
regard to the repricing or maturity of certain assets and liabilities.
Assumptions as to prepayments on first and second mortgage loans and
mortgage-backed securities were obtained from prepayment rate tables that
provide assumptions correlating to recent actual repricing experienced in
the marketplace. Assumptions have also been made with regard to payments
on tax certificates based on historical experience. Money market, NOW and
passbook accounts are assumed to be rate sensitive in six months or less.
The rates paid in these accounts, however, are determined by management
based on market conditions and other factors and may reprice more slowly
than assumed. All other assets and liabilities have been repriced based
on the earlier of repricing or contractual maturity. The mortgage
prepayment rate tables, deposit decay rates and the historical
assumptions used regarding payments on tax certificates should not be
regarded as indicative of the actual repricing that may be experienced by
the Company.
6
<PAGE>
ASSET AND LIABILITY MANAGEMENT. The Company's net earnings depend
primarily on its net interest income, which is the difference between
interest income received on its interest-earning assets (principally loans,
short-term and long-term investments, and mortgage-backed securities) and
interest expense paid on its interest-bearing liabilities (principally
deposits and FHLB advances).
NET PORTFOLIO VALUE. The OTS adopted a final rule in August of 1993
incorporating an interest rate risk ("IRR") component into the risk-based
capital rules (see "Regulations"). The IRR component is a dollar amount that
is deducted from total capital for the purpose of calculating an
institution's risk-based capital requirement and is measured in terms of the
sensitivity of its net portfolio value ("NPV") to changes in interest rates.
An institution's NPV is the difference between incoming and outgoing
discounted cash flows from assets, liabilities, and off-balance sheet
contracts. An institution's IRR component is measured as the change in the
ratio of NPV to the present value of total assets as a result of a
hypothetical 200 basis point change in market interest rates. A resulting
decline in this ratio of more than 2% of the estimated market value of an
institution's assets will require the institution to deduct from its capital
50% of that excess decline. Implementation of the rule has been postponed
indefinitely.
The following table presents the Company's ratio of NPV to the present
value of total assets as of September 30, 1996, as calculated by the OTS,
based on information provided to the OTS by the Company.
<TABLE>
<CAPTION>
CHANGE IN INTEREST RATES RATIO OF NPV
IN BASIS POINTS PRESENT VALUE OF TO THE PRESENT VALUE OF
(RATE SHOCK) NPV TOTAL ASSETS TOTAL ASSETS CHANGE
- ------------------------- ---------- ----------------- ------------------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
+400 $19,142 $763,216 2.51% (5.92)%
+200 48,290 798,031 6.05 (2.38)
Static 69,597 825,359 8.43 --
-200 79,063 841,628 9.39 .96
-400 87,288 856,792 10.19 1.76
</TABLE>
Certain shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes
in market interest rates, while interest rates on other types may lag behind
changes in market rates. Additionally, certain assets, such as
adjustable-rate mortgage loans, have features that restrict changes in
interest rates on a short-term basis and over the life of the asset. Further,
in the event of a change in interest rates, prepayment and early withdrawal
levels would likely deviate significantly from those assumed in calculating
the tables. Finally, the ability of many borrowers to service their debt may
decrease in the event of an interest rate increase.
In addition, the previous table does not necessarily indicate the impact
of general interest rate movements on the Company's net interest income
because the repricing of certain categories of assets and liabilities is
subject to competitive and other pressures beyond the Company's control. As a
result, certain assets and liabialities indicated as maturing or otherwise
repricing within a stated period may in fact mature or reprice at different
times and at different volumes.
7
<PAGE>
YIELDS EARNED AND RATES PAID. The following table sets forth certain
information relating to the categories of the Company's interest-earning
assets and interest-bearing liabilities for the periods indicated. All yield
and rate information is calculated on an annualized basis. Yield and rate
information for a period is average information for the period calculated by
dividing the income or expense item for the period by the average balances
during the period of the appropriate balance sheet item. Net interest margin
is net interest income divided by average interest-earning assets.
Non-accrual loans are included in asset balances for the appropriate periods,
whereas recognition of interest on such loans is discontinued and any
remaining accrued interest receivable is reversed, in conformity with federal
regulations. The yields and net interest margins appearing in the following
table have been calculated on a pre-tax basis.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------
1996
---------------------------------------
AS OF
9/30/96 AVERAGE
YIELD/RATE BALANCE INTEREST
------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ........... 7.97% $540,313 $41,313
Mortgage-backed securities ..... 6.82 62,711 4,250
Short-term investments(1) ...... 5.30 41,240 2,359
Tax certificates ................ 8.96 34,831 3,018
Long-term investments and FHLB
stock, net .................... 6.98 17,352 1,192
--------- --------- ---------
Total interest-earning assets . 7.80 696,447 52,132
--------- --------- ---------
Interest-bearing liabilities:
NOW/Money Market ................ 2.45 33,148 775
Savings ......................... 4.40 59,965 2,627
Certificate of deposits ......... 5.52 313,521 17,389
FHLB advances and other
borrowings .................... 5.74 235,264 13,831
--------- --------- ---------
Total interest-bearing
liabilities .................. 5.31 641,898 34,622
--------- --------- ---------
Excess of interest-earning assets
over interest-bearing
liabilities .................... $ 54,549
========= ---------
Net interest income .............. $17,510
=========
Interest rate spread ............. 2.49%
=============
Net interest margin .............. 2.90%
=============
Ratio of interest-earning assets
to interest-bearing liabilities 108.50%
=========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1995 1994
----------------------------------- ----------------------------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
--------- ----------- ----------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ........... 7.65% $419,501 $30,171 7.19% $364,224 $23,513 6.46%
Mortgage-backed securities ..... 6.78 59,204 4,093 6.91 35,215 2,308 6.55
Short-term investments(1) ...... 5.72 23,844 1,491 6.25 21,101 803 3.81
Tax certificates ................ 8.66 37,377 3,087 8.26 39,228 3,207 8.17
Long-term investments and FHLB
stock, net .................... 6.87 7,930 577 7.29 10,041 590 5.89
------- ----------- ----------- --------- ----------- ----------- ---------
Total interest-earning assets . 7.49 547,856 39,419 7.20 469,809 30,421 6.48
------- ----------- ----------- --------- ----------- ----------- ---------
Interest-bearing liabilities:
NOW/Money Market ................ 2.34 41,196 875 2.12 51,860 1,102 2.12
Savings ......................... 4.38 55,950 2,420 4.33 46,925 1,716 3.66
Certificate of deposits ......... 5.55 276,564 14,554 5.26 221,074 8,526 3.86
FHLB advances and other
borrowings .................... 5.88 144,052 8,456 5.87 120,604 4,951 4.11
------- ----------- ----------- --------- ----------- ----------- ---------
Total interest-bearing
liabilities .................. 5.39 517,762 26,305 5.08 440,463 16,295 3.70
------- ----------- ----------- --------- ----------- ----------- ---------
Excess of interest-earning assets
over interest-bearing
liabilities .................... $ 30,094 $ 29,346
<PAGE>
1995 1994
----------------------------------- -----------------------------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
--------- ----------- ----------- --------- ----------- ----------- ---------
--------- =========== ----------- --------- ===========
Net interest income .............. $13,114 $14,126
--------- =========== ===========
Interest rate spread ............. 2.10% 2.12% 2.78%
========= ========= =========
Net interest margin .............. 2.51% 2.39% 3.01%
========= ========= =========
Ratio of interest-earning assets
to interest-bearing liabilities 105.81% 106.66%
========= =========== ===========
</TABLE>
- --------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
8
<PAGE>
RATE/VOLUME ANALYSIS. The following table presents, for the periods
indicated, the changes in interest income and the changes in interest expense
attributable to the changes in interest rates and the changes in the volume
of interest-earning assets and interest-bearing liabilities. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to: (i) changes in volume
(change in volume multiplied by prior year rate); (ii) changes in rate
(change in rate multiplied by prior year volume); (iii) changes in
rate/volume (change in rate multiplied by change in volume); and (iv) total
changes in rate and volume.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 V. 1995
--------------------------------------
INCREASE (DECREASE)
DUE TO
--------------------------------------
CHANGES CHANGES CHANGES
IN IN IN
VOLUME RATE RATE/VOLUME
---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income attributable to:
Loans .............................. $ 8,689 $1,905 $548
Mortgage-backed securities and
collateralized mortgage obligations 242 (81) (4)
Short-term investments(1) .......... 1,088 (127) (93)
Tax Certificates ................... (210) 152 (11)
Long-term investments and
FHLB stock ....................... 687 (33) (39)
--------- --------- -----------
Total interest-earning assets .... 10,496 1,816 401
--------- --------- -----------
Interest expense attributable to:
NOW/Money Market ................. (171) 88 (17)
Savings ............................ 173 31 3
Certificates of Deposit ............ 1,946 785 104
FHLB advances and other borrowings 5,354 13 8
--------- --------- -----------
Total interest-bearing liabilities 7,302 917 98
--------- --------- -----------
Increase (decrease) in net interest
income ........................... $ 3,194 $ 899 $303
========= ======== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
1995 V. 1994
------------------------------------------------------------------
INCREASE (DECREASE)
DUE TO
------------------------------------------------------------------
TOTAL CHANGES CHANGES CHANGES TOTAL
INCREASE IN IN IN INCREASE
(DECREASE) VOLUME RATE RATE/VOLUME (DECREASE)
----------- ---------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income attributable to:
Loans .............................. $11,142 $3,568 $ 2,683 $ 407 $ 6,658
Mortgage-backed securities and
collateralized mortgage obligations 157 1,572 126 87 1,785
Short-term investments(1) .......... 868 104 517 67 688
Tax Certificates ................... (69) (151) 33 (2) (120)
Long-term investments and
FHLB stock ....................... 615 (124) 140 (29) (13)
--------- --------- ----------- ---------- ---------
Total interest-earning assets .... 12,713 4,969 3,499 530 8,998
--------- --------- ----------- ---------- ---------
Interest expense attributable to:
NOW/Money Market ................. (100) (227) -- -- (227)
Savings ............................ 207 330 314 60 704
Certificates of Deposit ............ 2,835 2,140 3,108 780 6,028
FHLB advances and other borrowings 5,375 963 2,128 414 3,505
--------- --------- ----------- ---------- ---------
Total interest-bearing liabilities 8,317 3,206 5,550 1,254 10,010
--------- --------- ----------- ---------- ---------
Increase (decrease) in net interest
income ........................... $ 4,396 $1,763 $(2,051) $ (724) $(1,012)
========= ========= =========== ========== =========
</TABLE>
- ---------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
9
<PAGE>
LENDING ACTIVITIES
GENERAL. The Company focuses its lending activity on purchasing and
originating single-family residential mortgage loans. The Company's lending
strategy also includes expanding its commercial real estate, commercial
business, and real estate construction lending. The Company also currently
offers consumer loans, such as automobile loans and boat loans, primarily as
an accommodation to existing customers.
LOAN PORTFOLIO. The Company's loan portfolio primarily consists of
adjustable-rate mortgage loans and, to a lesser extent, fixed-rate mortgage
loans secured by one-to-four-family residential and commercial real estate.
As of September 30, 1996, the Company's loan portfolio totaled $646.4
million, of which $570.8 million or 88.3% consisted of one-to-four-family
residential first mortgages. At the present time, the Company's residential
real estate loans are primarily "conventional" loans, which means that these
loans are not insured by the Federal Housing Administration (the "FHA") or
guaranteed by the Veterans Administration (the "VA"). The Company is,
however, approved to originate FHA and VA loans. The average yield on the
Company's mortgage loans, of which 76.7% had adjustable rates and 23.3% had
fixed rates, was 7.65%, 7.19% and 6.46% for the fiscal years ended September
30, 1996, 1995 and 1994, respectively. The remainder of the Company's loan
portfolio consisted of $49.2 million of commercial real estate loans (7.6% of
total loans); five or more unit
9
<PAGE>
residential loans of $12.6 million (1.9% of total loans); $2.7 million of
second mortgage loans (0.4% of total loans); $2.6 million of consumer loans
(0.4% of total loans); $5.8 million of commercial business loans (0.9% of
total loans); and $2.7 million of other loans (0.4% of total loans).
At September 30, 1996, the Company's loan portfolio included $38.2 million
of residential mortgage loans to nonresident aliens. See "Mortgage Loan
Purchases and Originations" for additional information on the Company's loans
to non-resident aliens.
Set forth below is a table showing the Company's loan origination,
purchase and sale activity for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 1995 1994
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Total loans receivable, net, at beginning of period(1) ..... $ 453,350 $413,287 $310,441
Loans originated:
Residential real estate .................................... 65,954 54,438 72,108
Commercial, business and consumer .......................... 16,705 7,556 3,885
------------ ----------- -----------
Total loans originated .................................... 82,659 61,994 75,993
Loans purchased ............................................. 250,215 76,081 150,502
Loans sold .................................................. (4,356) (2,449) (21,867)
Principal payments and amortization of discounts and
premiums .................................................. (133,836) (93,787) (96,214)
Loans charged off ........................................... (493) (594) (1,582)
Transfers to real estate owned .............................. (1,154) (1,182) (3,986)
------------ ----------- -----------
Total loans receivable, net, at end of period(1) ........ $ 646,385 $453,350 $413,287
============ =========== ===========
</TABLE>
- ---------
(1) Includes loans held for sale.
10
<PAGE>
The following table sets forth certain information with respect to the
composition of the Company's loan portfolio, including mortgage loans held
for sale and mortgage-backed securities, as of the dates indicated. For
additional information as to the Company's mortgage-backed securities,
including carrying values and approximate market values of such securities,
see Notes 1 and 4 of the Notes to the Company's Consolidated Financial
Statements included in Appendix D hereto.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------------
1996 1995
----------------------- -----------
AMOUNT PERCENT AMOUNT
----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
First mortgage loans:
One-to-four-family residential $570,890 79.7% $433,122
Five-or-more-unit residential . 12,559 1.7 1,124
Commercial ..................... 49,318 6.9 10,223
Second mortgage loans ........... 2,748 0.4 2,412
---------- ---------- -----------
Total first and second mortgage
loans ........................... 635,515 88.7 446,881
---------- ---------- -----------
Consumer loans .................. 2,648 0.4 920
Commercial business loans ...... 5,822 0.8 3,632
---------- ---------- -----------
Total loans receivable ......... 643,985 89.9 451,433
---------- ---------- -----------
Deferred loan fees, premiums and
(discounts) ..................... 4,558 0.6 3,386
Allowance for loan losses ...... (2,158) (0.3) (1,469)
---------- ---------- -----------
Loans receivable, net(1) ........ 646,385 90.2 453,350
---------- ---------- -----------
Mortgage-backed securities, net 70,165 9.8 52,998
---------- ---------- -----------
Total loans receivable, net
and mortgage-backed
securities .................. $716,550 100.0% $506,348
========== ========== ===========
Weighted average yield on total
loan losses receivable, net, and
mortgage-backed securities ..... 7.86%
==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1994 1993 1992
----------------------- ----------------------- -----------------------
PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four-family residential 85.5% $395,028 84.0% $301,689 93.3% $224,707 89.7%
Five-or-more-unit residential . 0.2 2,164 0.5 705 0.2 856 0.3
Commercial ..................... 2.0 4,469 0.9 748 0.2 350 0.1
Second mortgage loans ........... 0.5 2,616 0.6 623 0.2 631 0.3
-------- ---------- -------- ---------- ---------- -------- --------
Total first and second mortgage
loans ........................... 88.2 404,277 86.0 303,765 93.9 226,544 90.4
-------- ---------- -------- ---------- ---------- -------- --------
Consumer loans .................. 0.2 2,336 0.5 2,786 0.9 2,664 1.1
Commercial business loans ...... 0.7 4,732 1.0 3,665 1.1 2,143 0.8
-------- ---------- -------- ---------- ---------- -------- --------
Total loans receivable ......... 89.1 411,345 87.5 310,216 95.9 231,351 92.3
-------- ---------- -------- ---------- ---------- -------- --------
Deferred loan fees, premiums and
(discounts) ..................... 0.7 2,783 0.6 1,409 0.4 (437) (0.2)
Allowance for loan losses ...... (0.3) (841) (0.2) (1,184) (0.4) (265) (0.1)
-------- ---------- -------- ---------- ---------- -------- --------
Loans receivable, net(1) ........ 89.5 413,287 87.9 310,441 95.9 230,649 92.0
-------- ---------- -------- ---------- ---------- -------- --------
Mortgage-backed securities, net 10.5 57,155 12.1 13,156 4.1 19,957 8.0
-------- ---------- -------- ---------- ---------- -------- --------
Total loans receivable, net
and mortgage-backed
securities .................. 100.0% $470,442 100.0% $323,597 100.0% $250,606 100.0%
======== ========== ======== ========== ========== ======== ========
Weighted average yield on total
loan losses receivable, net, and
mortgage-backed securities ..... 7.53% 6.60% 6.37% 7.90%
======== ======== ========== ========
</TABLE>
- ---------
(1) Includes loans held for sale.
The following table sets forth, as of September 30, 1996 the amount of
11
<PAGE>
loans, mortgage loans held for sale and mortgage-backed securities held in
the Company's portfolio by category and expected principal repayments by
year. As of September 30, 1996, the total amount of loans with contractual
maturities greater than one year with fixed and adjustable interest rates
totaled approximately $119.0 million and $368.3 million, respectively.
<TABLE>
<CAPTION>
OUTSTANDING ON
SEPTEMBER 30,
1996 1997 1998
--------------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
First Mortgage Loans:
One-to-four-family residential $570,890 $133,259 $ 96,871
Five-or-more-unit residential . 12,559 3,763 2,973
Commercial ..................... 49,318 13,415 10,668
Second Mortgage loans ........... 2,748 792 736
--------------- ----------- -----------
Total first and second mortgage
loans ........................ 635,515 151,229 111,248
Consumer ....................... 2,648 1,552 1,096
Commercial business loans ..... 5,822 3,885 1,937
--------------- ----------- -----------
Total loans receivable ......... 643,985 156,666 114,281
Mortgage-backed securities ..... 70,002 17,099 14,128
--------------- ----------- -----------
Total ......................... $713,987 $173,765 $128,409
=============== =========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
2001- 2003- 2006 AND
1999 2000 2002 2006 THEREAFTER
---------- ---------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
First Mortgage Loans:
One-to-four-family residential $72,613 $55,069 $42,273 $109,147 $61,658
Five-or-more-unit residential . 2,331 1,810 1,390 292 --
Commercial ..................... 8,431 6,614 10,190 -- --
Second Mortgage loans ........... 686 534 -- -- --
--------- ---------- ---------- ---------- -----------
Total first and second mortgage
loans ........................ 84,061 64,027 53,853 109,439 61,658
Consumer ....................... -- -- -- -- --
Commercial business loans ..... -- -- -- -- --
--------- ---------- ---------- ---------- -----------
Total loans receivable ......... 84,061 64,027 53,853 109,439 61,658
Mortgage-backed securities ..... 11,738 6,943 3,951 10,718 5,425
--------- ---------- ---------- ---------- -----------
Total ......................... $95,799 $70,970 $57,804 $120,157 $67,083
========= ========== ========== ========== ===========
</TABLE>
Applicable regulations permit the Company to engage in various categories
of secured and unsecured commercial and consumer lending, in addition to
residential real estate financing, subject to limitations on the percentage
of total assets attributable to certain categories of loans. An additional
11
<PAGE>
limitation imposed by regulation requires that certain types of loans only be
made in aggregate amounts that do not exceed specified percentages of the
institution's capital. As of September 30, 1996, 19.5% of the Company's gross
loans receivable (15.3% of total assets) were secured by properties located
in California and 40.8% of gross loans receivable (31.9% of total assets)
were secured by properties located in Florida. Because of this concentration,
regional economic circumstances in those states could affect the level of the
Company's non-performing loans. The following table sets forth, as of
September 30, 1996 the distribution of the amount of the Company's loans
(including mortgage loans held for sale) by state.
<TABLE>
<CAPTION>
OUTSTANDING ON
STATE SEPTEMBER 30, 1996
- ---------------------------- -------------------
(IN THOUSANDS)
<S> <C>
Florida(1) ................. $262,747
California ................. 125,802
Ohio ....................... 27,808
New Jersey ................. 20,411
Maryland ................... 19,346
Colorado ................... 19,099
Virginia ................... 19,038
New York ................... 18,363
Illinois ................... 16,261
Arizona .................... 12,275
Michigan ................... 11,179
Minnesota .................. 10,996
Connecticut ................ 10,661
Massachusetts .............. 10,274
Texas ...................... 6,884
Georgia .................... 5,679
Washington ................. 5,492
Pennsylvania ............... 4,475
Nevada ..................... 2,762
Utah ....................... 1,915
District of Columbia ....... 1,839
Missouri ................... 1,816
Tennessee .................. 1,704
South Carolina ............. 1,664
North Carolina ............. 1,485
Oregon ..................... 1,458
New Hampshire .............. 1,357
Oklahoma ................... 1,331
Kentucky ................... 1,280
Arkansas ................... 1,250
Alabama .................... 1,154
Indiana .................... 1,036
Kansas ..................... 1,036
Wisconsin .................. 1,010
Maine ...................... 858
Louisana ................... 831
Rhode Island ............... 792
Hawaii ..................... 731
Idaho ...................... 641
Others(2) .................. 775
Not secured by real estate 8,470
-------------------
Total ..................... $643,985
===================
</TABLE>
- ---------
(1) Does not include $40.1 million of tax certificates representing liens
secured by properties in Florida.
(2) Less than $500,000 in any one state.
12
<PAGE>
RESIDENTIAL MORTGAGE LOAN PURCHASES AND ORIGINATIONS. The Company's
lending primarily involves purchasing in the secondary mortgage market and
originating loans secured by first mortgages on real estate improved with
single-family dwellings. The Company services loans in its portfolio that it
originates. The Company attempts to purchase loans servicing-released, when
available, although at September 30, 1996, the Company's loan portfolio
included $320.0 million of loans that were serviced by others. As of
September 30, 1996, the Company was servicing a total of approximately $318.8
million in mortgage loans, including $3.8 of loans serviced for others.
The Company's first mortgage loans purchased or originated are generally
repayable over 15 or 30 years. Additionally, the Company offers second
mortgage residential loans with maturities ranging from five to 15 years.
Residential loans typically remain outstanding for shorter periods than their
contractual maturities because borrowers prepay the loans in full upon sale
of the mortgaged property or upon refinancing of the original loan. The
Company currently originates and purchases fixed-rate and adjustable-rate
first mortgage loans secured by owner-occupied residences with 15-year term
or 30-year term amortization, and second mortgage loans with 15-year term
amortization or 30-year term amortization with a balloon payment after five
years.
The Company's adjustable-rate mortgage loans ("ARMs") generally have
interest rates that adjust monthly, semi-annually or annually at a margin
over the weekly average yield on U.S. Treasury securities adjusted to a
constant maturity of one year published by the Federal Reserve or the FHLB
11th District cost-of-funds index ("COFI") published by the FHLB of San
Francisco. The maximum interest rate adjustment of the Company's ARMs is
generally 1% semi-annually and 6% over the life of the loan, above or below
the initial rate on the loan for semi-annual adjustables, or 2% annually and
6% over the life of the loan, above or below the initial rate on the loan for
annual adjustables. The Company's COFI loans with monthly adjustable interest
rates also provide for a 7.5% cap on monthly payment increases from one
annual payment adjustment to the next, except at the end of five years, when
monthly payments may be adjusted by more than the payment increase cap in
order to provide for the complete amortization by maturity. Because of the
payment cap and the different times at which interest rate adjustments and
payment adjustments are made on these loans, monthly payments on these loans
may not be sufficient to pay the interest accruing on the loan. The amount of
any shortage is added to the principal balance of the loan to be repaid
through future monthly payments to the Company ("negative amortization"). If
the loan-to-value ratio is high, negative amortization could significantly
increase the risk associated with the loan; the Company's management,
however, believes that this risk is mitigated due to the relative stability
of the index used and to conservative underwriting policies.
The Company sometimes purchases or originates loans with "teaser" rates
that are below market rates during an initial period after the loan is x
originated. For loans with teaser rates, the borrower's ability to repay is
determined upon fully indexed rates.
Applicable regulations permit the Company to lend up to 100% of the
appraised value of the real property securing a loan ("loan-to-value ratio").
The Company, however, generally does not make or acquire loans with
loan-to-value ratios that exceed 80% at origination. When terms are
favorable, the Company will purchase or originate single-family mortgage
loans with loan-to value ratios between 80% and 95%. In most of these cases,
the Company will, as a matter of policy, require the borrower to obtain
private mortgage insurance that insures that portion of the loan exceeding
the 80% loan-to-value ratio, thereby reducing the risk to no more than 80% of
appraised value.
The Company generally applies the same underwriting criteria to
residential mortgage loans purchased or originated. In its loan purchases,
the Company generally reserves the right to reject particular loans from a
loan package being purchased and does reject loans in a package that do not
meet its underwriting criteria. In determining whether to purchase or
originate a loan, the Company assesses both the borrower's ability to repay
the loan and the adequacy of the proposed collateral. On originations, the
Company obtains appraisals of the property securing the loan. On purchases,
the Company reviews the appraisal obtained by the loan seller or originator
and arranges for an updated
13
<PAGE>
review appraisal before purchasing the loan. On purchases and originations,
the Company reviews information concerning the income, financial condition,
employment and credit history of the applicant. On purchases, the Company
generally obtains a credit report on the borrower separate from that provided
by the loan seller.
The Company has adopted written, non-discriminatory underwriting standards
for use in the underwriting and review of every loan considered for
origination or purchase. These underwriting standards are reviewed and
approved annually by the Company's Board of Directors. The Company's
underwriting standards for residential mortgage loans generally conform to
(except as to principal balance and with regard to certain loans discussed
below, as to the borrower's citizenship and related factors) standards
established by Fannie Mae ("FNMA") and the Federal Home Loan Mortgage
Corporation (the "FHLMC"). A loan application is obtained or reviewed by the
Company's underwriters to determine the borrower's ability to repay, and
confirmation of the more significant information is obtained through the use
of credit reports, financial statements, and employment and other
verifications.
The Company generally uses appraisals to determine the value of collateral
for all loans it originates. When originating a real estate mortgage loan,
the Company obtains a new appraisal of the property from an independent third
party to determine the adequacy of the collateral, and such appraisal is
reviewed by one of the underwriters. With respect to a substantial percentage
of loans purchased, the collateral value is determined by reference to a
review appraisal. Otherwise, the collateral value is determined by reference
to the documentation contained in the original file. Borrowers are required
to obtain casualty insurance and, if applicable, flood insurance in amounts
at least equal to the outstanding loan balance or the maximum amount allowed
by law.
The Company also requires that a survey be conducted and title insurance
be obtained, insuring the priority of its mortgage lien. Pursuant to its
underwriting standards, the Company generally requires private mortgage
insurance policies on newly originated mortgage loans with loan-to-value
ratios greater than 80%. All loans are reviewed by the Company's underwriters
to ensure that its guidelines are met or that waivers are obtained in limited
situations where offsetting factors exist.
With regard to loan purchases, a legal review of every loan file is
conducted to determine the adequacy of the legal documentation. The Company
receives various representations and warranties from the sellers of the loans
regarding the quality and characteristics of the loans.
Approximately $38.2 million, or 5.9%, of the Company's gross loans
receivable are first mortgage loans to non-resident aliens secured by
single-family residences located in Florida. These loans are purchased and
originated by the Company in a manner similar to that described above for
other residential loans. Loans to non-resident aliens generally afford the
Company an opportunity to receive rates of interest higher than those
available from other single-family residential loans. Nevertheless, such
loans generally involve a greater degree of risk than other single-family
residential mortgage loans. The ability to obtain access to the borrower is
more limited for non-resident aliens, as is the ability to attach or verify
assets located in foreign countries. The Company has attempted to minimize
these risks through its underwriting standards for such loans (including
generally lower loan-to-value ratios and qualification based on verifiable
assets located in the United States).
COMMERCIAL REAL ESTATE LENDING. The Company's commercial real estate
lending division originates or purchases multi-family and commercial real
estate loans from $250,000 to $4.0 million. The Company's strategy is to
promote commercial lending together with private banking (see "Private
Banking" below), as both areas seek to develop long-term relationships with
select businesses, real estate borrowers, and professionals. At September 30,
1996, the Company had $49.3 million of commercial real estate loans,
representing a total of 7.7% of the Company's loan portfolio before net
items. The Company's commercial real estate loan portfolio includes loans
secured by apartment buildings, office buildings, warehouses, retail stores
and other properties, which are located in the Company's primary market area.
Commercial real estate loans generally are originated in amounts up
14
<PAGE>
to 75% of the appraised value of the property securing the loan. In
determining whether to originate or purchase multi-family or commercial real
estate loans, the Company also considers such factors as the financial
condition of the borrower and the debt service coverage of the property.
Commercial real estate loans are made at both fixed and adjustable interest
rates for terms of up to 10 years.
Appraisals on properties securing commercial real estate loans originated
by the Company are performed at the time the loan is made by an independent
appraiser. In addition, the Company's underwriting procedures generally
require verification of the borrower's credit history, income and financial
statements, banking relationships, references and income projections for the
property. Personal guarantees are generally obtained for the Company's
commercial real estate loans.
Management's expansion into this area reflects its business strategy to
obtain seasoned loan product divested by the super-regional financial
companies in South Florida and its belief that commercial real estate loans
are generally of short-to moderate-term with higher-yielding variable
interest rates as compared to residential loans. In December 1995, the
Company purchased approximately $32.0 million of commercial real estate loans
in Florida from another financial institution. The loan package comprised 23
loans with principal balances ranging from $376,000 to $4.7 million.
Management believes that with the recent acquisition of several Florida-based
financial institutions by out-of-state regional banks, the Company will be
able to expand its commercial real estate business.
Commercial real estate lending affords the Company an opportunity to
receive interest at rates higher than those generally available from
one-to-four-family residential lending. Nevertheless, loans secured by such
properties are generally larger and involve a greater degree of risk than
one-to-four-family residential mortgage loans. Because payments on loans
secured by commercial real estate properties are often dependent on the
successful operation or management of the properties, repayment of such loans
may be subject to adverse conditions in the real estate market or the
economy. If the cash flow from the project is reduced (for example, if leases
are not obtained or renewed), the borrower's ability to repay the loan may be
impaired. In addition, adjustable-rate commercial real estate loans are
subject to increased risk of delinquency or default as interest rates
increase. The Company has attempted to minimize these risks through its
underwriting standards.
REAL ESTATE CONSTRUCTION LENDING. The Company has commenced a program to
make real estate construction loans to individuals for the construction of
their residences, as well as to builders and real estate developers for the
construction of one-to-four-family residences and commercial and multi-family
real estate, although at September 30, 1996, the Company had no construction
loans.
Construction loans to individuals for their residences may be, but would
not be required to be, structured to be converted to permanent loans with the
Company at the end of the construction phase. Such residential construction
loans would generally be underwritten pursuant to the same guidelines used
for originating permanent residential loans. The Company's construction loans
would typically have terms of up to nine months and have rates higher than
permanent one-to-four-family loans offered by the Company. During the
construction phase, the borrower would pay interest only. Generally, the
maximum loan-to-value ratio of owner-occupied, single-family construction
loans would be 75%.
The Company may from time to time make construction loans on commercial
real estate projects secured by apartments, shopping centers, industrial
properties, small office buildings, medical facilities or other property.
Such loans would generally be structured to be converted to permanent loans
at the end of the construction phase, which generally runs from 12 to 18
months. These construction loans would have rates and terms that match any
permanent commercial real estate loan then offered by the Company, except
that during the construction phase, the borrower would pay interest only.
These loans would generally provide for the payment of interest and loan fees
from loan proceeds.
Because of the uncertainties inherent in estimating construction costs and
the market for the project upon completion, it is relatively difficult to
evaluate accurately the total loan funds that would be required to complete a
project, the related loan-to-value ratios, and the likelihood of ultimate
15
<PAGE>
success of a project. Construction loans to borrowers other than
owner-occupants also involve many of the same risks discussed above regarding
commercial real estate loans and tend to be more sensitive to general
economic conditions than many other types of loans. Also, the funding of loan
fees and interest during the construction phase makes the monitoring of the
progress of the project particularly important, as customary early warning
signals of project difficulties may not be present.
COMMERCIAL BUSINESS LENDING. Commercial business loans totaled $5.8
million as of September 30, 1996, representing .9% of total loans. In its
commercial business loan underwriting, the Company evaluates the value of the
collateral securing the loan and assesses the borrower's creditworthiness and
ability to repay. While commercial business loans generally are made for
shorter terms and at higher yields than one-to-four-family residential loans,
such loans generally involve a higher level of risk than one-to-four-family
residential loans because the risk of borrower default is greater and the
collateral may be more difficult to liquidate and more likely to decline in
value.
LOAN PORTFOLIO QUALITY. Federal regulations require a savings institution
to review its assets on a regular basis and, if appropriate, to classify
assets as "substandard," "doubtful", or "loss" depending on the likelihood of
loss. General allowances for loan losses are required to be established for
assets classified as substandard or doubtful. For assets classified as loss,
the institution must either establish specific allowances equal to the amount
classified as a loss or charge off such amount. Assets that do not require
classification as substandard but that possesses credit deficiencies or
potential weaknesses deserving management's close attention are required to
be designated as "special mention." The deputy director of the appropriate
OTS regional office may approve, disapprove or modify any classifications of
assets and any allowance for loan losses established.
Additionally, under standard banking practices, an institution's asset
quality is also measured by the level of non-performing loans in the
institution's portfolio. Non-performing loans consist of (i) non-accrual
loans; (ii) loans that are more than 90 days contractually past due as to
interest or principal but that are well-secured and in the process of
collection or renewal in the normal course of business; and (iii) loans that
have been renegotiated to provide a deferral of interest or principal because
of a deterioration in the financial condition of the borrower. The Company
provides delinquency notices to borrowers when loans are 30 or more days past
due. The Company places conventional mortgage loans on non-accrual status
when more than 90 days past due. When a loan is placed on non-accrual status,
the Company reverses all accrued and uncollected interest. The Company also
begins appropriate legal procedures to obtain repayment of the loan or
otherwise satisfy the obligation.
As of September 30, 1996, the Company had $8.3 million in substandard
assets of which $7.8 million are included in non-performing assets.
Substandard assets consisted of the following:
AS OF
SEPTEMBER 30, 1996
-------------------
(IN THOUSANDS)
One-to-four-family residential loans ........ $6,409
Consumer and business loans ................ 15
REO ......................................... 632
Tax certificates ............................ 1,264
------
Total Substandard Assets ................... $8,320
======
In addition, $259,000 of tax certificates were classified as loss as of
September 30, 1996 and have been specifically reserved for.
16
<PAGE>
The following table sets forth information regarding the Company's
allowance for loan losses for the periods indicated:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- ---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses balance (at beginning of period $1,469 $ 841 $ 1,184 $ 265 $195
Provisions (credit) for loan losses ...................... (120) 1,221 1,187 1,052 70
Allowance from Bank of Florida ........................... 183 -- -- -- --
Allocation from discounts on loans purchased ............. -- -- -- 90 --
Loans charged off:
One-to four-family residential loans ..................... (493) (535) (1,582) (223) --
Commercial and other ..................................... -- (59) -- -- --
-------- --------- ---------- ---------- --------
Total (493) (594) (1,582) (223) --
-------- --------- ---------- ---------- --------
Recoveries:
One-to four-family residential loans ..................... 1,119 1 52 -- --
-------- --------- ---------- ---------- --------
Allowance for loan losses, balance (at end of period) ... $2,158 $1,469 $ 841 $1,184 $265
======== ========= ========== ========== ========
</TABLE>
Historically, recoveries of charged off loans have been minimal since
charged off loans have been primarily one-to-four family residential loans
and typically the only substantial asset available to the Company is the real
estate securing the loan which is acquired through foreclosure and sold.
However, in its fiscal year ended September 30, 1996, the Company received a
recovery of approximately $1.0 million as settlement of litigation the
Company initiated against a seller of residential mortgage loans. The Company
is not aware of any significant liability related to REO or loans that may be
foreclosed.
The following table sets forth the allocation of general allowance for
loan losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ ---------------------------
% OF LOANS % OF LOANS % OF LOANS
IN EACH IN EACH IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to: ..................
One-to-four-family residential
mortgages ....................... $1,381 88.6% $1,207 95.9% $766 96.0%
Commercial and other loans ..... 739 11.4% 168 4.1% 75 4.0%
Unallocated ..................... 38 N/A 94 N/A -- N/A
-------- --------- ------- -------- -------- ------
Total allowances for loan losses $2,158 100.0% $1,469 100.0% $841 100.0%
======== ========= ======= ======== ======== ======
</TABLE>
For additional information regarding the Company's allowance for loan
losses and the credit quality of the Company's assets, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Credit Quality" in Appendix C hereto.
PRIVATE BANKING
The Company's Private Banking Division focuses on the diverse lending and
deposit needs of professionals and executives in South Florida. Private
banking is customer-oriented, not transaction-oriented, with an emphasis on
building a total banking relationship. The Private Banking target market
includes the upscale markets of metropolitan Miami with emphasis on the Coral
Gables and southwest Dade County areas.
Currently, the Company's commercial business loans and
non-interest-bearing demand deposit accounts are originated primarily by the
Private Banking Division. The Company is developing its
17
<PAGE>
capability to deliver loan services to businesses in communities served by
its branch offices. The Private Banking Division is also responsible for a
portion of the residential real estate loans originated by the Company,
particularly the loans with higher balances, which usually generate higher
fees. The Company's consumer lending business is also generated by this
division.
MORTGAGE BANKING
The Company has established a correspondent mortgage banking operation for
the origination of single-family residential mortgage loans in its market
area. This correspondent operation consists of a network of mortgage brokers
and lenders in South Florida that generate mortgage loans for the Company.
Originations in the correspondent program, together with branch lending,
reached $54.0 million in fiscal 1996.
INVESTMENTS
The Company maintains an investment portfolio consisting primarily of
federal agency securities, FHLB overnight deposits, securities purchased
under agreements to resell and tax certificates. Federal regulations limit
the instruments in which the Company may invest its funds. The Company's
current investment policy permits purchases only of investments (with the
exception of tax certificates) rated in one of the three highest grades by a
nationally recognized rating agency and does not permit purchases of
securities of non-investment grade quality (such as so-called "junk bonds").
The Company's portfolio also includes tax certificates issued by various
counties in the State of Florida. Tax certificates represent tax obligations
that are auctioned by county taxing authorities on an annual basis in order
to collect delinquent real estate taxes. Although tax certificates have no
stated maturity, the certificate holder has the right to collect the
delinquent tax amount, plus interest, and can file for a tax deed if the
delinquent tax amount is unpaid at the end of two years. Tax certificates
have a claim superior to most other liens. If the holder does not file for
deed within seven years, the certificate becomes null and void. The Company
has adopted detailed policies with regard to its investment in tax
certificates, which specify due diligence procedures, purchasing procedures
(including parameters for the location, type and size of tax certificates
acceptable for purchase) and procedures for managing the portfolio after
acquisition.
The following table sets forth information regarding the Company's
investments as of the dates indicated. Amounts shown are historical amortized
cost. For additional information regarding the Company's investment
securities, including the carrying values and approximate market values of
such investment securities, see Notes 1 and 4 of the Notes to the Company's
Consolidated Financial Statements included in Appendix D hereto.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities purchased under agreements to
resell ........................................ $ -- $ -- $ 700
Federal funds sold ............................ 400 400 375
Federal agency securities ..................... 4,985 4,675 2,003
FHLB overnight deposits ....................... 28,253 31,813 11,212
Tax certificates .............................. 40,088 39,544 42,612
Other ......................................... 1,711 11 11
--------- --------- ---------
Total investment securities .................. $75,437 $76,443 $56,913
========= ========= =========
Weighted average yield ....................... 7.35% 7.88% 7.61%
========= ========= =========
</TABLE>
18
<PAGE>
The following table sets forth information regarding the maturities of the
Company's investments as of September 30, 1996. Amounts shown are book
values.
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1996
------------------------------------
WITHIN 1 THROUGH OVER
1 YEAR 5 YEARS 5 YEARS
---------- ------------ -----------
<S> <C> <C> <C>
Federal agency securities $ 2,004 $2,981 $ --
FHLB overnight deposits .. 28,253 -- --
Tax certificates(1) ....... 40,088 -- --
Federal funds sold ........ 400 -- --
Other ..................... 910 765 36
--------- --------- -------
Total .................... $71,655 $3,746 $ 36
========= ========= =======
Weighted average yield .. 7.36% 7.15% 6.76%
========= ========= =======
</TABLE>
- ----------
(1) Maturities are based on historical experience.
OTHER INTEREST-EARNINGS ASSETS
Included in other interest-earning assets is stock of the FHLB of Atlanta,
which totaled $12.2 million, $12.3 million and $7.9 million as of September
30, 1996, 1995 and 1994, respectively. The Company also had a $25,000 equity
investment in the Community Reinvestment Group as of September 30, 1996 and
1995. Carrying value, which is par, is estimated to be the fair market value
of these assets.
SOURCES OF FUNDS
The Company's primary sources of funds for its investment and lending
activities are customer deposits, loan repayments, funds from operations, the
Company's capital and FHLB advances.
DEPOSITS. The Company offers a full variety of deposit accounts ranging
from passbook accounts to certificates of deposit with maturities of up to
five years. The Company also offers transaction accounts, which include
commercial checking accounts, negotiable order of withdrawal ("NOW")
accounts, super NOW accounts and money market deposit accounts. The rates
paid on deposits are established periodically by management based on the
Company's need for funds and the rates being offered by the Company's
competitors with the goal of remaining competitive without offering the
highest rates in the market area. The Company has not utilized brokered
deposits.
The Company has placed increasing reliance on passbook accounts, money
market accounts, certificates of deposit and other savings alternatives that
are more responsive to market conditions than long-term, fixed-rate
certificates. While market-sensitive savings vehicles permit the Company to
reduce its cost of funds during periods of declining interest rates, such
savings alternatives also increase the Company's vulnerability to periods of
high interest rates. There are no regulatory interest rate ceilings on the
Company's accounts.
19
<PAGE>
The following table sets forth information concerning the Company's
deposits by account type and the weighted average nominal rates at which
interest is paid thereon as of the dates indicated:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
--------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- -----------------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
----------- -------- ----------- -------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts:
Regular ............................... $ 73,741 4.44% $ 50,327 3.04% $ 44,533 3.04%
Holiday club .......................... 39 2.00 46 2.00 50 1.75
----------- ---------- -------------
Total passbook accounts .............. 73,780 50,373 44,583
----------- ---------- -------------
Checking:
Insured money market .................. 16,556 3.87 7,733 2.68 18,006 1.51
NOW and non-interest-bearing accounts 24,566 1.49 18,157 2.17 29,805 1.67
----------- -------- ---------- ------------
Total transaction accounts ........... 41,122 25,890 47,811
----------- ---------- ------------
Total passbook and checking accounts 114,902 76,263 92,394
----------- ---------- ------------
Certificates:
30-89-day certificates of deposit .... 91 2.73 166 3.01
3-5-month certificates of deposit .... 7,114 4.67 1,465 4.78 4,552 3.95
6-8-month certificates of deposit .... 159,850 5.40 93,684 5.65 87,071 4.23
9-11-month certificates of deposit ... 20,279 5.45 5,654 5.55 1,302 3.53
12-17-month certificates of deposit .. 124,637 5.49 79,637 5.90 71,115 4.44
18-23-month certificates of deposit .. 12,375 5.79 12,382 5.37 33,282 4.31
24-29-month certificates of deposit .. 42,875 5.94 18,593 5.57 24,453 4.36
30-35-month certificates of deposit .. 1,774 5.57 2,868 4.99 4,867 4.66
36-60-month certificates of deposit .. 22,300 5.93 19,437 5.81 28,593 5.46
----------- -------- ---------- ----------- --------
Total certificates ................... 391,204 233,811 255,401
----------- ---------- -----------
Total ............................... $506,106 $310,074 $347,795
=========== ========== ===========
Weighted average rate .............. 5.11% 4.99% 3.88%
======== ======== ========
</TABLE>
The following table sets forth information by various rate categories
regarding the amounts of the Company's certificate accounts (under $100,000)
as of September 30, 1996 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1996
-------------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1996 1 YEAR 2 YEARS 3 YEARS 3 YEARS
------------------- ----------- ---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificate accounts:
3.00% to 3.99% ................... $ 93 $ 93 $ -- $ -- $ --
4.00% to 4.99% ................... 6,700 6,182 366 152 --
5.00% to 5.99% ................... 309,070 257,517 43,406 3,965 4,182
6.00% to 6.99% ................... 21,555 8,819 6,762 2,405 3,569
7.00% to 7.99% ................... 862 368 -- 48 446
8.00% to 8.99% ................... -- -- -- -- --
------------------- ----------- ---------- ---------- ------------
Total certificate accounts (under
$100,000) ....................... $338,280 $272,979 $50,534 $6,570 $8,197
=================== =========== ========== ========== ============
</TABLE>
20
<PAGE>
The following table sets forth information by various rate categories
regarding the amounts of the Company's jumbo ($100,000 and over) certificate
accounts as of September 30, 1996 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1996
------------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1996 1 YEAR 2 YEARS 3 YEARS 3 YEARS
------------------- ---------- ---------- ---------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Jumbo certificate accounts:
2.00% to 2.99% .................. $ 100 $ 100 $ 135 $ -- $ --
4.00% to 4.99% .................. 1,733 1,598 6,308 331 219
5.00% to 5.99% .................. 46,969 40,111 1,076 631 540
6.00% to 6.99% .................. 4,021 1,774 -- -- --
7.00% to 7.99% .................. 101 -- -- -- 101
------------------- ---------- ---------- ---------- ------------
Total jumbo certificate accounts $52,924 $43,583 $7,519 $962 $860
=================== ========== ========== ========== ============
</TABLE>
Of the Company's total deposits at September 30, 1996, 1995 and 1994,
10.5%, 8.6% and 10.3%, respectively, were deposits of $100,000 or more issued
to the public. Although jumbo certificates of deposit are generally more rate
sensitive than smaller size deposits, management believes that the Company
will retain these deposits.
In 1995, the Company sold its three branches on the west coast of Florida,
including their deposits which totaled $130 million at the date of sale. The
sale was part of a shift in growth strategy to focus on South Florida and
take advantage of consolidation trends in banking there. Also, as part of
this strategy, the Company opened branches in Boca Raton, Florida in December
1995, Delray Beach, Florida in June 1996 and West Palm Beach, Florida in
September 1996. On March 29, 1996, the Company acquired the Bank of Florida
whose single branch with total deposits of $27.3 million was consolidated
with the Company's South Miami branch. On November 15, 1996, as discussed
above, the Company acquired Suncoast which had six branches.
BORROWINGS. When the Company's primary sources of funds are not sufficient
to meet deposit outflows, loan originations and purchases and other cash
requirements, the Company may borrow funds from the FHLB of Atlanta and from
other sources. The FHLB system acts as an additional source of funding for
savings institutions. In addition, the Company uses subordinated notes and
agreements to repurchase in order to increase funds.
FHLB borrowings, known as "advances," are made on a secured basis, and the
terms and rates charged for FHLB advances vary in response to general
economic conditions. As a shareholder of the FHLB of Atlanta, the Bank is
authorized to apply for advances from this bank. A wide variety of borrowing
plans are offered by the FHLB of Atlanta, each with its own maturity and
interest rate. The FHLB of Atlanta will consider various factors, including
an institution's regulatory capital position, net income, quality and
composition of assets, lending policies and practices, and level of current
borrowings from all sources, in determining the amount of credit to extend to
an institution. In addition, an institution that fails to meet the qualified
thrift lender test may have restrictions imposed on its ability to obtain
FHLB advances. BankUnited currently meets the qualified thrift lender test.
See "Regulation--Savings Institution Regulation--Qualified Thrift Lender
Test."
21
<PAGE>
The following tables set forth information as to the Company's borrowings
as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PERIOD END BALANCES:
FHLB advances(1) ................... $237,000 5.73% $241,000 5.92% $136,000 5.17%
Subordinated notes ................. 775 9.00 775 9.00 775 9.00
Securities sold under agreements to
repurchase (2) ..................... -- -- -- -- 21,400 4.49
----------- ----------- ----------- ---------- ----------- --------
Total borrowings .................. $237,775 5.74% $241,775 5.93% $158,175 5.10%
========== ========= =========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
FHLB advances(1) ................... $234,489 5.77% $136,706 5.86% $116,493 4.03%
Subordinated notes ................. 775 9.00 775 9.00 775 9.00
Securities sold under agreements to
repurchase (2) ................... -- -- 6,571 5.59 3,224 5.68
----------- --------- ----------- ------- --------- -----
Total borrowings .................. $235,264 5.78% $144,052 5.86% $120,492 4.11%
=========== ========= =========== ======= ========= ====
</TABLE>
- ----------
(1) The maximum amount of FHLB advances outstanding during the years ended
September 30, 1996, 1995 and 1994 was $244.0 million, $246.0 million and
$149.0 million, respectively.
(2) The maximum amount of securities sold under agreements to repurchase at
any month-end during the years ended September 30, 1995 and 1994 was
$33.6 million and $21.4 million.
ACTIVITIES OF SUBSIDIARY.
T&D Properties of South Florida, Inc., a Florida corporation ("T&D"), is a
wholly owned operating subsidiary of the Bank, organized in 1991 to invest in
tax certificates. T&D also holds title to, maintains, manages and supervises
the disposition of real property acquired through tax deeds.
Bay Holdings, Inc., a Florida corporation ("Bay Holding") is a wholly
owned operating subsidiary of the Bank that holds title to, maintains,
manages and supervises the disposition of real property acquired through
foreclosure. Bay Holdings was established in 1994 for the purpose of
insulating the Bank from risk of liability concerning maintenance, management
and disposition of real property.
BU Ventures, Inc., a Florida corporation ("BU Ventures") is a wholly owned
operating subsidiary of the Company organized in 1994 to assume from T&D the
responsibility for the maintenance, management and disposition of real
property acquired through tax deeds.
EMPLOYEES
At September 30, 1996, the Company had 126 full-time equivalent employees.
The Company's employees are not represented by a collective bargaining group,
and the Company considers its relations with its employees to be excellent.
The Company provides employee benefits customary in the
22
<PAGE>
savings industry, which include group medical and life insurance, a 401(k)
savings plan and paid vacations. The Company also provides stock awards and a
profit sharing plan for certain officers, directors and employees.
REGULATION
RECENT LEGISLATIVE DEVELOPMENTS
In recent years, measures have been taken to reform the thrift and banking
industries and to strengthen the insurance funds for depository institutions.
The most significant of these measures for savings institutions was the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (the
"FIRREA"), which has had a major impact on the operation and regulation of
savings associations generally. In 1991, the Federal Deposit Insurance
Corporation Improvement Act of 1991 (the "FDICIA"), became law. Although the
FDICIA's primary purpose was to recapitalize the Bank Insurance Fund (the
"BIF") of the FDIC, which insures the deposits of commercial banks, the
FDICIA also affected the supervision and regulation of all federally insured
depository institutions, including federal savings banks such as the Bank.
More recent legislation has attempted to resolve the problems of the SAIF in
meeting its minimum required reserve ratio and the related concern facing
SAIF-insured institutions, such as the Bank, of paying significantly higher
deposit insurance premiums than BIF-insured institutions. The following
discussion is a summary of the significant provisions of the recent
legislation affecting the banking industry.
THE FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989.
The FIRREA, which was enacted in response to concerns regarding the soundness
of the thrift industry, brought about a significant regulatory restructuring,
limited savings institutions' business activities, and increased their
regulatory capital requirements. The FIRREA abolished the Federal Home Loan
Bank Board and the Federal Savings and Loan Insurance Corporation (the
"FSLIC"), and established the OTS as the primary federal regulator for
savings institutions. Deposits at the Bank are insured through the SAIF, a
separate fund managed by the FDIC for institutions whose deposits were
formerly insured by the FSLIC. Regulatory functions relating to deposit
insurance are generally exercised by the FDIC. The Resolution Trust
Corporation (the "RTC") was created to manage conservatorships and
receiverships of insolvent thrifts.
THE FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991. The
FDICIA authorizes regulators to take prompt corrective action to solve the
problems of critically undercapitalized institutions. As a result, the
banking regulators are required to take certain supervisory actions against
undercapitalized institutions, the severity of which increases as an
institution's level of capitalization decreases. Pursuant to the FDICIA, the
federal banking agencies have established the levels at which an insured
institution is considered to be "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." See "--Savings Institution Regulations--Prompt Corrective
Action" below for a discussion of the applicable capital levels.
The FDICIA requires that the federal banking agencies revise their
risk-based capital requirements to include components for interest rate risk,
concentration of credit risk and the risk of non-traditional activities. See
"--Savings Institution Regulations--Regulatory Capital Requirements" below
for a description of the final rule adopted by the OTS that incorporates an
interest rate risk component in the risk-based capital requirement. Although
adopted, implementation of this rule has been postponed indefinitely.
In addition, the FDICIA requires each federal banking agency to establish
standards relating to internal controls, information systems, and internal
audit systems that are designed to assess the financial condition and
management of the institution; loan documentation; credit underwriting;
interest
23
<PAGE>
rate exposure; asset growth; and compensation, fees and benefits. The FDICIA
lowered the qualified thrift lender ("QTL") investment percentage applicable
to SAIF-insured institutions. See "--Savings Institution
Regulations--Qualified Thrift Lender Test" below. The FDICIA also provided
that a risk-based assessment system for insured depository institutions must
be established before January 1, 1994. See "--Savings Institution
Regulations--Insurance of Accounts" below. These requirements have been
implemented. The FDICIA further requires annual on-site full examinations of
depository institutions, with certain exceptions, and annual reports on
institutions' financial and management controls.
THE RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994.
In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Branching Act") became law. Savings
associations, whose primary federal regulator is the OTS, generally are not
directly affected by the Interstate Branching Act except for a provision that
allows an insured savings association that was an affiliate of a bank on July
1, 1994, to act as the bank's agent as though it were an insured bank
affiliate of the bank.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified
as well capitalized (i.e., a core capital ratio of at least 5%, a ratio of
Tier 1 or core capital to risk-weighted assets ("Tier 1 risk-based capital")
of at least 6% and a risk-based capital ratio of at least 10%) and considered
healthy pay the lowest premium while institutions that are less than
adequately capitalized (i.e., core or Tier 1 risk-based capital ratios of
less than 4% or a risk-based capital ratio of less than 8%) and considered of
substantial supervisory concern pay the highest premium. Risk classification
of all insured institutions is made by the FDIC for each semi-annual
assessment period.
The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than
the designated reserve ratio of 1.25% of SAIF insured deposits. In setting
these increased assessments, the FDIC must seek to restore the reserve ratio
to that designated reserve level, or such higher reserve ratio as established
by the FDIC. The FDIC may also impose special assessments on SAIF members to
repay amounts borrowed from the United States Treasury or for any other
reason deemed necessary by the FDIC.
For the first six months of 1995, the assessment schedule for members of
the Bank Insurance Fund ("BIF") of the FDIC and SAIF members ranged from .23%
to .31% of deposits. As is the case with the SAIF, the FDIC is authorized to
adjust the insurance premium rates for banks that are insured by the BIF of
the FDIC in order to maintain the reserve ratio of the BIF at 1.25% of BIF
insured deposits. As a result of the BIF reaching its statutory reserve ratio
the FDIC revised the premium schedule for BIF insured institutions to provide
a range of .04% to .31% of deposits. The revisions became effective in the
third quarter of 1995. In addition, the BIF rates were further revised,
effective January 1996, to provide a range of 0% to .27%. The SAIF rates,
however, were not adjusted. At the time the FDIC revised the BIF premium
schedule, it noted that, absent legislative action (as discussed below), the
SAIF would not attain its designated reserve ratio until the year 2002. As a
result, SAIF insured members would continue to be generally subject to higher
deposit insurance premiums than BIF insured institutions until, all things
being equal, the SAIF attained its required reserve ratio.
In order to eliminate this disparity and any competitive disadvantage
between BIF and SAIF member institutions with respect to deposit insurance
premiums, legislation to recapitalize the SAIF was enacted in September 1996.
The legislation provides for a one-time assessment to be imposed on all
deposits assessed at the SAIF rates, as of March 31, 1995, in order to
recapitalize the SAIF. It also provides for the merger of the BIF and the
SAIF on January 1, 1999 if no savings associations then exist. The special
assessment rate has been established at .657% of deposits by the FDIC and the
resulting assessment of $2.6 million (exclusive of an additional $2.3 million
payment which relates to Suncoast deposits) was paid in November 1996. This
special assessment significantly increased noninterest expense and adversely
affected the Bank's results of operations for the year ended September 30,
1996. As a result of the special assessment, the Bank's deposit insurance
premiums were
24
<PAGE>
reduced to .067% based upon its current risk classification and the new
assessment schedule for SAIF insured institutions. These premiums are subject
to change in future periods.
Prior to the enactment of the legislation, a portion of the SAIF
assessment imposed on savings associations was used to repay obligations
issued by a federally chartered corporation to provide financing ("FICO") for
resolving the thrift crisis in the 1980's. Although the FDIC has proposed
that the SAIF assessment be equalized with the BIF assessment schedule,
effective October 1, 1996, SAIF-insured institutions will continue to be
subject to a FICO assessment as a result of this continuing obligation.
Although the legislation also now requires assessments to be made on
BIF-assessable deposits for this purpose, effective January 1, 1997, that
assessment will be limited to 20% of the rate imposed on SAIF assessable
deposits until the earlier of December 31, 1999 or when no savings
association continues to exist, thereby imposing a greater burden on SAIF
member institutions such as the Bank. Thereafter, however, assessments on
BIF-member institutions will be made on the same basis as SAIF-member
institutions. The rates to be established by the FDIC to implement this
requirement for all FDIC-insured institutions is uncertain at this time, but
are anticipated to be about a 6.5 basis points assessment on SAIF deposits
and 1.5 basis points on BIF deposits until BIF insured institutions
participate fully in the assessment.
SAVINGS AND LOAN HOLDING COMPANY REGULATIONS
TRANSACTIONS WITH AFFILIATES. The Company is a unitary savings and loan
holding company and is subject to the OTS regulations, examination,
supervision and reporting requirements pursuant to certain provisions of the
Home Owners' Loan Act (the "HOLA") and the Federal Deposit Insurance Act. As
an insured institution and a subsidiary of a savings and loan holding
company, the Bank is subject to restrictions in its dealings with companies
that are "affiliates" of the Company under the HOLA, certain provisions of
the Federal Reserve Act that were made applicable to savings institutions by
the FIRREA, and the OTS regulations.
As a result of the FIRREA, savings institutions' transactions with its
affiliates are subject to the limitations set forth in the HOLA and the OTS
regulations, which incorporate Sections 23A, 23B, 22(g) and 22(h) of the
Federal Reserve Act and Regulation O adopted by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Under Section 23A, an
"affiliate" of an institution is defined generally as (i) any company that
controls the institution and any other company that is controlled by the
company that controls the institution, (ii) any company that is controlled by
the shareholders who control the institution or any company that controls the
institution, or (iii) any company that is determined by regulation or order
to have a relationship with the institution (or any subsidiary or affiliate
of the institution) such that "covered transactions" with the company may be
affected by the relationship to the detriment of the institution. "Control"
is determined to exist if a percentage stock ownership test is met or if
there is control over the election of directors or the management or policies
of the company or institution. "Covered transactions" generally include loans
or extensions of credit to an affiliate, purchases of securities issued by an
affiliate, purchases of assets from an affiliate (except as may be exempted
by order or regulation), and certain other transactions. The OTS regulations
and Sections 23A and 23B require that covered transactions and certain other
transactions with affiliates be on terms and conditions consistent with safe
and sound banking practices or on terms comparable to similar transactions
with non-affiliated parties, and imposes quantitative restrictions on the
amount of and collateralization requirements on covered transactions. In
addition, a savings institution is prohibited from extending credit to an
affiliate (other than a subsidiary of the institution), unless the affiliate
is engaged only in activities that the Federal Reserve Board has determined,
by regulation, to be permissible for bank holding companies. Sections 22(g)
and 22(h) of the Federal Reserve Act impose limitations on loans and
extensions of credit from an institution to its executive officers, directors
and principal stockholders and each of their related interests.
ACTIVITIES LIMITATIONS. A unitary savings and loan holding company, such
as the Company, whose sole insured institution subsidiary qualifies as a QTL
(described below) generally has the broadest authority to engage in various
types of business activities. A holding company that acquires
25
<PAGE>
another institution and maintains it as a separate subsidiary or whose sole
subsidiary fails to meet the QTL test will become subject to the activities
limitations applicable to multiple savings and loan holding companies.
In general, a multiple savings and loan holding company (or subsidiary
thereof that is not an insured institution) may not commence, or continue for
more than a limited period of time after becoming a multiple savings and loan
holding company (or a subsidiary thereof), any business activity other than
(i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or an escrow business, (iii)
holding, managing or liquidating assets owned by or acquired from a
subsidiary insured institution, (iv) holding or managing properties used or
occupied by a subsidiary insured institution, (v) acting as trustee under
deeds of trust, (vi) those activities previously directly authorized by the
OTS by regulation as of March 5, 1987 to be engaged in by multiple savings
and loan holding companies, or (vii) subject to prior approval of the OTS,
those activities authorized by the Federal Reserve Board as permissible for
bank holding companies. These restrictions do not apply to a multiple savings
and loan holding company if (a) all, or all but one, of its insured
institution subsidiaries were acquired in emergency thrift acquisitions or
assisted acquisitions and (b) all of its insured institution subsidiaries are
QTLs.
SAVINGS INSTITUTION REGULATIONS
Federal savings institutions such as the Bank are chartered by the OTS,
are members of the FHLB system, and have their deposits insured by the SAIF.
They are subject to comprehensive OTS and FDIC regulations that are intended
primarily to protect depositors. SAIF-insured, federally chartered
institutions may not enter into certain transactions unless applicable
regulatory tests are met or they obtain necessary approvals. They are also
required to file reports with the OTS describing their activities and
financial condition, and periodic examinations by the OTS test compliance by
institutions with various regulatory requirements, some of which are
described below.
INSURANCE OF ACCOUNTS. The Bank's deposits are insured by the SAIF up to
$100,000 for each insured account holder, the maximum amount currently
permitted by law. Under the FDIC regulations implementing risk-based
insurance premiums, institutions are divided into three groups--well
capitalized, adequately capitalized and undercapitalized--based on criteria
consistent with those established pursuant to the prompt corrective action
provisions of the FDICIA. See "--Prompt Corrective Action" below. Each of
these groups is further divided into three subgroups, based on a subjective
evaluation of supervisory risk to the insurance fund posed by the
institution.
As an insurer, the FDIC issues regulations and conducts examinations of
its insured members. SAIF insurance of deposits may be terminated by the
FDIC, after notice and hearing, upon a finding that an institution has
engaged in unsafe and unsound practices, cannot continue operations because
it is in an unsafe and unsound condition, or has violated any applicable law,
regulation, rule, order or condition imposed by the OTS or FDIC. When
conditions warrant, the FDIC may impose less severe sanctions as an
alternative to termination of insurance. The Bank's management does not know
of any present condition pursuant to which the FDIC would seek to impose
sanctions on the Bank or terminate insurance of its deposits.
REGULATORY CAPITAL REQUIREMENTS. As mandated by the FIRREA, the OTS
adopted capital standards under which savings institutions must currently
maintain (i) a tangible capital requirement of 1.5% of tangible assets, (ii)
a leverage (or core capital) ratio of 3.0% of adjusted tangible assets, and
(iii) a risk-based capital requirement of 8.0% of risk-weighted assets. These
requirements (which cannot be less stringent than those applicable to
national banks) apply to the Bank. Under current law and regulations, there
are no capital requirements directly applicable to the Company. See also
"--Changes to Capital Requirements" below.
Under the current OTS regulations, "tangible capital" includes common
stockholders' equity, noncumulative perpetual preferred stock and related
paid-in capital, certain qualifying non-withdrawable accounts and pledged
deposits, and minority interests in fully consolidated subsidiaries,
26
<PAGE>
less intangible assets (except certain purchased mortgage servicing rights)
and specified percentages of debt and equity investments in certain
subsidiaries. "Core capital" is tangible capital plus limited amounts of
intangible assets meeting marketability criteria. The "risk-based capital"
requirement provides that an institution's total capital must equal 8% of
risk-weighted assets. Certain institutions will be required to deduct an
interest rate risk component from their total capital, as described below.
"Total capital" equals core capital plus "supplementary capital" (which
includes specified amounts of cumulative preferred stock, certain
limited-life preferred stock, subordinated debt and other capital
instruments) in an amount equal to not more than 100% of core capital.
"Risk-weighted assets" are determined by assigning designated risk weights
based on the credit risk associated with the particular asset. As provided by
OTS regulations, representative risk weights include: 0% for cash and assets
that are backed by the full faith and credit of the United States; 20% for
cash items in the process of collection, FHLB stock, agency securities not
backed by the full faith and credit of the United States and certain
high-quality mortgage-related securities; 50% for certain revenue bonds,
qualifying mortgage loans, certain non-high-quality mortgage-related
securities and certain qualifying residential construction loans; and 100%
for consumer, commercial and other loans, repossessed assets, assets that are
90 or more days past due, and all other assets.
As of September 30, 1996, the Bank's tangible, core and risk-based capital
ratios were 7.0%, 7.0% and 14.2%, respectively.
The OTS regulatory capital regulations take into account a savings
institution's exposure to the risk of loss from changing interest rates.
Under the regulations, a savings institution with an above normal level of
interest rate risk exposure will be required to deduct an interest rate risk
("IRR") component from its total capital when determining its compliance with
the risk-based capital requirements. An "above normal" level of interest rate
risk exposure is a projected decline of 2% in the net present value of an
institution's assets and liabilities resulting from a 2% swing in interest
rates. The IRR component will equal one-half of the difference between the
institution's measured interest rate exposure and the "normal" level of
exposure. Savings institutions are required to file data with the OTS that
the OTS will use to calculate, on a quarterly basis, the institutions'
measured interest rate risk and IRR components. The IRR component to be
deducted from capital is the lowest of the IRR components for the preceding
three quarters. The OTS may waive or defer an institution's IRR component on
a case-by-case basis. Implementation of the IRR requirements have been
delayed. As of September 30, 1996, the Company would have been required to
deduct an IRR component from its total capital when determining its
compliance with the Bank's risk-based capital requirements; however, the Bank
would continue to be well capitalized.
If an institution becomes categorized as "undercapitalized" under the
definitions established by the "prompt corrective action" provisions of the
FDICIA, it will become subject to certain restrictions imposed by the FDICIA.
See "--Prompt Corrective Action" below.
PROMPT CORRECTIVE ACTION. The OTS and other federal banking regulators
have established capital levels for institutions to implement the "prompt
corrective action" provisions of the FDICIA. Based on these capital levels,
insured institutions will be categorized as well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized or critically
undercapitalized. The FDICIA requires federal banking regulators, including
the OTS, to take prompt corrective action to solve the problems of those
institutions that fail to satisfy their applicable minimum capital
requirements. The level of regulatory scrutiny and restrictions imposed
become increasingly severe as an institution's capital level falls.
A "well capitalized" institution must have risk-based capital of 10% or
more, core capital ratio of 5% or more and Tier 1 risk-based capital (based
on the ratio of core capital to risk-weighted assets) of 6% or more and may
not be subject to any written agreement, order, capital directive, or prompt
corrective action directive issued by the OTS. The Bank is a well capitalized
institution under the definitions as adopted. An institution will be
categorized as "adequately capitalized" if it has total risk-based capital of
8% or more, Tier 1 risk-based capital of 4% or more, and core capital of 4%
or
27
<PAGE>
more; "undercapitalized" if it has total risk-based capital of less than 8%,
Tier 1 risk-based capital of less than 4%, or core capital of less than 4%;
"significantly undercapitalized" if it has total risk-based capital of less
than 6%, Tier 1 risk-based capital of less than 3%, or core capital of less
than 3%; and "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to less than 2%.
In the case of an institution that is categorized as "undercapitalized,"
such an institution must submit a capital restoration plan to the OTS. An
undercapitalized depository institution generally will not be able to acquire
other banks or thrifts, establish additional branches, pay dividends, or
engage in any new lines of business unless consistent with its capital plan.
A "significantly undercapitalized" institution will be subject to additional
restrictions on its affiliate transactions, the interest rates paid by the
institution on its deposits, the institution's asset growth, compensation of
senior executive officers, and activities deemed to pose excessive risk to
the institution. Regulators may also order a significantly undercapitalized
institution to hold elections for new directors, terminate any director or
senior executive officer employed for more than 180 days prior to the time
the institution became significantly undercapitalized, or hire qualified
senior executive officers approved by the regulators.
The FDICIA provides that an institution that is "critically
undercapitalized" must be placed in conservatorship or receivership within 90
days of becoming categorized as such unless the institution's regulator and
the FDIC jointly determine that some other course of action would result in a
lower resolution cost to the institution's insurance fund. Thereafter, the
institution's regulator must periodically reassess its determination to
permit a particular critically undercapitalized institution to continue to
operate. A conservator or receiver must be appointed for the institution at
the end of an approximately one-year period following the institution's
initial classification as critically undercapitalized unless a number of
stringent conditions are met, including a determination by the regulator and
the FDIC that the institution has positive net worth and a certification by
such agencies that the institution is viable and not expected to fail.
The final rules establishing the capital levels for purposes of the FDICIA
also indicate that the federal regulators intend to lower or eliminate the
core capital requirement from the definitions of well capitalized, adequately
capitalized and undercapitalized after the requirement to deduct an IRR
component from total capital becomes effective. This action has not yet been
taken. See "--Regulatory Capital Requirements" above.
In addition to the foregoing prompt corrective action provisions, the
FDICIA also sets forth requirements that the federal banking agencies,
including the OTS, review their capital standards every two years to ensure
that their standards require sufficient capital to facilitate prompt
corrective action and to minimize loss to the SAIF and the BIF.
RESTRICTIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. The current OTS
regulation applicable to the payment of dividends or other capital
distributions by savings institutions imposes limits on capital distributions
based on an institution's regulatory capital levels and net income. An
institution that meets or exceeds all of its capital requirements (both
before and after giving effect to the distribution) and is not in need of
more than normal supervision would be a "Tier 1 association." A Tier 1
association may make capital distributions during a calendar year of up to
the greater of (i) 100% of net income for the current calendar year plus 50%
of its capital surplus or (ii) or the amount permitted for a "Tier 2
association" which is 75% of its net income over the most recent four
quarters. Any additional capital distributions would require prior regulatory
approval. The Bank currently exceeds its fully phased-in capital requirements
and qualifies as a Tier 1 association under the regulation. A "Tier 3
association" is defined as an institution that does not meet all of the
minimum regulatory capital requirements and therefore may not make any
capital distributions without the prior approval of the OTS.
Savings institutions must provide the OTS with at least 30 days' written
notice before making any capital distributions. All such capital
distributions are also subject to the OTS' right to object to a distribution
on safety and soundness grounds.
28
<PAGE>
The OTS has proposed regulations that would revise the current capital
distribution restrictions. Under the proposal a savings association may make
a capital distribution without notice to the OTS (unless it is a subsidiary
of a holding company) provided that it has a CAMEL 1 or 2 rating, is not of
supervisory concern, and would remain adequately capitalized (as defined in
the OTS prompt corrective action regulations) following the proposed
distribution. Savings associations that would remain adequately capitalized
following the proposed distribution but do not meet the other noted
requirements must notify the OTS 30 days prior to declaring a capital
distribution. The OTS stated it will generally regard as permissible that
amount of capital distributions that do not exceed 50% of the institution's
excess regulatory capital plus net income to date during the calendar year.
As under the current rule, the OTS may object to a capital distribution if it
would constitute an unsafe or unsound practice. No assurance may be given as
to whether or in what form the regulations may be adopted.
QUALIFIED THRIFT LENDER TEST. Pursuant to amendments effected by the
FDICIA, a savings institution will be a QTL if its qualified thrift
investments equal or exceed 65% of its portfolio assets on a monthly average
basis in nine of every 12 months. Qualified thrift investments, under the
revised QTL test, include (i) certain housing-related loans and investments,
(ii) certain obligations of the FSLIC, the FDIC, the FSLIC Resolution Fund
and the RTC, (iii) loans to purchase or construct churches, schools, nursing
homes and hospitals (subject to certain limitations), (iv) consumer loans
(subject to certain limitations), (v) shares of stock issued by any FHLB, and
(vi) shares of stock issued by the FHLMC or the FNMA (subject to certain
limitations). Portfolio assets under the revised test consist of total assets
minus (a) goodwill and other intangible assets, (b) the value of properties
used by the savings institution to conduct its business, and (c) certain
liquid assets in an amount not exceeding 20% of total assets.
Any savings institution that fails to become or remain a QTL must either
convert to a national bank charter or be subject to restrictions specified in
the OTS regulations. Any such savings institution that does not become a bank
will be: (i) prohibited from making any new investment or engaging in
activities that would not be permissible for national banks; (ii) prohibited
from establishing any new branch office in a location that would not be
permissible for a national bank in the institution's home state; (iii)
ineligible to obtain new advances from any FHLB; and (iv) subject to
limitations on the payment of dividends comparable to the statutory and
regulatory dividend restrictions applicable to national banks. Also,
beginning three years after the date on which the savings association ceases
to be a QTL, the savings association would be prohibited from retaining any
investment or engaging in any activity not permissible for a national bank
and would be required to repay any outstanding advances to any FHLB. A
savings institution may requalify as a QTL if it thereafter complies with the
QTL test. At September 30, 1996, the Bank exceeded the QTL requirements.
FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB system,
which consists of 12 regional Federal Home Loan Banks governed and regulated
by the Federal Housing Finance Board. The Federal Home Loan Banks provide a
central credit facility for member institutions. The Bank, as a member of the
FHLB of Atlanta, is required to acquire and hold shares of capital stock in
the FHLB of Atlanta in an amount at least equal to the greater of 1% of the
aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations as of the close of each calendar
year, or 5% of its borrowings from the FHLB of Atlanta (including advances
and letters of credit issued by the FHLB on the Bank's behalf). The Bank is
currently in compliance with this requirement, with a $12.2 million
investment in stock of the FHLB of Atlanta as of September 30, 1996.
The FHLB of Atlanta makes advances to members in accordance with policies
and procedures periodically established by the Federal Housing Finance Board
and the Board of Directors of the FHLB of Atlanta. Currently outstanding
advances from the FHLB of Atlanta are required to be secured by a member's
shares of stock in the FHLB of Atlanta and by certain types of mortgages and
other assets. The FIRREA further limited the eligible collateral in certain
respects. Interest rates charged for advances vary depending on maturity, the
cost of funds to the FHLB of Atlanta and the purpose of the borrowing. As of
September 30, 1996, advances from the FHLB of Atlanta totaled $237.0 million.
See Note 8 of the Notes to the Company's Consolidated Financial Statements.
The FIRREA restricted the amount of FHLB advances that a member institution
may obtain, and in some
29
<PAGE>
circumstances requires repayment of outstanding advances, if the institution
does not meet the QTL test. See "--Qualified Thrift Lender Test," above.
LIQUIDITY. OTS regulations currently require member savings institutions
to maintain for each calendar month an average daily balance of liquid assets
(cash and certain time deposits, securities of certain mutual funds, bankers'
acceptances, corporate debt securities and commercial paper, and specified
U.S. government, state government and federal agency obligations) equal to at
least 5% of its average daily balance during the preceding calendar month of
net withdrawable deposits and short-term borrowings (generally borrowings
having maturities of one year or less). An institution must also maintain for
each calendar month an average daily balance of short-term liquid assets
(generally those having maturities of one year or less) equal to at least 1%
of its average daily balance during the preceding calendar month of net
withdrawable accounts and short-term borrowings. The Director of the OTS may
vary this liquidity requirement from time to time within a range of 4% to
10%. Monetary penalties may be imposed for failure to meet liquidity
requirements. For the month of September 1996, the Bank's liquidity ratio was
3.80%, and its short-term liquidity ratio, which must be at least 1%, was
6.75%.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act (the
"CRA"), as implemented by the OTS regulations, a savings institution has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including
low and moderate income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions nor does it limit
an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with its examination of a
financial institution, to assess the institution's record of meeting the
credit needs of its community and to take such records into account in its
evaluation of certain applications. The FIRREA amended the CRA to require
public disclosure of an institution's CRA rating and to require that the OTS
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system in lieu of the existing five-tiered
numerical rating system. Based upon an OTS examination in fiscal 1995, the
Bank's CRA rating is satisfactory.
Effective July 1, 1995, the OTS together with the other federal banking
agencies, adopted a joint rule amending each of their regulations concerning
the CRA. Subject to certain exceptions and elections, the new regulations
prescribe three tests for the evaluation of a savings institution's
performance. The lending test evaluates a savings institution's record of
helping to meet the credit needs of its assessment area through its lending
activities by considering an institution's home mortgage, small business,
small farm, and community development lending. The investment test evaluates
a savings institution's record of helping to meet the credit needs of its
assessment area through qualified investments that benefit its assessment
area or a broader statewide or regional area including the assessment area.
Finally, the service test evaluates a savings institution by analyzing both
the availability and the effectiveness of the institution's systems for
delivering retail banking services and the extent and innovativeness of its
community development services. Based upon the savings institution's
performance under the lending, investment and service tests, and any other
tests which may be applicable to the institution under the new regulations,
the OTS will assign the savings institution one of the same four ratings
prescribed under current regulations. Additionally, under the new
regulations, the OTS will continue to consider an institution's record of
performance under the CRA in the same manner and for the same purposes as
required under current regulations.
These new regulations, while effective July 1, 1995, will be implemented
over a two-year time frame. A savings institution may elect to be evaluated
under the revised performance tests beginning January 1, 1996, although the
Company has not made such election. Absent such an election, these revised
performance tests will not become mandatory and will not be deemed to replace
the current regulations described above until July 1, 1997.
30
<PAGE>
LOANS-TO-ONE-BORROWER LIMITATIONS
The FIRREA provided that loans-to-one borrower limits applicable to
national banks apply to savings institutions. Generally, under current
limits, loans and extensions of credit outstanding at one time to a single
borrower shall not exceed 15% of the savings institution's unimpaired capital
and unimpaired surplus. Loans and extensions of credit fully secured by
certain readily marketable collateral may represent an additional 10% of
unimpaired capital and unimpaired surplus. As of September 30, 1996, the Bank
was in compliance with the loans-to-one-borrower limitations.
PORTFOLIO POLICY GUIDELINES
The Federal Financial Institutions Examination Council issued a
Supervisory Policy Statement on Securities Activities (the "Policy"), which
provides guidance to an institution in developing its portfolio policy,
specifies factors that must be considered when evaluating an institution's
investment portfolio, and provides guidance on the suitability of acquiring
and holding certain products, such as mortgage derivative products, in its
investment portfolio. The Policy, among other things, defines "high-risk
mortgage securities" and provides that such securities are not suitable
investment portfolio holdings for depository institutions and that they may
only be acquired to reduce interest rate risk. The determination of a
high-risk mortgage security will be based upon a quantitative calculation of
the average life of the security, and the change in the average life and
market price sensitivity of the security based on a 300-basis-point shift in
the yield curve. Currently, the Bank does not hold any high-risk mortgage
securities. The Policy, however, is applicable to all depository institutions
and will affect the Bank's ability to invest in certain mortgage securities,
primarily collateralized mortgage obligations, in the future.
GENERAL LENDING REGULATIONS
The Bank's lending activities are subject to federal and state regulation,
including the Equal Credit Opportunity Act, the Truth in Lending Act, the
Real Estate Settlement Procedures Act, the Community Reinvestment Act and the
laws of Florida, California and other jurisdictions governing discrimination,
lender disclosure to borrowers, foreclosure procedures and anti-deficiency
judgments, among other matters.
FEDERAL RESERVE SYSTEM
The Bank is subject to certain regulations promulgated by the Federal
Reserve Board. Pursuant to such regulations, savings institutions are
required to maintain reserves against their transaction accounts (primarily
interest-bearing checking accounts) and non-personal time deposits. The
balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements imposed by the
OTS. In addition, Federal Reserve Board regulations limit the periods within
which depository institutions must provide availability for and pay interest
on deposits to transaction accounts. Depository institutions are required to
disclose their check-hold policies and any changes to those policies in
writing to customers. The Bank is in compliance with all such Federal Reserve
Board regulations.
TAXATION
The Company reports its income and expenses under an accrual method of
accounting and has been filing federal income tax returns on a calendar year
basis. For 1994 and thereafter, the Company and its subsidiaries have elected
to file consolidated tax returns on a fiscal year basis ended September 30.
The Tax Reform Act of 1986 (the "1986 Act"), which was signed into law on
October 22, 1986, revised the income tax laws applicable to corporations in
general and to savings institutions, such as the Bank, in particular. Except
as specifically noted, the discussion below relates to taxable years
beginning after December 31, 1986.
31
<PAGE>
The Company has not been notified of a proposed examination by the
Internal Revenue Service (the "IRS") of its federal income tax returns.
BAD DEBT RESERVES
DEDUCTIONS. The Internal Revenue Code of 1986, as amended (the "Code"),
currently permits savings institutions, such as the Bank, to establish a
reserve for bad debts and to make annual additions thereto, which additions
may, within specified formula limits, be deducted in determining taxable
income. The bad debt reserve deduction is generally based upon a savings
institution's actual loss experience (the "experience method"). In addition,
provided that certain definitional tests relating to the composition of
assets and sources of income are met, a savings institution was permitted to
elect annually to compute the allowable addition to its bad debt reserve for
losses on qualifying real property loans (generally loans secured by improved
real estate) by reference to a percentage of its taxable income (the
"percentage of taxable income method").
Under the percentage of taxable income method, a savings institution was
permitted, in general, to claim a deduction for additions to bad debt
reserves equal to 8% of the savings institution's taxable income. Taxable
income for this purpose is defined as taxable income before the bad debt
deduction, but reduced for any addition to the reserve for non-qualifying
loans. For this purpose, the taxable income of a savings institution for a
taxable year is calculated after utilization of net operating loss
carryforwards.
In August 1996, legislation was enacted that repeals the reserve method of
accounting (including the percentage of taxable income method) used by many
thrifts, including the Bank, to calculate their bad debt reserve for federal
income tax purposes. As a result, large thrifts such as the Bank must
recapture that portion of the reserve that exceeds the amount that could have
been taken under the specific charge-off method for post-1987 tax years. The
legislation also requires thrifts to account for bad debts for federal income
tax purposes on the same basis as commercial banks for tax years beginning
after December 31, 1995. The recapture will occur over a six-year period, the
commencement of which will be delayed until the first taxable year beginning
after December 31, 1997, provided the institution meets certain residential
lending requirements. The management of the Company does not believe that the
legislation will have a material impact on the Company or the Bank.
DISTRIBUTIONS. Under the Code, a portion of the Bank's bad debt reserves
may be reduced on account of a "non-dividend" distribution. A distribution is
a non-dividend distribution to the extent that, for federal income tax
purposes, (i) it is in redemption of shares, (ii) it is pursuant to a
liquidation of the institution, or (iii) in the case of a current
distribution it, together with all other such distributions during the
taxable year, exceeds the Bank's current and post-1951 accumulated earnings
and profits. The amount charged against the Bank's bad debt reserves in
respect of a distribution will be includable in its gross income and will
equal the amount of such distribution, increased by the amount of federal
income tax resulting from such inclusion.
ALTERNATIVE MINIMUM TAX
In addition to the income tax, corporations are generally subject to an
alternative minimum tax at a rate of 20%. The alternative minimum tax is
imposed on the sum of regular taxable income (with certain adjustments) and
tax preference items, less any available exemption ("AMTI"). The alternative
minimum tax is imposed to the extent that it exceeds a corporation's regular
income tax liability. The items of tax preference that constitute AMTI for
1990 and thereafter include 75% of the excess of the taxpayer's adjusted
current earnings over AMTI (determined without regard to this preference and
prior to any deduction for net operating loss carryforwards or carrybacks).
Another item of tax preference is the excess of the bad debt deduction over
the amount allowable under the actual loss experience method. In addition,
net operating loss carryforwards cannot offset more than 90% of AMTI.
32
<PAGE>
INTEREST ALLOCABLE TO TAX-EXEMPT OBLIGATIONS
The 1986 Act eliminates for financial institutions the deduction for
interest expense allocable to the purchase or carrying of most tax-exempt
obligations for taxable years ending after December 31, 1986, with respect to
tax-exempt obligations acquired after August 7, 1986 excluding certain
financial institution-qualified issues. For all qualified issues and for
non-qualified tax-exempt obligations acquired after 1982 and before August 7,
1986, 20% of allocable interest expense deductions will be disallowed.
STATE TAXATION
The State of Florida imposes a corporate franchise tax on the Company, at
a rate of 5% of the Company's taxable income as determined for Florida
franchise tax purposes. Taxable income for this purpose is based on federal
taxable income with certain adjustments. A credit against the franchise tax,
for Florida intangible taxes paid, is allowable in an amount equal to the
lesser of (i) the amount of such intangible taxes paid or (ii) 65% of the
franchise tax.
33
<PAGE>
ITEM 2. PROPERTIES.
The executive and administrative offices of the Company and the Bank and
the Coral Gables branch are located at 255 Alhambra Circle, Coral Gables,
Florida 33134. On November 15, 1996 the Company completed the purchase of
Suncoast Savings and Loan Association FSA ("Suncoast"). Suncoast had six
branch offices, two mortgage origination offices and several other facilities
which were acquired by the Company. The Company owns electronic data
processing equipment for its exclusive use, which consists of personal
computers and peripherals and software having an aggregate net book value of
approximately $330,000 as of September 30, 1996.
The following table sets forth the location of, and certain additional
information regarding, the Company's and the Bank's executive and
administrative offices and branches, including Suncoast properties. The total
net book value of the Company's premises as of September 30, 1996 which
excludes the Suncoast properties was approximately $1.1 million.
<TABLE>
<CAPTION>
NET BOOK VALUE OF LEASE EXPIRATION DATE
LOCATION LEASEHOLD IMPROVEMENTS AND RENEWAL TERMS SQUARE FOOTAGE
- ----------------------------------- ----------------------- ---------------------- -----------------
<S> <C> <C> <C>
Executive and
administrative offices, and
savings branches ..................
Boca Raton branch ................. $80,637 1999 2,442
21222 St. Andrews Boulevard #11 (3 options to renew
Boca Raton, Florida 33434 for 3 years each)
Boynton Beach branch .............. $139,182 2001 2,933
117 North Congress Avenue ........ (2 options to renew
Boynton Beach, Florida 33426 .... for 5 years each)
Coral Gables branch ............... $543,891 2004 14,097
255 Alhambra Circle (2 options to renew
Coral Gables, Florida 33134 for 5 years)
Coral Springs branch .............. $22,901 2001 2,805
1307 University Drive (2 options to renew
Coral Springs, Florida 33071 for 5 years each)
Deerfield Beach branch
and Commercial Real Estate office $217,268 1998 4,000
2201 West Hillsboro Boulevard (2 options to renew
Deerfield Beach, Florida 33442 for 5 years each)
Delray Beach branch ............... $16,135 1995 4,000
7431-39 West Atlantic Avenue (3 options to renew
Delray Beach, Florida 33446 for 5 years each)
East Delray Beach branch .......... (5) 2001 4,059
1177 George Bush Boulevard, #102 (1 option to renew
Delray Beach, Florida for 5 years)
Hallandale branch ................. (5) -- (1)(3) 4,500
501 Golden Isles Drive
Hallandale, Florida
Hollywood branch .................. (5) -- (1)(2) 12,200
4350 Sheridan Street
Hollywood, Florida
Lauderdale-by-the-Sea branch ..... (5) -- (1) 5,000
227 Commercial Boulevard
Lauderdale-by-the-Sea, Florida
34
<PAGE>
NET BOOK VALUE OF LEASE EXPIRATION DATE
LOCATION LEASEHOLD IMPROVEMENTS AND RENEWAL TERMS SQUARE FOOTAGE
- ----------------------------------- ----------------------- ---------------------- ------------------
Pembroke Pines branch ............. (5) 2,000 3,500
100 South Flamingo Road (1 option to renew
Pembroke Pines, Florida for 5 years)
Pompano Beach branch .............. (5) -- (1) 7,600
1313 North Ocean Boulevard
Pompano Beach, Florida ...........
South Miami branch ................ $43,059 1998 6,100
6075 Sunset Drive
South Miami, Florida 33143
Tamarac branch .................... $32,148 2002 3,531
5779 North University Drive (1 option to renew
Tamarac, Florida 33321 for 5 years)
West Palm Beach branch ............ $36,379 2001 3,740
2911C North Military Trail ...... (2 options to renew
West Palm Beach, Florida 33409 for 5 years each)
Mortgage Origination office ...... (5) 1998 1,129
7700 North Kendall Drive, #506
Miami, Florida ...................
Mortgage Origination office ...... (5) 2000 32,850
Presidential Circle (2 options to renew
4000 Hollywood Boulevard for 5 years each)
Hollywood, Florida ...............
Storage Warehouses ................ (5) 1996 1,500
1009 South 21st Avenue
Hollywood, Florida
1017 South 21st Avenue (5) 1996 2,322
Hollywood, Florida
Other ............................. (5) 1998 5,371
1177 George Bush Boulevard, #200 (1 option to renew
Delray Beach, Florida ............ for 3 years)(4)
4340 Sheridan Street .............. (5) -- (1)(4) 4,764
Hollywood, Florida
6101 Sunset Drive
South Miami, Florida 33143 ...... -- 1998 4,000
</TABLE>
- --------
(1) The Bank owns the facility.
(2) A savings branch occupies 3,100 square feet. The remainder of the
building is leased by unrelated parties.
(3) The Bank leases 1,400 square feet to unrelated parties.
(4) The entire space is currently sub-leased to an unrelated party
(5) Prior Suncoast properties acquired on November 15, 1996.
35
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries, from time to time, are involved as
plaintiff or defendant in various legal actions arising in the normal course
of their businesses. While the ultimate outcome of any such proceedings
cannot be predicted with certainty, it is the opinion of management that no
proceeding exist, either individually or in the aggregate, that, if
determined adversely to the Company and its subsidiaries, would have a
material adverse effect on the Company's consolidated financial condition,
results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended September 30, 1996.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers and directors of the Company and the Bank.
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
<S> <C> <C>
Alfred R. Camner 52 Director, Chairman of the Board, Chief Executive Officer and President
of the Company (1993 to present); Director, Chairman of the Board and Chief
Executive Officer and President (1984 to present) of the Bank; Senior Managing
Director (1996 to present) and Managing Director of Stuzin and Camner,
Professional Association, attorneys-at-law (1973 to present); Director
and member of the executive committee of the Board of Directors of Loan
America Financial Corporation, a national mortgage banking company (1985
to 1994); Director of CSW Associates, Inc., an asset management firm (1990
to 1995).
Lawrence H. Blum 53 Director and Vice Chairman of the Board of the Company (1993 to present)
and the Bank (1984 to present); Managing Director (1992 to present) and
partner (1974 to present) of Rachlin, Cohen & Holtz, certified public
accountants.
Albert J. Finch(1) 59 Director and Vice Chairman of the Company and the Bank (November 1996 to
present); President and sole owner of Finch Financial, Inc., a financial
consulting firm (November 1996 to present); Director, Chairman of the Board
and Chief Executive Officer of Suncoast (1985 to November 1996); Chief
Operating Officer and President of Suncoast (1992 to November 1996).
James A. Dougherty 46 Director (December 1995 to present) and Executive Vice President of the
Company (1994 to present); Director, Executive Vice President and Chief
Operating Officer of the Bank (1994 to present); Executive Vice President
of Retail Banking of Intercontinental Bank (1989 to 1994).
36
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
Earline G. Ford 53 Director, Executive Vice President and Treasurer of the Company (1993 to
present); Director (1984 to present), Executive Vice President (1990 to
present), Senior Vice President--Administration (1988 to 1990), Treasurer
(1984 to present) and Vice President--Administration (1984 to 1988) of
the Bank; Legal Administrator of Stuzin and Camner, Professional Association,
attorneys-at-law (1973 to 1996); Vice Chairman of CSW Associates, Inc.,
an asset management firm (1990 to 1995).
Marc D. Jacobson 54 Director and Secretary of the Company (1993 to present) and the Bank (1984
to present); Vice President of Head-Beckham Insurance Agency, Inc. (1990
to present); President and principal owner of American Central Insurance
Agency, Inc. (1969 to 1990).
Allen M. Bernkrant 65 Director of the Company (1993 to present) and the Bank; private investor
in Miami, Florida (1990 to present); Chairman, President and principal
owner of Southern General Diversified, Inc., manufacturer and distributor
of recreational equipment (1960 to 1990).
Irving P. Cohen(1) 55 Director of the Company and the Bank (November 1996 to present); Director
of Suncoast (1988 to 1996); Partner, Thompson Hine & Flory, attorneys at
law (1995 to present); Partner, Semmes Bowen & Semmes, attorneys at law
(1990 to 1995).
Bruce Friesner 71 Director of the Company (1996 to present) and the Bank (1996 to present);
Director of Loan America Financial Corporation (1990-1994); Partner of
F&G Associates, a commercial real estate development company (1972 to
present).
Patricia L. Frost 58 Director of the Company (1993 to present) and the Bank; private investor
in Miami, Florida; Principal of West Laboratory School, Coral Gables, Florida
(1970 to 1993).
Sandra Goldstein 55 Director of the Company and the Bank (1993 to present); Real estate broker,
Sandra Goldstein & Associates, Inc. (1995 to present); Codina-Klein Realty,
Inc. (1989 to 1995); Broker/salesperson with L.J. Hooker International,
Inc., a real estate agency (1986 to 1989).
Elia J. Gusti(1) 62 Director of the Company and the Bank (November 1996 to present); Director
of Suncoast (1990 to 1996); President and principal owner of Lee Guisti
Realty, Inc., a real estate and mortgage brokerage firm (1982 to present).
Marc Lipsitz 55 Director of the Company (1996 to present); Managing Director (1996 to present)
of Stuzin & Camner, P.A.; General Counsel of Jefferson National Bank
(1993-1996); Partner, Stroock Stroock & Lavan, attorneys at law (1991-1993).
Robert D. Lurie 50 Director of the Company (1993 to present) and the Bank (1993-1996); Chairman,
President and principal owner of Resources for Child Care Management, Inc.,
a provider of child care services to companies (1985 to 1995); Chairman
of Corporate Childcare, Inc. (beginning in 1995).
37
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
Norman E. Mains(1) 53 Director of the Company and the Bank (November 1996 to present); Director
of Suncoast (1985 to 1986); Chief Economist and Director of Research for
the Chicago Mercantile Exchange (1994 to present); President and Chief
Operating Officer of Rodman & Renshaw Capital Group, Inc., a securities
broker/dealer firm (1991 to 1994).
Neil Messinger 58 Director of the Company (1996 to present) and the Bank (1996 to present);
radiologist; President (1986 to present), Radiological Associates, P.A.;
Chairman (1986 to present) of Imaging Services of Baptist Hospital.
Christina Cuervo Migoya 31 Director of the Company and the Bank (1995 to present); Assistant City
Manager and Chief of Staff of the City of Miami (1992 to present); Assistant
Vice President of United National Bank (1992); Assistant Vice President,
First Union National Bank/Southeast Bank (1986 to 1992).
Anne W. Solloway 79 Director of the Company and the Bank (1993 to present); private investor
in Miami, Florida.
OFFICERS OF THE COMPANY
AND/OR THE BANK WHO
ARE NOT DIRECTORS:
Charles A. Arnett 48 Executive Vice President of the Bank (beginning in 1995); Executive Vice
President of Intercontinental Bank (1991 to 1995); President and Chief
Executive Officer of Northridge Bank (1990-1991).
Samuel A. Milne 46 Executive Vice President (1996 to present) and Senior Vice President and
Chief Financial Officer of the Company and the Bank (May 1995 to present);
Senior President and Chief Financial Officer, Consolidated Bank (1992 to
1995); Senior Vice President, Southeast Bank (1984 to 1991)
Donald Putnam 40 Executive Vice President of the Bank (1996 to present); Senior Vice President
and Regional Sales Manager, NationsBank of Florida, N.A. (1996); Senior
Vice President of Citizens Federal Bank, a Federal Savings Bank (1994 to
1996); First Vice President (1987-1994).
Nancy L. Ashton 42 Senior Vice President and Assistant Secretary of the Company (1993 to present);
Senior Vice President (1990 to present), Vice President (1988 to 1990),
and Assistant Vice President (1984 to 1988) of the Bank.
Jessica Atkinson 44 Senior Vice President of the Bank (beginning in 1995); Vice President (1991
to 1995) and Southeast Regional Director (1989 to 1991) of American Savings
of Florida, F.S.B.
Pedro J. Gomez 42 Senior Vice President of the Bank (beginning in 1995); Vice President,
First Union National Bank of Florida (1991 to 1995); Vice President of
Southeast Bank, N.A. (1978 to 1991).
Anne Lehner-Garcia 35 Senior Vice President and Secretary of the Bank (1993 to present); Senior
Vice President (1990 to present), Vice President (1987 to 1990) and Assistant
Vice President (1986 to 1987) of the Bank.
38
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
Teresa Pacin 42 Senior Vice President of the Bank (beginning in 1995); Vice President,
NationsBank of Florida, N.A. (1994 to 1995); Vice President, First Union
National Bank of Florida (1985 to 1994).
</TABLE>
- -----------
(1) Under the merger agreement with Suncoast, Messrs. Mains, Guisti, and
Cohen were appointed directors of the Company and the Bank, and Mr. Finch
was appointed as a Director and a Vice Chairman of the Company and
BankUnited.
--------------
All executive officers serve at the discretion of the Board of Directors
and are elected annually by the Board.
39
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS
MATTERS
STOCK INFORMATION
The Company's Class A Common Stock, $.01 par value ("Class A Common
Stock"), is traded in the over-the-counter market and quoted in the Nasdaq
Stock Market, ("Nasdaq"). The Company's Class B Common Stock, $.01 par value
("Class B Common Stock"), is not currently traded on any established public
market.
At December 11, 1996, there were 430 and 19 holders of record of the
Company's Class A Common Stock and Class B Common Stock, respectively. The
number of holders, of record of the Class A Common Stock includes nominees of
various depository trust companies for an undeterminable number of individual
stockholders. Class B Common Stock is convertible into Class A Common Stock
at a ratio (subject to adjustment on the occurrence of certain events) of one
share of Class A Common Stock for each Class B share surrendered for
conversion.
There were no common stock dividends declared or paid in fiscal 1996 or
1995. See Note 11 to the Company's Consolidated Financial Statements for a
discussion of restrictions on the Bank's payment of dividends to the Company.
The following tables set forth, for the periods indicated, the range of
hgh and low bid prices for the Class A Common Stock quoted on Nasdaq. Stock
price data in the Nasdaq reflects inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK
------------------
PRICE
------------------
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended September 30, 1996:
1st Quarter ........................ $8.75 $6.00
2nd Quarter ........................ $8.50 $6.50
3rd Quarter ........................ $8.50 $7.25
4th Quarter ........................ $8.25 $7.25
Fiscal Year Ended September 30, 1995:
1st Quarter ........................ $7.00 $4.50
2nd Quarter ........................ $6.25 $4.75
3rd Quarter ........................ $7.00 $5.00
4th Quarter ........................ $8.75 $7.13
</TABLE>
40
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
Interest income ..................................... $ 52,132 $ 39,419 $ 30,421 $ 25,722 $ 24,243
Interest expense .................................... 34,622 26,305 16,295 12,210 14,022
----------- ------------ ------------- ----------- ------------
Net interest income ................................. 17,510 13,114 14,126 13,512 10,221
Provision for loan losses ........................... (120) 1,221 1,187 1,052 70
----------- ------------ ------------- ----------- ------------
Net interest income after provision for loan losses 17,630 11,893 12,939 12,460 10,151
----------- ------------ ------------- ----------- ------------
Non-interest income:
Service fees ........................................ 597 423 358 221 142
Gain on sales of loans and mortgage-backed
securities, net ................................... 5 239 150 1,496 94
Gain (loss) on sales of other assets, net(2) ....... (6) 9,569 -- -- 2
Other ............................................... 53 6 46 2 25
----------- ------------ ------------- ----------- ------------
Total non-interest income ......................... 649 10,237 554 1,719 263
----------- ------------ ------------- ----------- ------------
Non-interest expense:
Employee compensation and benefits ................. 4,275 3,997 3,372 2,721 1,986
Occupancy and equipment ............................ 1,801 1,727 1,258 978 940
Insurance(1) ....................................... 3,610 1,027 844 835 697
Professional fees .................................. 929 1,269 833 543 542
Other .............................................. 3,421 4,129 3,579 2,746 2,002
----------- ------------ ------------- ----------- ------------
Total non-interest expense ........................ 14,036 12,149 9,886 7,823 6,167
----------- ------------ ------------- ----------- ------------
Income before income taxes .......................... 4,243 9,981 3,607 6,356 4,247
Provision for income taxes(3) ....................... 1,657 3,741 1,328 2,318 1,538
----------- ------------ ------------- ----------- ------------
Net income before Preferred Stock dividends ........ 2,586 6,240 2,279 4,038 2,709
Preferred stock dividends:
Bank ............................................... -- -- 198 787 515
Company ............................................ 2,145 2,210 1,871 726 360
----------- ------------ ------------- ----------- ------------
Net income after preferred stock dividends ......... $ 441 $ 4,030 $ 210 $ 2,525 $ 1,834
=========== ============ ============= =========== ============
FINANCIAL CONDITION DATA
Total assets ........................................ $ 824,360 $ 608,415 $ 551,075 $ 435,378 $ 345,931
Loans receivable, net, and mortgage-backed
securities(5) ..................................... 716,550 506,132 470,154 313,899 250,606
Investments, overnight deposits, tax certificates,
reverse purchase agreements, certificates of
deposits and other earning assets ................. 87,662 88,768 64,783 100,118 83,445
Total liabilities ................................... 755,249 562,670 509,807 397,859 322,907
Deposits ............................................ 506,106 310,074 347,795 295,108 275,026
Borrowings .......................................... 237,775 241,775 158,175 97,775 42,241
Total stockholders' equity .......................... 69,111 45,745 41,268 30,273 16,797
Common stockholders' equity ......................... 42,350 21,096 16,667 17,162 11,134
PER COMMON SHARE DATA
Primary earnings per common share and common
equivalent share .................................. $ .10 $ 1.77 $ .10 $ 1.42 $ 1.27
=========== ============ ============= =========== ============
Earnings per common share assuming full dilution ... $ .10 $ 1.26 $ .10 $ 1.00 $ .92
=========== ============ ============= =========== ============
Weighted average number of common shares and common
equivalent shares assumed outstanding during the
period:
Primary .......................................... 4,558,521 2,296,021 2,175,210 1,773,264 1,448,449
Fully diluted ...................................... 4,558,521 4,158,564 2,175,210 3,248,618 2,376,848
Equity per common share ............................. $ 7.85 $ 10.20 $ 8.33 $ 8.86 $ 8.51
Fully diluted equity per common share ............... $ 6.83 $ 7.81 $ 6.87 $ 7.07 $ 6.40
Cash dividends per common share
Class A ............................................ $ -- $ -- $ .075 $ .094 $ .10
Class B ............................................ $ -- $ -- $ .03 $ .038 $ --
</TABLE>
(CONTINUED ON NEXT PAGE)
41
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED SEPTEMBER 30,
----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS
Performance ratios:
Return on average assets(6) ...................................... .36% 1.10% .46% 1.12% .92%
Return on average common equity .................................. 1.30 22.60 1.21 18.55 17.68
Return on average total equity ................................... 4.30 14.70 5.84 14.07 14.72
Interest rate spread ............................................. 2.10 2.12 2.78 3.59 3.34
Net interest margin .............................................. 2.51 2.39 3.01 3.87 3.63
Dividend payout ratio(7) ......................................... 82.95 35.42 96.79 40.66 34.97
Ratio of earnings to combined fixed charges and preferred stock
dividends(8):
Excluding interest on deposits ................................ 1.05 1.52 1.07 1.87 1.83
Including interest on deposits .................................. 1.02 1.21 1.03 1.27 1.18
Total loans, net, and mortgage-backed securities to total
deposits ......................................................... 141.58 163.13 134.40 109.65 91.12
Non-interest expenses to average assets .......................... 1.97 2.14 2.04 2.18 2.09
Efficiency ratio(9) .............................................. 76.45 14.58 66.06 45.17 57.76
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans ..................... .99% 1.02% 1.07% 1.54% .45%
Ratio of non-performing assets to total loans, real estate owned
and tax certificates ........................................... 1.14 1.35 1.41 1.78 .66
Ratio of non-performing assets to total assets ................... .95 1.10 1.17 1.46 .50
Ratio of charge-offs to total loans .............................. .08 .13 .39 .07 --
Ratio of loan loss allowance to total loans ...................... .34 .32 .20 .38 .11
Ratio of loan loss allowance to non-performing loans ............ 33.74 31.54 18.89 24.70 25.41
CAPITAL RATIOS:
Ratio of average common equity to average total assets .......... 4.78% 3.14% 3.58% 3.79% 3.51%
Ratio of average total equity to average total assets ........... 8.44 7.47 8.05 7.99 6.24
Tangible capital-to-assets ratio(10) ............................. 7.01% 7.09% 6.65% 7.56% 6.66%
Core capital-to-assets ratio(10) ................................. 7.01 7.09 6.65 7.56 6.66
Risk-based capital-to-assets ratio(10) ........................... 14.19 15.79 14.13 15.85 14.42
</TABLE>
- -----------
(1) In 1996 the Company recorded a one-time SAIF special assessment of $2.6
million ($1.6 million after tax).
(2) In 1995, the Company recorded a $9.3 million gain ($5.8 million after
tax) from the sale of its branches on the west coast of Florida. See
"Risk Factors--Effect of Non-interest Income."
(3) Amount reflects expense from change in accounting principle of $194,843
for fiscal 1994. See Note 15 to Consolidated Financial Statements.
(4) Amount is 1991 reflects extraordinary loss of $50,390 from early
extinguishment of debt.
(5) Does not include mortgage loans held for sale.
(6) Return on average assets is calculated before payment of Preferred Stock
dividends.
(7) The ratio of total dividends declared during the period (including
dividends on the Bank's and the Company's preferred stock and the
Company's Class A and Class B Common Stock) to total earnings for the
period before dividends.
(8) The ratio of earnings to combined fixed charges and Preferred Stock
dividends excluding interest on deposits is calculated by dividing
income before taxes and extraordinary items by interest on borrowings
plus 33% of rental expense plus Preferred Stock dividends on a pretax
basis. The ratio of earnings to combined fixed charges and Preferred
Stock dividends including interest on deposits is calculated by dividing
income before taxes and extraordinary items by interest on deposits plus
interest on borrowings plus 33% of rental expense plus Preferred Stock
dividends on a pretax basis.
(9) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income by net interest income.
(10) Regulatory capital ratio of the Bank.
42
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and the related financial data contained herein are
presented to assist the reader in the understanding and evaluating the
financial condition, results of operations and future prospects of BankUnited
Financial Corporation (the "Company") and are intended to supplement, and
should be read in conjunction with, the Consolidated Financial Statements and
related Notes and other financial information presented herein.
The Company's income is derived primarily from its loans and other
investments. Funding for such loans and investments is derived principally
from deposits, loan repayments, and borrowings. Consequently, the Company's
net income depends, to a large extent, on the interest rate spread between
the average yield earned on loans and investments and the average rate paid
on deposits and borrowings. Results of operations are also dependent on the
dollar volume and asset quality of the Company's loans and investments.
The results of the Company's operations, like those of other financial
institution holding companies, are affected by the Company's asset and
liability management policies, as well as factors beyond the Company's
control, such as general economic conditions and the monetary and fiscal
policies of the federal government. Lending activities are affected by the
demand for mortgage financing and other types of loans, which is in turn
affected by the interest rates at which such financing may be offered and
other factors affecting the supply of housing and the availability of funds.
Deposit flows and costs of funds are influenced by yields available on
competing investments and by general market rates of interest.
ACQUISITION OF SUNCOAST SAVINGS & LOAN ASSOCIATION, FSA AND THE BANK OF
FLORIDA.
On November 15, 1996, the Company completed its acquisition of Suncoast
Savings & Loan Association, FSA ("Suncoast"). Suncoast had total assets of
$409.4 million, net loans of $335.0 million, deposits of $298.5 million and
stockholders' equity of $24.7 million as of September 30, 1996. The cost of
the acquisition to the Company was $27.8 million, representing the fair value
of consideration given to Suncoast shareholders as well as option and warrant
holders. See Note 18 of Notes to Consolidated Financial Statements for
additional information regarding this acquisition.
In March 1996, the Company also acquired for cash consideration of $2.8
million, The Bank of Florida, a one branch state commercial bank which had
assets of $28.1 million and deposits of $27.3 million on the date of
acquisition.
RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME. Net income before preferred stock dividends for fiscal 1996
was $2.6 million compared to $6.2 million in 1995. The decrease in net income
was primarily attributable to the pretax gain recorded in the fourth quarter
of 1995 of $9.3 million ($5.8 million after tax) from the sale of the
Company's three branches on the west coast of Florida and the expense of a
one-time special assessment by the Savings Association Insurance Fund
("SAIF") of $2.6 million ($1.6 million after tax) in the fourth quarter of
1996. The SAIF special assessment became effective on September 30, 1996, in
connection with the federal government's plan to recapitalize the SAIF. Many
banks and thrifts were levied a 65.7 basis point charge against their SAIF
deposit base to help meet the 1.25% mandated deposit reserve ratio. See
"Non-Interest Expenses" below.
Primary earnings per share were $0.10 in 1996 compared to $1.77 in 1995.
Fully diluted earnings per share totaled $0.10 in 1996 compared to $1.26 in
1995. There were no common stock dividends declared in fiscal 1996 or 1995.
In the fourth quarter of fiscal 1994 the Company suspended common stock
dividends for the foreseeable future in order to use funds to support managed
and controlled growth.
NET INTEREST INCOME. Net interest income before provision for loan losses
increased $4.4 million or 33.6% to $17.5 million in fiscal 1996 from $13.1
million in fiscal 1995. The increase was attributable to an
43
<PAGE>
increase in the average interest-earning assets of $148.6 million, or 27.1%,
to $696.4 million in 1996 from $547.9 million in 1995, offset by a decline in
the net interest rate spread of two basis points, to 2.10% for 1996 from
2.12% for 1995. Average interest earning assets increased primarily because
of purchases of loans which were funded by an increase in certificates of
deposit. The average yield on interest-earning assets increased 29 basis
points to 7.49% for 1996 from 7.20% for fiscal 1995, and the average cost of
interest-bearing liabilities increased 31 basis points to 5.39% for 1996 from
5.08% for 1995.
The increase in interest income of $12.7 million, or 32.2%, to $52.1
million for fiscal 1996 from $39.4 million for 1995 reflects increases in
interest and fees on loans of $11.1 million or 36.9%. The average yield on
loans increased to 7.65% for 1996 from 7.19% for 1995 and the average balance
of loans receivable increased $120.8 million, or 28.8%, to $540.3 million for
fiscal 1996. The increase in average loans receivable was primarily due to
purchases of residential loans. In order to diversify its portfolio and
improve yields on loans receivable, the Company intends to increase
significantly through purchases and originations the amount of
non-residential loans in its portfolio. In this regard the Company acquired
$108.0 million as part of the Suncoast acquisition subsequent to year end.
The increase in interest expense of $8.3 million, or 31.6% to $34.6
million for fiscal 1996 from $26.3 million for 1995 primarily reflects an
increase in interest on deposits of $2.9 million or 16.5% to $20.8 million
for 1996, and an increase in interest on borrowings of $5.4 million, or
63.6%, to $13.8 million for 1996. The average cost of interest bearing
deposits increased 61 basis points to 5.39% in fiscal 1996 compared with
4.78% in fiscal 1995. The average cost of interest bearing deposits increased
primarily because higher rate certificates of deposit represent a greater
percentage of interest bearing liabilities. The average balance of interest
bearing deposits increased $32.9 million or 8.8% to $406.6 million for fiscal
1996. The average cost of borrowings remained relatively unchanged at 5.88%
in fiscal 1996 versus 5.87% in fiscal 1995, however the average balance of
borrowings increased $91.2 million, or 63.3%, to $235.3 million for 1996.
Borrowings increased in the fourth quarter of fiscal 1995 to replace deposits
sold with the Company's branches on the west coast of Florida.
PROVISION FOR LOAN LOSSES. In fiscal 1996, the Company recorded a credit
for loan losses of $120,000 as compared to a provision of $1.2 million in
fiscal 1995. The credit for loan losses recorded in fiscal 1996 was primarily
due to a recovery of $1.0 million as a result of a legal settlement reached
in October, 1995 with a seller/servicer of loans from which the Company had
previously purchased approximately $38.7 million of loans. The Company
experienced unusually large losses on these purchased loans and as a result
instituted a lawsuit against the seller for breach of warranty. Total charge
offs in fiscal 1996 were $493,000 and recoveries were $1.1 million compared
with charge offs of $594,000 and recoveries of $1,000 in fiscal 1995. For a
detailed discussion of the Company's asset quality and allowance for loan
losses, see "Financial Condition-Credit Quality".
NON-INTEREST INCOME. Other income for fiscal 1996 was $0.6 million
compared with $10.2 million in fiscal 1995. Fiscal 1995 included a gain of
$9.3 million from the sale of the Company's branches on the west coast of
Florida, a gain of $263,000 from the sale of $23.7 million of mortgage
servicing rights and gains of $239,000 from the sale of loans and
mortgage-backed securities. There were no significant gains or losses from
the sale of assets in 1996.
NON-INTEREST EXPENSES. Operating expenses increased $1.9 million or 15.7%
to $14.0 million for fiscal 1996 compared to $12.1 million for fiscal 1995
primarily as a result of a $2.6 million ($1.6 million after tax) accrual for
the one time SAIF special assessment. The SAIF special assessment was a 65.7
basis point charge on deposits that were insured by the SAIF of the FDIC on
March 31, 1995. There will be a significant reduction in deposit insurance
premiums in fiscal 1997.
The reduction of operating expenses as a result of the sale of the
Company's three branches on the west coast of Florida in July 1995 were
substantially offset by the opening of three new branches in Palm Beach
County on the east coast of Florida in fiscal 1996.
Employee compensation and benefits increased $278,000 or 7.0% to $4.3
million in fiscal 1996 from $4.0 million in fiscal 1995. The increase
primarily represents increased personnel resulting from the Company's growth.
44
<PAGE>
Insurance expense increased 251.5% due to the one time SAIF special
assessment of $2.6 million. Insurance expense is expected to decrease because
the annual insurance rate will decline to 6.7 basis points in 1997.
Expenses associated with real estate owned ("REO") decreased to $73,000 in
fiscal 1996 from $559,000 in fiscal 1995, a decrease of $486,000. This
decrease reflected net gains on the sale of REO of $178,000 in fiscal 1996,
compared with net losses of $172,000 in fiscal 1995.
Other operating expenses decreased $420,000 or 17.1%, to $2.0 million for
fiscal 1996 from $2.4 million for fiscal 1995. The decrease primarily
reflects a decrease in the provision for losses on tax certificates. In
fiscal 1995, the Company recorded an additional provision on tax certificates
previously purchased, which have not been redeemed and on which the Company
elected not to seek tax deeds.
INCOME TAX PROVISION. The income tax provision was $1.7 million for fiscal
1996 compared to $3.7 million for fiscal 1995. The difference primarily
results in the difference in income before income taxes. The effective tax
rate was 39.1% in 1996 and 37.5% in 1995.
PREFERRED STOCK DIVIDENDS. Total preferred stock dividends were $2.1
million in fiscal 1996 compared to $2.2 million in fiscal 1995. This decrease
was because the Company declared a special dividend in the fourth quarter of
fiscal 1995 on the Series A and Series B Non-Cumulative Convertible Preferred
Stock of $1.25 and $0.92 per share, respectively, payable in Class A Common
Stock. The special dividend represented five quarters of unpaid dividends.
Regular dividends were paid on all other classes of preferred stock for both
fiscal 1996 and 1995.
FINANCIAL CONDITION
Total assets increased $216.0 million, or 35.5% to $824.4 million at
September 30, 1996 from $608.4 million at September 30, 1995, as compared to
$551.1 million at September 30, 1994.
LOANS. The Company's net loans receivable increased by $193.3 million, or
42.6%, to $646.4 million, at September 30, 1996 from $453.1 million at
September 30, 1995. The increase was primarily the result of $218.9 million
of purchased residential loans, a $32.0 million purchase of a commercial real
estate loan package, and $82.7 million of loan originations, partially offset
by principal repayments of $133.8 million, sales of $4.4 million, and
principal charge-offs and transfers to REO of $1.1 million. The commercial
real estate loan package was comprised of 23 loans in South Florida with
principal balances ranging from $376,000 to $4.7 million. Loans receivable
increased $40.2 million from September 30, 1994 to September 30, 1995, a 9.8%
change, primarily due to $76.1 million in residential loans purchased in
fiscal 1995.
Of the new loans originated or purchased during fiscal 1996 totaling
$332.9 million, $207.1 million or 62.3% represented adjustable-rate
residential loans. Of the Company's total net loans receivable of $646.4
million, at September 30, 1996, $448.7 million or 69.4% were adjustable-rate
mortgage loans ("ARM's"). Of this amount the Company had at September 30,
1996 $155.7 million in ARM's tied to the 11th District Federal Home Loan Bank
cost of funds index ("COFI"). COFI is a lagging index in that it does not
change as quickly as market rates.
CREDIT QUALITY. At September 30, 1996 non-performing assets totaled $7.8
million as compared to $6.7 million and $6.4 million at September 30, 1995
and 1994, respectively. Expressed as a percentage of total assets,
non-performing assets declined to 0.95% as of September 30, 1996 as compared
to 1.10% as of September 30, 1995. The declines in fiscal 1996 and fiscal
1995 were due to asset growth.
Prior to 1993, the Company did not experience significant loan losses.
However, beginning late in 1993, the Company began to charge off loans,
particularly in Southern California where real estate values declined. Real
estate values in Southern California had declined because of i) a slowing in
the economy due to plant closings and layoffs in certain industries, ii)
natural disasters in the area, and
45
<PAGE>
iii) an over-valuation of the real estate market, in general, prior to the
decline. While real estate values in Southern California stabilized during
1996, the Company believes that real estate values there have declined
sufficiently since 1993 for there to be a continuing risk that borrowers
faced with home mortgage payments based on 1993 values would default on their
home mortgages. From late 1993 through September 30, 1996 the Company
recorded a total of $2.4 million in charge offs for residential loans secured
by property in Southern California. Of these Southern California charge offs,
$1.0 million or 41.7% (an unusually high charge off rate) were for loans
purchased from a single seller. As a result, the Company instituted legal
action against the seller for breach of warranty to recover the Company's
losses. In October 1995, this legal action was settled, which resulted in a
recovery of $1.0 million. Taking into account this $1.0 million recovery, the
Company recorded net charge offs of $1.7 million for the period from late
1993 through September 30, 1996, of which $1.4 million or 82.4% were for
residential loans secured by real properties in Southern California.
Beginning in fiscal 1993, management began to reduce the percentage of new
loans acquired in California and ceased acquiring all but de minimis amounts
of such loans in April 1994. As of September 30, 1996 the Company had $125.8
million of residential loans in California which constituted 15.3% of its
assets. This compares to $183.6 million, or 33.3% of its assets as of
September 30, 1994, and $147.2 million or 24.2% as of September 30, 1995.
Effective in fiscal 1997, after taking into account the improved economic
conditions in Southern California, management has discontinued this policy
and may purchase additional recently originated residential loans secured by
property located in California.
The allowance for loan losses was $2.2 million, $1.5 million, and $0.8
million at September 30, 1996, 1995, and 1994, respectively. The allowance
for loan losses as a percentage of total loans increased to 0.34% at fiscal
year end 1996, as compared to 0.32% at fiscal year end 1995, and .20% at
fiscal year end 1994. The increase in non-performing assets to $7.8 million
as of September 30, 1996 from $6.7 million as of September 30, 1995 was due
to increases in non-performing loans of $1.7 million and non-accrual tax
certificates of $226,000, partially offset by a decrease in REO of $821,000.
The increase in non-accrual tax certificates was due primarily to
certificates purchased in 1993 which were not redeemed and on which the
Company determined not to apply for tax deeds. REO declined from $1.5 million
as of September 30, 1995 to $632,000 as of September 30, 1996. The decrease
in REO was due to sales of properties in fiscal 1996 with net book values
totaling $2.3 million, partially offset by new additions to REO of $1.4
million during the year. As a percentage of non-performing loans, the
allowance for loan losses increased from 18.9% at September 30, 1994, to
31.5% at September 30, 1995 and 33.7% at September 30, 1996. At September 30,
1996, $2.8 million, or 43.4%, of the Company's non-performing loans were
secured by Southern California properties as compared to $1.5 million or
37.6%, as of September 30, 1995. This level of Southern California
non-performing loans reflected the longer time period required for
foreclosures to be completed on California properties, as compared to that
for foreclosures in other states .
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118. "Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosures ("SFAS No.
114"). There was no impact on the consolidated statement of operations upon
implementation due to the composition of the Company's loan portfolio
(primarily residential or collateral dependent loans) and the Company's
policy for establishing the allowance for loan losses. The only impact to the
consolidated statement of financial condition and to non-performing assets
was to reclassify three loans totaling $522,000 previously classified as in
substance foreclosures in real estate owned to non accrual loans. These loans
were reclassified because the Company did not have possession of the
collateral which, under SFAS No. 114 is required for a loan to be classified
as real estate owned. SFAS No. 114 does not apply to large groups of smaller
balance homogenous loans that are collectively evaluated for impairment.
Loans collectively reviewed by the Company for impairment include all
residential and consumer loans that are past due not more than 60 days. All
other loans are reviewed based on specific criteria such as delinquency or
other factors that may come to the attention of management. The Company's
impaired loans within the scope of SFAS No. 114 include all non-performing
loans.
46
<PAGE>
The Company's process for evaluating the adequacy of the allowance for
loans losses has three basic elements: first is the identification of
impaired loans; second is the establishment of an appropriate loan loss
allowance once individual specific impaired loans are identified; and third
is a methodology for establishing loans losses based on the inherent risk in
the remainder of the loan portfolio, past loan loss experience, specific
loans which could have loss potential, geographic and industry concentration,
delinquency trends, economic conditions, the views of its regulators, and
other relevant factors.
The identification of impaired loans is achieved mainly through individual
reviews of all loans 60 or more days past due. Loss allowances are
established for specifically identified impaired loans based on the fair
value of the underlying collateral in accordance with SFAS No. 114.
Impairment losses are included in the allowance for loan losses through a
charge to the provision for loan losses. Adjustments to impairment losses
resulting from changes in the fair value of an impaired loan's collateral are
included in the provision for loan losses. Upon disposition of an impaired
loan any related valuation allowance is removed from the allowance for loan
losses. The allowance for loan losses is adjusted by additions charged to
operations as a provision for loan losses and by loan recoveries, with actual
losses charged as reductions to the allowance.
Management believes that the allowance for loan losses is adequate given
the strength of the Company's collateral position and the attention given to
loan review and classifications. There can be no assurance that additional
provisions for loan losses will not be required in future periods.
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated:
<TABLE>
<CAPTION>
SEPEMBER 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
------------ --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans(1) ........................ $4,939(3) $3,496 $3,918 $4,225 $1,043
Restructured loans(2) ....................... 1,457 1,070 533 569 --
Loans past due 90 days and still accruing .. -- 92 -- -- --
------------ --------- -------- -------- ---------
Total non-performing loans ................. 6,396 4,658 4,451 4,794 1,043
Non-accrual tax certificates ................ 800 574 -- -- --
Real estate owned ........................... 632 1,453 1,983 1,581 680
------------ --------- -------- -------- ---------
Total non-performing assets ................ $7,828 $6,685 $6,434 $6,375 $1,723
============ ========= ======== ======== =========
Allowance for losses on tax certificates ... $ 614 $ 569 $ 85 $ -- $ --
Allowance for loan losses ................... 2,158 1,469 841 1,184 265
------------ --------- -------- -------- ---------
Total allowance ............................ $2,772 $2,038 $ 926 $1,184 $ 265
============ ========= ======== ======== =========
Non-performing assets as a percentage
of total assets ........................... .95% 1.10% 1.17% 1.46% .50%
Non-performing loans as a percentage
of total loans(4) ......................... .99% 1.02% 1.07% 1.54% .45%
Allowance for loan losses as a percentage
of total loans(4) ......................... .34% .32% .20% .38% .11%
Allowance for loan losses as a percentage of
non-performing loans ...................... 33.74% 31.54% 18.89% 24.70% 25.41%
</TABLE>
- ----------
(1) Gross interest income that would have been recorded on non-accrual loans
had they been current in accordance with original terms was $217,000,
$128,000, $52,000, $295,000, and $127,000, for the years ended September
30, 1996, 1995, 1994, 1993, and 1992, respectively. The amount of
interest income on such non-accrual loans included in net income for
years ended September 30, 1996, 1995, and 1994 was $145,000, $113,000 and
$15,000, respectively.
(2) All restructured loans were accruing.
(3) In addition to the above, management has concerns as to the borrower's
ability to comply with present repayment terms on $109,000 of accruing
loans as of September 30, 1996.
(4) Based on balances prior to deductions for allowance for loan losses.
47
<PAGE>
TAX CERTIFICATES. The Company's investment in tax certificates increased
$544,000, or 1.4%, to $40.1 million at September 30, 1996 from $39.5 million
at September 30, 1995. The increase was primarily the result of $30.4 million
in certificate purchases during fiscal 1996 which exceeded $29.9 million in
certificate redemptions and repayments.
MORTGAGE-BACKED SECURITIES. The Company's held-to-maturity mortgage-backed
securities portfolio decreased $36.2 million, or 71.1%, to $14.7 million at
September 30, 1996 from $50.9 million at September 30, 1995, primarily as a
result of the Company's reclassifying $31.8 million of held-to-maturity
mortgage-backed securities to available-for-sale in accordance with "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities" issued by the Financial Accounting Standards
Board which permitted a one-time reclassification. The reclassified
securities had a market value of $916,000 in excess of their book value at
the time of the transfer.
The Company's available for sale mortgage-backed securities portfolio
increased $53.4 million to $55.5 million as of September 30, 1996 from $2.1
million as of September 30, 1995: $31.8 million of the increase was due to
the reclassification from held to maturity discussed above; $9.1 million of
the increase was due to securities acquired with the Bank of Florida; and the
remainder of the increase was due to purchases made during the 1996 fiscal
year.
DEPOSITS. Deposits increased by $196.0 million, or 63.2%, to $506.1
million at September 30, 1996 from $310.1 million at September 30, 1995.
Management believes the increase in deposits was attributable to the Company
offering competitive interest rates and personalized service. In addition,
the Company acquired deposits of $27.3 million in the purchase of the Bank of
Florida and opened branches in Boca Raton, Florida in December, 1995, Boynton
Beach, Florida in June 1996 and West Palm Beach, Florida in September, 1996.
In July 1995, the Company sold its three branches on the west coast of
Florida with total deposits of $130.3 million. The Company has shifted its
deposit growth strategy to focus on Dade, Broward and Palm Beach Counties.
STOCKHOLDERS' EQUITY. Stockholders' equity was $69.1 million at September
30, 1996, an increase of $23.4 million or 51.1% from $45.7 million at
September 30, 1995. The increase was due primarily to the issuance of
3,565,000 shares of Class A Common Stock pursuant to a stock offering
completed in February 1996. Net proceeds from the offering were approximately
$23.0 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's most significant sources of funds are deposits, Federal Home
Loan Bank ("FHLB") advances, amortization and pre-payment of mortgage loans
and securities, maturities of investment securities and other short term
investments, and earnings and funds provided from operations. While FHLB
advances, scheduled mortgage loan repayments and securities repayments are
relatively predicable sources of funds, deposit flows and prepayments on
loans and mortgage-backed securities are greatly influenced by general
interest rates, economic conditions and competition. The Company manages the
pricing of its deposits to maintain a desired balance. In addition, the
Company invests excess funds in federal funds and other short-term
interest-earning assets which provide liquidity to meet lending requirements.
The Bank is required under applicable federal regulations to maintain
specified levels of liquid investments in cash, United States government
securities and other qualifying investments. Regulations currently in effect
require the Bank to maintain liquid assets of not less than 5.0% of its net
withdrawable accounts plus short-term borrowings, of which short-term liquid
assets must consist of not less than 1.0%. As of September 30, 1996, the Bank
had liquid assets and short-term liquid assets of 6.75% and 3.80%,
respectively, which was in compliance with these requirements.
The Company's primary use of funds is to purchase or originate loans and
to purchase mortgage-backed and investment securities. In fiscal 1996, 1995,
and 1994, loans increased $192.8 million, $43.1
48
<PAGE>
million, and $117.6 million, respectively, and the Company purchased $22.7
million, $16.6 million, and $61.4 million, respectively, of mortgage-backed
and investment securities. In addition, in 1995, the Company sold branches
having $130.3 million of deposits. Funding for the above came primarily from
increases in deposits of $196.0 million in 1996, increases in FHLB advances
of $83.6 million in 1995 and increases in both deposits and FHLB advances of
$52.7 million and $60.4 million, respectively in 1994.
Federal savings banks such as BankUnited, FSB (the "Bank") are also
required to maintain capital at levels specified by applicable minimum
capital ratios. For a detailed discussion of these requirements, see Note 11
of Notes to Consolidated Financial Statements. At September 30, 1996, the
Bank was in compliance with all capital requirements and met the definition
of a "well capitalized" institution under applicable federal regulations.
The Company is exploring several alternative public and/or private
financings that would provide the Bank with a significant increase in
liquidity and Tier 1 capital to permit additional growth.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements presented herein have been prepared
in accordance with generally accepted accounting principles, which require
the measurements of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing
power of money over time due to inflation. Savings institutions have asset
and liability structures that are essentially monetary in nature, and their
general and administrative costs constitute relatively small percentages of
total expenses. Thus, increases in the general price levels for goods and
services have a relatively minor effect on the total expenses of the Company.
Interest rates have a more significant impact on the Company's financial
performance than the effect of general inflation. Interest rates do not
necessarily move in the same direction or change in the same magnitude as the
prices of goods and services, although periods of increased inflation may
accompany a rising interest rate environment.
RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
NET INCOME. Net income before preferred stock dividends for fiscal 1995
was $6.2 million compared to $2.3 million in 1994. The increase in net income
was primarily attributed to the pretax gain recorded in the fourth quarter of
1995 of $9.3 million ($5.8 million after tax) from the sale of the Company's
three branches on the west coast of Florida
Primary earnings per share were $1.77 in 1995 compared to $0.10 in 1994.
Fully diluted earnings per share totaled $1.26 compared to $0.10 in 1994.
There were no common stock dividends declared in fiscal 1995 compared to
dividends of $0.075 per share of Class A Common Stock and $0.03 per share of
Class B Common Stock declared in fiscal 1994.
NET INTEREST INCOME. Net interest income before provision for loan losses
was $13.1 million in fiscal 1995 as compared to $14.1 million in fiscal 1994.
The $1.0 million, or 7.2%, decrease was attributable to a decline in the net
interest rate spread to 2.12% for fiscal 1995, from 2.78% for fiscal 1994,
which was only partially offset by an increase in the average balance of
interest-earning assets. The average yield on interest-earning assets
increased to 7.20% in fiscal 1995 from 6.48% in fiscal 1994 and the average
cost of interest-bearing liabilities increased to 5.08% in fiscal 1995
compared to 3.70% in fiscal 1994.
The net interest rate spread was negatively impacted by the 300 basis
point rise in market interest rates in 1994 and early 1995, resulting in
interest rate adjustments that were limited by the caps on the Company's
ARMs. In addition, the Company had at September 30, 1995, $156.4 million in
ARMs tied to COFI. Also, in fiscal 1995, in order to mitigate the loss of
deposits from the sale of the west coast branches, the Company paid higher
than usual rates on deposits in an effort to attract new deposits in its
remaining branches, and utilized these new funds and higher cost FHLB
advances in order to maintain its asset size.
49
<PAGE>
The increase in interest income of $9.0 million, or 29.6%, to $39.4
million for fiscal 1995 from $30.4 million for fiscal 1994 reflects increases
in interest and fees on loans of $6.7 million, or 28.3%, and interest on
mortgage-backed securities of $1.8 million, or 77.3%. The yield on loans
increased to 7.19% in fiscal 1995 from 6.46% in fiscal 1994 and the average
balance of loans receivable increased $55.3 million, or 15.2%, to $419.5
million for fiscal 1995. The yield on mortgage-backed securities increased to
6.91% in fiscal 1995 from 6.55% in fiscal 1994 and the average balance of
mortgage-backed securities increased $24.0 million, or 68.1%, to $59.2
million for fiscal 1995. In order to diversify its loan portfolio and improve
yields on loans receivable, the Company intends to increase significantly
through purchases and originations the amount of non-residential loans in its
portfolio. In December 1995, the Company purchased $32.0 million of
commercial real estate loans.
The increase in interest expense of $10.0 million, or 61.4%, to $26.3
million in fiscal 1995 from $16.3 million in fiscal 1994 reflects increases
in interest on deposits of $6.5 million, or 57.3%, to $17.8 million for
fiscal 1995 and an increase in interest on borrowings of $3.5 million, or
70.8%, to $8.4 million in fiscal 1995. The average cost of interest-bearing
deposits increased from 3.55% to 4.78%, and the average balance of
interest-bearing deposits increased $53.9 million, or 16.8%, to $373.7
million for fiscal 1995. The average cost of borrowings increased to 5.87% in
fiscal 1995 from 4.11% in fiscal 1994, and the average balance of borrowings
increased $23.5 million, or 19.4%, to $144.1 million for fiscal 1995.
PROVISIONS FOR LOAN LOSSES. The provision for loan losses increased
$34,000, or 2.9%, to $1.2 million in fiscal 1995. Net charge offs for fiscal
1995 were $593,000 compared to $1.5 million in fiscal 1994. for a detailed
discussion of the Company's asset quality and allowance for loan losses, see
"Financial Condition--Credit Quality."
NON-INTEREST INCOME. Other income for fiscal 1995 was $10.2 million
compared with $0.6 million in fiscal 1994. Fiscal 1995 included a gain of
$9.3 million from the sale of Company's branches on the west coast of
Florida, a gain of $263,000 from the sale of $23.7 million in mortgage
servicing rights and gains of $239,000 from sale of loans and mortgage-backed
securities. Fiscal 1994 included gains of $150,000 from the sale of loans and
mortgage-backed securities.
NON-INTEREST EXPENSES. Operating expenses increased $2.3 million, or
22.9%, to $12.1 million for fiscal 1995 compared to $9.9 million for fiscal
1994. Expenses increased in nearly every major category. The sale of the
Company's west coast branches did not significantly impact expenses because
it occurred late in the year.
Employee compensation and benefits increased $625,000 or 18.5% to $4.0
million in fiscal 1995 from $3.4 million in fiscal 1994. The increase
primarily represents a carryover from 1994, when the Company opened a new
branch in Deerfield Beach, Florida and a mortgage origination center in
Plantation, Florida.
Occupancy and equipment expense increased $469,000, or 37.2%, as a result
of the opening of the new branch and lending office in 1994 and increased
rent expense paid while the new space for the Company's executive and
administrative offices was being prepared for occupancy.
Insurance expense increased $183,000, or 21.7%, due to FDIC insurance paid
on the Company's increased deposits.
Professional fees--legal and accounting increased $436,000, or 52.3%, due
primarily to a legal action to recover losses on loans purchased from a
single seller which was settled in October 1995 and the payment of disputed
prior year legal fees.
Expenses associated with REO increased to $559,000 in fiscal 1995, from
$230,000 in fiscal 1994, an increase of $329,000. Net losses on the sale of
REO increased $117,000 primarily because of losses on
50
<PAGE>
property in Southern California. REO operating expenses increased $213,000
for fiscal 1995, due to higher levels of REO during the year.
INCOME TAX PROVISION. The income tax provision was $3.7 million for fiscal
1995 compared to $1.3 million for fiscal 1994. The difference primarily
resulted from the difference in income before income taxes. The effective tax
rate was 37.5% in 1995 and 31.4% in 1994; 1994 includes a $195,000 expense
for the cumulative effect of a change in accounting principle as a result of
the Company's adoption of Statement of Financial Accounting Standards No.
109-"Accounting for Income Taxes."
PREFERRED STOCK DIVIDENDS. Total preferred stock dividends were $2.2
million in fiscal 1995 compared to $1.9 million in fiscal 1994. In the fourth
quarter of fiscal 1995, the Company declared a special dividend on the Series
A and Series B Non-Cumulative Convertible Preferred Stock of $1.25 and $0.92
per share, respectively, payable in Class A Common Stock. The dividend
represented five quarters of unpaid dividends. In fiscal 1994, the Company
paid cash dividends of $0.75 and $0.55 on the Series A and Series B
Non-Cumulative Convertible Preferred Stock, respectively. Dividends of $0.55,
$0.80, and $0.80 were paid on the Company's Series C, Series C-II, and Series
1993, Non Cumulative Convertible Preferred Stock respectively for both years.
Dividends on the 9% Non Cumulative Perpetual Preferred Stock which was issued
in the first quarter of fiscal 1994, were $0.90 and $0.675 per share in
fiscal 1995 and 1994, respectively. In 1994, the Bank paid $198,000 in
preferred stock dividends on stock redeemed with the issuance of the
Non-Cumulative Perpetual Preferred Stock, Series 1993.
51
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Set forth below is selected quarterly data for the fiscal years ended
September 30, 1996 and 1995.
<TABLE>
<CAPTION>
1996
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net interest income .................................... $3,538 $3,758 $4,723 $5,491
Provision (credit)for loan losses ...................... (300) (--) 75 105
Non-interest income .................................... 158 129 198 164
Non-interest expense ................................... 2,528 2,764 3,006 5,738
-------- ---------- ---------- ----------
Income (loss) before taxes and preferred stock
dividends .............................................. 1,468 1,123 1,840 (188)
Income taxes ........................................... 557 430 706 (36)
-------- ---------- ---------- ----------
Net income (loss) before preferred stock dividends .... 911 693 1,134 (152)
Preferred stock dividends .............................. 536 536 537 536
-------- ---------- ---------- ----------
Net income (loss) applicable to common stock .......... $ 375 $ 157 $ 597 $ (688)
======== ========== ========== ==========
Primary earnings (loss) per share ...................... $ 0.16 $ 0.04 $ 0.10 $(0.12)
======== ========== ========== ==========
Fully diluted earnings (loss) per share ................ $ 0.15 $ 0.04 $ 0.10 $(0.12)
======== ========== ========== ==========
</TABLE>
In the fourth quarter of 1996, the Company recorded an expense of $2.6
million for a one-time special assessment by the Savings Association
Insurance Fund ("SAIF"). The SAIF special assessment required by the FDIC
became effective on September 30, 1996, in connection with the federal
government's plan to recapitalize the SAIF.
<TABLE>
<CAPTION>
1995
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net interest income ............................. $3,455 $3,497 $3,177 $2,985
Provision for loan losses ....................... 150 115 75 881
Non-interest income ............................. 369 232 215 9,421
Non-interest expense ............................ 2,856 2,919 2,822 3,552
---------- ---------- ---------- ----------
Income before taxes and preferred stock
dividends ....................................... 818 695 495 7,973
Income taxes .................................... 296 254 181 3,010
---------- ---------- ---------- ----------
Net income before preferred stock dividends .... 522 441 314 4,963
Preferred stock dividends ....................... 502 502 502 704
---------- ---------- ---------- ----------
Net income (loss) applicable to common stock ... $ 20 $ (61) $ (188) $4,259
========== ========== ========== ==========
Primary earnings (loss) per share ............... $ 0.01 $(0.03) $(0.09) $ 1.80
========== ========== ========== ==========
Fully diluted earnings (loss) per share ........ $ 0.01 $(0.03) $(0.09) $ 1.11
========== ========== ========== ==========
</TABLE>
In the fourth quarter of 1995, the Company sold its three branches on the
west coast of Florida and recorded a gain of $9.3 million. In addition, the
Company increased its allowance for loan losses from $720,000 at June 30,
1995 to $1.5 million at September 30, 1995, which required a fourth quarter
provision of $881,000. The additional allowance was required primarily due to
continued deterioration in the Southern California real estate market. The
Company also paid in the fourth quarter approximately $272,000 in previously
disputed legal fees and as part of its annual filings for tax deeds on tax
certificates, recorded approximately $350,000 for losses on tax certificates
primarily for certificates purchased in June 1992, for which the deeds will
not be applied.
52
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BANKUNITED FINANCIAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
---------
Report of Independent Certified Public Accountants ........................ 54
Consolidated Statements of Financial Condition as of September 30, 1996
and September 30, 1995 .................................................... 55
Consolidated Statements of Operations for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 56
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 57
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 59
Notes to Consolidated Financial Statements ................................ 61
Unaudited Pro Forma Condensed Combined Financial Statements .............. 88
</TABLE>
53
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
BankUnited Financial Corporation:
In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of operations, of
stockholders' equity, and of cash flows present fairly, in all material
respects, the financial position of BankUnited Financial Corporation and its
subsidiaries at September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1 and 15 to the consolidated financial statements,
the Company changed its method of accounting for income taxes as of October
1, 1993.
PRICE WATERHOUSE LLP
Miami, Florida
November 4, 1996, except as to Note 18,
which is as of November 15, 1996
54
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash ........................................................................ $ 5,483 $ 2,517
Federal Home Loan Bank overnight deposits ................................... 28,253 31,813
Federal funds sold .......................................................... 400 400
Tax certificates, (net of reserves of $614 and $569 at September 30, 1996
and 1995, respectively) ................................................... 40,088 39,544
Investments held to maturity, (market value of approximately $11 and $4,686
at September 30, 1996 and 1995, respectively) ............................. 11 4,686
Investments available for sale, at market ................................... 6,685 --
Mortgage-backed securities held to maturity, (market value of approximately
$14,274 and $50,670 at September 30, 1996 and 1995, respectively) ......... 14,698 50,934
Mortgage-backed securities available for sale, at market .................... 55,467 2,064
Loans receivable, net ....................................................... 646,385 453,134
Mortgage loans held for sale (market value of approximately $217 at
September 30, 1995) ....................................................... -- 216
Other interest earning assets ............................................... 12,225 12,325
Office properties and equipment, net ........................................ 2,608 2,119
Real estate owned, net ...................................................... 632 1,453
Accrued interest receivable ................................................. 7,023 5,573
Prepaid expenses and other assets ........................................... 4,402 1,637
---------- -----------
Total assets .............................................................. $824,360 $608,415
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ................................................................... $506,106 $310,074
Advances from Federal Home Loan Bank ....................................... 237,000 241,000
Subordinated notes ......................................................... 775 775
Interest payable (primarily on deposits and advances from Federal Home Loan
Bank) .................................................................... 1,244 1,169
Advance payments by borrowers for taxes and insurance ...................... 4,292 3,732
Accrued expenses and other liabilities ..................................... 5,832 5,920
---------- -----------
Total liabilities ......................................................... 755,249 562,670
---------- -----------
Commitments and contingencies (Notes 6 and 16)
Stockholders' equity:
Preferred stock, Series B, C, C-II, 1993 and 9%, $0.01 par value.
Authorized shares--10,000,000; issued and outstanding shares--2,664,547
and 2,679,107 at September 30, 1996 and 1995, respectively ............... 27 27
Class A Common Stock, $.01 par value. Authorized shares--15,000,000; issued
and outstanding shares--5,454,201 and 1,835,170 at September 30, 1996 and
1995, respectively ....................................................... 54 18
Class B Common Stock, $.01 par value. Authorized shares--3,000,000; issued
and outstanding shares--251,515 and 232,324 at September 30, 1996 and
1995, respectively ....................................................... 3 2
Additional paid-in capital .................................................. 62,055 38,835
Retained earnings ........................................................... 7,279 6,838
Net unrealized (losses) gains on securities available for sale, net of tax . (307) 25
---------- -----------
Total stockholders' equity ................................................ 69,111 45,745
---------- -----------
Total liabilities and stockholders' equity ................................ $824,360 $608,415
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
55
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans ........................................... $41,313 $30,171 $23,513
Interest on mortgage-backed securities ............................... 4,250 4,093 2,308
Interest on short-term investments ................................... 2,359 1,491 803
Interest and dividends on long-term investments and other
interest-earning assets ............................................ 4,210 3,664 3,797
---------- ---------- ----------
Total interest income ............................................... 52,132 39,419 30,421
---------- ---------- ----------
Interest expense:
Interest on deposits ................................................. 20,791 17,849 11,344
Interest on borrowings ............................................... 13,831 8,456 4,951
---------- ---------- ----------
Total interest expense .............................................. 34,622 26,305 16,295
---------- ---------- ----------
Net interest income before provision (credit) for loan losses ....... 17,510 13,114 14,126
Provision (credit) for loan losses .................................... (120) 1,221 1,187
---------- ---------- ----------
Net interest income after provision (credit) for loan losses ........ 17,630 11,893 12,939
---------- ---------- ----------
Non-interest income:
Service fees ......................................................... 597 423 358
Gain on sale of loans and mortgage-backed securities ................. 5 239 150
Gain (loss) on sale of other assets .................................. (6) 9,569 --
Other ................................................................ 53 6 46
---------- ---------- ----------
Total non-interest income ........................................... 649 10,237 554
---------- ---------- ----------
Non-interest expenses:
Employee compensation and benefits ................................... 4,275 3,997 3,372
Occupancy and equipment .............................................. 1,801 1,727 1,258
Insurance ............................................................ 3,610 1,027 844
Professional fees--legal and accounting .............................. 929 1,269 833
Data processing ...................................................... 340 356 335
Loan servicing expense ............................................... 979 765 672
Real estate owned operations ......................................... 73 559 230
Other operating expenses ............................................. 2,029 2,449 2,342
---------- ---------- ----------
Total non-interest expenses ......................................... 14,036 12,149 9,886
---------- ---------- ----------
Income before income taxes and cumulative effect of change in
accounting principle .............................................. 4,243 9,981 3,607
Income taxes .......................................................... 1,657 3,741 1,133
---------- ---------- ----------
Income before cumulative effect of change in accounting principle
and preferred stock dividends ..................................... 2,586 6,240 2,474
Cumulative effect of change in accounting principle ................... -- -- 195
---------- ---------- ----------
Net income before preferred stock dividends ......................... 2,586 6,240 2,279
Preferred stock dividends of BankUnited, FSB .......................... -- -- 198
Preferred stock dividends of the Company .............................. 2,145 2,210 1,871
---------- ---------- ----------
Net income after preferred stock dividends .......................... $ 441 $ 4,030 $ 210
========== ========== ==========
Primary earnings per share before cumulative effect of change in
accounting principle ................................................ $ 0.10 $ 1.77 $ 0.19
Expense from change in accounting principle ........................... -- -- 0.09
---------- ---------- ----------
Primary earnings per share ............................................ $ 0.10 $ 1.77 $ 0.10
========== ========== ==========
Fully diluted earnings per share before cumulative effect of change in
accounting principle ................................................ $ 0.10 $ 01.26 $ 0.19
Expense from change in accounting principle ........................... -- -- 0.09
---------- ---------- ----------
Fully diluted earnings per share ...................................... $ 0.10 $ 1.26 $ 0.10
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
56
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON
PREFERRED STOCK STOCK
----------------------- ------------
SHARES AMOUNT SHARES
------------ --------- -------------
<S> <C> <C> <C>
Balance at September 30, 1993 .. 1,529,107 $16 1,721,325
Underwritten public offering of
the Company's preferred stock
Series 9% .................... 1,150,000 11 --
Issuance costs of the Company's
preferred stock, Series 9% ... -- -- --
Issuance of Class A and Class B
Common Stock ................. -- -- 57,179
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- -- 8,514
Payment of dividends on
Company's preferred stock .... -- -- --
Payment of dividends on
BankUnited, FSB's
noncumulative
preferred stock .............. -- -- --
Dividend payment of $.075 per
Class A Common Stock and $.03
per Class B Common Stock ..... -- -- --
Net income for the year ended
September 30, 1994 ........... -- -- --
------------ --------- ------------
Balance at September 30, 1994 .. 2,679,107 27 1,787,018
Issuance of Class A and Class B
Common Stock ................. -- -- 22,418
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- -- 742
Payment of dividends on
Company's preferred stock .... -- -- 24,992
Net unrealized gain on
investments available
for sale ..................... -- -- --
Net income for the year ended
September 30, 1995 ........... -- -- --
------------ --------- ------------
Balance at September 30, 1995 .. 2,679,107 27 1,835,170
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 .. $17 215,765 $ 2 $27,503 $ 2,735 $-- $30,273
Underwritten public offering of
the Company's preferred stock
Series 9% .................... -- -- -- 11,489 -- -- 11,500
Issuance costs of the Company's
preferred stock, Series 9% ... -- -- -- (876) -- -- (876)
Issuance of Class A and Class B
Common Stock ................. 1 7,583 -- 297 -- -- 298
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- (8,514) -- -- -- -- --
Payment of dividends on
Company's preferred stock .... -- -- -- -- (1,871) -- (1,871)
Payment of dividends on
BankUnited, FSB's
noncumulative
preferred stock .............. -- -- -- -- (198) -- (198)
Dividend payment of $.075 per
Class A Common Stock and $.03
per Class B Common Stock ..... -- -- -- -- (137) -- (137)
Net income for the year ended
September 30, 1994 ........... -- -- -- -- 2,279 -- 2,279
------ ---------- -------- --------- ----------- --------- --------------
Balance at September 30, 1994 .. 18 214,834 2 38,413 2,808 -- 41,268
Issuance of Class A and Class B
Common Stock ................. -- 18,232 -- 222 -- -- 222
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- (742) -- -- -- -- --
57
<PAGE>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ------------
Payment of dividends on
Company's preferred stock .... -- -- -- 200 (2,210) -- (2,010)
Net unrealized gain on
investments available
for sale ..................... -- -- -- -- -- 25 25
Net income for the year ended
September 30, 1995 ........... -- -- -- -- 6,240 -- 6,240
------ --------- ----- ------- ------- ------- ---------
Balance at September 30, 1995 .. 18 232,324 2 38,835 6,838 25 45,745
</TABLE>
(TABLE CONTINUED ON NEXT PAGE)
57
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON
PREFERRED STOCK STOCK
----------------------- ------------
SHARES AMOUNT SHARES
------------ --------- ------------
<S> <C> <C> <C>
Conversion of Preferred Stock
to Common Stock Class A .... (14,560) -- 21,340
Issuance of Class A and Class
B Common Stock ............. -- -- 25,210
Underwritten public offering
of the Company's Common
Class A, net ............... -- -- 3,565,000
Payment of dividends on the
Company's Preferred Stock .. -- -- 7,481
Net change in unrealized loss
on investments available
for sale ................... -- -- --
Net income for the year ended
September 30, 1996 ......... -- -- --
----------- ------- ---------
Balance at September 30, 1996 2,664,547 $27 5,454,201
=========== ======= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Conversion of Preferred Stock
to Common Stock Class A .... -- -- -- -- -- -- --
Issuance of Class A and Class
B Common Stock ............. -- 19,191 1 330 -- -- 331
Underwritten public offering
of the Company's Common
Class A, net ............... 36 -- -- 22,831 -- -- 22,867
Payment of dividends on the
Company's Preferred Stock .. -- -- -- 59 (2,145) -- (2,086)
Net change in unrealized loss
on investments available
for sale ................... -- -- -- -- -- (332) (332)
Net income for the year ended
September 30, 1996 ......... -- -- -- -- 2,586 -- 2,586
------ --------- ------ --------- --------- --------- -----------
Balance at September 30, 1996 $54 251,515 $ 3 $62,055 $ 7,279 $(307) $69,111
====== ========= ====== ========= ========= ========= ===========
</TABLE>
The beginning balance at September 30, 1993 of each series of the
Company's preferred stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------ ---------
<S> <C> <C>
Series A ..... 55,000 $ 1
Series B ..... 142,378 2
Series C ..... 363,636 4
Series C-II . 222,223 2
Series 1993 . 745,870 7
----------- -------
Total ...... 1,529,107 $16
=========== =======
</TABLE>
The ending balance at September 30, 1996 of Preferred Stock were as
follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------ ---------
<S> <C> <C>
Series B ..... 183,818 $ 2
Series C ..... 363,636 4
Series C-II . 222,223 2
Series 1993 . 744,870 7
Series 9% .... 1,150,000 12
----------- -------
Total ...... 2,664,547 $27
=========== =======
</TABLE>
Effective September 30, 1995, the Series A Preferred Stock was exchanged
for Series B Preferred Stock.
See accompanying notes to consolidated financial statements.
58
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 2,586 $ 6,240 $ 2,279
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision (credit) for loan losses ........................ (120) 1,221 1,187
Provision for losses on tax certificates .................... 76 484 85
Depreciation and amortization ............................... 674 526 308
Amortization of discounts and premiums on investments ...... 20 3 32
Amortization of discounts and premiums on
mortgage-backed securities ................................ 144 84 92
Amortization of discounts and premiums on loans ............ (2,332) (784) 138
Loans originated for sale ................................... (4,141) (2,376) (12,387)
Increase in accrued interest receivable ..................... (1,239) (320) (859)
Increase in interest payable on deposits and FHLB advances . 31 685 61
Increase (decrease) in accrued expenses ..................... 213 (68) 121
Increase (decrease) in accrued taxes ........................ (2,960) 3,065 (547)
Increase (decrease) in deferred taxes ....................... (469) 33 (174)
Increase (decrease) in other liabilities .................... 2,841 1,763 (800)
(Increase) decrease in prepaid expenses and other assets ... (224) 566 (962)
Gain on sales of mortgage-backed securities ................. -- (231) (221)
Proceeds from sale of loans ................................. 4,362 2,456 21,797
Recovery on loans ........................................... 1,119 1 52
(Gain) loss on sales of loans ............................... (5) (8) 71
(Gain) loss on real estate owned operations ................. (185) 94 63
(Gain) on sales of tax certificates ......................... -- (3) (1)
(Gain) loss on sale of other assets ......................... 7 -- --
Gain on sale of loan servicing rights ....................... -- (265) --
Gain on sale of branches .................................... -- (9,304) --
----------- ---------- -----------
Net cash provided by (used in) operating activities ....... (398) 3,862 10,335
----------- ---------- -----------
Cash flows from investing activities:
Net increase in loans ....................................... (185,457) (44,744) (117,689)
Proceeds from sale of real estate owned ..................... 2,661 4,607 3,522
Purchase of investment securities ........................... (3,510) (4,675) (4,180)
Purchase of mortgage-backed securities ...................... (19,228) (11,931) (57,188)
Purchases of other earning assets ........................... (650) (9,580) --
Proceeds from sale of loan servicing rights ................. -- 265 --
Proceeds from repayments of investment securities .......... 5,675 2,000 7,150
Proceeds from repayments of mortgage-backed securities ..... 10,523 6,326 7,021
Proceeds from repayments of other earning assets ........... 750 5,125 --
Proceeds from sales of investment securities ................ 2,097 -- --
Proceeds from sale of mortgage-backed securities ........... -- 9,947 6,297
Purchases of office properties and equipment ................ (1,170) (742) (1,109)
Net decrease (increase) in tax certificates ................. (620) 2,587 1,682
Purchase of Bank of Florida, net of acquired cash
equivalents ............................................... 1,521 -- --
----------- ---------- -----------
Net cash used in investing activities ...................... (187,408) (40,815) (154,494)
----------- ---------- -----------
</TABLE>
(CONTINUED ON NEXT PAGE)
59
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------------------
1996 1995 1994
----------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits ...................................... $168,744 $ 92,555 $ 52,687
Net (decrease) in deposits from sale of branches .............. -- (130,276) --
Net (decrease) increase in Federal Home Loan Bank advances ... (4,000) 105,000 39,000
Net (decrease) increase in other borrowings ................... -- (21,400) 21,400
Premium on sale of branches ................................... -- 9,304 --
Underwritten public offering of Company's 9%
Preferred Stock ............................................. -- -- 5,873
Redemption of preferred stock--minority interests ............ -- -- (2,496)
Net proceeds from issuance of common stock .................... 23,198 222 298
Cash dividends paid on the Bank's noncumulative
preferred stock ............................................. -- -- (198)
Dividends paid on the Company's preferred stock ............... (2,086) (2,010) (1,871)
Cash dividends on common stock ................................ -- -- (137)
Increase in advances from borrowers for taxes and insurance .. 560 1,526 200
---------- ---------- --------
Net cash provided by financing activities .................... 186,416 54,921 114,756
---------- ---------- --------
Increase (decrease) in cash and cash equivalents .............. (594) 17,968 (29,403)
Cash and cash equivalents at beginning of year ................ 34,730 16,762 46,165
---------- ---------- --------
Cash and cash equivalents at end of year ...................... $ 34,136 $ 34,730 $ 16,762
========== ========== ========
Supplemental Disclosures:
Interest paid on deposits and borrowings ...................... $ 34,547 $ 25,617 $ 16,235
========== ========== ========
Income taxes paid ............................................. $ 4,626 $ 676 $ 1,888
========== ========== ========
Transfers from loans to real estate owned ..................... $ 1,154 $ 1,182 $ 3,986
========== ========== ========
Transfer of mortgage-backed securities from held for sale to
held to maturity at the lower of cost or market ............. $ -- $ -- $ 3,627
========== ========== ========
Transfer of mortgage-backed securities from held to maturity
to available for sale ....................................... $ 31,780 $ -- $ --
========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
60
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of BankUnited Financial Corporation
(the "Company") and subsidiaries conform to generally accepted accounting
principles and to general practices within the savings and loan industry.
Presented below is a description of the Company and its principal accounting
policies.
(A) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, BankUnited, FSB ("the Bank"), a federally chartered
savings bank and BU Ventures, Inc. and the Bank's wholly-owned subsidiaries,
T&D Properties of South Florida, Inc. ("T&D") and Bay Holdings Company, Inc.,
("Bay Holdings"). The Bank provides a full range of banking services to
individual and corporate customers through its branches in South Florida. The
Bank is subject to the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities. T&D invests in tax
certificates and holds title to, maintains, manages and supervises the
disposition of real property acquired through tax deeds. Bay Holdings holds
title to, maintains, manages and supervises the disposition of real estate
acquired through foreclosure. All significant intercompany transactions and
balances have been eliminated.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the date of the consolidated statements of financial condition and operations
for the period.
Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowances for loan
losses and the allowance for losses on tax certificates and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for loan losses
and real estate owned, management obtains independent appraisals for all
properties.
(B) MORTGAGE-BACKED SECURITIES AND INVESTMENTS
The Company adopted Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity
Securities," effective October 1, 1994. In accordance with SFAS No. 115,
mortgage-backed securities and other investments available for sale are
carried at fair value (market value), inclusive of unrealized gains and/or
losses, and net of discount accretion and premium amortization computed using
the level yield method. Net unrealized gains and losses are reflected as a
separate component of stockholders' equity, net of applicable deferred taxes.
Prior to adoption of SFAS No. 115, mortgage-backed securities and other
securities designated as held for sale were carried at the lower of cost or
market value, determined in the aggregate. Net unrealized losses were
recognized in a valuation allowance by charges to income.
Mortgage-backed securities and investments held to maturity are carried at
amortized cost. Under the guidance of SFAS No. 115, mortgage-backed
securities and investment securities that the Company has the positive intent
and ability to hold to maturity are designated as held-to-maturity
securities.
Gain or losses on sales of mortgage securities and investments are
recognized on the specific identification basis.
61
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Tax certificates are considered investments held to maturity and,
accordingly, are carried at cost less a valuation allowance. Interest is
accrued on tax certificates until payoff or until it appears uncollectible.
When deemed uncollectible, accrued but uncollected interest is reversed.
Applicable law permits application for tax deeds to be applied for two years
after the effective date of the acquisition of the tax certificate. Tax deeds
applied for are carried at the cost adjusted for accrued interest. Tax deeds
applied for carry an annual interest rate of 18%.
(C) ALLOWANCE FOR LOAN LOSSES
A provision for losses on loans is charged to operations when, in
management's opinion, the collectibility of the balances is doubtful and the
carrying value is greater than the estimated net realizable value of the
collateral. The provision is based upon a review of the nature, volume,
delinquency status and inherent risk of the loan portfolio in relation to the
allowance for loan losses.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require additions to the allowance based on their judgments
about information available to them at the time of their examination.
The Company's non-accrual policy provides that all loans are placed on
non-accrual status when they are 90 days past due as to either principal or
interest, unless the loan is fully secured and in the process of collection.
Loans are returned to accrual status when they become less than 90 days
delinquent.
Payments received on impaired loans are generally applied to principal and
interest based on contractual terms.
See Note 5 for information regarding the Company's adoption of Statement
of Financial Accounting Standards No. 114 "Accounting by Creditors for
Impairment of a Loan".
(D) LOANS RECEIVABLE
Loans receivable are considered long-term investments and, accordingly,
are carried at historical cost. Loans held for sale are recorded at the lower
of cost or market, determined in the aggregate. In determining cost, deferred
loan origination fees are deducted from principal balances of the related
loans.
(E) LOAN-ORIGINATION FEES, COMMITMENT FEES AND RELATED COSTS
Loan origination fees are accounted for in accordance with SFAS No. 91,
"Accounting for Non-refundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases." Loan origination fees
and certain direct loan origination costs are deferred, and the net fee or
cost is recognized as an adjustment to interest income using the interest
method over the contractual life of the loans, adjusted for estimated
prepayments based on the Company's historical prepayment
62
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
experience. Commitment fees and costs relating to commitments, of which the
likelihood of exercise is remote, are recognized over the commitment period
on a straight-line basis. If the commitment is subsequently exercised during
the commitment period, the remaining unamortized commitment fee at the time
of exercise is recognized over the life of the loan as an adjustment of
yield.
(F) OTHER INTEREST EARNING ASSETS
Other interest earning assets include Federal Home Loan Bank of Atlanta
stock and an equity investment in the Community Reinvestment Group. The fair
value is estimated to be the carrying value which is par.
(G) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation is provided using the estimated
service lives of the assets for furniture, fixtures and equipment (7 to 10
years), and computer equipment and software (3 to 5 years), or with leases,
the term of the lease or the useful life (10 years), whichever is shorter.
Repair and maintenance costs are charged to operations as incurred, and
improvements are capitalized.
(H) ACCRUED INTEREST RECEIVABLE
Recognition of interest on the accrual method is generally discontinued
when interest or principal payments are greater than 90 days in arrears,
unless the loan is well secured and in the process of collection. At the time
a loan is placed on nonaccrual status, previously accrued and uncollected
interest is reversed against interest income in the current period.
(I) INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
Deferred income taxes have been provided for elements of income and expense
which are recognized for financial reporting purposes in periods different
than such items are recognized for income tax purposes. Effective October 1,
1993, the Company implemented Statement of Financial Accounting Standards No.
109 ("SFAS No. 109"), "Accounting for Income Taxes." SFAS No. 109 requires
accounting for deferred taxes utilizing the liability method, which applies
the enacted statutory rates in effect at the statement of financial condition
date to differences between the book and tax bases of assets and liabilities.
The resulting deferred tax liabilities and assets are adjusted to reflect
changes in tax laws. Prior to implementing SFAS No. 109, the Company
accounted for income taxes in accordance with Accounting Principles Board
Opinion No. 11, which provided for deferred taxes based on differences
between taxable income and book income.
The implementation of SFAS No. 109 on October 1, 1993 resulted in an
increase of the net deferred tax liability of $195,000. This amount was
reported separately as a cumulative effect of a change in the method of
accounting for income taxes in the Consolidated Statement of Operations.
(J) EARNINGS PER SHARE
Primary earnings per common and common equivalent share is computed on a
weighted average number of common shares and common share equivalents
outstanding during the year. Common share
63
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
equivalents include the dilutive effect of stock options using the treasury
stock method. The weighted average number of common share equivalents assumed
outstanding for the years ended September 30, 1996, 1995 and 1994 were
4,559,000, 2,296,000, and 2,175,000, respectively. Earnings per common share,
assuming full dilution, assume the maximum dilutive effect of the average
number of shares from stock options and the conversion equivalents of
preferred stocks. The weighted average number of fully diluted common shares
outstanding during the years ended September 30, 1996, 1995 and 1994 were
4,559,000, 4,159,000, and 2,175,000, respectively. Stock dividends have been
included in the calculation of earnings per share for all years presented.
(K) REAL ESTATE OWNED
Property acquired through foreclosure, deeds in lieu of foreclosures, or
loans judged to be in-substance foreclosures are recorded at the lower of the
related principal balance at foreclosure or estimated fair value less
estimated costs to sell the property. Any excess of the loan balance over the
net realizable value is charged to the allowance for loan losses when the
property is classified as real estate owned. The net realizable value is
reviewed periodically and, when necessary, any decline in the value of the
real estate is charged to expense. Significant property improvements which
enhance the salability of the property are capitalized to the extent that the
carrying values do not exceed their estimated realizable values. Maintenance
and carrying costs on the property are charged to operations as incurred.
(L) STOCK OPTIONS
At the time stock options are granted to employees and directors, no
accounting entries are made, as the options are granted at the fair market
value of the Company's common stock. The proceeds from the exercise of
options are credited to common stock for the par value of the shares issued,
and the excess, net of any tax benefit is credited to paid-in capital.
(M) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 122 ("SFAS No. 122")
"Accounting for Mortgage Servicing Rights" an amendment of FASB Statement No.
65. SFAS No. 122 requires that the Company recognize rights to service
mortgage loans for others as a separate asset, regardless of how those
servicing rights were acquired. The value of the mortgage servicing rights
should be recorded at their relative fair values. SFAS No. 122 was adopted
prospectively beginning October 1, 1995. The impact of adopting SFAS No. 122
was not material.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes financial accounting and reporting
standards for stock based employee compensation plans. The statement defines
a "fair value based method" of accounting for employee stock options or
similar equity instruments and encourages all entities to adopt that method
of accounting for all of their employee stock compensation plans. However,
SFAS No. 123 also allows an entity to continue to measure compensation costs
for those plans using the "intrinsic value based method" of accounting, which
the Company currently uses. The Company currently intends to continue to use
the "intrinsic value based method" and disclose in the notes to the
consolidated financial statements, the required information using the "fair
value based method."
64
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In June 1996, the FASB issued Statement of Financial Accounting Standards
No. 125 ("SFAS 125"), "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities based on a financial-components approach that
focuses on control. SFAS 125 is effective for transfers and servicing of
financial assets and extinguishment of liabilities occurring after December
31, 1996 and is to be prospectively applied. Management is currently
evaluating the impact of adoption of SFAS 125 on its financial position and
results of operations.
(N) FINANCIAL STATEMENT RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
September 30, 1996 consolidated financial statements.
(2) TAX CERTIFICATES
Tax certificates are certificates representing delinquent real estate
taxes owed to the respective counties. A substantial percentage of tax
certificates are for properties located in southeast Florida. The Company's
policy is to purchase tax certificates only for properties located in
Florida.
The net carrying value of tax certificates was $40.0 million and $39.5
million at September 30, 1996 and 1995, respectively. Included in these
amounts at September 30, 1996 and 1995 were $1.9 million and $3.9 million,
respectively of tax certificates for which the Company had made application
for the tax deeds. The Company maintains loss reserves for tax certificates
which were $614,000 and $569,000 at September 30, 1996 and 1995,
respectively.
The estimated market values of the Company's tax certificates are the same
as the carrying values, since historically the tax certificates have had
relatively short lives and their yields approximate market rates.
(3) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Interest income from securities purchased under agreements to resell
aggregated approximately $1.2 million and $701,000 for the years ended
September 30, 1995 and 1994, respectively.
65
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
The following sets forth information concerning the Company's securities
purchased under agreements to resell for the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1996 1995 1994
------- ---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at
any month end during the period ............ -- $ 700 $ 6,800
Average amount outstanding during the period -- $20,262 $18,283
Weighted average interest rate for the period -- 6.10% 3.83%
Maturity ..................................... -- -- Oct. 1, 1994
</TABLE>
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Pursuant to the provisions of SFAS No. 115, securities designated as
available for sale are carried at market value with the resultant after-tax
appreciation or depreciation from amortized cost reflected as an addition to,
or deduction from, stockholders' equity. In December of 1995 the Company
reclassified $31.8 million of held-to-maturity mortgage-backed securities to
available-for-sale in accordance with "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities"
issued by the Financial Accounting Standard Board. The reclassified
securities had a market value of $916,000 in excess of their book value at
the time of transfer.
INVESTMENTS
Presented below is an analysis of the carrying values and approximate
market values of investments held to maturity.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
State of Israel
bonds ............... $11 $-- $-- $11
----------- ------------ ------------- ---------
Total .............. $11 $-- $-- $11
=========== ============= ============= =========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government agency securities $4,675 $-- $-- $4,675
State of Israel bonds ............ 11 -- -- 11
----------- ------------- ------------- ---------
Total ........................... $4,686 $-- $-- $4,686
=========== ============= ============= =========
</TABLE>
All investments held to maturity at September 30, 1996 and 1995 had
maturities between one and five years.
66
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
Presented below is an analysis of the investments designated as available
for sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury notes .............. $2,005 $-- $ (1) $2,004
U.S. government agency securities 2,999 -- (18) 2,981
Other ............................ 1,702 -- (2) 1,700
------------- ------------- ------------- -----------
Total ........................... $6,706 $-- $(21) $6,685
============= ============= ============= ===========
</TABLE>
The Company had no investments classified as available for sale in 1995.
MORTGAGE-BACKED SECURITIES
The carrying value and historical cost of mortgage-backed securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities $24,943 $207 $(338) $24,812
FNMA mortgage-backed securities 6,055 61 (2) 6,114
FHLMC mortgage-backed
securities ..................... 22,172 33 (432) 21,773
Other .......................... 2,772 6 (10) 2,768
------------- ------------- ------------- -----------
Total ......................... $55,942 $307 $(782) $55,467
============= ============= ============= ===========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FHLMC mortgage-backed securities $2,025 $39 $-- $2,064
------------- ------------- ------------- -----------
Total .......................... $2,025 $39 $-- $2,064
============= ============= ============= ===========
</TABLE>
67
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
The market value and historical cost of mortgage-backed securities held to
maturity are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA ............................... $ 83 $ 5 $ -- $ 88
FHLMC .............................. 4,144 -- (118) 4,026
Collateralized mortgage obligations 8,802 -- (289) 8,513
Mortgage pass-through certificates 1,669 -- (22) 1,647
----------- ------------- ------------- ---------
Total ............................. $14,698 $ 5 $(429) $14,274
=========== ============= ============= =========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
-----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA ............................... $25,644 $453 $(143) $25,954
FNMA ............................... 4,761 126 -- 4,887
FHLMC .............................. 7,406 -- (231) 7,175
Collateralized mortgage obligations 3,580 -- (84) 3,496
Mortgage pass-through certificates 9,543 -- (385) 9,158
----------- ------------- ------------- ----------
Total ............................. $50,934 $579 $(843) $50,670
=========== ============= ============= ==========
</TABLE>
The mortgage-backed securities have contractual maturities which range
from the years 1996 to 2026, however, expected maturities will differ from
contractual maturities as borrowers have the right to prepay obligations with
or without prepayment penalties.
There were no sales of mortgage-backed securities and collateralized
mortgage obligations in 1996, however, gross proceeds on sales of
mortgage-backed securities and collateralized mortgage obligations were $10.0
million and $6.3 million during the years ended September 30, 1995 and 1994,
respectively. Gross realized gains were $231,000 and $221,000 on sales of
mortgage-backed securities during the years ended September 30, 1995 and
1994, respectively. There were no realized losses during the years ended
September 30, 1995 and 1994.
At September 30, 1995 and 1994, GNMA, FHLMC and FNMA mortgage-backed
securities with carrying values of approximately $3.0 million and $5.4
million, respectively, were pledged as collateral for public funds on
deposit. There were none pledged in 1996. At September 30, 1994, FNMA and
GNMA mortgage-backed securities with a carrying value of approximately $25.0
million and a market value of approximately $23.7 million were pledged as
collateral for a $21.4 million reverse repurchase agreement. The securities
underlying the agreement were held in safekeeping by a trustee.
68
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(5) LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------
1996 1995
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage loans--conventional .................... $263,757 $224,160
Mortgage loans--conventional serviced by others 317,103 209,339
Mortgage loans--other ........................... 53,817 12,381
Commercial loans:
Secured ........................................ 5,618 3,372
Unsecured ...................................... 787 260
Line of credit loans ............................ 1,254 892
Share loans ..................................... 648 218
Installment loans ............................... 1,001 595
----------- -----------
Total .......................................... 643,985 451,217
Less allowance for loan losses .................. (2,158) (1,469)
Deferred loan fees, discounts and premiums ..... 4,558 3,386
----------- -----------
Loans receivable, net .......................... $646,385 $453,134
=========== ===========
</TABLE>
Of the total gross loans receivable of $644.0 million at September 30,
1996, approximately $262.7 million, or 40.8%, represents residential loans
secured by properties in Florida, $125.8 million, or 19.5% represents loans
in California and $255.5 million, or 39.7% represents loans in other states.
See Note 8 for loans collateralized for Federal Home Loan Bank Advances.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
--------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of the period $1,469 $ 841 $ 1,184
Provision (credit) ................ (120) 1,221 1,187
Allowance from Bank of Florida ... 183 -- --
Loans charged-off ................. (493) (594) (1,582)
Recoveries ........................ 1,119 1 52
--------- --------- ----------
Balance at end of the period ..... $2,158 $1,469 $ 841
========= ========= ==========
</TABLE>
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan Income Recognition and Disclosures" ("SFAS No.
114"). There was no impact on the consolidated statement of operations upon
implementation due to the composition of the Company's loan portfolio
(primarily residential or collateral dependent loans) and the Company's
policy for establishing the allowance for loan losses. The only impact to the
consolidated statement of financial condition and to non-performing assets
was to reclassify three loans totaling $522,000 previously classified as
insubstance foreclosures in real estate owned to non-accrual
69
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(5) LOANS RECEIVABLE--(CONTINUED)
loans. These loans were reclassified because the Company did not have
possession of the collateral which, under SFAS No. 114, is required for a
loan to be classified as real estate owned.
As of September 30, 1996 and 1995, the Company had impaired or non-accrual
loans of $4.9 million and $3.5 million, respectively, and had recorded
specific reserves on these loans of $801,000 and $802,000, respectively. For
the years ended September 30, 1996, 1995 and 1994 the average amounts of
impaired loans were $4,808,000, $2,251,000 and $2,576,000, respectively. No
income is recognized on loans during the period for which the loan is deemed
impaired.
(6) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
----------------------
1996 1995
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Leasehold improvements .............. $ 1,640 $ 1,068
Furniture, fixtures and equipment .. 1,881 1,409
Computer equipment and software .... 1,124 1,016
--------- ----------
Total ............................... 4,645 3,493
Less: accumulated depreciation ..... (2,037) (1,374)
--------- ----------
Office properties and equipment, net $ 2,608 $ 2,119
========= ==========
</TABLE>
Depreciation expense was $674,000, $526,000, and $308,000 for the years
ended September 30, 1996, 1995, and 1994, respectively.
The Company has entered into non-cancelable leases with approximate
minimum future rentals as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- --------------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997 ..................... $1,002
1998 ..................... 917
1999 ..................... 837
2000 ..................... 809
2001 ..................... 754
Thereafter ............... 1,538
---------------------
Total ................... $5,857
=====================
</TABLE>
Rent expense for the years ended September 30, 1996, 1995, and 1994 was
$905,000, $959,000, and $768,000, respectively.
70
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(7) DEPOSITS
The weighted average nominal interest rate payable on all deposit accounts
at September 30, 1996 and 1995 was 5.11% and 5.14%, respectively.
Types of deposits and related range of interest rates were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing deposits .......... --% - --% $ 7,301 --% - --% $ 2,804
Passbook and statement savings deposits 2.00% - 4.97% 73,780 2.00% - 4.97% 50,373
Super NOW deposits ..................... .00% - 3.00% 17,265 0.00% - 3.00% 15,353
Money market deposits .................. .00% - 4.65% 16,556 0.00% - 3.10% 7,733
Certificates of deposit ................ 3.92% - 6.16% 391,204 2.71% - 6.65% 233,811
--------- ----------
Total ................................. $506,106 $310,074
========= ==========
</TABLE>
Deposit accounts with balances of $100,000 or more totaled approximately
$69.4 million and $33.4 million at September 30, 1996 and 1995, respectively.
Interest expense on deposits for the years ended September 30, 1996, 1995
and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Super NOW and money market deposits ... $ 775 $ 875 $ 1,102
Passbook and statement savings deposits 2,627 2,420 1,716
Certificates of deposit ................ 17,389 14,554 8,526
--------- ---------- ---------
Total ................................. $20,791 $17,849 $11,344
========= ========== =========
</TABLE>
Early withdrawal penalties on deposits are recognized as a reduction of
interest on deposits. For the years ended September 30, 1996, 1995 and 1994,
early withdrawal penalties totaled $42,000, $110,000, and $27,000,
respectively.
The amounts of scheduled maturities of certificate accounts at September
30, 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- --------------------------- -------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997 ..................... $316,562
1998 ..................... 58,053
1999 ..................... 7,532
Thereafter ............... 9,057
---------------------
Total: .................. $391,204
=====================
</TABLE>
71
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(8) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank of Atlanta (FHLB) incur interest
and are repayable as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
REPAYABLE DURING YEAR ENDING SEPTEMBER 30, INTEREST RATE 1996 1995
- ------------------------------------------- ---------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1996 ..................................... 4.27% -6.80% $ -- $179,000
1997 ..................................... 4.56% -6.07% 192,000 57,000
1998 ..................................... 6.13% 5,000 5,000
2001(1) .................................. 5.33% -5.61% 40,000 --
---------- --------
$237,000 $241,000
========== ========
</TABLE>
- ------------------
(1) Advances for $15 million are callable by the FHLB in 1997 and $25 million
are callable in 1998.
The terms of a security agreement with the FHLB of Atlanta include a
blanket floating lien that requires the maintenance of qualifying first
mortgage loans as pledged collateral with unpaid principal amounts at least
equal to 100% of the FHLB advances, when discounted at 65% of the unpaid
principal balance. The FHLB of Atlanta stock, which is recorded at cost, is
also pledged as collateral for these advances.
(9) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE
Interest expense on securities sold under an agreement to repurchase
aggregated $367,000 and $183,000 for the years ended September 30, 1995 and
1994, respectively.
The following sets forth information concerning repurchase agreements for
the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEARS ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
-------- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at
any
month-end during the period ................. $ -- $33,600 $21,400
Average amount outstanding during the period . $-- $ 6,572 $ 3,856
Weighted average interest rate for the period $-- 5.59% 4.49%
Maturity ...................................... $-- -- Dec. 19, 1994
</TABLE>
At September 30, 1996 and 1995, the Company had no pledged securities
under repurchase agreements. At September 30, 1994, the Company had pledged
$25.0 million of FNMA and GNMA mortgage-backed securities as collateral for
the above repurchase agreements.
(10) SUBORDINATED NOTES
At September 30, 1996 and 1995, the Bank had outstanding $775,000, of
subordinated notes which, pursuant to the regulations of the Office of Thrift
Supervision (the "OTS"), are included in the Bank's risk-based capital. The
subordinated notes bear interest at 9% and mature from August 31, 2003 to
June 10, 2009.
72
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(11) REGULATORY CAPITAL
The Bank is required by federal regulations to maintain minimum levels of
capital as follows:
<TABLE>
<CAPTION>
REGULATORY CAPITAL
REQUIREMENT ACTUAL CAPITAL EXCESS CAPITAL
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital ... $12,196 $ 9,101 $56,967 $43,010 $44,771 $33,909
1.5% 1.5% 7.0% 7.1% 5.5% 5.6%
Core Capital ........ $24,392 $18,201 $56,967 $43,010 $32,575 $24,809
3.0% 3.0% 7.0% 7.1% 4.0% 4.1%
Risked-based capital $33,927 $23,008 $60,164 $45,426 $26,237 $22,418
8.0% 8.0% 14.2% 15.8% 6.2% 7.8%
</TABLE>
Under the OTS regulations adopted to implement the "prompt corrective
action" provisions of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (the "FDICIA"), a "well capitalized" institution must have a
risk-based capital ratio of 10%, a core capital ratio of 5% and a Tier 1
risk-based capital ratio of 6%. (The "Tier 1 risk-based capital" ratio is the
ratio of core capital to risk-weighted assets.) The Bank is a well
capitalized institution under the definitions as adopted. Regulatory capital
and net income amounts as of and for the years ended September 30, 1996, 1995
and 1994 did not differ from regulatory capital and net income amounts
reported to the OTS.
On August 31, 1993, the OTS adopted an amendment to its regulatory capital
regulations to take into account a savings institution's exposure to the risk
of loss from changing interest rates. Under the regulation as amended, a
savings institution with an above normal level of interest rate risk exposure
will be required to deduct an interest rate risk ("IRR") component from its
total capital when determining its compliance with the risk-based capital
requirements. An "above normal" level of interest rate risk exposure is a
projected decline of 2% in the net present value of an institution's assets
and liabilities resulting from a 2% swing in interest rates. The IRR
component will equal one-half of the difference between the institution's
measured interest rate exposure and the "normal" level of exposure. Savings
institutions will be required to file data with the OTS that the OTS will use
to calculate, on a quarterly basis (but with a two-quarter lag),
institutions' measured interest rate risk and IRR components. Implementation
of the IRR requirements have been delayed pending the testing of the OTS
appeals process. If the IRR component had been required as of September 30,
1996, the Bank would have been required to deduct an IRR component from its
total capital when determining its compliance with its risk based capital
requirements, however the Bank would continue to be well capitalized.
Payment of dividends by the Bank is limited by federal regulations, which
provide for certain levels of permissible dividend payments depending on the
Bank's regulatory capital and other relevant factors.
(12) MINORITY INTERESTS--PREFERRED STOCK OF BANKUNITED, FSB
As part of a plan to simplify the Company's capital structure, the Company
commenced an offer in November 1993 to exchange 2.5 shares of its 9%
Noncumulative Perpetual Preferred Stock for each share of the Bank's
Noncumulative Preferred Stock, Series D, E, F and G ("BankUnited Preferred
Stock"). Upon the closing of the exchange offer, all shares of BankUnited
Preferred Stock that remained outstanding were redeemed at $25.00 per share
plus declared but unpaid dividends. The exchange closed on December 28, 1993.
73
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(12) MINORITY INTERESTS--PREFERRED STOCK OF BANKUNITED, FSB--(CONTINUED)
(13) STOCKHOLDERS' EQUITY
The Company has the following capital structure:
PREFERRED STOCK--issuable in series with rights and preferences to be
designated by the Board of Directors. As of September 30, 1996, 7,259,141
shares were authorized but not designated to a particular series.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A:
Effective September 30, 1995, pursuant to an Offer to Exchange Preferred
Stock, the holders of the Non-cumulative Convertible Preferred Stock, Series
A, agreed to exchange each of the 55,000 shares of the Series A Preferred
stock for one share of the Company's Non-cumulative Convertible Preferred
Stock, Series B. Because the dividend rate, redemption price, and the
liquidation preference for the Series B Preferred Stock are lower than those
for the Series A Preferred Stock, the Company agreed not to redeem the shares
of Series B Preferred Stock issued pursuant to the exchange offer for a
period of three years and for three years thereafter, such Series B Preferred
Stock shall only be redeemed at a 50% premium or $11.0625 per share.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B:
Authorized shares--200,000 shares.
Issued and outstanding shares--183,818 shares as of September 30, 1996 and
197,378 shares as of September 30, 1995.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.7375 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $7.375 per share.
Redemption--except for the shares converted from Series A discussed above,
at the option of the Company at $7.59625 per share at September 30, 1994,
declining thereafter at $.07375 per share during each year through January
31, 1998, and thereafter the redemption price remains at $7.375 per share.
Voting rights--two-and-one-half votes per share. If the Company fails to
pay dividends for six quarters, whether or not consecutive, the holders shall
have the right to elect two additional directors until dividends have been
paid for four consecutive quarters.
Convertibility--convertible into 1.50 shares (adjusted for all stock
dividends) of Class B Common Stock for each share of Noncumulative
Convertible Preferred Stock, Series B, surrendered for conversion, subject to
adjustment on the occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C:
Authorized shares--363,636 shares.
Issued and outstanding shares--363,636 shares.
74
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.550 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $5.50 per share.
Redemption--at the option of the Company, at $5.50 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.45 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C-II:
Authorized shares--222,223 shares.
Issued and outstanding shares--222,223 shares.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $9.00 per share.
Redemption--at the option of the Company, at $9.00 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.32 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C-II, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993:
Authorized shares--805,000 shares.
Issued and outstanding--744,870 shares as of September 30, 1996 and
745,870 shares as of September 30, 1995.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
75
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Redemption--not redeemable prior to July 1, 1998, unless certain criteria
are met, in which case the redemption price would be $10.00 per share;
subsequent to June 30, 1998, redemption is at the option of the Company at a
redemption price of $10.40 per share, declining thereafter at $0.08 per share
during each year through July 1, 2003, and thereafter the redemption price
remains $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the
right to elect two additional directors until dividends have been paid for
four consecutive quarters.
Convertibility--convertible into one share of Class A Common Stock for
each share of non-cumulative Convertible Preferred Stock, Series 1993,
surrendered for conversion, subject to adjustment on the occurrence of
certain events.
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK:
Authorized shares--1,150,000 shares.
Issued and outstanding--1,150,000 shares.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.90 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
Redemption--not redeemable prior to October 1, 1998; subsequent to
September 30, 1998, redemption is at the option of the Company at a
redemption price of $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the
right to elect two additional directors until dividends have been paid for
four consecutive quarters.
Convertibility--none.
CLASS A COMMON STOCK:
Issuable in series with rights and preferences to be designated by the
Board of Directors:
As of September 30, 1996, 5,000,000 shares of Class A Common Stock were
authorized but not designated to a series.
SERIES I CLASS A COMMON STOCK:
Authorized shares--10,000,000.
Issued and outstanding--5,454,201 shares as of September 30, 1996 and
1,835,170 shares as of September 30, 1995.
76
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Dividends--as declared by the Board in the case of a dividend on the Class
A Common Stock alone or not less than 110% of the amount per share of any
dividend declared on the Class B Common Stock.
Voting rights--one tenth of one vote per share.
CLASS B COMMON STOCK:
Authorized shares--3,000,000.
Issued and outstanding--251,515 shares as of September 30, 1996 and
232,324 shares as of September 30, 1995.
Dividends--as declared by the Board of Directors.
Voting rights--one vote per share.
Convertibility--convertible into one share of Class A Common Stock for
each share of Class B Common Stock surrendered for conversion, subject to
adjustment on the occurrence of certain events.
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS
Pursuant to stockholder approval in 1992, the Company maintains the 1992
Stock Bonus Plan. In January 1994, stockholders approved an amendment of this
plan to increase the amount of stock issuable under the plan to 125,000
shares and to allow directors of the Company who are not employees to
participate in the plan and receive stock in partial payment of their
director's fees. As of September 30, 1996, 22,252 shares of Class A Common
Stock and 54,779 shares of Class B Common Stock have been issued under the
1992 Stock Bonus Plan. As of September 30, 1996, there were 47,969 shares
available for grant under the 1992 Stock Bonus Plan.
Pursuant to stockholder approval in 1987, the Company maintains a
non-statutory stock option plan for certain officers, directors and employees
to receive options to purchase shares of Class A and Class B Common Stock.
The stockholders approved an increase in the total number of shares for which
options may be granted under the plan to 750,000 in January 1994. The Board
of Directors approved an increase in the total number of shares for which
options may be granted under the plan to 825,000 (a non-material increase) in
1996. The options are for a period of 10 years and are exercisable at the
fair market value of the stock at the grant date. As of September 30, 1996,
758,718 options have been granted under this plan and 66,412 options have
been exercised.
Pursuant to stockholder approval in January 1994, the Company also
maintains an incentive stock option plan under which options for up to
250,000 shares of Class A and Class B Common Stock may be granted. As of
September 30, 1996, 92,500 options have been granted under this plan.
During October 1984, BankUnited's Board of Directors approved several
non-qualified stock option agreements (the "Agreements") under which options
to purchase shares of Class B Common Stock were granted at the fair market
price of the Class B Common Stock on the date of the grant. The Agreements,
which originally expired on October 23, 1994, have been extended pursuant to
Stockholders' approval to October 23, 1999. As of September 30, 1996, the
Agreements are exercisable for a total of 155,367 shares at the exercise
price of $4.64 per share; none have been exercised.
77
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
The following table presents additional data concerning the Company's
outstanding stock options:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OPTION PRICE OPTION
OF SHARES PER SHARE PRICE
------------ --------------- -------------
<S> <C> <C> <C>
Options outstanding, September 30, 1993 549,174 $3.11 -$10.98 $2,669,272
Options granted ........................ 113,088 7.00 -8.10 846,671
Options exercised ...................... (45,675) 3.21 -3.78 (154,371)
---------- -------------- ------------
Options outstanding, September 30, 1994 616,587 3.11 -10.98 3,361,572
Options granted ........................ 208,671 4.95 -7.95 1,139,902
Options exercised ...................... (6,695) 3.21 -5.73 (23,958)
---------- -------------- ------------
Options outstanding, September 30, 1995 818,563 3.11 -10.98 4,477,516
Options granted ........................ 121,610 7.24 -8.26 926,638
---------- -------------- ------------
Options outstanding, September 30, 1996 940,173 $3.11 -$10.98 $5,404,154
========== ============
</TABLE>
In 1992, the Company adopted a 401(k) savings plan pursuant to which
eligible employees are permitted to contribute up to 15% of their annual
salary to the savings plan. The Company will provide matching contributions
at a rate of 33% of such contributions, up to a maximum of 2% of an
employee's salary. The amount of such matching by the Company for the years
ended September 30, 1996, 1995 and 1994 totaled approximately $7,000,
$30,000, and $29,000, respectively. Employees are eligible to participate in
the plan after one year of service and become vested in the Company's
contribution after two years participation in the plan at the rate of 25% per
year up to 100%.
In September 1995, the Company's Board of Directors adopted a Profit
Sharing Plan. Under the terms of the plan, the Company, at the discretion of
the Board of Directors, may contribute Class A Common Stock to the plan. The
contributions are allocated to the account of eigible employees based upon
their salaries. Employees become eligible for the plan after one year of
service and become vested at the rate of 20% per year up to 100%. The Board
of Directors authorized a contribution of $100,000 and $75,000 in 1996 and
1995, respectively.
(15) INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 as of October 1,
1993 resulting in a cumulative adjustment of $195,000 to 1994 earnings and
stockholders' equity.
78
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(15) INCOME TAXES--(CONTINUED)
The Company's effective tax rate differs from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------
1996 1995 1994
------------------- ------------------- ---------------------
AMOUNT % AMOUNT % AMOUNT %
--------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax at federal income tax rate ... $1,443 34.0% $3,394 34.0% $1,262 35.0%
Increase (decrease) resulting
from:
State tax ....................... 154 3.6 362 3.6 (46) (1.3)
Other, net ...................... 60 1.5 (15) (0.1) (83) (2.3)
-------- -------- --------- -------- --------- --------
Total .......................... $1,657 39.1% $3,741 37.5% $1,133 31.4%
======== ======== ========= ======== ========= ========
</TABLE>
The components of the provision for income taxes for the years ended
September 30, 1996, 1995 and 1994 as computed in accordance with SFAS No.
109, are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------------------------
1996 1995 1994
--------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current--federal . $1,324 $3,590 $1,354
Current--state ... 227 620 (53)
Deferred--federal 90 (400) (151)
Deferred--state .. 16 (69) (17)
--------- --------- ---------
Total ............ $1,657 $3,741 $1,133
========= ========= =========
</TABLE>
The tax effects of significant temporary differences included in the net
deferred tax asset as of September 30, 1996 and 1995 were:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Non-accrual interest ......... $185 $178
Loan loss and other reserves 431 587
Fixed assets ................. 5 --
Deferrals and amortization .. 19 --
------ -------
Gross deferred tax asset ... 640 765
------ -------
Deferred tax liability:
FHLB Atlanta stock dividends 167 167
Fixed assets ................. -- 5
Deferrals and amortization .. -- 14
Other ........................ 13 13
------ -------
Gross deferred tax liability 180 199
------ -------
Net deferred tax asset ..... $460 $566
====== =======
</TABLE>
79
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(15) INCOME TAXES--(CONTINUED)
The components of deferred income tax provision (benefit) relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------
1996 1995 1994
-------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Differences in book/tax depreciation $(10) $ (21) $ (10)
Delinquent interest .................. (7) (80) --
FHLB Stock dividends ................. -- (144) 23
Loan fees ............................ -- -- 169
Loan loss and other reserves ......... 156 (164) (363)
Deferrals and amortization ........... (33) (60) 13
------ --------- --------
Total deferred taxes ................ $106 $(469) $(168)
====== ========= ========
</TABLE>
(16) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into instruments that
are not recorded in the consolidated financial statements, but are required
to meet the financing needs of its customers and to reduce its own exposure
to fluctuations in interest rates. These financial instruments include
commitments to extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated statements of financial
condition. The contract or notional amounts of those instruments reflect the
extent of involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party on the financial instrument for commitments to extend credit
and standby letters of credit by the other party is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Total commitments to extend credit
at September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------------------------------------------
1996 1995
---------------------------------- -----------------------------------
FIXED VARIABLE FIXED VARIABLE
RATE RATE TOTAL RATE RATE TOTAL
--------- ----------- ---------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commitments to fund loans ... $2,575 $ 7,057 $ 9,632 $3,801 $ 7,140 $10,941
Loans in process ............. 607 1,033 1,640 1,795 6,707 8,502
Letters of credit ............ 518 -- 518 45 -- 45
Commitments to purchase loans -- 12,260 12,260 -- -- --
-------- --------- --------- -------- --------- --------
Total ....................... $3,700 $20,350 $24,050 $5,641 $13,847 $19,488
======== ========= ========= ======== ========= ========
</TABLE>
The Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Company,
upon extension of credit is based on
80
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(16) COMMITMENTS AND CONTINGENCIESS--(CONTINUED)
management's credit evaluation of the customer. Collateral varies but may
include accounts receivable, property, plant and equipment, residential real
estate, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Company requires collateral to support those commitments.
The Company is a party to certain other claims and litigation arising in
the ordinary course of business. In the opinion of management, the resolution
of such claims and litigation will not materially affect the Company's
consolidated financial position or results of operations.
(17) RELATED PARTY TRANSACTIONS
The Company employs the services of a law firm, of which the Company's
Chairman of the Board and President is senior managing director and of which
another director of the Company is managing director; and the services of an
insurance company, of which a member of the Board of Directors is a vice
president. For the years ended September 30, 1996, 1995 and 1994, total fees
(a portion of which were capitalized) paid to this law firm totaled
approximately $986,000, $1.1 million, and $803,000, respectively, and amounts
paid to this insurance company totaled approximately $147,000, $129,000, and
$151,000, respectively.
(18) SUBSEQUENT EVENT
On November 15, 1996, the Company acquired Suncoast Savings & Loan
Association, FSA ("Suncoast"). The Company issued one share of its Class A
Common Stock for each share of Suncoast common stock of which 2,199,930 were
outstanding and one share of newly created 8% non-cumulative convertible
preferred stock, Series 1996 for each share of Suncoast preferred stock of
which 920,000 shares were outstanding. The newly created 8% non-cumulative
convertible preferred stock, Series 1996 has substantially the same terms and
conditions as the Suncoast preferred stock. The cost of the acquisition,
which will be accounted for as a purchase was $27.8 million, representing the
fair value of the consideration given to the Suncoast common and preferred
stockholders as well as the option and warrant holders. In addition, the
Company incurred approximately $925,000 of costs directly related to the
merger. The balance sheet and results of operations of Suncoast will be
included with those of BankUnited as of and for periods subsequent to
November 15, 1996.
81
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(18) SUBSEQUENT EVENTS--(CONTINUED)
The unaudited proforma combined condensed statements of financial
condition and operations as of and for the year ended September 30, 1996
after giving effect to certain proforma adjustments are as follows:
Proforma combined condensed Statement of Financial Condition as of
September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Loans receivable ................... $ 980,444
Other interest earning assets ..... 195,528
Goodwill and other intangibles .... 9,657
Other assets ....................... 53,282
-------------
$1,238,911
=============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits ........................... $ 804,567
Other liabilities .................. 337,420
Stockholders' equity ............... 96,924
-------------
$1,238,911
=============
</TABLE>
Proforma combined condensed Statement of Operations for the year ended
September 30, 1996 (in thousands except per share data):
Interest income ........................... $81,752
Interest expense .......................... 52,423
Provision for loan losses ................. 45
Non-interest income ....................... 9,193
Non-interest expense ...................... 31,885
Income tax expense ........................ 2,654
----------
Net income before preferred stock
dividends .............................. 3,938
Preferred stock dividends ................. 3,249
----------
Net income after preferred stock
dividends .............................. $ 689
==========
Earnings per share
Primary .................................. $ .10
Fully-diluted ............................ $ .10
The proforma combined condensed statement of operations assumes the
acquisition occurred as of October 1, 1995.
A summary of the terms of the newly created 8% non-cumulative convertible
preferred stock, Series 1996 are as follows:
Authorized shares --1,000,000.
Issued and outstanding shares--920,000 shares as of November 15, 1996.
82
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(18) SUBSEQUENT EVENT--(CONTINUED)
Dividends--non-cumulative cash dividends payable quarterly at the fixed
annual rate of $1.20 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $15.00 per share.
Redemption--not redeemable prior to July, 1998, unless certain criteria
are met, in which case the redemption price would be $15.00 per share,
subsequent to June 30, 1998, redemption is at the option of the Company at a
redemption price of $16.20 per share, declining thereafter at $0.20 per share
during each year through July 1, 2003, and thereafter the redemption price
remains at $15.00 per share.
Voting rights--nonvoting except under certain circumstances.
Convertibility--convertible into 1.67 shares of Class A Common Stock for
each share of 8% non-cumulative convertible preferred stock, Series 1996,
surrendered for conversion, subject to adjustment on the occurrence of
certain events.
As part of the purchase of Suncoast, the Company issued warrants to
Suncoast's warrant holders to purchase 80,000 shares of the newly created 8%
non-cumulative convertible preferred stock, Series 1996, and assumed
Suncoast's outstanding stock options. The warrants are exercisable at a price
of $18.00 for each share of the 8% non-cumulative convertible preferred
stock, Series 1996 or each warrant could be exercised to purchase 1.67
shares, subject to adjustment, of Class A Common Stock at a per share price
of $10.80, also subject to adjustment under certain conditions. The warrants
expire on July 8, 1998. The Company assumed 119,000 of Suncoast's options
with option prices ranging from $3.00 to $7.38 per share of Class A Common
Stock with an aggregate exercise price of $610,000.
83
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(19) BANKUNITED FINANCIAL CORPORATION
The following summarizes the major categories of the Company's (parent
company only) financial statements:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
Cash ............................................................... $ 88 $ 48
FHLB overnight deposits ............................................ 7,889 37
Tax certificates ................................................... 312 457
Investments, net (market value of approximately $10 and $10 at
September 30, 1996 and 1995, respectively) ....................... 10 10
Investments available for sale ..................................... 155 --
Mortgage-backed securities, held to maturity (market value of
approximately $1,727 at September 30, 1995) ...................... -- 1,676
Mortgage-backed securities, available for sale ..................... 1,309 --
Accrued interest receivable ........................................ 132 252
Investment in the Bank ............................................. 59,443 43,062
Other assets ....................................................... 248 236
--------- ----------
Total ............................................................. $69,586 $45,778
========= ==========
Liabilities ......................................................... $ 475 $ 33
--------- ----------
Stockholders' equity:
Preferred stock ................................................... 27 27
Common stock ...................................................... 57 20
Paid-in capital ................................................... 62,055 38,835
Retained earnings ................................................. 7,279 6,838
Net unrealized gains on securities available for sale, net of
taxes ........................................................... (307) 25
--------- ----------
Total stockholders' equity ...................................... 69,111 45,745
--------- ----------
Total liabilities and stockholders' equity ...................... $69,586 $45,778
========= ==========
</TABLE>
84
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(19) BANKUNITED FINANCIAL CORPORATION--(CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER
30,
------------------------------
1996 1995 1994
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income .............. $ 803 $ 307 $ 296
Interest expense ............. 17 36 24
Equity income of the Bank ... 2,406 6,587 2,443
Operating expenses ........... 491 818 529
-------- --------- --------
Income before income taxes .. 2,701 6,040 2,186
Income tax expense
(benefit) .................... 115 (200) (93)
-------- --------- --------
Net income ................. $2,586 $6,240 $2,279
======== ========= ========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income ........................................... $ 2,586 $ 6,240 $ 2,279
Less: Undistributed income of the Bank ............... (406) (6,587) (901)
Other ................................................ 242 156 (1,682)
---------- ---------- -----------
Net cash provided by (used in) in operating
activities ............................................ 2,422 (191) (304)
---------- ---------- -----------
Cash from investing activities:
Equity contributions to the Bank ..................... (16,000) -- (10,447)
Purchase of investment securities .................... (155) -- (10)
Purchase of mortgage-backed securities ............... -- -- (1,960)
Proceeds from repayments of mortgage-backed
securities ......................................... 368 181 103
Net decrease (increase) in tax certificates ......... 145 732 (379)
---------- ---------- -----------
Net cash provided by (used in) investing activities . (15,642) 913 (12,693)
---------- ---------- -----------
Cash flow from financing activities:
Public offering of Company's 9% Preferred Stock ..... -- -- 10,625
Public offering of Company's Class A Common Stock ... 22,867 -- --
Net proceeds from issuance of common stock .......... 331 222 298
Dividends paid on preferred stock .................... (2,086) (2,010) (1,871)
Dividends paid on common stock ....................... -- -- (137)
---------- ---------- -----------
Net cash provided by (used in) financing activities . 21,112 (1,788) 8,915
Decrease (increase) in cash and cash equivalents .... 7,892 (1,066) (4,082)
Cash and cash equivalents at beginning of year ...... 85 1,151 5,233
---------- ---------- -----------
Cash and cash equivalents at end of year ............. $ 7,977 $ 85 $ 1,151
========== ========== ===========
</TABLE>
85
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated fair
value of the Company's financial instruments presented in accordance with the
requirements of SFAS No. 107 (and as amended by SFAS No. 119) issued by the
Financial Accounting Standards Board. Management has made estimates of fair
value discount rates that it believes to be reasonable. However, because
there is no market for many of these financial instruments, management has no
basis to determine whether the fair value presented would be indicative of
the value negotiated in an actual sale. The fair value estimates do not
consider the tax effect that would be associated with the disposition of the
assets or liabilities at their fair value estimates.
Fair values are estimated for loan portfolios with similar financial
characteristics. Loans are segregated by category, such as commercial,
commercial real estate, residential mortgage, second mortgages, and other
installment. Each loan category is further segmented into fixed and
adjustable rate interest terms and by performing and non-performing status.
The fair value of loans, except residential mortgage and adjustable rate
loans, is calculated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loan. The estimate of average
maturity is based on historical experience with prepayments for each loan
classification, modified, as required, by an estimate of the effect of
current economic and lending conditions.
For residential mortgage loans, fair value is estimated by discounting
contractual cash flows adjusted for national historical prepayment estimates
using discount rates based on secondary market sources adjusted to reflect
differences in servicing and credit costs.
For adjustable-rate loans, the fair value is estimated at book value after
adjusting for credit risk inherent in the loan. The Company's interest rate
risk is considered insignificant since the majority of the Company's
adjustable rate loans are based on the average cost of funds for the Eleventh
District of the Federal Home Loan Bank System ("COFI") or one-year Constant
Maturity Treasuries ("CMT") rates and adjust monthly or at intervals
generally over a period not exceeding one year.
The fair value of the tax certificates is estimated at book value as these
investments historically have had relatively short lives and their yields
approximate market rates. The fair value of mortgage-backed securities and
investment securities is estimated based on bid prices available from
securities dealers.
Under SFAS No. 107, the fair value of deposits with no stated maturity,
such as non-interest-bearing demand deposits, savings and NOW accounts, and
money market accounts, is equal to the amount payable on demand. The fair
value of certificates of deposit is based on the discounted value of
contractual cash flows. The discount rate is estimated using the Company's
current rates for deposits of similar maturities adjusted for insurance
costs.
The fair value of subordinated notes is estimated by discounting
contractual cash flows using estimated market rates. The contract amounts and
related fees of the Company's commitments to extend credit approximate the
fair value of these commitments.
86
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENT--(CONTINUED)
The following table presents information for the Company's financial
instruments at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-------------------------------
CARRYING VALUE FAIR VALUE
---------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ...... $ 34,136 $ 34,136
Tax certificates and other
investments ............................ 46,784 46,784
Mortgage-backed securities ........... 70,165 69,741
Loans receivable ..................... 646,385 646,507
Other interest-earning assets ....... 12,225 12,225
Financial liabilities:
Deposits ............................. $506,106 $506,025
Advances from the FHLB ............... 237,000 237,218
Subordinated notes ................... 775 859
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
------------------------------
CARRYING VALUE FAIR VALUE
--------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ....... $ 34,730 $ 34,730
Tax certificates and other investments 44,230 44,230
Mortgage-backed securities ............ 52,998 52,734
Loans receivable ...................... 453,350 458,681
Other interest-earning assets ........ 12,325 12,325
Financial liabilities:
Deposits .............................. $310,074 $311,424
Advances from the FHLB ................ 241,000 240,675
Subordinated notes .................... 775 899
</TABLE>
87
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Statement of
Financial Condition as of September 30, 1996, and the Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended September 30,
1996 give effect to the Merger accounted for as a purchase of Suncoast by the
Company. Under the purchase method of accounting, all assets and liabilities
of Suncoast at September 30, 1996 have been adjusted to their current
estimated fair values and combined with the asset and liability book values
of the Company. The Unaudited Pro Forma Condensed Combined Statement of
Financial Condition assumes the Merger was effective on September 30, 1996.
The Unaudited Pro Forma Condensed Combined Statement of Operations give
effect to the Merger as if the Merger had occurred at the beginning of the
period presented.
The pro forma information is based on the historical consolidated
financial statements of the Company and of Suncoast, as adjusted, as set
forth in the accompanying Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements. Suncoast's fiscal year-end is June 30, and thus
Suncoast's financial statements have been adjusted to reflect an unaudited
fiscal year ending September 30, 1996. The Unaudited Pro Forma Condensed
Combined Financial Statements do not give effect to any anticipated cost
savings or potential revenue enhancements in connection with the Merger.
The information shown below should be read in conjunction with the
consolidated historical financial statements of the Company and of Suncoast,
including the respective notes thereto, which are included or incorporated by
reference in this Annual Report on Form 10-K. The pro forma data is presented
for comparative purposes only and is not necessarily indicative of the
combined financial position or results of operations in the future or of the
combined financial position or results of operations which would have been
realized had the Merger been consummated during the periods or as of the
dates for which the pro forma data is presented.
Pro forma per share amounts for the Company giving effect to the Merger
are based on the exchange ratio of one share of the Company Class A Common
Stock for each share of the Suncoast common stock and the issuance of New
Company Preferred Stock having substantially similar terms as the Suncoast
preferred stock.
88
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED
BANKUNITED SUNCOAST ADJUSTMENTS PRO FORMA
------------- ----------- -------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks .......................... $ 5,483 $ 4,588 $ -- $ 10,071
FHLB overnight deposits and federal funds sold .. 28,653 1,430 -- 30,083
Repurchase Agreements ............................ -- 15,000 -- 15,000
Tax certificates, net ............................ 40,088 -- -- 40,088
Investments, available for sale, at market ...... 6,696 -- -- 6,696
Mortgage-backed securities, held to maturity .... 14,698 -- -- 14,698
Mortgage-backed securities, available for sale,
at market ...................................... 55,467 18,196 -- 73,663
Loans receivable, net ............................ 646,385 330,781 (930)(1) 976,236
Mortgage loans held for sale ..................... -- 4,208 -- 4,208
Other interest earning assets .................... 12,225 3,075 -- 15,300
Loan servicing assets ............................ -- 11,454 (1,822)(1) 9,632
Office properties and equipment, net ............. 2,608 6,787 700 (1) 10,095
Real estate owned, net ........................... 632 245 -- 877
Accrued interest receivable ...................... 7,023 3,065 -- 10,088
Cost over fair value of net assets acquired and
other intangible assets ........................ 2,457 -- 7,200 (1) 9,657
Prepaid expenses and other assets ................ 1,945 10,574 -- 12,519
----------- ---------- ------------ ----------
Total assets ................................... $824,360 $409,403 $ 5,148 $1,238,911
=========== ========== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ........................................ $506,106 $298,461 $ -- $ 804,567
Advances from FHLB and other borrowings ........ 237,000 73,310 -- 310,310
Subordinated notes .............................. 775 -- -- 775
Advance payments by borrowers for taxes
and insurance ................................. 4,292 4,063 -- 8,355
Accrued expenses and other liabilities ......... 7,076 8,899 3,200 (3) 17,980
(1,195)(6)
----------- ----------- -------------- ----------
Total liabilities .............................. $755,249 $384,733 $ 2,005 $1,141,987
----------- ----------- -------------- ----------
Stockholders' Equity:
Preferred stock ................................. $ 27 $ 4,600 $ (4,591)(2)$ 36
Class A Common Stock ............................ 54 2,418 (2,396)(2) 76
Class B Common Stock ............................ 3 -- -- 3
Additional paid-in capital ...................... 62,055 17,657 10,125 (2) 89,837
Retained earnings ............................... 7,279 301 (301)(2) 7,279
Net unrealized gains on securities
available for sale ............................ (307) (306) 306 (307)
----------- ----------- ----------- ----------
Total stockholders' equity ..................... 69,111 24,670 3,143 96,924
----------- ----------- ----------- ----------
Total liabilities and stockholders' equity .... $824,360 $409,403 $ 5,148 $1,238,911
=========== =========== ============ ==========
Book value per common share ...................... $ 7.85 $ 7.44
Tangible book value per common share ............. $ 7.42 $ 6.22
Fully converted tangible book value per share ... $ 7.13 $ 6.64
</TABLE>
89
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED
BANKUNITED SUNCOAST ADJUSTMENTS(1) PRO FORMA
------------- ----------- --------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income .............................................. $ 52,132 $28,501 $ 1,119 (1) $ 81,752
Interest expense ............................................. 34,622 17,781 20 (1) 52,423
------------ ---------- -------------- ---------
Net interest income before provision for loan losses ........ 17,510 10,720 1,099 29,329
Provision for loan losses .................................... (120) 165 -- 45
------------ ---------- -------------- ---------
Net interest income after provision for loan losses ......... 17,630 10,555 1,099 29,284
------------ ---------- -------------- ---------
Non-interest income:
Loan servicing income, net .................................. -- 4,109 364 (1) 4,473
Gain on sale of assets ...................................... -- 2,870 -- 2,870
Other ....................................................... 649 1,201 -- 1,850
------------ ---------- -------------- ---------
Total non-interest income .................................. 649 8,180 364 9,193
------------ ---------- -------------- ---------
Non-interest expense:
Employee compensation and benefits .......................... 4,275 7,328 (300)(4) 11,303
Occupancy and equipment ..................................... 1,801 2,874 35 (1) 4,710
SAIF special assessment ..................................... 2,614 2,317 -- 4,931
Other operating expenses .................................... 5,346 5,215 280 (1) 10,941
100 (4)
------------ ---------- -------------- ---------
Total non-interest expenses ................................ 14,036 17,734 115 31,885
------------ ---------- -------------- ---------
Income before income taxes and preferred stock dividends .... 4,243 1,001 1,348 6,592
Provision for income taxes ................................... 1,657 371 626 (6) 2,654
------------ ---------- -------------- ---------
Net income before preferred stock dividends .................. 2,586 630 722 3,938
Preferred stock dividends .................................... 2,145 1,104 -- 3,249
------------ ---------- -------------- ---------
Net income after preferred stock dividends ................... $ 441 $ (474) $ 722 $ 689
============ ========== ============== =========
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ........................................... $ .10 $ .10
Earnings per common share assuming full dilution ............ .10 .10
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary .................................................. 4,558,521 6,695,848
Fully diluted .............................................. 4,558,521 6,695,848
OPERATIONS DATA (EXCLUDING SAIF SPECIAL ASSESSMENT):
SAIF special assessment, net of tax ........................ $ 1,621 $1,437 -- $ 3,058
============ ========== ============== =========
Net income before preferred stock dividends and excluding
SAIF special assessment .................................... $ 4,207 $ 2,067 $ 722 $ 6,996
============ ========== ============== =========
Net income after preferred stock dividends and excluding SAIF
special assessment ......................................... $ 2,062 $ 963 $ 722 $ 3,747
============ ========== ============== =========
PER COMMON SHARE DATA (EXCLUDING SAIF SPECIAL ASSESSMENT): ..
Primary earnings per common share and common
equivalent share ......................................... $ .45 $ .56
Earnings per common share assuming full dilution ............ .45 .50
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary .................................................. 4,558,521 6,695,848
Fully diluted .............................................. 4,558,521 7,498,847
</TABLE>
90
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(1) Adjustments to fair value for Suncoast's assets and liabilities are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
AMORTIZATION ANNUAL IMPACT ON
ADJUSTMENTS PERIOD AND METHOD STATEMENT OF OPERATIONS
-------------- ------------------------ ------------------------
<S> <C> <C> <C>
Commercial loans .................. $(2,000) 18 months/straight line $1,333
Residential loans ................. 1,070 5 years/straight line (214)
-------------- ------------------------
Total loans ..................... (930) 1,119
Deposits premium .................. 200 10 years/straight line (20)
Loan servicing assets ............. (1,822) 5 years/straight line 364
Land and buildings ................ 700 20 years/straight line (35)
Cost over fair value of net assets
acquired (goodwill) ............. 7,000 25 years/straight line (280)
</TABLE>
(2) The purchase price of $27,590,000 represents the issuance of 2,199,930
shares of BankUnited Class A Common stock at a price of $7.00 per share
(the closing bid price on the day of the Merger Agreement) and the
issuance of 920,000 shares of New BankUnited Preferred stock having an
estimated value of $13.25 per share. Also, $223,000, representing the
fair value of Suncoast's outstanding stock options and warrants which
will be exchanged for BankUnited stock options and warrants having
similar terms and conditions, was credited to paid-in capital.
The following summarizes the entries to Stockholders' Equity (dollars in
thousands):
<TABLE>
<CAPTION>
ENTRY TO
ENTRIES TO ENTRIES TO RECORD STOCK
ELIMINATE SUNCOAST'S RECORD STOCK OPTIONS AND
EQUITY TO BE ISSUED WARRANTS TOTAL
--------------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Preferred Stock ................... $ (4,600) $ 9 $ -- $(4,591)
Class A Common Stock .............. (2,418) 22 -- (2,396)
Class B Common Stock .............. -- -- -- --
Additional Paid-in Capital ........ (17,657) 27,559 223 10,125
Retained Earnings ................. (301) -- -- (301)
Net unrealized gains on securities
available for sale .............. 306 -- -- 306
--------------- ----------- --------- ---------
Total Stockholders' Equity ..... $(24,670) $27,590 $223 $ 3,143
=============== =========== ========= =========
</TABLE>
(3) The total purchase price includes $3.2 million of accrued liabilities as
follows:
/bullet/ $1.35 million in severance costs.
/bullet/ $1.85 million for direct acquisition costs such as legal,
accounting, investment banking and other professional fees and
expenses.
(4) The pro forma statements of operations include an annual reduction in
salary expense of $300,000 and an annual increase in professional fees of
$100,000 representing the change in status and compensation of Mr. Finch
in accordance with the terms of his change-of-control agreement.
(5) The pro forma adjustments do not include the effect of any potential
expense reductions, revenue enhancements or restructuring charges.
(6) The statutory income tax rate is assumed to be 38%. Amortization of the
cost over fair value of net assets acquired (goodwill) is not deductible
for tax purposes.
91
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information contained under the caption "Election of Directors" to
appear in the Company's definitive proxy statement relating to the Company's
1997 Annual Meeting of Stockholders, which definitive proxy statement will be
filed with the Securities and Exchange Commission not later than 120 days
after the end of the Company's fiscal year covered by this report on Form
10-K (hereinafter referred to as the "Annual Meeting Proxy Statement"), is
incorporated herein by reference. Information concerning the executive
officers of the Company is included in Part I of this Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the caption "Executive Compensation" to
appear in the Annual Meeting Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" to appear in the Annual Meeting Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and Related
Transactions" to appear in the Annual Meeting Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) Financial Statements.
The following consolidated financial statements of the Company and the
report of the independent certified public accountants thereon have been
filed with this report:
Report of Independent Certified Public Accountants (Price
Waterhouse LLP).
Consolidated Statements of Financial Condition as of September
30, 1996 and 1995.
Consolidated Statements of Operations for the years September
30, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 1996, 1995 and 1994.
92
<PAGE>
Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules.
Schedules are omitted because the conditions requiring their filing
are not applicable or because the required information is provided in
the Consolidated Financial Statements, including the Notes thereto.
(3) Exhibits.*
(3.1) Articles of Incorporation of the Company (Exhibit 3.1 to the
Company's Form 10-K Report for the year ended September 30, 1996).
(3.2) Statement of Designation of Series I Class A Common Stock and
Class B Common Stock of the Company, as amended (Exhibit 4.9 to the
Company's Form S-8 Registration Statement [File No. 333-43211]. as
filed with the Securities and Exchange Commission on November 14,
1996).
(3.3) Bylaws of the Company (Exhibit 4.5 to the Company's Form S-8
Registration Statement [File No. 333-43211], as filed with the
Securities and Exchange Commission on November 14, 1996).
(3.4) Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1996 (Exhibit 4.8 to the Company's Form S-8
Registration Statement [File No. 333-43211], as filed with the
Securities and Exchange Commission on November 14, 1996).
(4.1) Agreement for Advances and Security Agreement with Blanket
Floating Lien dated as of September 25, 1992, between the Bank and
the FHLB of Atlanta (Exhibit 4.1 to the Bank's Form 10-K for the year
ended September 30, 1992, filed with the Securities and Exchange
Commission as an exhibit to the Company's Form 8-K dated March 25,
1993).
(4.2) Forms of Series 15A-F, Series 18E and Series 20A-F of
Subordinated Notes of the Bank (Exhibit 4.3 to the Company's Form S-4
Registration Statement, File No. 33-55232, as filed with the
Securities and Exchange Commission on December 2, 1992).
(10.1) Non-Statutory Stock Option Plan, as amended (Exhibit 4.9 to
the Company's Form S-8 Registration Statement [File No. 33-76882], as
filed with the Securities and Exchange Commission on March 24,
1994).**
(10.2) 1992 Stock Bonus Plan, as amended. (Exhibit 10.2 to the
Company's Form 10-K Report for the year ended September 30, 1994 [the
"1994 10-K"]).**
(10.3) 1994 Incentive Stock Option Plan. (Exhibit 10.3 to the 1994
10-K).**
(10.4) Profit Sharing Plan of the Bank (Exhibit 10.4 to the Company's
Form 10-K Report for the year ended September 30, 1995).
(10.5) 1996 Incentive Compensation and Stock Award Plan
(Exhibit 10.5 to the Company's Form 10-K Report for the year ended
September 30, 1996).**
(10.6) Purchase and Assumption Agreement dated March 20, 1995 by and
among the Company, the Bank, SouthTrust Corporation, SouthTrust of
Florida, Inc., and SouthTrust Bank of the Suncoast (Exhibit 10.1 to
the Company's Form 10-Q Report for the quarter ended March 31, 1995
[the "March 31, 1995 10-Q"]).
93
<PAGE>
(10.7) Purchase and Assumption Agreement dated March 20, 1995 by and
among the Company, the Bank, SouthTrust Corporation, SouthTrust of
Florida, Inc., and SouthTrust Bank of Southwest Florida, N.A.
(Exhibit 10.2 to the March 31, 1995 10-Q).
(10.8) First Amendment to Purchase and Assumption Agreement dated
July 27, 1995 by and among the Company, the Bank, SouthTrust
Corporation, SouthTrust of Florida, Inc., and SouthTrust Bank of the
Suncoast (Exhibit 10.1 to the Company's Form 10-Q Report for the
quarter ended June 30, 1995 [the "June 30, 1995 10-Q"]).
(10.9) First Amendment to Purchase and Assumption Agreement dated
July 27, 1995 by and among the Company, the Bank, SouthTrust
Corporation, SouthTrust of Florida, Inc., and SouthTrust of Southwest
Florida, N.A. (Exhibit 10.2 to the June 30, 1995 10-Q).
(10.10) Form of Employment Agreement between the Company and Alfred
R. Camner (Exhibit 10.10 to the Company's 10-K Report for the year
ended September 30, 1996).
(10.11) Form of Employment Agreement between the Company and Earline
G. Ford (Exhibit 10.11 to the Company's 10-K Report for the year
ended September 30, 1996).
(10.12) Form of Employment Agreement between the Company and certain
of its senior officers (Exhibit 10.12 to the Company's 10-K Report
for the year ended September 30, 1996).
(11.1) Statement regarding calculation of earnings per common share
(Exhibit 11.1 to the Company's 10-K Report for the year ended
September 30, 1996).
(12.1) Statement regarding calculation of ratios (Exhibit 12.1 to the
Company's 10-K Report for the year ended September 30, 1996).
(21.1) Subsidiaries of the Company (Exhibit 21.1 to the Company's
10-K Report for the year ended September 30, 1996).
(23.1) Consent of Price Waterhouse LLP.
(24.1) Power of Attorney (set forth on the signature page of the
Annual Report on Form 10-K filed for the year ended September 30,
1996).
- ----------------------
* Exhibits followed by a parenthetical reference are incorporated herein by
reference from the documents described therein.
** Exhibits 10.1--10.4 are compensatory plans or arrangements.
(B) REPORTS ON FORM 8-K.
During the quarter ended September 30, 1996, the Company filed a Current
Report on Form 8-K dated July 15, 1996 with the Securities and Exchange
Commission.
94
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized on
December 23, 1996.
BANKUNITED FINANCIAL CORPORATION
By: /s/ ALFRED R. CAMNER
---------------------------------
Alfred R. Camner
Chairman of the Board,
President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alfred R. Camner, Earline G. Ford and Marc
Jacobson and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this report on Form 10-K and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or his substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on December 23, 1996 on behalf of the Registrant by
the following persons and in the capacities indicated.
<TABLE>
<CAPTION>
/S/ ALFRED R. CAMNER
- -------------------------------- CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
ALFRED R. CAMNER OFFICER, PRESIDENT AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
<S> <C>
/s/ EARLINE G. FORD
- -------------------------------- Executive Vice President, Treasurer and
Earline G. Ford Director
/s/ JAMES A. DOUGHERTY Executive Vice President and Director
- --------------------------------
James A. Dougherty
/s/ SAMUEL A. MILNE
- -------------------------------- Executive Vice President and Chief Financial
Samuel A. Milne Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ MARC D. JACOBSON Director
- --------------------------------
Marc D. Jacobson
/s/ ALLEN M. BERNKRANT Director
- --------------------------------
Allen M. Bernkrant
/s/ LAWRENCE H. BLUM Director
- --------------------------------
Lawrence H. Blum
95
<PAGE>
Director
- --------------------------------
Patricia L. Frost
Director
- --------------------------------
Sandra Goldstein
Director
- --------------------------------
Robert D. Lurie
/s/ ANNE W. SOLLOWAY Director
- --------------------------------
Anne W. Solloway
/s/ CHRISTINA CUERVO MIGOYA Director
- --------------------------------
Christina Cuervo Migoya
/s/ NEIL MESSINGER Director
- --------------------------------
Neil Messinger
Director
- --------------------------------
Bruce Friesner
Director
- --------------------------------
Albert J. Finch
Director
- --------------------------------
Irving P. Cohen
Director
- --------------------------------
Elia J. Giusti
Director
- --------------------------------
Norman E. Mains
/s/ MARC LIPSITZ Director
- --------------------------------
Marc Lipsitz
</TABLE>
96
<PAGE>
BANKUNITED FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1996
INDEX TO EXHIBITS*
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGE
- ---------------- -----------------
<S> <C> <C>
23.1 Consent of Price Waterhouse LLP
</TABLE>
- -------------
* All other exhibits listed under Item 14 of Part IV of the Form 10-K are
incorporated by reference to documents previously filed, as indicated
therein.
97
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-76878, No. 33-76884, No. 33-76882 and
333-432111) of BankUnited Financial Corporation of our report dated December
14, 1996 appearing on page 54 of this Form 10-K/A.
/s/ PRICE WATERHOUSE LLP
- -------------------------
PRICE WATERHOUSE LLP
Miami, Florida
December 14, 1996
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21850
BANKUNITED FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-037773
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ZIP CODE
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 569-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
CLASS A COMMON STOCK, $.01 PAR VALUE
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1996
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ ]
The aggregate market value of the Class A Common Stock held by
non-affiliates of the Registrant, based upon the average price on December
11, 1996, was $68,776,342.* The other voting securities of the Registrant are
not publicly traded.
The shares of the Registrant's common stock outstanding as of December 11,
1996 were as follows:
CLASS NUMBER OF SHARES
----- ----------------
Class A Common Stock, $.01 par value 7,675,931
Class B Common Stock, $.01 par value 251,515
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive Proxy Statement for its 1997 Annual Meeting of
Stockholders will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this Form
10-K pursuant to Rule G(3) of the General Instructions for Form 10-K.
Information from such Definitive Proxy Statement will be incorporated by
reference into Part III, Items 10, 11, 12 and 13 hereof.
1
<PAGE>
- -----------------------------------------------------------------------------
* Based on reported beneficial ownership of all directors and executive
officers of the Registrant; this determination does not, however,
constitute an admission of affiliated status for any of these individual
stockholders.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized on
January 29, 1997.
BANKUNITED FINANCIAL CORPORATION
By: /s/ ALFRED R. CAMNER
---------------------------------
Alfred R. Camner
Chairman of the Board,
President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alfred R. Camner, Earline G. Ford and Marc
Jacobson and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this report on Form 10-K and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or his substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on January 29, 1997 on behalf of the Registrant by
the following persons and in the capacities indicated.
<TABLE>
<CAPTION>
/S/ ALFRED R. CAMNER
- -------------------------------- CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
ALFRED R. CAMNER OFFICER, PRESIDENT AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
<S> <C>
/s/ EARLINE G. FORD
- -------------------------------- Executive Vice President, Treasurer and
Earline G. Ford Director
/s/ JAMES A. DOUGHERTY Executive Vice President and Director
- --------------------------------
James A. Dougherty
/s/ SAMUEL A. MILNE
- -------------------------------- Executive Vice President and Chief Financial
Samuel A. Milne Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ MARC D. JACOBSON Director
- --------------------------------
Marc D. Jacobson
/s/ ALLEN M. BERNKRANT Director
- --------------------------------
Allen M. Bernkrant
/s/ LAWRENCE H. BLUM Director
- --------------------------------
Lawrence H. Blum
2
<PAGE>
Director
- --------------------------------
Patricia L. Frost
Director
- --------------------------------
Sandra Goldstein
Director
- --------------------------------
Robert D. Lurie
/s/ ANNE W. SOLLOWAY Director
- --------------------------------
Anne W. Solloway
/s/ CHRISTINA CUERVO MIGOYA Director
- --------------------------------
Christina Cuervo Migoya
/s/ NEIL MESSINGER Director
- --------------------------------
Neil Messinger
Director
- --------------------------------
Bruce Friesner
Director
- --------------------------------
Albert J. Finch
Director
- --------------------------------
Irving P. Cohen
Director
- --------------------------------
Elia J. Giusti
Director
- --------------------------------
Norman E. Mains
/s/ MARC LIPSITZ Director
- --------------------------------
Marc Lipsitz
</TABLE>
3
<PAGE>
BANKUNITED FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1996
INDEX TO EXHIBITS*
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGE
- ---------------- -----------------
<S> <C> <C>
27.1 Financial Data Schedule
</TABLE>
- -------------
* All other exhibits listed under Item 14 of Part IV of the Form 10-K are
incorporated by reference to documents previously filed, as indicated
therein.
<PAGE>
EXHIBIT 27
ARTICLE 9
LEGEND
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANK UNITED, FSB FOR THE TWELVE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
/LEGEND
TABLE
PERIOD-TYPE 12-MOS
FISCAL-YEAR-END SEP-30-1996
PERIOD-END SEP-30-1996
CASH 5,483
INT-BEARING-DEPOSITS 28,253
FED-FUNDS-SOLD 400
TRADING-ASSETS 0
INVESTMENTS-HELD-FOR-SALE 62,152
INVESTMENTS-CARRYING 59,797
INVESTMENTS-MARKET 0
LOANS 648,543
ALLOWANCE 2,158
TOTAL-ASSETS 824,360
DEPOSITS 506,106
SHORT-TERM 237,000
LIABILITIES-OTHER 11,368
LONG-TERM 0
PREFERRED-MANDATORY 0
PREFERRED 27
COMMON 57
OTHER-SE 69,027
TOTAL-LIABILITIES-AND-EQUITY 824,360
INTEREST-LOAN 41,313
INTEREST-INVEST 10,819
INTEREST-OTHER 0
INTEREST-TOTAL 52,132
INTEREST-DEPOSIT 20,791
INTEREST-EXPENSE 34,622
INTEREST-INCOME-NET 17,510
LOAN-LOSSES (120)
SECURITIES-GAINS 0
EXPENSE-OTHER 14,036
INCOME-PRETAX 4,243
INCOME-PRE-EXTRAORDINARY 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 2,586
EPS-PRIMARY .10
EPS-DILUTED .10
YIELD-ACTUAL 2.52
LOANS-NON 6,396
LOANS-PAST 0
LOANS-TROUBLED 1,457
LOANS-PROBLEM 0
ALLOWANCE-OPEN 2,135
CHARGE-OFFS 160
RECOVERIES 78
ALLOWANCE-CLOSE 2,158
ALLOWANCE-DOMESTIC 0
ALLOWANCE-FOREIGN 0
ALLOWANCE-UNALLOCATED 0
/TABLE
/TEXT
<PAGE>
APPENDIX B
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 5-43936
BANKUNITED FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0377773
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
255 ALHAMBRA CIRCLE, CORAL GABLES 33134
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 569-2000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
The number of shares outstanding of the registrant's common stock at the close
of business on February 11, 1997 was 7,703,477 shares of Class A Common Stock,
$.01 par value, and 275,685 shares of Class B Common Stock, $.01 par value.
This Form 10-Q contains 19 pages.
The Index to Exhibits appears on page 17.
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q Report for the Quarter Ended December 31, 1996
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of
December 31, 1996 (unaudited) and September 30, 1996 3
Consolidated Statements of Operations (unaudited)
for the Three Months Ended December 31, 1996
and December 31, 1995 4
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended December 31, 1996 and
December 31, 1995 5
Condensed Notes to Consolidated Financial
Statements (unaudited) 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES 15
Item 5. OTHER INFORMATION 15
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
December 31, September 30,
1996 1996
- --------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C>
ASSETS
Cash and due from banks $ 15,095 $ 5,483
Federal funds sold and Federal Home Loan Bank overnight deposits 69,323 28,653
Tax certificates (net of reserves of $631 at December 31, 1996
and $614 at September 30, 1996) 33,789 40,088
Investments, available for sale, net at market 6,702 6,685
Mortgage-backed securities, held to maturity, net (market
value of approximately $13,728 at December 31, 1996
and $14,274 at September 30, 1996) 13,906 14,698
Mortgage-backed securities available for sale, net at market 72,206 55,467
Loans receivable, net 1,046,770 646,385
Other interest earning assets 15,136 12,236
Office properties and equipment, net 9,857 2,608
Accrued interest receivable 11,073 7,023
Mortgage servicing rights 8,883 --
Goodwill 11,934 2,457
Prepaid expenses and other assets 14,370 2,577
---------- --------
Total assets $1,329,044 $824,360
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 878,166 $506,106
Advances from Federal Home Loan Bank 288,484 237,000
Subordinated notes 775 775
Accrued expenses and other liabilities 13,464 11,368
---------- --------
Total liabilities 1,180,889 755,249
---------- --------
Company Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Company 50,000 --
---------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, Series B,C,C-II, 1993, 1996 and 9%, $.01 par value.
Authorized shares - 10,000,000; issued and outstanding shares - 3,584,547
at December 31, 1996 and 2,664,547 at September 30, 1996 36 27
Class A Common Stock, $.01 par value. Authorized shares
30,000,000; issued and outstanding shares - 7,656,953
at December 31, 1996 and 5,454,201 at September 30, 1996 76 54
Class B Common Stock, $.01 par value. Authorized shares
3,000,000; issued and outstanding shares - 251,515 at
December 31, 1996 and 251,515 at September 30, 1996 3 3
Additional paid-in capital 89,860 62,055
Retained earnings 8,206 7,279
Net unrealized losses on securities available for sale, net of tax (26) (307)
---------- --------
Total stockholders' equity 98,155 69,111
---------- --------
Total liabilities and stockholders' equity $1,329,044 $824,360
========== ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(Unaudited)
1996 1995
------- -------
(In thousands, except earnings per share)
<S> <C> <C>
Interest income:
Interest and fees on loans $16,616 $ 8,766
Interest on mortgage-backed securities 1,309 889
Interest on short-term investments 467 603
Interest and dividends on long-term investments
and other earning assets 1,099 1,066
------- -------
Total interest income 19,491 11,324
------- -------
Interest expense:
Interest on deposits 8,882 4,223
Interest on borrowings 3,505 3,563
------- -------
Total interest expense 12,387 7,786
------- -------
Net interest income before provision (credit) for loan losses 7,104 3,538
Provision (credit) for loan losses 250 (300)
------- -------
Net interest income after provision (credit) for loan losses 6,854 3,838
------- -------
Non-interest income:
Service fees, net 575 151
Other 25 7
------- -------
Total non-interest income 600 158
------- -------
Non-interest expenses:
Employee compensation and benefits 1,915 967
Occupancy and equipment 886 363
Insurance 361 226
Professional fees - legal and accounting 222 246
Other operating expenses 1,449 726
------- -------
Total non-interest expenses 4,833 2,528
------- -------
Income before income taxes and preferred stock dividends 2,621 1,468
Income taxes 1,022 557
------- -------
Net income before preferred stock dividends 1,599 911
Preferred stock dividends 672 536
------- -------
Net income after preferred stock dividends $ 927 $ 375
======= =======
Earnings Per Share
Primary $ 0.13 $ 0.16
======= =======
Fully-diluted $ 0.13 $ 0.15
======= =======
Weighted average number of common share equivalents assumed outstanding
during the period:
Primary 7,155 2,369
======= =======
Fully diluted 8,045 3,172
======= =======
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(Unaudited)
1996 1995
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,599 $ 911
Adjustments to reconcile net income to net cash used in
operating activities:
Provision (credit) for loan losses 250 (300)
Provision for losses on tax certificates 18 38
Depreciation and amortization 313 126
Amortization of discounts and premiums on investments 8 --
Amortization of discounts and premiums on mortgage-backed securities 30 34
Amortization of discounts and premiums on loans (23) (353)
Loans originated for sale (5,193) (3,057)
Increase in accrued interest receivable (1,097) (653)
(Decrease) increase in interest payable on deposits and FHLB advances (845) 53
Increase in accrued expenses 2,347 4
Decrease in accrued taxes (937) (2,589)
Increase (decrease) in deferred taxes 17 (469)
(Decrease) increase in other liabilities (27,320) 835
Decrease in prepaid expenses and other assets 2,039 972
Proceeds from sale of loans 3,657 1,521
Recovery on loans 11 941
Loss (gain) on sales of loans 11 (4)
Loss (gain) on sales of real estate owned 23 (52)
-------- --------
Net cash used in operating activities (25,092) (2,042)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (58,864) (34,126)
Proceeds from sale of real estate owned 488 650
Purchase of other earning assets (2,650) --
Proceeds from repayments of mortgage-backed securities 3,136 1,555
Proceeds from repayments of other earning assets 3,000 750
Proceeds from sale of investment securities -- 3,000
Purchases of premises and equipment (338) (159)
Net decrease in tax certificates 6,281 8,060
Purchase of Suncoast's cash equivalents 32,803 --
-------- --------
Net cash used in investing activities (16,144) (20,270)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 48,323 42,970
Net decrease in other borrowings (16) (10,000)
Net proceeds from issuance of preferred stock 9 --
Net proceeds from issuance of common stock 14 88
Net proceeds from issuance of trust guaranteed preferred
beneficial interest in the Company's debenture 48,350 --
Dividends paid on the Company's preferred stock (672) (536)
Decrease in advances from borrowers for taxes and insurance (4,490) (2,661)
-------- --------
Net cash provided by financing activities 91,518 29,861
-------- --------
Increase in cash and cash equivalents 50,282 7,549
Cash and cash equivalents at beginning of period 34,136 34,730
-------- --------
Cash and cash equivalents at end of period $ 84,418 $ 42,279
======== ========
SUPPLEMENTAL DISCLOSURES:
Transfer from loans to real estate owned $ 1,160 $ --
======== ========
Transfers from real estate owned to loans $ -- $ 184
======== ========
Transfers of mortgage-backed securities from held-to-maturity to
available for sale $ -- $ 31,780
======== ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements have been prepared
in conformity with Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and therefore do not include information or footnotes necessary for a
complete presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles ("GAAP").
However, all adjustments (consisting of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of the financial
statements of BankUnited Financial Corporation and its subsidiaries (the
"Company") have been included. Operating results for the three month period
ended December 31, 1996 are not necessarily indicative of the results which may
be expected for the year ended September 30, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K/A for fiscal year ended September 30,
1996.
2. REGULATORY CAPITAL
The Office of Thrift Supervision ("OTS") requires that BankUnited, FSB (the
"Bank") meet minimum regulatory tangible, core and risk-based capital
requirements. Currently, the Bank exceeds all regulatory capital requirements.
The Bank's required, actual and excess regulatory capital levels as of December
31, 1996 were as follows:
<TABLE>
<CAPTION>
REQUIRED ACTUAL EXCESS
------------------- -------------------- ---------------------
% OF % OF % OF
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
--------- ------ --------- ------ --------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible Capital $ 19,786 1.5% $ 102,841 7.7% $ 83,055 6.2%
Core Capital $ 39,573 3.0% $ 102,841 7.7% $ 63,268 4.7%
Risk-Based Capital $ 58,464 8.0% $ 106,758 14.6% $ 48,294 6.6%
</TABLE>
3. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES OF THE COMPANY
On December 30, 1996, a newly formed trust subsidiary created under the laws of
Delaware, BankUnited Capital, issued $50 million of 10 1/4% Trust Preferred
Securities, Series A (the "Trust Preferred Securities") and $2 million of common
securities, which are wholly owned by the Company. In connection with this
transaction, BankUnited Capital simultaneously purchased $52 million of 10 1/4%
Junior Subordinated Deferrable Interest Debentures, Series A issued by
BankUnited Financial Corporation with terms similar to the Trust Preferred
Securities.
These securities mature December 31, 2026 and pay a preferential cumulative cash
distribution at an annual rate of 10 1/4%. The Company and BankUnited Capital
have the right to defer payment of interest for up to 5 years. BankUnited
Financial Corporation has guaranteed all of the obligations of the Trust
Preferred Securities, including costs, expenses and liabilities of BankUnited
Capital.
6
<PAGE>
4. ACQUISITION
On November 15, 1996, the Company acquired Suncoast Savings & Loan Association,
FSA ("Suncoast"). The Company issued one share of its Class A Common Stock for
each share of Suncoast common stock of which 2,199,930 were outstanding and one
share of newly created 8% non-cumulative convertible preferred stock, Series
1996 for each share of Suncoast preferred stock of which 920,000 shares were
outstanding. The newly created 8% non-cumulative convertible preferred stock,
Series 1996 has substantially the same terms and conditions as the Suncoast
preferred stock. The cost of the acquisition, which will be accounted for as a
purchase was $27.8 million, representing the fair value of the consideration
given to the Suncoast common and preferred stockholders as well as the option
and warrant holders. In addition, the Company incurred approximately $1.3
million of costs directly related to the merger. At the date of the acquisition,
the fair value of the assets acquired (including goodwill of approximately $9.6
million) and liabilities assumed totaled approximately $436 million and $408
million, respectively.
The unaudited proforma combined condensed statements of operations for the three
month periods ended December 31, 1996, and 1995 assumes the acquisition occurred
as of the beginning of the period presented and, after giving effect to certain
proforma adjustments, are as follows:
Proforma combined condensed Statement of Operations (in thousands except per
share data):
Three Months Ended December 31,
(Unaudited)
1996 1995
--------- --------
Interest Income $ 23,359 $ 18,228
Interest expense 14,695 11,971
Provision (credit) for loan losses 356 (179)
Non-interest income 1,254 1,592
Non-interest expense 6,641 6,446
Income tax provision 1,155 617
-------- --------
Net income before preferred stock dividends 1,766 965
Preferred stock dividends 810 812
-------- --------
Net income after preferred stock dividends $ 956 $ 153
======== ========
Earnings per share
Primary $ 0.12 $ 0.03
Fully-diluted $ 0.11 $ 0.03
7
<PAGE>
5. CONTINGENCIES
The Company is a party to certain claims and litigation arising in the ordinary
course of business. In the opinion of management, the resolution of such claims
and litigation will not materially affect the Company's consolidated financial
position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis presents a review of the consolidated
operating results and financial condition of the Company for the three month
periods ended December 31, 1996 and 1995. This discussion and analysis should be
read in conjunction with the Consolidated Financial Statements and Notes thereto
contained in the Company's Annual Report on Form 10-K/A for the year ended
September 30, 1996.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1996 TO
DECEMBER 31, 1996.
ASSETS
Total assets increased by $505 million, or 61.2%, from $824 million at September
30, 1996, to $1.3 billion at December 31, 1996, principally due to the
acquisition of Suncoast Savings and Loan Association, FSA ("Suncoast") on
November 15, 1996. On the date of the acquisition, Suncoast had total assets of
$435.7 million.
Cash and due from banks increased $9.6 million from $5.5 million as of September
30, 1996 to $15.1 million at December 31, 1996. This increase is primarily due
to additional cash requirements as a result of the acquisition of Suncoast's
mortgage loan servicing operations.
The Company's short-term investments, consisting of Federal Home Loan Bank
("FHLB") overnight deposits and federal funds sold, increased by $40.7 million,
or 141.9%, to $69.3 million at December 31, 1996, from $28.6 million at
September 30, 1996. This increase is due primarily to investing the proceeds
from the sale of $50 million of Company Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated
Deferrable Interest Debentures of the Company (See Note 3 of Condensed Notes to
Consolidated Financial Statements.)
Mortgage-backed securities available for sale increased $16.7 million or 30.1%
from $55.5 million at September 30, 1996 to $72.2 million at December 31, 1996,
due primarily to the $18.7 million of mortgage-backed securities acquired with
Suncoast.
The Company's net loan portfolio increased by $400.4 million, or 61.9%, to $1.05
billion at December 31, 1996, from $646.4 million at September 30, 1996,
primarily due to the acquisition of $360.1 million of loans with Suncoast and
the purchase of $68.0 million of residential loans.
The increase in mortgage servicing rights, goodwill and prepaid expenses and
other assets of $8.9 million, $9.6 million and $11.8 million, respectively,
relate to the acquisition of Suncoast.
8
<PAGE>
Non-performing assets as of December 31, 1996 were $9.4 million which represents
an increase of $1.5 million or 19.7% from $7.8 million as of September 30, 1996.
Non-performing assets as a percentage of total assets declined 25 basis points
from .95% as of September 30, 1996 to .70% as of December 31, 1996. $2.4 million
of non-performing assets were acquired with Suncoast.
The allowance for loan losses increased $733,000 from $2.2 million as of
September 30, 1996 to $2.9 million as of December 31, 1996. The increase was
attributable primarily to the growth of the loan portfolio including loans
acquired with Suncoast. On the date of acquisition, Suncoast's loan loss
allowance was $775,000.
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated.
December 31, September 30,
1996 1996
------------ -------------
(Dollars in thousands)
Non-accrual loans (1) $5,558 $4,939
Restructured loans 1,691 1,457
Loans past due 90 days and still accruing 52 --
------ ------
Total non-performing loans 7,301 6,396
Non-accrual tax certificates 610 800
REO 1,457 632
------ ------
Total non-performing assets $9,368 $7,828
====== ======
Allowance for tax certificates $ 631 $ 614
Allowance for loan losses 2,891 2,158
------ ------
Total allowance $3,522 $2,772
====== ======
Non-performing assets as a percentage of
total assets .70% .95%
Non-performing loans as a percentage of
total loans .70% .99%
Allowance for loan losses as a percentage of
total loans .28% .34%
Allowance for loan losses as a percentage of
non-performing loans 39.60% 33.74%
- -----------
(1) In addition to the above, management had concerns as to the borrower's
ability to comply with present repayment terms on $540,000 and $109,000
of accruing loans as of December 31, 1996 and September 30, 1996,
respectively.
LIABILITIES
Deposits increased by $372.1 million, or 73.5%, to $878.2 million at December
31, 1996 from $506.1 million at September 30, 1996. $323.7 million of the
increase in deposits represents accounts acquired with Suncoast. Additionally,
$26.2 million of the increase represents growth in branches opened in the last
year. The
9
<PAGE>
Company intends to open 3 or more branches in the next 12 months. Management
believes the remaining increase is attributable to the Company offering
competitive interest rates and personalized service.
FHLB advances were $288.5 million at December 31, 1996, up $51.5 million from
$237.0 million at September 30, 1996. This increase was the result of the $51.5
million of FHLB advances assumed by BankUnited in connection with the
acquisition of Suncoast.
CAPITAL
The Company's total stockholders' equity was $98.2 million at December 31, 1996,
an increase of $29.1 million, or 42.1%, from $69.1 million at September 30,
1996. The increase is due primarily to the issuance of 2,199,930 shares of
Series A Common Stock and 920,000 shares of 8% Non-cumulative Convertible
Preferred Stock, Series 1996, issued in connection with the Suncoast
acquisition. The estimated value of the stock issued to acquire Suncoast was
$27.8 million.
On December 30, 1996, the Company's subsidiary, BankUnited Capital, issued $50
million of Trust Preferred Securities (see Note 3 of the condensed notes to
consolidated financial statements). The net proceeds from the sale of the Trust
Preferred Securities was $48 million. These funds may be used to provide
additional capital to the Bank and enables the Bank to continue its rapid
expansion. As of December 31, 1996, BankUnited Financial Corporation had
contributed $25 million additional capital to the Bank.
In February 1997, the holder of the Company's Series C and Series C-II classes
of preferred stock exercised the right to convert both classes to Class A common
stock at exchange ratios of 1.45 shares of Class A common stock for each share
of Series C preferred stock and 1.32 shares of Class A common stock for each
share of Series C-II preferred stock. The Company had previously exercised its
right to call both classes of preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
OTS regulations require that savings institutions, such as the Bank, maintain
specified levels of liquid investments in cash, United States government
securities and other qualifying investments. Regulations currently in effect
require the Bank to maintain liquid assets of not less than 5.0% of its net
withdrawal deposit accounts plus short term borrowings, of which short term
liquid assets must consist of not less than 1%. As of December 31, 1996 the Bank
had liquid assets and short term liquid assets of 16.9% and 12.10%,
respectively, which was in compliance with these requirements.
The Company is considering several allternative public and/or private financings
that would provide the Bank with a significant increase in liquidity and Tier 1
capital to permit additional growth.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND
1995.
NET INCOME AFTER PREFERRED STOCK DIVIDENDS
The Company had net income after preferred stock dividends of $927,000 for the
three months ended December 31, 1996, compared to net income after preferred
stock dividends of $375,000 for the three months ended December 31, 1995. All
major categories of income and expense increased significantly in the three
months ended December 31, 1996 as compared to the three months ended December
31, 1995 and reflect the significant growth the Company has experienced in the
last year. A significant factor in such growth was the
10
<PAGE>
acquisition of Suncoast, which was completed on November 15, 1996. The Company's
Consolidated Statement of Operations for the three months ended December 31,
1996 reflects the Suncoast operations from the date of acquisition forward.
Below is a more detailed discussion of each major category of income and
expenses.
NET INTEREST INCOME
Net interest income increased $3.6 million, or 100.8%, to $7.1 million for the
three months ended December 31, 1996 from $3.5 million for the three months
ended December 31, 1995. This increase is attributable to an expansion of the
net interest rate spread of 56 basis points, to 2.60% for the three months ended
December 31, 1996 from 2.04% for the three months ended December 31, 1995 and an
increase in average interest-earning assets of $396.0 million, or 65.7%, to
$998.3 million for the three months ended December 31, 1996 from $602.3 million
for the three months ended December 31, 1995, offset by an increase in average
interest-bearing liabilities of $384.6 million, or 68.7%, to $944.6 million for
the three months ended December 31, 1996 from $560.0 million for the three
months ended December 31, 1995. Approximately $200 million of the increase in
average earning assets for the three months ended December 31, 1996 is a result
of the acquisition of Suncoast. The remaining increase in average earning assets
is due primarily to loan purchases. The average yield on interest-earning assets
increased 27 basis points to 7.78% for the three months ended December 31, 1996
from 7.51% for the three months ended December 31, 1995. The increase in average
yield is attributable to an increase in the yield on loans receivable relating
primarily to commercial real estate and construction loans acquired with
Suncoast. Suncoast had a greater percentage of higher yielding commercial real
estate and construction loans than BankUnited.
The increase in interest income of $8.2 million, or 72.1%, to $19.5 million for
the three months ended December 31, 1996 from $11.3 million for the three months
ended December 31, 1995, reflects increases in interest and fees on loans of
$7.9 million. The average yield on loans receivable increased to 7.97% for the
three months ended December 31, 1996 from 7.66% for the three months ended
December 31, 1995 and the average balance of loans receivable increased $372.7
million, or 81.5%, to $830.2 million for the three months ended December 31,
1996. Approximately $180 million of the increase in loans is due to the
acquisition of Suncoast and, as stated above, the increase in the yield on loans
is also attributed to Suncoast.
The increase in interest expense of $4.6 million, or 59.1%, to $12.4 million for
the three months ended December 31, 1996 from $7.8 million for the three months
ended December 31, 1995 primarily reflects an increase in interest expense on
interest bearing deposits of $4.7 million, or 110%, from $4.2 million for the
three months ended December 31, 1995, to $8.9 million for the three months ended
December 31, 1996. This increase is due to an increase in average interest
bearing deposits of $376 million, or 116%, from $323 million for the three
months ended December 31, 1995 to $699 million for the three months ended
December 31, 1996. Approximately $150 million of this increase represents
deposits acquired with Suncoast. The average rate paid on interest bearing
deposits declined 13 basis points from 5.17% for the three months ended December
31, 1995 to 5.04% for the three months ended December 31, 1996. The decline in
the average rate paid on interest bearing deposits is due to a decline in the
average rate paid on certificates of deposits from 5.69% to 5.51%.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended December 31, 1996 was
$250,000 as compared with a credit for loan losses of $300,000 for the three
months ended December 31, 1995. The credit in 1995 was due to a recovery of
approximately $1 million as a result of a legal settlement relating to certain
loans previously purchased. The provision (credit) for loan losses represents
management's estimate of the charge
11
<PAGE>
to operations after reviewing the nature, volume, delinquency status,
and inherent risk in the loan portfolio in relation to the allowance for loan
losses.
NON-INTEREST INCOME
Non-interest income for the three months ended December 31, 1996 was $600,000
compared with $158,000 for the three months ended December 31, 1995, an increase
of $442,000. Of this increase, $262,000 represents loan servicing fees (net of
amortization of capitalized servicing rights) acquired with Suncoast. The
remaining increase is primarily attributable to service fees on deposits
reflecting the increase in the amount of deposits outstanding.
NON-INTEREST EXPENSES
Operating expenses increased $2.3 million, or 91.2%, to $4.8 million for the
three months ended December 31, 1996 compared to $2.5 million for the three
months ended December 31, 1995. The increase in expenses is attributable to the
growth the Company has experienced and includes the expenses of Suncoast after
November 15, 1996.
INCOME TAXES
The income tax provision was $1.0 million for the three months ended December
31, 1996, compared to $557,000 for the three months ended December 31, 1995. The
increase in income taxes is the result of the Company's higher pre-tax earnings
during the three months ended December 31, 1996, compared to the three months
ended December 31, 1995.
PREFERRED STOCK DIVIDENDS
Preferred stock dividends for the three months ended December 31, 1996 were
$672,000 an increase of $136,000, or 25.4%, as compared to $536,000 for the
three months ended December 31, 1995. This increase is the result of dividends
paid on the 8% Noncumulative Convertible Preferred Stock, Series 1996 issued in
connection with the acquisition of Suncoast.
YIELDS EARNED AND RATES PAID
The following tables set forth certain information relating to the categories of
the Company's interest-earning assets and interest-bearing liabilities for the
periods indicated. All yield and rate information is calculated on an annualized
basis. Yield and rate information for a period is average information for the
period calculated by dividing the income or expense item for the period by the
average balances during the period of the appropriate balance sheet item. Net
interest margin is net interest income divided by average interest-earning
assets. Non-accrual loans are included in asset balances for the appropriate
period, whereas recognition of interest on such loans is discontinued and any
remaining accrued interest receivable is reversed, in conformity with federal
regulations. The yields and net interest margins appearing in the following
table have been calculated on a pre-tax basis.
12
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------------------------------
1996 1995
--------------------------------- ---------------------------------
AVERAGE AVERAGE
BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
-------- -------- ---------- -------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net $830,157 $16,616 7.97% $457,493 $ 8,766 7.66%
Mortgage-backed securities 78,721 1,309 6.65 52,344 889 6.79
Short-term investments (1) 33,021 467 5.53 39,719 603 5.94
Tax certificates 36,681 756 8.24 35,876 762 8.49
Long-term investments and
FHLB stock, net 19,736 343 6.89 16,907 304 7.08
-------- ------- ---- -------- -------- ----
Total interest-earning assets 998,316 19,491 7.78 602,339 11,324 7.51
-------- ------- ---- -------- -------- ----
Interest-bearing liabilities:
NOW/money market 73,103 413 2.24 25,086 126 1.99
Savings 106,209 1,254 4.68 52,450 575 4.35
Certificates of deposit 519,785 7,215 5.51 245,711 3,522 5.69
FHLB advances and other
borrowings 245,520 3,505 5.59 236.775 3,563 5.86
-------- ------- ---- -------- -------- ----
Total interest-bearing
liabilities 944,617 12,387 5.18 560,022 7,786 5.47
-------- ------- ---- -------- -------- ----
Excess of interest-earning assets
over interest-bearing liabilities $ 53,699 $ 42.317
======== ========
Net interest income $ 7,104 $ 3,538
======= ========
Interest rate spread 2.60% 2.04%
===== =====
Net interest margin 2.87% 2.41%
===== =====
Ratio of interest-earning assets to
interest-bearing liabilities 105.68% 107.56%
======== ========
<FN>
- --------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
</FN>
</TABLE>
13
<PAGE>
RATE/VOLUME ANALYSIS
The following table presents, for the periods indicated, the change in interest
income and the changes in interest expense attributable to the changes in
interest rates and the changes in the volume of interest-earning assets and
interest-bearing liabilities. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to: (i) changes in volume (change in volume multiplied by prior year rate); (ii)
changes in rate (change in rate multiplied by prior year volume); (iii) changes
in rate/volume (change in rate multiplied by change in volume); and (iv) total
changes in rate and volume.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------------------------
1996 VS. 1995
--------------------------------------------------------------
INCREASE (DECREASE) DUE TO
--------------------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE/
VOLUME RATE RATE/VOLUME (DECREASE)
------- ------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans $ 7,673 $ 143 $ 34 $ 7,850
Mortgage-backed securities 448 (19) (9) 420
Short-term investments (1) (102) (41) 7 (136)
Tax certificates 17 (22) (1) (6)
Long-term investments and FHLB
stock 48 (6) (3) 39
------- ----- ------ -------
Total interest-earning assets 8,084 55 28 8,167
------- ----- ------ -------
Interest expense attributable to:
NOW/money market 241 16 30 287
Savings 590 44 45 679
Certificates of deposit 3,928 (111) (124) 3,693
FHLB advances and other
borrowings 131 (182) (7) (58)
------- ----- ------ -------
Total interest-bearing liabilities 4,890 (233) (56) 4,601
------- ----- ------ -------
Increase in net interest income $ 3,194 $ 288 $ 84 $ 3,566
======= ===== ====== =======
<FN>
- ------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
</FN>
</TABLE>
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On November 15, 1996, the Company acquired Suncoast Savings and
Loan Association, FSA which was merged with its wholly owned
bank subsidiary, BankUnited, FSB. In connection with the
acquisition, the Company issued 2,199,930 shares of Class A
Common Stock and 920,000 shares of 8% Non-cumulative
Convertible Preferred Stock, Series 1996. (See Note 4 of
Condensed Notes to Consolidated Financial Statements)
On December 30, 1996, the Company's subsidiary, BankUnited
Capital, a trust created under the laws of the state of
Delaware, sold through private placement, $50 million of
redeemable trust preferred securities. The trust preferred
securities were offered by Friedman, Billings, Ramsey & Co.,
Inc., and Raymond James & Associates, Inc., as compensation for
arranging such sales, an amount of $30.00 per preferred
security ($1.5 million in aggregate) was paid. The preferred
securities were offered and sold only to qualified
institutional buyers ("Qualified Institutional Buyers") as
defined under Rule 144A under the Securities Act and other
"accredited investors" (as defined in Rule 501 under the
Securities Act) ("Accredited Investors") in a private sale
exempt from the registration requirements of the Securities
Act. (See Note 3 of Condensed Notes to Consolidated Financial
Statements)
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11 Calculation of Earnings Per Share.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K dated
December 2, 1996 under item 2 and 7 thereof reporting
BankUnited Financial Corporation's acquisition of
Suncoast Savings and Loan Association, FSA.
The Company filed a current report on Form 8-K dated
January 8, 1997 reporting the Company's subsidiary,
BankUnited Capital, a trust created under the laws of
Delaware, sold through private placement, $50 million
of redeemable trust preferred securities.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
BANKUNITED FINANCIAL CORPORATION
Date: February 14, 1997 By: /s/ SAMUEL A. MILNE
--------------------------------------
Samuel A. Milne
Executive Vice President
and Chief Financial Officer
16
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarter Ended December 31, 1996
INDEX TO EXHIBITS
EXHIBIT NO.
- -----------
11 Calculation of Earnings Per Share
27.1 Financial Data schedule
17
<PAGE>
EXHIBIT 11
Calculation of Earnings Per Share
(In thousands, except per share data)
FOR THE THREE MONTHS
ENDED DECEMBER 31,
-----------------------
CALCULATION OF PRIMARY EARNINGS PER COMMON SHARE 1996 1995
- ------------------------------------------------ --------- ---------
Net income before preferred stock dividends $ 1,599 $ 911
Preferred stock dividends (672) (536)
Reduction of interest expense due to assumed
exercise of stock options, net of taxes -- 3
------- -------
Net income available to common shares $ 927 $ 378
======= =======
Weighted average number of common shares outstanding
during the period 6,807 2,078
Assumed exercise of stock options (Modified Treasury
Stock Method) 348 291
------- -------
Weighted average number of common share equivalents
assumed outstanding during the period 7,155 2,369
======= =======
Primary earnings per share $ 0.13 $ 0.16
======= =======
FOR THE THREE MONTHS
ENDED DECEMBER 31,
-----------------------
CALCULATION OF FULLY DILUTED EARNINGS PER COMMON SHARE 1996 1995
- ------------------------------------------------------ --------- ---------
Net income before preferred stock dividends $ 1,599 $ 911
Preferred stock dividends (588) (452)
Reduction of interest expense due to assumed
exercise of stock options, net of taxes -- 3
------- -------
Net income available to common shares $ 1,011 $ 462
======= =======
Weighted average number of common shares outstanding
during the period 6,807 2,078
Assumed exercise of stock options (Modified Treasury
Stock Method) 436 291
Conversion of Preferred Stock 803 803
Weighted average number of fully diluted common shares
assumed outstanding during the period 8,046 3,172
======= =======
Fully diluted earnings per share $ 0.13 $ 0.15
======= =======
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANK UNITED, FSB FOR THE THREE MONTHS ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
/LEGEND
MULTIPLIER 1,000
TABLE
PERIOD-TYPE 3-MOS
FISCAL-YEAR-END SEP-30-1997
PERIOD-END DEC-31-1996
CASH 15,095
INT-BEARING-DEPOSITS 69,323
FED-FUNDS-SOLD 0
TRADING-ASSETS 0
INVESTMENTS-HELD-FOR-SALE 78,098
INVESTMENTS-CARRYING 47,706
INVESTMENTS-MARKET 0
LOANS 1,049,661
ALLOWANCE 2,891
TOTAL-ASSETS 1,329,044
DEPOSITS 506,106
SHORT-TERM 288,484
LIABILITIES-OTHER 13,464
LONG-TERM 0
PREFERRED-MANDATORY 0
PREFERRED 36
COMMON 79
OTHER-SE 98,040
TOTAL-LIABILITIES-AND-EQUITY 1,329,044
INTEREST-LOAN 16,616
INTEREST-INVEST 2,875
INTEREST-OTHER 0
INTEREST-TOTAL 19,491
INTEREST-DEPOSIT 8,882
INTEREST-EXPENSE 12,387
INTEREST-INCOME-NET 7,104
LOAN-LOSSES 250
SECURITIES-GAINS 0
EXPENSE-OTHER 4,833
INCOME-PRETAX 2,621
INCOME-PRE-EXTRAORDINARY 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 2,621
EPS-PRIMARY .13
EPS-DILUTED .13
YIELD-ACTUAL 2.88
LOANS-NON 5,558
LOANS-PAST 52
LOANS-TROUBLED 1,691
LOANS-PROBLEM 0
ALLOWANCE-OPEN 2,158
CHARGE-OFFS 303
RECOVERIES 12
ALLOWANCE-CLOSE 2,891
ALLOWANCE-DOMESTIC 0
ALLOWANCE-FOREIGN 0
ALLOWANCE-UNALLOCATED 0
/TABLE
/TEXT
<PAGE>
APPENDIX C
OFFICE OF THRIFT SUPERVISION
WASHINGTON, D.C. 20552
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal year ended: June 30, 1996
OTS file number: 8147
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2383531
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
4000 HOLLYWOOD BOULEVARD, HOLLYWOOD, FLORIDA 33021
- -------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 981-6400
Securities registered pursuant to Section 12(b) of the Act: None
<TABLE>
<S> <C> <C>
Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $1.10 Per Share
8% Noncumulative Preferred Stock, Series A, Par
Value $5.00 Per Share
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Registration S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting Common Stock held by non-affiliates of
the Registrant as of September 23, 1996, was approximately $11,982,000. (1)
The number of shares outstanding of the Registrant's Common Stock as of
September 23, 1996 was 2,195,930.
DOCUMENTS INCORPORATED BY REFERENCE
None.
(1) The aggregate market value of the voting stock set forth equals the
amount of Common Stock outstanding at September 23, 1996, reduced
by the amount of Common Stock held by all officers and directors of
the Registrant multiplied by the NASDAQ closing price for the
Common Stock on September 23, 1996.
<PAGE>
ITEM 1. BUSINESS
GENERAL
Suncoast Savings and Loan Association, FSA ("Suncoast" or "the
Association") is a federally chartered stock savings association headquartered
in Hollywood, Florida that engages principally in the business of community
banking and mortgage loan servicing. Community banking consists primarily of
attracting checking and savings deposits from the public and investing such
deposits, together with borrowings and other funds, in various types of loans
and other permitted investments. In connection with its community banking
activities, Suncoast originates and purchases, for its own portfolio, both
residential and commercial real estate loans.
Suncoast's mortgage loan servicing activities include processing loan
payments, remitting principal and interest to investors, administering escrow
funds and providing other services in the administration of mortgage loans.
Suncoast is an approved seller/servicer for the Government National Mortgage
Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and
Fannie Mae ("FNMA"). Suncoast also services loans under contracts with the
Federal Deposit Insurance Corporation ("FDIC") and other financial institutions.
Suncoast operates six savings branches in Broward and Palm Beach
County, Florida. It is regulated and examined by the Office of Thrift
Supervision ("OTS") and the FDIC and its deposit accounts are insured up to the
applicable limits by the FDIC.
PROPOSED MERGER
On July 15, 1996, Suncoast and BankUnited Financial Corporation, a
Florida corporation ("BankUnited"), entered into an Agreement and Plan of Merger
(the "Agreement and Plan of Merger"), providing for the merger (the "Merger") of
Suncoast into BankUnited, FSB, a wholly-owned subsidiary of BankUnited. Pursuant
to the terms of the Agreement and Plan of Merger, BankUnited, FSB will be the
surviving corporation in the Merger.
Upon completion of the Merger, (i) each issued and outstanding share
of Common Stock, par value $1.10 per share, of Suncoast (the "Suncoast Common
Stock") will be converted into the right to receive one share of Series I Class
A BankUnited Common Stock ("BankUnited Common Stock") and (ii) each issued and
outstanding share of Series A NonCumulative Convertible Preferred Stock of
Suncoast (the "Suncoast Preferred Stock") will be converted into the right to
receive one share of a new series of preferred stock of BankUnited to be
authorized by the Board of Directors of BankUnited and to have rights and
preferences substantially similar to those of the Suncoast Preferred Stock ("New
BankUnited Preferred Stock").
Completion of the Merger is subject to certain conditions, including:
(a) approval by the shareholders of Suncoast and BankUnited, (b) approvals of
the Office of Thrift Supervision and other regulatory authorities, (c) the
effectiveness under the Securities Act of 1933, as amended of the Registration
Statement registering the BankUnited Common Stock and the New BankUnited
Preferred Stock to be issued in the Merger, (d) receipt by Suncoast of an
2
<PAGE>
opinion of counsel that the Merger constitutes a tax-free reorganization under
the provisions of Section 368 of the Internal Revenue Code of 1986, as amended,
(e) the absence of any event, occurrence or circumstance that would constitute a
Material Adverse Effect (as defined in the Agreement and Plan of Merger) on
either Suncoast or BankUnited and (f) other conditions to closing customary in a
transaction of this type.
In order to induce BankUnited to enter into the Agreement and Plan of
Merger, Suncoast has agreed in the Agreement and Plan of Merger to pay a
termination fee to BankUnited upon the occurrence of certain events. If the
Agreement and Plan of Merger is terminated by Suncoast in connection with an
Acquisition Proposal (as defined in the Agreement and Plan of Merger), Suncoast
has agreed to pay to BankUnited $1,000,000 plus BankUnited's out-of-pocket
expenses up to $300,000. If the Agreement and Plan of Merger is terminated
because the shareholders of Suncoast fail to approve the Merger, Suncoast has
agreed to pay to BankUnited $100,000 plus BankUnited's out-of-pocket expenses up
to $10,000.
In addition, if the Agreement and Plan of Merger is terminated (i) by
BankUnited pursuant to a willful breach by Suncoast and an Acquisition Event (as
defined in the Agreement and Plan of Merger) occurs within the twelve months
following the termination or (ii) because the shareholders of Suncoast fail to
approve the Merger and an Acquisition Event occurs within the four months
following the termination, Suncoast has agreed to pay BankUnited $1,000,000 (or
$900,000 if Suncoast has already paid the $100,000 termination fee referred to
above). One effect of the agreement by Suncoast to pay the termination fees is
to increase the likelihood that the Merger will be completed by BankUnited by
making it more difficult and more expensive for another party to obtain control
of or acquire Suncoast.
Under the terms of the Agreement and Plan of Merger, if the Agreement
and Plan of Merger is terminated (i) because the required regulatory approvals
have not been obtained, (ii) because the regulatory approvals contain conditions
that in the judgment of BankUnited would restrict the operations or activities
of BankUnited or (iii) because the Merger has not been consummated by February
28, 1997, BankUnited has agreed to pay Suncoast $100,000 plus Suncoast's
out-of-pocket expenses up to $10,000.
BUSINESS SEGMENTS
Suncoast's operations consist of activities in three principal
business segments: banking, loan servicing and mortgage banking. Revenues in the
banking segment consist primarily of interest on mortgage loans and investment
securities. Loan servicing activities derive revenues primarily from the
collection of fees on loans serviced. During 1995, Suncoast shifted its primary
business emphasis from mortgage banking to banking. The following is segment
information for the fiscal years ended June 30 (in thousands):
3
<PAGE>
1996 1995 1994
------ ------ ------
BANKING
Revenues:
Interest income $ 23,949 $ 25,011 $ 9,358
Gains on the sale of
mortgage-backed securities 2,950 1,388 0
Other income 731 1,117 1,154
-------- -------- --------
27,630 27,516 10,512
-------- -------- --------
Expenses:
Interest expense 16,489 18,499 6,449
Employee compensation
and benefits 3,048 1,918 1,311
Depreciation 396 212 178
Provision for losses on real
estate 95 68 150
Provision for loan losses 153 95
Other expenses 2,700 2,318 1,557
-------- -------- --------
22,881 23,110 9,645
-------- -------- --------
Banking income before income
taxes $ 4,749 $ 4,406 $ 867
======== ======== ========
MORTGAGE BANKING
Revenues:
Interest income $ 1,654 $ 300 $ 5,526
Gains on the sale of loans and
loan servicing assets, net 304 560 14,963
Loan origination and other income 331 336 6,212
-------- -------- --------
2,289 1,196 26,701
-------- -------- --------
Expenses:
Interest expense 1,009 236 3,703
Employee compensation
and benefits 1,272 2,438 13,347
Depreciation 134 412 564
Other expenses 1,050 2,667 8,249
-------- -------- --------
3,465 5,753 25,863
-------- -------- --------
Mortgage banking income (loss)
before income taxes $ (1,176) $ (4,557) $ 838
======== ======== ========
4
<PAGE>
LOAN SERVICING
Revenues:
Loan servicing fees $ 6,016 $ 7,450 $ 8,088
Amortization of loan
servicing assets (1,617) (1,175) (3,508)
--------- --------- ---------
Loan servicing income 4,399 6,275 4,580
Interest income 2,355 2,544 3,727
Gain on sale of loans and
loan servicing assets, net 621
Other income 190 254 264
--------- --------- ---------
7,565 9,073 8,571
--------- --------- ---------
Expenses:
Interest expense 439 283 758
Employee compensation
and benefits 2,920 3,649 3,704
Depreciation 610 784 559
Other expenses 3,356 3,275 2,147
--------- --------- ---------
7,325 7,991 7,168
--------- --------- ---------
Loan servicing income (loss)
before income taxes $ 240 $ 1,082 $ 1,403
========= ========= =========
Assets:
Banking $ 372,861 $ 439,175 $ 297,926
Mortgage banking 8,844 6,356 43,827
Loan servicing 20,864 16,822 17,337
--------- --------- ---------
$ 402,569 $ 462,353 $ 359,090
========= ========= =========
Capital dispositions (expenditures), net:
Banking $ (447) $ 8 $ (81)
Mortgage banking (188) 64 (1,760)
Loan servicing (860) 8 (86)
--------- --------- ---------
$ (1,495) $ 80 $ (1,927)
========= ========= =========
References in this document to the fiscal years ended June 30, 1996,
1995 and 1994 are stated as "Fiscal 1996", "Fiscal 1995" and "Fiscal 1994",
respectively.
OPERATING STRATEGY
Suncoast's current operative strategy reflects a fundamental shift in
Suncoast's business from a mortgage bank to a community bank. Prior to 1994,
Suncoast was primarily engaged in the mortgage banking business. Historically
low interest rates in 1992 and 1993 generated record volumes of loan origination
and resale activity, primarily refinancings, leading Suncoast to expand its
lending operations nationally to fifteen loan production offices.
5
<PAGE>
Beginning in January 1994, rising interest rates halted refinancings making it
unprofitable for Suncoast to continue its mortgage banking operation. Suncoast
downsized its mortgage banking operation by closing all but one of its
production offices and by reducing related staff and overhead expenses.
During Fiscal 1994 and 1995, Suncoast changed its operating strategy
to that of community bank and focused on enhancing its net interest income and
servicing revenues. Suncoast initially replaced its mortgage banking assets,
primarily its inventory of loans available for sale, with investments in
mortgage-backed securities, repurchase agreements, and loans originated for
portfolio. Suncoast's strategy was to restructure its assets initially into
interest bearing assets with minimal credit risk until Suncoast could reinvest
funds previously used to finance its mortgage banking activities into portfolio
loans. In addition, this strategy allowed Suncoast to shift its assets to those
with lower risk weights under the risk based capital regulations enabling
Suncoast to increase both its assets and deposits and, accordingly, its net
interest income, while remaining well capitalized under such regulations.
During Fiscal 1995 and Fiscal 1996, Suncoast sold portions of its
mortgage-backed securities portfolio due to its ability to reinvest the proceeds
in the purchase and origination of high quality commercial and residential real
estate loans for investment. In completing this restructuring, Suncoast not only
reduced its interest rate risk, but increased its net interest income by
shifting from longer term fixed rate mortgage-backed securities to higher
yielding adjustable rate loans receivable. As its assets were shifted into
portfolio loans, Suncoast was required to reduce the overall volume of both its
interest-earning assets and its interest-bearing liabilities in order to remain
well capitalized under the applicable regulations, since its asset mix shifted
from mortgage-backed securities and short term liquid investments, generally
bearing 0 to 20% risk weights, to commercial and residential loans bearing 50%
and 100% risk weights, respectively, for purposes of its risk-based capital
ratio.
From the period January 1990 through June 1995, Suncoast did not
purchase or accumulate any servicing assets due in part to regulatory changes
which placed restrictions on the amount of servicing rights which could be
included in the calculation of regulatory capital. During this period, Suncoast
concentrated on expanding its subservicing activities, as subservicing
contracts, unlike servicing generally, are not considered an investment in loan
servicing rights for financial reporting or regulatory capital purposes. During
Fiscal 1996, however, Suncoast's operating strategy with respect to its
servicing business has been to increase its servicing portfolio through the
purchase of servicing rights and the retention of servicing rights on loans
which have been sold. Despite these efforts to increase the servicing portfolio,
loan servicing income declined during Fiscal 1996 primarily due to declines in
the volume of loans serviced under government contracts and the repayment of
loans in the servicing portfolio. Management intends to continue to acquire and
accumulate servicing rights within applicable regulatory limitations as
opportunities arise. Investments in servicing rights in excess of $25,000,
however, are subject to the consent of BankUnited while the Agreement and Plan
of Merger is pending. Loan servicing income may continue to decline as loans in
the servicing portfolio are repaid and subservicing contracts are not renewed.
6
<PAGE>
LENDING ACTIVITIES
GENERAL. Prior to January 1994, it was Suncoast's policy, as a mortgage banker,
to sell in the secondary market substantially all residential first mortgage
loans it originated or purchased. With Suncoast's change in operating strategy
from mortgage banking to community banking, the Association has concentrated on
the purchase and origination, for its own portfolio of residential first
mortgage loans, commercial and multi-family real estate loans and construction
loans. During Fiscal 1995, Suncoast originated and purchased for portfolio $7.3
million and $45.0 million of single family residential loans and commercial and
multi-family real estate loans, respectively. In comparison, during Fiscal 1996,
Suncoast originated and purchased for portfolio $232.8 million and $48.0 million
of single family residential loans and commercial and multi-family real estate
loans, respectively.
The following chart describes the composition of Suncoast's loans
receivable as of June 30, 1996 and 1995:
1996 1995
--------- ---------
(in Thousands)
Loans in portfolio:
Real estate loans:
Commercial, collateralized by--
Undeveloped land $ 3,115 $ 5,256
Office buildings 8,287 7,625
Hotel property 21,692 9,082
Retail stores 21,552 17,245
Multi-family residential and other 43,836 34,099
--------- ---------
Total commercial 98,482 73,307
Residential (one to four family) 215,044 55,449
Construction 8,491 7,085
Consumer loans 1,917 1,750
--------- ---------
323,934 137,591
Allowance for loan losses (657) (504)
Deferred loan fees, net (617) (493)
Undisbursed portion of loans in process (4,354) (7,137)
Premiums paid on loans held in portfolio 2,522 329
--------- ---------
$ 320,828 $ 129,786
Loans held for sale:
Residential real estate loans $ 6,675 $ 2,962
Deferred loan fees, net (31) (19)
Premiums paid on loans held for sale 86 35
--------- ---------
$ 6,730 $ 2,978
========= =========
Total loans receivable, net $ 327,558 $ 132,764
========= =========
At June 30, 1996, 66.4% of Suncoast's loan portfolio consisted of
residential loans, and 33.6% consisted of commercial, construction and consumer
loans.
7
<PAGE>
COMMERCIAL REAL ESTATE LENDING. Suncoast's commercial real estate and
construction loan portfolio at June 30, 1996 is comprised of the following
percentages by loan type: 41.0% are permanent mortgage loans on multi-family
properties, 48.2% commercial property loans, 7.9% are construction loans secured
by residential or income producing properties and 2.9% are land loans. Suncoast
generally lends not more than 75% of the securing property's appraised value for
multi-family loans, 70% of the appraised value for all other commercial real
estate loans and 60% for land loans. Construction and permanent commercial real
estate lending is generally considered to have higher credit risk than
single-family residential lending because repayment typically is dependent on
the successful operation of the related real estate project and thus may be
subject, to a greater extent, to adverse conditions in the real estate market or
the economy. Construction loans involve additional risks because loan funds are
advanced based on the security of the project under construction, which is of
uncertain value prior to completion, and because it is relatively difficult to
evaluate accurately the total amount required to complete a project. As a
general rule, Suncoast also requires that all loans be personally guaranteed by
one or more individuals who have made a significant equity investment in the
property and that appropriate escrow accounts for the payment of taxes and
insurance be maintained at Suncoast. Suncoast's lending area is primarily within
the State of Florida, with 91% of its commercial real estate loans
collateralized by property located in the State of Florida at June 30, 1996.
Suncoast also has originated commercial loans in Maryland, South Carolina and
California.
In making lending decisions, Suncoast generally considers, among
other things, the overall quality of the loan, the credit of the borrower, the
location of the real estate, the projected income stream of the property and the
reputation and quality of management constructing or administering the property.
No one factor is determinative and such factors may be accorded different
weights in any particular lending decision. Commercial real estate loans
generally have shorter terms, adjust more rapidly to interest rate fluctuations
and bear higher rates of interest than alternative investments. Income from this
type of loan is more responsive to changes in the general level of interest
rates.
SINGLE-FAMILY RESIDENTIAL REAL ESTATE LENDING. A substantial portion
of the loans originated and purchased by the Association are conventional
mortgage loans (i.e., not guaranteed or insured by agencies of the federal
government) which are secured by residential properties and which conform with
the requirements for sale to FNMA or FHLMC (i.e., conforming loans), or which
would otherwise conform, except that they exceed the maximum amount to qualify
for sale to FNMA or FHLMC or they are made to non-resident alien borrowers.
Loans which do not comply with FNMA or FHLMC underwriting requirements are
referred to as non-conforming loans.
The majority of loans originated by the Association have been derived
from a correspondent program. Participants in the correspondent program are
independent and unaffiliated mortgage brokers who must satisfy certain
requirements established by the Association pertaining to experience, size of
business and the holding of various licenses and approvals.
The Association also purchases mortgage loans on properties located
throughout the United States from other lenders. The Association's loan
origination activities have been funded from deposits, loan sales and
borrowings. Suncoast originates and purchases for
8
<PAGE>
portfolio primarily adjustable rate first mortgage loans and, to a
lesser extent, fixed rate loans, generally repayable over 30 years. Residential
loans typically remain outstanding for shorter periods than their contractual
maturities because borrowers prepay the loans in full upon sale of the mortgaged
property or upon refinancing of the original loan. Suncoast's adjustable-rate
mortgage loans ("ARMS") generally have interest rates that adjust semi-annually
or annually at a margin over the weekly average yield on U.S. Treasury
securities adjusted to a constant maturity or at a margin over the one year
weekly average of secondary market interest rates on six month negotiable
certificates of deposit. Both indices are published by the Federal Reserve. The
maximum interest rate adjustment of the Association's ARMs is generally 1%
semi-annually and 6% over the life of the loan, above or below the initial rate
of the loan for semi-annual adjustable loans, or 2% annually and 6% over the
life of the loan, above or below the initial rate on the loan for annual
adjustable loans. Suncoast's policy is to require private mortgage insurance on
all residential loans with a loan-to-value ratio in excess of 80%.
Generally, ARM loans pose credit risks somewhat greater than the
risks inherent in fixed rate loans primarily because as interest rates rise, the
underlying payments of the borrower rise, thereby increasing the potential for
default. At the same time, the marketability of the underlying property may be
adversely affected by higher interest rates. In order to minimize these risks,
borrowers of ARM loans are qualified at the fully indexed rate. The Association
does not originate ARM loans which provide for negative amortization of deferred
interest.
At June 30, 1996 and 1995, loans due after one year with fixed and
adjustable interest rates, including loans held for resale, totaled $305.1
million and $129.0 million, respectively. The average remaining term to maturity
of the Association's loan portfolio, including loans held for resale, was 20.0
years at June 30, 1996.
The following table shows the scheduled principal payments of the
Association's loans receivable (including loans held for resale) prior to the
allowance for loan losses, deferred loan fees, premiums paid on loans and
undisbursed portion of loans in process, but without estimation of prepayment
expectations, at June 30, 1996:
9
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR(S) ENDING JUNE 30,
--------------------------------------------------------------------------------------------------
(In thousands)
2000- 2002- 2007- AFTER DUE AFTER
1997 1998 1999 2001 2006 2011 2011 TOTAL ONE YEAR
---- ---- ---- ---- ---- ---- ---- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans held for sale (1):
Residential first mortgage
loans - adjustable $ 196 $ - $ - $ - $ - $ - $ - $ 196 $ -
Residential first mortgage
loans - fixed 6,479 - - - - - - 6,479 -
--------------------------------------------------------------------------------------------------
6,675 - - - - - - 6,675 -
--------------------------------------------------------------------------------------------------
Loans in portfolio:
Residential first mortgage
loans - adjustable 2,460 2,657 2,869 6,446 20,930 27,479 122,433 185,274 182,814
Residential first mortgage
loans - fixed 612 662 715 1,608 5,302 7,829 13,042 29,770 29,158
Commercial real estate
loans - adjustable 7,200 10,209 7,500 14,531 46,929 3,995 0 90,364 83,164
Commercial real estate
loans - fixed 1,592 1,680 1,805 1,453 1,588 8,118 6,526
Construction loans (2) 6,244 750 435 432 630 8,491 2,247
Consumer loans - adjustable 691 67 456 504 1,718 1,027
Consumer loans - fixed 18 181 0 199 181
------------------------------------------------------------------------------------------------
18,817 16,206 13,780 24,974 75,379 39,303 135,475 323,934 305,117
------------------------------------------------------------------------------------------------
Total loans receivable $ 25,492 $16,206 $13,780 $24,974 $75,379 $39,303 $135,475 $330,609 $305,117
================================================================================================
</TABLE>
(1) Since loans held for sale are to be delivered within two months,
they are categorized within 1996 and not according to their
contractual maturities.
(2) All loans are adjustable rate.
10
<PAGE>
The table below shows Suncoast's mortgage and other loan originations
by geographic location for the periods indicated:
YEAR ENDED JUNE 30,
-------------------------------------------
1996 1995 1994
----------- ---------- ----------
(In thousands)
Florida $ 84,362 $ 57,889 $ 515,511
California 13,630 1,149,803
North Carolina 112,463
Massachusetts 340,339
Washington 18,531
Virginia 9,641
Nevada 1,958 117
---------- ---------- ----------
84,362 73,477 2,146,405
Streamlined refinances 34,258
Other loans originated 43,139 45,015 23,176
---------- ---------- ----------
$ 127,501 $ 118,492 $2,203,839
========== ========== ==========
The table below shows Suncoast's conforming and non-conforming
mortgage loan originations for the periods indicated:
YEAR ENDED JUNE 30,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(In thousands)
Residential one-to-four conforming $ 65,520 $ 25,519 $1,405,167
Non-conforming 18,842 47,958 775,496
---------- ---------- ----------
Mortgage loans originated $ 84,362 $ 73,477 $2,180,663
========== ========== ==========
UNDERWRITING STANDARDS AND REVIEW. Suncoast's commercial and
residential real estate mortgage lending is subject to its written underwriting
standards and to loan origination procedures prescribed by its Board of
Directors. These procedures require that detailed loan applications be obtained
to determine the prospective borrower's ability to repay the loan, and that the
more significant items on the applications be verified through the use of credit
reports, financial statements and confirmations. Loan applications are processed
and reviewed for approval pursuant to such standards and procedures as well as
applicable state and federal laws and regulations. Suncoast uses outside
appraisers and requires title insurance with respect to the security property.
In addition, residential loans are generally originated and underwritten in
accordance with standards established by FNMA, FHLMC and other third party
investors in the secondary market. Applications for loans originated by Suncoast
are processed by its staff and reviewed by its underwriting department based on
the application package presented. Conforming residential loans, those complying
with the requirements for sale to FNMA or FHLMC or conversion to mortgage-backed
securities and thus readily saleable in the secondary market, may be approved by
the underwriting department. Residential loans above prescribed lending limits
are referred to Suncoast's Loan Committee, consisting of the Chief Executive
Officer, the Executive Vice President-Lending and Servicing, Senior Vice
President-Loan Servicing, and the Vice President-Loan Production. All loans
referred to Loan Committee must be approved by the Chief Executive Officer and
two other members of Loan Committee. Purchases of residential loans that are
newly
11
<PAGE>
originated are subject to the same documentation requirements and
underwriting review and standards as those originated by Suncoast. Purchases of
residential loans that are more than one year old are subject to more limited
underwriting review which includes a review of a current credit and payment
history of the borrower, a current market valuation of the collateral, as well
as the original underwriting decision and documentation.
Commercial and multi-family loans under $2,000,000 are referred to
Suncoast's Major Loan Committee consisting of the Chief Executive Officer,
General Counsel and the Executive Vice President-Lending and Servicing.
Commercial loans in excess of $2,000,000 are approved by the entire Board of
Directors. Loan approvals by all loan committees are ratified by the Board of
Directors. All approved loans are closed for Suncoast by approved closing
agents.
Suncoast requires title, fire and extended casualty insurance to be
obtained by the borrower and, where appropriate, flood insurance. The
Association typically requires builders' risk insurance on construction loans.
Mortgage loans originated by Suncoast generally include a "due-on-sale" clause
giving the Association the right to declare a loan immediately due and payable
in the event, among other things, that the borrower sells or otherwise disposes
of the real property subject to the mortgage and the loan is not repaid.
ASSET QUALITY
COLLECTION PROCEDURES. With respect to loans receivable as well as
loans in the servicing portfolio, when a borrower fails to make a required
payment on a loan, Suncoast attempts to cause the deficiency to be cured. In
most cases, deficiencies are cured promptly; however, if a residential loan
payment is contractually delinquent for more than 30 days, additional collection
procedures are implemented. If the delinquency is not cured, Suncoast will
institute appropriate legal action. If foreclosed, the property may be sold at a
public or private sale or purchased by Suncoast.
CLASSIFIED ASSETS. OTS regulations provide for a method of
classifying all assets and re-evaluation of real estate owned by the OTS
examination staff. Under the regulations, assets may be classified as (i)
"Substandard", (ii) "Doubtful" or (iii) "Loss". Assets classified as Substandard
or Doubtful may have allowances for loan losses of an appropriate amount and
assets classified as Loss must have either valuation allowances up to 100% of
the book value of the assets or be charged off. Any such valuation allowance
would be drawn from, and thereby lower, the institution's capital as determined
under generally accepted accounting principles ("GAAP") which is the foundation
for the institution's regulatory capital computation. Assets that do not
currently expose a savings association to a sufficient degree of risk to warrant
classification but possess credit deficiencies or potential weaknesses deserving
management's attention are designated as "special mention". At June 30, 1996,
Suncoast had $208,000 in assets designated as "special mention", compared to
zero at June 30, 1995. Suncoast currently conducts weekly reviews of (a) its
real estate owned in order to determine whether to reduce the carrying value of
such real estate and (b) its residential mortgage loan portfolio, its consumer
loans and each of its commercial real estate and construction loans, in order to
determine whether to establish or increase any allowance for loan losses or
charge off loans or portions of loans that are determined to be uncollectible.
12
<PAGE>
Set forth below is information on classified assets as of the dates
indicated:
JUNE 30,
-------------------
1996 1995
------ ------
(Dollars in Thousands)
Substandard $1,182 $ 633
Doubtful - -
Loss - -
------ ------
Total classified assets $1,182 $ 633
====== ======
Percent of total assets 0.29% 0.14%
====== ======
At June 30, 1996, substandard assets consisted of two residential
loans, one residential foreclosed property and one commercial real estate loan
in bankruptcy proceedings. At June 30, 1995, all substandard assets were
residential loans.
NON-PERFORMING ASSETS. Suncoast generally ceases accruing interest
when a loan is 90 or more days delinquent. The following table sets forth
information regarding the Association's non-performing assets as of the dates
indicated:
<TABLE>
<CAPTION>
% OF % OF % OF
JUNE 30, TOTAL JUNE 30, TOTAL JUNE 30, TOTAL
1996 ASSETS 1995 ASSETS 1994 ASSETS
-------- ------ -------- ------ -------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans $ 466 0.12% $ 36 0.01% $ 563 0.16%
Accruing loans
90 days or more
past due - - - - - -
Restructured loans 455 0.11 115 0.03 947 0.26
Real estate
acquired through
foreclosure 261 0.06 523 0.11 428 0.12
In-substance
foreclosure - - - - - -
------ ---- ------ ---- ------ --
$1,182 0.29% $ 674 0.15% $1,938 0.54%
====== ==== ====== ==== ====== ====
</TABLE>
Non-performing assets are generally classified by Suncoast as
substandard. Information on classified assets is shown net of specific reserves
attributable to such assets while information on non-performing assets is shown
before allowances for specific reserves. During the years ended June 30, 1996,
1995 and 1994, interest income of $19,807, $6,700 and $5,100, respectively, was
recorded on non-accrual loans prior to their being placed on non-accrual status.
If non-accrual loans had been accruing interest, additional interest income of
$54,000, $10,000 and $42,000 would have been recorded during Fiscal 1996, 1995
and 1994, respectively.
ALLOWANCE FOR LOAN AND LEASE LOSSES. The allowance for loan and lease
losses is maintained at an amount management deems adequate to cover estimated
losses.
13
<PAGE>
The following table sets forth the breakdown of the allowance for
loan losses by loan category at the dates indicated.
JUNE 30,
---------------------
1996 1995
------ ------
(In thousands)
Real estate mortgages:
One-to-four family residential loans $131 $ 48
Multi-family loans 68 38
Commercial real estate loans 410 304
Unimproved land loans 31 53
Consumer loans 16 14
Unallocated 1 47
---- ----
Total allowance for loan losses $657 $504
==== ====
Suncoast provides for future losses based on management's assessment
of risk inherent in the portfolio and provides for losses on specific loans, if
necessary. Provisions for losses on specific loans are charged to earnings when,
in the opinion of management, it is probable that the loan has been impaired and
the amount of the loss can be reasonably estimated. Secondly, an allowance for
loan losses is established based upon loan type as well as the classification of
loans as substandard, doubtful or loss, or their designation as special mention.
Provisions for the allowance for loan losses are based on a management analysis
that incorporates a number of factors, including historical loss experience,
current economic conditions and management's ongoing assessment of risk inherent
in each type of loan and in the aggregate portfolio.
The process of updating the allowance for loan losses begins with the
application of a formula developed by Suncoast that calls for a fixed percent to
be applied against each loan type as well as loans designated as non-performing,
classified or subject to special mention. The percent varies based on the
expected risk of loss for each type of loan and level of classification or
designation. The allowance for loan losses is increased or decreased with an
offsetting charge or credit to earnings when dictated by the formula. When the
formula requires less than a minimum allowance balance established by Suncoast's
Board of Directors, the difference is labeled as "unallocated". Management
reviews the results of this formula-driven approach and where appropriate
changes factors used in the formula and amounts produced by the formula to
result in an allowance for loan losses that is adequate. While management uses
the best information available to make evaluations, future adjustments to the
allowance may be necessary if economic conditions differ substantially from the
assumptions used in making the evaluations.
The following table sets forth the activity in the Association's
allowance for loan losses during the periods indicated:
14
<PAGE>
JUNE 30,
---------------------------
1996 1995 1994
------ ------ -----
(In thousands)
Balance at beginning of period $504 $504 $521
---- ---- ----
Loans charged-off:
One-to-four family residential loans ( 0) (95) (17)
Multi-family loans - - -
Commercial real estate loans - - -
Unimproved land loans - - -
Consumer loans - -
----- ----- ---
( 0) (95) (17)
----- ----- -----
Recoveries:
One-to-four family residential loans - - -
Multi-family loans - - -
Commercial real estate loans - - -
Land loans - - -
Consumer loans - - -
---- ---- ---
- - -
---- ---- ---
Net charge-offs: (difference between
charge-offs and recoveries) ( 0) (95) (17)
----- ----- -----
Provision for loan losses(1) 153 95 -
----- ---- ---
Balance at end of period $657 $504 $504
===== ==== ====
Write-downs and reserves for Real Estate Owned:
Balance at beginning of period $ - $ - $ -
Net charge-offs ( 0) (68) (150)
Provision for REO losses 80 68 150
---- ---- ----
Balance at end of period $ 80 $ - $ -
==== ==== ===
(1) The provision for loan losses is the amount required to maintain a
total reserve balance that is the result of the current level of
loans and classified assets and the percentage reserve factors
applied against each type of loan and classified asset as discussed
above.
Effective July 1, 1995, Suncoast adopted Statement of Financial
Accounting Standards No. 114, ("FAS 114") "Accounting by Creditors for
Impairment of a Loan", subsequently amended by FAS 118. Loans within the scope
of FAS 114 are measured for impairment based on (a) the present value of
expected future cash flows discounted at the loan's effective interest rate, (b)
the market price, or (c) if collateral dependent, the fair value of the
collateral. If the value of the loan so determined is less than the loan's
recorded value, then the creditor must recognize a loss for the difference by
creating a valuation allowance or adjusting an existing valuation allowance with
a corresponding charge to bad debt expense. FAS 118 amended certain income
recognition and disclosure provisions of FAS 114. The adoption of FAS 114 and
FAS 118 did not have a significant effect on Suncoast's financial condition and
results of operations due to the composition of its loan portfolio and its
policy for establishing its allowance for loan losses. Notwithstanding FAS 114,
effective March 31, 1995, OTS policy requires the classification and valuation
of troubled, collateral dependent loans for purposes of regulatory reporting to
be based on the fair value of the collateral. This change in OTS policy has had
an insignificant effect on Suncoast.
15
<PAGE>
LOAN SERVICING ACTIVITIES
Prior to January 1990, Suncoast emphasized its mortgage servicing
activities and developed a substantial loan servicing portfolio by purchasing
from various originators the servicing rights to originated or purchased first
mortgage residential loans on properties located in all 50 states, although
predominantly in California, and retaining servicing rights to loans that it
sold in the secondary market. The Association continues to service the loans
from these prior years and also subservices loans for others.
From the period January 1990 through June 1995, Suncoast did not
purchase or accumulate any servicing assets due in part to regulatory changes
which placed restrictions on the amount of servicing rights which could be
included in the calculation of regulatory capital. During this period, Suncoast
concentrated on expanding its subservicing activities, as subservicing
contracts, unlike servicing generally are not considered an investment in loan
servicing rights for financial reporting or regulatory capital purposes. During
Fiscal 1996, however, Suncoast's operating strategy with respect to its
servicing business has been to increase its servicing portfolio through the
purchase of servicing rights and the retention of servicing rights on loans
which have been sold. The principal amount of loans for which Suncoast performed
servicing or subservicing as of June 30, 1996 was $1.5 billion. Suncoast has the
capacity to service up to $5.0 billion of loans without significantly increasing
its operational hardware and other equipment.
Suncoast's capitalized mortgage servicing rights ("MSRs") consist of
purchased mortgage servicing rights ("PMSRs"), originated mortgage servicing
rights ("OMSRs"), and premiums on the sale of loans. MSRs generate cash revenues
in the form of servicing fees, which are determined based on a percentage of the
declining principal amount of the loans serviced, and collected from a portion
of each mortgage loan payment received, plus any late charges or other ancillary
fees. Servicing income is reduced by the amortization of premiums on the sale of
loans and costs incurred to purchase loan servicing rights. Retention or
purchase of servicing rights creates a stream of payments which lasts throughout
the period during which a mortgage loan remains outstanding. The value of
servicing to the Association is dependent upon the expected income stream
associated with the underlying loans. Factors which may affect this value
include servicing fees, stated mortgage interest rates, loan balances, loan
types, estimated average loan life, escrow balances, delinquency and foreclosure
history, projected servicing costs and existing or expected liabilities related
to borrower delinquencies. See "Item 8. Financial Statements and Supplementary
Data - Note A to the Consolidated Financial Statements."
During the period from January 1990 through June 1995, Suncoast did
not accumulate or purchase MSRs resulting in a corresponding decrease in loan
principal balances and servicing revenue. To offset this decline in revenue,
starting in Fiscal 1992, Suncoast began to utilize its capacity to subservice
loans for other financial institutions for a mutually agreed monthly fee per
loan. The subservicing of loans utilizes the same operational capabilities as
are utilized with normal servicing, but does not require the capital investment
necessary for the purchase or retention of a normal servicing asset. It does,
however, generate a slightly lower yield than servicing loans directly because
an investor in servicing rights also has the ability to realize appreciation of
servicing assets and increased servicing income due to lower than expected loan
prepayments in periods of rising interest rates. At
16
<PAGE>
June 30, 1996, Suncoast was subservicing approximately 1,400 loans
with a principal value of $254.6 million for fifteen other financial
institutions. At June 30, 1995, Suncoast was subservicing approximately 3,100
loans with a principal value of $370.2 million for ten other financial
institutions. During Fiscal 1996, 1995, and 1994, Suncoast recorded servicing
fees related to these contracts of $247,000, $412,000, and $333,000,
respectively.
In addition, during Fiscal 1992, Suncoast expanded its subservicing
capabilities by entering into an agreement with the RTC to service residential
and commercial mortgage loans that came under the RTC's authority. Although this
agreement expired in October 1995, Suncoast entered into another agreement with
the RTC to service residential loans. As of December 31, 1995, the RTC ceased
operations, and the FDIC assumed responsibility for RTC functions, including the
administration of the contract with Suncoast ("the RTC Contract"). Loans under
the RTC Contract are serviced for a fixed monthly fee for each loan plus any
late charges or other ancillary fees collected. The Association also receives
fees under the RTC Contract to perform various other services related to the
loans. As of June 30, 1996 and 1995, Suncoast was subservicing over 600 and
6,600 loans, respectively, with a principal value of $43.9 million and $433.7
million, respectively, under the RTC Contract, including $26.9 million and
$127.0 million, respectively, under a master subservicing coordination agreement
for other FDIC servicers which obligates Suncoast to review reports of other
servicers for the FDIC and to consolidate cash remittances to the FDIC.
In January and October 1995, respectively, Suncoast signed national
contracts with the FDIC to service residential real estate loans and consumer
loans, respectively. Under the residential contract, Suncoast receives monthly
fees based on the declining principal balance of loans which do not exceed
certain delinquency requirements. Under the consumer servicing contract,
Suncoast receives a fixed monthly fee for certain performing loans and a
percentage of amounts collected related to non-performing loans. As of June 30,
1996 and 1995, Suncoast was subservicing approximately 5,000 loans and 2,000
loans, respectively, with a principal value of $164.3 million and $78.1 million,
respectively, for the FDIC.
Loan servicing fees related to RTC Contract and FDIC contracts for
the years ended June 30, 1996, 1995 and 1994 amounted to $1.8 million, $2.7
million, and $2.5 million, respectively. The amount of subservicing fees
generated by Suncoast from the RTC Contract and the FDIC contracts is dependent
upon the amount of assets which come under these entities' control, the length
of time which they are owned, and other factors. These factors are based upon
economic and other conditions which are generally beyond Suncoast's control.
Management anticipates that subservicing fees related to the RTC Contract will
continue to decrease as the FDIC continues to liquidate the inventory of loans
under its control.
During Fiscal 1996, in an effort to offset reduced servicing income
as a result of repayments of loans underlying the servicing assets and as a
result of decreased levels of loans subserviced, Suncoast resumed the purchase
and accumulation of servicing rights. Suncoast purchased $2.3 million of PMSRs,
representing approximately $286.8 million in principal loan balances. On July 1,
1995, Suncoast adopted Statement of Financial Accounting Standards No 122 ("FAS
122") "Accounting for Mortgage Servicing Rights", as discussed in "Item 8.
Financial Statements and Supplementary Data - Notes to the Consolidated
Financial Statements." With the adoption of FAS 122, Suncoast has reinitiated
its prior practice of retaining the servicing rights on most of the loans it
originates and sells
17
<PAGE>
and capitalizes as OMSRs the normal servicing fee to be received over the life
of each loan at its fair value. During Fiscal 1996, Suncoast capitalized
$860,000 of OMSRs representing $62.0 million in loan principal balances.
Management intends to continue to acquire PMSRs and generate OMSRs within
applicable regulatory guidelines as opportunities arise, subject, however, to
those restrictions contained in the Agreement and Plan of Merger.
The following table sets forth certain information regarding the loan
servicing portfolio of Suncoast for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
1996 1995 1994
---------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Loan servicing portfolio (beginning of period) $1,639,069 $2,009,762 $2,688,629
Servicing for loans originated and purchased 178,511 118,492 2,203,839
Loan servicing rights purchased 286,827 7,027 -
Run-off (1) (186,043) (169,252) (398,744)
Sale of servicing rights (55,235) (90,812) (2,313,543)
Subservicing added (transferred out) during the year (318,841) (142,381) 305,825
Loans serviced under temporary subservicing
agreements, net (2) (55,235) (93,767) (476,244)
---------- ---------- ----------
Loan servicing portfolio (end of period) $1,489,053 $1,639,069 $2,009,762
========== ========== ==========
Number of loans serviced (end of period) 22,822 22,524 22,421
Average loan balance (end of period) $ 65 $ 73 $ 90
Servicing fees (gross) $ 6,016 $ 7,450 $ 8,088
Servicing fees (net) (3) $ 4,399 $ 6,275 $ 4,580
</TABLE>
- ----------------------------
(1) Run-off refers to normal amortization of loans and prepayments.
(2) Represents net change in servicing rights sold prior to fiscal year
end which rights were transferred to the purchasers subsequent to the
fiscal year end.
(3) Net of amortization of the carrying value of PMSRs, OMSRs and
premiums on the sale of loans and of any valuation adjustments due to
changes in prepayment assumptions.
The following table sets forth, by type of servicing rights, the loan
principal serviced and related asset balances as of the dates indicated:
18
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
--------------------------- ---------------------------
(In thousands)
LOAN ASSET LOAN ASSET
PRINCIPAL BALANCE PRINCIPAL BALANCE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PMSRs $ 652,727 $ 9,525 $ 467,700 $ 8,572
Premiums on the sale of loans 55,692 1,359 65,393 1,533
OMSRs 46,148 834
FDIC, as successor to RTC 43,856 433,712
FDIC 164,299 78,112
Private 11,323 28,425
FHLMC/FNMA 16,772 54,952
Subservicing rights 199,355 370,222
Loans serviced under temporary
subservicing agreements 55,235
---------- ---------- ---------- ----------
Subtotal 1,245,407 11,718 1,498,516 10,105
Suncoast loans serviced 243,646 140,553
---------- ---------- ---------- ----------
Total $1,489,053 $ 11,718 $1,639,069 $ 10,105
========== ========== ========== ==========
</TABLE>
The following tables set forth, by category of investor, the
composition of the loan servicing portfolios of Suncoast as of the dates
indicated:
JUNE 30,
--------------------------
1996 1995
---------- ----------
(In thousands)
Investor:
FNMA $ 114,624 $ 79,256
GNMA 317,280 384,195
FHLMC 297,451 107,620
FDIC, as successor to RTC (1) 43,856 433,712
FDIC (1) 164,299 78,112
Private 53,307 45,399
Other financial institutions(1) 254,590 370,222
---------- ----------
Sub-total 1,245,407 1,498,516
Suncoast portfolio loans serviced 243,646 140,553
---------- ----------
Total loans serviced $1,489,053 $1,639,069
========== ==========
(1) Consists of subservicing.
19
<PAGE>
The following table sets forth, by location of the underlying loans,
the composition of the servicing portfolio of Suncoast as of June 30, 1996
(principal amounts in thousands):
STATE NUMBER OF LOANS PRINCIPAL AMOUNTS
- ----- --------------- -----------------
Florida 4,493 $ 477,628
California 4,380 345,648
Texas 2,060 75,730
Massachusetts 1,563 68,894
Michigan 1,044 93,032
New Jersey 742 34,544
Pennsylvania 532 24,911
New York 498 25,918
Indiana 435 36,101
Missouri 386 28,661
Illinois 343 24,411
Kentucky 315 5,384
Arizona 280 18,295
Ohio 256 19,247
Maryland 241 17,658
Connecticut 238 10,699
Georgia 233 8,465
Louisiana 220 8,860
Washington 194 11,737
Minnesota 165 14,859
Nevada 157 8,502
Virginia 153 10,719
Kansas 152 12,514
Connecticut 127 8,227
Tennessee 105 3,803
New Hampshire 105 7,802
Oklahoma 85 3,101
North Carolina 82 5,235
Hawaii 82 6,004
Puerto Rico 74 976
Oregon 74 3,714
South Carolina 68 6,158
All others (1) 636 32,246
Master Servicing FDIC and others (2) 2,304 29,370
------ ----------
Total 22,822 $1,489,053
====== ==========
- --------------------
(1) No other state accounted for more than 50 loans.
(2) Individual loans are serviced by others for FDIC, as successor to
RTC. Suncoast acts as coordinator of the servicing functions and
reports activity on these loans to FDIC on a combined basis based
upon reports from the various servicers.
Servicing agreements with FNMA, FHLMC and GNMA generally provide for
loan servicing fees ranging from 0.25% to 0.50% per annum of the declining
principal amount of the loans, plus any late charges or other ancillary fees.
Loan servicing fees for loans serviced under mortgage-backed securities programs
are either subject to negotiation with the sponsoring agency or in certain
instances set by the sponsoring agency. Servicing fees for loans sold to private
investors are determined by agreement with the investor, and also range from
0.25% to 0.50% per annum. In addition to the contractual fee, Suncoast also
receives excess servicing fees equal to the excess of the stated servicing fee
(the difference between the yield paid to the purchaser of the loan and the rate
paid by the borrower) over the
20
<PAGE>
contractual servicing fee under the servicing agreement. Income from
servicing is calculated based upon the contractual servicing fee plus any excess
servicing fee, net of amortization of the carrying value of the acquired loan
servicing rights or the premiums on the sale of loans. See "Item 8. Financial
Statements and Supplementary Data - Note A of the Notes to the Consolidated
Financial Statements."
Suncoast is subject to certain costs and risks related to servicing
delinquent loans. Servicing agreements relating to the mortgage-backed security
programs of FNMA, FHLMC and GNMA require the servicer to advance funds to make
scheduled payments of interest, taxes and insurance, and in some instances
principal, if such payments have not been received from the borrowers. However,
Suncoast recovers almost all of the advanced funds related to FNMA and FHLMC
servicing agreements upon cure of default by the borrower, or through
foreclosure proceedings and claims against agencies or companies that have
insured or guaranteed the loans. During the years ended June 30, 1996, 1995, and
1994, Suncoast incurred foreclosure losses related to primarily GNMA servicing
of $995,000, $614,000, and $487,000, respectively. The amount of foreclosure
losses increased in Fiscal 1996 as compared to 1995 and 1994 due to a higher
level of loan foreclosure actions. Certain servicing agreements for loans sold
directly to other investors require Suncoast to remit funds to the loan
purchaser only upon receipt of payments from the borrower and, accordingly, the
investor bears the risk of loss. Suncoast, however, is subject to the risk that
declines in the interest rates for mortgage loans or other economic conditions
will result in a revaluation of its servicing assets as borrowers refinance or
otherwise prepay higher rate loans.
The following table sets forth certain information for Suncoast by
interest rate range, regarding the principal balance and percentage of the total
servicing portfolio and the weighted average interest rate of residential first
mortgage loans serviced as of the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
-------------------------------------- ---------------------------------------
PERCENT OF PERCENT OF
MORTGAGE LOAN PRINCIPAL TOTAL SERVICING PRINCIPAL TOTAL SERVICING
INTEREST RATE BALANCE PORTFOLIO BALANCE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Below 5.00% $ 3,456 0.2% $ 17,525 1.1%
5.0 to 5.99 11,333 0.8 39,679 2.4
6.0 to 6.99 132,227 8.9 122,525 7.5
7.0 to 7.99 352,879 23.7 226,115 13.8
8.0 to 8.99 458,280 30.8 397,861 24.3
9.0 to 9.99 264,071 17.7 382,088 23.3
10.0 to 10.99 169,090 11.3 237,342 14.5
11.0 to 11.99 37,004 2.5 46,269 2.8
12.0 to 12.99 16,572 1.1 20,610 1.3
13.0 and above 14,771 1.0 22,083 1.3
---------- ------ ------------ ------
1,459,683 98.0% 1,512,097 92.3%
Master servicing
coordinated for
the FDIC
and others 29,370 2.0% 126,972 7.7%
---------- ------ ------------ -------
$1,489,053 100.00% $1,639,069 100.0%
========== ======= ========== ======
Weighted average rate 8.63% 8.72%
===== =====
</TABLE>
21
<PAGE>
At June 30, 1996 and 1995, 12.12% and 9.10%, respectively, of
mortgage loans in Suncoast's total servicing portfolio were 30 days or more past
due and 4.72% and 3.52%, respectively, were 90 days or more past due. At such
dates, 1.17% and 1.88% of mortgage loans, respectively, totaling $18.0 million
and $30.9 million, respectively, were in foreclosure. The delinquency ratios in
the aggregate servicing portfolio include high delinquency rates on FDIC loans
serviced. Suncoast has no risk of loss on these delinquent loans. The above
percentages do not include the population of FDIC consumer loans classified by
the FDIC as charged-off assets on which Suncoast receives a fee based on a
percentage of amounts collected from the borrower. Suncoast's overall loan
servicing portfolio, exclusive of subserviced loans, reflected that 2.61% and
1.18% of mortgage loans were 30 days or more past due at June 30, 1996 and 1995,
respectively.
MORTGAGE BANKING ACTIVITIES
Suncoast's mortgage banking activities consist primarily of
originating, purchasing, warehousing and selling one-to-four family residential
first mortgage loans without recourse. The income derived from mortgage banking
activities includes gains on the sale of mortgage loans and servicing rights in
the secondary market. Until January 1994, it had been Suncoast's policy to sell
in the secondary market substantially all the residential first mortgage loans
that it originated or purchased. As previously discussed, Suncoast changed its
operating strategy, beginning in January 1994, to emphasize community banking
activities over mortgage banking activities.
Suncoast originates and purchases fixed-rate and adjustable-rate
residential first mortgage loans for sale in the secondary market primarily to
FHLMC and private investors. To a lesser extent, the Association also
periodically originates FHA-insured and VA-guaranteed mortgage loans for sale in
the form of pass-through mortgage-backed securities guaranteed by GNMA. The
Association and its subsidiary, SCG Mortgage Corporation ("SCG"), are approved
Federal Housing Authority ("FHA") and Veterans Administration ("VA") supervised
mortgagees and approved seller-servicers with GNMA, FNMA and FHLMC.
Suncoast sells on a non-recourse basis substantially all fixed rate
residential first mortgage loans which it originates or purchases for resale.
Loans are held pending their delivery in the secondary market, as discussed
below, and sold either in pools through FHLMC participation certificates, FNMA
mortgage-backed securities, GNMA-guaranteed mortgage-backed securities or on a
loan by loan basis to FHLMC, FNMA or private investors. During Fiscal 1996 and
1995, 82.5% and 34.7%, respectively, of the principal amount of the
Association's loan sales were made in pools through FHLMC, FNMA or Residential
Funding Corporation, a private investor.
Loans originated for sale, whether as whole loans or subject to the
creation of mortgage-backed securities held for sale, are sold pursuant to
agreements which are established while the loans are in the processing stage,
thus reducing market risk. Suncoast primarily sells loans under agreements which
are binding on the investor, but non-binding on Suncoast, which delivers the
loans on a "best efforts" basis.
In the ordinary course of business, the Association makes
representations and warranties to the purchasers and insurers of mortgage loans
and the purchasers of servicing rights. When the Association sells mortgage
loans to FNMA, FHLMC or independent
22
<PAGE>
institutional investors, it makes certain representations and warranties that
the mortgage loans comply with applicable eligibility guidelines. The
Association may become required to repurchase loans if there has been a breach
of representations or warranties. Flaws with respect to repurchased loans may be
corrected and, if possible, such loans are resold. In addition, the Association
has the right to require the correspondent mortgage broker or seller of a loan
for which a repurchase has been requested to repurchase such loan from the
Association. The Association attempts to limit its exposure to this risk through
appropriate underwriting of mortgages prior to origination.
The table below shows real estate and other loan origination,
purchase, sale and repayment data for Suncoast for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1996 1995 1994
----------- ----------- -------
(In thousands)
<S> <C> <C> <C>
Loans originated and purchased:
Held for sale:
Mortgage loans originated $ 62,962 $ 60,334 $2,084,145
Mortgage loans purchased 62,335 - -
---------- ---------- -------
Total held for sale $ 125,297 60,334 2,084,145
---------- ---------- ----------
Portfolio:
Residential mortgage
loans originated 21,400 13,143 96,518
Other loans originated 43,139 45,015 23,176
Mortgage and other loans purchased 154,015 - -
---------- ---------- -------
Total portfolio 218,554 58,158 119,694
---------- ---------- ----------
Total loans originated and purchased 343,851 118,492 2,203,839
---------- ---------- ----------
Mortgage loans, participations and mortgage-
backed securities sold:
Residential loans (one-to-four family units) 111,963 51,081 865,093
Mortgage-backed securities (1) - 28,232 1,301,587
Commercial loans participated 5,649 - -
---------- ---------- -------
Total loans sold 117,612 79,313 2,166,680
---------- ---------- ----------
Portfolio loans securitized (2) - (16,596) (45,461)
Loan principal reductions (43,533) (8,982) (16,916)
GNMA early buyouts and transfers 7,350
Decrease (increase) in loans in process 2,783 (5,424) (865)
Accretion of deferred loan fees 223 178 88
Increase in deferred fees (347) (406) (264)
Increase (decrease) in premiums paid on
portfolio loans 2,193 (327) 656
Increase (decrease) in premiums paid on
loans held for sale, net of deferrals 39 (122) (1,799)
(Increase) decrease in provision
for loan losses (153) - 17
----------- ----------- ----------
Net increase (decrease) in loans receivable $ 194,794 $ 7,500 $ (27,385)
=========== =========== ==========
</TABLE>
- ------------------------
(1) Securities were formed by utilizing loans in the held for sale
category originated and purchased by Suncoast.
(2) Securities were formed using loans originated for portfolio which
securities were transferred to the mortgage-backed securities asset
category.
23
<PAGE>
In connection with its mortgage banking and servicing operations, the
Association is subject to the rules and regulations of, and examinations by,
FNMA, FHLMC, FHA, VA and GNMA with respect to originating, processing, selling
and servicing mortgage loans. Those rules and regulations, among other things,
prohibit discrimination, provide for inspection and appraisals of properties,
require credit reports on prospective borrowers and in some cases establish
maximum interest rates, fees and loan amounts.
INVESTMENT ACTIVITIES
Suncoast also invests in mortgage-backed securities and, from time to
time, related Real Estate Mortgage Investment Conduit ("REMIC") securities,
which are derived by reallocating cash flows from mortgage-backed securities
held by a trust. Suncoast's REMIC investments were sold during Fiscal 1996. As
discussed in "Item 8. Financial Statements and Supplementary Data - Notes A and
E of the Notes to the Consolidated Financial Statements", mortgage-backed
securities are classified as either held to maturity, available for sale, or
held for trading purposes. At June 30, 1996, all of Suncoast's mortgage-backed
securities were adjustable rate instruments classified as available for sale.
Due to this classification, fluctuations in the interest rate environment and
other factors may cause significant changes in the unrealized gain or loss on
mortgage-backed securities which is recorded as an adjustment, net of deferred
tax, to stockholders' equity.
During Fiscal 1996 and 1995, Suncoast sold mortgage-backed securities
and REMICs with a book value of $355.7 million and $265.2 million, respectively,
and realized net gains of $3.0 million and $1.4 million, respectively. During
Fiscal 1995, Suncoast sold its $138.7 million portfolio of fixed-rate
mortgage-backed securities previously classified as held to maturity, realizing
a gain of approximately $486,000. Mortgage-backed securities were sold due to
favorable market conditions, and Suncoast's ability to apply the proceeds to the
purchase and origination of primarily adjustable rate residential and commercial
loans, increasing Suncoast's yield and reducing its interest rate risk. Due to
the dependence of such gains on changes in interest rates, there is no assurance
that market conditions will continue to be favorable or that Suncoast will
continue to generate such revenue in the future.
Suncoast maintains an investment in stock of the Federal Home Loan
Bank of Atlanta ("FHLB Atlanta"), which is required for membership in the
Federal Home Loan Bank ("FHLB") system. Suncoast also periodically invests in
short term repurchase agreements to improve the yield on excess cash.
The following table shows the yields and maturity of Suncoast's
investments at June 30, 1996 and 1995:
<TABLE>
<CAPTION>
MATURITY
------------------------------------
NO STATED WITHIN MORE THAN
TYPE OF INVESTMENT YIELD MATURITY ONE MONTH TEN YEARS TOTALS
- ------------------ ------ ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
June 30, 1996:
FHLB stock 7.25 % $3,875,000 $ 3,875,000
June 30, 1995:
FHLB stock 5.94% $3,758,400 $ 3,758,400
Repurchase Agreements 6.04% $75,000,000 75,000,000
</TABLE>
24
<PAGE>
DEPOSIT ACTIVITIES
Suncoast has several types of savings programs designed to attract
core checking and both short-term and long-term deposits from the general public
by providing an assortment of accounts, terms and rates. The Association
attempts to control its cost of funds by adjusting the rates and terms of its
accounts. The emphasis on specific accounts, which varies from time-to-time, is
intended to permit the Association to take advantage of pre-selected investment
opportunities. The Association utilizes newspaper and direct mail advertising to
targeted market groups to attract deposits. The communities in which the
Association's branch offices are located generally contain a high concentration
of retirees and others who have had a history of maintaining substantial deposit
balances. In addition, Suncoast is the repository for mortgage escrow trust
funds (non-interest-bearing or low-interest-bearing custodial accounts) which
relate to the servicing and subservicing of mortgage loans by Suncoast.
The following table reflects the principal types of deposit accounts
offered by the Association, the rates of interest and effective yield as of June
30, 1996:
MINIMUM EFFECTIVE
TYPE OF ACCOUNT DEPOSIT RATE (1) ANNUAL YIELD
- --------------- ------- -------- ------------
Non-interest bearing checking account $ 500 - % - %
NOW account 500 2.03 (2) 2.05
NOW account 5,000 3.93 (2) 4.00
Savings account 50 2.03 (2) 2.05
Savings account 5,000 5.35 (2) 5.50
Daily money market account 1,000 2.23 (2) 2.25
Preferred money market account 5,000 4.17 (2) 4.25
Preferred money market account 10,000 4.41 (2) 4.50
Preferred money market account 25,000 4.89 (3) 5.00
3 month certificate 1,000 5.02 5.15
6 month certificate 1,000 5.06 5.20
9 month certificate 1,000 5.11 5.25
12 month certificate 1,000 5.35 5.50
18 month certificate 1,000 5.35 5.50
24 month certificate 1,000 5.54 5.70
30 month certificate 1,000 5.63 5.80
36 month certificate 1,000 5.73 5.90
60 month certificate 1,000 5.82 6.00
Jumbo certificate (4) 100,000 (5) (5)
- ------------------------
(1) Rates established by the Association based upon market conditions.
(2) Balances below minimum deposit earn no interest.
(3) Balances from $10,000 to $24,999.99 earn interest at $10,000 minimum
balance rate. Balances below $10,000 earn no interest.
(4) Term set by the Association.
(5) Rates on jumbo certificates correspond to rates on non-jumbo
certificates of a similar term.
25
<PAGE>
The following table sets forth the deposit activities of Suncoast
during the following periods:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
1996 1995 1994
---------- --------- ----------
(In thousands)
<S> <C> <C> <C>
Deposits $ 701,442 $ 903,374 $1,268,439
Withdrawals 748,238 834,690 1,223,309
---------- ---------- ----------
Net (decrease) increase in deposits
before interest credits ( 46,796) 68,684 45,130
Interest credited 10,143 8,735 4,220
Beginning balance 337,854 260,435 211,085
---------- ---------- ----------
Ending balance $ 301,201 $ 337,854 $ 260,435
========== ========== ==========
</TABLE>
The following table sets forth Suncoast's certificates of deposit by
interest rate range at the dates indicated:
JUNE 30,
-----------------------------
1996 1995
-------- --------
(In thousands)
Interest rate:
2.00% - 2.99% $ 204 $ 0
3.00% - 3.99% 4 411
4.00% - 4.99% 29,464 11,212
5.00% - 5.99% 146,965 104,003
6.00% - 6.99% 26,194 108,712
7.00% - 7.99% 2,783 3,801
8.00% - 8.99% - 2
-------- --------
Total $205,614 $228,141
======== ========
The following table sets forth the scheduled maturities of Suncoast's
certificates of deposit at June 30, 1996:
<TABLE>
<CAPTION>
AFTER
TWELVE MONTHS ENDED JUNE 30, JUNE 30,
-----------------------------------------
1997 1998 1999 2000 TOTAL
-------- -------- ------- -------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest rate:
2.00% - 2.99% $ 204 $ - $ - $ - $ 204
3.00% - 3.99% 4 - - 0 4
4.00% - 4.99% 28,488 625 318 33 29,464
5.00% - 5.99% 135,089 8,820 2,417 639 146,965
6.00% - 6.99% 11,317 10,016 220 4,641 26,194
7.00% - 7.99% 1,856 238 0 689 2,783
-------- ------- ------- -------- --------
Total certificates
of deposit $176,958 $19,699 $ 2,955 $ 6,002 $205,614
======== ======= ======= ======== ========
</TABLE>
26
<PAGE>
The following table sets forth the terms and weighted-average
interest rate of deposit accounts (excluding interest earned and not credited)
at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
-------------------------------------- ------------------------------------
CONTRACTUAL CONTRACTUAL
PERCENT WEIGHTED PERCENT WEIGHTED
OF TOTAL AVERAGE OF TOTAL AVERAGE
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
-------- ------ ----- -------- ----- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
No minimum term:
Non-interest bearing
checking accounts $ 874 0.30% 0.00% $ 556 0.16% 0.00%
Custodial accounts 24,198 8.03 .01 37,275 11.03 0.01
NOW accounts 17,751 5.89 2.42 6,418 1.90 2.42
Passbook accounts 40,959 13.60 4.08 48,605 14.39 5.27
Money market accounts 11,805 3.92 3.19 16,859 4.99 3.57
-------- ------ ----- -------- ----- ----
Total 95,587 31.74 2.85 109,713 32.47 3.03
-------- ------ ----- -------- ----- ----
Fixed term:
Certificates maturing in:
Six months or less 116,214 38.58 5.36 134,680 39.86 5.61
More than six months
to one year 60,743 20.17 5.51 53,003 15.69 6.10
More than one year
to three years 22,654 7.52 6.14 33,304 9.86 6.13
More than three years
to five years 6,003 1.99 6.34 7,154 2.12 6.27
-------- ------ ----- -------- ------ ----
Total 205,614 68.26 5.52 228,141 67.53 5.83
-------- ------ ----- -------- ------ ----
Total deposits $301,201 100.00% 4.55% $337,854 100.00% 4.92%
======== ======= ====== ======== ======= =====
</TABLE>
The following table presents the dollar amounts of certificate
accounts with balances equal to or greater than $100,000 at June 30, 1996,
maturing during the periods listed:
WEIGHTED
AVERAGE
MATURITY AMOUNT RATE
- -------- -------------- ----
(In thousands)
Three months or less $2,998 5.28%
Over three months through six months 1,599 5.59
Over six months through one year 2,792 5.60
Over one year 1,240 6.04
------ ----
Total $8,629 5.55%
====== ====
Suncoast's deposits are obtained primarily from the communities
surrounding its branch offices. Suncoast does not advertise for deposits outside
of Florida and has used brokered deposits only to facilitate the matching of
asset and liability maturities. At the end of each reporting period, deposits
from out-of-state sources represented an insignificant portion of the total
deposit accounts. There were no deposits obtained through brokers at either June
30, 1996 or June 30, 1995.
BORROWINGS
Suncoast borrows funds from the FHLB on the security of
mortgage-backed securities which are pledged as collateral and based upon the
security of a blanket floating lien on
27
<PAGE>
certain eligible residential mortgage loan collateral. The Association also
obtains funds through agreements to repurchase securities with broker/dealers,
which are considered secured borrowings and typically outstanding from seven to
thirty days. See "Item 8. Financial Statements and Supplementary Data - Note L
of the Notes to the Consolidated Financial Statements."
SUBSIDIARY ACTIVITIES
SFC and SCS Management are Delaware corporations formed in connection
with the sale of collateralized mortgage obligations. SCG Mortgage Corporation
is a Delaware subsidiary corporation through which title to GNMA servicing
rights is held. SCG Holdings, Inc., a Florida corporation, serves as the holding
company for SFC, SCS Management and SCG Mortgage Corporation.
SCS Ventures, is a Florida subsidiary corporation through which the
Association has participated as a limited partner or otherwise in real estate
ventures and through which the Association takes title to certain real estate
acquired by foreclosure. This corporation is presently inactive.
COMPETITION
Suncoast faces substantial competition in attracting and retaining
deposits as well as in its lending, servicing and mortgage banking operations.
The most direct competition for deposits comes from other savings institutions,
commercial banks, out-of-state financial institutions with Florida offices
located in the Association's market area and credit unions. Additional
competition for deposits comes from government and corporate securities and
money market funds. Suncoast competes for deposits through a highly focused
marketing program and by offering a wide variety of deposit accounts and deposit
incentives. However, the ability of the Association to attract and retain
deposits also depends on its ability to provide investment opportunities meeting
the requirements of depositors as to rate of return, liquidity, risk and other
factors. Generally, Suncoast's rates for both deposits and mortgages and loans
are in the mid-range for similar products in its market area.
Competition for the purchase, origination, sale and servicing of real
estate loans continues to intensify and comes predominantly from other savings
institutions, commercial banks, mortgage bankers, insurance companies and
governmental agencies. Factors that affect competition in the mortgage banking
operation include, among other things, the general availability of funds and
credit to make real property related investments and the demand therefor;
general and local economic conditions; current long-term and short-term interest
rates; government regulations; volatility in the mortgage markets; and rates of
inflation.
Legislative developments related to interstate branching and banking
are expected to continue the consolidation of small thrifts and banks, and also
provide easier access to large financial institutions in the marketplace.
Accordingly, Suncoast expects increased competition in the immediate future.
28
<PAGE>
INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC
Suncoast is a member of the Savings Association Insurance Fund
("SAIF"), which is administered by the FDIC. Deposits are insured up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the United States Government. As insurer, the FDIC imposes deposit
insurance premiums and is authorized to conduct examinations of and to require
reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured
institution from engaging in any activity the FDIC determines by regulation or
order to pose a serious risk to the FDIC. The FDIC also has the authority to
initiate enforcement actions against savings associations, after giving the OTS
an opportunity to take such action, and may terminate the deposit insurance if
it determines that the institution has engaged or is engaging in unsafe or
unsound practices, or is in an unsafe or unsound condition.
Under the FDIC risk-based deposit insurance assessment system, all
insured depository institutions are placed into one of nine categories and
assessed insurance premiums based upon their level of capital and supervisory
evaluation. Under the system, institutions classified as well-capitalized and
requiring little supervision would pay the lowest premium while institutions
that are classified as undercapitalized and considered of substantial
supervisory concern would pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment period.
With respect to the SAIF, the FDIC is authorized to increase
assessment rates, on a semi-annual basis, if it determines that the reserve
ratio of the SAIF will be less than the designated reserve ratio of 1.25% of
SAIF-insured deposits. In setting these increased assessments, the FDIC must
seek to restore the reserve ratio to that designated reserve level, or such
higher reserve ratio as established by the FDIC. In addition, the FDIC may
impose special assessments on SAIF members to repay amounts borrowed from the
United States Treasury or for any other reason deemed necessary by the FDIC.
Similarly, with respect to deposits insured by the Bank Insurance
Fund ("BIF"), the FDIC is authorized to adjust the assessment rates in order to
maintain the reserve ratio at 1.25% of BIF-insured deposits. The FDIC reported
that the BIF reached the required reserve ratio during May 1995 and as a result,
the FDIC reduced BIF assessment rates. The FDIC initially reduced the BIF
assessment rates, effective June 1, 1995 to rates ranging from 0.04% to 0.27% of
deposits. Subsequently, having determined that the BIF had sufficient reserves
in excess of the required 1.25% ratio, the FDIC further reduced the BIF
assessment rates. Effective January 1, 1996, the FDIC reduced the assessment
rate for "well capitalized" institutions without any significant supervisory
concerns to the statutory minimum of $2,000 annually, and reduced the rates for
other BIF-insured institutions to a range from 0.03% to 0.27% of deposits.
The FDIC has noted that the SAIF is not expected to attain the
designated reserve ratio until the year 2001. The SAIF rates were therefore not
adjusted. The FDIC has determined that SAIF-insured institutions should continue
to pay assessments at the current SAIF assessment rates, which range from 0.23%
of deposits to 0.31% of deposits. The Association's assessment rate for Fiscal
1996 was 0.23% of deposits.
As a result of the revisions to the deposit insurance assessment
rates, BIF members will generally pay lower premiums. This disparity is likely
to provide institutions paying only the BIF assessments with certain competitive
advantages in the pricing of loans and deposits,
29
<PAGE>
and in lowered operating costs. In order to eliminate this disparity, a number
of proposals to recapitalize the SAIF have been recently considered. The plan
under current consideration provides for a one-time assessment, anticipated to
range from .85% to .90%, to be imposed on all SAIF assessable deposits of each
insured depository institution as of March 31, 1995, and for BIF deposit
insurance premiums to be used to pay the FICO bond interest on a pro rata basis
together with SAIF premiums. The BIF and SAIF would be merged into one fund as
soon as practicable, but no later than January 1, 1998.
EMPLOYEES
As of June 30, 1996, the Association had 150 employees. Employees are
provided with various benefits, including a stock bonus/401(k) plan and life,
health and hospital insurance. The employees are not represented by a collective
bargaining group, and the Association considers its employee relations to be
good.
REGULATION AND SUPERVISION
Set forth below is a brief description of certain laws and
regulations which relate to the regulation of the Association. This description
does not purport to be complete and is qualified in its entirety by reference to
applicable laws and regulations.
GENERAL. The Association is a federally chartered stock savings
association with its deposits insured through the SAIF by the FDIC up to
applicable limits. The Association is also a member of the FHLB system. The
Association is subject to supervision, extensive regulation and periodic
examination by the OTS and to a lesser extent by the FDIC as the insurer of its
deposits. In addition, the Association is subject to certain of the regulations
of the Board of Governors of the Federal Reserve System ("FRB") governing
reserves to be maintained against deposits and certain other matters. Suncoast
must file reports with the OTS concerning its activities and financial
condition, in addition to obtaining regulatory approvals from the OTS and the
FDIC prior to entering into certain transactions. There are periodic
examinations by the OTS and the FDIC to examine Suncoast's compliance with
various regulatory requirements.
The Association's business, operations, financial condition and
results of operations are directly affected by the tax, fiscal and monetary
policies of the federal government and its agencies, particularly the FRB. These
policies affect all financial institutions, and any change in such policies that
primarily impacts savings institutions may affect their ability to compete with
other financial institutions. The Association is subject to extensive
supervision and regulation, which is intended primarily for the protection of
depositors rather than the Association's stockholders. As an integral part of
their supervisory role, the OTS and FDIC periodically review the Association's
policies and practices. As a result of these reviews, the Association could be
required to recognize changes in the valuation or classification of its assets
or liabilities. In addition, the Association is subject to changes in federal
and state law, as well as changes in regulations, governmental policies and
accounting principles. The effects of any such potential changes cannot be
accurately predicted at this time but could materially adversely affect the
Association and its operations.
30
<PAGE>
REGULATORY CAPITAL. Federally insured savings associations are
required to maintain minimum levels of regulatory capital. The OTS has
established regulations setting forth three capital standards for savings
institutions--a risk-based capital requirement, a leverage or core capital
requirement and a tangible capital requirement. At June 30, 1996, Suncoast
exceeded all applicable capital requirements.
RISK- BASED CAPITAL REQUIREMENT. The risk-based standards of the OTS
currently require maintenance of core capital equal to at least 4% of
risk-weighted assets and total capital equal to at least 8% of risk-weighted
assets. Total capital includes core capital plus supplementary capital but
supplementary capital that may be included in computing total capital for this
purpose may not exceed core capital. Supplementary capital includes cumulative
perpetual preferred stock, allowable subordinated debt and general loan loss
allowances, within specified limits. Such general loss allowances may not exceed
1.25% of risk-weighted assets. Additionally, since July 1, 1994, investments in
non-includable subsidiaries have been subject to a 100% exclusion from
risked-based capital.
In determining the required amount of risk-based capital, total
assets, including certain off-balance sheet items, are multiplied by a
risk-weight based on the risks inherent in the types of assets. The risk-weights
assigned by the OTS for principal categories of assets are (i) 0% for cash and
securities issued by the U.S. Government or unconditionally backed by the full
faith and credit of the U.S. Government; (ii) 20% for securities (other than
equity securities) issued by U.S. Government sponsored agencies and
mortgage-backed securities issued by, or fully guaranteed as to principal and
interest by the FNMA or the FHLMC, except for those classes with residual
characteristics or stripped mortgage-related securities; (iii) 50% for prudently
underwritten permanent one-to-four family first lien mortgage loans and
qualifying multi-family mortgage loans not more than 90 days delinquent and
having a loan-to-value ratio of not more than 80% at origination unless insured
to such ratio by an insurer approved by the FNMA or the FHLMC; and (iv) 100% for
all other loans and investments, including purchased and excess servicing
rights, foreclosed property, unsecured consumer loans, commercial loans, and
one-to-four family residential loans more than 90 days delinquent.
At June 30, 1996, the Association's risk-based requirement was $18.5
million and its actual risk-based capital was $25.6 million, or 11.09% of
risk-adjusted assets.
In August 1993, the OTS adopted a final rule incorporating an
interest rate risk ("IRR") component into the risk-based capital requirement.
Under the final rule, a savings association's risk-based capital requirement
would have two components: (i) a credit risk component, and (ii) an IRR
component. The credit risk component would remain at 8% and the IRR would be
measured in terms of the sensitivity of the market value of portfolio equity
("MVPE") to changes in interest rates. MVPE is defined as the net present value
of an association's assets, liabilities and off-balance sheet contracts. Savings
associations with "above normal" IRR would be required to have capital in
addition to their credit risk capital of 8%. An "above normal" IRR would exist
if the decline in the savings association's MVPE would exceed 2% of the savings
association's assets in the event of a 200 basis point change in interest rates.
The amount of additional capital required of an institution with "above normal"
IRR exposure would be equal to (i) one-half of the difference between its
measured interest rate risk ("MIRR") and 2%, multiplied by (ii) the market value
of its assets. For purposes of this calculation, MIRR means the decline in the
institution's MVPE resulting from the 200 basis point change in interest rates,
expressed as a percentage of the market value
31
<PAGE>
of the assets. The OTS would calculate the MIRR for each institution, and
institutions with MIRR of 2% or less would not be required to maintain
additional capital for IRR. The rule also authorizes the director of the OTS,
or his designee, to waive or defer an institution's IRR component on a
case-by-case basis. In August 1995, the OTS again delayed the implementation
of an automatic IRR component capital deduction pending the testing of an OTS
appeals process for certain institutions subject to such deductions. The
appeals process is contained in OTS Thrift Bulletin 67, which describes how and
under what circumstances an institution may seek an adjustment to the IRR
component generated by the OTS model or, alternatively, may seek prior approval
to use its own internal IRR model to calculate its IRR component. At June 30,
1996, Suncoast's interest rate risk exposure was within normal levels as
calculated by the OTS model.
LEVERAGE OR CORE CAPITAL REQUIREMENT. The leverage or core capital
requirement mandates that a savings institution maintain "core capital" of not
less than 3% of adjusted total assets. "Core capital" generally includes common
stockholders' equity, noncumulative perpetual preferred stock and related
surplus, less specified intangible assets (a percentage of MSRs in excess of
applicable limits). Generally, a portion of MSRs may be included in core capital
equal to the lower of (i) 90% of the fair market value of readily marketable
MSRs or (ii) the current amortized book value as determined under GAAP. However,
the amount of MSRs included in core capital is limited to a maximum of 50% of
core capital. At June 30, 1996, Suncoast's carrying value totaled $10.4 million,
and based upon a market valuation of MSR's at that date, Suncoast was required
to deduct $720,000 from assets and capital for regulatory capital purposes. At
June 30, 1996, the Association's core capital requirement was $12.0 million and
its actual core capital was $25.0 million, or 6.22% of its adjusted total
assets.
Additionally, the Office of the Comptroller of the Currency (the
"OCC"), which is the primary regulator for national banks, has adopted a final
rule increasing the leverage ratio requirements for all but the most highly
rated national banks. Pursuant to FIRREA, the OTS is required to issue capital
standards for savings institutions that are no less stringent than those
applicable to national banks. Accordingly, savings institutions must maintain a
leverage ratio (defined as the ratio of core capital to adjusted total assets)
of between 4% and 5%.
TANGIBLE CAPITAL REQUIREMENT. FIRREA requires a savings association
to maintain "tangible capital" in an amount not less than 1.5% of adjusted total
assets. Tangible capital is defined in the same manner as core capital except
that all intangible assets, except MSRs, must be deducted. The percentage of
MSRs which may be included in tangible capital is equal to the lesser of i) 100%
of the amount of tangible capital that exists before the deduction of any
disallowed MSRs or (ii) the amount of MSRs allowed to be included in core
capital. At June 30, 1996, the Association's tangible capital requirement was
$6.0 million and its actual tangible capital was $25.0 million, or 6.22% of its
adjusted total assets.
PROMPT REGULATORY ACTION. The OTS and other federal banking
regulators have established capital levels for institutions to implement the
"prompt regulatory action" provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). Capital levels have been
established for which an insured institution will be categorized as well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. The FDICIA requires federal
banking regulators, including the OTS, to take prompt corrective action to solve
the problems of those institutions that fail to satisfy their
32
<PAGE>
applicable minimum capital requirements. The level of regulatory scrutiny and
restrictions imposed become increasingly severe as an institution's capital
level falls.
A "well capitalized" institution must have risk-based capital of 10%
or more, core capital of 5% or more and Tier 1 risk-based capital (based on the
ratio of core capital to risk- weighted assets) of 6% or more and may not be
subject to any written agreement, order, capital directive or prompt corrective
action directive issued by the OTS to meet and maintain a specific capital
measure. An institution will be categorized as "adequately capitalized" if it
has a total risk-based capital of 8% or more, Tier 1 risk-based capital of 4% or
more and core capital of 4% or more; "undercapitalized" if it has total
risk-based capital of less than 8%, Tier 1 risk-based capital of less than 4% or
core capital of less 4%; "significantly undercapitalized" if it has total
risk-based capital of less than 6%, Tier 1 risk-based capital of less than 3% or
core capital of less than 3%; and "critically undercapitalized" if it has
tangible capital of less than 2%. Any savings institution that fails its
regulatory capital requirement is subject to enforcement action by the OTS or
the FDIC. At June 30, 1996, Suncoast meets the definition of a "well
capitalized" institution.
At each successive downward level of capital, institutions are
subject to more restrictions and regulators are given less flexibility in
deciding how to deal with the bank or thrift. For example, undercapitalized
institutions will be subject to asset growth restrictions and will be required
to obtain prior approval for acquisitions, branching and engaging in new lines
of business. As to significantly undercapitalized institutions, the appropriate
agency must require the institution to sell shares in order to raise capital,
must restrict interest rates, and must restrict transactions with affiliates
unless the agency determines that such actions would not further the purposes of
the prompt corrective action system. In addition, the agency may require prior
agency approval for any transaction outside the ordinary course of business.
Critically undercapitalized institutions must obtain prior agency approval for
transactions outside the ordinary course of business, and must be placed in
receivership or conservatorship unless the OTS and the FDIC make certain
affirmative findings regarding the viability of the institution, which findings
must be reviewed every 90 days.
FDICIA prohibits any insured institution (regardless of its
capitalization category) from making capital distributions to anyone or paying
management fees to any persons having control of the institution if after such
transaction the institution would be undercapitalized. Any undercapitalized
institution must submit an acceptable capital restoration plan to the
appropriate agency within 45 days of becoming undercapitalized.
A capital restoration plan will be acceptable only if each company
having control over an undercapitalized institution guarantees that the
institution will comply with the capital restoration plan until the institution
has been adequately capitalized for four consecutive calendar quarters and
provides adequate assurances of performance. The aggregate liability of such
guarantee is limited to the lesser of (i) an amount equal to 5% of the
institution's total assets at the time the institution became undercapitalized
or (ii) the amount which is necessary to bring the institution into compliance
with all capital standards applicable with respect to such institution as of the
time the institution fails to comply with its capital restoration plan.
INDIVIDUAL CAPITAL REQUIREMENTS. In addition to the capital
requirements set forth in the OTS regulations, the OTS has delegated to its
Regional Directors the authority to establish higher individual minimum capital
requirements for savings institutions based upon a
33
<PAGE>
determination that the institution's capital is or may become inadequate
in view of its circumstances. For example, circumstances which may be considered
by the Regional Directors include situations where the institution needs special
supervisory attention, has or is expected to have losses resulting in capital
inadequacy, has a high degree of interest rate risk, prepayment risk,
off-balance sheet risk, or has poor liquidity, excessive growth or a portfolio
with weak credit quality. No such individual capital requirement has been
established for the Association.
REGULATORY RESTRICTIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS.
Current regulations applicable to the payment of cash dividends and other
capital distributions by savings institutions impose limits on capital
distributions based on an institution's regulatory capital levels and net
income. An institution that meets or exceeds all of its fully phased-in capital
requirements (both before and after giving effect to the distribution) and is
not in need of more than normal supervision would be a "Tier 1 Association." A
Tier 1 association may make capital distributions during a calendar year up to
the greater of (i) 100% of net income for the current calendar year plus 50% of
its capital surplus or (ii) 75% of its net income over the most recent four
quarters. Any additional capital distributions would require prior regulatory
approval.
An institution that meets the minimum regulatory capital requirements
but does not meet the fully phased-in capital requirements would be a "Tier 2
association," which may make capital distributions of between 25% and 75% of its
net income over the most recent four-quarter period, depending on the
institution's risk-based capital level. A "Tier 3 association" is defined as an
institution that does not meet all of the minimum regulatory capital
requirements and therefore may not make any capital distributions without the
prior approval of the OTS.
Savings institutions must provide the OTS with at least 30 days
written notice before making any capital distributions. All capital
distributions are subject to the OTS' right to object to a distribution on
safety and soundness grounds.
The OTS has proposed amendments to its capital distribution
regulations to conform the regulations to the "prompt corrective action"
provisions of FDICIA. As proposed, adequately or well capitalized savings
associations that (i) are not held by savings and loan holding companies; (ii)
have a composite rating of "1" or "2"; (iii) are not deemed to be in "troubled
condition"; and (iv) will remain at least adequately capitalized after the
proposed capital distribution, will not be required to provide notice to the OTS
before making capital distributions.
LIQUIDITY. OTS regulations currently require a savings institution to
maintain for each calendar month an average daily balance of liquid assets
(including cash, certain time deposits, bankers' acceptances and specified
United States government, state and federal agency obligations) equal to at
least 5% of the average daily balance of net withdrawable accounts plus
short-term borrowings during the preceding calendar month. This liquidity
requirement varies from time to time (between 4% to 10%) by OTS regulation
depending upon economic conditions and the deposit flows of savings
institutions. OTS regulations also require each member institution to maintain
for each calendar month an average daily balance of short-term liquid assets
(generally those having maturities of 12 months or less) equal to at least 1% of
the average daily balance of net withdrawable accounts plus short-term
borrowings during the preceding calendar month. Monetary penalties may be
imposed for failure to meet liquidity
34
<PAGE>
ratio requirements. The liquidity and short-term liquidity ratios of
the Association at June 30, 1996 were each 5.42%, exceeding the applicable
requirements.
QUALIFIED THRIFT LENDER TEST. All savings associations, including the
Association, are required to meet a qualified thrift lender ("QTL") test to
avoid certain restrictions on their operations.
The QTL test requires a savings association to have at least 65% of
its portfolio assets (which consist of total assets less intangibles, properties
used to conduct the savings association's business and liquid assets not
exceeding 20% of total assets) in qualified thrift investments and continue to
meet that test on a monthly average basis in nine out of every twelve months.
Loans and mortgage-backed securities secured by domestic residential housing, as
well as certain obligations of the FDIC and certain other related entities, may
be included in qualifying thrift investments without limit.
Certain other housing-related and non-residential real estate loans
and investments, including loans to purchase or develop churches, nursing homes,
hospitals and schools, and consumer loans and investments in subsidiaries
engaged in housing-related activities may also be included, in varying amounts,
up to 20% of portfolio assets. The Association was in compliance with the QTL
test as of June 30, 1996.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act ("CRA")
requires each savings institution, as well as other lenders, to identify the
communities served by the institution's offices and to identify the types of
credit the institution is prepared to extend within such communities. The CRA
also requires the OTS to assess, as part of its examination of a savings
institution, the performance of the institution in meeting the credit needs of
its community and to take such assessments into consideration in reviewing
applications for mergers, acquisitions and other transactions. A
less-than-satisfactory CRA rating may be the basis for denying such an
application. In connection with the assessment of a savings institution's CRA
performance, the OTS will assign a rating of "outstanding," "satisfactory,"
"needs to improve" or "substantial noncompliance." Based on an examination
conducted as of June 1995, the Association was rated "satisfactory."
Effective July 1, 1995, the OTS together with the other federal
banking agencies, adopted a joint rule amending each of their regulations
concerning the CRA. Subject to certain exceptions and elections, the new
regulations prescribe three tests for the evaluation of a savings association's
performance. The lending test evaluates a savings association's record of
helping to meet the credit needs of its assessment area through its lending
activities by considering an association's home mortgage, small business, small
farm, and community development lending. The investment test evaluates a savings
association's record of helping to meet the credit needs of its assessment area
through qualified investments that benefit its assessment area or a broader
statewide or regional area including the assessment area. Finally, the service
test evaluates a savings association by analyzing both the availability and the
effectiveness of the association's systems for delivering retail banking
services and the extent and innovativeness of its community development
services. Based upon the savings association's performance under the lending,
investment, and service tests, and any other tests which may be applicable to
the association under the new regulations, the OTS will assign the savings
association one of the same four ratings prescribed under current regulations.
Additionally, under the new regulations, the OTS will continue to consider an
35
<PAGE>
association's record of performance under the CRA in the same manner
and for the same purposes as required under current regulations.
These new regulations, while effective July 1, 1995, will be
implemented over a two-year time frame. A savings association may elect to be
evaluated under the revised performance tests beginning January 1, 1996. Absent
such an election, these revised performance tests will not become mandatory and
will not be deemed to replace the current regulations described above until July
1, 1997.
LOANS TO ONE BORROWER LIMITATIONS. Savings associations are subject
to the same loans to one borrower limitations that are applicable to national
banks. Savings associations generally are not permitted to make loans to a
single borrower in excess of 15% of the association's unimpaired capital and
unimpaired surplus (depending upon the type of loan), plus an additional 10% for
loans fully secured by readily marketable collateral. A savings association
which meets its fully phased-in capital requirements may make loans to one
borrower to develop domestic residential housing units, up to the lesser of $30
million or 30% of the savings association's unimpaired capital and unimpaired
surplus, if certain other conditions are satisfied. At June 30, 1996, the
Association was in compliance with the loans to one borrower limitations. At
that same date, its loan to one borrower limit was $3.9 million.
LIMITATION ON COMMERCIAL REAL ESTATE LOANS. FIRREA provides that,
absent an exemption, loans by a federal savings association that are secured by
non-residential real property may not exceed 400% of the Association's capital.
Such a restriction is not considered to materially affect the Association's
operations due to the availability of other loan products.
CERTAIN INVESTMENTS. In general, savings associations may not invest
directly in equity securities, noninvestment grade debt securities, or real
estate. Federal savings associations may invest in the stock of subsidiaries
that engage in activities reasonably related to the activities of federal
associations, including real estate development, subject to limitations based
generally on the institution's asset size. Investments in subsidiaries engaged
as principals in activities that are not permissible for national banks, such as
real estate development, must be deducted from regulatory capital.
A savings institution seeking to establish a new subsidiary, acquire
control of an existing company or conduct a new activity through an existing
subsidiary must provide 30 days prior notice to the FDIC and the OTS and must
conduct any activities of the subsidiary in accordance with regulations and
orders of the OTS. The OTS has the power to require a savings institution to
divest any subsidiary or terminate any activity conducted by a subsidiary that
the OTS determines to be a serious threat to the financial safety, soundness or
stability of the savings institution or to be otherwise inconsistent with sound
banking practices. See "Item 1. Business--Subsidiary Activities" for a
description of the Association's subsidiaries.
GENERAL LENDING POLICIES. The Association's lending activities are
subject to federal and state regulation, including the Equal Credit Opportunity
Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the
Community Reinvestment Act and the laws of California, Florida and other
jurisdictions governing discrimination, lender disclosure to borrowers,
foreclosure procedures and anti- deficiency judgments, among other matters.
36
<PAGE>
TAXATION
FEDERAL. For federal income tax purposes, Suncoast reports its income
and expenses on the accrual basis of accounting on a fiscal year basis ending
June 30. Suncoast files consolidated federal income tax returns.
Suncoast is subject to the rules of federal income taxation
applicable to corporations in general, and savings institutions, in particular,
under the Internal Revenue Code of 1986 (the "Code"). The Code reduced the
maximum tax rate from 46% to 34%. Except as specifically noted, the discussion
below relates to taxable years beginning after June 30, 1987. The Code provides
that net operating losses of a thrift institution incurred in taxable years
beginning after 1981 and before 1986 may be carried back ten years and forward
eight years. Other net operating losses of thrift institutions now come under
the general three year carryback and the 15-year carryover rules.
Under the Code, savings associations that meet certain conditions may
qualify for a bad debt reserve deduction to reduce taxable income. For the year
ended June 30, 1996, Suncoast did not qualify for this deduction.
Suncoast is subject to the corporate alternative minimum tax which is
imposed to the extent it exceeds Suncoast's regular income tax for the year. The
alternative minimum tax will be imposed at the rate of 20% of a specially
computed tax base. Included in this base will be a number of preference items
including the following: (i) 100% of the excess of a thrift institution's bad
debt deduction over the amount that would have been allowable on the basis of
actual experience; and (ii) interest on certain tax-exempt bonds issued after
August 7, 1986. In addition, for purposes of the new alternative minimum tax,
the amount of alternative minimum taxable income that may be offset by net
operating losses is limited to 90% of alternative minimum taxable income.
Suncoast accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). FAS 109 utilizes an asset and liability approach for financial accounting
and reporting for income taxes and requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of other assets and
liabilities. Suncoast adopted FAS 109 as of July 1, 1991 on a prospective basis.
See "Item 8. Financial Statements and Supplementary Data-Notes A and O to the
Consolidated Financial Statements" for a discussion of the effect of SFAS 109 on
the Association.
Legislation provisions was recently passed which eliminate the
preferential tax treatment for deducting additions to the tax bad debt reserves
previously available to thrifts in tax years beginning prior to December 31,
1995. These provisions require that all thrift institutions recapture all or a
portion of their tax bad debt reserves added since the last taxable year
beginning before January 1, 1988. This legislation has no impact on Suncoast
since it utilizes the direct write-off method for deducting bad debts for tax
purposes.
STATE. Florida has a corporate income tax which subjects Suncoast's
Florida taxable income to a 5.5% tax. This tax is deductible in determining
federal taxable income. For purposes of the Florida corporate income tax, tax
benefits from net operating losses may not be carried back to prior years, but
may be carried forward.
No tax returns of Suncoast have been audited by federal or state
authorities since inception.
37
<PAGE>
ITEM 2. PROPERTIES
The following schedule sets forth the location of the current offices of the
Association as well as certain additional information relating to these offices
and/or leases at June 30, 1996.
<TABLE>
<CAPTION>
NET BOOK VALUE OF
PREMISES OR LEASEHOLD
OFFICE DESCRIPTION LEASE SQUARE IMPROVEMENTS &
CORPORATE HEADQUARTERS AND EXPIRES (1) FOOTAGE EQUIPMENT
------------------ ------------ ------------------------
<S> <C> <C> <C>
Mortgage Origination Office
Presidential Circle 2/28/00 32.850 2.089.356Pts
4000 Hollywood Boulevard
Hollywood, Florida
Savings Branches
4350 Sheridan Street - (2)(3) 12.200 1.436.041
Hollywood, Florida
501 Golden Isles Drive - (2)(4) 4.500 656.816
Hallandale, Florida
227 Commercial Boulevard - (2) 5.000 784.737
Lauderdale-by-the-Sea, Florida
100 South Flamingo Road 12/31/96 3.500 49.687
Pembroke Pines, Florida
1177 George Bush Boulevard, #102 12/31/01 (5) 4.059 197.454
Delray Beach, Florida
1313 North Ocean Boulevard - (2)(6) 7.600 624.354
Pompano Beach, Florida
Mortgage Origination Office
7700 North Kendall Drive, #506 9/30/98 1.129 14.011
Miami, Florida
Storage Warehouses
1009 South 21st Avenue 3/31/98 1.500 --
Hollywood, Florida
1017 South 21st Avenue 12/31/96 2.322 --
Hollywood, Florida
Other
1177 George Bush Boulevard, #200 1/31/98 (7) 5.371 185.040
Delray Beach, Florida
4340 Sheridan Street - (2)(8) 4.764 602.203
Hollywood, Florida
</TABLE>
- -------------------------------------
(1) Certain of these leases have an option to renew.
(2) The Association owns the facility.
(3) A savings branch occupies 3,100 square feet. The remainder of the building
is leased by unrelated parties.
(4) The Association leases 1,400 square feet to unrelated parties.
(5) The Association is currently renovating this space to accommodate its
savings branch which is temporarily located in another suite at this
location (see note 6 below). The Association plans to relocate its savings
branch to this space in September, 1996.
(6) The Association opened this savings branch in August, 1996.
(7) The Association's savings branch at this location temporarily occupies
approximately 300 square feet (see note 5 above). The remainder of the
space is sub-leased to an unrelated party.
(8) The entire space is currently sub-leased to an unrelated party.
For further information regarding lease payments as of June 30, 1995, see "Item
8. - Financial Statements and Supplementary Data - Note M of Notes to
Consolidated Financial Statements."
38
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Association and its subsidiaries are parties to routine legal
proceedings which arise in the normal course of the Association's business.
There are no material pending legal proceedings to which the Association or any
subsidiary is a party or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of
Suncoast during the three months ended June 30, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Suncoast's Common Stock is traded over-the-counter and is quoted
on NASDAQ/NMS under the symbol SCSL. The table reflects the actual high and low
closing prices for the quarters of the fiscal years ended June 30, 1995 and
1996.
QUARTER ENDED COMMON STOCK
HIGH LOW
- -----------------------------------------------------------
September 30, 1994 $7.63 $6.50
December 31, 1994 $7.88 $5.50
March 31, 1995 $9.06 $6.44
June 30, 1995 $6.75 $5.50
September 30, 1995 $7.19 $6.25
December 31, 1995 $7.00 $5.88
March 31, 1996 $6.88 $6.25
June 30, 1996 $6.50 $5.75
No cash dividends have been paid on Suncoast's Common Stock since the fiscal
year ended June 30, 1990. Any cash dividend on the Common Stock will be
determined by future income and regulatory requirements. Suncoast has no current
plans to pay dividends on the Common Stock.
At September 23, 1996, 2,195,930 shares of Common Stock were
outstanding, held by approximately 700 beneficial stockholders of record.
39
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial and other data
provides information for the five year period ended June 30, 1996.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) AS OF AND FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Interest income 27,958 27,855 18,611 12,892 15,979
Interest expense 17,937 19,018 10,910 7,799 11,688
----------------------------------------------------------------
Net interest income before provision for loan losses 10,021 8,837 7,701 5,093 4,291
Provision for loan losses 153 95 - 537 55
Loan servicing income before valuation adjustments 4,399 6,275 4,580 3,768 3,510
Valuation adjustments - - - 6,021 5,514
Gains on the sale of loans and loan servicing assets, net 925 560 14,963 22,458 15,131
Gains on the sale of mortgage-backed securities, net 2,950 1,388 - - -
Other non-interest income 1,252 1,707 7,630 9,619 4,573
Non-interest expenses 15,581 17,741 31,766 31,167 20,564
Provision for income taxes 1,411 330 1,005 928 141
----------------------------------------------------------------
Net income 2,402 601 2,103 2,285 1,231
----------------------------------------------------------------
Earnings (loss) per share, primary 0.61 (0.26) 0.63 1.11 0.66
Earnings (loss) per share, fully diluted 0.61 * 0.59 1.10 0.66
Common Stock cash dividends per share $ - $ - $ - $ - $ -
Preferred Stock cash dividends per share 1.20 1.20 0.85 $ $ -
Weighted average common and common
equivalent shares, fully diluted 3,675 3,652 3,589 2,079 1,853
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $ 402,569 $ 462,353 $ 359,090 $ 226,931 $ 187,529
Loans receivable in portfolio 320,828 129,786 101,783 36,480 42,931
Loans receivable held for sale 6,730 2,978 23,481 116,169 36,296
Mortgage-backed securities 18,391 136,856 162,149 - -
Loan servicing assets 11,718 10,105 11,248 14,999 30,422
Real estate owned 261 523 428 533 1,852
Total liabilities 377,031 437,569 334,524 216,020 179,056
Deposits 301,201 337,854 260,435 211,085 173,296
Borrowings 68,500 88,623 69,000 - -
Stockholders' equity 25,538 24,784 24,566 10,911 8,473
- ----------------------------------------------------------------------------------------------------------------------------
REGULATORY CAPITAL RATIOS:
Tangible 6.22% 5.12% 6.57% 4.81% 4.04%
Core 6.22% 5.12% 6.57% 4.81% 4.04%
Risk-based 11.09% 13.43% 16.06% 11.01% 8.68%
- ----------------------------------------------------------------------------------------------------------------------------
OTHER:
Return on average assets 0.56% 0.15% 0.72% 1.10% 0.58%
Return on average equity 9.55% 2.44% 11.85% 23.58% 15.67%
Interest rate spread 2.66% 2.13% 2.69% 3.25% 2.77%
Loan servicing portfolio $1,489,053 $1,639,069 $2,009,762 $2,688,629 $2,402,915
Mortgages originated $ 127,504 $ 118,492 $2,203,839 $2,684,251 $1,659,336
Mortgages sold $ 117,615 $ 79,313 $2,166,937 $2,615,188 $1,691,410
Number of:
Savings branches 6 4 4 4 4
Mortgage origination offices 2 1 4 14 10
</TABLE>
40
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Suncoast is engaged primarily in community banking and loan
servicing activities. Suncoast provides community banking services primarily in
Dade, Broward and Palm Beach counties in Florida. Community banking consists
primarily of attracting checking and savings deposits from the public in a
localized market area and investing such deposits, together with borrowings and
other funds, in various types of loans and other permitted investments. In
connection with its community banking activities. Suncoast originates and
purchases, for its own portfolio, both residential and commercial real estate
loans. Suncoast services loans secured by real property located throughout the
United States. Suncoast's results of operations and financial condition over the
past three fiscal years reflect a fundamental shift in Suncoast's business from
a mortgage bank to a community bank. Prior to 1994, Suncoast was engaged
primarily in the mortgage banking business, which involves the origination or
purchase of single family residential loans for resale in the secondary mortgage
market. Historically low interest rates in 1992 and 1993 generated record
volumes of loan origination and resale activity, primarily refinancings, leading
Suncoast to expand its lending operations nationally to 15 loan production
offices. Beginning in January 1994, however, rising interest rates halted
refinancings, making it unprofitable for Suncoast to continue its mortgage
banking operation. Suncoast downsized its mortgage banking operations by closing
all but one of its loan production offices, and by reducing related staff and
overhead expenses.
During fiscal 1994 and 1995, Suncoast changed its operating
strategy to that of a community bank and focused on enhancing its net interest
income and servicing revenues. As a result of this change in strategy,
Suncoast's net interest income and loan servicing income have grown in relation
to mortgage banking income in the years ended June 30, 1995 and 1996. Suncoast
initially replaced its mortgage banking assets, primarily its inventory of loans
available for sale, with investments in mortgage-backed securities, repurchase
agreements, and loans originated for portfolio. Suncoast's strategy was to
restructure its assets initially into interest bearing assets with minimal
credit risk until Suncoast could reinvest funds previously used to finance its
mortgage banking activities into portfolio loans. In addition, this strategy
allowed Suncoast to shift its assets to those with lower risk weights under the
risk based capital regulations enabling Suncoast to increase both its assets and
deposits and, accordingly, its net interest income, while remaining well
capitalized under such regulations.
During fiscal 1995 and fiscal 1996, Suncoast sold portions of its
mortgage-backed securities portfolio due to favorable market conditions and its
ability to apply the proceeds to the purchase and origination of high quality
residential and commercial real estate loans for investment. At June 30, 1996,
$18.4 million of mortgage-backed securities remained available for sale. In
completing this restructuring, Suncoast not only reduced its interest rate risk,
but increased its net interest income by shifting from longer term fixed rate
mortgage-backed securities to higher yielding adjustable rate loans receivable.
As its assets were shifted into portfolio loans, Suncoast was required to reduce
the overall levels of both its interest-earning assets and its interest-bearing
liabilities in order to remain well capitalized under the applicable
regulations, since its asset mix shifted from mortgage-backed securities and
short term liquid investments, generally bearing 0 to 20% risk weights, to
residential and commercial loans bearing 50% and 100% risk weights,
respectively, for purposes of its risk- based capital ratio.
41
<PAGE>
The following table sets forth for the periods indicated the
amounts and percentages of Suncoast's total income represented by each source
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1996 1995 1994
---- ---- ----
AMOUNT % AMOUNT % AMOUNT %
--------- --- -------- ---- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Net interest
income before
provision for
loan losses..................... $ 10,021 51.3% $ 8,837 47.1% $ 7,701 22.1%
Loan servicing
income.......................... 4,399 22.5 6,275 33.4 4,580 13.1
Gains on the sale
of loans and
loan servicing
assets, net..................... 925 4.7 560 3.0 14,963 42.9
Gains on the sale
of mortgage-backed
securities..................... 2,950 15.1 1,388 7.4 -- --
Loan origination
income.......................... 435 2.2 391 2.1 6,075 17.4
Other............................ 817 4.2 1,316 7.0 1,555 4.5
--------- --- -------- ---- ------- ---
Total............................ $ 19,547 100.0% $ 18,767 100.0% $34,874 100.0%
======== ===== ======= ===== ====== =====
</TABLE>
Net interest income is the difference between interest income received
on Suncoast's interest-earning assets (principally loans, investments,
mortgage-backed securities, and premiums on the sales of loans) and interest
expense paid on its interest-bearing liabilities (principally deposits, FHLB
advances, and other borrowings). Loan servicing income includes fees received
for servicing loans, less amortization or valuation adjustments of loan
servicing assets. Mortgage banking income includes gains on the sale of loans
and loan servicing assets, interest on loans held in inventory for sale, and
loan origination income. Loan origination income includes fees collected for
document preparation and the processing of loans originated for sale in the
secondary market. Suncoast has also periodically realized other income from its
other mortgage-related and real estate activities, which is included in the
"Other" category in the table above.
FACTORS AFFECTING EARNINGS
ASSET/LIABILITY MANAGEMENT. The assets and liabilities of Suncoast
are managed to provide an optimum and stable net interest margin, after-tax
return on assets and return on equity capital. Management, in implementing
Suncoast's asset/liability management policy, attempts to minimize the interest
rate risk, credit risk, solvency risk and liquidity risk to Suncoast. Suncoast's
Asset/Liability Committee, which meets on a weekly basis and conducts scheduled
reviews of various indicators and other risk criteria, has the responsibility to
monitor
42
<PAGE>
interest rate risk, devise strategies to adjust interest rate risk and enhance
capital and operational effectiveness, monitor and set targets for loan
originations, purchases and sales and securities purchases, and establish
pricing on all deposit products. Suncoast's asset and liability strategy seeks
to achieve an optimum return on assets while assuming acceptable amounts of
credit and interest rate risk with the goal of reasonable returns on investments
relative to the risks assumed. Management balances these goals by minimizing
credit risk through strict underwriting standards and policies while accepting
moderate interest rate risk. While Suncoast accepts moderate levels of interest
rate risk in its loan and investment portfolio, it generally seeks to limit
interest rate risk by maintaining adjustable-rate assets and, in its mortgage
banking operation, through the ongoing sale into the secondary mortgage market
of all loans originated or purchased for sale.
The Suncoast Board of Directors has established an interest rate risk
policy to monitor the effect of interest rate risk in accordance with rules
issued by the OTS. Management has implemented this policy with quarterly
measurements. Management considers these measurements in its strategies to
enhance capital and operational effectiveness. See "Item 8. Financial Statements
and Supplementary Data - Note B of the Notes to Consolidated Financial
Statements" for additional discussion of OTS rules regarding interest rate risk.
GAP TABLE. The interest rate sensitivity of Suncoast can also be
measured by matching its assets and liabilities, analyzing the extent to which
such assets and liabilities are interest rate sensitive and by monitoring the
resulting "gap" position. An asset or liability is rate sensitive within a
specific time period if it will mature or reprice within that period. The
interest sensitivity gap is defined as the difference between the amount of
interest-earning assets anticipated, based upon certain assumptions, to mature
or reprice within a specific time period and the amount of interest-bearing
liabilities anticipated to mature within that time period. A gap is considered
positive when the amount of interest rate sensitive assets maturing within a
specific time frame exceeds the amount of interest rate sensitive liabilities
maturing within that same time frame. Accordingly, in a rising interest rate
environment, an institution with a positive gap would generally be expected,
absent the effects of other factors, to experience a greater increase in the
yield of its assets relative to the cost of its liabilities. Conversely, the
cost of funds for an institution with a positive gap would generally be expected
to decline less quickly than the yield on its assets in a falling interest rate
environment. Changes in interest rates generally have the opposite effect on an
institution with a "negative" gap. As of June 30, 1996, Suncoast had a negative
cumulative one-year gap of $21.5 million or 5.3% of total assets. During a
rising interest rate environment, Suncoast's negative gap position would
generally be expected, absent the effect of other factors, to result in
decreased net interest income as the increase in the cost of its liabilities
would exceed the increase in the yield on its assets.
The following table sets forth the amounts of interest-earning assets
and interest-bearing liabilities outstanding at June 30, 1996, which are
anticipated, based upon certain assumptions described in the following
paragraph, to reprice or mature in each of the future time periods shown.
Certain weaknesses are inherent in this method of analysis. As an example,
certain assets and liabilities may have similar maturity and repricing periods,
but may react in different degrees to changes in market interest rates.
Prepayment and early withdrawal penalties would likely deviate significantly
from those assumed in calculating the table in the event of a change in interest
rates.
43
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands)
OVER OVER OVER OVER
ONE THREE FIVE SEVEN
WITHIN YEAR TO YEARS TO YEARS TO YEARS TO
ONE THREE FIVE SEVEN THIRTY
YEAR(1) YEARS YEARS YEARS YEARS
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Interest-earning assets
First mortgage loans:
Adjustable-rate..................... $ 211,992 $ 63,990 $ 9,522 $ -- $ --
Fixed-rate and balloon.............. 12,239 3,995 6,044 4,052 13,189
Second mortgage loans................ 48 33 67 34 22
Consumer loans....................... 1,545 -- -- -- --
Non-performing loans.................
--------- --------- --------- --------- ---------
Loans receivable..................... 225,824 68,018 15,633 4,086 13,211
--------- --------- --------- --------- ---------
Mortgage-backed securities:
Adjustable.......................... 18,391 -- -- -- --
Unrealized gain on assets
available for sale................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total mortgage-backed securities:.... 18,391 -- -- -- --
--------- --------- --------- --------- ---------
Amounts due from purchasers of loans,
MBS, and loan servicing assets:
Loans ............................ -- -- -- -- --
Mortgage-backed securities & REMICS -- -- -- --
Loan servicing assets.............. -- -- -- -- --
--------- --------- --------- --------- ---------
-- -- -- -- --
-------- ------ ------ ------ -----
PMSRs ............................ -- -- -- -- --
Originated Servicing Rights - FAS 122 -- -- -- -- --
Premiums on the sale of loans........ 1,359 -- -- -- --
FHLB stock and
interest-earning deposits........... 4,497 -- -- -- --
--------- --------- --------- --------- ---------
5,856 -- -- -- --
--------- --------- ------ ------ -----
Total interest-earning assets........ 250,071 68,018 15,633 4,086 13,211
Non-interest earning assets.......... -- -- -- -- --
--------- --------- --------- --------- ---------
Total assets......................... 250,071 68,018 15,633 4,086 13,211
========= ========= ========= ========= =========
Interest-bearing liabilities
Fixed-maturity deposit accounts..... 176,991 22,653 5,970 -- --
NOW accounts........................ 6,568 6,012 1,609 1,108 2,454
Money market accounts............... 4,723 4,533 1,632 587 330
Passbook accounts................... 6,963 10,576 6,895 4,303 12,222
Custodial and business accounts..... 9,277 8,492 2,272 1,565 3,466
--------- --------- --------- --------- ---------
Deposits............................. 204,522 52,266 18,378 7,563 18,472
---------- --------- --------- --------- ----------
FHLB advances........................ 67,000 -- -- -- 1,500
Other borrowings
............................ -- -- -- -- --
--------- --------- --------- --------- ---------
Total interest-bearing liabilities... 271,522 52,266 18,378 7,563 19,972
Non-interest bearing liabilities..... -- -- -- -- --
Stockholders' equity................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total liabilities and
Stockholders' equity................ 271,522 52,266 18,378 7,563 19,972
========= ========= ========= ========= =========
Excess (deficit) of interest-earning
assets over interest-bearing
liabilities......................... (21,451) 15,752 (2,745) (3,477) (6,761)
========== ========= ========= --------- ==========
Cumulative excess (deficit).......... (21,451) (5,699) (8,444) (11,921) (18,682)
========= ========= ========= ========= =========
Cumulative excess (deficit) as a
percent of total assets............. -5.32% -1.41% -2.09% -2.96% -4.64%
</TABLE>
44
<PAGE>
(Dollars in thousands)
NON-
SUB- INTEREST
TOTAL SENSITIVE TOTAL
--------- ------- ---------
Interest-earning assets
First mortgage loans:
Adjustable-rate..................... 285,504 $ -- $ 285,504
Fixed-rate and balloon.............. 39,519 -- 39,519
Second mortgage loans................ 204 -- 204
Consumer loans....................... 1,545 -- 1,545
Non-performing loans................. 786 786
--------- ------- ---------
Loans receivable..................... 326,772 786 327,558
--------- ------- ---------
Mortgage-backed securities:
Adjustable.......................... 18,391 -- 18,391
Unrealized gain on assets
available for sale................. -- -- --
--------- ------- ---------
Total mortgage-backed securities:.... 18,391 -- 18,391
--------- ------- ---------
Amounts due from purchasers of loans,
MBS, and loan servicing assets:
Loans ............................ -- -- --
Mortgage-backed securities & REMICS -- -- --
Loan servicing assets.............. -- -- --
--------- ------- ---------
-- -- --
------- ------ ------
PMSRs ............................ -- 9,525 9,525
Originated Servicing Rights - FAS 122 -- 834 834
Premiums on the sale of loans........ 1,359 -- 1,359
FHLB stock and
interest-earning deposits........... 4,497 -- 4,497
--------- ------- ---------
5,856 10,359 16,215
---------- ---------- ----------
Total interest-earning assets........ 351,019 11,145 362,164
Non-interest earning assets.......... -- 40,405 40,405
--------- ------- ---------
Total assets......................... 351,019 51,550 402,569
========= ======= =========
Interest-bearing liabilities
Fixed-maturity deposit accounts..... 205,614 -- 205,614
NOW accounts........................ 17,751 -- 17,751
Money market accounts............... 11,805 -- 11,805
Passbook accounts................... 40,959 -- 40,959
Custodial and business accounts..... 25,072 -- 25,072
--------- ------- ---------
Deposits............................. 301,201 -- 301,201
--------- ------- ---------
FHLB advances........................ 68,500 -- 68,500
Other borrowings
............................ -- -- --
--------- ------- ---------
Total interest-bearing liabilities... 369,701 -- 369,701
Non-interest bearing liabilities..... -- 7,330 7,330
Stockholders' equity................. -- 25,538 25,538
--------- ------- ---------
Total liabilities and
Stockholders' equity................ 369,701 32,868 402,569
========= ======= =========
Excess (deficit) of interest-earning
assets over interest-bearing
liabilities......................... (18,682)
========
Cumulative excess (deficit).......... (18,682)
=========
Cumulative excess (deficit) as a
percent of total assets............. -4.64%
44 (CONTINUED)
<PAGE>
(1) Loans held for sale are included in this category because they are
held by Suncoast for less than six months. The maturity dates of the
loans range from seven to 30 years.
On June 30, 1996 and 1995, respectively, approximately 68.9% and 59.3%,
respectively, of Suncoast's total loans receivable were loans which mature or
reprice within one year.
Within the preceding table, interest-earning assets and
interest-bearing liabilities with no contractual maturities are included in the
"within one year" category. Premiums on the sales of loans are recorded as an
interest earning asset in the gap table, but do not have a stated contractual
yield. The investment in PMSRs and OMSRs which yield servicing fee income, and
escrow and custodial accounts deposited with Suncoast, are included in the
non-interest sensitive column.
In preparing the preceding table, certain assumptions have been made
with regard to prepayments on first mortgage loans and mortgage-backed
securities. The prepayment assumptions used were obtained from publicly
available mortgage prepayment rate tables. These sources provide assumptions
which correlate to recent actual repricings experienced in the marketplace.
These assumptions are that fixed-rate, single-family residential loans will
reprice according to their scheduled amortization and that Suncoast will
experience average annual prepayments of approximately the following percentages
on fixed-rate loans according to the original term to maturity as follows:
30-year maturity, 8%; 15-year maturity, 10%; and seven and five year balloon,
15%. The assumptions provided by the mortgage prepayment rate tables should not
be regarded as indicative of the actual repricings that may be experienced by
Suncoast. Decay rates are assumed to indicate the annual rate at which an
interest-bearing liability will be withdrawn in favor of an account with a more
favorable interest rate. Decay rates have been assumed by Suncoast for NOW
accounts, passbook and money market deposits and are the most recent national
assumptions published by the OTS. The assumptions used at the dates indicated,
although standardized, may not be indicative of actual withdrawals and repricing
experienced by Suncoast. Annual percentage decay rate assumptions used in the
table are as follows:
MORE
WITHIN 1-3 3-5 5-7 THAN
1 YEAR YEARS YEARS YEARS 7 YEARS
------ ----- ----- ----- - -----
Passbook..................... 17% 17% 16% 16% 14%
NOW.......................... 37 32 17 17 17
Money market................. 40 40 40 40 40
All other assets and liabilities have been repriced based on the
earlier of repricing or contractual maturity.
YIELDS EARNED AND RATES PAID. The following table provides
information relating to the categories of Suncoast's interest-earning assets and
interest-bearing liabilities for the periods indicated. All yield and rate
information is calculated on an annualized basis. Yield and rate information for
a period is average information for the period calculated by dividing the income
45
<PAGE>
or expense item for the period by the average balances during the period of the
appropriate balance sheet item. Net interest margin is net interest income
divided by average interest-earning assets. Non-accrual loans are included in
asset balances for the appropriate periods, whereas recognition of interest on
such loans is discontinued and any remaining accrued interest receivable is
reversed in conformity with federal regulations. The yields and net interest
margins appearing in the following table have been calculated on a pre-tax
basis.
<TABLE>
<CAPTION>
(Dollars in thousands)
1996 1995
---- ----
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- --------- ------ --------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
FHLB stock and interest-earning deposits $25,426 $1,488 5.85% $ 8,892 $ 558 6.28%
Overnight investments and repurchase
agreements......................... 20,366 1,165 5.72% 18,361 1,062 5.78%
-------- ------ -------- -------
Sub-total............................. 45,792 2,653 5.79% 27,253 1,620 5.94%
-------- ------ -------- -------
Loans receivable...................... 242,063 19,902 8.22% 117,401 9,359 7.97%
Mortgage-backed securities............ 77,096 5,276 6.84% 260,924 16,731 6.41%
Other interest-earning assets......... 1,405 127 9.00% 1,611 145 9.00%
--------- ------ -------- -------
Total interest-earning assets......... $366,356 $27,958 7.63% $407,189 $27,855 6.84%
======== ======= ======== =======
Interest-bearing liabilities:
Deposits.............................. $308,768 $14,891 4.82% $316,979 $14,087 4.44%
-------- ------- -------- -------
Advances from FHLB.................... 47,330 2,772 5.86% 57,065 3,155 5.53%
Other borrowings...................... 4,611 274 5.95% 29,672 1,776 5.99%
-------- ------ -------- -------
Sub-total............................. 51,941 3,046 5.86% 86,737 4,931 5.69%
-------- ------ -------- -------
Total interest-bearing liabilities.... $360,709 $17,937 4.97% $403,716 $19,018 4.71%
======== ======= ======== =======
Net interest income/interest rate spread $10,021 2.66% $ 8,837 2.13%
======= =======
Net interest-earning assets/net
interest margin....................... $366,356 $10,021 2.74% $407,189 $ 8,837 2.17%
======== ======= ======== =======
</TABLE>
48
<PAGE>
(Dollars in thousands)
1994
----
AVERAGE YIELD/
BALANCE INTEREST RATE
-------- -------- --------
Interest-earning assets:
FHLB stock and interest-earning deposit $25,061 $839 3.35%
Overnight investments and repurchase
agreements......................... 22,621 822 3.63%
-------- ------
Sub-total............................. 47,682 1,661 3.47%
-------- ------
Loans receivable...................... 223,764 15,220 6.80%
Mortgage-backed securities............ 23,894 1,575 6.59
Other interest-earning assets......... 1,727 155 8.98%
-------- ------
Total interest-earning assets......... $297,067 $18,611 6.26%
======== =======
Interest-bearing liabilities:
Deposits.............................. $277,185 $9,406 3.39%
-------- ------
Advances from FHLB.................... 8,898 349 3.92%
Other borrowings...................... 19,158 1,155 6.03%
-------- ------
Sub-total............................. 28,056 1,504 5.36%
-------- ------
Total interest-bearing liabilities.... $305,241 $10,910 3.57%
======== =======
Net interest income/interest rate spread $ 7,701 2.69%
=======
Net interest-earning assets/net
interest margin....................... $297,067 $7,701 2.59%
======== ======
48 (CONTINUED)
- ----------------------------
The increase in the interest rate spread for fiscal 1996 from that of
fiscal 1995 is primarily attributable to a change in Suncoast's asset mix as
funds previously invested in mortgage-backed securities were reinvested in
higher yielding primary adjustable rate residential and commercial mortgages.
Suncoast's yields and costs, however, have generally followed the financial
markets.
RATE/VOLUME ANALYSIS. The following table describes the extent to
which changes in interest rates and changes in volume of interest-related assets
and liabilities have affected Suncoast's interest income and expense during
Fiscal 1996, 1995 and 1994. For each category of interest-earning asset and
interest-bearing liability, information is provided on changes attributable to
changes in volume (changes in volume multiplied by prior year rates) and changes
in rate (changes in rate multiplied by prior year volume). Rate-volume variances
46
<PAGE>
(change in rate multiplied by the change in volume) have been allocated to the
change in volume. All amounts are in thousands.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996 YEAR ENDED JUNE 30, 1995
VS. YEAR ENDED JUNE 30, 1995 VS YEAR ENDED JUNE 30, 1994
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ------- ------ ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans ................................... $10,249 $ 294 $10,543 $(8,479) $2,618 $(5,861)
Mortgage-backed securities.................. (12,580) 1,125 (11,455) 15,199 ( 43) 15,156
Premiums on the sale of loans............... ( 18) -- ( 18) ( 10) -- ( 10)
FHLB stock and interest-earning deposits.... 1,074 ( 41) 1,033 (1,214) 1,173 ( 41)
------ ------- ------ ------- ----- -------
Net increase (decrease) in interest on
interest-earning assets.................... (1,275) 1,378 103 5,496 3,748 9,244
------ ------- ------ ------- ----- -------
Interest-bearing liabilities:
Deposits................................... ( 396) 1,200 804 1,769 2,912 4,681
Borrowings and FHLB advances............... (2,041) 156 (1,885) 3,336 91 3,427
------ ------- ------ ------- ----- -------
Net increase(decrease) in interest
on interest-bearing liabilities........... (2,437) 1,356 (1,081) 5,105 3,003 8,108
------ ------- ------ ------- ----- -------
Net increase (decrease) in net
interest income before provision
for loan losses........................... $1,162 $ 22 $1,184 $ 391 $ 745 $ 1,136
====== ======= ====== ======= ===== =======
</TABLE>
LOAN SERVICING INCOME. Loan servicing income includes fees received for
servicing loans less amortization and valuation adjustments of loan servicing
assets. Loan servicing assets consist of PMSRs, OMSRs and premiums on the sale
of loans. Premiums on the sales of loans represent the present value of the
future cash flows to be received in excess of the normal servicing fee, which
are recorded as gains on the sale of loans at the time the sales occur.
The value of loan servicing assets can be materially affected by
economic forces not within the control of Suncoast. For example, Suncoast is
subject to the risk that declines in the interest rates for mortgage loans will
diminish its servicing portfolio as borrowers refinance or otherwise prepay
higher rate loans. Management, however, seeks to reduce the risk of declining
interest rates on its loan servicing portfolio by implementing various
asset/liability management techniques and amortizing the assets. See "Asset and
Liability Management," above.
For the period from January 1990 through June 1995, Suncoast did not
purchase or accumulate any servicing assets due in part to regulatory changes
which placed restrictions on the value and amount of PMSRs that could be
included in the calculation of regulatory capital. PMSRs and premiums on the
sale of loans remaining from prior years, however, have continued to be
amortized over the remaining anticipated life of the loans. In amortizing its
loan servicing assets, and determining the carrying value of these assets,
Suncoast uses certain assumptions, including the estimated prepayment rate on
the mortgage loans being serviced. These estimates are reviewed in connection
with the preparation of quarterly and year-end financial statements, and, if the
estimated prepayment rates are too low, the values of the assets are adjusted
downward and the adjustments are recorded as an expense. On
47
<PAGE>
an annual basis, PMSRs and OMSRs are also valued by an independent
firm with the necessary expertise to perform such valuation and, if required by
the valuation, the carrying value of the PMSRs and OMSRs is reduced to fair
market value. No adjustments of PMSRs, OMSRs or premiums on the sale of loans
were required in fiscal 1996, 1995 or 1994.
On July 1, 1995, Suncoast adopted FAS 122, as discussed in "Item 8.
Financial Statements and Supplementary Data - Notes to Suncoast's Consolidated
Financial Statements." With its adoption of FAS 122, Suncoast has reinitiated
its prior practice of retaining the servicing rights on most of the loans that
it originates and sells, and capitalizes as OMSRs the normal servicing fee to be
received over the life of each loan at its fair value. The adoption of FAS 122
resulted in aggregate additional realized net gains of approximately $600,000
($380,000, net of tax) on the sale of loans during the year ended June 30, 1996.
Suncoast's loan servicing portfolio (including subservicing, but
excluding loans owned by Suncoast) at June 30, 1996 decreased to $1.2 billion as
compared to $1.5 billion at June 30, 1995, primarily due to a decrease in the
amount of loans subserviced for the FDIC and other entities. Unlike servicing
generally, subservicing contracts are not considered an investment in loan
servicing rights for financial reporting purposes. Subservicing contracts allow
Suncoast to utilize existing operational capabilities without incurring
additional capital investment in servicing rights or the interest rate risk
associated with these rights.
The amount of subservicing fees generated by Suncoast from the FDIC is
dependent upon the amount of assets which come under its control, the length of
time such assets are owned by the FDIC and other factors generally beyond the
control of Suncoast. The amount of subservicing fees from the FDIC declined due
to the sale by the Resolution Trust Corporation, the FDIC's predecessor, of the
majority of the loans under its control prior to the phase out of the RTC's
operations in December 1995. At June 30, 1996, the subservicing portfolio
declined to approximately $462.7 million from $881.0 million at June 30, 1995,
with FDIC loans serviced declining from $511.8 million to $208.2 million.
Included in the subservicing portfolio at June 30, 1996 is approximately $55.2
million of loans serviced under a sales agreement the servicing rights of which
will be transferred to the purchaser in the first quarter of fiscal 1997.
The portfolio of Suncoast owned servicing rights increased from $467.7
million at June 30, 1995 to $698.9 million at June 30, 1996 primarily as a
result of servicing purchases. During the year ended June 30, 1996, Suncoast
purchased approximately $2.3 million of loan servicing rights, representing
approximately $286.8 million in principal loan balances, and capitalized
approximately $860,000 in OMSRs, representing $62.0 million in principal loan
balances. During fiscal 1996, Suncoast also recorded $107,000 in premiums on the
sales of loans in connection with the sale of participation interests in certain
commercial real estate loans.
Repayments of loans underlying the servicing assets increased from
$72.7 million in fiscal 1995 to $95.5 million in fiscal 1996 due to declining
interest rates between the two periods. Suncoast intends to continue to generate
loan servicing fees in connection with its existing portfolio of loan servicing
rights and subservicing contracts, but loan servicing income may continue to
decrease as loans in the existing portfolio are repaid and subservicing
contracts are not renewed.
48
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
NET INCOME. Suncoast's net income for fiscal 1996 was $2.4 million,
representing earnings per common share of $.61, as compared to net income of
$601,000, representing a loss per common share of $.26, for fiscal 1995. The
increase in net income and earnings per share available to common stockholders
during fiscal 1996 is primarily attributable to the $1.1 million increase in
Suncoast's net interest income after provision for loan losses, combined with
the $2.2 million decrease in non-interest expenses primarily from downsizing of
Suncoast's mortgage banking operations and offices. The fiscal 1995 financial
results were materially impacted by the costs of closing these unprofitable
offices. These non-recurring costs, including employee separation and office
lease termination expenses, totalled $1.6 million before income tax during
fiscal 1995. Results of operations in fiscal 1996 and 1995 were favorably
impacted by gains on the sale of mortgage-backed securities of $3.0 and $1.4
million, respectively.
NET INTEREST INCOME. Net interest income before provision for loan
losses increased to $10.0 million in fiscal 1996, as compared to $8.8 million in
fiscal 1995, an increase of 13.4%. Although average interest earning assets were
reduced by 10.0% from fiscal 1995 to fiscal 1996, interest income remained
unchanged due to the shift in the asset mix from mortgage backed securities into
higher yielding loans. During fiscal 1996, Suncoast originated or purchased for
portfolio approximately $232.8 million of primarily adjustable rate single
family residential loans, and $48.0 million of commercial and multi-family real
estate loans. Interest expense decreased 5.7% in fiscal 1996, as compared to the
prior fiscal years, primarily as a result of a decrease in the average balances
of other borrowings and deposits. The average balance of such items decreased
during fiscal 1996 as Suncoast repaid higher cost borrowings and reduced higher
cost deposits. Both assets and liabilities were reduced during fiscal 1996 in
order for Suncoast to remain in the well capitalized category.
PROVISION FOR LOAN LOSSES. A provision for loan losses is recorded when
available information indicates that it is probable that an asset has been
impaired and the amount of the loss can be reasonably estimated. The adequacy of
the allowance for loan losses is evaluated monthly by application of a formula
developed by Suncoast that applies to outstanding loan balances percentages that
vary based on the expected risk of loss for each type of loan and the
designation of specific loans as classified assets, as well as management's
further consideration of the inherent risk in the portfolio. The allowance is
further based upon management's systematic and detailed evaluation of the
potential loss exposure in Suncoast's loan portfolio considering such factors as
historical loss experience, the borrower's ability to repay, repayment
performance, estimated collateral value and mortgage insurance coverage. The
evaluation process resulted in a provision for loan losses of $153,000 during
fiscal 1996 as compared to $95,000 for fiscal 1995, due to the 247.2% increase
in portfolio loan balances from June 30, 1995 to June 30, 1996.
Effective July 1, 1995, Suncoast adopted Statement of Financial
Accounting Standards No. 114 ("FAS 114") "Accounting by Creditors or Impairment
of a Loan," subsequently amended by FAS 118, as discussed in Notes to Suncoast's
Consolidated Financial Statements. FAS 114 did not have any significant effect
on Suncoast's financial condition and results of operations.
49
<PAGE>
LOAN SERVICING INCOME. Loan servicing fees decreased from $7.5 million
for fiscal 1995 to $6.0 million for fiscal 1996 primarily as a result of a
decline in the number of loans subserviced and the reduction of loan balances in
Suncoast's servicing portfolio due to loan repayments and pay offs.
The amount of subservicing fees generated by Suncoast from the FDIC
depends upon the amount of assets which come under its control, the length of
time such assets are owned by the FDIC and other factors generally beyond the
control of Suncoast.
Amortization of loan servicing assets increased $440,000 from fiscal
1995 to fiscal 1996 primarily as a result of lower interest rates which
increased loan prepayment activity during fiscal 1996. As a result, Suncoast's
loan servicing income during fiscal 1996 was $4.4 million, compared to $6.3
million in the prior fiscal year.
GAINS ON THE SALE OF LOANS AND LOAN SERVICING ASSETS, NET. Gains on
sale of loans and loan servicing assets for fiscal 1996 amounted to $925,000
compared to $560,000 in the prior year. During fiscal 1996 and fiscal 1995,
Suncoast sold the servicing rights to $54.9 million and $14.0 million of
conventional loans, respectively, and recorded gains of $591,000 and $150,000,
respectively. These servicing rights, which had no carrying value for Suncoast ,
were sold to take advantage of favorable market conditions. Also included in
other income in fiscal 1996 is $151,000 of gains on the sale of participation
interests in certain commercial loans. Suncoast's loan sales amounted to $117.6
million and $79.3 million during fiscal 1996 and 1995, respectively.
GAINS ON THE SALE OF MORTGAGE-BACKED SECURITIES. During the years ended
June 30, 1996 and 1995, Suncoast sold mortgage-backed securities with a book
value of $355.7 million and $265.2 million, respectively, and realized gains of
$3.0 million and $1.4 million, respectively. Suncoast sold these securities in
order to restructure its assets, reduce its interest rate sensitivity and take
advantage of market opportunities. Due to the dependence of such gains on
changes in interest rates, there is no assurance that market conditions will
continue to be favorable for such sales or that Suncoast will be able to
continue generating such revenue in the future. As of June 30, 1996, Suncoast
had $18.4 million in available for sale securities.
LOAN ORIGINATION INCOME. In fiscal 1996, loan origination income was
$435,000 as compared to $391,000 in fiscal 1995 due to an increase in the number
of loans originated in fiscal 1996 as compared to fiscal 1995. Total loan
originations were $127.5 million and $118.5 million during fiscal 1996 and 1995,
respectively.
OTHER INCOME. Suncoast earned other income of $817 thousand and $1.3
million in fiscal 1996 and fiscal 1995, respectively. During fiscal 1995, the
principal component of other income was fees earned from contracts with the RTC
to underwrite, process and close certain loans that the RTC made in connection
with the resale of properties acquired by the RTC. These fees declined and
ultimately stopped as the RTC liquidated its inventory of acquired properties
and phased out its operations. No further revenue is expected from this source.
During fiscal 1996, other income was principally comprised of $306,000 in rental
income from branch office properties owned by Suncoast.
50
<PAGE>
NON-INTEREST EXPENSES. Non-interest expenses for fiscal 1996 were $15.6
million as compared to $17.7 million for fiscal 1995, a 12.2% decrease. This
overall decrease was principally due to the reduction in compensation, benefit,
overhead and occupancy expenses resulting from the closing of loan production
offices. In fiscal 1995, $1.6 million of these expenses were a one-time expense
incurred in connection with office closings, including employee separation and
office lease termination expenses.
Employee compensation and benefits is the largest component of
non-interest expenses and decreased from $8.0 million in fiscal 1995 to $7.2
million in fiscal 1996, a 9.6% decrease. Occupancy and equipment expenses
decreased 29.4% in fiscal 1996 as compared to fiscal 1995.
YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994
NET INCOME. Suncoast's net income for fiscal 1995 was $601,000,
representing a loss per common share of $.26, as compared to net income of $2.1
million, or earnings of $.59 per share, for fiscal 1994. The decrease in net
income and earnings per share available to common stockholders was primarily
attributable to $1.6 million in non-recurring costs of closing unprofitable loan
origination offices during fiscal 1995. Loan sales amounted to $79.3 million and
$2.2 billion during fiscal 1995 and 1994, respectively.
NET INTEREST INCOME. Net interest income before provision for loan
losses increased to $8.8 million in fiscal 1995, as compared to $7.7 million in
fiscal 1994, an increase of 14.8%. Interest income increased 49.7% primarily due
to the increase in the outstanding balances of mortgage-backed securities and
other interest earning assets. The average balance of total interest earning
assets increased as a part of Suncoast's strategy to shift its focus from the
generation of mortgage banking income to the enhancement of net interest income.
Interest expense increased 74.3% in fiscal 1995, as compared to the prior fiscal
year primarily as a result of higher deposits and borrowings which were used to
finance the increase in assets discussed above.
PROVISION FOR LOAN LOSSES. During fiscal 1995, Suncoast recorded a
provision for loan losses of $95,000 compared to no such provision during fiscal
1994. The increased provision during fiscal 1995 was a result of management's
systematic and detailed evaluation of the potential loss exposure in Suncoast's
loan portfolio.
LOAN SERVICING INCOME. Loan servicing fees decreased from $8.1 million
for fiscal 1994 to $7.5 million for fiscal 1995. Fees earned on the servicing
portfolio owned by Suncoast decreased due to the repayment and pay off of the
underlying loans. Fees earned on originated servicing rights pending delivery
under servicing sale agreements declined due to significantly reduced loan
origination activity in fiscal 1995 as compared to Fiscal 1994. Amortization of
loan servicing assets decreased $2.3 million between Fiscal 1995 and 1994
primarily as a result of higher interest rates which reduced loan prepayment
activity during Fiscal 1995. As a result, Suncoast's loan servicing income
during Fiscal 1995 was $6.3 million, compared to income of $4.6 million in the
prior fiscal year.
GAINS ON THE SALE OF LOANS AND LOAN SERVICING ASSETS, NET. Gains on
sale of loans and loan servicing assets for Fiscal 1995 amounted to $560,000
compared to $15.0 million in the
51
<PAGE>
prior year. This decrease was attributable to the significant decline in
mortgage banking activity.
GAINS ON THE SALE OF MORTGAGE-BACKED SECURITIES. During the year ended
June 30, 1995, Suncoast sold mortgage-backed securities with a book value of
$265.2 million and realized gains of $1.4 million. No similar transactions were
recorded in Fiscal 1994. Included in these sales was the sale of the $138.7
million portfolio of fixed-rate mortgage backed securities consisting of $56.6
million of seven-year balloon, $59.0 million of five-year balloon, $13.3 million
of fifteen-year and $9.8 million of thirty-year securities. Suncoast sold these
securities in order to restructure its assets, reduce its interest rate
sensitivity and take advantage of market conditions.
LOAN ORIGINATION INCOME. In Fiscal 1995, loan origination income
declined to $391,000 as compared to $6.1 million in Fiscal 1994, due to the
significant decrease in the number of originated loans. Total loan originations
were $118.5 million and $2.2 billion during fiscal 1995 and 1994, respectively.
OTHER INCOME. Suncoast derived other income of $1.3 million and $1.6
million in Fiscal 1995 and Fiscal 1994, respectively, principally consisting of
fees earned from contracts previously made with the RTC to underwrite, process
and close certain loans that the RTC made in connection with the resale of
properties acquired by the RTC. These fees stopped as a result of the phase out
of the RTC's operations in December 1995.
NON-INTEREST EXPENSES. Non-interest expenses for Fiscal 1995 and 1994
were $17.7 million and $31.8 million, respectively, a 44.2% decrease. The
overall decrease was principally due to closing of the loan production offices
and the scale back of the mortgage banking operation. Employee compensation and
benefits, the largest component of non-interest expenses, decreased from $18.4
million in Fiscal 1994 to $8.0 million in Fiscal 1995, a 56.4% decrease.
Occupancy and equipment expenses decreased 3.6% in Fiscal 1995 as compared to
Fiscal 1994.
Other expenses decreased from $9.0 million in Fiscal 1994 to $5.6
million in Fiscal 1995. This decrease was primarily attributable to operating
efficiencies, including decreased foreclosure losses experienced in the loan
servicing operations and lower real estate owned maintenance expenses, as well
as the loan production office closings.
FINANCIAL CONDITION
Suncoast's total assets decreased by $59.8 million to $402.6 million
at June 30, 1996 from $462.4 million at June 30, 1995, or 12.9%, primarily due
to changes in asset mix. The decrease in assets was part of Suncoast's strategy
to shift its assets from lower yielding assets with lower risk weights under the
capital regulations to higher yielding assets with higher risk weights and still
remain well capitalized. Interest earning deposits, mortgage-backed securities
and amounts due from purchasers of loans, loan servicing rights and
mortgage-backed securities decreased in the aggregate $185.5 million from June
30, 1995 to June 30, 1996 as funds previously invested in these assets were used
to originate or acquire loans receivable, reduce deposits and repay borrowings.
Loans receivable increased $194.8 million as Suncoast continued to implement its
strategy of replacing lower yielding
52
<PAGE>
mortgage-backed securities with higher yielding loans receivable.
Deposits and advances from the FHLB and other borrowings decreased $36.7 and
$20.1 million, respectively, between June 30, 1995 and June 30, 1996 as Suncoast
reduced deposits and repaid borrowings with higher costs and reduced its total
assets. Other assets increased by $2.1 million primarily as a result of
increased foreclosure advances related to loans serviced for others, primarily
GNMA.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management requires that funds be available to meet the daily
financial commitments of Suncoast. These commitments consist primarily of loan
originations, savings deposit withdrawals, and repayments of borrowed funds.
Suncoast is required by federal regulations to maintain a minimum average daily
balance of cash and qualifying liquid assets equal to 5.0% of the aggregate of
the prior month's daily average savings deposits and short-term borrowings.
Suncoast's average liquidity ratio decreased from 22.9% at June 30, 1995 to
5.42% at June 30, 1996, as liquid assets were redeployed into residential loan
investments. Suncoast must also maintain an average daily balance of short-term
liquid assets equal to at least 1% of its prior month's average daily balance of
net withdrawable accounts plus short-term debt. At June 30, 1996 and June 30,
1995, Suncoast's short-term liquidity percentage was 5.42% and 22.9%,
respectively. Suncoast maintains minimum levels of liquid assets in order to
maximize net interest income.
Suncoast's primary sources of funds consist of retail savings deposits
bearing market rates of interest. Suncoast also obtains funds through interest
and principal repayments on loans and from FHLB advances and other borrowings,
including reverse repurchase and dollar reverse repurchase agreements with
brokerage firms.
Under the regulatory capital regulations of the OTS, Suncoast is
required to maintain minimum levels of capital as measured by three ratios.
Savings institutions are currently required to maintain tangible capital of at
least 1.5% of tangible assets, core capital of at least 3.0% of adjusted
tangible assets and risk based capital of at least 8.0% of risk-weighted assets
(at least half of which must be comprised of core capital). Each of the capital
requirements of the OTS that are applicable to Suncoast were exceeded at June
30, 1996. The tangible and core capital ratios were 6.22% and the risk-based
capital ratio was 11.09%. The minimum capital requirements are $6.0 million for
tangible capital, $12.1 million for core capital and $18.6 million for
risk-based capital. At June 30, 1996, Suncoast's regulatory capital exceeded
minimum requirements by $18.9 million for tangible capital, $12.9 million for
core capital and $7.1 million for risk-based capital. Details of the computation
of regulatory capital are provided in Note B of the Notes to Suncoast's
Consolidated Financial Statements.
IMPACT OF INFLATION
The Consolidated Statements of Financial Condition and related
consolidated financial data presented herein have been prepared in accordance
with generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money
over time due to inflation. The primary impact of inflation and changing prices
on the
53
<PAGE>
operations of Suncoast is reflected in increased operating costs. Unlike
most industrial companies, virtually all of the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates have a
more significant impact on a financial institution's performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or change in the same magnitude as the price of goods and
services, although periods of increased inflation may accompany a rising
interest rate environment.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (" FASB")
issued Statement of Financial Accounting Standards No. 123 ("FAS 123"),
"Accounting for Stock- Based Compensation." This statement requires certain
disclosures about stock-based employee compensation arrangements, regardless of
the method used to account for them, and defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for stock based compensation plans using the
intrinsic value method of accounting prescribed by existing principles. Suncoast
has elected to remain with the existing principles and will make pro forma
disclosures of net income and earnings per share, as if the fair value method of
accounting defined in FAS 123 had been applied. Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under the intrinsic value based method, compensation cost is the excess, if any,
of the quoted market price of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock. The disclosure
requirements of FAS 123 are effective for financial statements for Suncoast's
fiscal years beginning after June 30, 1996.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("FAS 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." FAS 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial- components
approach that focuses on control. FAS 125 is effective for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
December 31, 1996 and is to be prospectively applied. Management is currently
evaluating the impact of adoption of FAS 125 on its financial position and
results of operations.
CONTINGENCY RELATING TO RECAPITALIZATION OF THE SAVINGS ASSOCIATION INSURANCE
FUND
Suncoast pays deposit insurance premiums to the Savings Association
Insurance Fund ("SAIF"). SAIF and its counterpart for commercial banks, the Bank
Insurance Fund ("BIF"), were previously assessed deposit insurance premiums at
the same rate. However, in 1995, the FDIC has twice reduced deposit insurance
premiums for most BIF-insured banks so the minimum annual assessment applicable
to BIF deposits effective January 1, 1996 is $2,000 as compared to a 23 basis
point assessment rate for SAIF deposits. This disparity between BIF and SAIF in
assessment rates may place Suncoast at a competitive disadvantage to
54
<PAGE>
institutions whose deposits are exclusively or primarily BIF-insured (such as
most commercial banks).
Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have been proposed by the U.S. Congress, federal regulators, industry
lobbyists and the Clinton Administration. One plan to recapitalize the SAIF that
has gained support of several sponsors would require all SAIF member
institutions, including Suncoast, to pay a one-time fee of approximately 85
basis points on the amount of deposits held by the member institution at March
31, 1995. This fee would amount to approximately $1.9 million on an after tax
basis to Suncoast and, if this proposal is enacted into law, the effect would be
to immediately reduce the capital of the SAIF-member institutions by the amount
of the fee, and such amount would be an immediate charge to earnings.
55
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Suncoast Savings and Loan Association, FSA
In our opinion, the accompanying consolidated statements of financial condition
and the related consolidated statements of income, of stockholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Suncoast Savings and Loan Association, FSA and its subsidiaries ("Suncoast")
at June 30, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Suncoast's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note A to the consolidated financial statements, Suncoast
changed its method of accounting for mortgage servicing rights during 1996.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Miami, Florida
August 12, 1996
56
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
Consolidated Statements of Financial Condition June 30,
------------------------------
1996 1995
---------- -----------
<S> <C>
ASSETS (In thousands)
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 1,260 $ 157
Interest-earning deposits 622 43,613
---------- -----------
Total cash and cash equivalents 1,882 43,770
---------- -----------
Repurchase agreements 75,000
Federal Home Loan Bank Stock 3,875 3,758
Loans receivable:
In portfolio 320,828 129,786
Held for sale, sold under commitments 6,730 2,978
---------- -----------
Total loans receivable, net 327,558 132,764
---------- -----------
Mortgage-backed securities available for sale 18,391 136,856
Loan servicing assets:
Purchased mortgage servicing rights 9,525 8,572
Originated mortgage servicing rights 834
Premiums on the sale of loans 1,359 1,533
---------- -----------
Total loan servicing assets 11,718 10,105
---------- -----------
Accrued interest and dividends receivable 3,042 2,123
Real estate owned, net 261 523
Amounts due from purchasers of loans, loan
servicing rights and mortgage-backed securities 19,883 43,941
Office properties and equipment 6,640 6,285
Other assets 9,319 7,228
---------- -----------
$ 402,569 $ 462,353
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 301,201 $ 337,854
Advances by borrowers for taxes and insurance 3,138 1,642
Advances from Federal Home Loan Bank and other borrowings 68,500 88,623
Deferred income taxes 107 115
Principal and interest payable on loans serviced for others 274 576
Other liabilities 3,811 8,759
---------- -----------
Total liabilities 377,031 437,569
---------- -----------
Commitments and contingencies (Notes D, M and N)
Stockholders' equity:
Preferred stock - $5.00 par value; 1,000,000 shares authorized;
920,000 shares issued and outstanding 4,600 4,600
Common stock - $1.10 par value; 5,000,000 shares authorized; 1,996,930 shares
and 1,982,530 shares, respectively, issued and outstanding 2,197 2,181
Additional paid-in capital 17,295 17,252
Retained earnings 1,642 344
---------- -----------
25,734 24,377
Unrealized gain (loss) on mortgage-backed securities available
for sale, net of deferred income taxes (196) 407
---------- -----------
Total stockholders' equity 25,538 24,784
---------- -----------
$ 402,569 $ 462,353
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Income Year Ended June 30,
------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income: (In thousands, except per share data)
Loans $ 19,902 $ 9,359 $ 15,220
Mortgage-backed securities 5,276 16,731 1,575
Premiums on the sale of loans 127 145 155
Repurchase agreements and investments 1,463 1,344 941
Other 1,190 276 720
--------- --------- ---------
27,958 27,855 18,611
--------- --------- ---------
Interest expense:
Deposits 14,891 14,087 9,406
Short-term borrowings 2,982 4,931 1,504
Long-term borrowings 64
--------- --------- ---------
17,937 19,018 10,910
--------- --------- ---------
Net interest income before provision for loan losses 10,021 8,837 7,701
Provision for loan losses 153 95
--------- --------- ---------
Net interest income after provision for loan losses 9,868 8,742 7,701
--------- --------- ---------
Other income (expense):
Loan servicing fees 6,016 7,450 8,088
Amortization of loan servicing assets (1,617) (1,175) (3,508)
--------- --------- ---------
Loan servicing income 4,399 6,275 4,580
Gains on the sale of loans and loan servicing assets, net 925 560 14,963
Gains on the sale of mortgage-backed securities, net 2,950 1,388
Loan origination income 435 391 6,075
Other 817 1,316 1,555
--------- --------- ---------
9,526 9,930 27,173
--------- --------- ---------
Non-interest expenses:
Employee compensation and benefits 7,240 8,005 18,362
Occupancy and equipment 2,866 4,057 4,209
Provision for losses on real estate 95 68 150
Other 5,380 5,611 9,045
--------- --------- ---------
15,581 17,741 31,766
--------- --------- ---------
Income before taxes 3,813 931 3,108
Provision for income taxes 1,411 330 1,005
--------- --------- ---------
Net income $ 2,402 $ 601 $ 2,103
========= ========= =========
Net income $ 2,402 $ 601 $ 2,103
Preferred stock dividends 1,104 1,104 780
--------- --------- ---------
Earnings (loss) available to common stockholders $ 1,298 $ (503) $ 1,323
========= ========= =========
Earnings (loss) per common share:
Primary $ 0.61 $ (0.26) $ 0.63
Fully diluted (omitted in 1995 due to anti-dilution) $ 0.61 $ 0.59
Weighted-average common and common equivalent shares:
Primary 2,137,327 1,940,275 2,105,358
Fully diluted 3,674,730 3,652,457 3,588,620
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized
gain (loss)
on mortgage-
backed
Additional securities Total
Preferred Common paid-in Retained available Stockholders'
stock stock capital earnings for sale, net equity
---------- --------- ------------ --------- ------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 $ -- $ 2,085 $ 9,302 $ (476) $ -- $ 10,911
Issuance of common stock 27 42 69
Issuance of preferred stock 4,600 7,628 12,228
Tax benefit on disqualification of
stock options 35 35
Net income 2,103 2,103
Cash dividends on preferred stock (780) (780)
------- ------- --------- ------- --------- ---------
Balance, June 30, 1994 4,600 2,112 17,007 847 -- 24,566
Common stock issued in acquisition 33 143 176
Issuance of common stock 36 47 83
Tax benefit on disqualification of
stock options 55 55
Net income 601 601
Cash dividends on preferred stock (1,104) (1,104)
Net change in unrealized gain (loss) on
mortgage-backed securities available
for sale 407 407
------- ------- --------- ------- --------- ---------
Balance, June 30, 1995 4,600 2,181 17,252 344 407 24,784
Issuance of common stock 16 25 41
Tax benefit on disqualification of
stock options 18 18
Net income 2,402 2,402
Cash dividends on preferred stock (1,104) (1,104)
Net change in unrealized gain (loss) on
mortgage-backed securities available
for sale (603) (603)
------- ------- --------- ------- --------- ---------
Balance, June 30, 1996 $ 4,600 $ 2,197 $ 17,295 $ 1,642 $ (196) $ 25,538
======= ======= ========= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flow Year Ended June 30,
-------------------------------------
1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
(In thousands)
Cash flows from operating activities:
Net income $ 2,402 $ 601 $ 2,103
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization of office properties and equipment 1,140 1,409 1,330
Provision for income taxes 1,411 330 1,005
Accretion of deferred loan fees (223) (178) (88)
Amortization of purchased and originated mortgage servicing rights 1,336 990 3,090
Amortization of premiums on the sale of loans 281 185 418
Amortization of discounts and premiums, net (488) (1,419) (18)
Net (increase) decrease in loans receivable held for sale (3,002) 21,039 98,494
Provision for loan losses 153 95
Provision for losses on real estate 95 68 150
Net decrease (increase) in amounts due from purchasers of loans,
loan servicing rights and mortgage-backed securities 24,058 (35,441) 8,329
Federal Home Loan Bank stock dividends (64)
Gains on the sale of loans and loan servicing assets, net (925) (560) (14,963)
Gains on the sale of mortgage-backed securities (2,950) (1,388)
Increase in accrued interest and dividends receivable (919) (460) (918)
(Increase) decrease in other assets (2,122) 4,627 (2,463)
(Decrease) increase in other liabilities (6,314) 5,121 (890)
Other 31 33
----------- -------- ----------
Net cash provided by (used in) operating activities 13,964 (4,948) 95,515
----------- -------- ----------
Cash flows from investing activities:
Net increase in loans receivable in portfolio (191,821) (29,089) (65,905)
Principal repayments of mortgage-backed securities 7,016 18,897 715
Purchase of mortgage-backed securities (244,701) (256,711) (162,846)
Proceeds from sales of mortgage-backed securities 358,630 266,560
Purchase of repurchase agreements (2,110,000) (307,000) (2,968,000)
Proceeds from maturities of repurchase agreements 2,185,000 252,000 2,948,000
Capital (expenditures) dispositions, net (1,495) 80 (1,927)
Increase in originated mortgage servicing rights (863)
Payments for purchased mortgage servicing rights (2,260) (51)
Proceeds from sales of purchased servicing rights and premiums on the
sale of loans 621 380 9,576
Proceeds from sale of real estate owned 463 650 469
Purchase of Federal Home Loan Bank stock (3,417) (3,075) (3,840)
Proceeds from redemption of Federal Home Loan Bank stock 3,300 2,867 1,731
----------- -------- ----------
Net cash provided by (used in) investing activities 473 (54,492) (242,027)
----------- -------- ----------
Cash flows from financing activities:
Net (decrease) increase in deposits (36,653) 77,419 49,350
Increase in advances by borrowers for taxes and insurance 1,496 335 39
Advances from Federal Home Loan Bank 43,500 69,000
Repayments of advances and other borrowings from Federal Home Loan Bank, net (44,000)
(Repayments of) proceeds from other borrowings, net (63,623) 63,623
Proceeds from issuance of common stock 59 138 104
Proceeds from issuance of preferred stock 12,228
Cash dividends paid on preferred stock (1,104) (1,104) (780)
----------- -------- ----------
Net cash (used in) provided by financing activities (56,325) 96,411 129,941
----------- -------- ----------
Net (decrease) increase in cash and cash equivalents (41,888) 36,971 (16,571)
Cash and cash equivalents at beginning of year 43,770 6,799 23,370
----------- -------- ----------
Cash and cash equivalents at end of year $ 1,882 $ 43,770 $ 6,799
=========== ======== ==========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 18,088 $ 18,683 $ 10,782
Cash paid for income taxes, net of refunds received 1,208 120 841
Supplemental non-cash activities:
REO obtained through foreclosure $ 199 $ 1,133 $ 537
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
Suncoast Savings and Loan Association, FSA and
Subsidiaries Notes To Consolidated Financial Statements
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Suncoast Savings and Loan Association, FSA
("Suncoast") conform to generally accepted accounting principles ("GAAP") and
to general practices within the savings and loan industry. The following
summarizes the most significant of those policies and procedures.
1. Principles of Consolidation--The consolidated financial
statements include the accounts of Suncoast and its wholly-owned subsidiaries.
All significant intercompany transactions and balances are eliminated in
consolidation.
In April, 1995, Suncoast issued common stock to acquire Intra-Coastal
Mortgage Company, Inc., a licensed lender/broker. The acquisition was
accounted for using the purchase method of accounting, and the effect of the
acquisition on the financial statements for the year ended June 30, 1995 was
not significant.
2. Cash and cash equivalents--Cash and amounts due from banks and
interest-earning deposits with original maturities of three months or less are
considered cash and cash equivalents for cash flow reporting purposes.
3. Repurchase Agreements, Mortgage-Backed Securities and
Investment Securities--On July 1, 1994, Suncoast adopted Statement of Financial
Accounting Standards No. 115 ("FAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities". Under FAS 115, investments in debt and equity
securities which Suncoast has a positive intent and ability to hold to maturity
are classified as "securities held to maturity" and are carried at cost,
adjusted for discounts and premiums which are accreted or amortized to
estimated maturity under the interest method. In accordance with FAS 115, a
security cannot be classified as held to maturity if it might be sold in
response to changes in market interest rates, related changes in the security's
prepayment risk, liquidity needs, changes in the availability of and the yield
on alternative investments, and changes in funding sources and terms. Debt and
equity securities purchased or sold for the purpose of a short-term profit are
classified as "trading account securities" and are recorded at fair value, with
unrealized gains and losses reflected in operations. Suncoast does not have
trading account securities. Debt and equity securities not classified as held
to maturity or trading account securities are classified as "available for
sale". Debt and equity securities available for sale are carried at fair
value, with the related unrealized appreciation or depreciation, net of
deferred income taxes, reported as a separate component of stockholders'
equity. Realized gain or loss on sales of securities is based on the specific
identification method.
At June 30, 1996 and 1995, the portfolio of mortgage-backed securities
was classified as available for sale with an unrealized loss (net of taxes) of
$196,000 and an unrealized gain (net of taxes) of $407,000, respectively,
recorded as a separate component of stockholders' equity.
61
<PAGE>
The portfolio was classified as such because management restructured Suncoast's
assets in fiscal 1995 and sold its entire $138.7 million portfolio of fixed
rate securities, previously classified as held to maturity, realizing a gain of
approximately $486,000.
4. Mortgage Banking Activities--Suncoast originates mortgage
loans for portfolio investment or sale in the secondary market. Mortgage loans
are designated as either available for sale or held in portfolio. Mortgage
loans held in the portfolio are stated at unpaid principal balances, less the
allowance for loan losses, and net deferred loan origination fees and
discounts. Mortgage loans available for sale are carried at the lower of cost
or fair market value, determined on an aggregate basis, and net unrealized
losses, if any, are recognized in a valuation allowance with a corresponding
charge to income. Suncoast recognizes gains or losses on the sales of
servicing rights when the related sales contract has been executed and legal
title and substantially all risks and rewards of ownership of the servicing
asset has passed to the buyer. Gains or losses are computed by deducting any
associated deferred excess servicing rights, mortgage servicing rights, and
other related expenses from the sales proceeds.
Suncoast minimizes its interest rate risk on loan commitments
expected to close and the inventory of mortgage loans held for sale through
commitments to permanent investors.
Effective July 1, 1995, Suncoast adopted Statement of Financial
Accounting Standards No. 114, ("FAS 114") "Accounting by Creditors for
Impairment of a Loan", subsequently amended by FAS 118. Loans within the scope
of FAS 114 are measured for impairment based on (a) the present value of
expected future cash flows discounted at the loan's effective interest rate,
(b) the market price, or (c) if collateral dependent, the fair value of the
collateral. If the value of the loan so determined is less than the loan's
recorded value, Suncoast recognizes a loss for the difference by creating a
valuation allowance or adjusting an existing valuation allowance with a
corresponding charge to operations. FAS 118 amended certain income recognition
and disclosure provisions of FAS 114. The adoption of FAS 114 and FAS 118 did
not have any significant effect on Suncoast's financial condition and results
of operations, due to the composition of the loan portfolio and its policy for
establishing its allowance for loan losses.
At June 30, 1996, 1995 and 1994, Suncoast was servicing loans
amounting to approximately $1.5 billion, $1.6 billion and $2.0 billion,
respectively. Servicing loans generally consists of collecting mortgage
payments, maintaining custodial accounts, disbursing payments to investors and
foreclosure processing. Loan servicing income is recorded on the accrual basis
and includes servicing fees from investors and certain charges collected from
borrowers, such as late payment fees. In connection with loans serviced for
others, Suncoast held in non-interest or low-interest bearing deposit accounts
borrowers' custodial balances of approximately $24.2 million and $37.3 million
at June 30, 1996 and 1995, respectively. Suncoast makes a provision for
expected unreimbursed costs, which are incurred as a result of Suncoast's
responsibility as servicer of Federal Housing Administration (FHA) insured,
Veterans Administration (VA) guaranteed, and other loans for investors. The
provision is determined based on a number of variables, including the amount of
delinquent loans serviced for other investors, the length of delinquency, and
the amounts previously advanced on behalf of the borrower that Suncoast does
not expect to recover. Actual cost incurred may vary from Suncoast's estimate
due to a number of factors beyond Suncoast's control.
62
<PAGE>
Effective July 1, 1995, Suncoast adopted Statement of Financial
Accounting Standards No. 122 ("FAS 122") "Accounting for Mortgage Servicing
Rights." FAS 122 requires that rights to service mortgage loans for others
acquired through either purchase or origination of mortgage loans be recognized
as separate assets if the related mortgage loan is intended to be sold with
servicing retained. The adoption of FAS 122 resulted in aggregate realized net
gains of approximately $600,000 ($380,000, net of income taxes) on the sale of
loans during the year ended June 30, 1996. Purchased mortgage servicing rights
("PMSRs") represent the cost of acquiring the rights to service mortgage loans,
and such cost is capitalized and amortized in proportion to, and over the
period of, estimated net servicing income.
Premiums on the sale of loans represent the present value of the cash
flows associated with the portion of estimated future interest income retained
on loans sold (based upon certain prepayment rate and interest rate assumptions
and net of a normal servicing fee), which are recognized as gains on the sale
of loans at the time the sales occur. As the cash flows are collected, Suncoast
amortizes the premiums and recognizes a normal servicing fee and interest
income on the premiums at the rate assumed in determining the present value of
the premiums. Such premiums are amortized in proportion to and over the
estimated period such cash flows will be collected.
Suncoast periodically makes an assessment of capitalized mortgage
servicing rights for impairment based on the fair value of those rights. The
carrying values of Suncoast's servicing assets, and the amortization thereon,
are evaluated in relation to estimated future net servicing cash flows
(discounted) to be received and retained. Such carrying values are adjusted
for indicated impairments based on management's best estimate of remaining cash
flows. Such estimates may vary from the actual remaining cash flows due to
prepayments of the underlying mortgage loans and increases in servicing costs.
Changes in open market values do not directly affect the expected cash flows
used in determining the carrying values.
5. Office Properties and Equipment--Land is carried at cost.
Office properties and equipment are carried at cost less accumulated
depreciation. Depreciation and amortization are computed on the straight-line
method over the estimated useful lives of the related assets, which range from
3 to 30 years; amortization of leasehold improvements is computed over the
terms of the respective leases (including renewal periods which management
intends to exercise) or their estimated useful lives, whichever is shorter.
6. Loan Fees--Suncoast defers loan origination fees (after
offsetting certain direct costs of originating the loans) and recognizes these
fees using the interest method over the life of the loans as an adjustment of
the loans' yield. Loan origination fees received on loans sold are recorded as
income upon the sale of the loans. Loan commitment fees received are deferred
and recognized similarly over the life of the loan or at the expiration of the
commitment if the commitment expires unexercised.
7. Provisions for Losses--Provisions for loan losses and losses
on real estate owned (included in non- interest expenses) include charges to
adjust the recorded balances of loans receivable and real estate owned to their
estimated net realizable value, as applicable. Such provisions are
63
<PAGE>
based on management's estimate of fair market value of the collateral,
considering the current and anticipated future operating or sales conditions.
Recovery of the carrying value of such loans and real estate owned is dependent
to a great extent on economic, operating and other conditions that may be
beyond Suncoast's control. Suncoast also provides an allowance for loan losses
based upon historical loss experience, delinquency trends, the value of
underlying collateral, known and inherent risks in the assets, prepayment rates
and the general state of the real estate market.
8. Provision for Uncollected Interest--When a loan becomes ninety
days or more delinquent, Suncoast stops the accrual of interest income and
reverses any interest previously accrued but uncollected. Such interest, if
ultimately collected, is credited to income in the period of recovery.
9. Real Estate Owned--Real estate owned represents property
acquired by foreclosure or deed in lieu of foreclosure. Real estate owned is
initially recorded at the fair market value less estimated selling expenses of
the property at date of foreclosure. Subsequent adjustments to the fair market
value at date of foreclosure are recorded as an expense. Sales of real estate
are recorded under the accrual method of accounting. Under this method, a sale
is not recognized until payments received aggregate a specific required
percentage of the contract sales price. Until a contract qualifies as a sale,
all collections are recorded as deposits.
The ability of Suncoast to recover the carrying value of its
investment in real estate owned is based upon future sales. The ability to
complete such sales is subject to market conditions and other factors, all of
which are beyond Suncoast's control.
10. Income Taxes--Suncoast uses the asset and liability approach
to account for income taxes. Deferred tax assets and liabilities are
recognized for the expected future tax consequences attributable to differences
between the financial statement carrying amounts and the tax bases of assets
and liabilities.
11. Earnings (Loss) Per Share--Earnings (loss) per share is
computed on the basis of the weighted average number of shares of common stock
outstanding during the period plus common stock equivalents applicable to stock
options. When dilutive, fully diluted earnings per common share is derived as
follows: Earnings (loss) available to common stockholders are increased by
preferred dividends paid eliminated upon conversion of preferred shares to
common shares. This remainder is divided by the sum of the average number of
common shares outstanding for the period plus the added common shares that
would have been outstanding if: (a) all of the outstanding preferred shares
had been converted into common shares at the beginning of the period and (b)
all stock options granted that have economic value were exercised at the
beginning of the period, and the related funds that would have been received by
Suncoast upon such exercise were used to repurchase outstanding common shares.
12. 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
64
<PAGE>
expenses during the reporting period. Actual results could differ from those
estimates. Estimates that are particularly susceptible to significant change
in the near term are the adequacy of reserves available for loan losses and the
present value of the estimated future cash flows utilized to calculate loan
servicing assets.
13. New Accounting Standards--In October 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 123 ("FAS 123"), "Accounting for Stock-Based Compensation." This
statement requires certain disclosures about stock-based employee compensation
arrangements, regardless of the method used to account for them, and defines a
fair value based method of accounting for an employee stock option or similar
equity instrument and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for stock based
compensation plans using the intrinsic value method of accounting prescribed by
existing principles. Suncoast has elected to remain with the existing
principles and will make pro forma disclosures of net income and earnings per
share, as if the fair value method of accounting defined in FAS 123 had been
applied. Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock. The disclosure requirements of FAS 123 are
effective for financial statements for Suncoast's fiscal years beginning after
June 30, 1996.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("FAS 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." FAS 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial-components
approach that focuses on control. FAS 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996 and is to be prospectively applied. Management is
currently evaluating the impact of adoption of FAS 125 on its financial
position and results of operations.
14. Reclassifications--Certain amounts reported in prior periods'
financial statements have been reclassified to conform to current
classifications.
B. REGULATORY CAPITAL REQUIREMENTS
Under the regulatory capital regulations of the Office of Thrift
Supervision ("OTS"), Suncoast is required to maintain minimum levels of capital
as measured by three ratios. Savings institutions are currently required to
maintain tangible capital of at least 1.5% of tangible assets, core capital of
at least 3.0% of adjusted tangible assets and risk based capital of at least
8.0% of risk-weighted assets.
65
<PAGE>
At June 30, 1996 Suncoast exceeded all three of its current capital
requirements. The status of the capital requirements of Suncoast at June 30,
1996 is as follows (dollars are in thousands and are unaudited):
<TABLE>
<CAPTION>
Percentage Percentage Risk- Percentage of
Tangible of Core of based risk-based
capital assets(1) capital assets(1) capital assets (1)
-------- ---------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity before adjustments $ 25,538 6.36% $ 25,538 6.36% $ 25,538 11.05%
Regulatory adjustments:
General valuation reserves 657 .28
Non-qualifying PMSRs (720) (.18) (720) (.18) (720) (.30)
Goodwill (47) (.01) (47) (.01) (47) (.02)
Unrealized loss on mortgage-backed
securities available for sale, net 196 .05 196 .05 196 .08
--------- ---- --------- ---- ---------- ----
Regulatory capital 24,967 6.22 24,967 6.22 25,624 11.09
Minimum capital requirement 6,024 1.50 12,048 3.00 18,486 8.00
--------- ---- --------- ---- ---------- ----
Regulatory capital excess $ 18,943 4.72% $ 12,919 3.22% $ 7,138 3.09%
========= ==== ========= ==== ========== ====
Assets for capital calculation $ 401,605 $ 401,605 $ 231,069
========= ========= ==========
</TABLE>
- - -------------------------------
(1) Tangible and core capital percentages are computed as a percentage of
tangible and adjusted tangible assets, respectively. The risk-based
capital percentage is computed as a percentage of risk-adjusted
assets.
Under current OTS capital rules, PMSRs and OMSRs (collectively,
"MSRs") may be included in regulatory capital only to the extent that, in the
aggregate, they do not exceed 50% of core capital. For purposes of calculating
core capital, MSRs are valued at the lesser of 90 percent of fair market value
or 100 percent of their book value (net of any valuation allowance). Any
excess amounts are deducted from assets and core capital. The estimated fair
market value of MSRs must be determined at least quarterly. Suncoast also uses
the services of an independent expert to perform an annual market valuation in
accordance with guidance issued by the OTS. The amount of MSRs that may be
included in tangible capital is the same as that permitted in core capital.
At June 30, 1996, Suncoast's book value of MSRs was $10.4 million, and based
upon a market valuation of MSRs at that date, a deduction from assets and
capital for regulatory capital purposes in the amount of $720,000 was
necessary.
The OTS amended risk-based capital rules to incorporate interest-rate
risk ("IRR") requirements which require a savings association to hold
additional capital if it is projected to experience an excessive decline in net
portfolio value in the event interest rates increase or decrease by two
percentage points. The additional capital required is equal to one-half of the
amount by which any decline in net portfolio value exceeds 2 percent of the
savings association's total net portfolio value. Suncoast does not expect the
interest-rate risk requirements to have a material impact on its required
capital levels at the present time.
The OTS rules establish the capital levels for which an insured
institution will be categorized as: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized or critically
undercapitalized. A well capitalized institution must have risk-based capital
of 10% or more, core capital of 5% or more and Tier 1 risk- based capital
(based on the ratio of core capital to risk-weighted assets ) of 6% or more and
may not be subject to any written agreement, order, capital directive or prompt
corrective action directive issued by the OTS. The
66
<PAGE>
OTS and other federal banking agencies are required to take prompt corrective
action to resolve the problems of critically undercapitalized financial
institutions. Suncoast is a well capitalized institution under the definitions
as adopted.
C. REPURCHASE AGREEMENTS AND FEDERAL HOME LOAN BANK STOCK
During the years ended June 30, 1996 and 1995, Suncoast invested in
repurchase agreements but had no such investment at June 30, 1996. These
investments were collateralized by U.S. Government securities through agency
agreements with a national brokerage firm (the "counter-party"). The
securities underlying the agreements are book- entry securities. The
securities were delivered by appropriate entry with a third-party custodian as
per agreement between Suncoast and the counter-party. Based on month-end
balances for the years ended June 30, 1996 and 1995 repurchase agreements
averaged $16.7 million and $21.3 million, respectively, the maximum amount
outstanding at any month-end in each year was $75.0 million, and the maximum
amount outstanding in each year with any single counter-party was $75.0
million. The market values of these agreements approximated their carrying
value.
Federal Home Loan Bank ("FHLB") stock ownership is required for
membership in the bank system. Its carrying value approximates market value.
D. LOANS RECEIVABLE
Loans receivable at June 30 are comprised of (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Loans in portfolio:
Real estate loans:
Commercial, collateralized by--
Undeveloped land $ 3,115 $ 5,256
Office buildings 8,287 7,625
Hotel property 21,692 9,082
Retail stores 21,552 17,245
Multi-family residential and other 43,836 34,099
------------ -------------
Total commercial 98,482 73,307
Residential (one to four family) 215,044 55,449
Construction 8,491 7,085
Consumer loans 1,917 1,750
------------ -------------
323,934 137,591
Allowance for loan losses (657) (504)
Deferred loan fees, net (617) (493)
Undisbursed portion of loans in process (4,354) (7,137)
Premiums paid on loans held in portfolio 2,522 329
------------ -------------
$ 320,828 $ 129,786
============ =============
</TABLE>
67
<PAGE>
<TABLE>
<S> <C> <C>
Loans held for sale:
Residential real estate loans $ 6,675 $ 2,962
Deferred loan fees, net (31) (19)
Premiums paid on loans held for sale 86 35
------------ -------------
$ 6,730 $ 2,978
============ =============
Total loans receivable, net $ 327,558 $ 132,764
============ =============
</TABLE>
At June 30, 1996, Suncoast had pledged approximately $163.5 million of
first mortgage loans as collateral for FHLB advances (see Note L).
The commercial real estate loans are primarily in the State of Florida
and are considered by management to be of somewhat greater risk of
uncollectibility due to the dependency on income production or future
development of real estate. Loans not accruing interest were $853,000 and
$151,000 at June 30, 1996 and 1995, respectively. If non-accrual loans had been
accruing interest, interest income of $54,000, $10,000 and $42,000 would have
been recorded during the years ended June 30, 1996, 1995 and 1994,
respectively.
The OTS regulatory capital regulations require that the portion of
nonresidential construction and land loans in excess of 80% loan-to-value ratio
be deducted from total capital for purposes of the risk-based capital standard.
At June 30, 1996, Suncoast had no loans subject to this regulation.
Suncoast originates and purchases both adjustable and fixed interest
rate loans. At June 30, 1996, the composition of these loans was approximately
as follows (in thousands):
<TABLE>
<CAPTION>
Fixed-rate Adjustable-rate
- - ------------------------------------------- ----------------------------------------
<S> <C> <C> <C>
Term to Term to
maturity Carrying value rate adjustment Carrying value
- - -------- -------------- --------------- --------------
1mo.-1 yr. $ 353 1 mo.-1 yr. $ 217,509
1 yr.-3 yr. 3,138 1 yr.-3 yr. 65,967
3 yr.-5 yr. 4,261 3 yr.-5 yr 8,542
5 yr.-10 yr. 3,016
10 yr.-20 yr. 7,204
Over 20 years 13,944
----------- -----------
Total loans
in portfolio 31,916 292,018
Total loans held
for sale 6,480 195
----------- -----------
$ 38,396 $ 292,213
=========== ===========
</TABLE>
The adjustable-rate loans have interest rate adjustment limitations
and are generally indexed to U.S. Treasury Bill rates. Future market factors
may affect the correlation of the interest rate adjustment with the rates
Suncoast pays on the short-term deposits that have been primarily utilized to
fund these loans.
68
<PAGE>
The following summarizes the activity in the allowance for loan losses
for the years ended June 30 (in thousands):
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
------ ----- ------
Balance, at beginning of year $504 $504 $521
Provision for loan losses 153 95
Chargeoffs and recoveries, net (95) (17)
------ ------ ------
Balance, at end of year $ 657 $ 504 $ 504
====== ====== ======
</TABLE>
At June 30, 1996, Suncoast had commitments to originate and purchase
loans, excluding the undisbursed portion of loans in process, of approximately
$3.7 million. These commitments are scheduled to be disbursed within one year.
Suncoast had also entered into commitments to sell loans of approximately $7.6
million at June 30, 1996 of which approximately $1.0 million are binding on the
investor but not on Suncoast. At June 30, 1996, Suncoast had no floating
market rate commitments outstanding.
Loans to executive officers, directors and principal holders of equity
securities were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other customers (unless they were in effect under regulations prior to
1989) and do not involve more than the normal risk of collectibility. The
activity regarding these loans is as follows (in thousands):
<TABLE>
<CAPTION>
Beginning New Ending
Year Ended June 30, Balance Loans Repayments Balance
- - ------------------- --------- ----- ---------- -------
<S> <C> <C> <C> <C>
1996 $2,199 $ 328 $ 336 $2,191
1995 1,083 1,365 249 2,199
1994 2,693 1,610 1,083
</TABLE>
E. MORTGAGE-BACKED SECURITIES
At June 30, 1996, mortgage-backed securities with an aggregate book
value of $11.8 million were pledged as collateral for FHLB advances (see Note
L). Summarized below are the amortized costs and market value of
mortgage-backed securities at June 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Market
costs gains losses value
-------- ---------- ---------- --------
<S> <C> <C> <C> <C>
June 30, 1996:
Adjustable rate:
GNMA $ 14,659 $ - $ (312) $ 14,347
Private Issue 4,044 4,044
-------- --------- ------- --------
Total mortgage-backed
securities $ 18,703 $ - $ (312) $ 18,391
======== ========= ======= ========
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
June 30, 1995:
<S> <C> <C> <C> <C>
FHLMC $ 59,015 $ 414 $ (80) $ 59,349
FNMA 51,069 363 (51) 51,381
FNMA Real Estate Mortgage
Investment Conduit 26,126 26,126
-------- -------- ------ --------
Total mortgage-backed
securities $136,210 $ 777 $ (131) $136,856
======== ======== ====== ========
</TABLE>
Mortgage-backed securities as of June 30, 1996 and 1995 were
adjustable-rate securities with a term to rate adjustment not exceeding one
year.
F. LOAN SERVICING ASSETS
1. Purchased mortgage servicing rights--The following table sets
forth the activities of Suncoast's PMSRs for the years ended June 30 (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -------------
<S> <C> <C> <C>
Balance, at beginning of year $ 8,572 $ 9,511 $ 12,830
Cost of acquiring servicing rights 2,260 51
Sales of servicing rights (229)
Amortization charged against loan
servicing fee income (1,307) (990) (3,090)
----------- ------------ -------------
Balance, at end of year $ 9,525 $ 8,572 $ 9,511
=========== ============ =============
</TABLE>
2. Originated mortgage servicing rights ("OMSR")--The following
table sets forth the activities of Suncoast's OMSR's for the years ended June
30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Balance, at beginning of year $ - $ - $ -
Servicing rights originated 863
Amortization charged against loan
servicing fee income ( 29)
----------- ----------- ----------
Balance, at end of year 834 $ - $ -
=========== =========== ==========
</TABLE>
The fair value of Suncoast's PMSRs and OMSRs is determined annually by
an independent firm which has the necessary expertise to perform such valuation
studies. At June 30, 1996, the fair value of Suncoast's PMSRs and OMSRs was
approximately $10.0 million and $949,000, respectively.
70
<PAGE>
Fair value has been estimated by using a discounted cash flow model,
the most significant assumptions of which are as follows:
Prepayment Rate--The average "Dealer Prepayment Estimates" as of July
8, 1996 as published by Bloomberg Financial Markets.
Discount Rate--A base rate of 10.5%, adjusted for loan type, size and
remaining term. Cost of Service--$45 incremental per loan per year.
Ancillary Income--Suncoast's actual ancillary income was utilized for
the portfolio purchased prior to 1995 and $10 annually per loan was
utilized on the portfolio purchased subsequent to 1995.
Escrow Balances--Determined using a twelve month weighted average
multiple calculated by state.
For purposes of evaluating and measuring PMSRs and OMSRs for
impairment, Suncoast stratifies the population by product type, investor type
and interest rate. No valuation allowance for the impairment of PMSRs or OMSRs
was required at June 30, 1996.
The ability of Suncoast to recover the carrying value of the PMSRs and
OMSRs is dependent upon certain factors including future prepayment experience,
which is influenced by economic and other conditions that may be beyond
Suncoast's control. If actual future prepayment experience exceeds the rate
anticipated in the valuation study, a reduction in the carrying value of the
PMSRs and OMSRs may be required.
3. Premiums on the sale of loans--The following table sets forth
the activities of Suncoast's premiums on the sale of loans for the years ended
June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Balance, at beginning of year $ 1,533 $ 1,737 $ 2,169
Premium on sales 107 14
Sales of servicing rights (19) (28)
Amortization charged against loan
servicing fee income (281) (185) (418)
----------- ----------- ----------
Balance, at end of year $ 1,359 $ 1,533 $ 1,737
=========== =========== ==========
</TABLE>
Management has estimated the future constant prepayment rates ("CPRs")
used to determine the above premiums based upon an analysis of the actual
historical CPRs, comparative industry CPRs and market conditions. Suncoast
calculates premiums using the present value model, which calculates present
values based upon estimated annual cash inflows.
71
<PAGE>
G. ACCRUED INTEREST AND DIVIDENDS RECEIVABLE
Interest and dividends receivable at June 30 are accrued for (in
thousands):
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Loans receivable $ 2,782 $ 885
Mortgage-backed securities 164 1,041
Federal Home Loan Bank Stock 88 68
Repurchase agreements 121
Interest-earning deposits 8 8
----------- -----------
$ 3,042 $ 2,123
=========== ===========
</TABLE>
H. REAL ESTATE OWNED
At June 30, 1996, real estate owned consisted of one single-family
residence. The following summarizes the activity in the allowance for losses on
real estate owned for the years ended June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Balance, at beginning of year $ - $ - $ -
Provision for losses on real estate 95 68 150
Chargeoffs and recoveries, net (15) (68) (150)
------- ------- --------
Balance, at end of year 80 $ - $ -
======= ======= ========
</TABLE>
I. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment at June 30 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Land $ 1,204 $ 827
Buildings 3,971 3,630
Leasehold improvements 839 669
Furniture, fixtures and equipment 6,890 7,341
--------- ---------
12,904 12,467
Less accumulated depreciation and
amortization 6,264 6,182
--------- ---------
$ 6,640 $ 6,285
========= =========
</TABLE>
72
<PAGE>
J. OTHER ASSETS
Other assets at June 30 are comprised of (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Foreclosure advances $ 3,821 $ 1,633
Other receivables 2,978 1,404
Escrow advances on serviced loans 1,036 1,580
Prepaid income taxes 1,145 302
All other 339 2,309
--------- ---------
$ 9,319 $ 7,228
========= =========
</TABLE>
K. DEPOSITS
The nominal interest rates paid on deposits and related balances are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
Weighted June 30, 1996 June 30, 1995
Average Rate at ------------------------ -----------------------
June 30, 1996 Amount Percent Amount Percent
--------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Negotiable
order of
withdrawal
("NOW")
accounts 2.42% $ 17,751 5.9% $ 6,418 1.9%
Non-interest
bearing 874 0.3% 556 0.2
Money market 3.19% 11,805 3.9% 16,859 5.0
Passbook 4.08% 40,959 13.6% 48,605 14.3
-------- ------ -------- ------
71,389 23.7% 72,438 21.4
-------- ------ -------- ------
Custodial
accounts 0% 24,198 8.0% 37,275 11.0
-------- ------ -------- ------
Certificates of
deposit:
2.00%-2.99% 204 0.1%
3.00%-3.99% 4 411 0.1
4.00%-4.99% 29,464 9.8% 11,212 3.3
5.00%-5.99% 146,965 48.8% 104,003 30.8
6.00%-6.99% 26,194 8.7% 108,712 32.2
7.00%-7.99% 2,783 0.9% 3,801 1.1
8.00%-8.99% 2 0.1
--------- ------ -------- -----
Total certificates
of deposit 5.46% 205,614 68.3% 228,141 67.6%
--------- ------ -------- -----
4.55% $ 301,201 100.0% $337,854 100.0%
========= ====== ======== =====
</TABLE>
73
<PAGE>
The amounts of scheduled maturities of certificate accounts, including
those with balances exceeding $100,000, at June 30, 1996 for future fiscal
years ending June 30 are summarized below (in thousands):
<TABLE>
<CAPTION>
Certificates
Exceeding Total
$100,000 Certificates
----------- ------------
<S> <C> <C>
1997 $7,389 $176,957
1998 824 19,699
1999 209 2,955
2000 106 4,430
2001 101 1,573
------- --------
$8,629 $205,614
====== ========
</TABLE>
Interest on deposits for the years ended June 30 is summarized below
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Certificate accounts $ 12,537 $ 11,893 $ 7,849
Money market accounts 565 420 748
NOW accounts 272 451 92
Passbook accounts 1,368 1,226 27
----------- ----------- ----------
Deposit accounts 14,742 13,990 8,716
----------- ----------- ----------
Interest on custodial accounts:
Escrow accounts 82 78 105
Serviced loans paid off 67 19 585
----------- ----------- ----------
149 97 690
----------- ----------- ----------
Total interest on deposits $ 14,891 $ 14,087 $ 9,406
=========== =========== ==========
</TABLE>
L. ADVANCES FROM FEDERAL HOME LOAN BANK AND OTHER BORROWINGS
Advances from the Federal Home Loan Bank and other borrowings at June
30 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
At June 30, 1996 During Year Ended June 30, 1996
--------------------------------------------------- -------------------------------
Average Maximum
Balance Weighted
Outstanding Average Rate Maturity Outstanding Outstanding
----------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Advances from FHLB
Short term $67,000 5.30% 7/96-2/97 $50,963 $117,000
Long term 1,500 6.65 12/05 1,000 1,500
Borrowings under reverse
repurchase agreements 850 10,199
Borrowings under fixed coupon
dollar reverse repurchase0
agreements 2,631 31,572
-------- ----
$ 68,500 5.30%
======== ====
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
At June 30, 1995 During Year Ended June 30, 1995
----------------------------------------------------- --------------------------------
Average Maximum
Balance Weighted Balance Balance
Outstanding Average Rate Maturity Outstanding Outstanding
----------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Advances from
FHLB - short term $ 25,000 6.13% 5/96 $ 61,371 $ 108,000
Borrowings under
reverse
repurchase
agreements 32,051 6.09 7/95-8/95 20,821 62,766
Borrowings under
fixed coupon
dollar reverse
repurchase
agreements 31,572 5.77 7/95 10,025 35,148
-------- ----
$ 88,623 5.99%
======== ====
</TABLE>
At June 30, 1996, Suncoast is a party to two advance agreements with
the FHLB whereby the FHLB will provide borrowings as requested by Suncoast when
such borrowings are secured by specific collateral. Under the first agreement,
advances are secured by government securities and U.S. government agency
securities with a market value of 103% of the advance amount. Under the second
agreement, advances are secured by a blanket floating loan on eligible single
family residential mortgage loan collateral. In determining the amount of
advances available under the second agreement, the unpaid principal balance of
eligible collateral is discounted to 75% (see note D). The stock of the FHLB
owned by Suncoast is also pledged as collateral for advances under this
agreement. After meeting all of its collateral requirements, Suncoast had
excess qualifying assets eligible as collateral for additional borrowings under
this agreement of approximately $54.1 million at June 30, 1996.
Suncoast enters into sales of securities under agreements to
repurchase, which are treated as financings. The obligations to repurchase
securities sold are reflected as a liability and the carrying amount of the
securities underlying the agreements is included in mortgage-backed securities
available for sale in the Consolidated Statements of Financial Condition.
Mortgage-backed securities sold under reverse repurchase agreements are
delivered to the broker- dealers who arrange the transactions. The
broker-dealers may sell, loan, or otherwise dispose of such securities to other
parties in the normal course of their operation, and agree to resell to
Suncoast the identical securities at the maturities of the agreements. As of
June 30, 1996, no such financings were outstanding.
Suncoast also enters into fixed coupon dollar reverse repurchase
agreements, which are treated as financings. Under a fixed coupon dollar
reverse repurchase agreement, Suncoast sells a security and agrees to
repurchase another security which is substantially the same as the one sold.
These agreements are accounted for in the same manner as reverse repurchase
agreements. As of June 30, 1996, no such financings were outstanding.
During the period from July 1, 1993 to February 28, 1995, RFC, a
lender, provided Suncoast with a revolving warehouse credit facility for as
much as $100.0 million which bore interest either at the prime rate or at
tiered rates over the U.S. Dollar London Interbank Offered Rate. Suncoast drew
advances on this line of credit to fund its mortgage originations and the
advances were collateralized by specific mortgages originated and awaiting sale
by Suncoast.
75
<PAGE>
Commitment fees of $41,666 and $58,800 were paid during Fiscal 1995 and 1994,
respectively, to RFC by Suncoast to use the credit line. Upon expiration, this
credit line was not renewed by Suncoast.
Interest expense on borrowed funds for the years ended June 30 is
summarized below (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Advances from:
FHLB $ 2,772 $ 3,155 $ 349
RFC 1,155
Reverse repurchase agreements 159 1,283
Dollar reverse repurchase agreements 115 493
--------- -------- --------
$ 3,046 $ 4,931 $ 1,504
========= ======== ========
</TABLE>
M. LEASES
Suncoast leases space for its administrative offices, two savings
branch offices, storage facilities and certain equipment. All office leases
have escalation clauses tied either to a fixed schedule or to increases in the
Consumer Price Index. The following is a schedule of approximate future minimum
payments required under these operating leases at June 30, 1996 for future
fiscal years ending June 30 (in thousands):
1997 $1,078
1998 906
1999 881
2000 610
2001 66
Thereafter -
------
3,541
Less:
Income from subleases 147
------
$3,394
======
Rent expense was $1.2 million, $2.0 million and $2.1 million for the
years ended June 30, 1996, 1995, and 1994, respectively.
N. STOCKHOLDERS' EQUITY
Suncoast has an incentive stock option plan approved by its Board of
Directors and stockholders. There are 467,500 total shares in the plan, and a
total of 349,760 shares of common stock are reserved and authorized for
issuance under this plan. Transactions relating to this stock option plan for
the three year period ended June 30, 1996 are as follows:
76
<PAGE>
<TABLE>
<CAPTION>
Options Option Price
Outstanding Per Share
----------- ------------
<S> <C> <C>
Balance, June 30, 1993 349,400 $ 2.00-3.00
Exercised (24,400) 2.00-3.00
Cancelled (8,200) 2.00-3.00
---------- ------------
Balance, June 30, 1994 316,800 2.00-3.00
Granted 84,000 7.19-7.38
Exercised (33,000) 2.00-3.00
Cancelled (11,600) 2.00-7.38
---------- ------------
Balance, June 30, 1995 356,200 2.00-7.38
Granted 7,000 6.94
Exercised (14,400) 2.00-3.00
Cancelled (26,800) 2.00-7.38
---------- ------------
Balance, June 30, 1996 322,000 $ 2.00-7.38
========== ============
</TABLE>
At June 30, 1996 and 1995, options for 284,600 and 274,800 shares were
exercisable at an average price per share of $3.26 and $3.12, respectively.
Suncoast has an Employee Stock Bonus/401K Plan (Stock Bonus Plan) for
the benefit of certain eligible employees of Suncoast. Contributions to the
Stock Bonus Plan by Suncoast are at the discretion of Suncoast's Board of
Directors. No contributions were made to the Stock Bonus Plan for the years
ended June 30, 1996 and 1995. Suncoast expensed $224,400 for contributions made
to the Stock Bonus Plan for the year ended June 30, 1994.
There are various regulatory limitations on the extent to which
Suncoast can pay dividends. Suncoast is required to comply with the OTS capital
distribution regulations, which condition Suncoast's ability to make certain
dividend distributions on Suncoast's capital level and supervisory condition.
The OTS has established a three-tiered qualification system, and gives savings
associations meeting their fully phased-in capital requirements greater
flexibility to pay dividends than associations that must build their capital
levels to reach the fully phased-in capital requirement. Even though Suncoast
presently meets its fully phased-in capital requirements, dividends cannot be
paid if Suncoast does not meet its capital requirements at a future date or if
payment of dividends would cause Suncoast not to meet its capital requirements.
The payment of dividends is also prohibited if after such payment Suncoast
would be considered undercapitalized. Moreover, the OTS has the authority to
prohibit the payment of dividends even if Suncoast meets its capital
requirements if such payments would affect the safety and soundness of the
institution.
On July 9, 1993, Suncoast issued 920,000 shares of its 8%
Noncumulative Convertible Preferred Stock, Series A (the "Preferred Stock") in
a public offering which added net proceeds of approximately $12.2 million to
stockholders' equity. The Preferred Stock is convertible by the holder into
Suncoast Common Stock at any time, unless previously redeemed by Suncoast, at a
conversion price of $9.00 per share of Common Stock. Suncoast can redeem the
Preferred Stock after July 1, 1995, at a redemption price of $15.00 per share
if the Common Stock is trading at a minimum price of $10.80 per share for 20 to
30 trading days prior to redemption.
77
<PAGE>
The Preferred Stock is otherwise redeemable from July 1, 1998 to June 30, 1999
at $16.20 per share and at declining premiums thereafter. Dividends on the
Preferred Stock are payable at an annual rate of $1.20 per share if, when and
as declared by Suncoast's Board of Directors. Dividends are not cumulative and
are payable quarterly in arrears. Dividends on the Preferred Stock were paid
each quarter after the issuance of the stock and amounted to $1.1 million in
each of the years ended June 30, 1996 and 1995. In connection with this stock
offering, Suncoast issued warrants to the offering underwriters to purchase an
aggregate of 80,000 shares of Preferred Stock. These warrants are exercisable
at a price per share of $18.00 in the case of Preferred Stock or at $10.80 in
the case of Common Stock for a period of four years after July 9, 1994. At
June 30, 1996, none of these warrants had been exercised and none of the
Preferred Stock had been converted or redeemed.
Suncoast has a deferred compensation plan to provide its President
with a supplemental retirement benefit. Under this plan, Suncoast funded an
irrevocable trust with a lump sum of $213,000, which has been invested in
corporate- owned life insurance. The President will be fully vested in the
plan in 1997. Suncoast recorded an expense of $49,000 and $108,000 under this
Plan in Fiscal 1996 and Fiscal 1995, respectively.
O. INCOME TAXES
The provision for income taxes for the years ended June 30 differs
from the amount of income tax determined by applying the applicable U.S.
statutory federal income tax rate to pretax income as a result of the following
differences (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- -------------------- ---------------------
% Amount % Amount % Amount
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S.
tax rates 35.0 $1,335 35.0 $326 35.0 $1,088
Increase (decrease)
in rates resulting
from:
Benefit of Federal
surtax exemption (1.0) (31)
State tax (net of
Federal benefit) 3.7 141 3.7 34 3.2 100
Other (1.7) (65) (3.3) (30) (4.9) (152)
---- ------ ---- ---- ---- -------
37.0 $1,411 35.4 $330 32.3 $ 1,005
==== ====== ==== ==== ==== =======
</TABLE>
The components of the provision for income taxes for the years ended
June 30, 1996, 1995 and 1994 consist of (in thousands):
78
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal $ 950 $ 24 $ 555
State 95 61 153
----------- ----------- ----------
Total current 1,045 85 708
----------- ----------- ----------
Deferred:
Federal 326 209 267
State 22 (19) (5)
----------- ----------- ----------
Total deferred 348 190 262
----------- ----------- ----------
Tax benefit for disqualification of
stock options credited to stockholders'
equity 18 55 35
----------- ----------- ----------
Total provision 1,411 $ 330 $ 1,005
=========== =========== ==========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of June 30, 1996 and 1995
are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax asset:
Capitalized servicing costs $ 375 $ 442
Deferred loan fees 243 191
Deferred gain on sale of servicing 38
Accrued vacation 76 81
Reserves 278 189
Unrealized loss on mortgage-backed
securities available for sale 117
Alternative minimum tax credit carryover 66
Other 87 40
-------- --------
Gross deferred tax asset 1,176 1,047
-------- --------
Deferred tax liability:
Deferred premium on loans sold 468 573
Deferred premium on loans in portfolio 230 123
Fixed assets 199 137
Book over tax basis for originated
mortgage servicing rights 312
Unrealized gain on mortgage-backed
securities available for sale 239
Other 74 90
-------- --------
Gross deferred tax liability 1,283 1,162
-------- --------
Deferred tax asset valuation allowance -- ---
-------- --------
Net deferred tax (liability) asset $ (107) $ (115)
======== ========
</TABLE>
79
<PAGE>
Management believes, based on Suncoast's earnings history and its
future expectations, that Suncoast will have sufficient taxable income in
future years to realize the net deferred income tax asset. In evaluating the
expectation of sufficient future taxable income, management considered future
reversal of temporary differences and available tax planning strategies that
could be implemented, if required. A valuation allowance was not required as of
June 30, 1996 and 1995 as it was management's assessment that, based on
available information, it is more likely than not that the deferred tax asset
will be realized. A valuation will be established if there is a change in
management's assessment of the amount of the net deferred tax asset that is
expected to be realized.
P. OTHER INCOME
The following is a computation of Suncoast's gains on the sale of
loans and loan servicing rights for the years ended June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Proceeds from sales of loans
and loan servicing rights $ 117,818 $ 79,873 $ 2,181,886
Carrying value of loans sold (117,000) (79,313) (2,166,937)
----------- ---------- -----------
Cash before premiums
on the sale of loans 818 560 14,949
Premiums on the sale of loans 107 14
----------- ---------- -----------
$ 925 $ 560 $ 14,963
=========== ========== ===========
</TABLE>
Other income for the years ended June 30 consists of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Loan processing and other
fees from RTC contracts $ 169 $ 573 $1,004
Rental income 306 310 180
Other 342 433 371
------ ------ ------
$ 817 $1,316 $1,555
====== ====== ======
</TABLE>
Q. OTHER EXPENSES
Other expenses for the years ended June 30 consists of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Loan expenses $ 375 $ 824 $ 2,162
Federal deposit insurance 859 773 772
Foreclosure expenses on servicing
portfolio 995 614 487
Data processing 645 535 634
Telephone 329 469 1,247
Business insurance 421 463 640
</TABLE>
80
<PAGE>
<TABLE>
<S> <C> <C> <C>
Professional and legal 356 381 294
Postage and overnight delivery 172 240 736
Stationery and supplies 240 210 502
Bank service charges and fees 109 95 207
Other 879 1,007 1,364
------- --------- --------
$ 5,380 $ 5,611 $ 9,045
======= ========= ========
</TABLE>
R. BUSINESS SEGMENTS
Suncoast's operations consist of activities in three principal
business segments: banking, mortgage banking and loan servicing. Revenues in
the banking segment consist primarily of interest on mortgage loans and
investment securities. Mortgage banking activities derive revenues primarily
from the interest on loans held for sale, sales of loans in the secondary
mortgage market, sale of loan servicing rights and loan origination income.
Loan servicing activities derive revenues primarily from the collection of fees
on loans serviced. During 1995, Suncoast shifted its primary business emphasis
from mortgage banking to banking. The following is segment information for the
fiscal years ended June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
BANKING
Revenues:
Interest income $ 23,949 $ 25,011 $ 9,358
Gains on the sale of
mortgage-backed securities 2,950 1,388
Other income 731 1,117 1,154
-------- -------- --------
27,630 27,516 10,512
-------- -------- --------
Expenses:
Interest expense 16,489 18,499 6,449
Employee compensation
and benefits 3,048 1,918 1,311
Depreciation 396 212 178
Provision for losses on real
estate 95 68 150
Provision for loan losses 153 95
Other expenses 2,700 2,318 1,557
-------- -------- --------
22,881 23,110 9,645
-------- -------- --------
Banking income before income
taxes $ 4,749 $ 4,406 $ 867
======== ======== ========
MORTGAGE BANKING
Revenues:
Interest income $ 1,654 $ 300 $ 5,526
Gains on the sale of loans and
loan servicing assets, net 304 560 14,963
Loan origination and other income 331 336 6,212
-------- -------- --------
2,289 1,196 26,701
-------- -------- --------
</TABLE>
81
<PAGE>
<TABLE>
<S> <C> <C> <C>
Expenses:
Interest expense 1,009 236 3,703
Employee compensation
and benefits 1,272 2,438 13,347
Depreciation 134 412 564
Other expenses 1,050 2,667 8,249
-------- -------- --------
3,465 5,753 25,863
-------- -------- --------
Mortgage banking income (loss)
before income taxes $ (1,176) $ (4,557) $ 838
======== ======== ========
LOAN SERVICING
Revenues:
Loan servicing fees $ 6,016 $ 7,450 $ 8,088
Amortization of loan
servicing assets (1,617) (1,175) (3,508)
-------- -------- --------
Loan servicing income 4,399 6,275 4,580
Interest income 2,355 2,544 3,727
Gain on sale of loans and
loan servicing assets, net 621
Other income 190 254 264
-------- -------- --------
7,565 9,073 8,571
-------- -------- --------
Expenses:
Interest expense 439 283 758
Employee compensation
and benefits 2,920 3,649 3,704
Depreciation 610 784 559
Other expenses 3,356 3,275 2,147
-------- -------- --------
7,325 7,991 7,168
-------- -------- --------
Loan servicing income (loss)
before income taxes $ 240 $ 1,082 $ 1,403
======== ======== ========
Assets:
Banking $372,861 $439,175 $297,926
Mortgage banking 8,844 6,356 43,827
Loan servicing 20,864 16,822 17,337
-------- -------- --------
$402,569 $462,353 $359,090
======== ======== ========
Capital dispositions
(expenditures), net:
Banking $ (447) $ 8 $ (81)
Mortgage banking (188) 64 (1,760)
Loan servicing (860) 8 (86)
-------- -------- --------
$ (1,495) $ 80 $ (1,927)
======== ======== ========
</TABLE>
82
<PAGE>
S. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate fair value:
-- The book value was used as a reasonable estimate of fair value for
cash and amounts due from depository institutions, interest-bearing
deposits, variable rate loans and fixed rate loans with maturities
less than one year, demand and savings deposits, and short-term time
deposits.
-- The book value was used as a reasonable estimate of fair value for
stock issued by the Federal Home Loan Bank and short-term repurchase
agreements maturing within one month.
-- Fair values of fixed rate loans and certificates of deposit with
maturities greater than one year are estimated by discounting the
future cash flows using the current rates at which similar instruments
would be issued with comparable credit ratings and terms.
-- The fair values of commitments, letters of credit and guarantees are
equal to their contractual amount based on the assumptions that
Suncoast will be required to perform on all such instruments existing.
-- The fair value of loan servicing assets is determined by independent
valuation or discounted cash flow analysis as discussed in Note F.
Since the reported fair values of financial instruments are based on a
variety of factors, they may not represent actual values that could have been
realized or that will be realized in the future.
The estimated fair values of Suncoast's financial instruments for
which fair value differed from book value are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
---------------------------- ----------------------------
Book Value Fair Value Book Value Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans receivable in portfolio $ 31,563 $ 31,635 $ 16,568 $ 16,634
Loan servicing assets $ 11,718 $ 12,140 $ 10,105 $ 10,186
Certificates of deposit $ 28,657 $ 29,103 $ 40,458 $ 40,758
</TABLE>
T. CONTINGENCIES
In order to increase the Savings Association Insurance Fund ("SAIF")
of the Federal Deposit Insurance Corporation to its minimum required reserve
ratio of 1.25%, a proposal has been made to impose a special one-time
assessment of 65 to 90 basis points on all SAIF-insured deposits as of March
31, 1995. This one-time assessment may be payable in 1997 at which point the
Association's annual premium would thereafter be reduced. If the assessment is
made at the currently proposed rate, the effect on the Bank would be an
after-tax charge of approximately $1.9 million.
83
<PAGE>
U. SUBSEQUENT EVENT
On July 15, 1996, Suncoast entered into a definitive agreement to be
acquired by BankUnited Financial Corporation ("BankUnited"). Under terms of
the agreement one share of BankUnited Class A Common Stock will be issued for
each share of Suncoast Common Stock. Each share of Suncoast Preferred Stock
will be exchanged for a new issue of BankUnited Preferred Stock having
substantially similar terms as the Suncoast Preferred Stock. The transaction
is subject to stockholder and regulatory approvals and other conditions and is
expected to close by December 1996.
84
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
- - -----------------------------------------------------------------------------
Consolidated Quarterly Results (Unaudited)
- - -----------------------------------------------------------------------------
The following table summarizes the quarterly results of operations for the
fiscal years ended June 30, 1996 and 1995 (in thousands, except per share data):
<TABLE>
<CAPTION>
First Quarter Second Quarter
Ended September 30, Ended December 31,
--------------------- ---------------------
1995 1994 1995 1994
------ ------ ------ -------
<S> <C> <C> <C> <C>
Income $9,510 $8,502 $9,333 $9,371
Expense 8,804 8,201 8,613 9,170
------ ------ ------ ------
Net income 706 301 720 201
Preferred stock dividends 276 276 276 276
------ ------ ------ ------
Earnings (loss) available to common stockholders $ 430 $ 25 $ 444 $ (75)
====== ====== ====== ======
Earnings (loss) per share - primary $ 0.20 $ 0.01 $ 0.21 $(0.04)
Earnings per share - fully diluted $ 0.19 * $ 0.20 *
====== ====== ====== ======
<CAPTION>
Third Quarter Fourth Quarter
Ended March 31, Ended June 30,
---------------------- ---------------------
1996 1995 1996 1995
------ ------- ------ -------
<S> <C> <C> <C> <C>
Income $9,136 $9,755 $9,505 $10,157
Expense 8,633 9,926 9,032 9,887
------ ------ ------ -------
Net income (loss) 503 (171) 473 270
Preferred stock dividends 276 276 276 276
------ ------ ------ -------
Earnings (loss) available to common stockholders $ 227 $ (447) $ 197 $ (6)
====== ====== ====== =======
Earnings (loss) per share - primary $ 0.10 $(0.23) $ 0.10 $ -
Earnings per share - fully diluted $ 0.10 * $ 0.10 *
====== ====== ====== =======
</TABLE>
* Omitted due to anti-dilution.
85
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
AGE AT YEAR
SEPTEMBER 12, POSITIONS HELD DIRECTOR OFFICE
1995 WITH ASSOCIATION SINCE EXPIRES
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Albert J. Finch 59 Chairman of the 1985 1998
Board, Chief
Executive Officer,
President and Chief
Operating Officer
Paul B. Fay, Jr. 78 Director 1985 1998
Norman E. Mains 53 Director 1985 1998
William E. Hammonds 45 Vice Chairman 1985 1997
of the Board
Irving P. Cohen 55 Director 1988 1997
Sumner G. Kaye 57 Director 1986 1996
Elia J. Giusti 62 Director 1990 1996
Walter Sweeting 44 Director 1996 1996
</TABLE>
The following provides the principal occupation or employment of each
Director and executive officer for the past five years and, as to each Director,
directorships in companies having securities registered pursuant to the
Securities Exchange Act of 1934, as amended.
Albert J. Finch has served as Chairman of the Board of Directors and
Chief Executive Officer of the Association since its founding in May 1985 and as
Chief Operating Officer and President since July 1992. Mr. Finch is Chairman of
the Executive Committee.
Paul B. Fay, Jr. has served as President and Chief Executive Officer
of The Fay Improvement Co., a financial consulting firm located in San
Francisco, California since 1975. He also serves as a director of Vestaur
Securities, Inc., First American Financial, Inc., and Compensation Resource
Group, Inc. Mr. Fay is also a trustee emeritus for the Naval War College
Foundation. Mr. Fay is the father-in-law of Mr. Hammonds. Mr. Fay has served as
a Director of the Association since it opened for business in May 1985 and is a
member of the Compensation, Deferred Compensation and Audit Committees.
86
<PAGE>
Norman E. Mains has served as the Chief Economist and Director of
Research for the Chicago Mercantile Exchange since October 1994. From January
1994 to October 1994, he was self-employed as an economic consultant. He
previously served as President and Chief Operating Officer of Rodman & Renshaw
Capital Group, Inc., the holding company for a securities broker/dealer firm
located in Chicago, Illinois, from February 1991 to January 1994. Mr. Mains has
served as a Director of the Association since its founding in May 1985 and is a
member of the Audit Committee.
William E. Hammonds has served as Chairman of the Board and Chief
Executive Officer of the Hammonds Ranch, Inc., an agricultural concern located
in Firebaugh, California, since June 1991. He also served as President of SCS
Mortgage Corporation, the Association's wholly-owned California subsidiary, from
September 1990 to June 1994. From May 1985 to June 1992, he was Chief Operating
Officer of the Association and from December 1988 to June 1992, its President.
Mr. Hammonds is a member of the California Bar and the son-in-law of Mr. Fay.
Since July 1992, Mr. Hammonds has served as Vice Chairman of the Board of
Directors and since May 1985, as a member of the Board of Directors. Mr.
Hammonds is a member of the Executive Committee.
Irving P. Cohen is an attorney in private practice. Since May 1995,
he has been a partner in the Washington, D.C. office of the law firm of Thompson
Hine and Flory. From June 1990 to May 1995, he was a partner in the Washington,
D.C. office of the firm of Semmes, Bowen & Semmes, Baltimore, Maryland. Mr.
Cohen joined the Association as a Director in July 1988 and is Chairman of the
Audit Committee.
Sumner G. Kaye has served as Director of the Southeast Region for the
American Committee for the Shaare-Zedek Medical Center of Jerusalem, Israel,
since September 1992. From 1974 to June, 1992, he served as executive director
of the Jewish Federation of South Broward located in Hollywood, Florida. Mr.
Kaye has served as Director of the Association since May 1986. He is Chairman of
the Compensation, Deferred Compensation and Fair Lending Committees.
Elia J. Giusti has served as President of Lee Giusti Realty, Inc., a
real estate and mortgage brokerage firm located in Fort Lauderdale, Florida
since 1982. Mr. Giusti joined the Association as a Director in July 1990 and is
a member of the Compensation, Deferred Compensation, Fair Lending and Executive
Committees.
Walter Sweeting, since 1980 has served as President and Chief
Operating Officer of Nadia Homes, Inc. the Sweeting Group, LTD., Sweet-Flick,
Inc. and Walter Sweeting & Associates, companies involved in real estate
construction and development located in Miami, Florida . Mr. Sweeting has served
as a Director of the Association since March 1996 and is a member of the Fair
Lending and Audit Committees.
Richard L. Browdy, 44, is Executive Vice President and Chief
Financial Officer of the Association. He joined the Association in 1985 as Vice
President and Controller of the Association. In 1988, he was appointed a Senior
Vice President and Chief Financial Officer, and in August 1994, Executive Vice
President.
87
<PAGE>
Thomas L. Clark, 50, is Executive Vice President of the Association.
He joined the Association in January 1994 as a Senior Vice President, and in
August 1994, was appointed Executive Vice President. Prior to his service with
the Association, from February 1993 to December 1993, he was Executive Vice
President of America's Lending Network, Inc., a mortgage banking subsidiary of
Standard Federal Savings Bank, a Federal savings bank located in Gaithersburg,
Maryland.
Wendy M. Mitchler, 42, is Senior Vice President, General Counsel and
Secretary of the Association. She joined the Association in September 1989 as a
Vice President and Corporate Counsel and was appointed Senior Vice President,
General Counsel and Secretary in July 1990.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Federal securities laws require the Association's Directors, certain
of its officers, and persons owning beneficially more than ten percent of a
registered class of the Association's equity securities, to file initial reports
of ownership and reports of changes in ownership with OTS and NASDAQ. The
Association is required to disclose in this 10-K any failure of persons, who, at
any time during the fiscal year, were Directors, officers required to report, or
more than ten-percent beneficial owners, to file timely those reports during the
year ended June 30, 1996 or prior years. To the Association's knowledge, based
solely upon information furnished to the Association by its Directors and
certain of its officers, during the fiscal year ended June 30, 1996, all of the
Association's Directors, officers required to report, and greater than 10%
beneficial owners made all such filings timely, except for the following: (1)
One report for each of the Association's officers required to report relating to
the reallocation of both common and preferred shares under the Association's
Employee Stock Bonus/401(k) Plan due to employee forfeitures and terminations
was filed late; (2) One report relating to one transaction and one report
relating to three transactions were filed late on behalf of Director Irving
Cohen; and (3) One report relating to three transactions was filed late on
behalf of Director Elia Giusti.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid for services
rendered to the Association in all capacities during the fiscal years ended June
30, 1994, 1995 and 1996 (i) to the chief executive officer of the Association,
and (ii) to the other most highly compensated executive officers whose Fiscal
1996 salary and bonuses exceeded $100,000 (collectively hereinafter referred to
as the "named executive officers").
88
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
LONG TERM
COMPENSATION ALL OTHER
YEAR SALARY BONUS OPTION AWARDS (#) COMPENSATION(1)
---- -------- ------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Albert J. Finch, 1996 $300,000 $35,000 -0- $ 50,448
Chairman of the Board 1995 300,000 -0- 10,000 106,538
Chief Executive Officer, 1994 300,000 43,100 -0- 16,631
Chief Operating Officer
and President
Richard L. Browdy, 1996 $137,500 $30,000 -0- $ 1,346
Chief Financial Officer 1995 132,500 -0- 5,000 7,773
and Exec. Vice President 1994 130,000 9,000 -0- 8,119
Thomas L. Clark, 1996 $140,000 $15,000 -0- $ 1,346
Executive Vice President 1995 137,500 -0- 10,000 -0-
1994 65,131 -0- -0- -0-
Wendy M. Mitchler, 1996 $118,000 $ 5,000 -0- $ 1,042
General Counsel, Secretary 1995 114,000 -0- -0- 6,276
and Senior Vice President 1994 110,000 4,700 -0- 6,242
Thomas A. Dean, (2) 1996 $136,897 $15,000 -0- $ -0-
Executive Vice President 1995 69,013 -0- 20,000 -0-
</TABLE>
- --------------------------
(1) For Messrs. Browdy and Clark, and Ms. Mitchler, amounts consist of
employer allocations to the executive officer under the Association's
Employee Stock Bonus/401(k) Plan. For Mr. Finch, $1,346, $8,975 and
$13,516 of the amounts for 1996, 1995 and 1994, respectively, consist
of allocations to Mr. Finch under the Association's Employee Stock
Bonus/401(k) Plan. For 1996, 1995 and 1994, $49,102, $97,563 and
$3,115, respectively, of the amounts set forth for Mr. Finch reflect
vested amounts credited by the Association to Mr. Finch's account
under his deferred compensation plan.
(2) Mr. Dean's employment as Executive Vice President with Suncoast ended
in May 1996.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning stock options
exercised by the named executive officers during the 1996 fiscal year, including
the value realized upon exercise. This table also describes the number of
unexercised options and the value of unexercised in-the-money options at the end
of the 1996 fiscal year held by the named executive officers.
89
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE OF
ACQUIRED VALUE NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY
ON EXERCISE REALIZED OPTIONS AT 6/30/96 (#) OPTIONS AT 6/30/96 ($) (1)
------- -- ------- --- ------- -- ------- --- ---
(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Albert J. Finch - - 104,000 6,000 $293,750 $ -0-
Richard L. Browdy - - 15,000 3,000 $ 41,188 $ -0-
Thomas L. Clark - - 4,000 6,000 -0- -0-
Wendy M. Mitchler - - 15,000 -0- $ 49,063 $ -0-
</TABLE>
(1) Based on a fair market value of the Common Stock which was $5.9375
per share on June 30, 1996, minus the exercise price.
COMPENSATION OF DIRECTORS
Each outside director receives a fee of $500 for each month of
service, as well as a fee of $500 for each Board meeting attended and $200 for
each Board committee meeting attended. Those directors who are salaried
employees of the Association receive no additional compensation for serving as a
director. Pursuant to the Association's Stock Option Plan, each non-employee
director serving on May 1, 1991, received an option to purchase 22,000 shares of
the Association's Common Stock at an option price of $3.00 per share but
voluntarily surrendered the option to purchase 7,000 of those shares. Any newly
elected member of the Board after May 1, 1991 will receive an option to purchase
22,000 shares as of the January 1st following his or her election to the Board
at a share price not less than the fair market value of a share of Common Stock
at the date of the grant, provided, however, that sufficient shares are
available for grant under the Option Plan.
The Bylaws of Suncoast Savings provide for a Board of Directors with
seven members serving staggered terms of three years each, resulting in the
election of approximately one-third of the Board of Directors each year. A
Director who is appointed to fill a vacancy on the Board of Directors serves
only until the next election of Directors by the shareholders.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
In January 1991, the Association entered into a Split-Dollar Life
Insurance Agreement (the "Insurance Agreement") with Mr. Finch. Under the
Insurance Agreement, as amended, the Association has purchased for Mr. Finch a
life insurance policy with a one-time premium of $690,000 and a death benefit of
$2,362,482. Mr. Finch vests 20% annually in the cash surrender value of the
policy in excess of $690,000 (the "excess policy interest"), except upon the
acquisition generally by any person of 20% of the combined voting power of the
Association's then outstanding stock, in which case he vests immediately in 100%
of the excess policy interest. On November 15, 1995, Mr. Finch vested fully in
the excess policy interest. The Insurance Agreement will terminate on the first
to occur of the following events: (i) after ten years; (ii) surrender of the
policy by Mr. Finch, which may be made only with Suncoast's consent; (iii)
termination of Mr. Finch's employment for cause or in connection with a
conservatorship or receivership by federal or state regulators; or (iv)
voluntary
90
<PAGE>
termination of Mr. Finch's employment by Mr. Finch, except as a result
of disability. In the event of such termination, the policy is to be split into
two policies--one owned by Suncoast and having a cash surrender value equal to
the amount of premium paid by Suncoast and any non-vested excess policy interest
and one owned by Mr. Finch and having a cash surrender value equal to the vested
excess policy interest. The death benefit value of each separate policy is equal
to an amount that bears the same proportional relationship to the cash surrender
value of that policy on the date of the split as the death benefit value of the
undivided policy bears to the cash surrender value of the undivided policy on
the date of the split. Upon the death of Mr. Finch, prior to the termination of
the Insurance Agreement, his beneficiary receives the entire death benefit less
$690,000, which is paid to Suncoast to reimburse the premium payment.
In September 1993 the Association entered into a nonqualified
deferred compensation plan ("DCP") with Mr. Finch, which is intended to provide
Mr. Finch with a supplemental retirement benefit. Under the DCP, Suncoast has
funded an irrevocable trust with a lump sum of $213,000 which has been invested
in corporate-owned life insurance. In November 1994, Mr. Finch vested 40% in the
account balance, and will vest an additional 20% on each November 1st thereafter
so that he will be fully vested in the DCP in November 1997 at age 59. The
account balance includes interest credited annually at a rate which is
determined by the Deferred Compensation Committee, but which generally equals
130% of the Moody's Corporate Bond rate. In the event of Mr. Finch's termination
of employment due to disability, the acquisition generally by any person of 20%
of the combined voting power of the Association's then outstanding stock, or
termination of Mr. Finch's employment without cause, Mr. Finch would vest
immediately in the DCP and receive his entire account balance within sixty (60)
days. Notwithstanding the above, the following events would trigger a
termination of Mr. Finch's account vesting and a sixty (60) day payout of his
vested account balance: (i) termination of Mr. Finch's employment for cause or
in connection with a conservatorship or receivership by federal or state
regulators; or (ii) voluntary termination of Mr. Finch's employment by Mr.
Finch, except as a result of disability.
As part of the Merger, the Suncoast Board approved an amendment to
the DCP in which Mr. Finch is the participant, to clarify the original intent of
the DCP that a participant becomes 100% vested upon a change in control. The
amendment further provides that, after a change in control or upon termination
of employment, benefits under the DCP are not paid in a lump sum but rather are
paid in accordance with the election made by the participant with respect to the
payment of retirement benefits under the DCP, which, in the case of Mr. Finch,
was for equal monthly payments over a period of 60 months. In addition, the
amendment provides that the crediting rate for earnings on the participant's
account balance for the three-year period following a change in control shall be
9% per annum, with benefits determined by applying this rate without reduction
for present value. After the three-year period following the change in control,
the amendment provides that the crediting rate shall be zero. The amendment also
provides that, prior to the change in control, Suncoast will make a contribution
to the trust maintained pursuant to the DCP to the extent necessary to fully
fund the trust to provide the benefits to which participants are entitled under
the DCP.
The Merger Agreement provides that at the Effective Time of the
merger, Albert J. Finch, Chairman of the Board, Chief Executive Officer, and
President of Suncoast, will be
91
<PAGE>
appointed as a Vice-Chairman of the Board of Directors of BankUnited and
BankUnited, FSB and as a member of the BankUnited Board for three years.
Suncoast has entered into severance and/or employment continuation
agreements (the "Change in Control Agreements") with each of Albert J. Finch,
Richard L. Browdy, and Wendy M. Mitchler, each of whom is an executive officer
of Suncoast. The benefits payable to them under the Change in Control Agreements
include a severance payment to Mr. Finch in the amount of $150,000, a payment to
Mr. Finch in an amount equal to the amount of compensation that Suncoast
otherwise would have paid to Mr. Finch for the period from the Effective Time
through the end of the month in which the Effective Time occurs (but only in the
event the Effective Time is prior to November 30, 1996) and an employment
continuation payment to Mr. Finch in the amount of $150,000 at the Effective
Time, and employment continuation payments to Mr. Browdy in the amount of
$280,000 and to Ms. Mitchler in the amount of $110,000, on the Effective Time or
the later of January 2, 1997. The severance payment to Mr. Finch is in lieu of
the payment to which he would otherwise be entitled under Suncoast's senior
officer severance policy. The employment continuation payments to Mr. Finch and
Ms. Mitchler are to be made for their remaining in the employ of Suncoast
through the Effective Time, or in the event of Suncoast's prior termination of
their employment other than for cause. The employment continuation payment to
Mr. Browdy is to be made for his remaining in the employ of Suncoast through the
Effective Time and for two subsequent three-month periods (terminable by either
upon thirty days' notice during the second three-month period), or in the event
of Suncoast's prior termination of his employment other than for cause. For
these purposes, "cause" includes any action or inaction of the executive
involving personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform his or
her duties, willful violation of any law, rule or regulation (other than traffic
violation or similar offenses), or final cease-and-desist order, or material
breach of any provision of the Change in Control Agreements. Under the Merger
Agreement, BankUnited has agreed to provide after the Effective Time the
benefits and perform the obligations of Suncoast set forth in the Change in
Control Agreements in accordance with the terms thereof.
In addition, under the Merger Agreement, BankUnited has agreed to
enter into a consulting agreement with Albert J. Finch, effective as of the
Effective Time. The terms of such consulting agreement include payment of a
monthly consultant fee at the rate of $100,000 per year for a three-year period
for consulting services of up to 600 hours per year. In addition, BankUnited
will pay all out-of-pocket expenses incurred by Mr. Finch in performance of his
consulting duties, and will, through April 1998, make the lease payments on a
leased automobile to be used by Mr. Finch. In addition, BankUnited will provide
health insurance coverage to Mr. Finch to the same extent and on the same terms
and conditions as that provided for BankUnited employees for the greater of
three years or as long as he remains a director of BankUnited, with continuation
coverage for 18 months thereafter. The consulting agreement further provides
that, as long as Mr. Finch remains willing to stand for election as a director,
whether or not he is elected, the Split Dollar Agreement between Suncoast and
Mr. Finch, dated January 28, 1991, as amended, shall remain in full force and
effect in accordance with its terms. BankUnited has the right to terminate the
consulting agreement only for cause, as defined above.
92
<PAGE>
Options granted under Suncoast Savings' stock option plan will
generally become fully and automatically exercisable, to the extent not already
exercisable, upon the acquisition by any person of 20% or more of the combined
voting power of the Association's then outstanding stock.
Under the Stock Bonus/401(k) Plan, in the event the Plan is
terminated in connection with a merger, plan participants shall become 100%
vested as to employer contribution amounts.
REPORT OF THE COMPENSATION COMMITTEE
Suncoast's Compensation Committee (the "Compensation Committee")
reviews and recommends to the full Board of Directors all aspects of the
compensation program for the executive officers of Suncoast. The Compensation
Committee is comprised of three outside, independent directors: Sumner G. Kaye
(Committee Chairman), Paul B. Fay, Jr. and Elia J. Giusti.
The goal of the compensation program is to attract, motivate, reward
and retain the management talent required to achieve corporate objectives and
increase shareholder value. Toward that end, the program attempts to provide
competitive levels of total compensation, incentive compensation that varies
with the financial performance of Suncoast, and incentive compensation that
effectively rewards individual performance.
Each year, the Compensation Committee conducts a thorough review of
its executive officer compensation program. This review includes a market survey
provided by the Wyatt Company, an independent, internationally recognized
compensation and benefits consulting firm. Suncoast's executive compensation
program is analyzed by component of pay (i.e., base salary and bonus), and in
the aggregate, to measure its competitiveness with other comparable financial
institutions. Each year, the Compensation Committee reviews the criteria used
for the selection of peer companies included in the market survey data.
The three key components of Suncoast's executive officer compensation
program are generally base salaries, incentive bonuses, and long term incentive
stock options. Each component of executive compensation is discussed below.
BASE SALARIES
The base salaries of executive management are set annually based on a
consideration of survey group data provided by the Cole Survey published by the
Wyatt company, Mortgage Bankers Association and/or other in-house surveys.
Consideration is also given to the individual achievements of each officer over
the past year, the financial performance of Suncoast and, with the exception of
the Chief Executive Officer's salary, the recommendations of the Chief Executive
Officer. The executive officers' base salaries established for the 1996 fiscal
year, on average, were substantially equivalent to the average salaries of
Suncoast's peer group contained in the survey group data.The Compensation
Committee has established a goal of providing base salaries for executive
management that
93
<PAGE>
are comparable to the average salaries of Suncoast's peer group as company
performance warrants.
INCENTIVE BONUSES
Discretionary incentive bonuses may be paid from time to time to
executive officers based on the Chief Executive Officer's recommendation (with
the exception of the Chief Executive Officer's bonus, which will be based on the
Compensation Committee's recommendation). Any such recommendations will be based
on a discretionary evaluation of the individual's contribution to the financial
performance of the Association, his or her level of responsibility, the
financial performance of Suncoast and survey group data. All incentive bonus
payments are payable at the discretion of the Compensation Committee and the
Board of Directors.
STOCK OPTION PLAN
Suncoast has included stock options as a key element in its total
compensation package. The stock option awards are intended to offer the
executive officers significant incentives to increase their efforts on behalf of
Suncoast and to focus managerial efforts on enhancing long-term shareholder
value. Each year the Compensation Committee determines the level of stock option
awards to be granted to executive officers. The awards take into account the
following factors:
/bullet/ total aggregate grants to officers and directors as a
percentage of the total outstanding common stock;
/bullet individual level of responsibility and current performance;
and
/bullet/ prior grants of awards to each individual
Stock options are granted with an exercise price equal to the market
price of Suncoast's common stock on the date of grant, generally vest over five
years and expire ten years from the date of grant. Benefits to an executive
officer from stock options will be realized only in the event of an increase in
the market value of Suncoast's Common Stock. The Stock Option Plan currently has
minimal options available for issuance; accordingly, no current grants are
contemplated by the Compensation Committee until additional options become
available either through forfeitures or an increase in the number of shares
reserved for issuance under the Stock Option Plan.
BASES FOR CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Finch's base salary and annual incentive bonus were determined
using the criteria described above which were applied to all executive officers.
Mr. Finch's base salary for Fiscal 1996 remained the same as his base salary for
the prior fiscal year and 11% less than the average salary of his peer group as
determined by a Financial Institutions Compensation
94
<PAGE>
Survey performed by Watson Wyatt Data Service for the Association's
Compensation Committee. No salary adjustment was recommended in recognition of
the need to contain administrative expenses during the transition of Suncoast
from a national mortgage banking operation to a community bank. In maintaining
Mr. Finch's base salary at its previous level, the Committee also considered Mr.
Finch's leadership role in completing the restructuring of the assets and
operations during the year. Mr. Finch received an incentive bonus during Fiscal
1996 based on a review of the contribution that he made to the financial
performance of Suncoast during such fiscal year.
The Compensation Committee
Sumner G. Kaye, Chairman
Paul B. Fay, Jr.
Elia J. Giusti
95
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return on the Association's Common Stock with the
NASDAQ Stock Market Index and the NASDAQ Financial Index for the five year
period beginning July 1, 1991 and ending June 30, 1996. This graph assumes that
$100 was invested on July 1, 1990 in the Association's Common Stock and in the
other indices, and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULTIVE TOTAL RETURN
AMONG SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA,
NASDAG STOCK MARKET INDEX AND NASDAQ FINANCIAL INDEX
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Indices as of June 30, 1991 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------
Suncoast 100 123 304 267 246 232
- ------------------------------------------------------------------------------------
NASDAQ Stock Market Index 100 120 252 253 204 261
- ------------------------------------------------------------------------------------
NASDAQ Financial Index 100 139 183 206 236 307
- ------------------------------------------------------------------------------------
</TABLE>
96
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of September 23, 1996
with respect to the ownership of shares of Common Stock by (i) such persons who
are believed by management to be beneficial owners of more than five percent of
the Association's outstanding Common Stock, which includes certain Directors,
(ii) all other Directors of the Association, (iii) all named executive officers,
and (iv) all Directors and officers as a group:
97
<PAGE>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF OWNERSHIP OF TOTAL
OUTSTANDING
BENEFICIAL OWNER COMMON STOCK (1) COMMON STOCK (2)
- -------------------------------------------------------------------------------
Albert J. Finch, Chairman 153,634 (3)(4) 6.98%
4000 Hollywood Blvd.
Hollywood, FL 33021
Suncoast Savings Employee 136,198 (5) 6.14
Stock Bonus/401(k) Plan
and Trust
4000 Hollywood Blvd.
Hollywood, FL 33021
Paul B. Fay, Jr., Director 135,257 (3)(6) 6.07
3766 Clay Street
San Francisco, CA 94118
E. J. Giusti, Director 113,198 (3)(7) 5.12
3101 N. Federal Hwy. #503
Fort Lauderdale, FL 33306
William E. Hammonds, Vice Chairman 101,604 (3) 4.63
47375 West Dakota Avenue
Firebaugh, CA 93622
Norman E. Mains, Director 44,833 (3) 2.02
Irving P. Cohen, Director 46,370 (3)(8) 2.09
Sumner G. Kaye, Director 2,110 (3) *
Richard L. Browdy, 23,483 (3) 1.07
Chief Financial Officer and
Executive Vice President
Thomas L. Clark 6,148 (3) *
Executive Vice President
Wendy M. Mitchler, 20,954 (9) *
General Counsel, Secretary
and Senior Vice President
All directors and 707,948 (10) 30.63
officers as a group
(16 persons)
- --------------------
* Less than one percent of outstanding Common Stock
(1) Includes shares of Common Stock held of record individually by such
persons as well as jointly with their spouses. In accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a
person is deemed to be the beneficial owner of a security for
purposes of the Rule if that person has or shares voting power or
98
<PAGE>
investment power with respect to such security or has the right to
acquire such ownership within 60 days. Each individual, for purposes
of the regulations under the Securities Exchange Act of 1934, as
amended, and for all other purposes, disclaims beneficial
ownership of any shares owned by any other person or entity,
including immediate family members, unless otherwise noted below, and
disclaims being a member of any "group", as that term is defined in
regulations issued under that statute.
(2) Percentage based upon (a) 2,195,930 outstanding shares of Common
Stock; plus (b) the number of shares of Common Stock considered
potentially outstanding based on (i) options currently exercisable
(within 60 days of September 23, 1996) by such individual or group
under the Association's Stock Option Plan, and (ii) the conversion of
the Association's Noncumulative Convertible Preferred Stock
("Preferred Stock") into Common Stock by such individual or group;
plus (c) the number of shares of Common Stock and the number of
shares of Common Stock convertible from Preferred Stock allocated to
such individual or group under the Association's Employee Stock
Bonus/401(k) Plan.
(3) For Messrs. Finch, Hammonds, Browdy and Clark, and Ms. Mitchler,
includes 4,000, -0-, 2,000, 4,000 and -0- shares, respectively,
subject to options under the Association's Stock Option Plan which
are presently exercisable, and 18,659, 11,745, 8,483, 148 and 5,621
shares, allocated under the Association's Employee Stock Bonus/401(k)
Plan. For Messrs. Cohen, Fay, Kaye, Mains, Giusti and Sweeting
includes 8,000, 15,000, 1,000, 15,000, 15,000 shares and -0- shares,
respectively, subject to options under the Association's Stock Option
Plan which are presently exercisable and 10,970, 18,417, 1,110,
8,333, -0- and -0- shares, respectively, which such persons or their
immediate family members have the right to acquire through the
conversion of their Preferred Stock into Common Stock.
(4) Includes 165 shares held by Mr. Finch's son, as to which shares Mr.
Finch does not disclaim beneficial ownership.
(5) Includes 21,291 shares which the Employee Stock Bonus/401(k) Plan has
the right to acquire through the conversion of Preferred Stock into
Common Stock, and 26,720 shares held in the 401(k) portion of the
Plan as to which the employee participants have sole voting and
investment power.
(6) Includes 59,640 shares of Common Stock held by a pension plan of a
company controlled by Mr. Fay and 6,666 shares which such pension
plan has the right to acquire through the conversion of Preferred
Stock into Common Stock.
(7) Includes 49,581 shares held by an individual retirement account for
the benefit of Mr. Giusti's wife.
(8) Includes 1,100 shares held by an individual retirement account for
the benefit of Mr. Cohen's wife, and 1,110 shares and 555 shares
which Mr. Cohen's wife and Mr. Cohen's wife and son, respectively,
have the right to acquire through the conversion of Preferred Stock
into Common Stock.
99
<PAGE>
(9) Includes 333 shares which Ms. Mitchler has the right to acquire
through the conversion of Preferred Stock into Common Stock.
(10) Includes 76,200 shares subject to options under the Association's
Stock Option Plan which are presently exercisable; 55,611 shares, and
7,960 shares convertible from Preferred Stock, allocated under the
Association's Employee Stock Bonus/401(k) Plan; and 39,330 shares
which officers and Directors have the right to acquire through the
conversion of Preferred Stock into Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Elia Giusti is a director and principal stockholder of the
Association and a member of the Compensation Committee. In the ordinary course
of its business, the Association has made loans secured by real estate to Mr.
Giusti and members of his immediate family on the same basis as comparable
transactions with non-affiliated persons, including interest rates and
collateral. At June 30, 1996, Mr. Giusti and members of his immediate family
were indebted to the Association in the aggregate amount of $2,096,305.
Under its former director and employee lending program, the
Association made a preferential rate $920,000 first mortgage home loan to Mr.
Fay. As part of its asset restructuring, the Association sold this loan to a
third party investor in the fiscal year ended June 30, 1991 and agreed with Mr.
Fay to pay the investor, on a monthly basis, an amount equal to the interest
differential between the preferential rate paid by Mr. Fay (currently at 6 7/8%)
and the stated note rate, which was a market rate at the time the loan was
originated. The amount paid in the fiscal year ended June 30, 1996 by the
Association to the third party investor for Mr. Fay was $13,326.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Irving P. Cohen, a director of the Association, is a partner in the
law firm of Thompson Hine & Flory P.L.L. Thompson Hine & Flory has performed
legal services for the Association during the fiscal year ended June 30, 1996
for which the law firm received $975.
Under its former director and employee lending program, the
Association made a $791,200 first mortgage home loan at a preferential rate to
Norman E. Mains, a Director of the Association. As part of its asset
restructuring, the Association sold this loan to a third party investor in the
fiscal year ended June 30, 1991, and agreed with Mr. Mains to pay the investor,
on a monthly basis, an amount equal to the interest differential between the
preferential rate paid by Mr. Mains (currently at 6-7/8%) and the stated note
rate, which was a market rate at the time the loan was originated. The amount
paid in the fiscal year ended June 30, 1996 by Suncoast to a third party
investor for Mr. Mains was $10,614.
For information relating to certain transactions with members of the
Compensation Committee, see "Compensation Committee Interlocks and Insider
Participation".
100
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements, including notes in Item 8:
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Supplementary Data
2. Financial Statement Schedules
None
3. Exhibits:
2.1 Federal Home Loan Bank of Atlanta (the "Bank") Agreement
for Advances and Security Agreement with Blanket Floating
Lien between Suncoast and the Bank dated January 18, 1996
3.1 Federal Stock Charter (1)
3.1.1 First Supplemental Section to Section 5.B of Federal Stock
Charter (7)
3.2.1 By-laws, as amended
3.2.2 Amendment to By-laws dated February 5, 1996
4.1 Specimen Preferred Stock Certificate (6)
4.2 Suncoast Underwriters' Warrant Agreement, dated July 9,
1993, between Josephthal Lyon & Ross Incorporated,
Southeast Research Partners, Inc., Rodman & Renshaw Inc.,
and Suncoast (7)
10.2 Lease between Hollywood Corporate Circle Associates and
Suncoast dated June 19, 1989 (2)
10.3 Fourth Addendum to Lease between Hollywood Corporate
Circle Associates and Suncoast dated September 20, 1994
(8)
10.3.1 Fifth Addendum to Lease between Hollywood Corporate Circle
Associates and Suncoast dated December 5, 1994 (9)
10.3.2 Sixth Amendment to Lease between Hollywood Corporate
Circle Associates and Suncoast dated April 1, 1996
10.4 Electronic Data Processing Agreement for Remote Processing
Services between Computer Power, Inc. and SCG Mortgage
Corporation dated December 12, 1989 (4)
10.4.1 Microcomputer Software Maintenance and Support Agreement
between Computer Power, Inc. and SCG Mortgage Corporation
dated December 12, 1989 (4)
101
<PAGE>
10.4.2 Microcomputer Software License Agreement between Computer
Power, Inc. and Mortgage Corporation dated December 12,
1989 (4)
10.4.3 Master Agreement for Hardware Purchase between Computer
Power, Inc. and SCG Mortgage Corporation dated December
12, 1989 (4)
10.5 Master Agreement between Data-Link Systems, L.L.C. d/b/a
Fiserv Mortgage Products Division and Suncoast, dated June
17, 1996
10.5.1 Master Software System License Agreement, between
Servantis Systems Inc. and Suncoast, dated June 26, 1996
10.6 Deferred Compensation Plan Agreement between Suncoast and
Albert J. Finch dated September 30, 1993 (8)
10.7 Trust Agreement between Suncoast and Imperial Trust
Company dated September 30, 1993 for Albert J. Finch
Deferred Compensation Plan (8)
10.7.1 Life Insurance Policy on Albert J. Finch issued by
Connecticut Mutual Life Insurance Company dated July 1,
1994 (9)
10.7.2 Amendment to Deferred Compensation Plan Agreement for
Albert J. Finch dated July 15, 1996
10.8 Restated Stock Option Plan (5)
10.8.1 Amendment Number One to Complete Restatement of Stock
Option Plan dated June 4, 1993 (7)
10.9 Employee Stock Bonus/401(k) Plan (8)
10.9.1 First Amendment to Employee Stock Bonus/401(k) Plan dated
December 20, 1994 (9)
10.10 Split Dollar Insurance Plan between Suncoast and Albert J.
Finch dated January 8, 1991 (5)
10.10.1 Life Insurance Policy on Albert J. Finch issued by General
American Life Insurance Company on November 15, 1990 (5)
10.10.2 Amendment to Split Dollar Insurance Plan between Suncoast
and Albert J. Finch dated January 28, 1992 (3)
10.11 Supplemental Health Benefit Plan for Senior Officers (5)
10.12 Residential Loan Servicing Agreement between Federal
Deposit Insurance Corporation ("FDIC") and Suncoast
effective February 1, 1995, as amended (9)
10.13 Employment Continuation and Severance Agreement between
Suncoast and Albert J. Finch dated August 28, 1996
10.13.1 Employment Continuation Agreement between Suncoast and
Richard L. Browdy dated August 28, 1996
10.13.2 Employment Continuation Agreement between Suncoast and
Wendy Mitchler dated August 28, 1996
10.13.3 Amendment to Employment Continuation and Severance
Agreement between Suncoast and Albert J. Finch dated
September 26, 1996
10.14 Residential Mortgage Loan Servicing Agreement between
Federal Deposit Insurance Corporation and Suncoast dated
January 30, 1995 (9)
10.14.1 Modification Number One of Residential Mortgage Loan
Servicing Agreement between FDIC and Suncoast dated March
14, 1995 (9)
10.14.2 Modification Number Two of Residential Mortgage Loan
Servicing Agreement between FDIC and Suncoast dated June
15, 1995 (9)
10.14.3 Modification Number Three of Residential Mortgage Loan
Servicing Agreement between FDIC and Suncoast dated June
27, 1995 (9)
102
<PAGE>
10.15 Agreement and Plan of Merger, as Amended, between
BankUnited Financial Corporation and Suncoast Savings and
Loan Association, FSA, dated July 15, 1996
11.1 Computation of Shares Used for Earnings Per Share
Calculation
21.1 Statement of Subsidiaries of the Association
- ------------------------------------------
(1) Previously filed in the Exhibits to Pre-Effective Form OC
(Docket Number 8147) filed May 20, 1993.
(2) Previously filed in the Exhibits to Form 10-K for the
Fiscal Year ended June 30, 1989 (Docket Number 8147) on
September 28, 1989.
(3) Previously filed in the Exhibits to the Form 10-K for the
Fiscal Year ended June 1992 (Docket Number 8147) on
September 28, 1992.
(4) Previously filed in the Exhibits to Form 10-K for the
Fiscal Year ended June 30, 1989 (Docket Number 8147) on
October 30, 1990.
(5) Previously filed in the Exhibits to the Form 10-K for the
Fiscal Year ended June 30, 1991 (Docket Number 8147) on
October 4, 1991.
(6) Previously filed in the Exhibits to Pre-Effective
Amendment No. 1 (Docket Number 8147) to Form OC on June
22, 1993.
(7) Previously filed in the Exhibits to the Form 10-K for the
Fiscal Year Ended June 30, 1993 (Docket Number 8147) on
September 28, 1993.
(8) Previously filed in the Exhibits to the Form 10-K for the
Fiscal Year Ended June 30, 1994 (Docket Number 8147) on
September 28, 1994.
(9) Previously filed in the Exhibits to the Form 10-K for the
Fiscal Year Ended June 30, 1995 (Docket Number 8147) on
September 28, 1995.
(b) The Association filed one report on Form 8-K during the quarter ended
September 30, 1996. The Form 8-K was filed on July 19, 1996 to report
the execution by Suncoast and BankUnited of a Merger Agreement dated
July 15, 1996.
103
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Suncoast Savings and Loan Association, FSA
By: S/ ALBERT J. FINCH Date: SEPTEMBER 26, 1996
------------------------------------ ------------------
Albert J. Finch
President
Chairman of the Board of Directors
and Chief Executive Officer
By: S/ RICHARD L. BROWDY Date: SEPTEMBER 26, 1996
------------------------------------ ------------------
Richard L. Browdy
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer
104
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Suncoast Savings and Loan Association, FSA
By: S/ ALBERT J. FINCH Date: SEPTEMBER 26, 1996
------------------------------------- ------------------
Albert J. Finch
President
Chairman of the Board of Directors
and Chief Executive Officer
By: S/ ELIA J. GIUSTI Date: SEPTEMBER 26, 1996
------------------------------------- ------------------
Elia J. Giusti
Director
By: S/ SUMNER G. KAYE Date: SEPTEMBER 26, 1996
------------------------------------- ------------------
Sumner G. Kaye
Director
105
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Suncoast Savings and Loan Association, FSA
By: S/ WILLIAM E. HAMMONDS Date: SEPTEMBER 26, 1996
------------------------------------- ------------------
William E. Hammonds
Vice Chairman
106
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Suncoast Savings and Loan Association, FSA
By: S/ IRVING P. COHEN Date: SEPTEMBER 26, 1996
------------------------------------- ------------------
Irving P. Cohen
Director
107
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Suncoast Savings and Loan Association, FSA
By: S/ PAUL B. FAY, JR. Date: SEPTEMBER 26, 1996
--------------------------------- ------------------
Paul B. Fay, Jr.
Director
108
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Suncoast Savings and Loan Association, FSA
By: S/ NORMAN E. MAINS Date: SEPTEMBER 26, 1996
---------------------------------- ------------------
Norman E. Mains
Director
109
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Suncoast Savings and Loan Association, FSA
By: S/ WALTER SWEETING Date: SEPTEMBER 26, 1996
---------------------------------- ------------------
Walter Sweeting
Director
110
<PAGE>
APPENDIX D
OFFICE OF THRIFT SUPERVISION
WASHINGTON, D.C. 20552
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended: September 30, 1996 Docket Number 8147
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
------------------------------------------
(Exact name of registrant as specified in charter)
Florida 59-2383531
------------ -------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Hollywood Boulevard, Hollywood, Florida 33021
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 981-6400
Former name, former address and former fiscal year, if changed since last
report:
(Not Applicable}
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No[ ]
On November 1, 1996, 2,197,930 shares of common stock of the Registrant were
outstanding.
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
FORM 10-Q
INDEX
DESCRIPTION
PAGE
Part I. FINANCIAL INFORMATION ----
Item 1. Financial Statements:
1. Consolidated Statements of Financial
Condition as of September 30, 1996 (Unaudited)
and June 30, 1996 3
2. Consolidated Statements of Operations [Unaudited),
Three months ended September 30,1996
and 1995 4
3. Consolidated Statements of Cash Flow (Unaudited),
Three months ended September 30,1996 and 1995 5
4. Notes to Unaudited Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-20
Part II. OTHER INFORMATION 21
SIGNATURE PAGE 22
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPT. 30,
1996 JUNE 30,
(UNAUDITED) 1996
---------- ---------
ASSETS (In thousands)
<S> <C> <C>
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 4,588 $ 1,260
Interest-earning deposits 1,430 622
---------- ---------
Total cash and cash equivalents 6,018 1,882
---------- ---------
Repurchase agreements 15,000
Federal Home Loan Bank Stock 3,075 3,875
Loans receivable:
In portfolio 330,781 320,828
Held for sale, sold under commitments 4,208 6,730
---------- ---------
Total loans receivable, net 334,989 327,558
---------- ---------
Mortgage-backed securities available for sale 18,196 18,391
Loan servicing assets:
Purchased mortgage servicing rights 9,396 9,525
Originated mortgage servicing rights 747 834
Premiums on the sale of loans 1,311 1,359
---------- ---------
Total loan servicing assets 11,454 11,718
---------- ---------
Accrued interest and dividends receivable 3,065 3,042
Real estate owned, net 245 261
Amounts due from purchasers of loans and loan servicing rights 128 19,883
Office properties and equipment 6,787 6,640
Other assets 10,446 9,319
---------- ---------
$ 409,403 $ 402,569
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 298,461 $ 301,201
Advances by borrowers for taxes and insurance 4,063 3,138
Advances from Federal Home Loan Bank and other borrowings 73,310 68,500
Deferred income taxes 0 107
Principal and interest payable on loans serviced for others 105 274
Other liabilities 8,794 3,811
---------- ---------
Total liabilities 384,733 377,031
---------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $5.00 par value; 1,000,000 shares authorized;
920,000 shares issued and outstanding 4,600 4,600
Common stock - $1.10 par value; 5,000,000 shares authorized; 2,197,930 shares
and 1,996,930 shares, respectively, issued and outstanding 2,418 2,197
Additional paid-in capital 17,657 17,295
Retained earnings 301 1,642
---------- ---------
24,976 25,734
Unrealized gain (loss) on mortgage-backed securities available for sale, net of
deferred income taxes (306) (196)
---------- ---------
Total stockholders' equity 24,670 25,538
---------- ---------
$ 409,403 $ 402,569
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------- --------
(In thousands, except per share data)
<S> <C> <C>
Interest income:
Loans $ 6,600 $ 3,138
Mortgage-backed securities 379 2,738
Repurchase agreements and investments 256 561
Premiums on the sale of loans 30 34
Other 48 299
-------- --------
7,313 6,770
-------- --------
Interest expense:
Deposits 3,442 3,981
Short-term borrowings 972 614
Long-term borrowings 25
-------- --------
4,439 4,595
-------- --------
Net interest income before provision for loan losses 2,874 2,175
Provision for loan losses 12
-------- --------
Net interest income after provision for loan losses 2,862 2,175
-------- --------
Other income (expense):
Loan servicing fees 1,412 1,536
Amortization of loan servicing assets (466) (300)
-------- --------
Loan servicing income 946 1,236
Gains on the sale of loans and loan servicing assets, net 222 14
Gains on the sale of mortgage-backed securities, net 1,213
Other 226 277
-------- --------
1,394 2,740
-------- --------
Non-interest expenses:
Employee compensation and benefits 1,715 1,627
Occupancy and equipment 739 731
Provision for losses on real estate 16
Other 1,161 1,437
Assessment to recapitalize Savings Association Insurance Fund 2,317
-------- --------
5,948 3,795
-------- --------
Income before taxes (1,692) 1,120
(Benefit from) provision for income taxes (626) 414
-------- --------
Net (loss) income $ (1,066) $ 706
======== ========
Net (loss) income (1,066) 706
Preferred stock dividends 276 276
-------- --------
(Loss) earnings available to common stockholders $(1,342) $ 430
======== ========
(Loss) earnings per common share:
Primary $ (0.62) $ 0.20
Fully diluted $ (0.62) $ 0.19
Weighted-average common and common equivalent shares:
Primary 2,160 2,140
Fully diluted 3,710 3,680
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNUADITED)
Three months ended
September 30
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands)
<S> <C> <C>
Net (loss) income $ (1,065) $ 706
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization of office properties and equipment 296 283
(Benefit from) provision for income taxes (626) 414
Accretion of deferred loan fees (61) (45)
Amortization of purchased and originated mortgage servicing rights 379 255
Amortization of premiums on the sale of loans 48 45
Amortization of discounts and premiums, net 67 (136)
Net decrease (increase) in loans receivable held for sale 2,532 (2,304)
Provision for loan losses 12
Provision for losses on real estate 16
Net decrease in amounts due from purchasers of loans and loan servicing rights 19,755 254
Increase in amounts due for purchases of mortgage securities 48,634
Gains on the sale of loans and loan servicing assets, net (222) (14)
Gains on the sale of mortgage-backed securities (1,212)
Increase in accrued interest and dividends receivable (23) (496)
Increase in other assets ( 1,135) (231)
Increase (decrease) in other liabilities 5,398 (3,412)
Other 8 8
--------- ---------
Net cash provided by (used in) operating activities 25,379 42,749
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans receivable in portfolio (9,909) (34,379)
Principal repayments of mortgage-backed securities 20 4,361
Purchase of mortgage-backed securities (149,307)
Proceeds from sales of mortgage-backed securities 117,158
Purchase of repurchase agreements (15,000) (1,870,000)
Proceeds from maturities of repurchase agreements 1,935,000
Capital (expenditures) dispositions, net (443) (115)
(Decrease) increase in originated mortgage servicing rights 45 (68)
Payments for purchased mortgage servicing rights (208)
Proceeds from sales of purchased servicing rights and premiums on the sale of loans 150
Proceeds from sale of real estate owned 285
Purchase of Federal Home Loan Bank stock 2,900
Proceeds from redemption of Federal Home Loan Bank stock (2,100)
--------- ---------
Net cash provided by (used in) investing activities (24,545) 2,935
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (2,740) (21,529)
Increase in advances by borrowers for taxes and insurance 925 318
Advances from Federal Home Loan Bank 108,500
Repayments of advances and other borrowings from Federal Home Loan Bank, net (118,000)
Proceeds from (repayments of) other borrowings, NET 14,310 (63,623)
Proceeds from issuance of common stock 583 14
Cash dividends paid on preferred stock (276) (276)
--------- ---------
Net cash (used in) provided by financing activities 3,302 (85,096)
--------- ---------
Net (decrease) increase in cash and cash equivalents 4,136 (39,412)
Cash and cash equivalents at beginning of period 1,882 43,770
--------- ---------
Cash and cash equivalents at end of period $ 6,018 $ 4,358
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 4,293 $ 4,867
Cash paid for income taxes, net of refunds received -0- 1
Supplemental non-cash activities:
REO obtained through foreclosure $ -0- $ -0-
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
( 1 ) ACCOUNTING PRINCIPLES
The unaudited interim consolidated financial statements of Suncoast
Savings and Loan Association, FSA ("Suncoast") presented herein should be read
in conjunction with the audited consolidated financial statements of Suncoast
for the fiscal year ended June 30, 1996 and the footnotes to such statements.
The Consolidated Statement of Financial Condition as of September
30, 1996 and the Consolidated Statements of Operations for the three months
ended September 30, 1996 and 1995 and the Consolidated Statements of Cash Flows
for the three months ended September 30, 1996 and 1995 are unaudited, but in the
opinion of management reflect all adjustments (none of which was other than a
normal recurring accrual) which are necessary to a fair statement of the results
for the interim periods presented. Interim results are not necessarily
indicative of the results to be expected for the entire year.
Certain amounts reported in prior periods' financial statements have
been reclassified to conform to classifications used for the period ended
September 30, 1996.
(2) EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per share is computed on the basis of the weighted
average number of common shares outstanding during the period plus common stock
equivalents applicable to stock options. When dilutive, fully diluted earnings
(loss) per common share is derived as follows: Earnings (loss) available to
common shareholders are increased by preferred dividends paid eliminated upon
conversion of the preferred shares to common shares. This remainder is divided
by the sum of the average number of common shares outstanding for the period
plus the added common shares that would have been outstanding if: (a) all of the
outstanding preferred shares had been converted into common shares at the
beginning of the period and (b) all stock options granted that have economic
value were exercised at the beginning of the period, and the related funds that
would have been received by Suncoast upon such exercise were used to repurchase
outstanding common shares.
(3) ASSESSMENT TO RECAPITALIZE THE SAVINGS ASSOCIATION INSURANCE FUND ("SAIF")
On September 30, 1996, Congressional legislation was enacted to
recapitalize the SAIF and to merge the fund into the Bank Insurance Fund
("BIF"). Both SAIF and BIF are administered by the Federal Deposit Insurance
Corporation ("FDIC"). As a result of the legislation, Suncoast
6
<PAGE>
has been assessed $2,317,000 which has been accrued as an expense at September
30, 1996 and will be paid on November 27, 1996.
(4) PENDING MERGER
On July 15, 1996, Suncoast entered into a definitive agreement to be
acquired by BankUnited Financiai Corporation ("BankUnited"). Under terms of the
agreement one share of BankUnited Class A Common Stock will be issued for each
share of Suncoast Common Stock. Each share of Suncoast Preferred Stock will be
exchanged for a new issue of BankUnited Preferred Stock having substantially
similar terms as the Suncoast Preferred Stock. The transaction has now been
approved by stockholders of both Suncoast and BankUnited and has received all
regulatory approvals. The merger is expected to be effective on November 15,
1996.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Suncoast Savings and Loan Association, FSA ("Suncoast") is engaged
primarily in community banking and loan servicing activities. Suncoast provides
community banking services primarily in Dade, Broward and Palm Beach counties in
Florida. Community banking consists primarily of attracting checking and savings
deposits from the public in a localized market area and investing such deposits,
together with borrowings and other funds, in various types of loans and other
permitted investments. In connection with its community banking activities,
Suncoast originates and purchases for its own portfolio both residential and
commercial real estate loans.
Suncoast's mortgage loan servicing activities include processing
loan payments, remitting principal and interest to investors, administering
escrow funds and providing other services in the administration of mortgage
loans. Suncoast is an approved seller/servicer for the Government National
Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") and Fannie Mae ("FNMA"). Suncoast also services loans under contracts
with the Federal Deposit Insurance Corporation ("FDIC") and other financial
institutions.
Suncoast operates six savings branches in Broward and Palm Beach
County, Florida. It is regulated and examined by the Office of Thrift
Supervision ("OTS") and the FDIC, and its deposit accounts are insured up to the
applicable limits by the FDIC.
Suncoast's fiscal years ended on June 30, 1997 and 1996 are referred
to as "Fiscal 1997" and "Fiscal 1996" in this discussion.
PROPOSED MERGER
On July 15, 1996, Suncoast and BankUnited Financiai Corporation, a
Florida corporation ("BankUnited"), entered into an Agreement and Plan of Merger
(the "Agreement and Plan of Merger"), providing for the merger (the "Merger") of
Suncoast into BankUnited, FSB, a wholly-owned subsidiary of BankUnited. Pursuant
to the terms of the Agreement and Plan of Merger, BankUnited, FSB will be the
surviving corporation of the Merger.
Upon completion of the Merger, (i) each issued and outstanding share
of Common Stock, par value $1.10 per share, of Suncoast (the "Suncoast Common
Stock") will be converted into the RIGHT TO RECEIVE one share of Series I Class
A BankUnited Common Stock ("BankUnited Common Stock") and (ii) each issued and
outstanding share of Series A NonCumulative Convertible Preferred Stock of
Suncoast (the "Suncoast Preferred Stock") will be converted into the right to
receive one share of a new series of preferred stock of BankUnited to be
authorized by the Board of Directors of BankUnited and to have rights and
preferences substantially similar to those of the Suncoast Preferred Stock ("New
BankUnited Preferred Stock").
The Merger has been approved by the Office of Thrift Supervision
("OTS"), and by the stockholders of both Suncoast and BankUnited and is
scheduled to occur on November 15, 1996. Completion of the Merger is subject to
certain conditions, including: (a) the absence of
8
<PAGE>
any event, occurrence or circumstance that would constitute a Material Adverse
Effect (as defined in the Agreement and Plan of Merger) on either Suncoast or
BankUnited and (b) other conditions to closing customary in a transaction of
this type.
FACTORS AFFECTING EARNINGS
Suncoast's operating strategy is that of a community bank and
focuses on enhancing net interest income and servicing revenues. As a result of
this strategy, Suncoast's net interest income has grown in relation to other
income sources in the three months ended September 30, 1996 as compared to the
three months ended September 30, 1996. Starting in Fiscal 1995, Suncoast has
gradually replaced assets invested in its mortgage banking operations, primarily
its inventory of loans available for sale, with investments in mortgage-backed
securities, repurchase agreements, and loans originated or purchased for
portfolio. Suncoast's strategy restructured its assets initially into
interest-bearing assets with minimal credit risk until it could reinvest funds
previously used to finance its mortgage banking activities into portfolio loans.
In addition, this strategy allowed Suncoast to shift its assets to those with
lower risk weights under the risk based capital regulations enabling Suncoast to
increase both its assets and deposits and, accordingly, its net interest income,
while remaining well capitalized under such regulations.
During the first quarter of Fiscal 1996, Suncoast sold portions of
its mortgage-backed securities portfolio due to favorable market conditions and
its ability to apply the proceeds to the purchase and origination of high
quality residential and commercial real estate loans for investment and recorded
gains from these sales of $1.2 million. At September 30, 1996, $18.2 million of
mortgage-backed securities remained available for sale. In completing this
restructuring, Suncoast not only reduced its interest rate risk, but increased
its net interest income by shifting from longer term fixed rate mortgage-backed
securities to higher yielding adjustable rate loans receivable.
The following table sets forth for the periods indicated the amounts
and percentages of Suncoast's total income represented by each source (dollars
in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1996 1995
-----------------------------------------
AMOUNT % Amount %
------- ------ ------- ------
<S> <C> <C> <C> <C>
Net interest income before provision for loan losses $ 2,874 67.3% $ 2,175 44.3%
Loan servicing income 946 22.2 1,236 25.2
Gains on the sale of loans and loan servicing assets, net 222 5.2 14 .3
Gains on the sale of mortgage-backed securities -- -- 1,213 24.7
Other 226 5.3 277 5.5
------- ------ ------- ------
Total $ 4,268 100.0% $ 4,915 100.0%
======= ====== ======= ======
</TABLE>
Net interest income is the difference between interest income
received on Suncoast's interest-earning assets (principally loans,
investments, mortgage-backed securities and
9
<PAGE>
premiums on the sales of loans) and interest expense paid on its
interest-bearing liabilities (principally deposits, Federal Home Loan Bank
("FHLB") advances, and other borrowings). Suncoast also periodically realizes
other income from its other mortgage-related and real estate activities, which
is included in the "Other" category in the table above.
RECAPITALIZATION OF THE SAVINGS ASSOCIATION INSURANCE FUND ("SAIF").
Suncoast pays deposit insurance premiums to the SAIF. SAIF and its counterpart
for commercial banks, the Bank Insurance Fund ("81F"), were previously assessed
deposit insurance premiums at the same rate. However, in 1995, the FDIC twice
reduced deposit insurance premiums for most BIF-insured banks so the minimum
annual assessment applicable to BIF deposits effective January 1, 1996 is $2,000
as compared to a 23 basis point assessment rate for SAIF deposits. This
disparity between BIF and SAIF in assessment rates placed Suncoast and most
thrifts at a competitive disadvantage to institutions whose deposits are
exclusively or primarily BlF-insured (such as most commercial banks).
On September 30, 1996, Congress enacted legislation to recapitalize
the SAIF and bridge the premium disparity between BIF and SAIF insured
institutions. This legislation authorized the FDIC to assess all SAIF member
institutions, including Suncoast, a one-time fee of 65.7 basis points on the
amount of SAIF deposits held by the member institutions at March 31, 1995. This
assessment to Suncoast is approximately $2.3 million and is to be paid on
November 27, 1996. Suncoast recorded the assessment on September 30, 1996, which
significantly reduced earnings for the first quarter of Fiscal 1997.
ASSET/LIABILITY MANAGEMENT. The assets and liabilities of Suncoast
are managed to provide an optimum and stable net interest margin, after-tax
return on assets and return on equity capital. Management, in implementing
Suncoast's asset/liability management policy, attempts to minimize the interest
rate risk, credit risk, solvency risk and liquidity risk to Suncoast. Suncoast's
Asset/Liability Committee, which meets on a weekly basis and conducts scheduled
reviews of various indicators and other risk criteria, has the responsibility to
monitor interest rate risk, devise strategies to adjust interest rate risk and
enhance capital and operational effectiveness, monitor and set targets for loan
originations, purchases and sales and securities purchases, and establish
pricing on all deposit products. Suncoast's asset and liability strategy seeks
to achieve an optimum return on assets while assuming acceptable amounts of
credit and interest rate risk with the goal of reasonable returns on investments
relative to the risks assumed. Management balances these goals by minimizing
credit risk through strict underwriting standards and policies while accepting
moderate interest rate risk. While Suncoast accepts moderate levels of interest
rate risk in its loan and investment portfolio, it generally seeks to limit
interest rate risk by maintaining adjustable-rate assets and through the ongoing
sale into the secondary mortgage market of all loans originated or purchased for
sale.
The Suncoast Board of Directors has established an interest rate
risk policy to monitor the effect of interest rate risk in accordance with rules
issued by the OTS. Management has implemented this policy with quarterly
measurements. Management considers these measurements in its strategies to
enhance capital and operational effectiveness.
10
<PAGE>
GAP TABLE. The interest rate sensitivity of Suncoast can also be
measured by matching its assets and liabilities, analyzing the extent to which
such assets and liabilities are interest rate sensitive and by monitoring the
resulting "gap" position. An asset or liability is rate sensitive within a
specific time period if it will mature or reprice within that period. The
interest sensitivity gap is defined as the difference between the amount of
interest-earning assets anticipated, based upon certain assumptions, to mature
or reprice within a specific time period and the amount of interest-bearing
liabilities anticipated to mature within that time period. A gap is considered
positive when the amount of interest rate sensitive assets maturing within a
specific time frame exceeds the amount of interest rate sensitive liabilities
maturing within that same time frame.. Accordingly, in a rising interest rate
environment, an institution with a positive gap would generally be expected,
absent the effects of other factors, to experience a greater increase in the
yield of its assets relative to the cost of its liabilities. Conversely, the
cost of funds for an institution with a positive gap would generally be expected
to decline less quickly than the yield on its assets in a falling interest rate
environment. Changes in interest rates generally have the opposite effect on an
institution with a "negative" gap. During a rising interest rate environment,
Suncoast's negative gap position would generally be expected, absent the effect
of other factors, to result in decreased net interest income as the increase in
the cost of its liabilities would exceed the increase in the yield on its
assets. As of September 30, 1996, Suncoast had a negative cumulative one-year
gap of $17.5 million or 4.28% of total assets.
The following table sets forth the amounts of interest-earning
assets and interest-bearing liabilities outstanding at September 30, 1996, which
are anticipated, based upon certain assumptions described in the following
paragraph, to reprice or mature in each of the future time periods shown.
Certain weaknesses are inherent in this method of analysis. As an example,
certain assets and liabilities may have similar maturity and repricing periods,
but may react in different degrees to changes in market interest rates.
Prepayment and early withdrawal penalties would likely deviate significantly
from those assumed in calculating the table in the event of a change in interest
rates.
<TABLE>
<CAPTION>
(Dollars in thousands)
OVER OVER OVER OVER
ONE THREE FIVE SEVEN
WITHIN YEAR TO YEARS TO YEARS TO YEARS TO
ONE THREE FIVE SEVEN THIRTY
YEAR(1) YEARS YEARS YEARS YEARS TOTAL
--------- --------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets $ 261,465 $ 86,646 $ 10,716 $ 4,911 $ 9,790 $373,528
Interest-bearing liabilities 279,002 50,648 15,582 7,625 18,914 $371,771
--------- --------- -------- ------- ------- --------
Excess (deficit) of interesting assets
over interest-bearing liabilities . $ (17,537) $ 35,998 $ (4,866) $(2,714) $(9,124) $ 1,757
========= ========= ======== ======= ======= ========
</TABLE>
(1 ) Loans held for sale are included in this category because they are
held by Suncoast for less than six months. The maturity dates of the
loans range from seven to 30 years.
11
<PAGE>
On September 30, 1996 and June 30, 1996, approximately 63.9% and
68.9%, respectively, of Suncoast's total loans receivable were loans which
mature or reprice within one year.
Within the preceding table, interest-earning assets and
interest-bearing liabilities with no contractual maturities are included in the
"within one year" category. Premiums on the sale of loans are included as an
interest earning asset in the gap table, but do not have a stated contractual
yield. Investments in purchased mortgage servicing rights ("PMSRs") and
originated mortgage servicing rights ("OMSRs") which yield servicing fee income,
and escrow and custodial accounts deposited with Suncoast, are not considered
interest sensitive.
In preparing the preceding table, certain assumptions have been made
with regard to prepayments on first mortgage loans and mortgage-backed
securities. The prepayment assumptions used were obtained from publicly
available mortgage prepayment rate tables. These sources provide assumptions
which correlate to recent actual repricings experienced in the marketplace.
These assumptions are that fixed-rate, single-family residential loans will
reprice according to their scheduled amortization and that Suncoast will
experience average annual prepayments of approximately the following percentages
on fixed-rate loans according to the original term to maturity as follows:
30-year maturity, 8%; 1 5-year maturity, 10%; and seven and five year balloon,
15%. The assumptions provided by the mortgage prepayment rate tables should not
be regarded as indicative of the actual repricings that may be experienced by
Suncoast. Decay rates are assumed to indicate the annual rate at which an
interest-bearing liability will be withdrawn in favor of an account with a more
favorable interest rate. Decay rates have been assumed by Suncoast for NOW
accounts, passbook and money market deposits and are the most recent national
assumptions published by the OTS. The assumptions used at the dates indicated,
although standardized, may not be indicative of actual withdrawals and repricing
experienced by Suncoast. Annual percentage decay rate assumptions used for the
table are as follows:
MORE
WITHIN 1-3 3-5 5-7 THAN
1 YEAR YEARS YEARS YEARS 7 YEARS
------ ----- ----- ----- -------
Passbook 17% 17% 16% 16% 14%
NOW 37 32 17 17 17
Money market 40 40 40 40 40
All other assets and liabilities have been repriced based on the
earlier of repricing or contractual maturity.
YIELDS EARNED AND RATES PAID. The following table provides
information relating to the categories of Suncoast's interest-earning assets and
interest-bearing liabilities for the periods indicated. All yield and rate
information is calculated on an annualized basis. Yield and rate information for
a period is average information for the period calculated by dividing the income
or expense item for the period by the average balances during the period of the
appropriate balance sheet item. Net interest margin is net interest income
divided by average interest-earning assets. Non-accrual loans are included in
asset balances for the appropriate periods,
12
<PAGE>
whereas recognition of interest on such loans is discontinued and any
remaining accrued interest receivable is reversed in conformity with federal
regulations. The yields and net interest margins appearing in the following
table have been calculated on a pre-tax basis.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------
1996 1995
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
----------- --------- ------- -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-earning deposits 3,460 $ 48 5.51$ $ 19,677 $ 299 6.03%
Repurchase agreements and investments 17,380 256 5.85% 37,662 561 5.91%
---------- -------- --------- --------
Sub-total 20,840 304 5.79% 57,339 860 5.95%
---------- -------- --------- --------
Loans receivable 328,108 6,600 8.05% 146,249 3,138 8.58%
Mortgage-backed securities 23,034 379 6.58$ 163,642 2,738 6.69%
Other interest-earning assets 1,329 30 9.00% 1,513 34 8.99%
---------- -------- --------- --------
Total interest-earning assets $ 373,311 $ 7,313 7.83% 368,743 $ 6,770 7.34%
========== ======== ========= ========
Interest-bearing liabilities:
Deposits $295,109 $ 3,442 4.63% $ 325,134 $ 3,981 4.86%
---------- -------- --------- --------
Advances from F1HLB 61,685 849 5.39% 25,000 399 6.25%
Other borrowings 10,716 148 5.42% 14,085 215 5.97%
---------- -------- --------- --------
Sub-total 72,401 997 5.39% 39,085 614 6.15%
---------- -------- --------- --------
Total interest-bearing liabilities $ 367,510 $ 4,439 4.79% $ 364,219 $ 4,595 5.01%
========== ======== ========= ========
Net interest income/interest
rate spread $ 2,874 3.04% $ 2,175 2.33%
======== ========
Net interest-earning assets/net
interest-margin $ 373,311 $ 2,874 3.13% $ 368,743 $ 2,175 2.36%
========== ======== ========= ========
</TABLE>
The increase in the interest rate spread for the three months ended
September 30, 1996 as compared to the three months ended September 30, 1995 is
primarily attributable to a change in Suncoast's asset mix as funds previously
invested in mortgage-backed securities were reinvested in higher yielding
primary adjustable rate residential and commercial mortgages. Suncoast's yields
and costs, however, have generally followed the financial markets.
RATE/VOLUME ANALYSIS. The following table describes the extent to
which changes in interest rates and changes in volume of interest-related assets
and liabilities have affected Suncoast's interest income and expense during the
three month periods ended September 30, 1996, 1995 and 1994. For each category
of interest-earning asset and interest-bearing liability, information is
provided on changes attributable to changes in volume (changes in volume
multiplied by prior year rates) and changes in rate (changes in rate multiplied
by prior year volume). Rate-volume variances (change in rate multiplied by the
change in volume) have been allocated to the change in volume. All amounts are
in thousands.
13
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30
1996 VS. 1995
INCREASE (DECREASE) DUE TO
-----------------------------
VOLUME RATE TOTAL
------- ------ --------
Interest-earning assets:
Loans $ $3,658 $(196) $ 3,462
Mortgage-backed securities (2,314) (45) (2,359)
Premiums on the sale of loans (4) -- (4)
FHLB stock and interest-earning deposits (532) (24) (556)
------- ------ --------
Net increase (decrease) in interest on
interest-bearing assets 808 (265) 543
------- ------ --------
Interest-bearing liabilities:
Deposits (350) (189) (539)
Borrowings and FHLB advances 459 (76) 383
------- ------ --------
Net increase (decrease) in interest
on interest-bearing liabilities 109 (265) (156)
------- ------ --------
Net increase (decrease) in net
interest income before provision
for loan losses $ 699 $ -- $ 699
======= ====== ========
LOAN SERVICING INCOME. Loan servicing income includes fees received
for servicing loans less amortization and valuation adjustments of loan
servicing assets. Loan servicing -assets consist of PMSRs, OMSRs and premiums on
the sale of loans. Premiums on the sales of loans represent the present value of
the future cash flows to be received in excess of the normal servicing fee,
which are recorded as gains on the sale of loans at the time the sales occur.
The value of loan servicing assets can be materially affected by
economic forces not within the control of Suncoast. For example, Suncoast is
subject to the risk that declines in the interest rates for mortgage loans will
diminish its servicing portfolio as borrowers refinance or otherwise prepay
higher rate loans. Management, however, seeks to reduce the risk of declining
interest rates on its loan servicing portfolio by implementing various
asset/liability management techniques and amortizing the assets. See "Asset and
Liability Management," above.
Prior to July 1, 1995, Suncoast did not purchase or accumulate any
servicing assets due in part to regulatory changes which placed restrictions on
the value and amount of PMSRs that could be included in the calculation of
regulatory capital. PMSRs and premiums on the sale of loans remaining from prior
years, however, have continued to be amortized over the remaining anticipated
life of the loans. In amortizing its loan servicing assets, and determining the
carrying value of these assets, Suncoast uses certain assumptions, including the
estimated prepayment rate on the mortgage loans being serviced. These estimates
are reviewed in connection with the preparation of quarterly and year-end
financial statements, and, if the estimated prepayment rates are too low, the
values of the assets are adjusted downward and the adjustments are recorded as
an expense. On an annual basis, PMSRs and OMSRs are also valued by an
independent firm with the necessary expertise to perform such valuation and, if
required by the valuation, the carrying value of the PMSRs and OMSRs is reduced
to fair market
14
<PAGE>
value. No adjustments of PMSRs, OMSRs or premiums on the sale of loans were
required in the three month periods ended September 30, 1996 and 1995.
On July 1, 1995, Suncoast adopted Statement of Financial Accounting
Standards No. 122 ("FAS 122"), "Accounting for Mortgage Servicing Rights." With
its adoption of FAS 122, Suncoast has retained the servicing rights on most of
the loans that it subsequently originated and sold, and capitalized as OMSRs the
normal servicing fee to be received over the life of each loan at its fair
value. The adoption of FAS 122 resulted in aggregate additional realized net
gains of approximately $165,000 and $120,000($104,500 and $76,000, net of tax)
on the sale of loans during the three months ended September 30, 1996 and 1995,
respectively.
Suncoast's loan servicing portfolio (including subservicing, but
excluding loans owned by Suncoast) at June 30, 1996 and September 30, 1996
totaled approximately $1.2 billion. Unlike servicing generally, subservicing
contracts are not considered an investment in loan servicing rights for
financial reporting purposes. Subservicing contracts allow Suncoast to utilize
existing operational capabilities without incurring additional capital
investment in servicing rights or the interest rate risk associated with these
rights.
The amount of subservicing fees generated by Suncoast from the FDIC
is dependent upon the amount of assets which come under its control, the length
of time such assets are owned by the FDIC and other factors generally beyond the
control of Suncoast. The amount of subservicing fees from the FDIC declined due
to the sale by the Resolution Trust Corporation ("RTC"), the FDIC's predecessor,
of the majority of the loans under its control prior to the phase out of the
RTC's operations in December 1995. At September 30, 1996, the subservicing
portfolio declined to approximately $397.5 million from $462.7 million at June
30, 1996, with FDIC loans serviced declining from $208.2 million to $187.8
million. Included in the subservicing portfolio at September 30, 1996 is
approximately $13.8 million of loans serviced under a sales agreement the
servicing rights of which will be transferred to the purchaser in the second
quarter of Fiscal 1997.
The portfolio of Suncoast owned servicing rights decreased from
$698.8 million at June 30, 1996 to $695.5 million at September 30, 1996
primarily as a result of net repayments. During the three months ended September
30, 1996, Suncoast purchased approximately $200,000 of loan servicing rights,
representing approximately $16.0 million in principal loan balances, and
capitalized approximately $165,000 in OMSRs, representing $12.4 million in
principal loan balances. During the three months ended September 30, 1996,
Suncoast also recorded $38,000 in premiums on the sale of loans in connection
with the sale of participation interests in certain commercial real estate
loans. No similar premiums were recorded in the first quarter of Fiscal 1996.
Repayments of loans underlying the servicing assets increased from
$24.2 million in the three months ended September 30, 1995 to $41.7 million in
the three months ended September 30, 1996 due to lower interest rates in the
latter period as compared to the prior period. Suncoast intends to continue to
generate loan servicing fees in connection with its existing portfolio of loan
servicing rights and subservicing contracts, but loan servicing income may
continue to decrease as loans in the existing portfolio are repaid and
subservicing contracts are not renewed.
15
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
NET INCOME. Suncoast's net loss for the first quarter of Fiscal 1997
was $1.1 million, representing a loss per common share of $.62, as compared to
net income of $706,000, representing earnings per common share of $.19, for the
same period in Fiscal 1996. The net loss for the first quarter of Fiscal 1997 is
the result of the $2.3 million SAIF assessment discussed previously
under "Recapitalization of Savings Association Insurance Fund". This expense had
a $1.5 million effect on after-tax net earnings. Excluding this one-time
expense, net income would have been approximately $400,000 or $.06 per share.
The Fiscal 1996 first quarter financial results were positively affected by the
$1.2 million in gains on sales of mortgage-backed securities discussed
previously.
NET INTEREST INCOME. Net interest income before provision for loan
losses increased to $2.9 million in the first quarter of Fiscal 1997, as
compared to $2.2 million in the first quarter of Fiscal 1996, an increase of
32.1 %. Average interest earning assets declined by 0.6% from the first quarter
of Fiscal 1996 as compared to the first quarter of Fiscal 1997, and interest
income increased due to the shift in the asset mix from mortgage-backed
securities into higher yielding loans. Interest expense decreased 3.4% in the
first quarter of Fiscal 1997, as compared to the first quarter of the prior
fiscal year, primarily as a result of a decrease in the average balances of
deposits.
PROVISION FOR LOAN LOSSES. A provision for loan losses is recorded
when available information indicates that it is probable that an asset has been
impaired and the amount of the loss can be reasonably estimated. The adequacy of
the allowance for loan losses is evaluated monthly by application of a formula
developed by Suncoast that applies to outstanding loan balances percentages that
vary based on the expected risk of loss for each type of loan and the
designation of specific loans as classified assets, as well as management's
further consideration of the inherent risk in the portfolio. The allowance is
further based upon management's systematic and detailed evaluation of the
potential loss exposure in Suncoast's loan portfolio considering such factors as
historical loss experience, the borrower's ability to repay, repayment
performance, estimated collateral value and mortgage insurance coverage. The
evaluation process resulted in a provision for loan losses of $ 12,000 during
the first quarter of Fiscal 1997. No provision was required in the comparable
period of Fiscal 1996.
Effective July 1,1995, Suncoast adopted Statement of Financial
Accounting Standards No. 114 ("FAS 114n) "Accounting by Creditors or Impairment
of a Loan," subsequently amended by FAS 118. FAS 114 did not have any
significant effect on Suncoast's financial condition and results of operations
in the first quarter of Fiscal 1997 or Fiscal 1996.
LOAN SERVICING INCOME. Loan servicing fees decreased from $1.5
million for the first quarter of Fiscal 1996 to $1.4 million for the first
quarter of Fiscal 1997 primarily as a result of a decline in the number of loans
subserviced for FDIC. The amount of subservicing fees generated by Suncoast from
the FDIC depends upon the amount of assets which come under the FDIC's control,
the length of time such assets are owned by the FDIC and other factors generally
beyond the control of Suncoast.
16
<PAGE>
Amortization of loan servicing assets increased $166,000 from the
first quarter of Fiscal 1996 as compared to the same period in Fiscal 1997
primarily as a result of amortization of the PMSRs and OMSRs added over the past
year. As a result, Suncoast's loan servicing income during the first quarter of
Fiscal 1997 was $946,000, compared to $1.2 million in the first quarter of the
prior fiscal year.
GAINS ON THE SALE OF LOANS AND LOAN SERVICING ASSETS, NET. Gains on
sale of loans and loan servicing assets for the first quarter of Fiscal 1997
amounted to $222,000 as compared to $14,000 in the comparable quarter of the
prior fiscal year. During the first quarter of Fiscal 1997, Suncoast sold the
servicing rights to $13.8 million of conventional loans, and recorded gains of
$160,000 . These servicing rights, which had no carrying value for Suncoast,
were sold to take advantage of favorable market conditions. There were no
similar sales in the first quarter of Fiscal 1996. The first quarter of Fiscal
1997 also included $51,000 in gains on the sale of participation interests in
certain commercial loans. Other gains in both periods resulted from sales of
residential loans held for sale.
GAINS ON THE SALE OF MORTGAGE-BACKED SECURITIES. During the three
months ended September 30, 1995, Suncoast sold mortgage-backed securities with a
book value of $ 115.9 million, and realized gains of $1.2 million. Suncoast
sold these securities in order to restructure its assets, reduce its interest
rate sensitivity and take advantage of market opportunities. There were no
similar sales in the first quarter of Fiscal 1997. As of September 30, 1996,
Suncoast had $18.2 million in available for sale securities.
OTHER INCOME. Suncoast earned other income of $226,000 and $277,000
in the first quarters of Fiscal 1997 and Fiscal 1996, respectively, from
community banking and servicing operations.
NON-INTEREST EXPENSES. Non-interest expenses, excluding the SAIF
assessment, for the first quarter of Fiscal 1997 were $3.6 million as compared
to $3.8 million for the first quarter. of Fiscal 1996, a 4.3% decrease. This
overall decrease was principally due to a $294,000 reduction in foreclosure
losses incurred in the servicing operations and losses incurred in Fiscal 1996
resulting from the termination of prior mortgage banking operations. These
expenses are included in the "Other" classification.
Employee compensation and benefits is the largest component of
non-interest expenses and increased from $1.6 million in the first quarter of
Fiscal 1996 to $1.7 million in the first quarter of Fiscal 1997, a 5.4% increase
that resulted from salary increases and a small increase in staff.
FINANCIAL CONDITION
Suncoast's total assets increased by $6.8 million to $409.4 million
at September 30, 1996 from $402.6 million at June 30, 1996, primarily due to
changes in asset mix. Amounts due from purchasers of loans and loan servicing
rights at June 30, 1996 were collected and invested in repurchase agreements,
interest-earning deposits and overnight funds during the first quarter of Fiscal
199.7. There were no other significant changes in financial condition.
17
<PAGE>
The following table presents additional data on Suncoast's financial condition
for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
Loan servicing income as a percentage of
net interest income after provision for loan losses 33.05% 56.83%
Annualized return on average assets during period (.26)% .64%
Annualized return on average equity during period (4.25)% 11.26%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management requires that funds be available to meet the
daily financial commitments of Suncoast. These commitments consist primarily of
loan originations, savings deposit withdrawals, and repayments of borrowed
funds. Suncoast is required by federal regulations to maintain a minimum average
daily balance of cash and qualifying liquid assets equal to 5.0% of the
aggregate of the prior month's daily average savings deposits and short-term
borrowings. Suncoast's average liquidity ratio decreased from 5.42% at June 30,
1996 to 5.00% at September 30, 1996, as liquid assets were redeployed into
residential loan investments. Suncoast must also maintain an average daily
balance of short-term liquid assets equal to at least 1% of its prior month's
average daily balance of net withdrawable accounts plus short-term debt. At June
30, 1996 and September 30, 1996, Suncoast's short-term liquidity percentage was
5.42% and 5.00%, respectively. Suncoast maintains minimum levels of liquid
assets in order to maximize net interest income.
Suncoast's primary sources of funds consist of retail savings
deposits bearing market rates of interest. Suncoast also obtains funds through
interest and principal repayments on loans and from FHLB advances and other
borrowings, including reverse repurchase agreements with brokerage firms.
Under the regulatory capital regulations of the OTS, Suncoast is
required to maintain minimum levels of capital as measured by three ratios.
Savings institutions are currently required to maintain tangible capital of at
least 1.5% of tangible assets, core capital of at least 3.0% of adjusted
tangible assets and risk-based capital of at least 8.0% of risk-weighted assets
(at least half of which must be comprised of core capital). Each of the capital
requirements of the OTS that are applicable to Suncoast were exceeded at
September 30, 1996. The status of the capital requirements of Suncoast at
September 30, 1996 is as follows (amounts are in thousands and are unaudited):
18
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE PERCENTAGE RISK- OF
TANGIBLE OF CORE OF BASED RISK-BASED
CAPITAL ASSETS(1) CAPITAL ASSETS(1) CAPITAL ASSETS (1)
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stockholder' equity before adjustments $ 24,670 6.03% $ 24,670 6.03% $ 24,670 10.54%
Regulatory Adjustments:
General valuation reserves 669 .29
Non-qualifying PMSRs and OMSRs (800) (.20) (800) (.20) (800) (.34)
Goodwill (39) (.01) (39) ( 01) (39) (.02)
Unrealized loss on mortgage-backed
securities available for sale 306 .08 306 .08 306 .13
------- ------- ------- ------- ------- -------
Regulatory capital 24,137 5.90 24,137 5.90 24,806 10.60
Minimum capital requirement 6,133 1.5 24,137 3.00 18,719 8.OO
------- ------- ------- ------- ------- -------
Regulatory capital excess $ 18,004 4.40% $ 11,871 2.90% $ 6,087 2.60%
-------- ------- ------- ------- ------- -------
Assets for capital calculation $408,894 $408,894 $233,984
-------- -------- --------
</TABLE>
(1) Tangible and core capital percentages are computed as a percentage of
tangible and adjusted tangible assets, respectively. The risk-based
capital percentage is computed as a percentage of risk-adjusted assets.
IMPACT OF INFLATION
The Consolidated Statements of Financial Condition and related
consolidated financial data presented herein have been prepared in accordance
with generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation The primary impact of inflation and changing prices on the operations
of Suncoast is reflected in increased operating costs Unlike most industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates have a more
significant impact on a financial institution's performance than the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or change in the same magnitude as the price of goods and services,
although periods of increased inflation may accompany a rising interest rate
environment.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 ("FAS 1 23n),
"Accounting for Stock-Based Compensation." This statement requires certain
disclosures about stock-based employee compensation arrangements, regardless of
the method used to account for them, and defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for stock based compensation plans using the
intrinsic value method of accounting prescribed by existing principles. Suncoast
has elected to remain with the existing principles and will make pro forma
disclosures of net income and earnings per share, as if the fair value method of
accounting defined in FAS 123 had been applied. Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and
19
<PAGE>
is recognized over the service period, which is usually the vesting period.
Under the intrinsic value based method, compensation cost is the excess, if
any, of the quoted market price of the stock at grant date or other
measurement date over the amount an employee must pay to acquire the stock.
The disclosure requirements of FAS 123 are effective for financial statements
for Suncoast's fiscal years beginning after June 30, 1996.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("FAS 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." FAS 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial-components
approach that focuses on control. FAS 125 is effective for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
December 31, 1996 and is to be prospectively applied. Management is currently
evaluating the impact of adoption of FAS 125 on its financial position and
results of operations.
20
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
Part II - Other Information
Item 1. Legal proceedings- none
Item 2. Changes in securities - none
Item 3. Defaults upon senior securities - none
Item 4. Submission of Matters to a Vote of Security Holders - none
Item 5. Other information - none
Item 6. Exhibits and reports on Form 8-K
On July 20, 1996 Suncoast filed a Current Report on Form 8-K
to report that on July 15, 1996 Suncoast and BankUnited
Financial Corporation entered into a definitive agreement
providing for the merger of Suncoast with and into
BankUnited F.S.B., a wholly owned subsidiary of BankUnited
and the survivor of the merger (the "Merger").
On September 30, 1996, Suncoast filed a Current Report on
Form 8-K to provide certain BankUnited documents flied with
the Securities Exchange Commission that are incorporated by
reference into the proxy materials being utilized in
connection with the Merger, including BankUnited's (i)
Annual Report on Form # 10-K/A for the year ended September
30, 1995, (ii) Quarterly Reports on 10-Q for the periods
ended December 31, 1995, March 31, 1996 and June 30, 1996;
and (iii) Current Reports for Form 8K dated November 30,
1995, March 1, 1996 and July 17, 1996.
21
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
By: /s/ ALBERT J. FINCH Date: NOVEMBER 13, 1996
----------------------------- -----------------
Albert J. Finch
Chairman of the Board
By: /s/ RICHARD L. BROWDY Date: NOVEMBER 13, 1996
----------------------------- -----------------
Richard L. Browdy
Executive Vice President
Chief Financial Officer
22
<PAGE>
APPENDIX E
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of
the Securities Exchange Act of 1934
Date of Report: December 30, 1996
BANKUNITED FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 5-43936 65-0377773
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
---------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (305) 569-2000
<PAGE>
Item 5. OTHER EVENTS.
Attached hereto as Exhibit 20.1 is a press release announcing
that BankUnited Financial Corporation's (the "Corporation")
subsidiary, BankUnited Capital, a trust formed under the laws
of Delaware, sold $50 million in new equity capital through
the private placement of redeemable trust preferred
securities.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
BANKUNITED FINANCIAL CORPORATION
By:/s/ SAMUEL A. MILNE
-------------------------------------
Samuel A. Milne
Executive Vice President and
Chief Financial Officer
Dated: January 9, 1997
<PAGE>
EXHIBIT 20.1
Contacts:
Alfred R. Camner
Chief Executive Officer
NEWS RELEASE
James A. Dougherty
BANKUNITED Chief Operating Officer
Nasdaq National Market: BKUNA Samuel Milne
Chief Financial Officer
Phone (305) 569-2000
BankUnited Financial Corporation * 255 Alhambra Circle
* Coral Gables, Florida 33134
BankUnited, FSB * Private and Relationship Banking
FOR IMMEDIATE RELEASE
December 30, 1997
BANKUNITED FINANCIAL SUBSIDIARY SELLS $50 MILLION
NEW EQUITY IN PRIVATE PLACEMENT
CORAL GABLES, FL -- Coral Gables-based BankUnited Financial Corporation (the
"Corporation") today announced that its subsidiary, BankUnited Capital (the
"Company"), sold $50 million in new equity capital through the private placement
of redeemable trust preferred securities.
The Company said it sold, at par, 50,000 shares of redeemable trust preferred
securities, par value of $1,000, for a total of $50 million. These securities
have an annual dividend rate of 10.25 percent, payable semi-annually, beginning
June 1997. The securities have been rated "b2" by Moody's and "BB-" by
Thompson's BankWatch.
The net proceeds from the sale will be available for general corporate purposes,
including capital contributions to BankUnited, FSB. Alfred R. Camner, chairman
and president of BankUnited, stated, "These additional capital contributions
will qualify as Tier One capital, enabling the bank to continue its rapid growth
through new branch openings and potential acquisitions. This offering is a
significant step along the road to becoming a major franchise in South Florida."
Friedman, Billings, Ramsey & Co. and Raymond James & Associates, Inc. acted as
placement agents for the offering.
Coral Gables-based BankUnited Financial Corporation is the parent company of
BankUnited, FSB, a federal savings bank with assets of $1.3 billion and 15
branch offices throughout Dade, Broward and Palm Beach counties.
BankUnited Financial Corporation trades on the Nasdaq National Market. Its
common stock trades under the symbol BKUNA, and its preferred stocks trade under
the symbols BKUNP, BKUNO and BKUNN.
/CONTACT: SAMUEL MILNE, CFO, (305) 569-2000
Distributed by: Boardroom Communications, Inc., Plantation, FL
Linda Greck or Julie Silver, (954) 321-6334
<PAGE>
APPENDIX F
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of
the Securities Exchange Act of 1934
Date of Report: February 21, 1997
BANKUNITED FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 5-43936 65-0377773
------- ------- ----------
(State or other Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
---------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (305) 569-2000
<PAGE>
Item 5. OTHER EVENTS.
Attached hereto as Exhibit 20.1 is a press release announcing
BankUnited Financial Corporation's (the "Corporation")
first quarter earnings.
Attached hereto as Exhibit 20.2 is a press release announcing
the conversion of two classes of preferred stock into Class A
Common Stock.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
BANKUNITED FINANCIAL CORPORATION
By: /s/ SAMUEL A. MILNE
-------------------------------
Samuel A. Milne
Executive Vice President and
Chief Financial Officer
Dated: February 21, 1997
<PAGE>
BANKUNITED FINANCIAL CORPORATION
FORM 8-K
INDEX TO EXHIBITS
EXHIBIT
NO.
- -------
20.1 Press release regarding the Corporation's first quarter....
earnings
22.2 Press release regarding the conversion of two classes of the
Corporation's preferred stock..............................
<PAGE>
Exhibit 20.1
<PAGE>
Contacts:
Alfred R. Camner
Chief Executive Officer
NEWS RELEASE
BANKUNITED James A. Dougherty
Chief Operating Officer
Nasdaq National Market: BKUNA
Samuel Milne
Chief Financial Officer
PHONE (305) 569-2000
- --------------------------------------------------------------------------------
BankUnited Financial Corporation * 255 Alhambra Circle
* Coral Gables, Florida 33134
BANKUNITED, FSB * PRIVATE AND RELATIONSHIP BANKING
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
- ---------------------
February 3, 1997
BANKUNITED'S FIRST QUARTER EARNINGS JUMP 76%;
DOUBLES SIZE FROM PRIOR YEAR
CORAL GABLES, FL -- BankUnited Financial Corporation, parent company of
BankUnited, FSB, today reported net income of $1.6 million for the three months
ended December 31, 1996, a 76% increase over net income of $911,000 for the same
quarter of last year.
Fully-diluted earnings after payment of preferred stock dividends amounted to
$.13 (13 cents) per share for the first quarter of fiscal 1997, on 8,045,353
average fully-diluted common shares. This compared with $.15 (15 cents) per
share a year ago, on 3,172,243 average fully-diluted common shares.
BankUnited also reported that its assets more than doubled to $1.3 billion at
December 31, 1996 as compared with $638 million a year ago. Deposits increased
149% to $878 million at December 31, 1996 from $353 million one year ago; and
loans grew to $1 billion, a 114% increase over $88 million at December 31, 1995.
Alfred R. Camner, Chairman and CEO stated that "BankUnited has shown a strong
increase in net income compared to last year. This strong earnings performance
is not yet completely reflected in year to year comparisons in earnings per
share, as a result of the almost tripling of our average common shares
outstanding from the common shares issued in the Suncoast acquisition and the
$3.6 million shares issued in our public offering in February of last year. We
fully anticipate receiving important additional benefits to our bottom line from
substantial merger cost savings as the consolidation of Suncoast operations into
BankUnited continues during this year.
BankUnited has more than doubled its size during this past year in pursuing our
goal of becoming one of the most significant franchises headquartered in South
Florida. This expansion resulted not only from our acquisition of Suncoast
Savings and Loan, which had $409 million in assets, but additionally from a high
level of internal expansion which was more than 63% during the last year.
Furthermore, we are very pleased with the initial speed with which we have
merged the operations of Suncoast into BankUnited. For example, we substantially
integrated all Suncoast branch operations into BankUnited's system including
completing name changes within 30 days of the November closing. These newly
acquired branches have strengthened our South Florida presence significantly,
particularly in Broward County where we now have eight offices.
<PAGE>
The Suncoast acquisition combined with our recently completed $50 million trust
preferred stock offering has placed us in a unique position to pursue our target
of rapid growth in the consolidated bank market in South Florida. Our total core
capitalization, now totaling approximately $140 million, will enable us to
continue rapid internal expansion during the coming year; and, of course, we
will always be interested in attractive acquisitions which are appropriate to
achieve our goals."
Headquartered in Coral Gables, BankUnited currently is the fourth largest
publicly-held financial institution based in the tri-county South Florida
region, operating 15 branches in Dade, Broward and Palm Beach counties of
southeast Florida.
BankUnited Financial Corporation is traded on the Nasdaq National Market., Its
common stock trades under the symbol of BKUNA and its preferred stocks trade
under the symbols BKUNO, BKUNP and now BKUNN.
CONTACT: SAMUEL MILNE, CFO, BANKUNITED, (305) 569-2000
Distributed by: Boardroom Communications (954) 321-6334
Contact: Linda Greck or Julie Silver
<PAGE>
BankUnited Financial Corporation
FIRST QUARTER 1997 EARNINGS RELEASE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------
1996 1995
---- ----
(Dollars in thousands, except per share data)
<S> <C> <C>
Total interest income............................................. $ 19,491 $ 11,324
Total interest expense............................................ 12,387 7,786
----------- -----------
Net interest income........................................... 7,104 3,538
Provision (credit) for loan losses................................ 250 (300)
----------- ------------
Net interest income after provision for loan losses........... 6,854 3,838
Net gain on sale of assets........................................ -- --
Total other income................................................ 600 158
Total other expense............................................... 4,833 2,528
----------- -----------
Income before income taxes and preferred stock dividends...... 2,621 1,468
Provision for income taxes........................................ 1,022 557
----------- -----------
Net income before preferred stock dividends................... 1,599 911
Preferred stock dividends......................................... 672 536
----------- -----------
Net income after preferred stock dividends.................... $ 927 $ 375
=========== ===========
Primary earnings per common shares:............................... $ 0.13 $ 0.16
=========== ===========
Weighted average common shares and equivalents.................... 7,154,658 2,369,244
=========== ===========
Fully-diluted earnings per common share:.......................... $ 0.13 $ 0.15
=========== ===========
Weighted average fully-diluted common shares...................... 8,045,353 3,172,243
=========== ===========
Return on average equity.......................................... 8.08% 5.01%
Return on average assets.......................................... 0.62% 0.42%
Net interest yield on earning assets.............................. 2.83% 2.31%
Net interest spread............................................... 2.60% 1.91%
DECEMBER 31,
------------
1996 1995
---- ----
(Dollars in thousands)
Total assets...................................................... $1,329,044 $ 638,434
Loan receivable, net.............................................. 1,046,771 488,390
Mortgage-backed securities........................................ 86,112 52,353
Deposits.......................................................... 878,166 353,044
Borrowings........................................................ 289,259 231,775
Stockholders' equity.............................................. 98,155 46,793
Book value per common share....................................... 7.59 10.60
</TABLE>
<PAGE>
Exhibit 22.2
<PAGE>
Contacts:
Alfred R. Camner
Chief Executive Officer
NEWS RELEASE
James A. Dougherty
BANKUNITED Chief Operating Officer
Nasdaq National Market: BKUNA Samuel Milne
Chief Financial Officer
PHONE (305) 569-2000
- --------------------------------------------------------------------------------
BankUnited Financial Corporation * 255 Alhambra Circle
* Coral Gables, Florida 33134
BANKUNITED, FSB * PRIVATE AND RELATIONSHIP BANKING
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
- ---------------------
February 13, 1997
BANKUNITED ANNOUNCES CONVERSION OF TWO CLASSES OF
PREFERRED STOCK
CORAL GABLES, FL -- Alfred R. Camner, Chairman and CEO of BankUnited Financial
Corporation (NASDAQ: BKUNA) today announced that Frost-Nevada, Ltd., a limited
partnership controlled by Dr. Phillip Frost, the holder of BankUnited's Series C
and Series C-II classes of preferred stock, has exercised its right to convert
both classes to Class A Common Stock. BankUnited had previously exercised its
right to call both classes of preferred stock.
The Company called all 363,636 outstanding shares of its Series C Noncumulative
Convertible Preferred Stock at $5.50 per share. The shares will be converted to
Class A Common Stock at an exchange ratio of 1.45 shares of Common Stock for
each share of Series C Preferred Stock.
BankUnited also called all 222,223 outstanding shares of its Series C-II
Noncumulative Convertible Preferred Stock at $9 per share. The shares will be
converted to Class A Common Stock at an exchange ratio of 1.32 shares of Common
Stock for each share of Series C-II Preferred Stock.
Headquartered in Coral Gables, BankUnited currently is the fourth largest
publicly-held financial institution based in the tri-county South Florida
region, operating 15 branches in Dade, Broward and Palm Beach counties of
southeast Florida.
BankUnited Financial Corporation is traded on the Nasdaq National Market. Its
common stock trades under the symbol of BKUNA, Preferred stocks trade under the
symbols BKUNO, BKUNP and BKUNN.
CONTACT: SAMUEL MILNE, CFO, BANKUNITED, (305) 569-2000
Distributed by: Boardroom Communications (954) 321-6334
Contact: Linda Greck or Julie Silver
<PAGE>
APPPENDIX G
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of
the Securities Exchange Act of 1934
Date of Report: March 24, 1997
BANKUNITED FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 5-43936 65-0377773
------- ------- ----------
(State or other Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
---------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (305) 569-2000
<PAGE>
Item 5. OTHER EVENTS.
Attached hereto as Exhibit 20.1 is a press release announcing
that BankUnited Financial Corporation's (the "Corporation")
subsidiary, BankUnited Capital, a trust formed under the laws
of Delaware, sold an additional $20 million in new equity
capital through a second private placement of its redeemable
trust preferred securities.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
BANKUNITED FINANCIAL CORPORATION
By: /s/ SAMUEL A. MILNE
-------------------------------
Samuel A. Milne
Executive Vice President and
Chief Financial Officer
Dated: March 25, 1997
<PAGE>
BANKUNITED FINANCIAL CORPORATION
FORM 8-K
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. PAGE
- ------- ------------
<S> <C> <C>
20.1 Press Release regarding a second private placement of
redeemable trust preferred securities by BankUnited
Capital, a subsidiary of the Corporation................. 4
</TABLE>
<PAGE>
Exhibit 20.1
<PAGE>
Contacts:
Alfred R. Camner
Chief Executive Officer
NEWS RELEASE
BANKUNITED James A. Dougherty
Chief Operating Officer
Nasdaq National Market: BKUNA
Samuel Milne
Chief Financial Officer
PHONE (305) 569-2000
- --------------------------------------------------------------------------------
BankUnited Financial Corporation * 255 Alhambra Circle
* Coral Gables, Florida 33134
BANKUNITED, FSB * PRIVATE AND RELATIONSHIP BANKING
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
- ---------------------
March 24, 1997
BANKUNITED INCREASES TRUST PREFERRED EQUITY
CORAL GABLES, Fla. -- Coral Gables-based Bank United Financial Corporation (the
"Corporation") today announced that its subsidiary, BankUnited Capital (the
"Company"), sold an additional $20 million in new equity capital through a
second private placement of its redeemable trust preferred securities.
The completion of this sale constitutes a further issuance of the $50 million
securities sold by the Company in December 1996, bringing the new issuance of
trust preferred securities, with a par value of $1,000 and a coupon of 10.25
percent, to a total of $70 million. These securities were sold between December
1996 and today, and pay interest semi-annually beginning June 30, 1997. The
securities have been rated "b2" by Moody's and "BB-" by Thompson's Bank Watch.
The net proceeds from the sale will be available for general corporate purposes,
including capital contributions to BankUnited, FSB.
Friedman, Billings, Ramsey & Co. acted as placement agents for the offering.
Alfred R. Camner, chairman and president of BankUnited, stated, "This additional
capital will enhance our position as we continue to pursue rapid growth through
the opening of new branches and potential acquisitions in our target market of
Dade, Broward and Palm Beach counties."
Coral Gables-based BankUnited Financial Corporation is the parent company of
BankUnited, FSB, a federal savings bank which had assets of over $1.3 billion as
of December 31, 1996 and 15 branch offices throughout Dade, Broward and Palm
Beach counties.
BankUnited Financial Corporation trades on the Nasdaq National Market. Its
common stock trades under the symbol BKUNA, and its preferred stocks trade
under the symbols BKUNP, BKUNO and now BKUNN.
CONTACT: SAMUEL MILNE, CFO, (305) 569-2000
Distributed by: Boardroom Communications, Inc., Plantation, FL
Linda Greck or Julie Silver, (954) 321-6334
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IX of the Articles of Incorporation of the Company
provides that the Company shall indemnify its officers and directors to the
fullest extent permitted by law.
The Bylaws of the Company provide that the Company will
indemnify any person against whom an action is brought or threatened because
that person is or was a director, officer or employee of the Company for any
amount for which that person becomes liable under a judgment in such action and
reasonable costs and expenses, including attorney's fees. Such indemnification
may only be made, however, if (i) final judgment on the merits is in his or her
favor or (ii) in case of settlement, final judgment against him or her or final
judgment in his or her favor, other than on the merits, if a majority of the
Board of Directors of the Company determines that he or she was acting in good
faith within the scope of his or her duties and for a purpose he or she could
have reasonably believed under the circumstances was in the best interests of
the Company.
Section 607.0831 of the Florida Business Corporation Act
provides, among other things, that a director is not personally liable for
monetary damages to a company or any other person for any statement, vote,
decision, or failure to act, by the director, regarding corporate management or
policy, unless the director breached or failed to perform his or her duties as a
director and such breach or failure constitutes (a) a violation of criminal law,
unless the director had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(b) a transaction from which the director derived an improper personal benefit;
(c) a circumstance under which the liability provisions of Section 607.0834 of
the Florida Business Corporation Act (relating o the liability of the directors
for improper distributions) are applicable; (d) willful misconduct or a
conscious disregard for the best interests of the company in the case of a
proceeding by or in the right of the company to procure a judgment in its favor
or by or in the right of a shareholder; or (e) recklessness or an act or
omission in bad faith or with malicious purpose or with wanton and willful
disregard of human rights, safety or property, in a proceeding by or in the
right of someone other than such company or a shareholder.
Section 607.0850 of the Florida Business Corporation Act
authorizes, among other things, the Company to indemnify any person who was or
is a party to any proceeding (other than an action by or in the right of the
Company) by reason of the fact that he is or was a director, officer, employee
or agent of the Company (or is or was serving at the request of the Company in
such a position for any entity) against liability incurred in connection with
such proceeding, if he or she acted in good faith and in a manner reasonably
believed to be in the best interests of the Company and, with respect to
criminal proceedings, had no reasonable cause to believe his or her conduct was
unlawful.
Florida law requires that a director, officer or employee be
indemnified for expenses (including attorneys' fees) to the extent that he or
she has been successful on the merits or otherwise in the defense of any
proceeding. Florida law also allows expenses of defending a proceeding to be
advanced by a company before the final disposition of the proceedings, provided
that the officer,
II-1
<PAGE>
director or employee undertakes to repay such advance if it is ultimately
determined that indemnification is not permitted.
Florida law states that the indemnification and advancement of
expenses provided pursuant to Section 607.0850 is not exclusive and that
indemnification may be provided by a company pursuant to other means, including
agreements or bylaw provisions. Florida law prohibits indemnification or
advancement of expenses, however, if a judgment or other final adjudication
establishes that the actions of a director, officer or employee constitute (i) a
violation of criminal law, unless he or she had reasonable cause to believe his
or her conduct was lawful or had no reasonable cause to believe his or her
conduct was unlawful; (ii) a transaction from which such person derived an
improper personal benefit; (iii) willful misconduct or conscious disregard for
the best interests of the company in the case of a derivative action or a
proceeding by or in the right of a shareholder; or (iv) in the case of a
director, a circumstance under which the liability provisions of Section
607.0834 of the Florida Business Corporation Act (relating to the liability of
directors for improper distributions) are applicable.
The Company has purchased director and officer liability
insurance that insures directors and officers against liabilities in connection
with the performance of their duties.
Under the Trust Agreement, the Company will agree to indemnify each of
the Trustees of the Series A Issuer or any predecessor Trustee for the Series A
Issuer, and to hold the Trustee harmless against, any loss, damage, claims,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
Trust Agreements, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties under the Trust Agreements.
Item 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
4.1A Junior Subordinated Indenture
4.1B Supplemental Indenture
4.2 Certificate of Trust of BankUnited Capital
4.3 Amended and Restated Trust Agreement dated as of March 24, 1997
4.4 Form of Series A Preferred Security Certificate for BankUnited
Capital
4.5 Amended and Restated Guarantee Agreement dated as of
March 24, 1997.
4.6 Registration Rights Agreement dated as of December 30, 1996
4.7 Registration Rights Agreement dated as of March 24, 1997
II-2
<PAGE>
5.1 Opinion and consent of Stuzin and Camner, P.A. to the Company
as to legality of the Junior Subordinated Debentures and the
Guarantees to be issued by the Company
5.2 Opinion and consent of Richards, Layton & Finger, P.A. as to
legality of the Series A Preferred Securities to be issued by
BankUnited Capital
8 Opinion and consent of Kronish, Lieb, Weiner & Hellman, LLP as
to certain federal income tax matters
12 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
23.1a Consent of Price Waterhouse LLP
23.1b Consent of Price Waterhouse LLP
23.2 Consent of Stuzin and Camner, P.A., included in Exhibit 5.1
23.3 Consent of Richards, Layton & Finger, P.A., included in
Exhibit 5.2
23.4 Consent of Kronish, Lieb, Weiner & Hellman, LLP, included in
Exhibit 8
24 Power of Attorney
25.1 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Series A Subordinated Indenture
25.2 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Amended and Restated Trust Agreement
of BankUnited Capital
25.3 Form T-1 Statement of Eligibility of The Bank of New York
under the guarantee for the benefit of the holders of Series A
Preferred Securities of BankUnited Capital
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guarantee Delivery
99.3 Form of Exchange Agent Agreement
99.4 Purchase Agreement dated December 23, 1996
99.5 Purchase Agreement dated March 18, 1997
99.6 Agreement as to Expenses and Liabilities dated as of December
30, 1997
Item 22. UNDERTAKINGS
(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-3
<PAGE>
(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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities t 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.
The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of each Registrant pursuant to the provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by each
Registrant of expenses incurred or paid by a director, officer or controlling
person of each 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, each Registrant will, unless in
the opinion of its counsel the matter has been settled by the controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the she registration
statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Coral Gables, State of Florida, on March 26, 1997
BANKUNITED FINANCIAL CORPORATION
By: ----------------------------------------
Alfred R. Camner
Chairman of the Board, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Alfred R. Camner, Earline G. Ford and
Marc D. Jacobson and each of them, his true and lawful attorney-in-fact and
agent with full power of substitution, for him and in his name, place and stead,
in any and all capacities, to sign any or all amendments (including the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on March 26, 1997 by the following
persons in the capacities indicated.
/s/ ALFRED R CAMNER Chairman of the Board, Chief Executive
- -------------------------- Officer, President and Director
Alfred R. Camner (Principal Executive Officer)
/s/ LAWRENCE H. BLUM Director
- --------------------------
Lawrence H. Blum
/s/ EARLINE G. FORD Executive Vice President, Treasurer and
- -------------------------- Director
Earline G. Ford
/s/ SAMUEL A. MILNE Senior Vice President and Chief Financial
- -------------------------- Officer (Principal Financial Officer and
Samuel A Milne Principal Accounting Officer)
II-5
<PAGE>
/s/ MARC D. JACOBSON Director
- --------------------------
Marc D. Jacobson
/s/ ALLEN M. BERNKRANT Director
- --------------------------
Allen M. Bernkrant
Director
- --------------------------
Patricia L. Frost
/s/ NEIL MESSINGER Director
- --------------------------
Neil Messinger
/s/ MARC LIPSITZ Director
- --------------------------
Marc Lipsitz
/s/ ANNE W. SOLLOWAY Director
- --------------------------
Anne W. Solloway
/s/ ALBERT J. FINCH Director
- --------------------------
Albert J. Finch
Director
- --------------------------
Norman Mains
/s/ IRVIN P. COHEN Director
- --------------------------
Irving P. Cohen
/s/ E.J. GIUSTI Director
- --------------------------
E.J. Giusti
II-6
<PAGE>
/s/ BRUCE FRIESNER Director
- --------------------------
Bruce Friesner
Director
- --------------------------
Christina Cuervo Migoya
II-7
<PAGE>
BANKUNITED FINANCIAL CORPORATION
INDEX TO EXHIBITS (A)
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ------------
4.1A Junior Subordinated Indenture
4.1B Supplemental Indenture
4.2 Certificate of Trust of BankUnited Capital
4.3 Amended and Restated Trust Agreement of dated as of March 24, 1997
4.4 Form of Series A Preferred Security Certificate for
BankUnited Capital
4.5 Amended and Restated Guarantee Agreement dated as of March 24, 1997
4.6 Registration Rights Agreement dated as of December 30, 1996
4.7 Registration Rights Agreement dated as of March 24, 1997
5.1 Opinion and consent of Stuzin and Camner, P.A. to the Company
as to the legality of the Junior Subordinated Debentures and the
Guarantees to be issued by the Company*
5.2 Opinion and consent of Richards, Layton & Finger, P.A. as to
legality of the Series A Preferred Securities to be issued by
BankUnited Capital*
8 Opinion and consent of Kronish, Lieb, Weiner & Hellman, LLP as to
certain federal income tax matters*
12 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends*
23.1a Consent of Price Waterhouse, LLP
23.1b Consent of Price Waterhouse, LLP
23.2 Consent of Stuzin and Camner, P.A. (included in Exhibit 5.1)*
23.3 Consent of Richard, Layton & Finger, P.A. (included in Exhibit 5.2)*
<PAGE>
23.4 Consent of Kronish, Lieb, Weiner & Hellman, LLP (included in
Exhibit 8)*
24 Power of attorney*
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Series A Subordinated Indenture*
25.2 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Amended and Restated Trust Agreement
of BankUnited Capital*
25.3 Form T-1 Statement of Eligibility of The Bank of New York under
the Guarantee for the benefit of the holders of Series A
Preferred Securities of BankUnited Capital*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
99.4 Purchase Agreement dated December 23, 1996
99.5 Purchase Agreement dated March 18, 1997
99.6 Agreement as to Expenses and Liabilities dated as of December 30,
1996
To be filed by amendment
BANKUNITED FINANCIAL CORPORATION
TO
THE BANK OF NEW YORK
TRUSTEE
JUNIOR SUBORDINATED INDENTURE
--------------------------------
DATED AS OF DECEMBER 30, 1996
--------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 1.1. DEFINITIONS ..... .............................. 1
Section 1.2. COMPLIANCE CERTIFICATE AND OPINIONS ............10
Section 1.3. FORMS OF DOCUMENTS DELIVERED TO TRUSTEE ........11
Section 1.4. ACTS OF HOLDERS ................................12
Section 1.5. NOTICES, ETC. TO TRUSTEE AND CORPORATION .......14
Section 1.6. NOTICE OF HOLDERS; WAIVER ......................14
Section 1.7. CONFLICT WITH TRUST INDENTURE ACT ..............14
Section 1.8. EFFECT OF HEADINGS AND TABLE OF CONTENTS .......15
Section 1.9. SUCCESSORS AND ASSIGNS .........................15
Section 1.10. SEPARABILITY CLAUSE ............................15
Section 1.11. BENEFITS OF INDENTURE ..........................15
Section 1.12. GOVERNING LAW ..................................15
Section 1.13. NON-BUSINESS DAYS ..............................15
ARTICLE II. SECURITY FORMS
Section 2.1. FORMS GENERALLY ................................16
Section 2.2. FORM OF FACE OF SECURITY .......................16
Section 2.3. FORM OF REVERSE OF SECURITY ....................21
Section 2.4. ADDITIONAL PROVISIONS REQUIRED IN
GLOBAL SECURITY .............................24
Section 2.5. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.24
ARTICLE III. THE SECURITIES
Section 3.1. TITLE AND TERMS ................................25
Section 3.2. DENOMINATIONS ..................................25
Section 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING .25
Section 3.4. TEMPORARY SECURITIES ...........................26
Section 3.5. REGISTRATION, TRANSFER AND EXCHANGE;
GLOBAL SECURITIES ...........................26
Section 3.6. MUTILATED, DESTROYED, LOST AND STOLEN
SECURITIES ..................................28
Section 3.7. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED .29
Section 3.8. PERSONS DEEMED OWNERS ..........................30
Section 3.9. CANCELLATION ...................................31
Section 3.10. COMPUTATION OF INTEREST ........................31
Section 3.11. DEFERRALS OF INTEREST PAYMENT DATES ............31
Section 3.12. RIGHTS OF SET-OFF ..............................32
Section 3.13. AGREED TAX TREATMENT ...........................32
Section 3.14. CUSIP NUMBERS ..................................32
ARTICLE IV. SATISFACTION AND DISCHARGE
Section 4.1. SATISFACTION AND DISCHARGE OF INDENTURE ........33
Section 4.2. APPLICATION OF TRUST MONEY .....................34
ARTICLE V. REMEDIES
Section 5.1. EVENTS OF DEFAULT ..............................34
Section 5.2. ACCELERATION OF MATURITY; RESCISSION AND
ANNULMENT ...................................35
Section 5.3. COLLECTION OF DEBT AND SUITS FOR ENFORCEMENT
BY TRUSTEE ..................................36
ii
<PAGE>
Section 5.4. TRUSTEE MAY FILE PROOFS OF CLAIM ...............37
Section 5.5. TRUSTEE MAY ENFORCE CLAIM WITHOUT POSSESSION
OF SECURITIES ...............................38
Section 5.6. APPLICATION OF MONEY COLLECTED .................38
Section 5.7. LIMITATION ON SUITES ...........................38
Section 5.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST; DIRECT
ACTION BY HOLDERS OF PREFERRED SECURITIES ...39
Section 5.9. RESTORATION OF RIGHTS AND REMEDIES .............39
Section 5.10. RIGHTS AND REMEDIES CUMULATIVE .................39
Section 5.11. DELAY OR OMISSION NOT WAIVER ...................40
Section 5.12. CONTROL BY HOLDERS .............................40
Section 5.13. WAIVER OF PAST DEFAULTS ........................40
Section 5.14. UNDERTAKING FOR COSTS ..........................41
Section 5.15. WAIVER OF USURY, STAY OR EXTENSION LAWS ........41
ARTICLE VI. THE TRUSTEE
Section 6.1. CERTAIN DUTIES AND RESPONSIBILITIES42
Section 6.2. NOTICE OF DEFAULTS .............................43
Section 6.3. CERTAIN RIGHTS OF TRUSTEE ......................43
Section 6.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES ..................................44
Section 6.5. MAY HOLD SECURITIES ............................44
Section 6.6 MONEY HELD IN TRUST ............................45
Section 6.7. COMPENSATION AND REIMBURSEMENT .................45
Section 6.8. DISQUALIFICATION; CONFLICTING INTERESTS ........45
Section 6.9. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY ........46
Section 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR ...................................46
Section 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR .........48
Section 6.12. MERGER, CONVERSION, CONSOLIDATION OR
SUCCESSION TO BUSINESS ......................49
Section 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
CORPORATION .................................49
Section 6.14. APPOINTMENT OF AUTHENTICATING AGENT ............49
ARTICLE VII. HOLDERS' LIST AND REPORTS BY TRUSTEE
AND CORPORATION
Section 7.1. CORPORATION TO FURNISH TRUSTEE NAMES AND
ADDRESSES OF HOLDERS ........................52
Section 7.2. PRESERVATION OF INFORMATION, COMMUNICATIONS
TO HOLDERS ..................................52
Section 7.3. REPORTS BY TRUSTEE .............................52
Section 7.4. REPORTS BY CORPORATION .........................53
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
Section 8.1. CORPORATION MAY CONSOLIDATE, ETC. ONLY ON
CERTAIN TERMS ...............................53
Section 8.2. SUCCESSOR CORPORATION SUBSTITUTED ..............54
ARTICLE IX. SUPPLEMENTAL INDENTURES
Section 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF HOLDERS ..................................55
Section 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF
HOLDERS .....................................56
Section 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES ...........57
Section 9.4. EFFECT OF SUPPLEMENTAL INDENTURES ..............57
Section 9.5. CONFORMITY WITH TRUST INDENTURE ACT ............57
iii
<PAGE>
Section 9.6. REFERENCE IN SECURITIES TO SUPPLEMENTAL
INDENTURES ..................................57
ARTICLE X. COVENANTS
Section 10.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST .....58
Section 10.2. MAINTENANCE OF OFFICE OR AGENCY ................58
Section 10.3. MONEY FOR SECURITY PAYMENTS TO BE HELD
IN TRUST ....................................58
Section 10.4. STATEMENT AS TO COMPLIANCE .....................60
Section 10.5. WAIVER OF CERTAIN COVENANTS ....................60
Section 10.6. ADDITIONAL SUMS ................................60
Section 10.7. ADDITIONAL COVENANTS ...........................61
ARTICLE XI. REDEMPTION OF SECURITIES
Section 11.1. RIGHT OF REDEMPTION ............................62
Section 11.2. ELECTION TO REDEEM; NOTICE TO TRUSTEE ..........62
Section 11.3. SELECTION OF SECURITIES TO BE REDEEMED .........62
Section 11.4. NOTICE OF REDEMPTION ...........................63
Section 11.5. DEPOSIT OF REDEMPTION PRICE ....................63
Section 11.6. PAYMENT OF SECURITIES CALLED FOR REDEMPTION ....64
ARTICLE XII. SUBORDINATION OF SECURITIES
Section 12.1. SECURITIES SUBORDINATE TO SENIOR DEBT ..........64
Section 12.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC..64
Section 12.3. PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION
OF SECURITIES ...............................65
Section 12.4. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT .........66
Section 12.5. PAYMENT PERMITTED IF NO DEFAULT ................66
Section 12.6. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT 67
Section 12.7. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS ....67
Section 12.8. TRUSTEE TO EFFECTUATE SUBORDINATION ............67
Section 12.9. NO WAIVER OF SUBORDINATION PROVISIONS ..........68
Section 12.10. NOTICE TO TRUSTEE ..............................68
Section 12.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT ...........................69
Section 12.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF
SENIOR DEBT .................................69
Section 12.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS ............69
Section 12.14. ARTICLE OF APPLICABLE TO PAYING AGENTS .........69
iv
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of December 30, 1996, between
BANKUNITED FINANCIAL CORPORATION, a Florida corporation (hereinafter called the
"Corporation") having its principal office at 255 Alhambra Circle, Coral Gables,
Florida 33134, and THE BANK OF NEW YORK, a New York banking corporation, as
Trustee (hereinafter called the "Trustee").
RECITALS OF THE CORPORATION
The Corporation has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its 10 1/4% Junior Subordinated
Deferrable Interest Debentures, Series A, due December 31, 2026 (hereinafter
called the "Securities") of substantially the tenor and amount hereinafter
provided, which are to be issued to evidence loans made to the Corporation of
the proceeds from the issuance by a business trust ("BankUnited Capital") of
preferred trust interests in BankUnited Capital (the "Preferred Securities") and
common interests in BankUnited Capital (the "Common Securities" and,
collectively with the Preferred Securities, the "Trust Securities"), and to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the
Corporation and authenticated and delivered hereunder and duly issued by the
Corporation, the valid obligations of the Corporation, and to make this
Indenture a valid agreement of the Corporation, in accordance with their and its
terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular;
(2) All other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and the term "generally accepted accounting
principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles that are generally
accepted at the date or time of such computation; PROVIDED, that when
two or more principles are so generally accepted, it shall mean that
set of principles consistent with those in use by the Corporation; and
<PAGE>
(4) The words " herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"ACCREDITED INVESTOR" means an accredited investor within the meaning
of Rule 501(a) of Regulation D under the Securities Act.
"ACT" when used with respect to any Holder has the meaning specified in
Section 1.4.
"ADDITIONAL INTEREST" means any Registration Penalty and the interest,
if any, that shall accrue on any interest on the Securities the payment of which
has not been made on the applicable Interest Payment Date and which shall accrue
at the rate per annum specified or determined as specified in such Security.
"ADDITIONAL SUMS" has the meaning specified in Section 10.6.
"ADDITIONAL TAXES" means the sum of any additional taxes, duties and
other governmental charges to which BankUnited Capital has become subject from
time to time as a result of a Tax Event.
"ADJUSTED TREASURY RATE" means, with respect to any redemption date,
the Treasury Rate plus (i) 1.40% basis points if such redemption date occurs on
or before December 31, 1997 or (ii) .80% basis points if such redemption date
occurs after December 31, 1997.
"ADMINISTRATIVE TRUSTEE" means, in respect of BankUnited Capital, each
Person identified as an "Administrative Trustee" in the Trust Agreement, solely
in such Person's capacity as Administrative Trustee of BankUnited Capital under
the Trust Agreement and not in such Person's individual capacity, or any
successor Administrative Trustee appointed as therein provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; PROVIDED, HOWEVER, that BankUnited Capital
shall not be deemed to be an Affiliate of the Corporation. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"AGENT MEMBER" means any member of, or participant in, the Depositary.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate the
Securities.
"BANKUNITED CAPITAL" has the meaning specified in the first recital of
this Indenture.
2
<PAGE>
"BANKUNITED CAPITAL GUARANTEE" means the guarantee by the Corporation
of distributions on the Preferred Securities of BankUnited Capital to the extent
provided in the Guarantee Agreement.
"BOARD OF DIRECTORS" means either the board of directors of the
Corporation or any executive committee or other committee of that board duly
authorized to act hereunder.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Corporation to have been duly adopted
by the Board of Directors, or officers of the Corporation to which authority to
act on behalf of the Board of Directors has been delegated, and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities
initially issued to BankUnited Capital, the principal corporate trust office of
the Property Trustee under the related Trust Agreement, is closed for business.
"COMMISSION" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"COMMON SECURITIES" has the meaning specified in the first recital of
this Indenture.
"COMMON STOCK" means the common stock, par value $2.50 per share, of
the Corporation.
"COMPARABLE TREASURY ISSUE" means with respect to any redemption date
the United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate indebtedness securities of comparable maturity to the
Remaining Life. If no United States Treasury security has a maturity which is
within a period from three months before to three months after December 31,
2006, the two most closely corresponding United States Treasury securities shall
be used as the Comparable Treasury Issue, and the Treasury Rate shall be
interpolated or extrapolated on a straight-line basis, rounding to the nearest
month using such securities.
"COMPARABLE TREASURY PRICE" means (A) the average of five Reference
Dealer Treasury Quotations for such redemption date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such Quotations.
"CORPORATION" means the Person named as the "Corporation" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Corporation" shall mean such successor corporation. "Corporation" includes a
corporation, association, company, joint-stock company or business trust.
"CORPORATION REQUEST" and "CORPORATION ORDER" mean, respectively, the
written request or order signed in the name of the Corporation by the Chairman
of the Board of Directors, the Chairman
3
<PAGE>
of the Executive Committee of the Board of Directors, a Vice Chairman of the
Board of Directors, the Chief Executive Officer, the President, the Chief
Operating Officer, a Vice Chairman or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation,
and delivered to the Trustee.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office as of the date of this Indenture is located at 101 Barclay Street,
21W, New York, New York 10286, Attention: Corporate Trust Trustee Administration
"DEBT" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, currency and foreign exchange rate and commodity
forward contracts, options and swaps and similar arrangements; and (vii) every
obligation of the type referred to in clauses (i) through (vi) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"DEFAULTED INTEREST" has the meaning specified in Section 3.7.
"DEPOSITARY" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, the Person
designated as Depositary by the Corporation pursuant to Section 3.1 with respect
to such Securities (or any successor thereto).
"DEFINITIVE SECURITY" shall have the meaning ascribed to "Definitive
Preferred Security" in the Trust Agreement.
"DISTRIBUTIONS" with respect to the Trust Securities issued by
BankUnited Capital, means amounts payable in respect of such Trust Securities as
provided in the Trust Agreement and referred to therein as "Distributions."
"DOLLAR" means the currency of the United States of America that, as at
the time of payment, is legal tender for the payment of public and private
indebtedness.
"DTC" means The Depository Trust Company.
"EVENT OF DEFAULT" has the meaning specified in Article V.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
4
<PAGE>
"EXTENSION PERIOD" has the meaning specified in Section 3.11.
"GLOBAL SECURITY" means a Security in the form prescribed in Section
2.4 evidencing all or part of the Securities, issued to the Depositary or its
nominee for the Securities, and registered in the name of such Depositary or its
nominee.
"GUARANTEE AGREEMENT" means the Guarantee Agreement substantially in
the form attached hereto as Annex C, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities, as
amended from time to time.
"HOLDER" means a Person in whose name a Security is registered in the
Securities Register.
"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
and shall include the terms of each the Securities established as contemplated
by Section 3.1.
"INTEREST PAYMENT DATE" means as to the Securities the Stated Maturity
of an installment of interest on the Securities.
"LIKE AMOUNT" means (i) with respect to a redemption of the Preferred
Securities, Preferred Securities having a Liquidation Amount equal to that
portion of the principal amount of the Securities to be contemporaneously
redeemed in accordance with this Indenture, allocated to the Common Securities
and to the Preferred Securities PRO RATA based upon the relative Liquidation
Amounts of such Securities and the proceeds of which will be used to pay the
Redemption Price of such Preferred Securities and (ii) with respect to a
distribution of the Securities to holders of the Preferred Securities in
exchange therefor in connection with a dissolution or liquidation of BankUnited
Capital, Securities having a principal amount equal to the Liquidation Amount of
the Preferred Securities of the holder to whom such Securities would be
distributed.
"MAKE-WHOLE AMOUNT" means an amount equal to the greater of (i) 100% of
the principal amount of the Securities or (ii) as determined by a Quotation
Agent, the sum of the present values of the principal amount and premium payable
as part of the Redemption Price with respect to an optional redemption of such
Securities on December 31, 2006, together with scheduled payments of interest
from the redemption date to December 31, 2006 (the "Remaining Life"), in each
case discounted to the redemption date on a quarterly basis (assuming a 360-day
year consisting of 30-day months) at the Adjusted Treasury Rate.
"MATURITY" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"MOODY'S " means Moody's Investors Service, Inc.
"NOTICE OF DEFAULT" means a written notice of the kind specified in
Section 5.1(3).
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board of Directors, a Vice Chairman of the Board of Directors, the President
or a Vice President, and by the Treasurer, an Assistant Treasurer,
5
<PAGE>
the Secretary or an Assistant Secretary of the Corporation, and delivered to
the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Corporation, and who shall be acceptable to the Trustee.
"OTHER SECURITIES" means Securities transferred, upon exchange or
otherwise, to holders of "Other Preferred Securities" as defined in the related
Trust Agreement.
"OUTSTANDING" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary
amount has been theretofore deposited with the Trustee or any Paying
Agent in trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been
paid pursuant to Section 3.6, unless proof satisfactory to the Trustee
is presented that any such Securities are held by Holders in whose
hands such Securities are valid, binding and legal obligations of the
Corporation;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Corporation or any other obligor upon the Securities or any Affiliate of
the Corporation or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Corporation or
any other obligor upon the Securities or any Affiliate of the Corporation or
such other obligor. Upon the written request of the Trustee, the Corporation
shall furnish to the Trustee promptly an Officers' Certificate listing and
identifying all Securities, if any, known by the Corporation to be owned or held
by or for the account of the Corporation, or any other obligor on the Securities
or any Affiliate of the Corporation or such obligor, and, subject to the
provisions of Section 6.1, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination.
"PAYING AGENT" means the Trustee or any Person authorized by the
Corporation to pay the principal of (and premium, if any) or interest on the
Securities on behalf of the Corporation.
"PERSON" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
6
<PAGE>
"PLACE OF PAYMENT" means, with respect to the Securities, the place or
places where the principal of (and premium, if any) and interest on the
Securities are payable pursuant to Sections 3.1 and 3.11.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same indebtedness as that evidenced
by such particular Security; and, for the purposes of this definition, any
security authenticated and delivered under Section 3.6 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same indebtedness
as the lost, destroyed or stolen Security.
"PREFERRED SECURITIES" has the meaning specified in the first recital
of this Indenture.
"PROCEEDING" has the meaning specified in Section 13.2.
"PROPERTY TRUSTEE" means, in respect of BankUnited Capital, the
commercial bank or trust company identified as the "Property Trustee" in the
related Trust Agreement, solely in its capacity as Property Trustee of
BankUnited Capital under the Trust Agreement and not in its individual capacity,
or its successor in interest in such capacity, or any successor property trustee
appointed as therein provided.
"QUOTATION AGENT" means Friedman, Billings, Ramsey & Co., Inc. and its
respective successors.
"REDEMPTION DATE" when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE" when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"REFERENCE TREASURY DEALER" means (i) the Quotation Agent and (ii) any
other primary U. S. Government ecurities dealer in New York City selected by the
Corporation.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing and promptly delivered to the Trustee by such Reference Treasury Dealer
at 5:00 p.m., New York City time, on the third Business Day preceding such
redemption date.
"REGISTRATION PENALTY" has the meaning set forth in the Registration
Rights Agreement dated as of December 30, 1996 among the Company, BankUnited
Capital and Friedman, Billings, Ramsey & Co., Inc. and Raymond James &
Associates, Inc.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date with respect to the Securities means, unless otherwise provided pursuant to
Section 3.1 with respect to the Securities, the date which is fifteen days next
preceding such Interest Payment Date (whether or not a Business Day).
7
<PAGE>
"RESPONSIBLE OFFICER" means when used with respect to the Trustee, any
officer assigned to the Corporate Trust Office, including any vice president,
assistant vice president, assistant treasurer, or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers, and also, with respect to a particular matter,
any other officer, to whom such matter is referred because of such officer' s
knowledge of and familiarity with the particular subject.
"RESTRICTED SECURITY" means each Security required to bear a Restricted
Securities Legend.
"RESTRICTED SECURITIES LEGEND" means a legend substantially in the form
of the legend required in the form of Security set forth in Section 2.2 to be
placed upon a Restricted Security.
"RIGHTS PLAN" means a plan of the Corporation providing for the
issuance by the Corporation to all holders of its Common Stock of rights
entitling the holders thereof to subscribe for or purchase shares of Common
Stock or any class or series of preferred stock, which rights (i) are deemed to
be transferred with such shares of Common Stock, (ii) are not exercisable and
(iii) are also issued in respect of future issuances of Common Stock, in each
case until the occurrence of a specified event or events.
"S&P" means Standard & Poor's Ratings Services.
"SECURITIES" or "SECURITY" means any indebtedness securities or
indebtedness security, as the case may be, authenticated and delivered under
this Indenture.
"SECURITIES ACT" means the Securities Act of 1933 (or any successor
statute), as it may be amended from time to time.
"SECURITIES REGISTER" and "SECURITIES REGISTRAR" have the respective
meanings specified in Section 3.5.
"SENIOR DEBT" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Securities or to other Debt which is PARI
PASSU with, or subordinated to, the Securities; PROVIDED, HOWEVER, that Senior
Debt shall not be deemed to include: (i) any Debt of the Corporation which when
incurred and without respect to any election under Section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to the
Corporation, (ii) any Debt of the Corporation to any of its subsidiaries and
(iii) Debt to any employee of the Corporation.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"STATED MATURITY" when used with respect to the Securities or interest
thereon means the date specified pursuant to the terms of the Securities as the
date on which the principal of the Securities
8
<PAGE>
or such installment of interest is due and payable, in the case of such
principal, as such date may be shortened as provided pursuant to the terms of
the Securities and this Indenture.
"SUBSIDIARY" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Corporation or by
one or more other Subsidiaries, or by the Corporation and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"SUCCESSOR SECURITY" of any particular Security means every Security
issued after, and evidencing all or a portion of the same indebtedness as that
evidenced by, such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.6 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall
be deemed to evidence the same indebtedness as the mutilated, destroyed, lost or
stolen Security.
"TAX EVENT" means the receipt by BankUnited Capital of an Opinion of
Counsel (as defined in the Trust Agreement) experienced in such matters to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the Preferred Securities of BankUnited Capital, there is more
than an insubstantial risk that (i) BankUnited Capital is, or will be within 90
days of the date of such Opinion of Counsel, subject to United States Federal
income tax with respect to income received or accrued on the corresponding
Securities issued by the Corporation to BankUnited Capital, (ii) interest
payable by the Corporation on the Securities is not, or within 90 days of the
date of such Opinion of Counsel will not be, deductible by the Corporation, in
whole or in part, for United States Federal income tax purposes or (iii)
BankUnited Capital is, or will be within 90 days of the date of such Opinion of
Counsel, subject to more than a DE MINIMIS amount of other taxes, duties or
other governmental charges.
"TREASURY RATE" means (i) the yield, under the heading which represents
the average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities", for the
maturity corresponding to the remaining life (if no maturity is within three
months before or after the remaining life, yields for the two published
maturities most closely corresponding to the remaining life shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line, rounding to the nearest month) or (ii) if such release (or any
successor release) is not published during the week preceding the calculation
date or does not contain such yields, the rate per annum equal to the quarterly
equivalent yield to maturity of the Comparable Treasury Issue, calculated using
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption
date. The Treasury Rate shall be calculated on the third Business Day preceding
the redemption date.
"TRUST AGREEMENT" means the Trust Agreement substantially in the form
attached hereto as Annex A, as amended by the form of Amended and Restated Trust
Agreement substantially in the
9
<PAGE>
form attached hereto as Annex B, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities, in each
case as amended from time to time.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder and,
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities shall mean the Trustee with respect to the Securities.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"TRUST SECURITIES" has the meaning specified in the first recital of
this Indenture.
"VICE PRESIDENT" when used with respect to the Corporation, means any
duly appointed vice president, whether or not designated by a number or a word
or words added before or after the title "vice president."
Section 1.2. COMPLIANCE CERTIFICATE AND OPINIONS.
Upon any application or request by the Corporation to the Trustee to
take any action under any provision of this Indenture, the Corporation shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent (including covenants, compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent (including covenants
compliance with which constitute a condition precedent), if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided pursuant to Section 10.4) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he 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
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3. FORMS OF DOCUMENTS DELIVERED TO TRUSTEE.
10
<PAGE>
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Corporation may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Corporation stating that the
information with respect to such factual matters is in the possession of the
Corporation, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given
to or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in
person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when
such instrument or instruments is or are delivered to the Trustee, and,
where it is hereby expressly required, to the Corporation. Such
instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
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 (subject to Section
6.1) conclusive in favor of the Trustee and the Corporation, 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 the certificate of any 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 Person acting
in other than his individual capacity, such certificate or affidavit
shall also constitute sufficient proof of his authority.
(c) The fact and date of the execution by any Person 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 and in accordance with such reasonable rules as the Trustee
may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
11
<PAGE>
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by any Holder of the Securities shall
bind every future Holder of the same Securities and the Holder of
Securities issued upon the transfer thereof or in exchange therefor or
in lieu thereof in respect of anything done or suffered to be done by
the Trustee or the Corporation in reliance thereon, whether or not
notation of such action is made upon such Securities.
(f) The Corporation may set any day as a record date for the
purpose of determining the Holders of Outstanding Securities entitled
to give, make or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided or permitted by this
Indenture to be given, made or taken by Holders of the Securities,
PROVIDED that the Corporation may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the
giving or making of any notice, declaration, request or direction
referred to in the next paragraph. If any record date is set pursuant
to this paragraph, the Holders of the Outstanding Securities on such
record date, and no other Holders, shall be entitled to take the
relevant action, whether or not such Holders remain Holders after such
record date, PROVIDED that no such action shall be effective hereunder
unless taken on or prior to the applicable Expiration Date (as
hereinafter in this Section 1.4(f) provided) by Holders of the
requisite principal amount of Outstanding Securities on such record
date. Nothing in this paragraph shall be construed to prevent the
Corporation from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in
this paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of Outstanding
Securities on the date such action is taken. Promptly after any record
date is set pursuant to this paragraph, the Corporation, at its own
expense, shall cause notice of such record date, the proposed action by
Holders and the applicable Expiration Date to be given to the Trustee
in writing and to each Holder of Securities in the manner set forth in
Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.2, (iii) any request to institute proceedings referred
to in Section 5.7(2) or (iv) any direction referred to in Section 5.12, in each
case with respect to the Securities. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date,
provided that no such action shall be effective hereunder unless taken on or
prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities on such record date. Nothing in this paragraph
shall be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Trustee, at the Corporation's expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration Date
to be given to the Corporation in writing and to each Holder of Securities in
the manner set forth in Section 1.6.
12
<PAGE>
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities in the manner set forth in Section 1.6, on or prior
to the existing Expiration Date. If an Expiration Date is not designated with
respect to any record date set pursuant to this Section, the party hereto which
set such record date shall be deemed to have initially designated the 180th day
after such record date as the Expiration Date with respect thereto, subject to
its right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled
hereunder to take any action hereunder with regard to the Securities
may do so with regard to all or any part of the principal amount of
such Security or by one or more duly appointed agents each of which may
do so pursuant to such appointment with regard to all or any part of
such principal amount.
Section 1.5. NOTICES, ETC. TO TRUSTEE AND CORPORATION.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Preferred
Securities or the Corporation shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
(2) the Corporation by the Trustee, any Holder or any holder
of Preferred Securities shall be sufficient for every purpose
(except as otherwise provided in Section 5.1) hereunder if in
writing and mailed, first class, postage prepaid, to the
Corporation addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the Trustee
by the Corporation.
Section 1.6. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. In case, by reason of
the suspension of or irregularities in regular mail service or for any other
reason, it shall be impossible or impracticable to mail notice of any event to
Holders when said notice is required to be given pursuant to any provision of
this Indenture or of the relevant Securities, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice. Where this Indenture provides for notice in
any manner, such notice may be waived in writing
13
<PAGE>
by the Person entitled to receive such notice, either before or after the
event, and such waiver shall be the equivalent of such notice. Waivers of notice
by Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
Section 1.7. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control. This Indenture, the Corporation and the Trustee shall be deemed
for all purposes hereof to be subject to and governed by the Trust Indenture Act
to the same extent as would be the case if this Indenture were so qualified on
the date hereof.
Section 1.8. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.9. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Corporation shall
bind its successors and assigns, whether so expressed or not.
Section 1.10 SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, expressed or implied,
shall give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Debt, the Holders of the Securities and, to the
extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and 9.2,
the holders of Preferred Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
Section 1.12. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles thereof.
Section 1.13. NON-BUSINESS DAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day (and no interest shall accrue for the period
14
<PAGE>
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, until such next succeeding Business Day except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day (in each case with the same force and
effect as if made on the Interest Payment Date or Redemption Date or at the
Stated Maturity).
ARTICLE II
SECURITY FORMS
Section 2.1. FORMS GENERALLY.
The Securities and the Trustee's certificate of authentication shall be
in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with applicable tax laws or the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such securities, as evidenced by their execution of the Securities.
The Trustee's certificate of authentication shall be substantially in
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
Securities distributed to holders of Book-Entry Preferred Securities
upon the dissolution of BankUnited Capital shall be distributed in the form of
one or more Global Securities registered in the name of a Depositary or its
nominee, and deposited with the Security Registrar, as custodian for such
Depositary, or held by such Depositary, for credit by the Depositary to the
respective accounts of the beneficial owners of the Securities represented
thereby (or such other accounts as they may direct). Securities distributed to
holders of Preferred Securities other than Book-Entry Preferred Securities upon
the dissolution of BankUnited Capital shall not be issued in the form of a
Global Security or any other form intended to facilitate book-entry trading in
beneficial interests in such Securities.
Section 2.2. FORM OF FACE OF SECURITY.
[If the Security is a Restricted Security, then insert -- THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)
BY THE INITIAL PURCHASER (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER IN A TRANSACTION
15
<PAGE>
MEETING THE REQUIREMENTS RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) BY SUBSEQUENT INVESTORS HOLDING THIS SECURITY IN
BOOK-ENTRY FORM AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO AN ACCREDITED
INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS
SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.]
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH, A "PLAN"), NO
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S
INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE")
96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY
PURCHASER OR HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO
HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT EITHER (A) IS NOT A
PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING THIS SECURITY ON BEHALF OF OR
WITH "PLAN ASSETS" OF ANY PLAN OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF
AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH
PURCHASE OR HOLDING.
16
<PAGE>
BANKUNITED FINANCIAL CORPORATION
(Title of Security)
CUSIP No.
$___________
BankUnited Financial Corporation, a corporation organized and existing
under the laws of Delaware (hereinafter called the "Corporation", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to __________________, or registered
assigns, the principal sum of ________ Dollars or such other principal amount as
may be set forth in the records of the Securities Registrar hereinafter referred
to in accordance with the Indenture, on December 31, 2026. The Corporation
further promises to pay interest on said principal sum from December 30, 1996 or
from the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, semi-annually
(subject to deferral as set forth herein) in arrears on the last day of June and
December of each year, commencing on June 30, 1997 at the rate of 10 1/4% per
annum, until the principal hereof shall have become due and payable, plus
Additional Interest, if any, until the principal hereof is paid or duly provided
for or made available for payment and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the rate of __% per
annum, compounded semi-annually. The amount of interest payable for any period
less than a full interest period shall be computed on the basis of twelve 30-day
months and a 360-day year and the actual number of days elapsed in a partial
month in a period. The amount of interest payable for any full interest period
shall be computed by dividing the rate per annum by two. In the event that any
date on which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date the payment was originally payable. A "Business Day, shall mean any
day other than (i) a Saturday or Sunday, (ii) a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or (iii) a day on which the Corporate Trust
Office of the Trustee, or the principal corporate trust office of the Property
Trustee under the Trust Agreement hereinafter referred to, for BankUnited
Capital, is closed for business. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest installment, which shall be the June
15 or December 15 (whether or not a Business Day) next preceding such Interest
Payment Date. Any such interest installment not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
17
<PAGE>
So long as no Event of Default has occurred and is continuing, the
Corporation shall have the right at any time during the term of this Security to
defer payment of interest on this Security, at any time or from time to time,
for up to 10 consecutive semi-annual interest payment periods with respect to
each deferral period (each an "EXTENSION PERIOD"), and at the end of which the
Corporation shall pay all interest then accrued and unpaid (together with
Additional Interest thereon to the extent permitted by applicable law);
PROVIDED, HOWEVER, that no Extension Period shall extend beyond the Stated
Maturity of the principal of this Security; PROVIDED, FURTHER, that during any
such Extension Period, the Corporation shall not, and shall not permit any
Subsidiary of the Corporation to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Corporation's capital stock or (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem any
indebtedness securities of the Corporation that rank PARI PASSU with or junior
in interest to this Security or make any guarantee payments with respect to any
guarantee by the Corporation of the indebtedness securities of any Subsidiaries
of the Corporation if such guarantee ranks PARI PASSU with or junior in interest
to this Security (other than (a) dividends or distributions in Common Stock of
the Corporation, (b) any declaration of a dividend in connection with the
implementation of a Rights Plan, the issuance of any Common Stock or any class
or series of preferred stock of the Corporation under any Rights Plan in the
future or the redemption or repurchase of any rights distributed pursuant to a
Rights Plan, (c) Payments under the BankUnited Capital Guarantee, and (d)
Purchases of Common Stock related to the issuance of Common Stock or rights
under any of the Corporation's benefit plans for its directors, officers or
employees). Prior to the termination of any such Extension Period, the
Corporation may further extend the interest payment period, PROVIDED that no
Extension Period shall exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity of the principal of this Security. Upon the
termination of any such Extension Period and upon the payment of all amounts
then due on any Interest Payment Date, the Corporation may elect to begin a new
Extension Period, subject to the above requirements. No interest shall be due
and payable during an Extension Period except at the end thereof. The
Corporation shall give the Property Trustee, the Administrative Trustee and the
Trustee notice of its election to begin any Extension Period at least one
Business Day prior to the earlier of (i) the date interest on the Securities
would have been payable except for the election to begin such Extension Period
or (ii) the date of the Administrative Trustees are required to give notice to
DTC or applicable self-regulatory organization or to holders of the Preferred
Securities as of the record date or the date such Distributions are payable, but
in any event not less than one Business Day prior to such record date.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee in the City of New
York or at the offices of such Paying Agents or Agents as the Corporation may
designate from time to time outside the United States, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private indebtedness; PROVIDED, HOWEVER, that at the
option of the Corporation payment of interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Securities Register or (ii) by wire transfer in immediately available funds at
such place and to such account as may be designated by the Person entitled
thereto 15 days before the Record Date as specified in the Securities Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder hereof by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs
18
<PAGE>
the Trustee on his behalf to take such actions as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof,
by his acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Debt, whether now outstanding or hereafter incurred, and waives reliance
by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
19
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
duly executed under its corporate seal.
BankUnited Financial Corporation
By: _______________________________________
[President, Vice President, Treasurer or
Assistant Treasurer]
Attest:
- ----------------------------------
[Secretary or Assistant Secretary]
Section 2.3. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of securities of the
Corporation designated as its 10 1/4% Junior Subordinated Deferrable Interest
Debentures, Series A, Due December __, 2026 (herein called the "Securities"),
limited (except as otherwise provided in the Indenture) in aggregate principal
amount to $__________, issued and to be issued under a Junior Subordinated
Indenture, dated as of December 30, 1996 (herein called the "INDENTURE"),
between the Corporation and The Bank of New York, as Trustee (herein called the
"TRUSTEE", which term includes any successor Trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Corporation and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is designated on the face hereof
[limited in aggregate Principal amount to $_________.]
All terms used in this Security that are defined in the Indenture or in
the Amended and Restated Trust Agreement, dated as of December 30, 1996, as
amended (the "Trust Agreement"), for BankUnited Capital, entered into among
BANKUNITED FINANCIAL CORPORATION, as Depositor, and the Trustees named therein,
shall have the meanings assigned to them in the Indenture or the Trust
Agreement, as the case may be.
The Corporation may, at its option, on or after December 31, 2006, and
subject to the terms and conditions of Article XI of the Indenture, redeem this
Security in whole at any time or in part from time to time, at the following
Redemption Prices (expressed as percentages of the principal amount), plus in
each case accrued interest thereon to the date of redemption, if redeemed during
the twelve-month period indicated.
REDEMPTION PRICE
December 31, 2006 to December 31, 2007: 105.125%
December 31, 2007 to December 31, 2008: 104.613%
December 31, 2008 to December 31, 2009: 104.100%
20
<PAGE>
December 31, 2009 to December 31, 2010: 103.588%
December 31, 2010 to December 31, 2011: 103.075%
December 31, 2011 to December 31, 2012: 102.563%
December 31, 2012 to December 31, 2013: 102.050%
December 31, 2013 to December 31, 2014: 101.538%
December 31, 2014 to December 31, 2015: 101.025%
December 31, 2015 to December 31, 2016: 100.513%
On or after December 31, 2016: 100%
Upon the occurrence and during the continuation of a Tax Event, the
Corporation may, at its option, at any time within 90 days of the occurrence of
such Tax Event redeem the Securities, in whole but not in part, subject to the
provisions of Section 11.6 and the other provisions of Article XI of the
Indenture, at a redemption price equal to the Make-Whole Amount plus accrued and
unpaid interest on the Securities to the date fixed for redemption.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Corporation with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Corporation and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Corporation and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all Securities, to waive compliance by the Corporation with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to the Securities at the time Outstanding occurs
and is continuing, then and in every such case the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities may declare the
principal amount of all the Securities to be due and payable immediately, by a
notice in writing to the Corporation (and to the Trustee if given by Holders),
provided that, in the case of the Securities issued to BankUnited Capital, if
upon an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities fail to declare the principal of
all the Securities to be immediately due and payable, the holders of at least
25% in aggregate Liquidation Amount of the Preferred Securities of BankUnited
Capital then outstanding shall have such right by a notice in writing to the
Corporation and the Trustee; and upon any such declaration the principal amount
of and the accrued interest (including any Additional Interest) on all the
Securities shall become immediately due and payable, provided that the payment
of principal and
21
<PAGE>
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XII of the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Corporation maintained under Section 10.2 of the
Indenture duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Corporation and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of transfer,
the Corporation, the Trustee and any agent of the Corporation or the Trustee
shall treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Corporation, the Trustee nor any such agent shall be affected by notice to
the contrary.
The Securities are issuable only in registered form without coupons in
minimum denominations of $100,000 and any integral multiples of $1,000 in excess
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
The Corporation and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
Each holder of this Security covenants and agrees by his or her
acceptance thereof to comply with and be bound by the foregoing provisions.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 2.4. ADDITIONAL PROVISIONS REQUIRED IN GLOBAL SECURITY.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the
following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
22
<PAGE>
DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND NO
TRANSFER OF THIS SECURITY (OTHER THAN AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH SPECIFIED
CIRCUMSTANCES."
Section 2.5. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
The Bank of New York
as Trustee
By: _______________________________
AUTHORIZED SIGNATORY
23
<PAGE>
ARTICLE III
THE SECURITIES
Section 3.1. TITLE AND TERMS.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $52,000,000 except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6,
9.6 or 11.6.
The Securities shall be known and designated as the Junior Subordinated
Deferrable Interest Debentures, Series A, Due 2026, of the Corporation. Their
Stated Maturity shall be December 31, 2026, and they shall bear interest at the
rate of 10 1/4% per annum, from December 30, 1996 or from the most recent
Interest Payment Due to which interest has been paid or duly provided for, as
the case may be, payable semi-annually on June 30 and December 31, commencing
June 30, 1997, until the principal thereof is paid or made available for
payment.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Corporation in New York, New
York maintained for such purpose and at any other office or agency maintained by
the Corporation for such purpose; PROVIDED, HOWEVER, that at the option of the
Corporation payment of interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Securities
Register or (ii) by wire transfer in immediately available funds at such place
and to such account as may be designated by the person entitled thereto as
specified in the Securities Register.
The Securities shall be redeemable as provided in Article XI.
The Securities shall be subordinated in right of payment to Senior Debt
as provided in Article XII.
All Securities shall be substantially identical except as to
denomination and except as may otherwise be provided herein.
Section 3.2. DENOMINATIONS.
The Securities shall be in registered form without coupons and shall be
issuable in denominations of $100,000 and any integral multiple of $1,000 in
excess thereof.
Section 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Corporation by its
President, one of its Vice Presidents, its Treasurer or an Assistant Treasurer
under its corporate seal reproduced or impressed thereon and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals
24
<PAGE>
or any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of such
Securities. At any time and from time to time after the execution and delivery
of this Indenture, the Corporation may deliver the Securities executed by the
Corporation to the Trustee for authentication, together with a Corporation Order
for the authentication and delivery of such Securities, and the Trustee in
accordance with the Corporation Order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder. Notwithstanding the foregoing, if any Security shall
have been authenticated and delivered hereunder but never issued and sold by the
Corporation, and the Corporation shall deliver such Security to the Trustee for
cancellation as provided in Section 3.9, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
Section 3.4. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Corporation may
execute, and upon Corporation Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.
If temporary Securities are issued, the Corporation will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Corporation designated for that
purpose without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities, of any authorized denominations having the same Original Issue Date
and Stated Maturity and having the same terms as such temporary Securities.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as definitive Securities.
Section 3.5. REGISTRATION, TRANSFER AND EXCHANGE; GLOBAL SECURITIES.
The Corporation shall cause to be kept at the Corporate Trust Office of
the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Corporation shall provide for the registration of Securities
and of transfers of Securities. Such register is herein sometimes referred to as
the "Securities Register". The Trustee is hereby appointed. "Securities
Registrar" for the purpose of registering Securities and transfers of Securities
as herein provided.
25
<PAGE>
Upon surrender for registration of transfer of any Security at the
office or agency of the Corporation designated for that purpose, the Corporation
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and having the same terms and bearing
such restrictive legends as may be required by this Indenture.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations, of a like aggregate principal
amount, of the same Original Issue Date and Stated Maturity and having the same
terms and bearing such restrictive legends as may be required by this Indenture,
upon surrender of the Securities to be exchanged at such office or agency.
Whenever any Securities are so surrendered for exchange, the Corporation shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities shall
be the valid obligations of the Corporation, evidencing the same indebtedness,
and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall
(if so required by the Corporation or the Securities Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Corporation and the Securities Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Securities.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for such
Global Security or a nominee thereof and delivered to such Depositary
or a nominee thereof or custodian therefor, and each such Global
Security shall constitute a single Security for all purposes of this
Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
for such Global Security or a nominee thereof unless (A) such
Depositary (i) has notified the Corporation that it is unwilling or
unable to continue as Depositary for such Global Security or (ii) has
ceased to be a clearing agency registered under the Exchange Act at a
time when the Depositary is required to be so registered to act as
depositary, in either case unless the Corporation has approved a
successor Depositary within 90 days, (B) there shall have occurred and
be continuing an Event of Default with respect to such Global Security,
(C) the Corporation in its sole discretion determines that such Global
Security will be so exchangeable or transferable or (D) there shall
exist such circumstances, if any, in addition to or in lieu of the
foregoing as have been specified for this purpose as contemplated by
Section 3.1.
26
<PAGE>
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion
thereof shall be registered in such names as the Depositary for such
Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Section,
Section 3.4, 3.6, 9.6 or 11.6 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
Neither the Corporation nor the Trustee shall be required, pursuant to
the provisions of this Section, (a) to issue, transfer or exchange any Security
during a period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption of Securities pursuant to Article XI and
ending at the close of business on the day of such mailing or (b) to transfer or
exchange any Security so selected for redemption in whole or in part, except, in
the case of any Security to be redeemed in part, any portion thereof not to be
redeemed.
Section 3.6. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Corporation or the Trustee
to save each of them harmless, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor a new Security of the same
issue of like tenor and principal amount, having the same Original Issue Date
and Stated Maturity, and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Corporation and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Corporation or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Corporation shall execute and upon its request the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and principal amount, having the same Original Issue Date
and Stated Maturity as such destroyed, lost or stolen Security, and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Corporation in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Corporation, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
27
<PAGE>
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date, shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest in respect
of the Securities, except that, unless otherwise provided in the Securities,
interest payable on the Stated Maturity of the principal of a Security shall be
paid to the Person to whom principal is paid. The initial payment of interest on
any Security which is issued between a Regular Record Date and the related
Interest Payment Date shall be payable as provided in such Security or in the
Board Resolution pursuant to Section 3.1 with respect to the Securities.
Any interest on any Security which is payable, but is not timely paid
or duly provided for, on any Interest Payment Date for the Securities (herein
called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Corporation, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Corporation may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities in respect of
which interest is in default (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Corporation shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Corporation shall deposit with the Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Corporation of
such Special Record Date and, in the name and at the expense of the
Corporation, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first class, postage prepaid, to each Holder of a Security at the
address of such Holder as it appears in the Securities Register not
less than 10 days prior to such Special Record Date. The Trustee may,
in its discretion, in the name and at the expense of the Corporation,
cause a similar notice to be published at least once in a newspaper,
customarily published in the English language on each Business Day and
of general circulation in the Borough of Manhattan, The City of New
York, but such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date
28
<PAGE>
therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered on such Special
Record Date and shall no longer be payable pursuant to the following
Clause (2).
(2) The Corporation may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities in respect of which
interest is in default may be listed and, upon such notice as may be
required by such exchange (or by the Trustee if the Securities are not
listed), if, after notice given by the Corporation to the Trustee of
the proposed payment pursuant to this Clause, such payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
Section 3.8. PERSONS DEEMED OWNERS.
The Corporation, the Trustee and any agent of the Corporation or the
Trustee may treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payment of principal of and
(subject to Section 3.7) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Corporation, the Trustee nor any agent of the Corporation or the Trustee shall
be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Corporation,
the Trustee and any agent of the Corporation or the Trustee as the owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Corporation, the Trustee or any agent of the
Corporation or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by a Depositary or impair, as between a
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
Section 3.9. CANCELLATION.
All Securities surrendered for payment, redemption, transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and any such Securities and Securities surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it.
The Corporation may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the
Corporation may have acquired in any manner whatsoever, and all Securities so
delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities shall be delivered to the Corporation for destruction.
Section 3.10. COMPUTATION OF INTEREST.
29
<PAGE>
Interest on the Securities for any period shall be computed on the
basis of a 360-day year of twelve 30-day months.
Section 3.11. DEFERRALS OF INTEREST PAYMENT DATES.
So long as no Event of Default has occurred and is continuing, the
Corporation shall have the right, at any time during the term of the Securities,
from time to time to defer the payment of interest on the Securities for a
period not exceeding 10 consecutive semi-annual periods (each, an "EXTENSION
PERIOD"). No Extension Period shall end on a date other than an Interest Payment
Date. At the end of any such Extension Period the Corporation shall pay all
interest then accrued and unpaid on the Securities (together with Additional
Interest thereon, if any, at the rate specified for the Securities to the extent
permitted by applicable law); PROVIDED, HOWEVER, that no Extension Period shall
extend beyond the Stated Maturity of the principal of the Securities; PROVIDED,
further, that during any such Extension Period, the Corporation shall not, and
shall not permit any Subsidiary to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Corporation's capital stock, or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any indebtedness securities of the Corporation that rank PARI PASSU in
all respects with or junior in interest to the Securities or make any guarantee
payments with respect to any guarantee by the Corporation of the indebtedness
securities of any Subsidiary of the Corporation if such guarantee ranks PARI
PASSU with or junior in interest to the securities (other than (a) dividends or
distributions in Common Stock, (b) any declaration of a dividend in connection
with the implementation of a Rights Plan, or the issuance of any Common Stock of
any class or series of preferred stock of the Corporation under any Rights Plan
in the future or the redemption or repurchase of any rights pursuant thereto,
(c) payments under the BankUnited Capital Guarantee, and (d) purchases of Common
Stock related to the issuance of Common Stock or rights under any of the
Corporation's benefit plans for its directors, officers or employees). Prior to
the termination of any such Extension Period, the Corporation may further extend
the interest payment period, provided that no Extension Period shall exceed 10
consecutive semi-annual periods or extend beyond the Stated Maturity of the
principal of such Securities. Upon the termination of any Extension Period and
upon the payment of all amounts then due on any Interest Payment Date, the
Corporation may elect to begin a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Corporation shall give the Property Trustee and
the Trustee notice of its election to begin any such Extension Period at least
one Business Day prior to the earlier of (i) the date interest on the Securities
would have been payable except for the election to begin such Extension Period
or (ii) the date the Administrative Trustees are required to give notice to DTC
or applicable self-regulatory organization or to holders of the Preferred
Securities as of the record date or the date such Distributions are payable, but
in any event not less than one Business Day prior to such record date. For
purposes hereof, the Corporation's Senior Debt shall not be deemed to be PARI
PASSU with the Securities.
The Trustee, at the expense of the Corporation, shall promptly give
notice of the Corporation's election to begin any such Extension Period to the
Holders of the Outstanding Securities.
Section 3.12. RIGHT OF SET-OFF.
With respect to the Securities issued to BankUnited Capital,
notwithstanding anything to the contrary herein, the Corporation shall have the
right to set-off any payment it is otherwise required
30
<PAGE>
to make thereunder in respect of any such Security to the extent the
Corporation has theretofore made, or is concurrently on the date of such payment
making, a payment under the BankUnited Capital Guarantee relating to such
Security or under Section 5.8 hereof.
Section 3.13. AGREED TAX TREATMENT.
Each Security issued hereunder shall provide that the Corporation and,
by its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States Federal, state and local tax purposes it is intended that such
Security constitute indebtedness.
Section 3.14. CUSIP NUMBERS.
The Corporation in issuing the Securities may use " CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption or other related material as a convenience to Holders;
PROVIDED that any such notice or other related material may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or other related
material and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Corporation shall promptly
notify the Trust of any change in the CUSIP numbers.
31
<PAGE>
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall, upon Corporation Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Corporation, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when:
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 3.6 and (ii) Securities for
whose payment money has theretofore been deposited with the
Trustee in trust or segregated and held in trust by the
Corporation and thereafter repaid to the Corporation or
discharged from such trust, as provided in Section 10.3)
have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year of the date of deposit, or
(iii) are to be called for redemption within one
year by the Trustee in the name, and at the expense, of
the Corporation,
and the Corporation, in the case of Clause (B) (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose an amount in the currency or currencies in which the Securities are
payable sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest (including any Additional Interest)
to the date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Corporation has paid or caused to be paid all other sums
payable hereunder by the Corporation; and
(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
32
<PAGE>
Notwithstanding the satisfaction and discharge of this Indenture, or
the earlier resignation or removal of the Trustee or any Authenticating Agent,
the obligations of the Corporation to the Trustee under Section 6.7, the
obligations of the Corporation to any Authenticating Agent under Section 6.14
and, if money shall have been deposited with the Trustee pursuant to subclause
(B) of clause (1) of this Section, the obligations of the Trustee under Section
4.2 and the last paragraph of Section 10.3 shall survive.
Section 4.2. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by the Trustee, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Corporation acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for the payment of which such money or obligations have been
deposited with or received by the Trustee.
ARTICLE V
REMEDIES
Section 5.1. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to the
Securities, means any one of the following events that has occurred and is
continuing (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) :
(1) failure to pay any interest upon any Security, including any
Additional Interest in respect thereof, when it becomes due and
payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension
Period); or
(2) failure to pay the principal of (or premium, if any, on) any
Security when due, whether at maturity, upon redemption by declaration
or otherwise; or
(3) failure to observe or perform, in any material respect, any
covenant of the Corporation in this Indenture (other than a covenant a
default in the performance of which or the breach of which is
elsewhere in this Section specifically dealt with), and continuance of
such default or breach for a period of 90 days after there has been
given, by registered or certified mail, to the Corporation by the
Trustee or to the Corporation and the Trustee by the Holders of at
least 25% in principal amount of the Outstanding Securities a written
notice specifying such failure to observe or perform and requiring it
to be remedied; or
(4) the entry of a decree or order for relief in respect of the
Corporation by a court having jurisdiction in the premises in an
involuntary case under Federal or State bankruptcy laws, as now or
hereafter constituted, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
33
<PAGE>
(5) the commencement by the Corporation of a voluntary case under
Federal or State bankruptcy laws, as now or hereafter constituted, or
the consent by the Corporation to the entry of a decree or order for
relief in an involuntary case under any such laws.
Section 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4) or 5.1(5)) with respect to the Securities at the time Outstanding
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Securities may
declare the principal amount of all the Securities to be due and payable
immediately, by a notice in writing to the Corporation (and to the Trustee if
given by Holders), PROVIDED that, in the case of the Securities issued to
BankUnited Capital, if, upon an Event of Default, the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Securities fail to
declare the principal of all the Securities to be immediately due and payable,
the holders of at least 25% in aggregate Liquidation Amount (as defined in the
related Trust Agreement) of the corresponding Preferred Securities then
outstanding shall have such right by a notice in writing to the Corporation and
the Trustee; and upon any such declaration such principal amount (or specified
portion thereof) of and the accrued interest (including any Additional Interest)
on all the Securities shall become immediately due and payable. Payment of
principal (premium, if any) and interest (including any Additional Interest) on
such Securities shall remain subordinated to the extent provided in Article XII
notwithstanding that such amount shall become immediately due and payable as
herein provided. If an Event of Default specified in Section 5.1(4) or 5.1(5)
with respect to the Securities at the time Outstanding occurs, the principal
amount of all the Securities shall automatically, and without any declaration or
other action on the part of the Trustee or any Holder, become immediately due
and payable.
At any time after such a declaration of acceleration with respect to
the Securities has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the Outstanding
Securities, by written notice to the Corporation and the Trustee, may rescind
and annul such declaration and its consequences if:
(1) the Corporation has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest (including any
Additional Interest) on all the Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to the Securities, other
than the non-payment of the principal of the Securities which has
become due solely by such acceleration, have been cured or waived as
provided in Section 5.13.
34
<PAGE>
In the case of Securities issued to BankUnited Capital, the holders of
a majority in aggregate Liquidation Amount (as defined in the related Trust
Agreement under which BankUnited Capital is created) of the related Preferred
Securities issued by BankUnited Capital shall also have the right to rescind and
annul such declaration and its consequences by written notice to the Corporation
and the Trustee, subject to the satisfaction of the conditions set forth in
Clauses (1) and (2) above of this Section 5.2.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 5.3. COLLECTION OF DEBT AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Corporation covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest
becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of (and
premium, if any, on) any Security at the Maturity thereof,
the Corporation will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any) and interest (including
any Additional Interest) and, in addition thereto, all amounts owing the Trustee
under Section 6.7.
If the Corporation fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Corporation or any other obligor upon the
Securities and collect the monies adjudged or decreed to be payable in the
manner provided by law out of the property of the Corporation or any other
obligor upon the Securities, wherever situated.
If an Event of Default with respect to the Securities occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
Section 5.4. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Corporation or any other obligor upon the
Securities or the property of the Corporation or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Corporation for the payment of
35
<PAGE>
overdue principal (and premium, if any) or interest (including any
Additional Interest)) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (including any
Additional Interest) owing and unpaid in respect to the
Securities and to file such other papers or documents as may
be necessary or advisable and to take any and all actions as
are authorized under the Trust Indenture Act in order to
have the claims of the Holders and any predecessor to the
Trustee under Section 6.7 allowed in any such judicial
Proceedings; and
(ii) in particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same in
accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial
proceeding is hereby authorized by each Holder to make such payments
to the Trustee for distribution in accordance with Section 5.6, and in
the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due
to it and any predecessor Trustee under Section 6.7.
Nothing herein continued shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; PROVIDED, HOWEVER,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
Section 5.5. TRUSTEE MAY ENFORCE CLAIM WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 6.7, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 5.6. APPLICATION OF MONEY COLLECTED.
Any money or property collected or to be applied by the Trustee with
respect to the Securities pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money or property on account of principal (or premium, if
any) or interest (including any Additional Interest), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee;
36
<PAGE>
SECOND: Subject to Article XII, to the payment of the amounts then due and
unpaid upon the Securities for principal (and premium, if any) and interest
(including any Additional Interest), in respect of which or for the benefit of
which such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Securities for
principal (and premium, if any) and interest (including any Additional
Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
Section 5.7. LIMITATION ON SUITS.
No Holder of Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
Section 5.8. UNCONDITIONAL RIGHTS OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
AND INTEREST; DIRECT ACTION BY HOLDERS OF PREFERRED SECURITIES.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section 3.7)
interest (including any Additional Interest) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Securities issued to BankUnited Capital, any holder of
the corresponding Preferred Securities issued by BankUnited Capital shall have
the right, upon the occurrence of an Event of Default described in Section
5.1(1) or 5.1(2), to institute
37
<PAGE>
a suit directly against the Corporation for enforcement of payment to such
holder of principal of (premium, if any) and (subject to Section 3.7) interest
(including any Additional Interest) on the Securities having a principal amount
equal to the aggregate Liquidation Amount (as defined in the Trust Agreement
under which BankUnited Capital is formed) of such Preferred Securities held by
such holder.
Section 5.9. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, any Holder or any holder of Preferred Securities has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, such Holder or such holder of
Preferred Securities, then and in every such case the Corporation, the Trustee,
the Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, the Holders and the holders of Preferred Securities shall continue as
though no such proceeding had been instituted.
Section 5.10. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee, any Holder of any Security or any
holder of any Preferred Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee
or to the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Preferred
Securities, as the case may be.
Section 5.12. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, with respect to the Securities,
PROVIDED that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
38
<PAGE>
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee
shall have the right to decline to follow such direction if a
Responsible Officer or Officers of the Trustee shall, in good faith,
determine that the proceeding so directed would be unjustly prejudicial
to the Holders not joining in any such direction or would involve the
Trustee in personal liability.
Section 5.13. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities and, in the case of any Securities issued to BankUnited
Capital, the holders of majority in aggregate Liquidation Amount (as defined in
the related Trust Agreement) of Preferred Securities issued by BankUnited
Capital, may waive any past default hereunder and its consequences with respect
to the Securities except a default:
(1) in the payment of the principal of (or premium, if any)
or interest (including any Additional Interest) on any Security,
or
(2) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of
the Holder of each Outstanding Security of affected.
Any such waiver shall be deemed to be on behalf of the Holders of all
the Securities or, in the case of a waiver by holders of Preferred Securities
issued by BankUnited Capital, by all holders of Preferred Securities issued by
BankUnited Capital.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section. 5.14. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security on or after the respective Stated Maturities expressed
in such Security.
Section 5.15. WAVIER OF USURY, STAY OR EXTENSION LAWS.
39
<PAGE>
The Corporation covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Corporation (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
40
<PAGE>
ARTICLE VI
THE TRUSTEE
Section 6.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture; but in the case of any such certificates or
opinions which by any provisions hereof are specifically
required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own
affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct
except that
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of Holders pursuant to Section
5.12 relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under this Indenture with respect to the Securities.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if there shall be
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not
reasonably assured to it.
41
<PAGE>
(e) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 6.2. NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities, the Trustee shall transmit by mail to all Holders of Securities, as
their names and addresses appear in the Securities Register, notice of such
default, unless such default shall have been cured or waived; PROVIDED, HOWEVER,
that, except in the case of a default in the payment of the principal of (or
premium, if any) or interest (including any Additional Interest) on any
Security, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders of
Securities; and PROVIDED, FURTHER, that, in the case of any default of the
character specified in Section 5.1(3), no such notice to Holders of Securities
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to the Securities.
Section 6.3. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, Security or other
paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Corporation mentioned
herein shall be sufficiently evidenced by a Corporation Request
or Corporation Order and any resolution of the Board of Directors
may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection
and the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
42
<PAGE>
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice. request,
direction, consent, order, bond, indenture, Security or other
paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Corporation, personally or by
agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be under any obligation to take
any action that is discretionary under the provisions of this
Indenture;
(i) the Trustee shall not be charged with knowledge of any
Event of Default unless either (i) a Responsible Officer of the
Trustee shall have actual knowledge thereof or (ii) the Trustee
shall have received notice thereof in accordance with Section
1.5(1) hereof from the Corporation or a Holder; and
(j) no permissive power or authority available to the
Trustee shall be construed as a duty.
Section 6.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Corporation, and neither the Trustee nor any Authenticating Agent assumes
any responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Corporation of the Securities or the proceeds thereof.
Section 6.5. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Corporation, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Corporation with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent,
Securities Registrar or such other agent.
Section 6.6. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Corporation.
Section 6.7. COMPENSATION AND REIMBURSEMENT.
43
<PAGE>
The Corporation agrees
(1) to pay to the Trustee from time to time such compensation for all
services rendered by it hereunder in such amounts as the Corporation and
the Trustee shall agree from time to time (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim, liability
or expense (including the reasonable compensation and the expenses and
disbursements of its agents and counsel) incurred without negligence or bad
faith, arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Corporation under this Section 6.7 shall survive
the termination of the Indenture or the earlier resignation or removal of the
Trustee.
To secure the Corporation's payment obligations in this Section, the
Corporation and the Holders agree that the Trustee shall have a lien prior to
the Securities on all money or property held or collected by the Trustee. Such
lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.
Section 6.8. DISQUALIFICATION; CONFLICTING INTERESTS.
The Trustee for the Securities issued hereunder shall be subject to the
provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall
prevent the Trustee from filing with the Commission the application referred to
in the second to last paragraph of said Section 310(b) .
Section 6.9. CORPORATE TRUSTEE REQUIRED ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of
the United States of America or of any State or Territory or the
District of Columbia, authorized under such laws to exercise corporate
trust powers and subject to supervision or examination by Federal,
State, Territorial or District of Columbia authority, or
44
<PAGE>
(b) a corporation or other Person organized and doing business
under the laws of a foreign government that is permitted to act as
Trustee pursuant to a rule, regulation or order of the Commission,
authorized under such laws to exercise corporate trust powers, and
subject to supervision or examination by authority of such foreign
government or a political subdivision thereof substantially equivalent
to supervision or examination applicable to United States
institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article. Neither the Corporation nor any Person directly or indirectly
controlling, controlled by or under common control with the Corporation shall
serve as Trustee for the Securities issued hereunder.
Section 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee under
Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities by giving written notice thereof to the Corporation. If an
instrument of acceptance by a successor Trustee shall not have been
delivered to the Trustee within 30 days after the giving of notice of
removal, the removal Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect
to the Securities.
(c) The Trustee may be removed at any time with respect to the
Securities by Act of the Holders of a majority in principal amount of
the Outstanding Securities, delivered to the Trustee and to the
Corporation. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the
giving of a notice of removal, the removed Trustee may petition any
court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Corporation or by any Holder who
has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 6.9
and shall fail to resign after written request therefor by the
Corporation or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed
45
<PAGE>
or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Corporation, acting pursuant to the authority of
a Board Resolution, may remove the Trustee with respect to the Securities, or
(ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to the Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for
any cause with respect to the Securities, the Corporation, by a Board
Resolution, shall promptly appoint a successor Trustee with respect to
the Securities. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Securities shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding
Securities delivered to the Corporation and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of
such appointment, become the successor Trustee with respect to the
Securities and supersede the successor Trustee appointed by the
Corporation. If no successor Trustee with respect to the Securities
shall have been so appointed by the Corporation or the Holders and
accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months
may, subject to Section 5.14, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities.
(f) The Corporation shall give notice of each resignation and
each removal of the Trustee with respect to the Securities and each
appointment of a successor Trustee with respect to the Securities by
mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of the Securities as their names and addresses
appear in the Securities Register. Each notice shall include the name
of the successor Trustee with respect to the Securities and the
address of its Corporate Trust Office.
Section 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee
with respect to the Securities, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Corporation
and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall
become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on the request of the
Corporation or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee
with respect to the Securities, the Corporation, the retiring Trustee
and each successor Trustee with respect to the Securities shall
execute and deliver an instrument in writing or an indenture
46
<PAGE>
supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in,
each successor Trustee all the rights, powers, trusts and duties of
the retiring Trustee with respect to the Securities, (2) if the
retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring
Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trust hereunder by more than one Trustee, it
being understood that nothing herein or in such instrument in writing
or supplemental indenture shall constitute such Trustees co-trustees
of the trust and that each such Trustee shall be trustee of a trust
hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and
delivery of such instrument in writing or supplemental indenture the
resignation or removal of the retiring Trustee shall become effective
to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts, and duties of the retiring Trustee
with respect to the Securities to which the appointment of such
successor Trustee relates; but, on request of the Corporation or any
successor Trustee, such retiring Trustee shall duly assign, transfer
and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities to
which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Corporation
shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all rights, powers
and trusts referred to in paragraph (a) or (b) of this Section, as the
case may be.
(d) No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be eligible
under this Article.
Section 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
Section 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST CORPORATION.
47
<PAGE>
If and when the Trustee shall be or become a creditor of the
Corporation (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection of
claims against the Corporation (or any such other obligor).
Section 6.14. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities which shall be authorized to act on behalf of the Trustee to
authenticate the Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
3.6, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Corporation and shall at
all times be a corporation organized and doing business under the laws of the
United States of America, or of any State or Territory or the District of
Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal or State authority. If such Authenticating
Agent publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section, such Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Corporation. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Corporation. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Corporation and shall give notice of such
appointment in the manner provided in Section 1.6 to all Holders of Securities
with respect to which such Authenticating Agent will serve. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provision of
this Section.
48
<PAGE>
The Corporation agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to the Securities is made pursuant to
this Section, the Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
49
<PAGE>
This is one of the Securities referred to in the
within mentioned Indenture.
Dated:
The Bank of New York
As Trustee
By:______________________________
AS AUTHENTICATING AGENT
By:______________________________
AUTHORIZED OFFICER
50
<PAGE>
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND CORPORATION
Section 7.1. CORPORATION TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Corporation will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after each
Regular Record Date in each year, a list, in such form as
the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Corporation
of any such request, a list of similar form and content as
of a date not more than 15 days prior to the time such list
is furnished,
EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Securities Registrar.
Section 7.2. PRESERVATION OF INFORMATION, COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained
in the most recent list furnished to the Trustee as provided in
Section 7.1 and the names and addresses of Holders received by the
Trustee in its capacity as Securities Registrar. The Trustee may
destroy any list furnished to it as provided in Section 7.1 upon
receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities,
and the corresponding rights and privileges of the Trustee, shall be
as provided in the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Corporation and the Trustee that neither the
Corporation nor the Trustee nor any agent of either of them shall be
held accountable by reason of the disclosure of information as to the
names and addresses of the Holders made pursuant to the Trust
Indenture Act.
Section 7.3. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act, at the times and in the manner
provided pursuant thereto.
(b) If such reports are required, such reports so required to be
transmitted at stated intervals of not more than 12 months shall be
transmitted no later than 60 days after May 31 in each calendar year,
commencing 60 days after the first May 31 after the first issuance of
Securities under this Indenture.
51
<PAGE>
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each securities
exchange upon which any Securities are listed and also with the
Commission. The Corporation will promptly notify the Trustee when any
Securities are listed on any securities exchange.
Section 7.4. REPORTS BY CORPORATION.
The Corporation shall file with the Trustee and with the Commission,
and transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; PROVIDED that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Corporation may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Corporation shall continue to file with the Commission and provide the
Trustee with the annual reports and the information, documents and other reports
which are specified in Sections 13 and 15(d) of the Exchange Act. The
Corporation also shall comply with the other provisions of Trust Indenture Act
Section 314(a). Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Corporation's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1. CORPORATION MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Corporation shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Corporation or convey, transfer or lease its properties and assets
substantially as an entirety to the Corporation, unless:
(1) in case the Corporation shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or into which the Corporation is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Corporation substantially as an entirety shall be a
corporation, partnership or Trust organized and existing under the laws of
the United States of America or any State or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest
(including any Additional Interest) on all the Securities and the
performance of every covenant of this Indenture on the part of the
Corporation to be performed or observed;
52
<PAGE>
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
(3) in the case of the Securities issued to BankUnited Capital, such
consolidation, merger, conveyance, transfer or lease is permitted under the
related Trust Agreement and BankUnited Capital Guarantee and does not give
rise to any breach or violation of the related Trust Agreement or
BankUnited Capital Guarantee; and
(4) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and any such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and the Trustee, subject to Section 6.1, may rely upon such
Officers' Certificate and Opinion of Counsel as conclusive evidence that
such transaction complies with this Section 8.1.
Section 8.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger by the Corporation with or into any
other Person, or any conveyance, transfer or lease by the Corporation of its
properties and assets substantially as an entirety to any Person in accordance
with Section 8.1, the successor corporation formed by such consolidation or into
which the Corporation is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Corporation under this Indenture with the same effect as if
such successor Person had been named as the Corporation herein; and in the event
of any such conveyance, transfer or lease the Corporation shall be discharged
from all obligations and covenants under the Indenture and the Securities and
may be dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Corporation, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the
Corporation and delivered to the Trustee; and, upon the order of such successor
Person instead of the Corporation and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities which previously shall have been signed and
delivered by the officers of the Corporation to the Trustee for authentication
pursuant to such provisions and any Securities which such successor Person
thereafter shall cause to be signed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
53
<PAGE>
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Corporation, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Corporation,
and the assumption by any such successor of the covenants of the
Corporation herein and in the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon
the Corporation; or
(3) to establish the form or terms of the Securities as permitted by
Sections 2.1 or 3.1; or
(4) to add to the covenants of the Corporation for the benefit of the
Holders of the Securities or to surrender any right or power herein
conferred upon the Corporation; or
(5) to add any additional Events of Default for the benefit of the
Holders of the Securities; or
(6) to change or eliminate any of the provisions of this Indenture,
PROVIDED that any such change or elimination (a) shall become effective
only when there is no Security Outstanding created prior to the execution
of such supplemental indenture which is entitled to the benefit of such
provision or (b) shall not apply to any Outstanding Securities; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, PROVIDED that such action pursuant
to this clause (7) shall not adversely affect the interest of the Holders
of the Securities in any material respect or, in the case of the Securities
issued to BankUnited Capital and for so long as any of the corresponding
Preferred Securities issued by such BankUnited Capital shall remain
outstanding, the holders of such Preferred Securities; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities and to add
to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by
more than one Trustee, pursuant to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
54
<PAGE>
Section 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities affected by such supplemental
indenture, by Act of said Holders delivered to the Corporation and the Trustee,
the Corporation, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities under this Indenture; PROVIDED, HOWEVER, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) except to the extent permitted by Section 3.12 or as otherwise
specified as contemplated by Section 2.1 or Section 3.1 with respect to the
deferral of the payment of interest on the Securities, change the Stated
Maturity of the principal of, or any installment of interest (including any
Additional Interest) on, the Securities, or reduce the principal amount
thereof or the rate of interest thereon or reduce any premium payable upon
the redemption thereof, or change the place of payment where, or the coin
or currency in which, the Securities or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Security affected thereby;
PROVIDED, further, that, in the case of the Securities issued to BankUnited
Capital, so long as any of the corresponding Preferred Securities issued by
BankUnited Capital remains outstanding, (i) no such amendment shall be made
that adversely affects the holders of such Preferred Securities in any
material respect, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of
at least a majority of the aggregate Liquidation Amount of such Preferred
Securities then outstanding unless and until the principal (and premium, if
any) of the Securities and all accrued and, subject to Section 3.7, unpaid
interest (including any Additional Interest) thereon have been paid in full
and (ii) no amendment shall be made to Section 5.8 of this Indenture that
would impair the rights of the holders of Preferred Securities provided
therein without the prior consent of the holders of each Preferred Security
then outstanding unless and until the principal (and premium, if any) of
the Securities and all accrued and (subject to Section 3.7) unpaid interest
(including any Additional Interest) thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
55
<PAGE>
Section 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing or accepting the modifications thereby of the trust
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent have been complied with. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee' s own rights, duties or immunities under this Indenture or otherwise or
that may subject it to any liability.
Section 9.4. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.5. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Corporation, bear a notation in form approved by the Corporation as to any
matter provided for in such supplemental indenture. If the Corporation shall so
determine, new Securities so modified as to conform, in the opinion of the
Corporation, to any such supplemental indenture may be prepared and executed by
the Corporation and authenticated and delivered by the Trustee in exchange for
the Outstanding Securities.
56
<PAGE>
ARTICLE X
COVENANTS
Section 10.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Corporation covenants and agrees that it will duly and punctually
pay the principal of (and premium, if any) and interest on the Securities in
accordance with the terms of such Securities and this Indenture.
Section 10.2. MAINTENANCE OF OFFICE OR AGENCY.
The Corporation will maintain in the Place of Payment for the
Securities, an office or agency where the Securities may be presented or
surrendered for payment and an office or agency where the Securities may be
surrendered for transfer or exchange and where notices and demands to or upon
the Corporation in respect of the Securities and this Indenture may be served.
The Corporation initially appoints the Trustee, acting through its Corporate
Trust Office, as its agent for said purposes. The Corporation will give prompt
written notice to the Trustee of any change in the location of any such office
or agency. If at any time the Corporation shall fail to maintain such office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Corporation hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Corporation may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Corporation of its obligation to maintain an office or agency in the
Place of Payment for the Securities for such purposes. The Corporation will give
prompt written notice to the Trustee of any such designation and any change in
the location of any such office or agency.
Section 10.3. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Corporation shall at any time act as its own Paying Agent with
respect to the Securities, it will, on or before each due date of the principal
of (and premium, if any) or interest on any of the Securities, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal (and premium, if any) or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided, and will promptly notify the Trustee of its failure so to act.
Whenever the Corporation shall have one or more Paying Agents, it will,
prior to 10:00 a.m., New York City time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum to be
held in Trust for the benefit of the Persons entitled to such principal and
premium (if any) or interest, and (unless such Paying Agent is the Trustee) the
Corporation will promptly notify the Trustee of its failure so to act.
57
<PAGE>
The Corporation will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Corporation (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Corporation may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Corporation Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Corporation or such Paying Agent, such sums to be held by
the Trustee upon the same Trusts as those upon which such sums were held by the
Corporation or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Corporation, in trust for the payment of the principal of (and premium,
if any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid on Corporation Request to the Corporation, or (if then held by the
Corporation) shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Corporation for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Corporation as Trustee thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Corporation cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Corporation.
Section 10.4. STATEMENT AS TO COMPLIANCE.
The Corporation shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Corporation ending after the date hereof, an
Officers' Certificate executed by the Principal executive officer, principal
financial officer or principal accounting officer of the Corporation covering
the preceding calendar year, stating whether or not to the best knowledge of the
signers
58
<PAGE>
thereof the Corporation is in default in the performance, observance or
fulfillment of or compliance with any of the terms, provisions, covenants and
conditions of this Indenture, and if the Corporation shall be in default,
specifying all such defaults and the nature and status thereof of which they may
have knowledge. For the purpose of this Section 10.4, compliance shall be
determined without regard to any grace period (other than an Extension Period)
or requirement of notice provided pursuant to the terms of this Indenture.
Section 10.5. WAIVER OF CERTAIN COVENANTS.
The Corporation may omit in any particular instance to comply with any
covenant or condition provided pursuant to Section 3.1, 9.1(3) or 9.1(4) with
respect to the Securities, if before or after the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Securities
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Corporation in respect of any such covenant or condition shall remain in
full force and effect.
Section 10.6. ADDITIONAL SUMS.
In the case of the Securities issued to BankUnited Capital, so long as
no Event of Default has occurred and is continuing, in the event that (i)
BankUnited Capital is the Holder of all of the Outstanding Securities and (ii) a
Tax Event in respect of BankUnited Capital shall have occurred and be
continuing, the Corporation shall pay to BankUnited Capital (and its permitted
successors or assigns under the related Trust Agreement) as Holder of the
Securities for so long as BankUnited Capital (or its permitted successor or
assignee) is the registered holder of any Securities, such additional sums as
may be necessary in order that the amount of Distributions (including any
Additional Amounts (as defined in such Trust Agreement)) paid by BankUnited
Capital on the related Preferred Securities and Common Securities that at any
time remain outstanding in accordance with the terms thereof shall not be
reduced as a result of any Additional Taxes (the "Additional Sums"). Whenever in
this Indenture or the Securities there is a reference in any context to the
payment of principal of or interest on the Securities, such mention shall be
deemed to include mention of the payments of the Additional Sums provided for in
this paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional Sums in those
provisions hereof where such express mention is not made.
Section 10.7. ADDITIONAL COVENANTS.
The Corporation covenants and agrees with each Holder of Securities
that it shall not, and it shall not permit any Subsidiary of the Corporation to,
(a) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Corporation's
capital stock, or (b) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any indebtedness securities of the
Corporation that rank PARI PASSU with or junior in interest to the Securities or
make any guarantee payments with respect to any guarantee by the Corporation of
indebtedness securities of any subsidiary of the Corporation if such guarantee
ranks PARI PASSU with or junior in interest to the Securities (other than (a)
dividends or
59
<PAGE>
distributions in Common Stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a Rights Plan, the issuance of
any Common Stock of any class or series of preferred stock of the Corporation
under any Rights Plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the BankUnited Capital Guarantee,
and (d) purchases of Common Stock related to the issuance of Common Stock or
rights under any of the Corporation's benefit plans for its directors, officers
or employees) if at such time (i) there shall have occurred any event of which
the Corporation has actual knowledge that (A) with the giving of notice or the
lapse of time, or both, would constitute an Event of Default with respect to the
Securities and (B) in respect of which the Corporation shall not have taken
reasonable steps to cure, (ii) if the Securities are held by BankUnited Capital,
the Corporation shall be in default with respect to its payment of any
obligations under the BankUnited Capital Guarantee relating to the Preferred
Securities issued by BankUnited Capital or (iii) the Corporation shall have
given notice of its election to begin an Extension Period with respect to the
Securities as provided herein and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing. For purposes
hereof, the Corporation's Senior Debt shall not be deemed to be PARI PASSU with
the Securities.
The Corporation also covenants with each Holder of the Securities
issued to BankUnited Capital (i) to maintain directly or indirectly 100%
ownership of the Common Securities of BankUnited Capital; PROVIDED, HOWEVER,
that any permitted successor of the Corporation hereunder may succeed to the
Corporation's ownership of such Common Securities, (ii) as holder of the Common
Securities not to voluntarily terminate, wind-up or liquidate BankUnited Capital
and (a) in connection with a distribution of the Securities to the holders of
Preferred Securities in liquidation of BankUnited Capital or (b) in connection
with certain mergers, consolidations or amalgamations permitted by the related
Trust Agreement and (iii) to use its reasonable efforts, consistent with the
terms and provisions of such Trust Agreement, to cause BankUnited Capital to
remain classified as a grantor trust and not an association taxable as a
corporation for United States federal income tax purposes.
60
<PAGE>
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1. RIGHT OF REDEMPTION.
The Corporation, at its option, may redeem the Securities (i) on or
after December 31, 2006 in whole at any time or in part from time to time, or
(ii) upon the occurrence and during the continuation of a Tax Event, in whole
(but not in part) at any time within 90 days following the occurrence of such
Tax Event, in each case at a Redemption Price specified in the form of Security
set forth in Section 2.3.
Redemption of the Securities as permitted or required pursuant to this
Indenture shall be made in accordance with such form of Security and this
Article; PROVIDED, HOWEVER, that if any provision of the form of Security shall
conflict with any provision of this Article, the provision of the form of
Security shall govern. Each Security shall be subject to partial redemption only
in the amount of $1,000 or integral multiples thereof.
Section 11.2. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Corporation to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at the
election of the Corporation of any of the Securities, the Corporation shall, not
less than 45 nor more than 60 days prior to the Redemption Date (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee and, in
the case of Securities held by BankUnited Capital, the related Property Trustee
of such date and of the principal amount of the Securities to be redeemed and
provide the additional information required to be included in the notice or
notices contemplated by Section 11.4. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities, the Corporation shall furnish the
Trustee with an Officers' Certificate and an Opinion of Counsel evidencing
compliance with such restriction.
Section 11.3. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security.
The Trustee shall promptly notify the Corporation in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Corporation shall so direct, Securities registered in the name
of the Corporation, any Affiliate or any Subsidiary thereof shall not be
included in the Securities selected for redemption.
Section 11.4. NOTICE OF REDEMPTION.
61
<PAGE>
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day, and not earlier than the
sixtieth day, prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities to be redeemed, each notice of redemption
shall identify the Securities to be redeemed (including CUSIP number) and shall
state:
(a) the Redemption Date;
(b) the Redemption Price or if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, the
estimate of the Redemption Price provided pursuant to the Indenture
together with a statement that it is an estimate and that the actual
Redemption Price will be calculated on the third Business Day prior to
the Redemption Date (if such an estimate of the Redemption Price is
given, a subsequent notice shall be given as set forth above setting
forth the Redemption Price promptly following the calculation
thereof);
(c) if less than all Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption, the
respective principal amounts) of the particular Securities to be
redeemed;
(d) that on the Redemption Date, the Redemption Price will become
due and payable upon each such Security or portion thereof, and that
interest thereon, if any, shall cease to accrue on and after said
date;
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price; and
(f) such other provisions as may be required in respect of the
terms of the Securities.
Notice of redemption of the Securities to be redeemed at the election
of the Corporation shall be given by the Corporation or, at the Corporation's
request, by the Trustee in the name and at the expense of the Corporation and
shall not be irrevocable. The notice if mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives such notice. In any case, a failure to give such notice by mail
or any defect in the notice to the Holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
Section 11.5. DEPOSIT OF REDEMPTION PRICE.
Prior to 10:00 a.m. New York City time on the Redemption Date specified
in the notice of redemption given as provided in Section 11.4, the Corporation
will deposit with the Trustee or with one or more Paying Agents (or if the
Corporation is acting as its own Paying Agent, the Corporation will segregate
and hold in trust as provided in Section 10.3) an amount of money sufficient to
pay the Redemption Price of, and any accrued interest (including Additional
Interest) on, all the Securities which are to be redeemed on that date.
Section 11.6. PAYMENT OF SECURITIES CALLED FOR REDEMPTION.
62
<PAGE>
If any notice of redemption has been given as provided in Section 11.4,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date. On
presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said Securities or the specified portions thereof shall be
paid and redeemed by the Corporation at the applicable Redemption Price,
together with accrued interest (including any Additional Interest) to the
Redemption Date; PROVIDED, HOWEVER, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant record dates according to their terms and the
provisions of Section 3.7.
Upon presentation of any Security redeemed in part only, the
Corporation shall execute and the Trustee shall authenticate and deliver to the
Holder thereof, at the expense of the Corporation, a new Security or Securities,
of authorized denominations, in aggregate principal amount equal to the
unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms. If a Global Security is so surrendered,
such new Security (subject to Section 3.5) will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
ARTICLE XII
SUBORDINATION OF SECURITIES
Section 12.1. SECURITIES SUBORDINATE TO SENIOR DEBT.
The Corporation covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Debt.
Section 12.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Corporation or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Corporation, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company (each such event, if any, herein sometimes referred to as a
"Proceeding"), then and in any such event the holders of Senior Debt shall be
entitled to receive payment in full of all amounts due or to become due on or in
respect of all Senior Debt, or provision shall be made for such payment in money
or money's worth, before the Holders of the Securities are entitled to receive
any payment on account of principal of (or premium, if any) or interest on the
63
<PAGE>
Securities or on account of the purchase or other acquisition of Securities, and
to that end the holders of Senior Debt shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any kind or
character, whether in cash, property or securities, which may be payable or
deliverable in respect of the Securities in any such case, proceeding,
dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security (or any Person on its behalf
shall have received any payment or distribution of assets of the Corporation of
any kind or character, whether in cash, property or securities, before all
Senior Debt is paid in full or payment thereof provided for, and if such fact
shall, at or prior to the time of such payment or distribution have been made
known to the Trustee or, as the case may be, such Holder, then and in such event
such payment or distribution shall be paid over or delivered forthwith to the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other Person making payment or distribution of assets of the Corporation for
application to the payment of all Senior Debt remaining unpaid, to the extent
necessary to pay all Senior Debt in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Corporation as
reorganized or readjusted, or securities of the Corporation or any other
corporation provided for by a plan of reorganization or readjustment, in each
case, which are subordinated in right of payment to all Senior Debt which may at
the time be outstanding to the same extent as, or to a greater extent than, the
Securities are so subordinated as provided in this Article. The consolidation of
the Corporation with, or the merger of the Corporation into, another Person or
the liquidation or dissolution of the Corporation following the conveyance or
transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article VIII shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshalling of assets and liabilities of the
Corporation for the purposes of this Section if the Person formed by such
consolidation or into which the Corporation is merged or the Person which
acquires by conveyance, transfer or lease such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the conditions
set forth in Article VIII.
Section 12.3. PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF SECURITIES.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior Debt shall
be entitled to receive payment in full of all amounts due or to become due on or
in respect of all Senior Debt, or provision shall be made for such payment in
cash, before the Holders of the Securities are entitled to receive any payment
of the principal of, premium, if any, or interest on the Securities or on
account of the purchase or other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Corporation shall
make any payment to the Trustee or to or on behalf of the Holder of any Security
prohibited by the foregoing provisions of this Section, and if such fact shall,
at or prior to the time of such payment, have been made known to the Trustee or,
as the case may be, such Holder, then and in such event such payment shall be
paid over and delivered forthwith to the Corporation.
64
<PAGE>
The provisions of this Section shall not apply to any payment with
respect to which Section 12.2 would be applicable.
Section 12.4. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior Debt
beyond any applicable grace period with respect thereto, or in the event that
any event of default with respect to any Senior Debt shall have occurred and be
continuing permitting the holders of such Senior Debt (or a Trustee on behalf of
the holders thereof) to declare such Senior Debt due and payable prior to the
date on which it would otherwise have become due and payable, unless and until
such event of default shall have been cured or waived or shall have ceased to
exist and any such acceleration shall have been rescinded or annulled, or (b) in
the event any judicial proceeding shall be pending with respect to any such
default in payment, or event of default, then no payment shall be made by the
Corporation on account of principal of (or premium, if any) or interest on the
Securities or on account of the purchase or other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Corporation shall
make any payment to the Trustee or to or on behalf of the Holder of any Security
prohibited by the foregoing provisions of this Section, and if such fact shall,
at or prior to the time of such payment, have been made known to the Trustee or,
as the case may be, such Holder, then and in such event such payment shall be
paid over and delivered forthwith to the Corporation.
The provisions of this Section shall not apply to any payment with
respect to which Section 12.2 would be applicable.
Section 12.5. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Corporation, at any time except
during the pendency of any case, proceeding, dissolution, liquidation or other
winding up, assignment for the benefit of creditors or other marshalling of
assets and liabilities of the Corporation referred to in Section 12.2 or under
the conditions described in Section 12.3 or 12.4, from making payments at any
time of principal of (and premium, if any) or interest on the Securities, or (b)
the application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of (and premium, if any) or interest
on the Securities of any series or the retention of such payment by the Holder,
if, at the time of such application by the Trustee, it did not have actual
knowledge that such payment would have been prohibited by the provisions of this
Article.
Section 12.6. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all amounts due or to become due on
all Senior Debt, or the provision for such payment in cash or cash equivalents
or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders
of the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Debt pursuant to the provisions
of this Article (equally and ratably with the holders of all indebtedness of the
Corporation which by its express terms is subordinated to Senior Debt of the
Corporation to substantially the same extent as the Securities are subordinated
to the Senior Debt and is entitled to like rights of subrogation by reason of
any
65
<PAGE>
payments or distributions made to holders of such Senior Debt) to the rights
of the holders of such Senior Debt to receive payments and distributions of
cash, property and securities applicable to the Senior Debt until the principal
of (and premium, if any) and interest on the Securities shall be paid in full.
For purposes of such subrogation, no payments or distributions to the holders of
the Senior Debt of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Debt by Holders of the Securities or the Trustee, shall, as
among the Corporation, its creditors other than holders of Senior Debt, and the
Holders of the Securities, be deemed to be a payment or distribution by the
Corporation to or on account of the Senior Debt.
Section 12.7. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as between the Corporation and the Holders of the
Securities, the obligations of the Corporation, which are absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Corporation of the
Holders of the Securities and creditors of the Corporation other than their
rights in relation to the holders of Senior Debt; or (c) prevent the Trustee or
any Holder of the Securities from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture including, without limitation,
filing and voting claims in any Proceeding, subject to the rights, if any, under
this Article of the holders of Senior Debt to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
Section 12.8. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of the Securities by his or her acceptance thereof
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to acknowledge or effectuate the subordination
provided in this Article and appoints the Trustee his or her attorney-in-fact
for any and all such purposes.
Section 12.9. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Corporation or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Corporation with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof that any such holder may
have or be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of
66
<PAGE>
payment of, or renew or alter, Senior Debt, or otherwise amend or supplement
in any manner Senior Debt or any instrument evidencing the same or any agreement
under which Senior Debt is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Debt; (iii) release any Person liable in any manner for the collection of Senior
Debt; and (iv) exercise or refrain from exercising any rights against the
Corporation and any other Person.
Section 12.10. NOTICE TO TRUSTEE.
The Corporation shall give prompt written notice to the Trustee of any
fact known to the Corporation which would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the provisions
of this Article or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Corporation or a holder of Senior Debt or from any trustee, agent or
representative therefor; PROVIDED, HOWEVER, that if the Trustee shall not have
received the notice provided for in this Section at least two Business Days
prior to the date upon which by the terms hereof any monies may become payable
for any purpose (including, without limitation, the payment of the principal of
(and premium, if any) or interest (including any Additional Interest) on any
Security), then, anything herein contained to the contrary notwithstanding, 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 within two Business
Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Debt (or a trustee or attorney-in-fact
therefor) to establish that such notice has been given by a holder of Senior
Debt (or a trustee or attorney-in-fact therefor). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Debt to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Debt held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Section 12.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Corporation referred
to in this Article, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt and
other indebtedness of the Corporation, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
67
<PAGE>
Section 12.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee, in its capacity as trustee under this Indenture, shall not
be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not
be liable to any such holders if it shall in good faith mistakenly pay over or
distribute to Holders of Securities or to the Corporation or to any other Person
cash, property or securities to which any holders of Senior Debt shall be
entitled by virtue of this Article or otherwise. With respect to the holders of
Senior Debt, the Trustee undertakes to perform or to observe only such of its
covenants or obligations as are specifically set forth in this Article and no
implied covenants or obligations with respect to holders of Senior Debt shall be
read into this Indenture against the Trustee.
Section 12.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.7.
Section 12.14. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Corporation and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee.
*****************
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
68
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
BANKUNITED FINANCIAL CORPORATION
By: ____________________________
THE BANK OF NEW YORK
as Trustee
By: ____________________________
69
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, dated as of March 24, 1997 (the "Supplemental
Inden ture"), between BANKUNITED FINANCIAL CORPORATION, a Florida corporation
(hereinafter called the "Corporation") having its principal office at 255
Alhambra Circle, Coral Gables, Florida 33134, and THE BANK OF NEW YORK, a New
York banking corporation, as Trustee (hereinafter called the "Trustee"), entered
into pursuant to the provisions of the JUNIOR SUBOR DINATED INDENTURE, dated as
of December 30, 1996 (the "Indenture"), between the Corpora tion and the
Trustee.
Whereas, the Indenture provides for the issuance by the Corporation of
10 1/4% Junior Subor dinated Deferrable Interest Debentures, Series A, due
December 31, 2026 ("Series A Debentures"), in an aggregate principal amount of
no more than $52,000,000;
Whereas, pursuant to the terms of the Indenture the Corporation issued
$52,000,000 of Series A Debentures to evidence loans made to the Corporation of
the proceeds from the issuance by a business trust ("BankUnited Capital") of
preferred trust interests in BankUnited Capital (the "Preferred Securities") and
common interests in BankUnited Capital (the "Common Securities" and,
collectively with the Preferred Securities, the "Trust Securities");
Whereas, Section 9.2 of the Indenture provides, among other things,
that the Corporation and the Trustee may enter into an indenture or indentures
supplemental to the Indenture for the purpose of changing in any manner the
provisions of the Indenture, except as provided in subsections (1), (2) and (3)
thereof, with the consent of the holders of not less than a majority in
principal amount of the Series A Debentures;
Whereas, the Corporation wishes to issue an additional $20,800,000 of
Series A Debentures ("New Series A Debentures") to evidence additional loans to
be made to the Corporation of the proceeds from an additional issuance by
BankUnited Capital of $20,000,000 of Preferred Securities ("New Preferred
Securities") and an additional $800,000 of Common Securities ("New Common
Securities");
Whereas, the Corporation intends that the New Series A Debentures and
the New Preferred Securities have the same rights, terms and conditions as the
Series A Debentures and the Preferred Securities;
Whereas, the Corporation, by corporate action duly taken, has
authorized the execution of this Supplemental Indenture and the issuance of the
New Series A Debentures; and
Whereas, all other conditions have been complied with, all actions have
been taken and all things have been done which are necessary to make the Series
A Debentures, when executed by the Corporation and authenticated by or on behalf
of the Trustee and when delivered as provided in the Indenture, the valid
obligations of the Corporation and to make this Supplemental Indenture a valid
and binding supplemental indenture.
-1-
<PAGE>
NOW, THEREFORE, in consideration of the premises and the purchase of
New Series A Debentures by the holders thereof, it is mutually covenanted and
agreed that the Indenture is supplemented to provide in Section 3.1 thereof for
the issuance by the Corporation under the Indenture of an aggregate principal
amount of $72,800,000 of Series A Debentures, to revise the form of the Series A
Debentures as set forth in Annex C to this Supplemental Indenture dated March
24, 1997, and to revise certain of the definitions in Section 1.1 of the
Indenture as follows:
"GUARANTEE AGREEMENT" means the Guarantee Agreement substantially in
the form attached to this Supplemental Indenture dated March 24, 1997 as Annex
B, or substantially in such form as may be specified as contemplated by Section
3.1 of the Indenture with respect to the Securities, as amended from time to
time.
"REGISTRATION PENALTY" has the meaning set forth in the Registration
Rights Agreement dated as of December 30, 1996 among the Corporation, BankUnited
Capital and Friedman, Billings, Ramsey & Co., Inc. and Raymond James &
Associates, Inc., and in the Registration Rights Agreement dated as of March 24,
1997 among the Corporation, BankUnited Capital and Friedman, Billings, Ramsey &
Co., Inc.
"TRUST AGREEMENT" means the Amended and Restated Trust Agreement
substantially in the form attached to this Supplemental Indenture dated March
24, 1997 as Annex A, or substantially in such form as may be specified as
contemplated by Section 3.1 of the Indenture with respect to the Securities, in
each case as amended from time to time.
In all other respects, the terms, covenants and provisions of the
Indenture shall remain as specified in the Indenture.
* * * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
BANKUNITED FINANCIAL CORPORATION
By: ----------------------------------
THE BANK OF NEW YORK
as Trustee
By:-----------------------------------
-2-
CERTIFICATE OF TRUST
OF
BANKUNITED CAPITAL
THIS Certificate of Trust of BankUnited Capital (the "Trust"), dated as of
December 13, 1996, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
DEL.C. Section 3801, ET SEQ.)
1. NAME. The name of the business trust formed hereby is BankUnited
Capital.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are The Bank
of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first-above written.
THE BANK OF NEW YORK (DELAWARE), as Trustee
By: /s/ JOSEPH G. ERNST
-------------------------------
Name: JOSEPH G. ERNST
Title: Assistant Vice President
JAMES A. DOUGHERTY, as Trustee
-------------------------------
/s/JAMES A. DOUGHERTY
NANCY L. ASHTON, as Trustee
/s/ NANCY L. ASHTON
-------------------------------
================================================================================
AMENDED AND RESTATED TRUST AGREEMENT
AMONG
BANKUNITED FINANCIAL CORPORATION,
AS DEPOSITOR,
THE BANK OF NEW YORK,
AS PROPERTY TRUSTEE,
THE BANK OF NEW YORK (DELAWARE),
AS DELAWARE TRUSTEE,
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF MARCH 24, 1997
BANKUNITED CAPITAL
================================================================================
<PAGE>
BANKUNITED CAPITAL
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE TRUST AGREEMENT
ACT SECTION SECTION
- --------------- ---------------
<S> <C>
(Section) 310 (a)(1)......................................................................... 8.7
(a)(2)......................................................................... 8.7
(a)(3)......................................................................... 8.9
(a)(4)......................................................................... 2.7(a)(ii)
(Section) 311 (a)............................................................................ 8.8
(b)............................................................................ 8.13
(c)............................................................................ 8.13
(Section) 312 (a)............................................................................ 5.7
(b)............................................................................ 5.7
(c)............................................................................ 5.7
(Section) 313 (a)............................................................................ 8.14(a)
(a)(4)......................................................................... 8.14(b)
(b)............................................................................ 8.14(b)
(c)............................................................................ 10.8
(d)............................................................................ 8.14(c)
(Section) 314 (a)............................................................................ 8.15
(b)............................................................................ Not Applicable
(c)(1)......................................................................... 8.16
(c)(2)......................................................................... 8.16
(c)(3)......................................................................... Not Applicable
(d)............................................................................ Not Applicable
(e)............................................................................ 1.1, 8.16
(Section) 315 (a)............................................................................ 8.1(a), 8.3(a)
(b)............................................................................ 8.2, 10.8
(c)............................................................................ 8.1(a)
(d)............................................................................ 8.1, 8.3
(e)............................................................................ Not Applicable
(Section) 316 (a)............................................................................ Not Applicable
(a)(1)(A)...................................................................... Not Applicable
(a)(1)(B)...................................................................... Not Applicable
(a)(2)......................................................................... Not Applicable
(b)............................................................................ 5.14
(c)............................................................................ 6.7
(Section) 317 (a)(1)......................................................................... Not Applicable
(a)(2)......................................................................... Not Applicable
(b)............................................................................ 5.9
(Section) 318 (a)............................................................................ 10.10
- -------------
Note: This reconciliation and tie sheet shall not, for any purpose, be
deemed to be a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINED TERMS 1
Section 1.1. Definitions..........................................................1
ARTICLE II. CONTINUATION OF THE TRUST........................................................11
Section 2.1. Name................................................................11
Section 2.2. Office of the Delaware Trustee; Principal Place of Business.........11
Section 2.3. Initial Contribution of Trust Property; Organization Expenses.......11
Section 2.4. Issuance of the Preferred Securities................................12
Section 2.5. Issuance of the Common Securities; Subscription and
Purchase of Debentures............................................12
Section 2.6. Declaration of Trust................................................12
Section 2.7. Authorization to Enter into Certain Transactions....................13
Section 2.8. Assets of Trust.....................................................16
Section 2.9. Title to Trust Property.............................................17
ARTICLE III. PAYMENT ACCOUNT.................................................................17
Section 3.1. Payment Account.....................................................17
ARTICLE IV. DISTRIBUTIONS; REDEMPTION........................................................17
Section 4.1. Distributions.......................................................17
Section 4.2. Redemption..........................................................18
Section 4.3. Subordination of Common Securities..................................21
Section 4.4. Payment Procedures..................................................21
Section 4.5. Tax Returns and Reports.............................................22
Section 4.6. Payment of Taxes, Duties, Etc. of the Trust........................22
Section 4.7. Payments under Indenture or Pursuant to Direct Actions..............22
ARTICLE V. TRUST SECURITIES..................................................................22
Section 5.1. Initial Ownership...................................................22
Section 5.2. The Trust Securities................................................22
Section 5.3. Execution and Delivery of Trust Securities..........................23
Section 5.4. Global Preferred Securities.........................................23
Section 5.5. Registration of Transfer and Exchange of Preferred Securities.......25
Section 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates..29
Section 5.7. Persons Deemed Securityholders......................................29
Section 5.8. Access to List of Securityholders' Names and Addresses..............30
Section 5.9. Maintenance of Office or Agency.....................................30
Section 5.10. Appointment of Paying Agent.........................................30
Section 5.11. Ownership of Common Securities by Depositor.........................31
Section 5.12. Notices to Clearing Agency..........................................31
Section 5.13. Definitive Preferred Securities and Temporary Preferred Securities..31
Section 5.14. Rights of Securityholders...........................................32
ARTICLE VI. ACTS OF SECURITYHOLDERS; MEETINGS; VOTING........................................34
Section 6.1. Limitations on Voting Rights........................................34
Section 6.2. Notice of Meetings..................................................35
Section 6.3. Meetings of Preferred Securityholders...............................35
Section 6.4. Voting Rights.......................................................36
Section 6.5. Proxies, etc........................................................36
Section 6.6. Securityholder Action by Written Consent............................36
<PAGE>
Section 6.7. Record Date for Voting and Other Purposes...........................36
Section 6.8. Acts of Securityholders.............................................36
Section 6.9. Inspection of Records...............................................37
ARTICLE VII. REPRESENTATIONS AND WARRANTIES...................................................38
Section 7.1. Representations and Warranties of the Property Trustee and
the Delaware Trustee..............................................38
Section 7.2. Representations and Warranties of Depositor.........................39
ARTICLE VIII. THE TRUSTEES...................................................................39
Section 8.1. Certain Duties and Responsibilities.................................39
Section 8.2. Certain Notices.....................................................41
Section 8.3. Certain Rights of Property Trustee..................................41
Section 8.4. Not Responsible for Recitals or Issuance of Securities..............44
Section 8.5. May Hold Securities.................................................44
Section 8.6. Compensation; Indemnity; Fees.......................................44
Section 8.7. Corporate Property Trustee Required; Eligibility of Trustees........45
Section 8.8. Conflicting Interests...............................................45
Section 8.9. Co-Trustees and Separate Trustee....................................46
Section 8.10. Resignation and Removal; Appointment of Successor...................47
Section 8.11. Acceptance of Appointment by Successor..............................48
Section 8.12. Merger, Conversion, Consolidation or Succession to Business.........49
Section 8.13. Preferential Collection of Claims Against Depositor or Trust........49
Section 8.14. Reports by Property Trustee.........................................50
Section 8.15. Reports to the Property Trustee.....................................51
Section 8.16. Evidence of Compliance with Conditions Precedent....................51
Section 8.17. Number of Trustees..................................................51
Section 8.18. Delegation of Power.................................................52
ARTICLE IX. TERMINATION, LIQUIDATION AND MERGER..............................................52
Section 9.1. Termination Upon Expiration Date....................................52
Section 9.2. Early Termination...................................................52
Section 9.3. Termination.........................................................53
Section 9.4. Liquidation.........................................................53
Section 9.5. Mergers, Consolidations, Amalgamations or Replacements
of the Trust......................................................54
ARTICLE X. MISCELLANEOUS PROVISIONS..........................................................55
Section 10.1. Limitation of Rights of Securityholders.............................55
Section 10.2. Amendment...........................................................55
Section 10.3. Separability........................................................57
Section 10.4 Governing Law.......................................................57
Section 10.5. Payments Due on Non-Business Day....................................57
Section 10.6. Successor...........................................................57
Section 10.7. Headings............................................................57
Section 10.8. Reports, Notices and Demands........................................57
Section 10.9. Agreement Not to Petition...........................................58
Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act..............58
Section 10.11. Acceptance of Terms of Trust Agreement, Guarantee and Indenture ....59
</TABLE>
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of March 24, 1997, among
(i) BankUnited Financial Corporation, a Florida corporation (including any
successors or assigns, the "Depositor"), (ii) The Bank of New York, a banking
corporation organized under the laws of the State of New York, as property
trustee (in such capacity, the "Property Trustee" and, in its separate corporate
capacity and not in its capacity as Property Trustee, the "Bank"), (iii) The
Bank of New York (Delaware), a banking corporation organized under the laws of
the State of Delaware, as Delaware trustee (the "Delaware Trustee"), (iv) Nancy
Ashton, an individual, and James Dougherty, an individual, each of whose address
is c/o BankUnited Financial Corporation, 255 Alhambra Circle, Coral Gables,
Florida 33134 (each an "Administrative Trustee" and collectively, the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee and the
Administrative Trustees referred to collectively as the "Trustees") and (v) the
several Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor, the Property Trustee and the Delaware Trustee
have heretofore duly declared and established a business trust, BankUnited
Capital, pursuant to the Delaware Business Trust Act by entering into that
certain Trust Agreement dated as of December 13, 1996 and by the execution and
filing by the Property Trustee and the Delaware Trustee with the Secretary of
State of the State of Delaware of the Certificate of Trust, filed on December
13, 1996, attached as Exhibit A;
WHEREAS, the parties hereto entered into that certain Amended and
Restated Trust Agreement, dated as of December 30, 1996 (the "Original Trust
Agreement");
WHEREAS, the parties hereto desire to amend and restate the Original
Trust Agreement in its entirety as set forth herein in order to INTER ALIA,
authorize the issuance of additional Trust Securities;
Now THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, as hereinafter defined, hereby
amends and restates the Original Trust Agreement in its entirety and agrees as
follows:
ARTICLE I
DEFINED TERMS
Section 1.1. Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have
the meanings assigned to them in this Article and include the
plural as well as the singular;
<PAGE>
(b) all other terms used herein that are
defined in the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them therein;
(c) unless the context otherwise requires,
any reference to an "Article" or a "Section" refers to an
Article or a Section, as the case may be, of this Trust
Agreement; and
(d) the words "herein", "hereof and
"hereunder" and other words of similar import refer to this
Trust Agreement as a whole and not to any particular article,
Section or other subdivision.
"Accredited Investor" means an accredited investor within the meaning
of Rule 501(a) of Regulation D under the Securities Act.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust formed and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor Trustee
appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Preferred Security, the rules and procedures of
the Clearing Agency for such Global Preferred Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a
court having jurisdiction in the premises judging such Person
a bankrupt or insolvent, or approving as properly
-2-
<PAGE>
filed a petition seeking reorganization, arrangement,
adjudication or composition of or in respect of such Person
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its
property or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of
proceedings to be adjudicated a bankrupt or insolvent, or the
consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any
applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to
the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, Trustee, sequestrator (or
similar official) of such Person or of any substantial part of
its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due and
its willingness to be adjudicated a bankrupt, or the taking of
corporate action by such Person in furtherance of any such
action.
"Bankruptcy Laws" has the meaning specified in Section 10.9.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the Trustees.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Certificate Depository Agreement" means one or more of the agreements
among the Trust, the Depositor and The Depository Trust Company, as the initial
Clearing Agency relating to the Trust Securities Certificates, substantially in
the form attached as Exhibit B, as the same may be amended and supplemented from
time to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depository Trust Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
-3-
<PAGE>
"Closing Date" means the date specified as the Closing Time as set
forth in the New Purchase Agreement.
"Closing Time" has the meaning specified in the New Purchase Agreement.
"Code " means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $1,000 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" or "Common Securities Certificates"
means one or more certificates evidencing ownership of Common Securities,
substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal corporate trust office of the Property Trustee
located in New York, New York, and (ii) when used with respect to the Debenture
Trustee, the principal corporate trust office of the Debenture Trustee located
in New York, New York.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means The Bank of New York, a banking corporation
organized under the laws of the State of New York, and any successor thereto.
"Debentures" means the aggregate principal amount of the Depositor's 10
1/4% Junior Subordinated Deferrable Interest Debentures, Series A, issued
pursuant to the Indenture.
"Definitive Preferred Security" means a Preferred Security issued in
certificated, fully registered form (non-global) as provided in Section 5.2, 5.4
or 5.12, substantially in the form set forth in Exhibit D-2.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. (Section.) 3801, et seq., as it may be amended from
time to time.
-4-
<PAGE>
"Delaware Trustee" means the Person identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Delaware Trustee of the Trust created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor Trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1 (a).
"Distribution" means amounts payable in respect of the Trust Securities
as provided in Section 4.1.
"Distributions" has the meaning specified in Section 4.1(a).
"DTC" means The Depository Trust Company.
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of
Default; or
(b) default by the Trust in the payment of
any Distribution when it becomes due and payable, and
continuation of such default for a period of 30 days; or
(c) default by the Trust in the payment of
any Redemption Price of any Trust Security when it becomes due
and payable; or
(d) default in the performance, or breach,
in any material respect, of any covenant or warranty of the
Trustees in this Trust Agreement (other than a covenant or
warranty a default in the performance or breach of which is
dealt with in clause (b) or (c) above) and continuation of
such default or breach for a period of 60 days after there has
been given, by registered or certified mail, to the defaulting
Trustee or Trustees by the Holders of at least 25% in
aggregate Liquidation Amount of the Outstanding Preferred
Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event
with respect to the Property Trustee and the failure by the
Depositor to appoint a successor Property Trustee within 60
days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
-5-
<PAGE>
"Expense Agreement" means one or more Agreements as to Expenses and
Liabilities between the Depositor and the Trust, substantially in the form
attached as Exhibit G, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Global Preferred Security" means each Preferred Security registered in
the Securities Register in the name of a Clearing Agency or a nominee thereof
and includes Global 144A Preferred Securities.
"Global Rule 144A Preferred Security" has the meaning specified in
Section 5.2.
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor, as Guarantor, and The Bank of New York, as Trustee, for the benefit
of the Holders of the Preferred Securities, as amended from time to time.
"Indenture" means the Junior Subordinated Indenture, dated as of
December 30, 1996, between the Depositor and the Debenture Trustee, as Trustee,
as amended or supplemented from time to time.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture the proceeds of which will be used to pay the Redemption Price of such
Trust Securities, and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a dissolution or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"New Purchase Agreement" means the Purchase Agreement, dated as of
March 18, 1997, among the Trust, the Depositor, BankUnited, FSB and the Initial
Purchaser named therein.
"New Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 24, 1997, among the Trust, the Depositor and the
Initial Purchaser defined therein.
-6-
<PAGE>
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman,
Chief Executive Officer and President or a Vice President, and by the Treasurer,
an Associate Treasurer, an Assistant Treasurer, the Controller, the Secretary or
an Assistant Secretary, of the Depositor, and delivered to the appropriate
Trustee. One of the officers signing an Officers' Certificate given pursuant to
Section 8.15 shall be the principal executive, financial or accounting officer
of the Depositor. Any Officers' Certificates delivered with respect to
compliance with a condition or covenant provided for in this Trust Agreement
shall include:
(a) a statement that each officer signing
the Officers' Certificate has read the covenant or condition
and the definitions relating thereto;
(b) a brief statement of the nature and
scope of the examination or investigation undertaken by each
officer in rendering the Officers' Certificate;
(c) a statement that each such officer has
made such examination or investigation as, in such officer's
opinion, is necessary to enable such officer to express an
informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the
opinion of each such officer, such condition or covenant has
been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Depositor, but not an
employee of any thereof, and who shall be reasonably acceptable to the Property
Trustee.
"Original Preferred Securities" has the meaning specified in Section
2.4.
"Original Trust Agreement" has the meaning specified in the preamble
to this Trust Agreement.
"Other Preferred Securities" means the Preferred Securities sold to
Accredited Investors in reliance on an exemption from the registration
requirements of the Securities Act other than Rule 144A as set forth in Section
3 of the Purchase Agreement or Section 3 of the New Purchase Agreement.
"Outstanding", when used with respect to Trust Securities, means, as of
the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Trust Securities theretofore cancelled
by the Property Trustee or delivered to the Property Trustee
for cancellation;
(b) Trust Securities for whose payment or
redemption money in the necessary amount has been therefore
deposited with the Property Trustee or any
-7-
<PAGE>
Paying Agent for the Holders of such Trust Securities;
provided that, if such Trust Securities are to be redeemed,
notice of such redemption has been duly given pursuant to
this Trust Agreement; and
(c) Trust Securities which have been paid or
in exchange for or in lieu of which other Preferred Securities
have been executed and delivered pursuant to Sections 5.4,
5.5, 5.11 and 5.13; provided, however, that in determining
whether the Holders of the requisite Liquidation Amount of the
Outstanding Preferred Securities have given any request,
demand, authorization, direction, notice, consent or waiver
hereunder, Preferred Securities owned by the Depositor, any
Trustee or any Affiliate of the Depositor or any Trustee shall
be disregarded and deemed not to be Outstanding, except that
(a) in determining whether any Trustee shall be protected in
relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Preferred
Securities that such Trustee actually knows to be so owned
shall be so disregarded and (b) the foregoing shall not apply
at any time when all of the outstanding Preferred Securities
are owned by the Depositor, one or more of the Trustees or any
such Affiliate. Preferred Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Administrative
Trustees the pledgee's right so to act with respect to such
Preferred Securities and that the pledgee is not the Depositor
or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a beneficial
interest in a Global Preferred Security as reflected in the records of the
Clearing Agency or, if a Clearing Agency participant is not the Owner, then as
reflected in the records of a Person maintaining an account with such Clearing
Agency (directly or indirectly, in accordance with the rules of such Clearing
Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.10 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its corporate
trust department for the benefit of the Securityholders in which all amounts
paid in respect of the Debentures will be held and from which the Property
Trustee, through the Paying Agent, shall make payments to the Securityholders in
accordance with Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $1,000 and having the rights
provided therefor in this Trust Agreement including the right to receive
Distributions and a Liquidation Distribution as provided herein.
-8-
<PAGE>
"Preferred Securities Certificate" or "Preferred Securities
Certificates" means one or more certificates evidencing ownership of Preferred
Securities, substantially in the form attached as Exhibit D-1 or D-2.
"Property Trustee" means the Person identified as the "property
trustee" in the preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Trust heretofore created and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor property trustee appointed as herein provided.
"Purchase Agreement" means the Purchase Agreement, dated as of December
23, 1996, among the Trust, the Depositor, BankUnited, FSB and the Initial
Purchasers named therein.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a like Amount of
Debentures allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Securities.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 30, 1996, among the Trust, the Depositor and the
Initial Purchasers named therein.
"Regulation D" means Regulation D under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Responsible Officer" means, when used with respect to the Property
Trustee, any officer assigned to the Corporate Trust Office, including any vice
president, assistant vice president, assistant treasurer or any other officer of
the Property Trustee customarily performing functions similar to those performed
by any of the above designated officers, and also, with respect to a particular
matter, any other officer, to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject and with
respect to the Delaware Trustee, any officer of the Delaware Trustee customarily
performing functions similar to those performed by any of the above designated
officers, and also, with respect to a particular matter, any other officer, to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Restricted Preferred Securities" means all Preferred Securities
required pursuant to Section 5.5(c) to bear a Restricted Preferred Securities
Legend.
-9-
<PAGE>
"Restricted Preferred Securities Legend" means a legend substantially
in the form of a Legend required on Exhibit D-2 to be placed on non-global
Definitive Preferred Securities issued to Accredited Investors.
"Restricted Security Certificate" means a certificate substantially in
the form set forth in Exhibit E.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Preferred Securities" means the Preferred Securities sold to
qualified institutional buyers as defined in Rule 144A as set forth in Section 3
of the Purchase Agreement or Section 3 of the New Purchase Agreement..
"Rule 144A Preferred Securities Legend" means a legend substantially in
the form of the legend required in Exhibit D-1 to be placed upon the Rule 144A
Preferred Securities.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Securities Act Legend" means a Rule 144A Preferred Securities Legend.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.5.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Trust Securities are registered in the Securities Register; any such
Person shall be a beneficial owner within the meaning of the Delaware Business
Trust Act; provided, however, that in determining whether the Holders of the
requisite amount of Outstanding Preferred Securities have voted on any matter
provided for in this Trust Agreement, then for the purpose of any such
determination, so long as Definitive Preferred Securities Certificates have not
been issued, the term Security- holders or Holders as used herein shall refer to
the Owners.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all exhibits hereto and (ii) for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern of this Trust Agreement and any such modification, amendment
or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
-10-
<PAGE>
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Property Trustee pursuant to the Trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Unrestricted Securities Certificate" means a certificate substantially
in the form set forth in Exhibit F.
ARTICLE II.
CONTINUATION OF THE TRUST
Section 2.1. Name.
The Trust continued hereby shall be known as "BankUnited Capital", as
such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Trust Securities and the other
Trustees, in which name the Trustees may conduct the business of the Trust, make
and execute contracts and other instruments on behalf of the Trust and sue and
be sued.
Section 2.2. Office of the Delaware Trustee; Principal Place of Business.
The address of the Delaware Trustee in the State of Delaware is c/o The
Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
19711, Attention: Corporate Trust Department, or such other address in the State
of Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the Trust
is c/o BankUnited Financial Corporation, 255 Alhambra Circle, Coral Gables,
Florida 33134.
Section 2.3. Initial Contribution of Trust Property; Organizational
Expenses.
The Property Trustee acknowledged receipt in Trust from the Depositor
in connection with the creation of the Trust of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as agreed to in writing from time to time as they arise or
shall, upon written request of any Trustee, promptly reimburse such Trustee for
any such expenses paid by such Trustee. The Depositor shall make no claim upon
the Trust Property for the payment of such expenses.
-11-
<PAGE>
Section 2.4. Issuance of the Preferred Securities.
The Depositor, on behalf of the Trust and pursuant to this Trust
Agreement, executed and delivered the Purchase Agreement and shall execute and
deliver the New Purchase Agreement. Contemporaneously with the execution and
delivery of the Original Trust Agreement, an Administrative Trustee, on behalf
of the Trust, executed in accordance with Section 5.2 and delivered to the
Initial Purchasers named in the Purchase Agreement Preferred Securities
Certificates, registered as set forth in Section 5.2, in an aggregate amount of
50,000 Preferred Securities having an aggregate Liquidation Amount of
$50,000,000, against receipt of such aggregate purchase price of such Preferred
Securities of $50,000,000, which amount the Administrative Trustee promptly
delivered to the Property Trustee (the "First Original Preferred Securities").
Contemporaneously with the execution and delivery of this Trust Agreement, an
Administrative Trustee, on behalf of the Trust, shall execute in accordance with
Section 5.2 and deliver to the Initial Purchaser named in the New Purchase
Agreement additional Preferred Securities Certificates, registered as set forth
in Section 5.2, in an aggregate amount of 20,000 Preferred Securities having an
aggregate Liquidation Amount of $20,000,000 against receipt of such aggregate
purchase price of such Preferred Securities of $19,700,000, which amount the
Administrative Trustee shall promptly deliver to the Property Trustee (the
"Second Original Preferred Securities") (the First Original Preferred Securities
and the Second Original Preferred Securities being hereinafter collectively
referred to as the "Original Preferred Securities"). The Original Preferred
Securities shall consist of Rule 144A Preferred Securities and Other Preferred
Securities. All of the Preferred Securities issued as described in this Trust
Agreement shall constitute one class of Preferred Securities.
-12-
<PAGE>
Section 2.5. Issuance of the Common Securities; Subscription and Purchase
of Debentures.
Contemporaneously with the execution and delivery of the Original Trust
Agreement, an Administrative Trustee, on behalf of the Trust, executed in
accordance with Section 5.3 and delivered to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
2,000 Common Securities having an aggregate Liquidation Amount of $2,000,000
against payment by the Depositor of such amount, which amount such
Administrative Trustee promptly delivered to the Property Trustee.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
subscribed to and purchased from the Depositor Debentures, registered in the
name of the Trust and having an aggregate principal amount equal to $52,000,000,
and, in satisfaction of the purchase price for such Debentures, the Property
Trustee, on behalf of the Trust, delivered to the Depositor the sum of
$52,000,000 (being the sum of the amounts delivered to the Property Trustee
pursuant to (i) the second sentence of Section 2.4 and (ii) the first sentence
of this Section 2.5). Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 5.3 and deliver to the Depositor additional
Common Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of 800 Common Securities having an aggregate Liquidation Amount
of $800,000 against payment by the Depositor of such amount, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor additional Debentures,
registered in the name of the Trust and having an aggregate principal amount
equal to $20,800,000, and, in satisfaction of the purchase price for such
Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the sum of $20,800,000 (being the sum of the amounts delivered to the
Property Trustee pursuant to (i) the third sentence of Section 2.4 and (ii) the
third sentence of this Section 2.5). All of the Common Securities issued as
described in this Trust Agreement shall constitute one class of Common
Securities.
Section 2.6. Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to invest in the
Debentures and (b) to engage in those activities necessary, convenient or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it will hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all of the rights,
powers and duties set forth herein and in accordance with applicable law with
respect to accomplishing the purposes of the Trust. The Delaware Trustee shall
not be entitled to exercise any powers, nor shall the Delaware Trustee have any
of the duties and responsibilities, of the Property Trustee or the
Administrative Trustees set forth herein. The Delaware Trustee shall be one of
the Trustees of the Trust for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Delaware Business Trust Act.
13
<PAGE>
Section 2.7. Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs
of the Trust in accordance with the terms of this Trust
Agreement. Subject to the limitations set forth in paragraph
(b) of this Section, and in accordance with the following
provisions (i) and (ii), the Trustees shall have the authority
to enter into all transactions and agreements determined by
the Trustees to be appropriate in exercising the authority,
express or implied, otherwise granted to the Trustees under
this Trust Agreement, and to perform all acts in furtherance
thereof, including without limitation, the following :
(i) As among the Trustees, each
Administrative Trustee shall have the power and
authority to act on behalf of the Trust with respect
to the following matters:
(A) the issuance and sale
of the Trust Securities;
(B) to cause the Trust to
enter into, and to execute, deliver and perform on
behalf of the Trust, the Expense Agreement, the
Registration Rights Agreement, the New Registration
Rights Agreement and the Certificate Depository
Agreement and such other agreements as may be
necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting in connection
with the Registration Rights Agreement and the New
Registration Rights Agreement in the registration of
the Preferred Securities under the Securities Act, as
amended, and under state securities or blue sky laws,
and the qualification of this Trust Agreement as a
trust indenture under the Trust Indenture Act;
(D) assisting in the
registration or listing of the Preferred Securities
with The Depository Trust Company or upon such other
trading facilities or exchanges as shall be
determined by the Depositor and the registration of
the Preferred Securities under the Exchange Act, as
amended, and the preparation and filing of all
periodic and other reports and other documents
pursuant to the foregoing;
(E) the sending of notices
(other than notices of default) and other information
regarding the Trust Securities and the Debentures to
the Securityholders in accordance with this Trust
Agreement;
(F) the appointment of a
Paying Agent, authenticating agent and Securities
Registrar in accordance with this Trust Agreement;
(G) registering transfer of
the Trust Securities in accordance with this Trust
Agreement;
-14-
<PAGE>
(H) to the extent provided
in this Trust Agreement, the winding up of the
affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate
of cancellation with the Secretary of the State of
Delaware;
(I) unless otherwise
determined by the Depositor, the Property Trustee or
the Administrative Trustees, or as otherwise required
by the Delaware Business Trust Act or the Trust
Indenture Act, to execute on behalf of the Trust
(either acting alone or together with any or all of
the Administrative Trustees) any documents that the
Administrative Trustees have the power to execute
pursuant to this Trust Agreement;
(J) assisting in the
designation of the Preferred Securities for trading
in the Private Offering, Resales and Trading through
the Automatic Linkages (PORTAL) system; and
(K) the taking of any action
incidental to the foregoing as the Trustees may from
time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement for
the benefit of the Securityholders (without
consideration of the effect of any such action on any
particular Securityholder).
(ii) As among the Trustees, the
Property Trustee shall have the power, duty and
authority to act on behalf of the Trust with respect
to the following matters:
(A) the establishment of the
Payment Account;
(B) the receipt of the
Debentures;
(C) the collection of
interest, principal (premium, if any) and any other
payments made in respect of the Debentures in the
Payment Account;
(D) the distribution through
the Paying Agent of amounts owed to the
Securityholders in respect to the Trust Securities;
(E) the exercise of all of
the rights, powers and privileges of a holder of the
Debentures;
(F) the sending of notices
of default and other information regarding the Trust
Securities and the Debentures to the Securityholders
in accordance with this Trust Agreement;
(G) the distribution of the
Trust Property in accordance with the terms of this
Trust Agreement;
-15-
<PAGE>
(H) to the extent provided
in this Trust Agreement, the winding up of the
affairs of and liquidation of the Trust and the
execution of the certificate of cancellation with the
Secretary of State of the State of Delaware;
(I) after an Event of
Default (other than under paragraph (b), (c), (d) or
(e) of the definition of such term if such Event of
Default is by or with respect to the Property
Trustee), the taking of any action incidental to the
foregoing as the Property Trustee may from time to
time determine is necessary or advisable to give
effect to the terms of this Trust Agreement and
protect and conserve the Trust Property for the
benefit of the Securityholders (without consideration
of the effect of any such action on any particular
Securityholder); and
(J) except as otherwise
provided in this Section 2.7(a)(ii), the Property
Trustee shall have none of the duties, liabilities,
powers or the authority of the Administrative
Trustees set forth in Section 2.7(a)(i).
(b) So long as this Trust Agreement remains in
effect, the Trust (or the Trustees acting on behalf of the
Trust) shall not undertake any business, activities or
transaction except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not
(i) acquire any investments or engage in any activities not
authorized by this Trust Agreement, (ii) sell, assign,
transfer, exchange, mortgage, pledge, set-off or otherwise
dispose of any of the Trust Property or interests therein,
including to Securityholders, except as expressly provided
herein, (iii) take any action that would cause the Trust to
fail or cease to qualify as a "grantor trust" for United
States federal income tax purposes, (iv) incur any
indebtedness for borrowed money or issue any other debt or
(v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The
Administrative Trustees shall defend all claims and demands
of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the
Preferred Securities, the Depositor shall have the right and
responsibility to assist the Trust with respect to, or effect
on behalf of the Trust, the following (and any actions taken
by the Depositor in furtherance of the following prior to the
date of this Trust Agreement are hereby ratified and
conformed in all respects):
(i) the preparation by the
Trust of an offering memorandum or memoranda,
including any supplements thereto, in relation to the
Preferred Securities and filing by the Trust with the
Commission and the execution on behalf of the Trust
of a registration statement or registration
statements on the appropriate form in relation to the
Preferred Securities, including any amendments
thereto;
-16-
<PAGE>
(ii) the determination of
the states in which to take appropriate action to
qualify or register for sale all or part of the
Preferred Securities and the determination of any and
all such acts, other than actions which must be taken
by or on behalf of the Trust, and the advice to the
Trustees of actions they must take on behalf of the
Trust, and the preparation for execution and filing
of any documents to be executed and filed by the
Trust or on behalf of the Trust, as the Depositor
deems necessary or advisable in order to comply with
the applicable laws of any such states in connection
with the sale of the Preferred Securities;
(iii) the preparation for
filing by the Trust and execution on behalf of the
Trust of an application to The Depository Trust
Company or any other trading facility or exchange for
registration or listing upon notice of issuance of
any Preferred Securities;
(iv) the preparation for
filing by the Trust with the Commission and the
execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of
the Preferred Securities under Section 12(b) or 12(g)
of the Exchange Act, including any amendments
thereto;
(v) the negotiation of the
terms of, and the execution and delivery of, the
Purchase Agreement and the New Purchase Agreement
providing for the sale of the Preferred Securities;
and
(vi) the taking of any other
actions necessary or desirable to carry out any of
the foregoing activities.
(d) Notwithstanding anything herein to the contrary,
the Depositor and the Administrative Trustees are authorized
and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust will not be deemed to be
an "investment company" required to be registered under the
1940 Act, or fail to be classified as a grantor trust for
United States federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor
for United States Federal income tax purposes. In this
connection, the Depositor and the Administrative Trustees are
authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or this Trust
Agreement, that each of the Depositor and any Administrative
Trustee determines in its discretion to be necessary or
desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the
holders of the Preferred Securities.
Section 2.8. Assets of Trust.
The assets of the Trust shall consist of the Trust Property.
-17-
<PAGE>
Section 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III.
PAYMENT ACCOUNT
Section 3.1. Payment Account.
(a) On or prior to the Closing Date, the
Property Trustee established the Payment Account. The Property
Trustee and any agent of the Property Trustee shall have
exclusive control and sole right of withdrawal with respect to
the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this
Trust Agreement. All moneys and other property deposited or
held from time to time in the Payment Account shall be held by
the Property Trustee in the Payment Account for the exclusive
benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments
provided for herein.
(b) The Property Trustee shall deposit in
the Payment Account, promptly upon receipt, all payments of
principal of or interest on, and any other payments or
proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee
pending distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
Section 4.1. Distributions.
(a) The Trust Securities represent undivided
beneficial interests in the Trust Property, and Distributions
(including Additional Amounts) will be made on the Trust
Securities at the rate and on the dates that payments of
interest (including of Additional Interest, as defined in the
Indenture) are made on the Debentures. Accordingly:
(i) Distributions on the Trust
Securities shall be cumulative, and will accumulate
whether or not there are funds of the Trust available
for the payment of Distributions. Distributions shall
accrue from December 30, 1996 and, except in the
event (and to the extent) that the Depositor
exercises its right to defer the payment of interest
on the Debentures pursuant to the Indenture, shall be
payable semi-annually in arrears on June 30 and
December 31 of each year, commencing on
-18-
<PAGE>
June 30, 1997. If any date on which a Distribution is
otherwise payable on the Trust Securities is not a
Business Day, then the payment of such Distribution
shall be made on the next succeeding day that is a
Business Day (and without any interest or other
payment in respect of any such delay) except that, if
such Business Day is in the next succeeding calendar
year, payment of such Distribution shall be made on
the immediately preceding Business Day, in each case
with the same force and effect as if made on such
date (each date on which distributions are payable in
accordance with this Section 4.l(a), a "Distribution
Date").
(ii) Assuming payments of interest
on the Debentures are made when due (and before
giving effect to Additional Amounts, if applicable),
Distributions on the Trust Securities shall be
payable at a rate of 10 1/4% per annum of the
Liquidation Amount of the Trust Securities. The
amount of Distributions payable for any full period
shall be computed on the basis of a 360-day year of
twelve 30-day months. The amount of Distributions for
any partial period shall be computed on the basis of
the number of days elapsed in a 360-day year of
twelve 30-day months. The amount of Distributions
payable for any period shall include the Additional
Amounts, if any.
(iii) Distributions on the Trust
Securities shall be made by the Property Trustee from
the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust
has funds then on hand and available in the Payment
Account for the payment of such Distributions.
(b) Distributions on the Trust
Securities with respect to a Distribution Date shall
be payable to the Holders thereof as they appear on
the Securities Register for the Trust Securities on
the relevant record date, which shall be one Business
Day prior to such Distribution Date; provided,
however, that in the event that the Preferred
Securities do not remain in book-entry-only form, the
relevant record date shall be the date 15 days prior
to the relevant Distribution Date.
Section 4.2. Redemption.
(a) On any Debenture Redemption Date
and on the stated maturity of the Debentures, the
Trust will be required to redeem a Like Amount of
Trust Securities at the Redemption Price.
(b) Notice of redemption shall be
given by the Property Trustee by first-class mail,
postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date to each
Holder of Trust Securities to be redeemed, at such
Holder's address appearing in the Security Register.
All notices of redemption shall state:
-19-
<PAGE>
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all of the
Outstanding Trust Securities are to be redeemed, the
identification and the total Liquidation Amount of
the particular Trust Securities to be deemed;
(v) that on the Redemption Date the
Redemption Price will become due and Payable upon
each such Trust Security to be redeemed and that
Distributions thereon will cease to accrue on and
after said date; and
(vi) the place or places where the
Trust Securities are to be surrendered for the
payment of the Redemption Price.
The Trust in issuing the Trust Securities may use "CUSIP" or "private
placement" numbers (if then generally in use), and, if so, the Property Trustee
shall indicate the "CUSIP" or "private placement" numbers of the Trust
Securities in notices of Redemption and related materials as a convenience to
Securityholders; PROVIDED that any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the Trust
Securities or as contained in any notice of redemption and related materials.
(c) The Trust Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price with the proceeds from the
contemporaneous Redemption of Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on
each Redemption Date only to the extent that the Trust has funds then
on hand and available in the Payment Account for the payment of such
Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 10:00 a.m., New York City
time, on the Redemption Date, subject to Section 4.2(c), the Property
Trustee will, so long as the Preferred Securities are in
book-entry-only form, irrevocably deposit with the Clearing Agency for
the Preferred Securities funds sufficient to pay the applicable
Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the holders
thereof. If the Preferred Securities are no longer in book-entry-only
form, the Property Trustee, subject to Section 4.2(c), will irrevocably
deposit with the Paying Agent funds sufficient to pay the applicable
Redemption Price and will give the Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the Holders
thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be
payable to the Holders of such Trust Securities as they appear on the
register for the Trust Securities on the relevant record dates for the
related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such
deposit, all rights of Securityholders holding Trust
-20-
<PAGE>
Securities so called for redemption will cease, except the right of such
Securityholders to receive the Redemption Price and any Distribution payable on
or prior to the Redemption Date, but without interest, and such Securities will
cease to be outstanding. In the event that any date on which any Redemption
Price is payable is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day, in each case, with the
same force and effect as if made on such date. In the event that payment of the
Redemption Price in respect of any Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by the
Depositor pursuant to the Guarantee, Distributions on such Trust Securities will
continue to accrue, at the then applicable rate, from the Redemption Date
originally established by the Trust for such Trust Securities to the date such
Redemption Price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities
shall be made to the recordholders thereof as they appear on the
Securities register for the Trust Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption
Date; provided, however, that in the event that the Preferred
Securities do not remain in book-entry-only form, the relevant record
date shall be the date fifteen days prior to the relevant Redemption
Date.
(f) Subject to Section 4.3(a), if less than all of the
Outstanding Trust Securities are to be redeemed on a Redemption Date,
then the aggregate Liquidation Amount of Trust Securities to be
redeemed shall be allocated on a pro rata basis (based on Liquidation
Amounts) among Common Securities and the Preferred Securities. The
particular Preferred Securities to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Property Trustee
from the Outstanding Preferred Securities not previously called for
redemption, by such method (including, without limitation, by lot) as
the Property Trustee shall deem fair and appropriate and which may
provide for the selection for Redemption of portions (equal to $1,000
or an integral multiple of $1,000 in excess thereof) of the Liquidation
Amount of Preferred Securities of a denomination larger than $1,000,
provided that the Holder of such Preferred Securities shall not hold
less than $100,000 Preferred Securities after the redemption. The
Property Trustee shall promptly notify the Security Registrar in
writing of the Preferred Securities selected for redemption and, in the
case of any Preferred Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of this
Trust Agreement, unless the context otherwise requires, all provisions
relating to the Redemption of Preferred Securities shall relate, in the
case of any Preferred Securities redeemed or to be redeemed only in
part, to the portion of the Liquidation Amount of Preferred Securities
that has been or is to be Redeemed.
-21-
<PAGE>
Section 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including
Additional Amounts, if applicable) on, and the Redemption
Price of, the Trust Securities, as applicable, shall be made,
subject to Section 4.2(f), pro rata among the Common
Securities and the Preferred Securities based on the
Liquidation Amount of the Trust Securities; provided, however,
that if on any Distribution Date or Redemption Date any Event
of Default resulting from a Debenture Event of Default shall
have occurred and be continuing, no payment of any
Distribution (including Additional Amounts, if applicable) on,
or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other
acquisition of Common Securities, shall be made unless payment
in full in cash of all accumulated and unpaid Distributions
(including Additional Amounts, if applicable) on all
Outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of
the Redemption Price the full amount of such Redemption Price
on all Outstanding Preferred Securities, shall have been made,
and all funds immediately available to the Property Trustee
shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts, if applicable)
on, or the Redemption Price of, Preferred Securities then due
and payable.
(b) In the case of the occurrence of any
Event of Default resulting from any Debenture Event of
Default, the Holder of Common Securities will be deemed to
have waived any right to act with respect to any such Event of
Default under this Trust Agreement until the effect of all of
such Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated.
Until any such Event of Default under this Trust Agreement
with respect to the Preferred Securities has been so cured,
waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the Holders of the Preferred Securities
and not the Holder of the Common Securities, and only the
Holders of the Preferred Securities will have the right to
direct the Property Trustee to act on their behalf.
Section 4.4. Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Preferred Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register or, if the Preferred Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which shall credit the relevant Persons' accounts at such
Clearing Agency on the applicable Distribution Dates. Payments in respect of the
Common Securities shall be made in such manner as shall be mutually agreed
between the Property Trustee and the Common Securityholder.
-22-
<PAGE>
Section 4.5. Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
provided on such form. The Administrative Trustees shall provide the Depositor
and the Property Trustee with a copy of all of such returns and reports promptly
after such filing or furnishing. The Trustees shall comply with United States
federal withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
Section 4.6. Payment of Taxes, Duties, Etc. of the Trust.
Upon receipt under the Debentures of Additional Sums, the
Administrative Trustee shall promptly pay any taxes, duties or governmental
charges of whatsoever nature (other than withholding taxes) imposed on the Trust
by the United States or any other taxing authority.
Section 4.7. Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities
shall be reduced by the amount of any corresponding payment such Holder (and
Owner with respect to such Holder's Preferred Securities) has directly received
pursuant to Section 5.8 of the Indenture or Section 5.14 of this Trust
Agreement.
ARTICLE V.
TRUST SECURITIES
Section 5.1. Initial Ownership.
Upon the formation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 of the Original Trust Agreement and until the issuance
of the Trust Securities pursuant to the Original Trust Agreement, the Depositor
was, and at any time during which no Trust Securities are outstanding, the
Depositor shall be, the sole beneficial owner of the Trust.
Section 5.2. The Trust Securities.
The Preferred Securities shall be issued in minimum denominations of
$100,000 Liquidation Amount and integral multiples of $1,000 in excess thereof,
and the Common Securities shall be issued in denominations of $1,000 Liquidation
Amount and integral multiples thereof. The Trust Securities shall be executed on
behalf of the Trust by manual or facsimile signature of at least one
Administrative Trustee. Trust Securities bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefits of
-23-
<PAGE>
this Trust Agreement, notwithstanding that such individuals or any of them shall
have ceased to be so authorized prior to the delivery of such Trust Securities
or did not hold such offices at the date of delivery of such Trust Securities. A
transferee of a Trust Security shall become a Securityholder, and shall be
entitled to the rights and subject to the obligations of a Securityholder
hereunder, upon due registration of such Trust Securities in such transferee's
name pursuant to Sections 5.4, 5.5 and 5.13.
Upon their original issuances or any subsequent issuances, Rule 144A
Preferred Securities shall be issued in the form of one or more global Rule 144A
Preferred Securities (the "Global Rule 144A Preferred Securities") registered in
the name of the nominee of DTC for credit to the respective accounts of the
Owners thereof (or such other accounts as they may direct). Upon their original
issuance or any subsequent issuances, Other Preferred Securities shall also be
issued in the form of Global Preferred Securities except in the event that such
Other Preferred Securities are required to be issued to the Accredited Investor
in the form of a Definitive Preferred Security certificate and registered to the
name of the Accredited Investor thereof to comply with state securities or other
laws.
Common Securities Certificate representing the Common Securities shall
be issued to the Depositor in the form of a definitive Common Securities
Certificates.
Section 5.3. Execution and Delivery of Trust Securities.
On or prior to the Closing Date the Administrative Trustees shall have
caused or shall cause Trust Securities consisting of Preferred Securities and
Common Securities, in an aggregate Liquidation Amount as provided in Sections
2.4 and 2.5, to be executed on behalf of the Trust and delivered to or upon the
written order of the Depositor, signed by its chairman of the board and
president, any executive vice president or any vice president, treasurer or
assistant treasurer or controller without further corporate action by the
Depositor, in authorized denominations.
Section 5.4. Global Preferred Securities.
(a) Each Global Preferred Security issued
under this Trust Agreement shall be registered in the name of
the Clearing Agency designated by the Depositor for the
related Global Preferred Securities or a nominee thereof and
delivered to such Clearing Agency or a nominee thereof or
custodian therefor.
(b) Notwithstanding any other provision in
this Trust Agreement, no Global Preferred Securities may be
exchanged in whole or in part for Preferred Securities
registered, and no transfer of Global Preferred Securities in
whole or in part may be registered, in the name of any Person
other than the Clearing Agency for such Global Preferred
Securities or a nominee thereof unless (i) the Clearing Agency
advises the Property Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Global Preferred
Securities, and the Property Trustee is unable to locate a
qualified successor, (ii) the Trust at its option advises the
Clearing Agency in writing that it elects to eliminate the
global system through the Clearing Agency, (iii) after the
occurrence of a Debenture Event of Default or (iv) pursuant to
the
-25-
<PAGE>
following sentence. All or any portion of a Global
Preferred Security may be exchanged for a Preferred Security
that has a like aggregate principal amount and is not a Global
Preferred Security upon 20 days' prior written request made by
the Clearing Agency or its authorized representative to the
Property Trustee; provided, however, that no Definitive
Preferred Security shall be issued in an amount representing
less than 100 Preferred Securities. Upon the occurrence of any
event specified in clause (i), (ii) or (iii) above, the
Administrative Trustees shall notify the Clearing Agency and
the Clearing Agency shall notify all Owners of beneficial
interests in Global Preferred Securities, the Delaware
Trustee, the Property Trustee and the Administrative Trustees
of the occurrence of such event and of the availability of the
Definitive Preferred Securities to such Owners requesting the
same; provided, however, that no Definitive Preferred
Securities shall be issued in an amount representing less than
$100,000 in aggregate Liquidation Amount of Preferred
Securities. Upon surrender to the Administrative Trustees of
the typewritten Preferred Securities Certificate or
Certificates representing the Global Preferred Securities held
by the Clearing Agency, accompanied by registration
instructions, the Administrative Trustees, or any one of them,
shall execute a Definitive Preferred Security in accordance
with the instructions of the Clearing Agency. Neither the
Securities Registrar nor the Trustees shall be liable for any
delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such
instructions. Upon the issuance of the Definitive Preferred
Security, the Trustees shall recognize the Holder of a
Definitive Preferred Security as a Securityholder. Definitive
Preferred Securities shall be printed, lithographed or
engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as
evidenced by the execution thereof by the Administrative
Trustees or any one of them.
(c) If any Global Preferred Security is to
be exchanged for Definitive Preferred Securities or cancelled
in part, or if Definitive Preferred Securities are to be
exchanged in whole or in part for a Global Preferred Security,
then either (i) such Global Preferred Security shall be so
surrendered for exchange or cancellation as provided in this
Article Five or (ii) the aggregate Liquidation Amount
represented by such Global Preferred Security shall be
reduced, subject to Section 5.2, or increased, by an amount
equal to the Liquidation Amount represented by that portion of
the Global Preferred Security to be so exchanged or cancelled,
or equal to the Liquidation Amount represented by such
Definitive Preferred Security to be so exchanged for
beneficial interests in the Global Preferred Security
represented thereby, as the case may be, by means of an
appropriate adjustment made on the records of the Securities
Registrar, whereupon the Property Trustee, in accordance with
the Applicable Procedures, shall instruct the Clearing Agency
or its authorized representative to make a corresponding
adjustment to its records. Upon surrender to the
Administrative Trustees or the Securities Registrar of the
Global Preferred Security by the Clearing Agency, accompanied
by registration instructions, the Administrative Trustees, or
any one of them, shall execute the Definitive Preferred
Securities in accordance with the instructions of the Clearing
Agency; provided, however, that no Definitive Preferred
Securities shall be issued in an amount representing less than
$100,000
-25-
<PAGE>
in Aggregate Liquidation Amount of Preferred Securities. None
of the Securities Registrar, the Trustees or the
Administrative Trustees shall be liable for any delay in
delivery of such instructions and may conclusively rely on,
and shall be protected in relying on, such instructions. Upon
the issuance of Definitive Preferred Securities, the Trustees
and Administrative Trustees shall recognize the Holders of the
Definitive Preferred Securities as Securityholders. The
Definitive Preferred Securities shall be printed, lithographed
or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as
evidenced by the execution thereof by the Administrative
Trustees or any one of them.
(d) Every Definitive Preferred Security
executed and delivered upon registration of, transfer of, or
in exchange for or in lieu of, a Global Preferred Security or
any portion thereof, whether pursuant to this Article Five or
Article Four or otherwise, shall be executed and delivered in
the form of, and shall be, a Global Preferred Security, unless
such Definitive Preferred Security is registered in the name
of a Person other than the Clearing Agency for such Global
Preferred Security or a nominee thereof.
(e) The Clearing Agency or its nominee, as
registered owner of a Global Preferred Security, shall be the
Holder of such Global Preferred Security for all purposes
under this Trust Agreement and the Global Preferred Security,
and Owners with respect to a Global Preferred Security shall
hold such interests pursuant to the Applicable Procedures. The
Securities Registrar and the Trustees shall be entitled to
deal with the Clearing Agency for all purposes of this Trust
Agreement relating to the Global Preferred Securities
(including the payment of the Liquidation Amount of and
Distributions on the beneficial interests in Global Preferred
Securities represented thereby and the giving of instructions
or directions to Owners of Global Preferred Securities
represented thereby) as the sole Holder of the Global
Preferred Securities represented thereby and shall have no
obligations to the Owners thereof. Neither the Property
Trustee nor the Securities Registrar shall have any liability
in respect of any transfers effected by the Clearing Agency.
The rights of the Owners of the Global Preferred Securities shall be
exercised only through the Clearing Agency and shall be limited to those
established by law, the Applicable Procedures and agreements between such Owners
and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Certificate Depository Agreement, unless and until Definitive Preferred
Securities are issued pursuant to Section 5.4(b), the initial Clearing Agency
will make global transfers among the Clearing Agency Participants and receive
and transmit payments on the Preferred Securities to such Clearing Agency
Participants.
Section 5.5. Registration of Transfer and Exchange of Preferred Securities.
(a) The Property Trustee shall keep or cause
to be kept, at the office or agency maintained pursuant to
Section 5.9, a register or registers for the purpose of
registering Trust Securities and transfers and exchanges of
Preferred
-26-
<PAGE>
Securities (the "Securities Register") in which, the
registrar designated by the Depositor (the "Securities
Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Preferred
Securities and Common Securities (subject to Section 5.11 in
the case of the Common Securities) and registration of
transfers and exchanges of Preferred Securities as herein
provided. The Bank shall be the initial Securities Registrar.
Upon surrender for registration of transfer of any
Preferred Security at the office or agency maintained pursuant
to Section 5.9, the Administrative Trustees or any one of them
shall execute and the Property Trustee shall deliver, in the
name of the designated transferee or transferees, one or more
new Preferred Securities in authorized denominations of a like
aggregate Liquidation Amount dated the date of execution by
such Administrative Trustee or Trustees.
The Securities Registrar shall not be required to
register the transfer of any Preferred Securities that have
been called for redemption and during the period starting 15
days before mailing notice of redemption.
At the option of a Holder, Preferred Securities may
be exchanged for other Preferred Securities in authorized
denominations of the same class and of a like aggregate
Liquidation Amount upon surrender of the Preferred Securities
to be exchanged at the office or agency maintained pursuant to
Section 5.9.
Every Preferred Security presented or surrendered for
registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to an
Administrative Trustee and the Securities Registrar duly
executed by the Holder or his attorney duly authorized in
writing. Each Preferred Security surrendered for registration
of transfer or exchange shall be cancelled and subsequently
disposed of by an Administrative Trustee in accordance with
such Person's customary practice.
No service charge shall be made for any registration
of transfer or exchange of Preferred Securities, but the
Securities Registrar may require payment of a sum sufficient
to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Preferred
Securities.
(b) CERTAIN TRANSFERS AND EXCHANGES.
Notwithstanding any other provision of this Trust Agreement,
transfers and exchanges of Preferred Securities and of
beneficial interests in Global Preferred Securities of the
kinds specified in this Section 5.5(b) shall be made only in
accordance with this Section 5.5(b).
(i) OTHER PREFERRED SECURITIES TO
OTHER PREFERRED SECURITIES. An Other Preferred Security may be
transferred, in whole or in part, to a Person who takes
delivery in the form of another Other Preferred Security
provided that the Securities Registrar shall have received a
Restricted Security Certificate, satisfactory to the
Securities Registrar and duly executed by the transferor Owner
or his attorney duly authorized in writing.
-27-
<PAGE>
(ii) OTHER PREFERRED SECURITIES TO
GLOBAL 144A PREFERRED SECURITIES. If an Owner of an Other
Preferred Security wishes at any time to transfer all or any
portion of such Other Preferred Security to a Person who
wishes to take delivery thereof in the form of a beneficial
interest in a Global 144A Preferred Security, such transfer
may be effected only in accordance with the provisions of this
Clause (b)(ii) and subject to the Applicable Procedures. Upon
receipt by the Property Trustee, as Security Registrar, of (A)
such Restricted Securities Certificate as provided in Section
5.5(a) and instructions satisfactory to the Securities
Registrar directing that a beneficial interest in the Global
144A Preferred Security in a specified principal amount be
credited to a specified Agent Member's account and (B) a
Restricted Securities Certificate, if the specified account is
to be credited with a beneficial interest in the Global 144A
Preferred Security, in either case satisfactory to the
Securities Registrar and duly executed by such Owner or his
attorney duly authorized in writing, then the Securities
Registrar shall cancel such Other Preferred Securities (and
issue a new Other Preferred Security in respect of any
untransferred portion thereof as provided in Section 5.5(a)
and increase the principal amount of the Global 144A Preferred
Security by the specified principal amount as provided in
Section 5.5(b)(v)).
(iii) GLOBAL RULE 144A PREFERRED
SECURITIES TO OTHER PREFERRED SECURITIES. An Owner of a
beneficial interest in a Global Rule 144A Preferred Security
may transfer such interest to a Person who wishes to acquire
the same in the form of an Other Preferred Security, provided
that the Securities Registrar shall have received a Restricted
Securities Certificate, satisfactory to the Securities
Registrar and duly executed by the transferor Owner or his
attorney duly authorized in writing.
(iv) CERTAIN INITIAL TRANSFERS OF
OTHER PREFERRED SECURITIES. An initial transfer or exchange of
Other Preferred Securities that does not involve any change in
beneficial ownership may be made to an Accredited Investor or
Investors as if such transfer or exchange were not a transfer
or exchange, provided that a written certification is provided
certifying that such exchange or transfer does not involve a
change in beneficial ownership.
(v) LIMITATIONS RELATING TO SIZE OF
BLOCKS. Notwithstanding any other provision of this Trust
Agreement, Preferred Securities may only be transferred or
exchanged in blocks having a Liquidation Amount of not less
than $100,000. Any transfer, exchange or other disposition of
Preferred Securities in contravention of this Section
5.5(b)(v) shall be deemed to be void and of no legal effect
whatsoever, any such transferee shall be deemed not to be the
Holder or Owner of such Preferred Security for any purpose,
including but not limited to the receipt of distributions on
such Preferred Securities, and such transferee shall be deemed
to have no interest whatsoever in such Preferred Securities.
(c) SECURITIES ACT LEGENDS. Global Rule 144A
Preferred Securities and their successor Rule 144A Preferred
Securities shall bear a Rule 144A Preferred Securities Legend.
Other Preferred Securities that are registered by a Global
-28-
<PAGE>
Preferred Security will also have a Rule 144A Preferred
Security legend. Other Preferred Securities that are not
registered by a Global Preferred Security and their successor
Other Preferred Securities shall bear Restricted Preferred
Securities Legend, subject to the following:
(i) subject to the following Clauses
of this Section 5.5(c), Preferred Securities that are
exchanged, upon transfer or otherwise, for interests in a
Global Preferred Security or any portion thereof shall bear
the Securities Act Legend borne by such Global Preferred
Security while represented thereby;
(ii) any Preferred Securities which
are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act (including the
registration statement contemplated by the Registration Rights
Agreement and the New Registration Rights Agreement), together
with their successor Preferred Securities, shall not be
required to bear any legend; the Depositor or an
Administrative Trustee shall inform the Property Trustee in
writing of the effective date of any such registration
statement registering Preferred Securities under the
Securities Act and shall notify the Property Trustee at any
time when prospectuses may not be delivered with respect to
Preferred Securities to be sold pursuant to such registration
statement. The Property Trustee shall not be liable for any
action taken or omitted to be taken by it in good faith in
accordance with the aforementioned registration statement;
(iii) after December 30, 1999 or at
the earliest date permitted as computed in accordance with
paragraph (k) of Rule 144 under the Securities Act, new
Preferred Securities (other than a Global Preferred Security)
that do not bear a Restricted Preferred Securities Act Legend
shall be issued in exchange for or in lieu of Other Preferred
Securities or any portions thereof if the Property Trustee has
received an Unrestricted Security Certificate, in the form of
Exhibit F hereto, duly executed by the Holder or Owner of such
Other Preferred Securities or his attorney duly authorized in
writing, and after such date and receipt of such certificate,
the Administrative Trustees shall execute and deliver such new
Preferred Securities in exchange for or in lieu of such Other
Preferred Securities as provided in this Article Five,
(iv) at any time after the Preferred
Securities may be freely transferred without registration
under the Securities Act or without being subject to transfer
restrictions pursuant to the Securities Act, new Preferred
Securities that do not bear a legend may be issued in exchange
for or in lieu of a Preferred Security (other than a Global
Preferred Security) or any portion thereof which bears such a
legend if the Security Registrar has received an Unrestricted
Securities Certificate in the form of Exhibit F hereto,
satisfactory to the Security Registrar and duly executed by
the Holder of such legended Preferred Securities or his
attorney duly authorized in writing;
(v) new Preferred Securities that do
not bear a legend may be issued in exchange for or in lieu of
Preferred Securities (other than Global
-29-
<PAGE>
Preferred Securities) or any portion thereof that bear such a
legend if, in the Property Trustee's judgment, placing such a
legend upon such new Preferred Securities is not necessary to
ensure compliance with the registration requirements of the
Securities Act; and
(vi) notwithstanding the foregoing
provisions of this Section 5.5(c), a successor Preferred
Security that does not bear a particular form shall not be
required to bear such legend unless the Property Trustee has
reasonable cause to believe that such successor Preferred
Security is a "restricted security" within the meaning of Rule
144, in which case the Property Trustee, at the direction of
the Administrative Trustees, shall authenticate and deliver a
new Preferred Security bearing a Restricted Preferred
Securities Legend in exchange for such successor Preferred
Security as provided in this Article Five.
(d) The Property Trustee shall not be
required to insure or verify compliance with securities laws,
including the Securities Act, Exchange Act and 1940 Act, in
connection with transfers and exchanges of Preferred
Securities Certificates.
Section 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute and make available for delivery, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a
new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Securities Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive evidence
of an undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
Section 5.7. Persons Deemed Securityholders.
The Trustees or the Securities Registrar shall treat the Person in
whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Securities Registrar shall be bound by any notice
to the contrary.
-30-
<PAGE>
Section 5.8. Access to List of Securityholders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold
the Depositor, the Property Trustee or the Administrative Trustees accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
Section 5.9. Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or
agency or agencies where Preferred Securities Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Trustees in respect of the Trust Securities Certificates may be served.
The Administrative Trustees initially designate The Bank of New York, 101
Barclay Street, New York, New York Attn: Corporate Trust Trustee Administration,
as its principal corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
Section 5.10. Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying Agent
shall initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days ' written notice to the Administrative Trustees, and
the Depositor. In the event that the Property Trustee shall no longer be the
Paying Agent or a successor Paying Agent shall resign or its authority to act be
revoked, the Administrative Trustees shall appoint a successor that is
accountable to the Depositor to act as Paying Agent (which shall be a bank or
trust company). The Administrative Trustees shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Administrative Trustees to
execute and deliver to the Trustees an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Trustees that as Paying
Agent, such successor Paying Agent or additional Paying Agent will hold all
sums, if any, held by it for payment to the Securityholders in Trust for the
benefit of the Securityholders entitled thereto until such sums shall be paid to
such Securityholders. The Paying Agent shall return all unclaimed funds to the
Property Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Property Trustee. The provisions of
Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as
Paying Agent, for so long as the Bank shall act as Paying Agent and, to the
extent applicable, to any other paying agent appointed hereunder. Any reference
in this Trust Agreement to the Paying Agent shall include any co-paying agent
unless the context requires otherwise.
-31-
<PAGE>
Section 5.11. Ownership of Common Securities by Depositor.
On or prior to the Closing Date the Depositor shall have acquired or
shall acquire and retain beneficial and record ownership of the Common
Securities. To the fullest extent permitted by law, other than a transfer in
connection with a consolidation or merger of the Depositor into another Person,
or any conveyance, transfer or lease by the Depositor of its properties and
assets substantially as an entirety to any Person, pursuant to Section 8.1 of
the Indenture, any attempted transfer of the Common Securities shall be void.
The Administrative Trustees shall cause each Common Securities Certificate
issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE."
Section 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Preferred
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
Section 5.13. Definitive Preferred Securities and Temporary Preferred
Securities.
(a) ISSUANCE OF DEFINITIVE PREFERRED
SECURITIES IN LIEU OF GLOBAL PREFERRED SECURITIES. If (a) the
Depositor advises the Trustees in writing that the Clearing
Agency is no longer willing or able to discharge properly its
responsibilities with respect to the Preferred Security, and
the Depositor is unable to locate a qualified successor, (b)
the Depositor at its option advises the Trustees in writing
that it elects to terminate the book-entry system through the
Clearing Agency or (c) after the occurrence of a Debenture
Event of Default, Owners of a beneficial interest in a
Preferred Security representing beneficial interests
aggregating at least a majority of the Liquidation Amount
advise the Administrative Trustees in writing that the
continuation of a book-entry system through the Clearing
Agency is no longer in the best interest of the Owners of
Preferred Securities, then the Administrative Trustee shall
notify the Clearing Agency and the Clearing Agency shall
notify all Owners of a Preferred Security and the other
Trustees of the occupance of any such event and of the
availability of a Definitive Preferred Security to Owners of
such class requesting the same.
(b) TEMPORARY SECURITIES. Pending the
preparation of permanent Preferred Securities (the "Permanent
Preferred Securities"), an Administrative Trustee may cause to
be executed and delivered on behalf of the Trust temporary
Preferred Securities (the "Temporary Preferred Securities"),
which Temporary Preferred Securities are printed,
lithographed, typewritten, mimeographed or otherwise produced,
in any authorized denomination, substantially of the tenor of
the Permanent Preferred Securities in lieu of which they are
issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers
-32-
<PAGE>
executing such Temporary Preferred Securities may determine,
as evidenced by their execution thereof.
If Temporary Preferred Securities are issued, an Administrative Trustee
will cause Definitive Preferred Securities to be prepared without unreasonable
delay. After the preparation of Permanent Preferred Securities, the Temporary
Preferred Securities shall be exchangeable for Permanent Preferred Securities
upon surrender of the Temporary Preferred Securities at any office or agency of
the Depositor designated pursuant to Section 5.9, without charge to the Holder.
Upon surrender for cancellation of any one or more Temporary Preferred
Securities, the Depositor shall execute and an Administrative Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
Permanent Preferred Securities of authorized denominations. Until so exchanged
the Temporary Preferred Securities shall in all respects be entitled to the same
benefits as Permanent Preferred Securities.
Section 5.14. Rights of Securityholders.
(a) The legal title to the Trust Property is
vested exclusively in the Property Trustee (in its capacity as
such) in accordance with Section 2.9, and the Securityholders
shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust
conferred by their Trust Securities and they shall have no
right to call for any partition or division of property,
profits or rights of the Trust except as described below. The
Trust Securities shall be personal property giving only the
rights specifically set forth therein and in this Trust
Agreement. The Trust Securities shall have no preemptive or
similar rights and when issued and delivered to
Securityholders against payment of the purchase price therefor
will be fully paid and nonassessable by the Trust. The Holders
of the Trust Securities, in their capacities as such, shall be
entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities
remain Outstanding, if, upon a Debenture Event of Default, the
Debenture Trustee fails or the Holders of not less than 25% in
principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due
and payable, the Holders of at least 25% in Liquidation Amount
of the Preferred Securities then Outstanding shall have such
right by a notice in writing to the Depositor and the
Debenture Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the
Debentures shall become immediately due and payable, provided
that the payment of principal and interest on such Debentures
shall remain subordinated to the extent provided in the
Indenture.
At any time after such a declaration of acceleration with respect to
the Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
-33-
<PAGE>
(i) the Depositor has paid or deposited with
the Debenture Trustee a sum sufficient to pay
(A) all overdue
installments of interest (including any Additional
Interest (as defined in the Indenture) on all of the
Debentures,
(B) the principal of (and
premium, if any, on) any Debentures which have become
due otherwise than by such declaration of
acceleration and interest thereon at the rate borne
by the Debentures, and
(C) all sums paid or
advanced by the Debenture Trustee under the Indenture
and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee
and the Property Trustee, their agents and counsel;
and
(ii) all Events of Default with respect to
the Debentures, other than the nonpayment of the principal of
the Debentures which has become due solely by such
acceleration, have been cured or waived as provided in Section
5.13 of the Indenture.
The Holders of a majority in aggregate outstanding principal amount of
the Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Debenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the
Preferred Securities (all or part of which may be represented by Global
Preferred Securities Certificates), a record date shall be established for
determining Holders of Outstanding Preferred Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Property Trustee receives such notice. The Holders on such record date, or their
duly designed proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by view of the
required percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.14(b).
-34-
<PAGE>
(c) For so long as any Preferred Securities
remain Outstanding, to the fullest extent permitted by law and
subject to the terms of this Trust Agreement and the
Indenture, upon a Debenture Event of Default specified in
5.1(1) or 5.1(2) of the Indenture, any Holder of Preferred
Securities shall have the right to institute a proceeding
directly against the Depositor, pursuant to Section 5.8 of the
Indenture, for enforcement of payment to such Holder of the
principal amount of or interest on Debentures having a
principal amount equal to the Liquidation Amount of the
Preferred Securities of such Holder (a "Direct Action").
Except as set forth in Section 5.14(b) and this Section
5.14(c), the Holders of Preferred Securities shall have no
right to exercise directly any right or remedy available to
the holders of, or in respect of, the Debentures.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 6.1. Limitations on Voting Rights.
(a) Except as provided in this Section, in
Sections 5.14, 8.10 and 10.2 and in the Indenture and as
otherwise required by law, no Holder of Preferred Securities
shall have any right to vote or in any manner otherwise
control the administration, operation and management of the
Trust or the obligations of the parties hereto, nor shall
anything herein set forth, or confined in the terms of the
Trust Securities Certificates, be construed so as to
constitute the Securityholders from time to time as partners
or members of an association.
(b) So long as any Debentures are held by
the Property Trustee, the Trustees shall not (i) direct the
time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee, or executing any
Trust or power conferred on the Debenture Trustee with respect
to such Debentures, (ii) waive any past default which is
waivable under Section 5.13 of the Indenture, (iii) exercise
any right to rescind or annul a declaration that the principal
of all the Debentures shall be due and payable or (iv) consent
to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required,
without, in each case, obtaining the prior approval of the
Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities, provided, however, that
where a consent under the Indenture would require the consent
of each Holder of Debentures affected thereby, no such consent
shall be given by the Property Trustee without the prior
written consent of each Holder of Preferred Securities. The
Trustees shall not revoke any action previously authorized or
proved by a vote of the Holders of Preferred Securities,
except by a subsequent vote of the Holders of Preferred
Securities. The Property Trustee shall notify all Holders of
the Preferred Securities of any notice of default received
from the Debenture Trustee with respect to the Debentures. In
addition to obtaining the foregoing approvals of the Holders
of the Preferred Securities, prior to taking any of the
foregoing actions, the Administrative Trustees shall, at the
expense of the Depositor, obtain an Opinion of Counsel
experienced in such
-35-
<PAGE>
matters to the effect that such action shall not cause the
Trust to fail to be classified as a grantor trust for United
States federal income tax purposes.
(c) If any proposed amendment to the Trust
Agreement provides for, or the Trustees otherwise propose to
effect, (i) any action that would adversely affect in any
material respect the powers, preferences or special rights of
the Preferred Securities, whether by way of amendment to the
Trust Agreement or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than pursuant to
the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class will be entitled
to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of
the Holders of at least a majority in Liquidation Amount of
the Outstanding Preferred Securities. Notwithstanding any
other provision of this Trust Agreement, no amendment to this
Trust Agreement may be made if, as a result of such amendment,
it would cause the Trust to fail to be classified as a grantor
trust for United States federal income tax purposes.
Section 6.2. Notice of Meetings.
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.8 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
Section 6.3. Meetings of Preferred Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Preferred
Securityholders to vote on any matter upon the written request of the Preferred
Securityholders of record of 25% of the Preferred Securities (based upon their
Liquidation Amount) and the Administrative Trustees or the Property Trustee may,
at any time in their discretion, call a meeting of Preferred Securityholders to
vote on any matters as to which Preferred Securityholders are entitled to vote.
Preferred Securityholders of record of 50% of the Outstanding Preferred
Securities (based upon their Liquidation Amount), present in person or by proxy,
shall constitute a quorum at any meeting of Preferred Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their Liquidation
Amount) held by the Preferred Securityholders of record present, either in
person or by proxy, at such meeting shall constitute the action of the Preferred
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
-36-
<PAGE>
Section 6.4. Voting Rights.
Securityholders shall be entitled to one vote for each $1,000 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
Section 6.5. Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of the Property Trustee or one or more
officers of the Property Trustee. Only Securityholders of record shall be
entitled to vote. When Trust Securities are held jointly by several persons, any
one of them may vote at any meeting in person or by proxy in respect of such
Trust Securities, but if more than one of them shall be present at such meeting
in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Trust Securities. A proxy purporting to be executed by or on behalf of a
Securityholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger. No
proxy shall be valid more than three years after its date of execution.
Section 6.6. Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding not less than a majority of
all Outstanding Trust Securities (based upon their Liquidation Amount) entitled
to vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing.
Section 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of a distribution or other action, as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
Section 6.8. Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective
-37-
<PAGE>
when such instrument or instruments are delivered to an Administrative Trustee.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
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 or other officer authorized by law total 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 any
Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
Section 6.9. Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
-38-
<PAGE>
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
Section 7.1. Representations and Warranties of the Property Trustee and the
Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on behalf
of and as to itself, hereby represents and warrants for the benefit of the
Depositor and the Securityholders that:
(a) the Property Trustee is a state banking
association, duly organized, validly existing and in good
standing under the laws of the State of New York;
(b) the Property Trustee has full corporate
power, authority and legal right to execute, deliver and
perform its obligations under this Trust Agreement and has
taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware
banking corporation duly organized, validly existing and in
good standing in the State of Delaware;
(d) the Delaware Trustee has full corporate
power, authority and legal right to execute, deliver and
perform its obligations under this Trust Agreement and has
taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly
authorized, executed and delivered by the Property Trustee and
the Delaware Trustee and constitutes the valid and legally
binding agreement of each of the Property Trustee and the
Delaware Trustee enforceable against each of them in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(f) the execution, delivery and performance
of this Trust Agreement has been duly authorized by all
necessary corporate or other action on the part of the
Property Trustee and the Delaware Trustee and does not require
any approval of stockholders of the Property Trustee and the
Delaware Trustee and such execution, delivery and performance
will not (i) violate the Charter or By-laws of the Property
Trustee or the Delaware Trustee, (ii) violate any provision
of, or constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of, any
Lien on any properties included in the Trust Property pursuant
to the provisions of, any indenture, mortgage, credit
agreement, license or other agreement or instrument to which
the Property Trustee or the Delaware Trustee is a party or by
which it is bound or (iii) violate any law, governmental rule
or regulation of the United States or the State of Delaware,
as the case may be, governing the banking, Trust or general
powers of the Property
-39-
<PAGE>
Trustee or the Delaware Trustee (as appropriate in context)
or any order, judgment or decree applicable to the Property
Trustee or the Delaware Trustee;
(g) neither the authorization, execution or
delivery by the Property Trustee or the Delaware Trustee of
this Trust Agreement nor the consummation of any of the
transactions by the Property Trustee or the Delaware Trustee
(as appropriate in context) contemplated herein or therein
requires the consent or approval of, the giving of notice to,
the registration with or the taking of any other action with
respect to any governmental authority or agency under any
existing federal law governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee, as the
case may be, under the laws of the United States or the State
of Delaware; and
(h) there are no proceedings pending or, to
the best of each of the Property Trustee's and the Delaware
Trustee's knowledge, threatened against or affecting the
Property Trustee or the Delaware Trustee in any court or
before any governmental authority, agency or arbitration board
or tribunal which, individually or in the aggregate, would
materially and adversely affect the Trust or would question
the right, power and authority of the Property Trustee or the
Delaware Trustee, as the case may be, to enter into or perform
its obligations as one of the Trustees under this Trust
Agreement.
Section 7.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued
or outstanding at the Closing Date on behalf of the Trust have
been duly authorized and have or will have been duly and
validly executed, issued and delivered by the Trustees
pursuant to the terms and provisions of, and in accordance
with the requirements of, the Original Trust Agreement and
this Trust Agreement and the Securityholders will be, as of
each such date, entitled to the benefits of this Trust
Agreement; and
(b) there are no taxes, fees or other
governmental charges payable by the Trust (or the Trustees on
behalf of the Trust) under the laws of the State of Delaware
or any political subdivision thereof in connection with the
execution, delivery and performance by the Property Trustee or
the Delaware Trustee, as the case may be, of this Trust
Agreement.
ARTICLE VIII.
THE TRUSTEES
Section 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the
Trustees shall be as provided by this Trust Agreement and, in
the case of the Property Trustee, by the Trust
-40-
<PAGE>
Indenture Act. Notwithstanding the foregoing, no provision of
this Trust Agreement shall require the Trustees to expend or
risk their own funds or otherwise incur any financial
liability in the performance of any of their duties hereunder,
or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or
liability is not reasonably assured to it. Whether or not
therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustees shall be subject to
the provisions of this Section. Nothing in this Trust
Agreement shall be construed to release an Administrative
Trustee from liability for its own gross negligent action, its
own gross negligent failure to act, or its own willful
misconduct. To the extent that, at law or in equity, an
Administrative Trustee has duties (including fiduciary duties)
and liabilities relating thereto to the Trust or to the
Securityholders, such Administrative Trustee shall not be
liable to the Trust or to any Securityholder for such
Trustee's good faith reliance on the provisions of this Trust
Agreement. The provisions of this Trust Agreement, to the
extent that they restrict the duties and liabilities of the
Administrative Trustees otherwise existing at law or in
equity, are agreed by the Depositor and the Securityholders to
replace such other duties and liabilities of the
Administrative Trustees.
(b) All payments made by the Property
Trustee or a Paying Agent in respect of the Trust Securities
shall be made only from the revenue and proceeds from the
Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to
enable the Property Trustee or a Paying Agent to make payments
in accordance with the terms hereof. Each Securityholder, by
its acceptance of a Trust Security, agrees that it will look
solely to the revenue and proceeds from the Trust Property to
the extent legally available for distribution to it as herein
provided and that the Trustees are not personally liable to it
for any amount distributable in respect of any Trust Security
or for any other liability in respect of any Trust Security.
This Section 8.l(b) does not limit the liability of the
Trustees expressly set forth elsewhere in this Trust Agreement
or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c) No provision of this Trust Agreement
shall be construed to relieve the Property Trustee from
liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) the Property Trustee
shall not be liable for any error of judgment made in
good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent
facts;
(ii) the Property Trustee
shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not
less than a majority in Liquidation Amount of the
Trust Securities relating to the time, method and
place of
-41-
<PAGE>
conducting any proceeding for any remedy
available to the Property Trustee, or exercising any
Trust or power conferred upon the Property Trustee
under this Trust Agreement;
(iii) the Property
Trustee's sole duty with respect to the custody, safe
keeping and physical presentation of the Debentures
and the Payment Account shall be to deal with such
Property in a similar manner as the Property Trustee
deals with similar property for its own account,
subject the protections and limitations on liability
afforded to the Property Trustee under this Trust
Agreement and the Trust Indenture Act;
(iv) the Property Trustee
shall not be liable for any interest on any money
received by it except as it may otherwise agree in
writing with the Depositor; and money held by the
Property Trustee need not be segregated from other
funds held by it except in relation to the Payment
Account maintained by the Property Trustee pursuant
to Section 3.1 and except to the extent otherwise
required by law; and
(v) the Property Trustee
shall not be responsible for monitoring the
compliance by the Administrative Trustees or the
Depositor with their respective duties under this
Trust Agreement, nor shall the Property Trustee be
liable for the default or misconduct of the
Administrative Trustees or the Depositor.
Section 8.2. Certain Notices.
Within ninety days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.8, notice of such Event of
Default to the Securityholders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived.
Within ninety days after the receipt of notice of the Depositor's
exercise of its right to defer the payment of interest on the Debentures
pursuant to the Indenture, the Administrative Trustee shall transmit, in the
manner and to the extent provided in Section 10.8, notice of such exercise to
the Securityholders and the Property Trustee, unless such exercise shall have
been revoked.
Section 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall
be protected in acting or refraining from acting in good faith
upon any resolution, Opinion of Counsel, certificate written
representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal,
bond, debenture, note, other evidence of indebtedness
-42-
<PAGE>
or other paper or document believed by it to be genuine and
to have been signed or presented by the property party or
parties;
(b) if (i) in performing its duties under
this Trust Agreement the Property Trustee is required to
decide between alternative courses of action or (ii) in
construing any of the provisions of this Trust Agreement the
Property Trustee finds the same ambiguous or inconsistent with
any other provisions contained herein or (iii) the Property
Trustee is unsure of the application of any provision of this
Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms
of this Trust Agreement, the Property Trustee shall deliver a
notice to the Depositor requesting written instructions of the
Depositor as to the course of action to be taken and the
Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee shall be
instructed in writing to take, or to refrain from taking, by
the Depositor; provided, however, that if the Property Trustee
does not receive such instructions of the Depositor within ten
Business Days after it has delivered such notice, or such
reasonably shorter period of time set forth in such notice
(which to the extent practicable shall not be less than two
Business Days), it may, but shall be under no duty to, take or
refrain from taking such action not inconsistent with this
Trust Agreement as it shall deem advisable and in the best
interests of the Securityholders, in which event the Property
Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(c) any direction or act of the Depositor or
the Administrative Trustees contemplated by this Trust
Agreement shall be sufficiently evidenced by an Officers'
Certificate;
(d) whenever in the administration of this
Trust Agreement, the Property Trustee shall deem it desirable
that a matter be established before undertaking, suffering or
omitting any action hereunder, the Property Trustee (unless
other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Depositor or the
Administrative Trustees;
(e) the Property Trustee shall have no duty
to see to any recording, filing or registration of any
instrument (including any financing or continuation statement
or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with
counsel of its selection (which counsel may be counsel to the
Depositor or any of its Affiliates and may include any of its
employees) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and
in reliance thereon and in accordance with such advice, such
counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees; the Property
Trustee shall have
-43-
<PAGE>
the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of
competent jurisdiction;
(g) the Property Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Trust Agreement at the request or direction of any
of the Securityholders pursuant to this Trust Agreement,
unless such Securityholders shall have offered to the Property
Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(h) the Property Trustee shall not be bound
to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other
paper or document, unless requested in writing to do so by one
or more Securityholders, but the Property Trustee may make
such further inquiry or investigation into such facts or
matters as it may see fit;
(i) the Property Trustee may execute any of
the Trusts or powers hereunder or perform any duties hereunder
either directly or by or through its agents or attorneys,
provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection
of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this
Trust Agreement the Property Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the
Trust Securities which instructions may be given only by the
Holders of the same proportion in Liquidation Amount of the
Trust Securities as would be entitled to direct the Property
Trustee under the terms of the Trust Securities in respect of
such remedy, right or action, (ii) may refrain from enforcing
such remedy or right or taking such other action until such
instructions are received and (iii) shall be protected in
acting in accordance with such instructions; and shall not be
under any obligation to take any action that is discretionary
under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or act's or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
-44-
<PAGE>
Section 8.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
Section 8.5. May Hold Securities.
Except as provided in the definition of the term "Outstanding" in
Article I, any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section 8.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express Trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustees upon request for all reasonable expenses,
disbursements and advances incurred or made by the Trustees in
accordance with any provision of this Trust Agreement (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Trustee, (ii) any Affiliate of any
Trustee, (iii) any officer, director, shareholder, employee,
representative or agent of any Trustee and (iv) any employee or agent
of the Trust or its Affiliates, (referred to herein as an "Indemnified
Person") from and against any loss, damage, liability, tax, penalty,
expense or claim of any kind or nature whatsoever incurred by such
Indemnified Person by reason of the creation, operation or termination
of the Trust or any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner
such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement,
except that no Indemnified Person shall be entitled to be indemnified
in respect of any loss, damage or claim incurred by such Indemnified
Person by reason of negligence or willful misconduct with respect to
such acts or omissions.
The provisions of this Section 8.6 shall survive the termination of
this Trust Agreement or the earlier resignations or removal of any Trustee.
-45-
<PAGE>
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and the Trust and
the Holders of Trust Securities shall have no rights by virtue of this Trust
Agreement in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. Neither the
Depositor, nor any Trustee, shall be obliged to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and the
Depositor or any Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Trustee may engage or be
interested in any financial or other transaction with the Depositor or any
Affiliate of the Depositor, or may act as depository for, Trustee or agent for,
or act on any committee or body of holders of, securities or other obligations
of the Depositor or its Affiliates.
Section 8.7. Corporate Property Trustee Required; Eligibility of Trustees.
(a) There shall at all times be a Property Trustee hereunder
with respect to the Trust Securities. The Property Trustee shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as
such and has a combined capital and surplus of at least $50,000,000. If
any such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section, the combined capital
and surplus of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each
Administrative Trustee shall be either a natural person who is at least
21 years of age or a legal entity that shall act through one or more
persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with
respect to the Trust Securities. The Delaware Trustee shall either be
(i) a natural person who is at least 21 years of age and a resident of
the State of Delaware or (ii) a legal entity with its principal place
of business in the State of Delaware and that otherwise meets the
requirements of applicable Delaware law that shall act through one or
more persons authorized to bind such entity.
Section 8.8. Conflicting Interests.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the
-46-
<PAGE>
extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Trust Agreement.
Section 8.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Depositor and the Administrative
Trustees, by agreed action of the majority of such Trustees, shall have power to
appoint, and upon the written request of the Administrative Trustees, the
Depositor shall for such purpose join with the Administrative Trustees in the
execution, delivery, and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Property Trustee
either to act as co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to the extent required by law to act as separate
trustee of any such property, in either case such powers as may be provided in
the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Depositor
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall either be (i) a natural person who is at least 21 years of age and
a resident of the United States or (ii) a legal entity with its principal place
of business in the United States that shall act through one or more persons
authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-Trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate Trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and
all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustees specified
hereunder shall be exercised solely by such Trustees and not by such
co-trustee or separate trustee.
(b) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Property Trustee or by the Property
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall
be incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations shall be exercised and performed
by such co-trustee or separate trustee.
-47-
<PAGE>
(c) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor,
may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Depositor. Upon the
written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate
trustee so resigned or removed may be appointed in the manner provided
in this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property
Trustee or any other trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any
act of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall
be deemed to have been delivered to each such co-trustee and separate
trustee.
Section 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11. Subject to the
immediately preceding sentence, the Relevant Trustee may resign at any time by
giving written notice thereof to the Securityholders.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of acting
as Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall
-48-
<PAGE>
comply with the applicable requirements of Section 8.11. If an Administrative
Trustee shall resign, be removed or become incapable of acting as Administrative
Trustee, at a time when a Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder by Act of the Common Securityholder
delivered to the Administrative Trustee shall promptly appoint a successor
Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no successor Relevant Trustee shall have been so appointed
by the Common Securityholder or the Preferred Securityholders and accepted
appointment in the manner required by Section 8.11, any Securityholder who has
been a Securityholder of Trust Securities for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.8 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
If the instrument of acceptance by the successor Trustee required by
Section 8.11 shall not have been delivered to the Relevant Trustee within 30
days after the giving of notice of resignation or removal, the Relevant Trustee
may petition, at the expense of the Trust, any court of competent jurisdiction
for the appointment of a successor Relevant Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
Section 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee such
successor Trustee so appointed shall execute, acknowledge and deliver to the
Trust and to the retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Depositor or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and if the Property Trustee is the
resigning Trustee shall duly assign, transfer and deliver to the successor
Trustee all property and money held by such retiring Property Trustee hereunder.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall
-49-
<PAGE>
execute and deliver an amendment hereto wherein each successor Relevant Trustee
shall accept such appointment and which (a) shall contain such provisions as
shall be necessary or desirable to transfer and confirm to, and to vest in, each
successor Relevant Trustee all the rights, powers, trusts and duties of the
retiring Relevant Trustee with respect to the Trust Securities and the Trust and
(b) shall add to or change any of the provisions of this Trust Agreement as
shall be necessary to provide for or facilitate the administration of the Trust
by more than one Relevant Trustee, it being understood that nothing herein or in
such amendment shall constitute such Relevant Trustees co-Trustees and upon the
execution and delivery of such amendment the resignation or removal of the
retiring Relevant Trustee shall become effective to the extent provided therein
and each such successor Relevant Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, Trusts and duties
of the retiring Relevant Trustee; but, on request of the Trust or any successor
Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and
deliver to such successor Relevant Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
Section 8.12. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
Section 8.13. Preferential Collection of Claims Against Depositor or Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and
to file such other papers or documents
-50-
<PAGE>
as may be necessary or advisable in order to have the claims of the
Property Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same.
Any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Property Trustee and, in the event the Property Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel, and
any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 8.14. Reports by Property Trustee.
(a) Not later than 60 days after May 15, of each year
commencing with May 15, 1997, the Property Trustee shall, if required
by the Trust Indenture Act, transmit to all Securityholders in
accordance with Section 10.8, and to the Depositor, a brief report
dated as of the immediately preceding May 15 with respect to:
(i) its eligibility under Section 8.7 or, in
lieu thereof, if to the best of its knowledge it has continued
to be eligible under said Section, a written statement to such
effect;
(ii) a statement that the Property Trustee
has complied with all of its obligations under this Trust
Agreement during the twelve-month period (or, in the case of
the initial report, the period since the Closing Date) ending
with such May 15 or, if the Property Trustee has not complied
in any material respect with such obligations, a description
of such noncompliance; and
(iii) any change in the property and funds
in its possession as Property Trustee since the date of its
last report and any action taken by the Property Trustee in
the performance of its duties hereunder which it has not
previously reported and which in its opinion materially
affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its
actions under this Trust Agreement as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant
thereto.
-51-
<PAGE>
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each
national stock exchange, the Nasdaq National Market or such other
interdealer quotation system or self-regulatory organization upon which
the Trust Securities are listed or traded, with the Commission and with
the Depositor. The Depositor will promptly notify the Property Trustee
when the Preferred Securities are listed on any securities exchange.
Section 8.15. Reports to the Property Trustee.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act. Delivery of such reports, information and documents to the Property Trustee
is for informational purposes only and the Property Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Trust's
compliance with any of its covenants hereunder (as to which the Property Trustee
is entitled to rely exclusively on Officers' Certificates).
Section 8.16 Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
Section 8.17 Number of Trustees.
(a) The number of Trustees shall be four, provided that the
Holder of all of the Common Securities by written instrument may
increase or decrease the number of Administrative Trustees. The
Property Trustee and the Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section
8.17(a), or if the number of Trustees is increased pursuant to Section
8.17(a), a vacancy shall occur. The vacancy shall be filed with a
Trustee appointed in accordance with Section 8.10.
(c) A Trustee's death, resignation, retirement, removal,
bankruptcy, incompetence or incapacity to perform the duties of a
Trustee shall not operate to annul the Trust. Whenever a vacancy in the
number of Administrative Trustees shall occur, until such vacancy is
filled by the appointment of an Administrative Trustee in accordance
with Section 8.10, the Administrative Trustees in office, regardless of
their number (and notwithstanding any other provision of this
Agreement), shall have all the
-52-
<PAGE>
powers granted to the Administrative Trustees and shall discharge all
the duties imposed upon the Administrative Trustees by this Trust
Agreement.
Section 8.18. Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person
over the age of 21 his or her power for the purpose of executing any
documents contemplated in Section 2.7(a), including any registration
statement or amendment thereto filed with the Commission, or making any
other governmental filing; and
(b) The Administrative Trustees shall have power to delegate
from time to time to such of their number or to the Depositor the doing
of such things and the execution of such instruments either in the name
of the Trust or the names of the Administrative Trustees or otherwise
as the Administrative Trustees may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the
provisions of this Trust Agreement, as set forth herein.
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER
Section 9.1. Termination Upon Expiration Date.
Unless earlier terminated, the Trust shall automatically terminate on
December 31, 2052 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
Section 9.2. Early Termination.
The first to occur of any of the following events is an "Early
Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the
Depositor at any time to terminate the Trust and distribute Debentures
to Securityholders in exchange for the Preferred Securities (which
direction is optional and wholly within the discretion of the
Depositor);
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Trust by a
court of competent jurisdiction.
-53-
<PAGE>
Section 9.3. Termination.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders.
Section 9.4. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b)
or (d) of Section 9.2 occurs prior to the Expiration Date, the Trust
shall be liquidated by the Trustees as expeditiously as the Trustees
determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to
each Securityholder a Like Amount of Debentures, subject to Section
9.4(d). Notice of liquidation shall be given by the Property Trustee by
first class mail, postage prepaid mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust
Securities at such Holder's address appearing in the Securities
Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the
Liquidation Date, the Trust Securities will no longer be
deemed to be Outstanding and any Trust Securities Certificates
not surrendered for exchange will be deemed to represent a
Like Amount of Debentures;
(iii) provide such information with respect
to the procedures by which Holders may exchange Trust
Securities Certificates for Debentures, or if Section 9.4(d)
applies, receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem
appropriate; and
(iv) state the CUSIP number.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures
to Securityholders, the Property Trustee shall establish a record date
for such distribution (which shall be not more than 45 days prior to
the Liquidation Date) and, either itself acting as exchange agent or
through the appointment of a separate exchange agent, shall establish
such procedures as it shall deem appropriate to effect the distribution
of Debentures in exchange for the Outstanding Trust Securities
Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to
be Outstanding, (ii) certificates
-54-
<PAGE>
representing a Like Amount of Debentures will be issued to Holders of
Trust Securities Certificates, upon surrender of such certificates to the
Administrative Trustees or their agent for exchange, (iii) the Depositor shall
use its reasonable best efforts to have the Debentures listed on the New York
Stock Exchange or on such other exchange, interdealer quotation system or
self-regulatory organization as the Preferred Securities are then listed, (iv)
any Trust Securities Certificates not so surrendered for exchange will be deemed
to represent a Like Amount of Debentures, accruing interest at the rate provided
for in the Debentures from the last Distribution Date on which a Distribution
was made on such Trust Securities Certificates until such certificates are so
surrendered (and until such certificates are so surrendered, no payments of
interest or principal will be made to Holders of Trust Securities Certificates
with respect to such Debentures) and (v) all rights of Securityholders holding
Trust Securities will cease, except the right of such Securityholders to receive
Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 9.4, whether because of an order for dissolution entered
by a court of competent jurisdiction or otherwise, distribution of the
Debentures in the manner provided herein is determined by the Property
Trustee not to be practical, the Trust Property shall be liquidated,
and the Trust shall be dissolved, wound-up or terminated by the
Property Trustee in such manner as the Property Trustee determines. In
such event, on the date of the dissolution, winding-up or other
termination of the Trust, Securityholders will be entitled to receive
out of the assets of the Trust available for distribution to
Securityholders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to the Liquidation
Amount per Trust Security plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, winding up or
termination, the Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust
Securities shall be paid on a pro rata basis (based upon Liquidation
Amounts). The Holder of the Common Securities will be entitled to
receive Liquidation Distributions upon any such dissolution, winding-up
or termination pro rata (determined as aforesaid) with Holders of
Preferred Securities, except that, if a Debenture Event of Default has
occurred and is continuing, the Preferred Securities shall have
priority over the Common Securities.
Section 9.5. Mergers, Consolidations, Amalgamations or Replacements of the
Trust.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except pursuant
to this Article IX. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a Trust
organized as such under the laws of any State; provided, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Preferred Securities or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so
-55-
<PAGE>
long as the Successor Securities rank the same as the Preferred
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Depositor expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the Holder of the Debentures, (iii) the Successor Securities
are listed or traded, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed or traded, if
any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized statistical
rating organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose substantially identical to that of the Trust, (vii) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
the Depositor has received an Opinion of Counsel to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Preferred Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the 1940 Act
and (viii) the Depositor owns all of the common securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity to be classified
as other than a grantor trust for United States federal income tax purposes.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.1. Limitation of Rights of Securityholders.
The death or incapacity of any person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such person or any
Securityholder for such person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
Section 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time by
the Property Trustee, the Administrative Trustees and the Depositor,
without the consent of any
-56-
<PAGE>
Securityholders, (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Trust Agreement, which shall not be
inconsistent with the other provisions of this Trust Agreement or (ii)
to modify, eliminate or add to any provisions of this Trust Agreement
to such extent as shall be necessary to ensure that the Trust will be
classified for United States federal income tax purposes as a grantor
Trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an investment
company under the 1940 Act; provided, however, that in the case of
clause (i), such action shall not adversely affect in any material
respect the interests of any Securityholder, and any amendments of this
Trust Agreement pursuant to this Section 10.2(a) shall become effective
when notice thereof is given to the Securityholders.
(b) Except as provided in Section 10.2(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and
the Depositor with (i) the consent of Trust Securityholders
representing not less than a majority (based upon Liquidation Amounts)
of the Trust Securities then Outstanding and (ii) receipt by the
Trustees of an Opinion of Counsel to the effect that such amendment or
the exercise of any power granted to the Trustees in accordance with
such amendment will not affect the Trust's status as a grantor trust
for United States federal income tax purposes or the Trust's exemption
from status of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in
this Trust Agreement, without the consent of each affected
Securityholder (such consent being obtained in accordance with Section
6.3 or 6.6 hereof), this Trust Agreement may not be amended to (i)
change the amount or timing of any Distribution on the Trust Securities
or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a Securityholder to institute suit for the
enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section
6.3 or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be
amended.
(d) Notwithstanding any other provisions of this Trust
Agreement, no Trustee shall enter into or consent to any amendment to
this Trust Agreement which would cause the Trust to fail or cease to
qualify for the exemption from status of an investment company under
the 1940 Act or fail or cease to be classified as a grantor trust for
United States federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor, this Trust Agreement
may not be amended in a manner which imposes any additional obligation
on the Depositor.
(f) In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the
Depositor a copy of such amendment.
-57-
<PAGE>
(g) Neither the Property Trustee nor the Delaware Trustee
shall be required to enter into any amendment to this Trust Agreement
which affects its own rights, duties or immunities under this Trust
Agreement. The Property Trustee shall be entitled to receive an Opinion
of Counsel and an Officers' Certificate stating that any amendment to
this Trust Agreement is in compliance with this Trust Agreement.
Section 10.3. Separability.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 10.4. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE.
Section 10.5. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.l(a) and 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no interest shall
accrue thereon for the period after such date.
Section 10.6. Successor.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee,
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article Eight of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
Section 10.7 Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
Section 10.8 Reports, Notices and Demands.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Securityholder or the Depositor may be given or served in writing
by deposit thereof, first-class postage prepaid, in the
-58-
<PAGE>
United States mail, hand delivery or facsimile transmission, in each case,
addressed, (a) in the case of a Preferred Securityholder, to such Preferred
Securityholder as such Securityholder's name and address may appear on the
Securities Register; and (b) in the case of the Common Securityholder or the
Depositor, to BankUnited Financial Corporation, 255 Alhambra Circle, Coral
Gables, Florida 33134, Attention: Treasurer, facsimile no.: (305) 569-2026. Any
notice to Preferred Securityholders shall also be given to such owners as have,
within two years preceding the giving of such notice, filed their names and
addresses with the Property Trustee for that purpose. Such notice, demand or
other communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (a) with respect to the Property Trustee to The Bank
of New York, 101 Barclay Street, 21W, New York, New York 10286, Attention:
Corporate Trust Trustee Administration; (b) with respect to the Delaware
Trustee, to The Bank of New York (Delaware), White Clay Center, Route 273,
Newark, Delaware 19711; and (c) with respect to the Administrative Trustees, to
them at the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of BankUnited Capital". Such notice, demand or other
communication to or upon the Trust or the Property Trustee shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by
the Trust or the Property Trustee.
Section 10.9. Agreement Not to Petition.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in
the commencement of any proceeding against the Trust under any Bankruptcy Law.
In the event the Depositor takes action in violation of this Section 10.9, the
Property Trustee agrees, for the benefit of Securityholders, that at the expense
of the Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be stopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert. The provisions of this Section 10.9 shall survive the
termination of this Trust Agreement.
Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Trust
Agreement and shall, to the extent applicable, be governed by such
provisions.
-59-
<PAGE>
(b) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act,
such required provision shall control. If any provision of this Trust
Agreement modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be
deemed to apply to this Trust Agreement as so modified or excluded, as
the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Trust Securities as equity
securities representing undivided beneficial interests in the assets of
the Trust.
Section 10.11. Acceptance of Terms of Trust Agreement, Guarantee and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL OF THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT
AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE
AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
-60-
<PAGE>
BANK UNITED FINANCIAL CORPORATION
as Depositor
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE BANK OF NEW YORK
as Property Trustee
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE BANK OF NEW YORK (DELAWARE)
as Delaware Trustee
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:______________________________________
Name: NANCY ASHTON
--------------------------------
Title: AS ADMINISTRATIVE TRUSTEE
--------------------------------
By:______________________________________
Name: JAMES DOUGHERTY
--------------------------------
Title: AS ADMINISTRATIVE TRUSTEE
--------------------------------
-61-
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST
OF
BankUnited Capital
THIS CERTIFICATE OF TRUST OF BANKUNITED CAPITAL (the "Trust"), dated
December 13, 1996, is being duly executed and filed by the undersigned, as
trustees, to form a business Trust under the Delaware Business Trust Act (12
Del. C. Section 3801 et seq.).
1. Name. The name of the business trust being formed hereby is
BankUnited Capital.
2. Delaware Trustee. The name and business address of the trustee of
the Trust with a principal place of business in the State of Delaware are The
Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
19711.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
THE BANK OF NEW YORK (DELAWARE)
as Trustee
By:_______________________________________
Name:_____________________________________
Title:____________________________________
JAMES A. DOUGHERTY, AS TRUSTEE
__________________________________
NANCY L. ASHTON, AS TRUSTEE
__________________________________
A-1
<PAGE>
[INSERT EXHIBIT B (LETTER OF REPRESENTATION) HERE]
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER NUMBER OF COMMON SECURITIES
C-1 (_____)
CUSIP NO.
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
BANKUNITED CAPITAL
TRUST COMMON SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER COMMON SECURITY)
BankUnited Capital, a statutory business Trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that BankUnited
Financial Corporation (the "Holder") is the registered owner of () common
securities of the Trust, representing beneficial interests of the Trust and
designated the Trust Common Securities, Series A (liquidation amount $1,000 per
Common Security) (the "Common Securities"). Except as provided in Section 5.11
of the Trust Agreement (as defined below) the Common Securities are not
transferable and any attempted transfer hereof shall be void. The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Common Securities are set forth in, and this certificate and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of March 24, 1997, as the same may be amended from time to time
(the "Trust Agreement") including the designation of the terms of the Common
Securities as set forth therein. The Trust will furnish a copy of the Trust
Agreement to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
By receipt and acceptance of this certificate, the Holder agrees to be
bound by the Trust Agreement and is entitled to the benefits thereunder.
C-1
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this 24th day of March, 1997.
BANKUNITED CAPITAL
BY:_______________________________
Name:_____________________________
Title: ADMINISTRATIVE TRUSTEE
C-2
<PAGE>
EXHIBIT D-1
GLOBAL RULE 144A PREFERRED SECURITY
The Preferred Securities evidenced hereby and any Debentures issuable
in connection therewith have not been registered under the U.S. Securities Act
of 1933, as amended (the "Securities Act") and may not be offered, sold, pledged
or otherwise transferred except (A)(i) to a person who the Seller reasonably
believes is a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act acquiring the Preferred Securities for its own account
or for the account of a Qualified Institutional Buyer in a transaction meeting
the requirements of Rule 144A, (ii) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 thereunder (if available) or (iii)
pursuant to an effective registration statement under the Securities Act, and
(B) in accordance with all applicable securities laws of the states of the
United States and other jurisdictions.
This Preferred Security is a Global Certificate within the meaning of
the Trust Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository. This
Preferred Security is exchangeable for Preferred Securities registered in the
name of a person other than the Depository or its nominee only in the limited
circumstances described in the Trust Agreement and no transfer of this Preferred
Security (other than a transfer of this Preferred Security as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository) may be registered except in
limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
BankUnited Capital or its agent for registration of transfer, exchange or
payment, and any Preferred Security issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment hereon is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
D-1-1
<PAGE>
Certificate Number Number of Preferred Securities
P-
CUSIP NO.
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
BANKUNITED CAPITAL
10 1/4% TRUST PREFERRED SECURITIES
SERIES A
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
BankUnited Capital, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of ( ) preferred securities of the Trust
representing an undivided beneficial interest in the assets of the Trust and
designated the BankUnited Capital 10 1/4% Trust Preferred Securities, Series A
(liquidation amount $1,000 per Preferred Security) (the "Preferred Securities").
The Preferred Securities are transferable on the books and records of the Trust,
in person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer as provided in Section 5.5 of the
Trust Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of March 24, 1997, as the same may be amended from time to time (the "Trust
Agreement") including the designation of the terms of Preferred Securities as
set forth therein. The Holder is entitled to the benefits of the Guarantee
Agreement, as amended, entered into by BankUnited Financial Corporation, a
Florida corporation, and The Bank of New York, as guarantee trustee, dated as of
March 24, 1997 (the "Guarantee"), to the extent provided therein. The Trust will
furnish a copy of the Trust Agreement and the Guarantee to the Holder without
charge upon written request to the Trust at its principal place of business or
registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
D-12
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this day of March 24, 1997.
BANKUNITED CAPITAL
BY:_________________________________
Name:_______________________________
Title: ADMINISTRATIVE TRUSTEE
D-13
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Securities Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:_____________________
Signature:______________________________________________________________________
(Sign exactly as your name appears on the other side of this Preferred
Securities Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule l7Ad-15.
D-14
<PAGE>
EXHIBIT D-2
The Preferred Securities evidenced hereby and any Debentures issuable
in connection therewith have not been registered under the U.S. Securities Act
of 1933, as amended (the "Securities Act") and may not be offered, sold, pledged
or otherwise transferred except (A)(i) to a person who the Seller reasonably
believes is a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act acquiring the Preferred Securities for its own account
or for the account of a Qualified Institutional Buyer in a transaction meeting
the requirements of Rule 144A, (ii) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 thereunder (if available) or (iii)
pursuant to an effective registration statement under the Securities Act, and
(B) in accordance with all applicable securities laws of the states of the
United States and other jurisdictions.
D-2-1
<PAGE>
OTHER PREFERRED SECURITY
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P
CUSIP NO.
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
BANKUNITED CAPITAL
10 1/4% TRUST PREFERRED SECURITIES
SERIES A
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
BankUnited Capital, a statutory business Trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that [ ] (the "Holder")
is the registered owner of ( ) preferred securities of the Trust representing an
undivided beneficial interest in the assets of the Trust and designated the
BankUnited Capital 10 1/4% Trust Preferred Securities, Series A (liquidation
amount $1,000 per Preferred Security) (the "Preferred Securities"). The
Preferred Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer as provided in Section 5.5 of the Trust
Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, Amended and Restated the Trust Agreement of the Trust dated
as of March 24, 1997, as the same may be amended from time to time (the "Trust
Agreement") including the designation of the terms of Preferred Securities as
set forth therein. The Holder is entitled to the benefits of the Guarantee
Agreement, as amended, entered into by BankUnited Financial Corporation, a
Florida corporation, as guarantor and The Bank of New York, as guarantee
trustee, dated as of March 24, 1997 (the "Guarantee"), to the extent provided
therein. The Trust will furnish a copy of the Trust Agreement and the Guarantee
to the Holder without charge upon written request to the Trust at its principal
place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
D-2-2
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this 24th day of March, 1997
BANKUNITED CAPITAL
BY:___________________________
Name:_________________________
Title: ADMINISTRATIVE TRUSTEE
D-2-3
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Securities Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:_____________________
Signature:______________________________________________________________________
(Sign exactly as your name appears on the other side of this
Preferred Securities Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule l7Ad-15.
D-2-4
<PAGE>
EXHIBIT E
FORM OF RESTRICTED SECURITIES CERTIFICATE
SECURITIES CERTIFICATE
(FOR TRANSFERS PURSUANT TO Section 5.5 OF THE TRUST AGREEMENT)
The Bank of New York,
as Securities Registrar
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Administration
Re: 10 1/4% TRUST PREFERRED SECURITIES, SERIES A, OF BANKUNITED
CAPITAL (THE "TRUST") (THE "PREFERRED SECURITIES")
Reference is made to the Amended and Restated Trust Agreement, dated as
of March 24, 1997 (as amended from time to time, the "Trust Agreement"), entered
among BankUnited Financial Corporation, as Depositor (the "Depositor"), The Bank
of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware
Trustee, the Administrative Trustees named therein and the holders, from time to
time, of undivided beneficial interests in the assets of the Trust. Terms used
herein and defined in the Trust Agreement or in Rule 144A or Rule 144 under the
U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to $_______ aggregate Liquidation Amount of
Preferred Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s).
CERTIFICATE No(s).
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Preferred Security, they
are held through the Clearing Agency or a Clearing Agency Participant in the
name of the Undersigned, as or on
E-1
<PAGE>
behalf of the Owner. If the Specified Securities are not represented by a Global
Preferred Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to
a person (the "Transferee") who will take delivery in the form of a Rule 144A
Preferred Security or in the form of Definitive Preferred Securities. In
connection with such transfer, the Owner hereby certifies that, unless such
transfer is being effected pursuant to an effective registration statement under
the Securities Act, it is being effected in accordance with Rule 144A or Rule
144 under the Securities Act and all applicable securities laws of the states of
the United States and other jurisdictions. Accordingly, the Owner hereby further
certifies as:
(1) RULE 144A TRANSFERS. If the transfer is being
effected in accordance with Rule 144A:
(A) the Specified Securities are being
transferred to a person that the Owner and any person acting
on its behalf reasonably believe is a "qualified institutional
buyer" within the meaning of Rule 144A, acquiring for its own
account or for the account of a qualified institutional buyer;
and
(B) the Owner and any person acting on its
behalf have taken reasonable steps to ensure that the
Transferee is aware that the Owner may be relying on Rule 144A
in connection with the transfer; and
(2) RULE 144 TRANSFERS. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a
holding period of at least two years (or such shorter period
as computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Securities were last acquired from
the Trust or the Depositor or from an affiliate of the Trust
or the Depositor, whichever is later, and is being effected in
accordance with the applicable amount, manner of sale and
notice requirements of Rule 144; or
(B) the transfer is occurring after a
holding period of at least three years (or such shorter period
as computed in accordance with paragraph (k) of Rule 144) has
elapsed since the Specified Securities were last acquired from
the Trust or the Depositor or from an affiliate of the Trust
or the Depositor, whichever is later, and the Owner is not,
and during the preceding three months has not been, an
affiliate of the Trust or the Depositor.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Depositor, the Trust and the Initial Purchasers.
E-2
<PAGE>
Dated:_______________
____________________________________________
(Print the name of the Undersigned, as such
term is defined in the second paragraph of
this certificate.)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
(If the Undersigned is a corporation,
partnership or fiduciary, the title of the
person signing on behalf of the Undersigned
must be stated.)
E-3
<PAGE>
EXHIBIT F
FORM OF UNRESTRICTED SECURITIES CERTIFICATE
UNRESTRICTED SECURITIES CERTIFICATE
(FOR REMOVAL OF SECURITIES ACT LEGENDS PURSUANT TO Section 5.5(C) OF THE TRUST
AGREEMENT)
The Bank of New York,
as Securities Registrar
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Administration
Re: 10 1/4% TRUST PREFERRED SECURITIES, SERIES A, OF BANKUNITED
CAPITAL (THE "TRUST") (THE "PREFERRED SECURITIES")
Reference is made to the Amended and Restated Trust Agreement, dated as
of March 24, 1997 (the "Trust Agreement"), entered among BankUnited Financial
Corporation, as Depositor (the "Depositor"), The Bank of New York, as Property
Trustee, The Bank of New York (Delaware), as Delaware Trustee, the
Administrative Trustees named therein and the holders from time to time of
undivided beneficial interests in the assets of the Trust. Terms used herein and
defined in the Trust Agreement or Rule 144 under the U.S. Securities Act of 1933
(the "Securities Act") are used herein as so defined.
This certificate relates to $_______ aggregate Liquidation Amount of
Preferred Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s).
CERTIFICATE No(s).
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Securities Certificate,
they are held through the Clearing Agency or a Clearing Agency Participant in
the name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Preferred Security, they are
registered in the name of the Undersigned, as or on behalf of the Owner.
F-1
<PAGE>
The Owner has requested that the Specified Securities be exchanged for
Preferred Securities bearing no Restricted Preferred Securities Legend pursuant
to Section 5.4(c) of the Trust Agreement. In connection with such exchange, the
Owner hereby certifies that the exchange is occurring after a holding period of
at least three years (or such shorter period as computed in accordance with
paragraph (k) of Rule 144) has elapsed since the Specified Securities were last
acquired from the Trust, the Depositor or from an affiliate of the Trust or the
Depositor, whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Trust or the Depositor. The Owner
also acknowledges that any future transfers of the Specified Securities must
comply with all applicable securities laws of the states of the United States
and other jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers.
Dated:_______________
____________________________________________
(Print the name of the Undersigned, as such
term is defined in the second paragraph of
this certificate.)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
(If the Undersigned is a corporation,
partnership or fiduciary, the title of the
person signing on behalf of the Undersigned
must be stated.)
F-2
<PAGE>
EXHIBIT G
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT, dated as of December 30, 1996, between BankUnited Financial
Corporation, a Florida corporation (the "Corporation") having its principal
office at 255 Alhambra Circle, Coral Gables, Florida 33134, and BankUnited
Capital, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities, Series A
(the "Common Securities") to and receive debentures from the Corporation and to
issue and sell 10 1/4% Trust Preferred Securities, Series A (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Trust Agreement of the Trust, dated as of December 30,
1996, as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Corporation will directly or indirectly own all of the
Common Securities of the Trust and will issue the debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Corporation hereby agrees shall benefit
the Corporation and which purchase the Corporation acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Corporation and
Trust hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by the Corporation.
Subject to the terms and conditions hereof, the Corporation hereby
irrevocably and unconditionally guarantees to each person or entity to whom the
Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the
full payment, when and as due, of any and all Obligations (as hereinafter
defined) to such Beneficiaries. As used herein, "Obligations" means any costs,
expenses or liabilities of the Trust, other than obligations of the Trust to pay
to holders of any Preferred Securities or other similar interests in the Trust
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise) and (b) the date on which there
are no Beneficiaries remaining; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any holder of Preferred Securities or any Beneficiary must restore payment
of any sums paid under the Preferred Securities, under any Obligation, under the
Guarantee Agreement dated the date hereof
G-1
<PAGE>
by the Corporation and The Bank of New York, as guarantee trustee or under this
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
Section 1.3. Waiver of Notice.
The Corporation hereby waives notice of acceptance of this Agreement
and of any Obligation to which it applies or may apply, and the Corporation
hereby waives presentment, demand for payment, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of the Corporation
under this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all
or any portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the
obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with respect
to the Obligations or any action on the part of the Trust granting
indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Corporation with respect to the happening of any of, the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against the
Corporation and the Corporation waives any right or remedy to require that any
action be brought against the Trust or any other person or entity before
proceeding against the Corporation.
Section 1.6. Subrogation.
The Corporation shall be subrogated to all (if any) rights of the Trust
in respect of any amounts paid to the Beneficiaries by the Corporation under
this Agreement; provided, however, that the Corporation shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Agreement, if, at the time of any such payment, any amounts are due and unpaid
under this Agreement.
G-2
<PAGE>
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the
Corporation and shall inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
So long as there remains arty Beneficiary or any Preferred Securities
are outstanding, this Agreement shall not be modified or amended in any manner
adverse to such Beneficiary or to the holders of the Preferred Securities.
Section 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail) or by registered or
certified mail, addressed as follows (and if so given, shall be deemed given
when mailed:
BankUnited Capital
c/o The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Facsimile No.: (305) 569-2057
Attention: Treasurer
Section 2.4. Choice of Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
THIS AGREEMENT is executed as of the day and year first above written.
BANKUNITED FINANCIAL CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
G-3
<PAGE>
BANKUNITED CAPITAL
By:______________________________
Name:____________________________
Title:___________________________
G-4
OTHER PREFERRED SECURITY
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P
CUSIP NO.
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
BANKUNITED CAPITAL
10 1/4% TRUST PREFERRED SECURITIES
SERIES A
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
BankUnited Capital, a statutory business Trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that [ ] (the "Holder")
is the registered owner of ( ) preferred securities of the Trust representing an
undivided beneficial interest in the assets of the Trust and designated the
BankUnited Capital 10 1/4% Trust Preferred Securities, Series A (liquidation
amount $1,000 per Preferred Security) (the "Preferred Securities"). The
Preferred Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer as provided in Section 5.5 of the Trust
Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, Amended and Restated the Trust Agreement of the Trust dated
as of March 24, 1997, as the same may be amended from time to time (the "Trust
Agreement") including the designation of the terms of Preferred Securities as
set forth therein. The Holder is entitled to the benefits of the Guarantee
Agreement, as amended, entered into by BankUnited Financial Corporation, a
Florida corporation, as guarantor and The Bank of New York, as guarantee
trustee, dated as of March 24, 1997 (the "Guarantee"), to the extent provided
therein. The Trust will furnish a copy of the Trust Agreement and the Guarantee
to the Holder without charge upon written request to the Trust at its principal
place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this 24th day of March, 1997
BANKUNITED CAPITAL
By:_____________________________
Name:___________________________
Title: ADMINISTRATIVE TRUSTEE
2
AMENDED GUARANTEE AGREEMENT
BETWEEN
BANKUNITED FINANCIAL CORPORATION
(AS GUARANTOR)
AND
THE BANK OF NEW YORK
(AS TRUSTEE)
DATED AS OF
MARCH 24, 1997
<PAGE>
CROSS-REFERENCE TABLE*
SECTION OF
SECTION OF TRUST INDENTURE ACT OF 1939, AS AMENDED GUARANTEE AGREEMENT
- -------------------------------------------------- -------------------
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
316(c) 8.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(b)
318(b) 2.1
318(c) 2.1(a)
- ----------
* This Cross-Reference Table does not constitute part of the Amended
Guarantee Agreement and shall not affect the interpretation of any of
its terms or provisions.
i
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I. DEFINITIONS......................................1
Section 1.1 Definitions......................................1
ARTICLE II. TRUST INDENTURE ACT..............................4
Section 2.1 Trust Indenture Act; Application.................4
Section 2.2 List of Holders..................................4
Section 2.3 Reports by the Guarantee Trustee.................5
Section 2.4 Periodic Reports to the Guarantee Trustee........5
Section 2.5 Evidence of Compliance with Conditions
Precedent......................................5
Section 2.6 Events of Default; Waiver........................5
Section 2.7 Event of Default; Notice.........................6
Section 2.8 Conflicting Interests............................6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE
TRUSTEE........................................6
Section 3.1 Powers and Duties of the Guarantee Trustee.......6
Section 3.2 Certain Rights of Guarantee Trustee..............8
Section 3.3 Indemnity........................................8
ARTICLE IV. GUARANTEE TRUSTEE...............................10
Section 4.1 Guarantee Trustee; Eligibility..................10
Section 4.2 Appointment, Removal and Resignation of the
Guarantee Trustee.............................10
ARTICLE V. GUARANTEE.......................................11
Section 5.1 Guarantee.......................................11
Section 5.2 Waiver of Notice and Demand.....................11
Section 5.3 Obligations Not Affected........................11
Section 5.4 Rights of Holders...............................12
Section 5.5 Guarantee of Payment............................12
Section 5.6 Subrogation.....................................12
Section 5.7 Independent Obligations.........................13
ARTICLE VI. COVENANTS AND SUBORDINATION.....................13
Section 6.1 Subordination...................................13
Section 6.2 PARI PASSU Guarantees...........................13
ARTICLE VII. TERMINATION.....................................13
Section 7.1 Termination.....................................13
ii
<PAGE>
ARTICLE VIII. MISCELLANEOUS...................................14
Section 8.1 Successors and Assigns..........................14
Section 8.2 Amendments......................................14
Section 8.3 Notices.........................................14
Section 8.4 Benefit.........................................15
Section 8.5 Interpretation..................................15
Section 8.6 Governing Law...................................16
iii
<PAGE>
AMENDED GUARANTEE AGREEMENT
This AMENDED GUARANTEE AGREEMENT, dated as of March 24, 1997, is
executed and delivered by BANKUNITED FINANCIAL CORPORATION, a Florida
corporation (the "Guarantor") having its principal office at 255 Alhambra
Circle, Coral Gables, Florida 33134, and THE BANK OF NEW YORK, a New York
banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of
the Holders (as defined herein) from time to time of the Preferred Securities
(as defined herein) of BankUnited Capital, a Delaware statutory business trust
(the "Issuer").
WHEREAS, pursuant to a Trust Agreement, dated as of December 30, 1996
(the "Original Trust Agreement"), and an Amended and Restated Trust Agreement,
dated as of March 24, 1997 (together with the Original Trust Agreement the
"Trust Agreement") among the Guarantor, as Depositor, the Property Trustee and
the Delaware Trustee named therein and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer issued
$50,000,000 and is issuing $20,000,000, respectively, aggregate Liquidation
Amount (as defined in the Trust Agreement) of its 10 1/4% Trust Preferred
Securities, Series A, Liquidation Amount $1,000 per preferred security) (the
"Preferred Securities") representing preferred undivided beneficial interests in
the assets of the Issuer and having the terms set forth in the Trust Agreement;
WHEREAS, the proceeds for the issuance of Preferred Securities,
together with the proceeds from the issuance of the Issuer's Common Securities
(as defined below), were and will be invested in the Subordinated Debentures (as
defined in the Trust Agreement) of the Guarantor which were and will be
deposited with THE BANK OF NEW YORK, as Property Trustee under the Trust
Agreement, as trust assets; and
WHEREAS, as incentive for the Holders to purchase Preferred Securities,
the Guarantor desired with respect to the $50,000,000 Liquidation Amount of
Preferred Series A and will desire with respect to the $20,000,000 Liquidation
Amount of Preferred Securities irrevocably and unconditionally to agree, to the
extent set forth herein, to pay to the Holders of the Preferred Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees benefits and
shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time of the Preferred
Securities.
<PAGE>
ARTICLE I. DEFINITIONS
Section 1.1. Definitions
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to be an Affiliate of the Issuer. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board of Directors" means either the board of directors of the
Guarantor or any committee of that board duly authorized to act hereunder.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf of the
2
<PAGE>
Issuer: (i) any accrued and unpaid Distributions (as defined in the Trust
Agreement) required to be paid on the Preferred Securities, to the extent the
Issuer shall have funds on hand available therefor at such time, (ii) the
redemption price, including all accrued and unpaid Distributions to the date of
redemption (the "Redemption Price"), with respect to any Preferred Securities
called for redemption by the Issuer, to the extent the Issuer shall have-funds
on hand available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Issuer, unless
Subordinated Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the Liquidation Amount of $1,000 per Preferred Security plus
accrued and unpaid Distributions on the Preferred Securities to the date of
payment and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer (in either case, the
"Liquidation Distribution").
"Guarantee Trustee " means THE BANK OF NEW YORK, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of
the Issuer, of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of
December 30, 1996, as supplemented and amended between the Guarantor and THE
BANK OF NEW YORK, as trustee.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
as a class, of more than 50% of the Liquidation Amount of all then outstanding
Preferred Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman or a Vice Chairman of the Board of Directors
of such Person or the President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Officers' Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
3
<PAGE>
(d) a statement as to whether, in the opinion of each officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, the Treasurer, any Trust Officer or any other officer of the
corporate trust department of the Guarantee Trustee and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Subordinated Debentures or to other Debt
which is PARI PASSU with, or subordinated to, the Subordinated Debentures;
provided, however, that Senior Debt shall not be deemed to include: (i) any Debt
of the Guarantor which when incurred and without respect to any election 1111(b)
of the United States Bankruptcy Code of 1978, as amended, was without recourse
to the Guarantor, (ii) any Debt of the Guarantor to any of its subsidiaries and
(iii) Debt to any employee of the Guarantor.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II. TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of
the Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
4
<PAGE>
Section 2.2. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to
the Guarantee Trustee semi-annually, on or before June 30, and December
31 of each year, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders ("List of
Holders") as of a date not more than 15 days prior to the delivery
thereof, and (b) at such other times as the Guarantee Trustee may
request in writing, within 30 days after the receipt by the Guarantor
of any such request, a List of Holders as of a date not more than 15
days prior to the time such list is furnished, in each case to the
extent such information is in the possession or control of the
Guarantor and is not identical to a previously supplied list of Holders
or has not otherwise been received by the Guarantee Trustee in its
capacity as such. The Guarantee Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations
under Section 311(a), Section 311(b) and Section 312(b) of the Trust
Indenture Act.
Section 2.3. Reports by the Guarantee Trustee.
Not later than July 15 of each year, commencing July 15, 1997, the
Guarantee Trustee shall provide to the Holders such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
Section 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and information,
if any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the Guarantee Trustee is
for informational purposes only and the Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained herein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Guarantee
Trustee is entitled to rely exclusively on Officers' Certificates).
Section 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
5
<PAGE>
Section 2.6. Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
Section 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders, notices of all Events of Default
actually known to the Guarantee Trustee, unless such defaults have been
cured before the giving of such notice, provided, that, except in the
case of a default in the payment of a Guarantee Payment, the Guarantee
Trustee shall be protected in withholding such notice if and so long as
the Board of Directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Guarantee Trustee in good
faith determines that the withholding of such notice is in the
interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Guarantee Trustee shall
have received written notice, or a Responsible Officer charged with the
administration of this Guarantee Agreement shall have obtained written
notice, of such Event of Default.
Section 2.8 Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF
THE GUARANTEE TRUSTEE
Section 3.1 Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee
Trustee for the benefit of the Holders, and the Guarantee Trustee shall
not transfer this Guarantee Agreement to any Person except a Holder
exercising his or her rights pursuant to Section 5.4(iv) or to a
Successor Guarantee Trustee on acceptance by such Successor Guarantee
Trustee of its appointment to act as Successor Guarantee Trustee. The
right, title and interest of the Guarantee Trustee shall automatically
vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such
vesting and cessation of title shall be effective whether
6
<PAGE>
or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the
benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are
specifically set forth in this Guarantee Agreement, and no implied
covenants shall be read into this Guarantee Agreement against the
Guarantee Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.6), the Guarantee
Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of
Default and after the curing or waiving of all such Events of
Default that may have occurred:
(A) the duties and obligations of
the Guarantee Trustee shall be determined solely by
the express provisions of this Guarantee Agreement,
and the Guarantee Trustee shall not be liable except
for the performance of such duties and obligations as
are specifically set forth in this Guarantee
Agreement; and
(B) in the absence of bad faith on
the part of the Guarantee Trustee, the Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to
the requirements of this Guarantee Agreement; but in
the case of any such certificates or opinions that by
any provision hereof or of the Trust Indenture Act
are specifically required to be furnished to the
Guarantee Trustee, the Guarantee Trustee shall be
under a duty to examine the same to determine whether
or not they conform to the requirements of this
Guarantee Agreement;
(ii) the Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a
Responsible Officer of the Guarantee Trustee, unless it shall
be proved that the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken
by it in good faith in accordance with the written
7
<PAGE>
direction of the Holders of not less than a Majority in
liquidation preference of the Preferred Securities relating to
the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee, or exercising
any trust or power conferred upon the Guarantee Trustee under
this Guarantee Agreement; and
(iv) no provision of this Guarantee
Agreement shall require the Guarantee Trustee to expend or
risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured
to it under the terms of this Guarantee Agreement or adequate
indemnity against such risk or liability is not-reasonably
assured to it.
Section 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall
be fully protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper
or document reasonably believed by it to be genuine and to
have been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor
contemplated by this Guarantee Agreement shall be sufficiently
evidenced by an Officers' Certificate unless otherwise
prescribed herein.
(iii) Whenever, in the administration of
this Guarantee Agreement, the Guarantee Trustee shall deem it
desirable that a matter be proved or established before
taking, suffering or omitting to take any action hereunder,
the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate
which, upon receipt of such request from the Guarantee
Trustee, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with
legal counsel of its selection, and the advice or opinion of
such legal counsel with respect to legal matters shall be full
and complete authorization and protection in respect of any
action taken, suffered or omitted to be taken by it hereunder
in good faith and in accordance with such advice or opinion.
Such legal counsel may be legal counsel to the Guarantor or
any of its Affiliates and may be one of its employees. The
Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee
Agreement from any court of competent jurisdiction.
8
<PAGE>
(v) The Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Guarantee Agreement at the request or direction of
any Holder, unless such Holder shall have provided to the
Guarantee Trustee such adequate security and indemnity as
would satisfy a reasonable person in the position of the
Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Guarantee Trustee; provided that, nothing contained in this
Section 3.2(a)(v) shall be taken to relieve the Guarantee
Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by
this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be
bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any
of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through its agents or
attorneys, and the Guarantee Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent
or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of
this Guarantee Agreement the Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder, the
Guarantee Trustee (A) may request written instructions from
the Holders, (B) may refrain from enforcing such remedy or
right or taking such other action until such written
instructions are received, and (C) shall be protected in
acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act
or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Guarantee Trustee shall
be construed to be a duty to act in accordance with such power and
authority.
Section 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of or
in connection with the acceptance or administration of this
9
<PAGE>
Guarantee Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Guarantee Trustee will not claim or
exact any lien or charge on any Guarantee Payments as a result of any amount due
to it under this Guarantee Agreement.
ARTICLE IV. GUARANTEE TRUSTEE
Section 4.1 Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor;
and
(ii) be a Person that is eligible pursuant
to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $70,000,000, and shall be a
corporation meeting the requirements of Section 310(a) of the
Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority, then,
for the purposes of this Section and to the extent permitted
by the Trust Indenture Act, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a
Successor Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold
office until a Successor Guarantee Trustee shall have been appointed or
until its removal or resignation. The Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a
Successor Guarantee
10
<PAGE>
Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Guarantee Trustee and
delivered to the Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery to the Guarantor of an instrument of
resignation or notice of removal, the Guarantee Trustee resigning or
being removed may petition, at the expense of the Guarantor, any court
of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V. GUARANTEE
Section 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim which the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
Section 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions (other than an extension of time
for payment of Distributions that results from the extension of any
interest payment period on the Subordinated Debentures as provided in
the Indenture), Redemption Price, Liquidation Distribution or any other
11
<PAGE>
sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Preferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, organization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
Section 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement, without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other Person.
Section 5.5. Guarantee of Payment.
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer) or upon distribution of Subordinated Debentures to Holders as
provided in the Trust Agreement.
12
<PAGE>
Section 5.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.
Section 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
Section 6.1. Subordination.
The obligations of the Guarantor under this Guarantee Agreement will
constitute unsecured obligations of the Guarantor and will rank subordinate and
junior in right of payment to all Senior Debt of the Guarantor except those made
PARI PASSU or subordinate to such obligations expressly by their terms.
Section 6.2. PARI PASSU Guarantees.
The obligations of the Guarantor under this Guarantee Agreement shall
rank PARI PASSU with the obligations of the Guarantor under any similar
Guarantee Agreements issued by the Guarantor on behalf of the holders of
preferred securities issued by any BankUnited Capital Trust (as defined in the
Indenture).
ARTICLE VII. TERMINATION
Section 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) full payment of the amounts payable in accordance with the
Trust Agreement upon liquidation of the Issuer or (iii) the
13
<PAGE>
distribution of Subordinated Debentures to the Holders in exchange for all of
the Preferred Securities. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must restore payment of any sums paid with respect
to Preferred Securities or this Guarantee Agreement.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VIII of the
Indenture and pursuant to which the successor or assignee agrees in writing to
perform the Guarantor's obligations hereunder, the Guarantor shall not assign
its obligations hereunder.
Section 8.2. Amendments.
Except with respect to any changes which do not adversely affect the
rights of the Holders in any material respect (in which case no consent of the
Holders will be required), this Guarantee Agreement may be amended only with the
prior approval of the Holders of not less than a Majority in Liquidation Amount
of all the outstanding Preferred Securities. The provisions of Article VI of the
Trust Agreement concerning meetings of the Holders shall apply to the giving of
such approval.
Section 8.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below
or such other address, facsimile number or to the attention of such
other Person as the Guarantor may give notice to the Holders:
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Facsimile No.: (305) 569-2057
Attention: Treasurer
14
<PAGE>
(b) if given to the Issuer, in care of the Guarantee Trustee,
at the Issuer's (and the Guarantee Trustee's) address set forth below
or such other address as the Guarantee Trustee on behalf of the Issuer
may give notice to the Holders:
BankUnited Capital
c/o BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Facsimile No.: (305) 569-2057
Attention: Treasurer
with a copy to:
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
(c) if given to any Holder, at the address set forth on the
books and records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
Section 8.4. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Preferred Securities.
Section 8.5. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to
them in Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has
the same meaning throughout;
15
<PAGE>
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined
in this Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the Plural and vice
versa; and
(g) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
Section 8.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
16
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
BANKUNITED FINANCIAL CORPORATION
By:________________________________________
Name:______________________________________
Title:_____________________________________
THE BANK OF NEW YORK
as Guarantee Trustee
By:________________________________________
Name:______________________________________
Title:_____________________________________
17
<PAGE>
EXHIBIT G
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT, dated as of December 30, 1996, between BankUnited Financial
Corporation, a Florida corporation (the "Corporation") having its principal
office at 255 Alhambra Circle, Coral Gables, Florida 33134, and BankUnited
Capital, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities, Series A
(the "Common Securities") to and receive debentures from the Corporation and to
issue and sell 10 1/4% Trust Preferred Securities, Series A (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Trust Agreement of the Trust, dated as of December 30,
1996, as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Corporation will directly or indirectly own all of the
Common Securities of the Trust and will issue the debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Corporation hereby agrees shall benefit
the Corporation and which purchase the Corporation acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Corporation and
Trust hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by the Corporation.
Subject to the terms and conditions hereof, the Corporation hereby
irrevocably and unconditionally guarantees to each person or entity to whom the
Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the
full payment, when and as due, of any and all Obligations (as hereinafter
defined) to such Beneficiaries. As used herein, "Obligations" means any costs,
expenses or liabilities of the Trust, other than obligations of the Trust to pay
to holders of any Preferred Securities or other similar interests in the Trust
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise) and (b) the
G-1
<PAGE>
date on which there are no Beneficiaries remaining; provided, however, that this
Agreement shall continue to be effective or shall be reinstated, as the case may
be, if at any time any holder of Preferred Securities or any Beneficiary must
restore payment of any sums paid under the Preferred Securities, under any
Obligation, under the Guarantee Agreement dated the date hereof by the
Corporation and The Bank of New York, as guarantee trustee or under this
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
Section 1.3. Waiver of Notice.
The Corporation hereby waives notice of acceptance of this Agreement
and of any Obligation to which it applies or may apply, and the Corporation
hereby waives presentment, demand for payment, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of the Corporation
under this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all
or any portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the
obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with respect
to the Obligations or any action on the part of the Trust granting
indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Corporation with respect to the happening of any of, the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against the
Corporation and the Corporation waives any right or remedy to require that any
action be brought against the Trust or any other person or entity before
proceeding against the Corporation.
Section 1.6. Subrogation.
The Corporation shall be subrogated to all (if any) rights of the Trust
in respect of any amounts paid to the Beneficiaries by the Corporation under
this Agreement; provided, however,
G-2
<PAGE>
that the Corporation shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Agreement, if, at the
time of any such payment, any amounts are due and unpaid under this Agreement.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the
Corporation and shall inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
So long as there remains arty Beneficiary or any Preferred Securities
are outstanding, this Agreement shall not be modified or amended in any manner
adverse to such Beneficiary or to the holders of the Preferred Securities.
Section 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail) or by registered or
certified mail, addressed as follows (and if so given, shall be deemed given
when mailed:
BankUnited Capital
c/o The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Facsimile No.: (305) 569-2057
Attention: Treasurer
Section 2.4. Choice of Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
G-3
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
BANKUNITED FINANCIAL CORPORATION
By:________________________________________
Name:______________________________________
Title:_____________________________________
BANKUNITED CAPITAL
By:________________________________________
Name:______________________________________
Title:_____________________________________
G-4
REGISTRATION RIGHTS AGREEMENT
DATED AS OF DECEMBER 30, 1996
AMONG
BANKUNITED FINANCIAL CORPORATION
AND
BANKUNITED CAPITAL
AND
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
AND
RAYMOND JAMES & ASSOCIATES, INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into this 30th day of December, 1996, among BankUnited Capital, a
Delaware business trust (the "Trust"), BankUnited Financial Corporation, a
Florida corporation (the "Company"), and Friedman, Billings, Ramsey & Co., Inc.
and Raymond James & Associates, Inc. (each an "Initial Purchaser," and
collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated as of
December 30, 1996, among the Trust and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Trust to the Initial Purchasers
of $50,000,000 aggregate principal amount of 10 1/4% Trust Preferred Securities,
Series A (the "Preferred Securities"). In order to induce the Initial Purchasers
to enter into the Purchase Agreement, the Trust has agreed to provide to the
Initial Purchasers and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. DEFINITIONS.
Capitalized terms used herein without definition shall have
their respective meanings set forth in or pursuant to the Purchase
Agreement or the Offering Memorandum dated December 23, 1996, in
respect of the Preferred Securities, as applicable. All references to
Sections herein are to Sections of this Agreement unless otherwise
indicated. As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"CLOSING TIME" shall mean the Closing Time as defined in the
Purchase Agreement.
"COMMISSION" shall mean the Securities and Exchange
Commission.
"DEBENTURES" shall mean the 10 1/4% Junior Subordinated
Deferrable Interest Debentures, Series A, subject to the Indenture.
"DEPOSITARY" shall mean The Depository Trust Company, or any
other depositary appointed by the Trust, PROVIDED, HOWEVER, that such
depositary must have an address in the Borough of Manhattan, in the
City of New York.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"EXCHANGE PREFERRED SECURITIES" shall mean the 10 1/4% Trust
Preferred Securities, Series B issued by the Trust containing terms
identical to the Preferred Securities in all material respects (except
that (i) interest thereon shall accrue from the last interest payment
date on which interest was paid on the Preferred Securities or, if no
interest has been paid, from the date of original issue of the
Preferred Securities, (ii) the transfer restrictions on the Preferred
Securities shall be modified or eliminated, as appropriate, and (iii)
certain provisions relating to an increase in the stated rate of
interest of the Preferred Securities shall be
2
<PAGE>
eliminated), to be offered to Holders of the Preferred Securities in
exchange for the Preferred Securities pursuant to the Exchange Offer.
"EXCHANGE OFFER" shall mean the exchange offer by the Trust
of Exchange Preferred Securities for Registrable Preferred Securities
pursuant to Section 2.1. hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"FAILURE TO REGISTER" shall have the meaning set forth in
Section 3 hereof.
"GUARANTEE" shall mean the guarantee of the Company to make
payments on liquidation or redemption of the Preferred Securities under
the Guarantee Agreement.
"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement
executed and delivered by the Company and The Bank of New York, as
Trustee, for the benefit of the holders of the Preferred Securities.
"HOLDERS" shall mean the Initial Purchasers, for so long as
they own any Registrable Preferred Securities, and each of their
successors, assigns and direct and indirect transferees who become
registered owners of Registrable Preferred Securities.
"INDENTURE" shall mean the Indenture dated as of December 30,
1996 between the Company and The Bank of New York, a New York banking
corporation, as trustee, as the same may be amended from time to time
in accordance with the terms thereof, providing for the issuance of the
Debentures.
"INITIAL PURCHASER" or "INITIAL PURCHASERS" shall have the
meaning set forth in the preamble.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Preferred
Securities; PROVIDED that whenever the consent or approval of Holders
of a specified percentage of Registrable Preferred Securities is
required hereunder, Registrable Preferred Securities held by the Trust
shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage or amount.
"PERSON" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus, including
a prospectus supplement with respect to the terms of the offering of
any portion of the Registrable Preferred Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to
a prospectus, including post-effective amendments, and in each case
including all material incorporated by reference therein.
3
<PAGE>
"PURCHASE AGREEMENT" shall have the meaning set forth in the
preamble.
"REGISTRABLE PREFERRED SECURITY/REGISTRABLE PREFERRED
SECURITIES" shall mean one or more shares of the Preferred Securities,
the Guarantee and the underlying Debentures subject to the Indenture;
PROVIDED, HOWEVER, that a share of the Preferred Securities shall cease
to be a Registrable Preferred Security when (i) a Registration
Statement with respect to such Preferred Securities shall have been
declared effective under the Securities Act and such shares of
Preferred Securities shall have been transferred pursuant to such
Registration Statement, (ii) such share of Preferred Securities shall
have been sold to the public pursuant to Rule 144 (or any similar
provision then in force, but not Rule 144A) under the Securities Act,
or shall be saleable pursuant to paragraph (k) of Rule 144 (or any
similar provision then in effect) or pursuant to an opinion of counsel
that a transfer may be effected without compliance with the Securities
Act under circumstances which will result in the share of Preferred
Securities being freely tradeable by the purchaser provided such
purchaser is not an affiliate of the Trust or the Company, (iii) such
share of Preferred Securities shall have ceased to be outstanding or
(iv) such share of Preferred Securities shall have been exchanged for
Exchange Preferred Securities upon the consummation of the Exchange
Offer.
"REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance by the Trust and the Company
with this Agreement, including without limitation: (i) all SEC, stock
exchange or National Association of Securities Dealers, Inc. (the
"NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and the
reasonable fees of its counsel) that is required to be retained by any
Holder of Registrable Preferred Securities in accordance with the rules
and regulations of the NASD, (ii) all fees and expenses incurred in
connection with compliance with state securities or blue sky laws and
compliance with the rules of the NASD (including reasonable fees and
disbursements of counsel for any underwriters or Holders in connection
with blue sky qualification of any of the Exchange Preferred Securities
or Registrable Preferred Securities), (iii) all expenses of any Persons
engaged by the Trust or the Company to prepare or assist in preparing,
word processing, printing and distributing any Registration Statement,
any Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to
the performance of and compliance with this Agreement, (iv) all fees
and expenses incurred in connection with the listing, if any, of any of
the Registrable Preferred Securities on any securities exchange or
exchanges, (v) all rating agency fees, (vi) the fees and disbursements
of counsel for the Trust and the Company and of the independent public
accountants of the Trust and the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident to
such performance and compliance, but excluding fees of counsel to the
underwriters or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Preferred Securities by a Holder, (vii) the fees and
expenses of the Trustee, and any escrow agent or custodian, and (viii)
any fees and disbursements of the underwriters customarily required to
be paid by issuers or sellers of securities and the reasonable fees and
expenses of any special experts retained by the Trust and the Company
in connection with any Registration Statement, but excluding
underwriting discounts and commissions and transfer taxes, if any, and
the expenses of any such Holder's counsel relating to the sale or
disposition of Registrable Preferred Securities by a Holder.
4
<PAGE>
"REGISTRATION STATEMENT" shall mean any registration statement
of the Trust which covers any of the Exchange Preferred Securities or
Registrable Preferred Securities pursuant to the provisions of this
Agreement, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including
the Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"RULE 144" shall mean Rule 144 under the 1933 Act, or any
successor rule.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
"SHELF REGISTRATION" shall mean a registration effected
pursuant to Section 2.2 hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf"
registration statement of the Trust pursuant to the provisions of
Section 2.2 of this Agreement which covers all of the Registrable
Preferred Securities required to be registered on an appropriate form
for purposes of an offering on a continuous basis pursuant to Rule 415,
under the Securities Act, or any similar rule that may be adopted by
the Commission, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including
the Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"TRUST" shall have the meaning set forth in the preamble and
shall also include the Trust's successors.
"TRUSTEE" shall mean the trustee with respect to the Preferred
Securities under the Indenture.
2. REGISTRATION UNDER THE 1933 ACT.
2.1 EXCHANGE OFFER.
(a) The Trust and the Company shall (i) prepare and,
not later than 60 days following the Closing Time, file with
the Commission an Exchange Offer Registration Statement under
the Securities Act with respect to a proposed offer (the
"Exchange Offer") to the Holders to issue and deliver to such
Holders, in exchange for the Registrable Preferred Securities,
a like principal amount of Exchange Preferred Securities, (ii)
use their best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the
Securities Act within 120 days after the Closing Time, (iii)
use their best efforts to keep the Exchange Offer Registration
Statement effective until the closing of the Exchange Offer,
subject to its use by Participating Broker-Dealers (as defined
below) as contemplated in Section 3(f) below, and (iv) use
their best efforts to cause the Exchange Offer to be
consummated not later than 180 days following the Closing
Time. Upon the effectiveness of the Exchange Offer
Registration Statement, the Trust shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer
to enable each Holder eligible and electing to exchange
Registrable Preferred Securities for Exchange Preferred
Securities (assuming that such Holder is not an affiliate of
the Trust or the
5
<PAGE>
Company, within the meaning of Rule 405 under the Securities
Act, acquires the Exchange Preferred Securities in the
ordinary course of such Holder's business and has no
arrangements or understandings with any Person to participate
in the Exchange Offer for the purpose of distributing the
Exchange Preferred Securities and, if such Holder is not a
broker-dealer, such Holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Preferred Securities) and to
trade such Exchange Preferred Securities from and after each
such Holder's receipt of the Exchange Preferred Securities
without any limitations or restrictions under the Securities
Act and without material restrictions under the securities
laws of a substantial proportion of the several states of the
United States.
(b) In connection with the Exchange
Offer, the Trust shall:
(i) mail to each Holder a copy of
the Prospectus forming part of the Exchange
Offer Registration Statement, together with
an appropriate letter of transmittal and
related documents;
(ii) keep the Exchange Offer open
for not less than 30 calendar days after the
date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) use the services of the
Depositary for the Exchange Offer;
(iv) permit Holders to withdraw
tendered Registrable Preferred Securities at
any time prior to the close of business, New
York time, on the last business day on which
the Exchange Offer shall remain open, by
sending to the institution specified in the
notice a telegram, telex, facsimile
transmission or letter setting forth the
name of such Holder, the principal amount of
Registrable Preferred Securities delivered
for exchange, and a statement that such
Holder is withdrawing his election to have
such Preferred Securities exchanged; and
(v) otherwise comply in all respects
with all applicable laws relating to the
Exchange Offer.
(c) As soon as practicable after the
close of the Exchange Offer, the Trust shall:
(i) accept for exchange all
Registrable Preferred Securities duly
tendered and not validly withdrawn pursuant
to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration
Statement and the letter of transmittal
which is an exhibit thereto;
(ii) deliver to the Trustee for
cancellation all Registrable Preferred
Securities so accepted for exchange; and
6
<PAGE>
(iii) cause the Trustee promptly to
authenticate and deliver Exchange Preferred
Securities to each Holder of Registrable
Preferred Securities equal in principal
amount to the Registrable Preferred
Securities of such Holder so accepted for
exchange.
Interest on each of the Exchange Preferred Securities will accrue from
the last interest payment date on which interest was paid on the Registrable
Preferred Securities surrendered in exchange therefor or, if no interest has
been paid on the Registrable Preferred Securities, from the date of original
issue of the Registrable Preferred Securities. The Exchange Offer shall not be
subject to any conditions, other than that (i) the Exchange Offer, or the making
of any exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the Commission, (ii) no action or proceeding
shall have been instituted or threatened in any court by or before any
governmental agency with respect to the Exchange Offer which, in the Trust's and
the Company's judgment, might impair the ability of the Trust to proceed with
the Exchange Offer, (iii) such Exchange Offer will not result in a "Tax Event"
as defined in the Indenture, or (iv) there shall not have been adopted or
enacted any law, statute, rule or regulation which, in the Trust's and the
Company's judgment, would materially impair the ability of the Trust to proceed
with the Exchange Offer. Each Holder of Registrable Preferred Securities (other
than Participating Broker-Dealers (as defined below)) who wishes to exchange
such Registrable Preferred Securities for Exchange Preferred Securities will be
required to represent that (i) it is not an affiliate of the Trust or the
Company, (ii) any Exchange Preferred Securities to be received by it will be
acquired in the ordinary course of its business, and (iii) it has no arrangement
with any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Preferred Securities, and (iv) it is not engaged
in, and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of the Exchange Preferred Securities. The Trust shall inform the
Initial Purchasers of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Initial Purchasers shall have the right, subject
to applicable law and at their own expense, to contact such Holders and
otherwise facilitate the tender of Registrable Preferred Securities in the
Exchange Offer.
2.2 SHELF REGISTRATION.
(a) (i) If, because of any change in law or
applicable interpretations thereof by the staff of the
Commission, the Trust is not permitted to effect the Exchange
Offer as contemplated by Section 2.1 hereof, (ii) if it is
determined that the Exchange Offer would trigger a Tax Event,
or (iii) if for any other reason the Exchange Offer is not
consummated within 180 days of the date hereof, or (iv) upon
the request of either Initial Purchaser (with respect to any
Registrable Preferred Securities which it acquired directly
from the Trust) following consummation of the Exchange Offer
if such Initial Purchaser shall hold Registrable Preferred
Securities which it acquired directly from the Trust and if
such Initial Purchaser is not permitted, in the opinion of
counsel to such Initial Purchaser, pursuant to applicable law
or applicable interpretation of the staff of the Commission,
to participate in the Exchange Offer, the Trust and the
Company shall, at the Company's cost, subject to Section 2.3
hereof,
(A) as promptly as practicable, file with the
Commission, and thereafter shall use their best
efforts to cause to be declared effective as promptly
as practicable, a Shelf Registration Statement
relating to the offer
7
<PAGE>
and sale of the Registrable Preferred Securities by
the Holders from time to time in accordance with the
methods of distribution selected by the Majority
Holders and set forth in such Shelf Registration
Statement. In the event that a Shelf Registration
Statement is required to be filed upon the request of
either Initial Purchaser pursuant to clause (iv)
above, the Trust and the Company shall file and use
their best efforts to have declared effective by the
Commission both an Exchange Offer Registration
Statement pursuant to Section 2.1 hereof with respect
to all Registrable Preferred Securities and a Shelf
Registration Statement (which may be a combined
Registration Statement with the Exchange Offer
Registration Statement) with respect to offers and
sales of Registrable Preferred Securities held by
such Initial Purchasers after completion of the
Exchange Offer;
(B) use their best efforts to keep the Shelf
Registration Statement continuously effective in
order to permit the Prospectus forming a part thereof
to be usable by Holders identified as selling
security holders in such Shelf Registration Statement
for a period of three years from the date the Shelf
Registration Statement is declared effective by the
Commission or until such earlier date as all
Registrable Preferred Securities shall have been
disposed of or on which all Registrable Preferred
Securities shall be saleable without registration
pursuant to Rule 144 (or any similar provision then
in effect), or as a result of any changes in the
existing registration requirements under the
Securities Act which eliminate the Holders' need for
the Shelf Registration Statement, or upon receipt of
an opinion of counsel satisfactory to the Initial
Purchasers which provides that all Registrable
Preferred Securities may be resold without
registration in a transaction that would result in
the Registrable Preferred Securities being freely
tradeable provided that the purchaser is not an
affiliate of the Trust or the Company (the
"Effectiveness Period"); and
(C) notwithstanding any other provisions hereof,
use its best efforts to ensure that (i) any Shelf
Registration Statement and any amendment thereto and
any Prospectus forming a part thereof and any
supplement thereto complies in all material respects
with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and
any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus
forming a part of any Shelf Registration Statement,
and any supplement to such Prospectus (as amended or
supplemented from time to time), does not include an
untrue statement of a material fact or omit to state
a material fact necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading, except
that the Trust and the Company shall be entitled to
rely on the information provided to them by the
Holders with respect to such Holders.
(b) The Trust and the Company further agree,
if necessary, to supplement or amend the Shelf Registration
Statement if reasonably requested by the Majority Holders with
respect to information relating to the Holders and otherwise
as required
8
<PAGE>
by Section 3(b) hereof, to use their best efforts
to cause any such amendment to become effective and such Shelf
Registration Statement to become usable as soon as thereafter
practicable and to furnish to the Holders of Registrable
Preferred Securities copies of any such supplement or
amendment promptly after its being used or filed with the
Commission.
2.3 EXPENSES. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2 and, in the case
of any Shelf Registration Statement, will reimburse the Holders or Initial
Purchasers for the reasonable fees and disbursements of one firm or counsel
designated in writing by the Majority Holders to act as counsel for the Holders
of the Preferred Securities in connection therewith, and, in the case of an
Exchange Offer Registration Statement, will reimburse the Initial Purchasers, as
applicable, for the reasonable fees and disbursements of one firm or counsel in
connection therewith (however, the reimbursement of such fees and disbursements
on behalf of the Holders or the Initial Purchasers shall not exceed an amount to
be agreed upon by the Company and the Initial Purchasers prior to the filing of
any such Registration Statement). Each Holder shall pay all expenses of its
counsel, underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Preferred
Securities pursuant to the Shelf Registration Statement.
2.4. EFFECTIVENESS.
(a) The Trust and the Company will be deemed
not to have used their best efforts to cause the Exchange
Offer Registration Statement or the Shelf Registration
Statement, as the case may be, to become, or to remain,
effective during the requisite period if either voluntarily
takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of
Registrable Preferred Securities covered thereby not being
able to exchange or offer and sell such Registrable Preferred
Securities during the period unless (i) such action is
required by applicable law or (ii) such action is taken by the
Trust or the Company in good faith and for valid business
reasons (not including avoidance of the Trust's obligations
hereunder), including the acquisition or divestiture of
assets, so long as the Trust and the Company comply with the
requirements of Section 3(b) hereof, if applicable, as
promptly as practicable.
(b) An Exchange Offer Registration Statement
pursuant to Section 2.1 hereof or a Shelf Registration
Statement pursuant to Section 2.2 hereof will not be deemed to
have become effective unless it has been declared effective by
the Commission; PROVIDED, however, that if, after a Shelf
Registration Statement has been declared effective, the
offering of Registrable Preferred Securities pursuant to such
Shelf Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such
Shelf Registration Statement will be deemed not to be
effective during the period of such interference, until the
offering of Registrable Preferred Securities pursuant to such
Shelf Registration Statement may legally resume.
2.5. ADDITIONAL INTEREST. If (i) on or prior to 60 days following the
date of original issuance of the Registrable Preferred Securities the Exchange
Offer Registration Statement, or the Shelf Registration Statement in the event
that (A) the Exchange Offer, or the making of any exchange
9
<PAGE>
by a Holder, would violate applicable law or any applicable interpretation of
the staff of the Commission, (B) any action or proceeding shall have been
instituted in any court by or before any governmental agency with respect to the
Exchange Offer which, in the judgment of the Trust and the Company, would
materially impair the ability of the Trust to proceed with the Exchange Offer,
(C) such Exchange Offer will result in a "Tax Event" as defined in the
Indenture, or (D) there shall have been adopted or enacted any law, statute,
rule or regulation which, in the judgment of the Trust and the Company, would
materially impair the ability of the Trust to proceed with the Exchange Offer,
has not been filed with the Commission, or (ii) on or prior to the 120th day
following the issuance of the Registrable Preferred Securities such Exchange
Offer Registration Statement is not declared effective, or (iii) on or prior to
the 180th day following the issuance of the Registrable Preferred Securities the
Exchange Offer is not consummated or a Shelf Registration Statement is not
declared effective (each, a "Registration Default"), additional interest
("Registration Penalty") will accrue on the Debentures and, accordingly,
additional Distributions will accrue on the Preferred Securities, in each case
from and including the day following such Registration Default. A Registration
Penalty will be paid semi-annually in arrears, with the first semi-annual
payment due on the first interest or distribution payment date, as applicable,
following the date on which such Registration Penalty begins to accrue, and will
accrue at a rate per annum equal to an additional one-quarter of one percent
(0.25%) per Registration Default (not to exceed in the aggregate 0.50%) of the
principal amount or liquidation amount, as applicable. Such Registration Penalty
will cease to accrue on the date on which the Exchange Offer is consummated or
the Shelf Registration Statement is declared effective by the Commission, as
applicable. In the event that a Shelf Registration Statement is filed and
declared effective, but subsequently ceases to be effective during the
Effectiveness Period for more than 90 days, whether or not consecutive, during
any 12-month period, then a Registration Penalty will accrue at a rate per annum
equal to one-half of one percent (0.50%) of the principal amount or liquidation
amount, as applicable, from such 91st day until such time as the Shelf
Registration Statement again becomes effective. At no time will a Registration
Penalty in excess of one-half of one percent (0.50%) be payable pursuant to the
provisions of the Registration Rights Agreement.
2.6 SPECIFIC ENFORCEMENT. Without limiting the remedies available to
the Initial Purchasers and the Holders, the Trust and the Company acknowledge
that any failure by the Trust or the Company to comply with its obligations
under Section 2.1 and Section 2.2 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Trust's and the Company's obligations under Section 2.1 and Section 2.2 hereof.
3. REGISTRATION PROCEDURES.
In connection with the obligations of the Trust and the Company with
respect to the Registration Statements pursuant to Sections 2.1 and 2.2 hereof,
the Trust and the Company shall:
(a) prepare and file with the Commission a Registration
Statement, within the time period specified in Section 2, on
the appropriate form under the Securities Act, which form (i)
shall be selected by the Trust, (ii) shall, in the case of a
Shelf Registration, be available for the sale of the
Registrable Preferred Securities by the selling Holders
thereof and (iii) shall comply as to form in all material
respects with the requirements of the applicable form and
include or incorporate by reference all
10
<PAGE>
financial statements required by the Commission to be filed
therewith, and use their best efforts to cause such
Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the Commission
such amendments and post-effective amendments to each
Registration Statement and such supplements to the Prospectus
as may be necessary under applicable law; and comply with the
provisions of the Securities Act with respect to the
disposition of all of the Registrable Preferred Securities or
Exchange Preferred Securities, as applicable, covered by each
Registration Statement during the applicable period in
accordance with the intended method or methods of distribution
by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i)
notify each Holder of the Registrable Preferred Securities, at
least five days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Preferred Securities
is being filed and advise such Holders that the distribution
of the Registrable Preferred Securities will be made in
accordance with the method selected by the Holders of a
majority in aggregate principal amount of the Registrable
Preferred Securities being registered; and (ii) furnish to
each Holder of the Registrable Preferred Securities, to
counsel for the Initial Purchasers, to one firm or counsel for
the Holders and to each underwriter of an underwritten
offering of the Registrable Preferred Securities, if any,
without charge, as many copies of each Prospectus, including
each preliminary Prospectus, and any amendment or supplement
thereto and such other documents as such Holder or underwriter
may reasonably request, including financial statements and
schedules and, if the Holder so requests, all exhibits
(including those incorporated by reference) in order to
facilitate the public sale or other disposition of the
Registrable Preferred Securities; and (iii) subject to the
penultimate paragraph of Section 3, hereby consent to the use
of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of the Registrable Preferred
Securities in connection with the offering and sale of the
Registrable Preferred Securities covered by the Prospectus or
any amendment or supplement thereto;
(d) use its best efforts to register or
qualify the Registrable Preferred Securities or Exchange
Preferred Securities, as applicable, under all applicable
state securities or "blue sky" laws of such jurisdiction as
any Holder (or Participating Broker-Dealer with respect to
Exchange Preferred Securities) of the Registrable Preferred
Securities or Exchange Preferred Securities, as applicable,
covered by a Registration Statement and each underwriter of an
underwritten offering of the Registrable Preferred Securities
shall reasonably request by the time the applicable
Registration Statement is declared effective by the
Commission, to cooperate with the Holders in connection with
any filings required to be made with the NASD, and do any and
all other acts and things which may be reasonably necessary or
advisable to enable each such Holder and underwriter to
consummate the disposition in each such jurisdiction of such
Registrable Preferred Securities owned by such Holder;
PROVIDED, HOWEVER, that the Trust shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities
in any jurisdiction where it would not otherwise be required
to qualify but for this Section 3(d) or (ii) take any action
which would subject it or
11
<PAGE>
its board of trustees to general service of process or
taxation in any such jurisdiction where it is not then so
subject;
(e) in the case of a Shelf Registration, notify each
Holder of the Registrable Preferred Securities and counsel for
the Initial Purchasers promptly and, if requested by such
Holder or counsel, confirm such advice in writing promptly (i)
when a Shelf Registration Statement has become effective, (ii)
of any request by the Commission or any state securities
authority for post-effective amendments and supplements to a
Shelf Registration Statement and Prospectus or for additional
information after the Shelf Registration Statement has become
effective, (iii) of the issuance by the Commission or any
state securities authority of any stop order suspending the
effectiveness of a Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iv) if,
between the effective date of a Shelf Registration Statement
and the closing of any sale of Registrable Preferred
Securities covered thereby, the representations and warranties
of the Trust and the Company contained in any underwriting
agreement, securities sales agreement or other similar
agreement, if any, relating to the offering of the Registrable
Preferred Securities cease to be true and correct in all
material respects, (v) of the happening of any event or the
discovery of any facts during the period a Shelf Registration
Statement is effective which makes any statement made in such
Shelf Registration Statement or the Prospectus untrue in any
material respect or which requires the making of any changes
in such Shelf Registration Statement or Prospectus in order to
make the statements therein not misleading, (vi) of the
receipt by the Trust of any notification with respect to the
suspension of the qualification of the Registrable Preferred
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (vii) of
any determination by the Trust or the Company that a
post-effective amendment to a Shelf Registration Statement
would be appropriate;
(f) (i) in the case of the Exchange Offer (A) include
in the Exchange Offer Registration Statement a "Plan of
Distribution" section covering the use of the Prospectus
included in the Exchange Offer Registration Statement by
broker-dealers who have exchanged their Registrable Preferred
Securities for Exchange Preferred Securities for the resale of
such Exchange Preferred Securities, (B) furnish to each
broker-dealer who desires to participate in the Exchange
Offer, without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement,
including any preliminary prospectus, and any amendment or
supplement thereto, as such broker-dealer may reasonably
request, (C) include in the Exchange Offer Registration
Statement a statement that any broker-dealer who holds
Registrable Preferred Securities acquired for its own account
as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer"), and who receives
Exchange Preferred Securities for Registrable Preferred
Securities pursuant to the Exchange Offer, may be a statutory
underwriter and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any
resale of such Exchange Preferred Securities, (D) subject to
the penultimate paragraph of Section 3, hereby consent to the
use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto,
by any Participating Broker-Dealer in connection with the sale
or transfer of the Exchange Preferred Securities covered by
the Prospectus or any amendment or supplement thereto, and
12
<PAGE>
(E) include in the transmittal letter or similar documentation
to be executed by an exchange offeree in order to participate
in the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of
Exchange Preferred Securities. If the undersigned is
a broker-dealer that will receive Exchange Preferred
Securities for its own account in exchange for
Registrable Preferred Securities, the undersigned
represents that the Registrable Preferred Securities
were acquired by it as a result of market-making or
other trading activities and acknowledges that it
will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of
such Exchange Preferred Securities; however, by so
acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act;" and
(y) a statement to the effect that by a
Participating Broker-Dealer making the
acknowledgement described in clause (x) and by
delivering a Prospectus in connection with the
exchange of Registrable Preferred Securities, the
Participating Broker-Dealer will not be deemed to
admit that it is an underwriter within the meaning of
the Securities Act; and
(ii) to the extent any Participating
Broker-Dealer participates in the Exchange
Offer, the Trust shall use its best efforts
to cause to be delivered at the request of an
entity representing the Participating
Broker-Dealers (which entity shall be one of
the Initial Purchasers, unless they elect not
to act as such representative) only one, if
any, "cold comfort" letter with respect to
the Prospectus in the form existing on the
last date on which exchanges will be accepted
and with respect to each subsequent amendment
or supplement, if any, effected during the
period specified in clause (D) below; and
(iii) to the extent any Participating
Broker-Dealer participates in the Exchange
Offer, the Trust shall use its best efforts
to maintain the effectiveness of the Exchange
Offer Registration Statement for a period of
180 days following the closing of the
Exchange Offer; and
(iv) the Trust shall not be required to
amend or supplement the Prospectus contained
in the Exchange Offer Registration Statement
commencing on the date which shall be 180
days after the last date for which exchanges
are accepted pursuant to the Exchange Offer
(unless such period may be extended by the
Trust) and Participating Broker-Dealers shall
not be authorized by the Trust and shall not
deliver such Prospectus after such date in
connection with resales contemplated by this
Section 3; and
13
<PAGE>
(v) (A) in the case of an Exchange Offer,
furnish counsel for the Initial Purchasers
and (B) in the case of a Shelf Registration,
furnish one firm or counsel for the Holders
of the Registrable Preferred Securities,
copies of any request by the Commission or
any state securities authority for amendments
or supplements to a Registration Statement
and Prospectus or for additional information;
and
(vi) use its best efforts to obtain the
withdrawal of any order suspending the
effectiveness of a Registration Statement at
the earliest possible moment and provide
immediate notice to each Holder of the
withdrawal of any such order.
(g) in the case of a Shelf Registration, furnish to each
Holder of the Registrable Preferred Securities, and each
underwriter, if any, without charge, at least one conformed
copy of each Registration Statement and any post-effective
amendment thereto, including financial statements and
schedules (without documents incorporated therein by reference
and all exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with
the selling Holders of the Registrable Preferred Securities to
facilitate the timely preparation and delivery of certificates
representing the Registrable Preferred Securities to be sold
and not bearing any restrictive legends; and enable such
Registrable Preferred Securities to be in such denominations
(consistent with the provisions of the Trust Agreement), and
registered in such names as the selling Holders or the
underwriters, if any, may reasonably request at least three
business days prior to the closing of any sale of the
Registrable Preferred Securities;
(i) in the case of a Shelf Registration, upon the
occurrence of any event or the discovery of any facts, each as
contemplated by Section 3(e)(ii)-(vii) hereof, use its best
efforts to prepare a supplement or post-effective amendment to
the Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the
purchasers of the Registrable Preferred Securities, such
Prospectus will not contain at the time of such delivery any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The Trust agrees to notify each Holder to suspend
use of the Prospectus as promptly as practicable after the
occurrence or discovery of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the Trust
has amended or supplemented the Prospectus to correct such
misstatement or omission. At such time as such public
disclosure is otherwise made or the Trust determines that such
disclosure is not necessary, the Trust agrees promptly to
notify each Holder of such determination, to amend or
supplement the Prospectus if necessary to correct any untrue
statement or omission therein and to furnish each Holder such
numbers of copies of the Prospectus, as amended or
supplemented, as such Holder may reasonably request;
14
<PAGE>
(j) a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a
Prospectus or any document which is to be incorporated by
reference into a Registration Statement or a Prospectus after
initial filing of a Registration Statement, provide copies of
such document to the Initial Purchasers, on behalf of such
Holders, and their counsel and make representatives of the
Trust as shall be reasonably requested by the Majority Holders
of the Registrable Securities, or the Initial Purchasers on
behalf of such Holders, available for discussion of such
document and shall not at any time file or make any amendment
to the Registration Statement, any Prospectus or any amendment
of or supplement to a Registration Statement or a Prospectus
or any document which is to be incorporated by reference into
a Registration Statement or a Prospectus, of which the Initial
Purchasers, on behalf of such Holders, and its counsel shall
not have previously been advised and furnished a copy or to
which the Initial Purchasers, on behalf of such Holders, or
its counsel shall reasonably object;
(k) obtain a CUSIP number for all Exchange Preferred
Securities or Registrable Preferred Securities or the
Debentures, as the case may be, not later than the effective
date of a Registration Statement, and provide the Trustee with
printed certificates for the Exchange Preferred Securities or
the Registrable Preferred Securities or the Debentures, as the
case may be, in a form eligible for deposit with the
Depositary;
(l) (i) cause the Indenture and the Guarantee Agreement to
be qualified under the Trust Indenture Act of 1939 (the "TIA")
in connection with the registration of the Debentures and the
Guarantee, (ii) cooperate with the Trustee and the Holders to
effect such changes to the Indenture and the Guarantee
Agreement as may be required for the Indenture and the
Guarantee Agreement to be so qualified in accordance with the
terms of the TIA and (iii) execute, and use its best efforts
to cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms and
documents required to be filed with the Commission to enable
the Indenture and the Guarantee Agreement to be so qualified
in a timely manner;
(m) in the case of a Shelf Registration, enter into
agreements (including underwriting agreements) and take all
other customary and appropriate actions (including those
reasonably requested by the Majority Holders) in order to
expedite or facilitate the disposition of such Registrable
Preferred Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(i) make such representations and
warranties to the Holders of such Registrable
Preferred Securities and the underwriters, if
any, in form, substance and scope as are
customarily made by issuers to underwriters
in similar underwritten offerings as may be
reasonably requested by such underwriters;
(ii) obtain opinions of counsel to the
Trust and updates thereof (which counsel and
opinions (in form, scope and substance) shall
be
15
<PAGE>
reasonably satisfactory to the managing
underwriters, if any, and the holders of a
majority in aggregate principal amount of the
Registrable Preferred Securities being sold),
addressed to each selling Holder and the
underwriters, if any, covering the matters
customarily covered in opinions requested in
sales of securities or underwritten offerings
and such other matters as may be reasonably
requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and
updates thereof from the Trust's independent
certified public accountants addressed to the
underwriters, if any, and use its best
efforts to have such letters addressed to the
selling Holders of the Registrable Preferred
Securities, such letters to be in customary
form and covering matters of the type
customarily covered in "cold comfort" letters
to underwriters in connection with similar
underwritten offerings;
(iv) enter into a securities sales
agreement with the Holders and an agent of
the Holders providing for, among other
things, the appointment of such agent for the
selling Holders for the purpose of soliciting
purchases of the Registrable Preferred
Securities, which agreement shall be in form,
substance and scope customary for similar
offerings;
(v) if an underwriting agreement is
entered into, cause the same to set forth
indemnification provisions and procedures
substantially equivalent to the
indemnification provisions and procedures set
forth in Section 5 hereof with respect to the
underwriters and all other parties to be
indemnified pursuant to said Section; and
(vi) deliver such documents and
certificates as are customarily delivered in
similar offerings and as may be reasonably
requested by the Holders of a majority in
aggregate principal amount of the Registrable
Preferred Securities being sold and the
managing underwriters, if any.
The above shall be done at (i) the effectiveness of such Shelf
Registration Statement (and each post-effective amendment thereto) and (ii) each
closing under any underwriting or similar agreement as and to the extent
required thereunder. In the case of any underwritten offering, the Trust shall
provide written notice to the Holders of all of the Registrable Preferred
Securities of such underwritten offering at least 30 days prior to the filing of
a Prospectus supplement for such underwritten offering. Such notice shall (x)
offer each such Holder the right to participate in such underwritten offering,
(y) specify a date, which shall be no earlier than 10 days following the date of
such notice, by which the Holder must inform the Trust of its intent to
participate in such underwritten offering and (z) include the instructions such
Holder must follow in order to participate in such underwritten offering;
(n) in the case of a Shelf Registration Statement, upon the
execution of a confidentiality agreement reasonably requested by the
Trust, in accordance with such procedural conditions as the Trust shall
reasonably impose, make available for inspection by representatives of
the Holders of the Registrable Preferred Securities and any
underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any one firm or counsel or accountant
retained by such Holders or underwriters, all financial and other
16
<PAGE>
records, pertinent corporate documents and properties of the Trust and
the Company reasonably requested by any such persons, and cause the
respective officers, directors, employees and any other agents of the
Trust and the Company to supply all information reasonably requested by
any such representative, underwriter, special counsel or accountant in
connection with a Registration Statement;
(o) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof,
any amendment to an Exchange Offer Registration Statement or amendment
or supplement to a Prospectus, provide copies of such document to the
Initial Purchasers and make such changes in any such document prior to
the filing thereof as any of the Initial Purchasers may reasonably
request; and (ii) in the case of a Shelf Registration Statement, a
reasonable time prior to filing any Shelf Registration Statement, any
Prospectus forming a part thereof, any amendment to such Shelf
Registration Statement or amendment or supplement to such Prospectus,
provide copies of such documents to the Holders of the Registrable
Preferred Securities, to the Initial Purchasers, to one firm or counsel
on behalf of the Holders and to the underwriter or underwriters of an
underwritten offering of the Registrable Preferred Securities, if any,
make such changes in any such document prior to the filing thereof as
counsel for the Trust and counsel for the Majority Holders and the
underwriter or underwriters may reasonably agree and cause the
representatives of the Trust and the Company available for discussion
of such document as shall be reasonably requested by the Holders of the
Registrable Preferred Securities, the Initial Purchasers on behalf of
such Holders or any underwriter; PROVIDED that any party receiving any
document pursuant to this clause (ii) who does not raise any objections
to the filing of such document within five calendar days after receipt
of such document shall be deemed to have no objection to the filing of
such document;
(p) in the case of a Shelf Registration Statement, use its
best efforts to cause all of the Registrable Preferred Securities to be
listed on any securities exchange on which similar securities issued by
the Trust are then listed if so requested by the Majority Holders or by
the underwriter or underwriters of an underwritten offering of
Registrable Preferred Securities, if any;
(q) in the case of a Shelf Registration Statement, use its
best efforts to cause the Registrable Preferred Securities to be rated
with the appropriate rating agencies if so requested by the Majority
Holders or by the underwriter or underwriters of an underwritten
offering of Securities, if any;
(r) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder; and
(s) cooperate and assist in any filings required to be made
with the NASD and, in the case of a Shelf Registration Statement, in
the performance of any due diligence investigation by any underwriter
and its counsel (including any "qualified independent underwriter" that
is required to be retained in accordance with the rules and regulations
of the NASD).
17
<PAGE>
In the case of a Shelf Registration Statement, the Trust may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of the Registrable Preferred Securities to furnish to the Trust such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Preferred Securities as the Trust may from time to time
reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Trust of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(ii)-(vii)
hereof, such Holder will forthwith discontinue disposition of Registrable
Preferred Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof, and, if so directed by the Trust, such Holder will deliver
to the Trust (at its expense) all copies in its possession, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Registrable Preferred Securities that was current at the time of receipt of such
notice. If the Trust shall give any such notice to suspend the disposition of
the Registrable Preferred Securities pursuant to a Shelf Registration Statement
as a result of the happening of any event or the discovery of any facts, each of
the kind described in Section 3(e)(ii)-(vii) hereof, the Trust shall be deemed
to have used its best efforts to keep the Shelf Registration Statement effective
during such period of suspension provided that the Trust shall use its best
efforts to file and have declared effective (if an amendment) as soon as
practicable an amendment or supplement to the Shelf Registration Statement.
4. UNDERWRITTEN REGISTRATIONS.
If any of the Registrable Preferred Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Majority Holders and shall be reasonably
acceptable to the Trust.
No Holder of Registrable Preferred Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Preferred Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Trust and the Company agree to indemnify and hold
harmless the Initial Purchasers, each participating Holder, each
Participating Broker-Dealer, each other person who participates in an
offering of the Registrable Preferred Securities, including
underwriters (as defined in the Securities Act and referred to herein
as "Underwriters"), and each person, if any, who controls any
participating Holder, Initial Purchaser or any other participating
person within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (each of the foregoing being an
"Indemnitee"), as follows:
(i) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, arising out
of any untrue statement or alleged untrue
18
<PAGE>
statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which
Exchange Preferred Securities or Registrable Preferred
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any
litigation or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission if such
settlement is effected with the written consent of the Trust
or the Company; and
(iii) against any and all expense
whatsoever, as incurred (including fees and disbursements of
one firm or counsel chosen by the Indemnitees), reasonably
incurred in investigating, preparing or defending against any
litigation or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph
(i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Trust by the Initial
Purchasers, any Holder or any Underwriter expressly for use in a Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(b) In the case of a Shelf Registration Statement, each Holder
agrees, severally and not jointly, to indemnify and hold harmless the
Trust, the Company, the Initial Purchasers, each Underwriter and the
other selling Holders, and each of their respective "controlling
persons" (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the trustees of the Trust and each
of the Trust's officers who signed the Shelf Registration Statement
against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 5(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf Registration
Statement (or any amendment thereto) or any Prospectus included therein
(or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Trust expressly
for use in the Shelf Registration Statement (or any amendment thereto)
or such Prospectus (or any amendment or supplement thereto); PROVIDED,
HOWEVER, that no such Holder shall be liable for any claims hereunder
in excess of the amount of net proceeds received by such Holder from
the sale of such Holder's Registrable Preferred Securities pursuant to
such Shelf Registration Statement.
19
<PAGE>
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought
hereunder, but failure so to notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have on
account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of such action. If it so
elects within a reasonable time after receipt of such notice, an
indemnifying party, jointly with any other indemnifying parties
receiving such notice, may assume the defense of such action with
counsel chosen by it and approved by the indemnified parties defendant
in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses
available to them which are different from or in addition to those
available to such indemnifying party. If an indemnifying party assumes
the defense of such action, the indemnifying parties shall not be
liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. In no event shall
the indemnifying party or parties be liable for the fees and expenses
of more than one counsel separate from their own counsel for all
indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 5
is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Trust and the
Company, the Holders and the Initial Purchasers shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by such indemnity incurred by the Trust and the
Company, the Holders and the Initial Purchasers; PROVIDED, HOWEVER,
that no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. As between the Trust and the Company, the Holders
and the Initial Purchasers, such parties shall contribute to the
aggregate losses, liabilities, claims, damages and expense of the
nature contemplated by such indemnity agreement in such proportions as
shall be appropriate to reflect (i) the relative benefits received by
the Trust and the Company on the one hand, the Holders on another hand
and the Initial Purchasers on another hand, from the offering of the
Exchange Preferred Securities or Registrable Preferred Securities
included in such offering, and (ii) the relative fault of the Trust and
the Company on the one hand, the Holders on another hand and the
Initial Purchasers on another hand, with respect to the statements or
omissions which resulted in such loss, liability, claim, damage or
expense, or action in respect thereof, as well as any other relevant
equitable considerations. The Trust and the Company, the Holders and
the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 5 were to be determined by pro
rata allocation or by any other method of allocation which does not
take into account the relevant equitable considerations. For purposes
of this Section 5, each Person, if any, who controls the Initial
Purchasers or a Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Initial Purchasers or such Holder, and
each trustee of the Trust and director of the Company, each officer of
the Trust or the Company who signed the Registration Statement, and
each Person, if any, who controls the Trust or the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Trust
and the Company. The parties hereto agree that any underwriting
discount or commission or reimbursement of fees paid to any
20
<PAGE>
Initial Purchaser pursuant to the Purchase Agreement shall not be
deemed to be a benefit received by any Initial Purchaser in connection
with the offering of the Exchange Preferred Securities or Registrable
Preferred Securities included in such offering.
6. MISCELLANEOUS.
6.1 RULE 144 AND RULE 144A. For so long as the Trust or the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act,
the Trust and the Company each covenant that it will file any reports required
to be filed by it under Section 13(a) or 15(d) of the Exchange Act and the rules
and regulations adopted by the Commission thereunder, and that if it ceases to
be so required to file such reports (or, in the case of the Trust, based upon
the view of the staff of the Commission that it will raise no objection if it
does not comply, as a separate registrant, with the reporting requirements of
Section 13 or 15(d) of the Exchange Act), it will upon the request of any Holder
of the Registrable Preferred Securities (a) make publicly available such
information, if any, as is necessary to permit sales pursuant to Rule 144 under
the Securities Act), provided all of the other applicable provisions of Rule 144
can be met by the Holder, (b) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the
Securities Act, if sales can otherwise be made under Rule 144A, and (c) take
such further action that is reasonable in the circumstances, in each case, to
the extent required from time to time to enable such Holder to sell its
Registrable Preferred Securities without registration under the Securities Act
within the limitation of the exemptions provided by, but only to the extent such
exemptions apply, (i) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, (ii) Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or (iii) any similar rules or regulations
hereafter adopted by the Commission. Upon the request of any Holder of the
Registrable Preferred Securities, the Trust and the Company each will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
6.2 NO INCONSISTENT AGREEMENTS. The Trust and the Company have not
entered into, and the Trust and the Company will not after the date of this
Agreement enter into, any agreement which is inconsistent with the rights
granted to the Holders of Registrable Preferred Securities in this Agreement or
which otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Trust's or the Company's other issued
and outstanding securities under any such agreements.
6.3 AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the written consent of Holders of at least a majority in aggregate
principal amount of the outstanding Registrable Preferred Securities affected by
such amendment, modification, supplement, waiver or departure has been obtained
by the Trust or the Company; PROVIDED, HOWEVER, that no amendment, modification,
supplement, waiver or consent to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Preferred
Securities unless consented to in writing by such Holder.
6.4 NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
the Trust by means of a notice given in accordance with the provisions of this
Section 6.4, which
21
<PAGE>
address initially is, with respect to each Initial Purchaser, the address set
forth in the Purchase Agreement; and (b) if to the Trust or the Company,
initially at the Trust's and the Company's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6.4.
All such notices and communications shall be deemed to have been duly
given; at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
6.5 SUCCESSOR AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; PROVIDED that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Preferred
Securities in violation of the terms of the Purchase Agreement. If any
transferee of any Holder shall acquire Registrable Preferred Securities, in any
manner, whether by operation of law or otherwise, such Registrable Preferred
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Preferred Securities such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
person shall be entitled to receive the benefits hereof.
6.6 THIRD PARTY BENEFICIARIES. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Trust and the
Company, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they deem
such enforcement necessary or advisable to protect their rights.
6.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.8 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.
6.10 SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
22
<PAGE>
6.11 EXECUTION OF AGREEMENT BY TRUST. The name "BankUnited Capital" is
the designation of the trustees of the Trust under a Declaration of Trust. All
Persons dealing with the Trust must look solely to the property and assets of
the Trust for the enforcement of any claims against the Trust; neither the
trustees, shareholders, officers, employees or agents of the Trust in their
individual capacities assume any personal liability for the obligations of the
Trust; and the respective properties of the trustees, shareholders, officers,
employees and agents of the Trust in their individual capacities shall not be
subject to the claims of any such Persons with respect to any such obligations.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BANKUNITED CAPITAL
By: _____________________________
Name:
Title:
BANKUNITED FINANCIAL CORPORATION
By: _____________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
As of the date first above
written:
Friedman, Billings, Ramsey & Co., Inc.
Raymond James & Associates, Inc.
By Friedman, Billings, Ramsey & Co., Inc.
By: ____________________
Name:
Title:
24
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MARCH 24, 1997
AMONG
BANKUNITED FINANCIAL CORPORATION
AND
BANKUNITED CAPITAL
AND
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into this 24th day of March, 1997, among BankUnited Capital, a Delaware business
trust (the "Trust"), BankUnited Financial Corporation, a Florida corporation
(the "Company"), and Friedman, Billings, Ramsey & Co., Inc. (the "Initial
Purchaser").
This Agreement is made pursuant to the New Purchase Agreement, dated as of
March 18, 1997, among the Trust and the Initial Purchaser (the "New Purchase
Agreement"), which provides for the sale by the Trust to the Initial Purchaser
of $20,000,000 aggregate principal amount of 10 1/4% Trust Preferred Securities,
Series A (the "Preferred Securities"). In order to induce the Initial Purchaser
to enter into the New Purchase Agreement, the Trust has agreed to provide to the
Initial Purchaser and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the New Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. DEFINITIONS.
Capitalized terms used herein without definition shall have their
respective meanings set forth in or pursuant to the New Purchase Agreement
or the Offering Memorandum dated March 18, 1997, in respect of the
Preferred Securities, as applicable. All references to Sections herein are
to Sections of this Agreement unless otherwise indicated. As used in this
Agreement, the following capitalized defined terms shall have the following
meanings:
"CLOSING TIME" shall mean the Closing Time as defined in the New
Purchase Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission.
"DEBENTURES" shall mean the 10 1/4% Junior Subordinated Deferrable
Interest Debentures, Series A, subject to the Indenture.
"DEPOSITARY" shall mean The Depository Trust Company, or any other
depositary appointed by the Trust, PROVIDED, HOWEVER, that such depositary
must have an address in the Borough of Manhattan, in the City of New York.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE PREFERRED SECURITIES" shall mean the 10 1/4% Trust Preferred
Securities, Series B issued by the Trust containing terms identical to the
Preferred Securities in all material respects (except that (i) interest
thereon shall accrue from the last interest payment date on which interest
was paid on the Preferred Securities or, if no interest has been paid, from
the date of original issue of the Preferred Securities, (ii) the transfer
restrictions on the Preferred Securities shall be modified or eliminated,
as appropriate, and (iii) certain provisions relating to an increase in the
stated rate of interest of the Preferred Securities shall be
2
<PAGE>
eliminated), to be offered to Holders of the Preferred Securities in
exchange for the Preferred Securities pursuant to the Exchange Offer.
"EXCHANGE OFFER" shall mean the exchange offer by the Trust of
Exchange Preferred Securities for Registrable Preferred Securities pursuant
to Section 2.1. hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"FAILURE TO REGISTER" shall have the meaning set forth in Section 3
hereof.
"GUARANTEE" shall mean the guarantee of the Company to make payments
on liquidation or redemption of the Preferred Securities under the
Guarantee Agreement, as amended.
"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement, as amended,
executed and delivered by the Company and The Bank of New York, as Trustee,
for the benefit of the holders of the Preferred Securities.
"HOLDERS" shall mean the Initial Purchaser, for so long as they own
any Registrable Preferred Securities, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Preferred Securities.
"INDENTURE" shall mean the Indenture dated as of December 30, 1996 and
as subsequently supplemented on March 24, 1997 between the Company and The
Bank of New York, a New York banking corporation, as trustee, as the same
may be amended from time to time in accordance with the terms thereof,
providing for the issuance of the Debentures.
"INITIAL PURCHASER" shall have the meaning set forth in the preamble.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Preferred Securities;
PROVIDED that whenever the consent or approval of Holders of a specified
percentage of Registrable Preferred Securities is required hereunder,
Registrable Preferred Securities held by the Trust shall not be counted in
determining whether such consent or approval was given by the Holders of
such required percentage or amount.
"NEW PURCHASE AGREEMENT" shall have the meaning set forth in the
preamble.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Preferred Securities covered by a Shelf Registration Statement,
and
3
<PAGE>
by all other amendments and supplements to a prospectus, including
post-effective amendments, and in each case including all material
incorporated by reference therein.
"REGISTRABLE PREFERRED SECURITY/REGISTRABLE PREFERRED SECURITIES"
shall mean one or more shares of the Preferred Securities, the Guarantee
and the underlying Debentures subject to the Indenture; PROVIDED, HOWEVER,
that a share of the Preferred Securities shall cease to be a Registrable
Preferred Security when (i) a Registration Statement with respect to such
Preferred Securities shall have been declared effective under the
Securities Act and such shares of Preferred Securities shall have been
transferred pursuant to such Registration Statement, (ii) such share of
Preferred Securities shall have been sold to the public pursuant to Rule
144 (or any similar provision then in force, but not Rule 144A) under the
Securities Act, or shall be saleable pursuant to paragraph (k) of Rule 144
(or any similar provision then in effect) or pursuant to an opinion of
counsel that a transfer may be effected without compliance with the
Securities Act under circumstances which will result in the share of
Preferred Securities being freely tradeable by the purchaser provided such
purchaser is not an affiliate of the Trust or the Company, (iii) such share
of Preferred Securities shall have ceased to be outstanding or (iv) such
share of Preferred Securities shall have been exchanged for Exchange
Preferred Securities upon the consummation of the Exchange Offer.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Trust and the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. (the "NASD") registration
and filing fees, including, if applicable, the fees and expenses of any
"qualified independent underwriter" (and the reasonable fees of its
counsel) that is required to be retained by any Holder of Registrable
Preferred Securities in accordance with the rules and regulations of the
NASD, (ii) all fees and expenses incurred in connection with compliance
with state securities or blue sky laws and compliance with the rules of the
NASD (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of any of
the Exchange Preferred Securities or Registrable Preferred Securities),
(iii) all expenses of any Persons engaged by the Trust or the Company to
prepare or assist in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Preferred Securities on any
securities exchange or exchanges, (v) all rating agency fees, (vi) the fees
and disbursements of counsel for the Trust and the Company and of the
independent public accountants of the Trust and the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, but excluding fees of counsel
to the underwriters or the Holders and underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition
of Registrable Preferred Securities by a Holder, (vii) the fees and
expenses of the Trustee, and any escrow agent or custodian, and (viii) any
fees and disbursements of the underwriters customarily required to be paid
by issuers or sellers of securities and the reasonable fees and expenses of
any special experts retained by the Trust and the Company in connection
with any Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, and the expenses of any such
Holder's counsel relating to the sale or disposition of Registrable
Preferred Securities by a Holder.
4
<PAGE>
"REGISTRATION STATEMENT" shall mean any registration statement of the
Trust which covers any of the Exchange Preferred Securities or Registrable
Preferred Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"RULE 144" shall mean Rule 144 under the 1933 Act, or any successor
rule.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2.2 hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Trust pursuant to the provisions of Section 2.2 of this
Agreement which covers all of the Registrable Preferred Securities required
to be registered on an appropriate form for purposes of an offering on a
continuous basis pursuant to Rule 415, under the Securities Act, or any
similar rule that may be adopted by the Commission, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"TRUST" shall have the meaning set forth in the preamble and shall
also include the Trust's successors.
"TRUSTEE" shall mean the trustee with respect to the Preferred
Securities under the Indenture.
2. REGISTRATION UNDER THE 1933 ACT.
2.1 EXCHANGE OFFER.
(a) The Trust and the Company shall (i) prepare not later than
March 1, 1997, and file with the Commission an Exchange Offer
Registration Statement under the Securities Act with respect to a
proposed offer (the "Exchange Offer") to the Holders to issue and
deliver to such Holders, in exchange for the Registrable Preferred
Securities, a like principal amount of Exchange Preferred Securities,
(ii) use their best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act on or
before April 29, 1997, (iii) use their best efforts to keep the
Exchange Offer Registration Statement effective until the closing of
the Exchange Offer, subject to its use by Participating Broker-Dealers
(as defined below) as contemplated in Section 3(f) below, and (iv) use
their best efforts to cause the Exchange Offer to be consummated on a
date not later than June 28, 1997. Upon the effectiveness of the
Exchange Offer Registration Statement, the Trust shall promptly
commence the Exchange Offer, it being the objective of such Exchange
Offer to enable each Holder eligible and electing to exchange
Registrable Preferred Securities for Exchange Preferred Securities
(assuming that such Holder is not an affiliate of the Trust or the
Company, within the meaning of Rule 405 under the Securities Act,
5
<PAGE>
acquires the Exchange Preferred Securities in the ordinary course of
such Holder's business and has no arrangements or understandings with
any Person to participate in the Exchange Offer for the purpose of
distributing the Exchange Preferred Securities and, if such Holder is
not a broker-dealer, such Holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Preferred Securities) and to trade
such Exchange Preferred Securities from and after each such Holder's
receipt of the Exchange Preferred Securities without any limitations
or restrictions under the Securities Act and without material
restrictions under the securities laws of a substantial proportion of
the several states of the United States.
(b) In connection with the Exchange Offer, the Trust shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and
related documents;
(ii) keep the Exchange Offer open for not less than 30
calendar days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law);
(iii) use the services of the Depositary for the
Exchange Offer;
(iv) permit Holders to withdraw tendered Registrable
Preferred Securities at any time prior to the close of
business, New York time, on the last business day on which
the Exchange Offer shall remain open, by sending to the
institution specified in the notice a telegram, telex,
facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Registrable Preferred
Securities delivered for exchange, and a statement that such
Holder is withdrawing his election to have such Preferred
Securities exchanged; and
(v) otherwise comply in all respects with all
applicable laws relating to the Exchange Offer.
(c) As soon as practicable after the close of the Exchange Offer,
the Trust shall:
(i) accept for exchange all Registrable Preferred
Securities duly tendered and not validly withdrawn pursuant
to the Exchange Offer in accordance with the terms of the
Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver to the Trustee for cancellation all
Registrable Preferred Securities so accepted for exchange;
and
6
<PAGE>
(iii) cause the Trustee promptly to authenticate and
deliver Exchange Preferred Securities to each Holder of
Registrable Preferred Securities equal in principal amount
to the Registrable Preferred Securities of such Holder so
accepted for exchange.
Interest on each of the Exchange Preferred Securities will accrue from the
last interest payment date on which interest was paid on the Registrable
Preferred Securities surrendered in exchange therefor or, if no interest has
been paid on the Registrable Preferred Securities, from the date of original
issue of the Registrable Preferred Securities. The Exchange Offer shall not be
subject to any conditions, other than that (i) the Exchange Offer, or the making
of any exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the Commission, (ii) no action or proceeding
shall have been instituted or threatened in any court by or before any
governmental agency with respect to the Exchange Offer which, in the Trust's and
the Company's judgment, might impair the ability of the Trust to proceed with
the Exchange Offer, (iii) such Exchange Offer will not result in a "Tax Event"
as defined in the Indenture, or (iv) there shall not have been adopted or
enacted any law, statute, rule or regulation which, in the Trust's and the
Company's judgment, would materially impair the ability of the Trust to proceed
with the Exchange Offer. Each Holder of Registrable Preferred Securities (other
than Participating Broker-Dealers (as defined below)) who wishes to exchange
such Registrable Preferred Securities for Exchange Preferred Securities will be
required to represent that (i) it is not an affiliate of the Trust or the
Company, (ii) any Exchange Preferred Securities to be received by it will be
acquired in the ordinary course of its business, and (iii) it has no arrangement
with any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Preferred Securities, and (iv) it is not engaged
in, and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of the Exchange Preferred Securities. The Trust shall inform the
Initial Purchaser of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Initial Purchaser shall have the right, subject to
applicable law and at their own expense, to contact such Holders and otherwise
facilitate the tender of Registrable Preferred Securities in the Exchange Offer.
2.2 SHELF REGISTRATION.
(a) (i) If, because of any change in law or applicable
interpretations thereof by the staff of the Commission, the Trust
is not permitted to effect the Exchange Offer as contemplated by
Section 2.1 hereof, (ii) if it is determined that the Exchange
Offer would trigger a Tax Event, or (iii) if for any other reason
the Exchange Offer is not consummated on or before June 28, 1997,
or (iv) upon the request of either Initial Purchaser (with
respect to any Registrable Preferred Securities which it acquired
directly from the Trust) following consummation of the Exchange
Offer if such Initial Purchaser shall hold Registrable Preferred
Securities which it acquired directly from the Trust and if such
Initial Purchaser is not permitted, in the opinion of counsel to
such Initial Purchaser, pursuant to applicable law or applicable
interpretation of the staff of the Commission, to participate in
the Exchange Offer, the Trust and the Company shall, at the
Company's cost, subject to Section 2.3 hereof,
(A) as promptly as practicable, file with the
Commission, and thereafter shall use their best efforts to
cause to be declared effective as promptly as practicable, a
Shelf Registration Statement relating to the offer and sale
of the Registrable Preferred Securities by the Holders from
time to
7
<PAGE>
time in accordance with the methods of distribution
selected by the Majority Holders and set forth in such Shelf
Registration Statement. In the event that a Shelf
Registration Statement is required to be filed upon the
request of either Initial Purchaser pursuant to clause (iv)
above, the Trust and the Company shall file and use their
best efforts to have declared effective by the Commission
both an Exchange Offer Registration Statement pursuant to
Section 2.1 hereof with respect to all Registrable Preferred
Securities and a Shelf Registration Statement (which may be
a combined Registration Statement with the Exchange Offer
Registration Statement) with respect to offers and sales of
Registrable Preferred Securities held by such Initial
Purchaser after completion of the Exchange Offer;
(B) use their best efforts to keep the Shelf
Registration Statement continuously effective in order to
permit the Prospectus forming a part thereof to be usable by
Holders identified as selling security holders in such Shelf
Registration Statement for a period of three years from the
date the Shelf Registration Statement is declared effective
by the Commission or until such earlier date as all
Registrable Preferred Securities shall have been disposed of
or on which all Registrable Preferred Securities shall be
saleable without registration pursuant to Rule 144 (or any
similar provision then in effect), or as a result of any
changes in the existing registration requirements under the
Securities Act which eliminate the Holders' need for the
Shelf Registration Statement, or upon receipt of an opinion
of counsel satisfactory to the Initial Purchaser which
provides that all Registrable Preferred Securities may be
resold without registration in a transaction that would
result in the Registrable Preferred Securities being freely
tradeable provided that the purchaser is not an affiliate of
the Trust or the Company (the "Effectiveness Period"); and
(C) notwithstanding any other provisions hereof, use
its best efforts to ensure that (i) any Shelf Registration
Statement and any amendment thereto and any Prospectus
forming a part thereof and any supplement thereto complies
in all material respects with the Securities Act and the
rules and regulations thereunder, (ii) any Shelf
Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming a
part of any Shelf Registration Statement, and any supplement
to such Prospectus (as amended or supplemented from time to
time), does not include an untrue statement of a material
fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading, except that the
Trust and the Company shall be entitled to rely on the
information provided to them by the Holders with respect to
such Holders.
(b) The Trust and the Company further agree, if necessary,
to supplement or amend the Shelf Registration Statement if
reasonably requested by the Majority Holders with respect to
information relating to the Holders and otherwise as required by
Section 3(b) hereof, to use their best efforts to cause any such
amendment
8
<PAGE>
to become effective and such Shelf Registration Statement to
become usable as soon as thereafter practicable and to furnish
to the Holders of Registrable Preferred Securities copies of any
such supplement or amendment promptly after its being used or
filed with the Commission.
2.3 EXPENSES. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2 and, in the
case of any Shelf Registration Statement, will reimburse the Holders or
Initial Purchaser for the reasonable fees and disbursements of one firm or
counsel designated in writing by the Majority Holders to act as counsel for
the Holders of the Preferred Securities in connection therewith, and, in
the case of an Exchange Offer Registration Statement, will reimburse the
Initial Purchaser, as applicable, for the reasonable fees and disbursements
of one firm or counsel in connection therewith (however, the reimbursement
of such fees and disbursements on behalf of the Holders or the Initial
Purchaser shall not exceed an amount to be agreed upon by the Company and
the Initial Purchaser prior to the filing of any such Registration
Statement). Each Holder shall pay all expenses of its counsel, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale
or disposition of such Holder's Registrable Preferred Securities pursuant
to the Shelf Registration Statement.
2.4. EFFECTIVENESS.
(a) The Trust and the Company will be deemed not to have
used their best efforts to cause the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may
be, to become, or to remain, effective during the requisite
period if either voluntarily takes any action that would result
in any such Registration Statement not being declared effective
or in the Holders of Registrable Preferred Securities covered
thereby not being able to exchange or offer and sell such
Registrable Preferred Securities during the period unless (i)
such action is required by applicable law or (ii) such action is
taken by the Trust or the Company in good faith and for valid
business reasons (not including avoidance of the Trust's
obligations hereunder), including the acquisition or divestiture
of assets, so long as the Trust and the Company comply with the
requirements of Section 3(b) hereof, if applicable, as promptly
as practicable.
(b) An Exchange Offer Registration Statement pursuant to
Section 2.1 hereof or a Shelf Registration Statement pursuant to
Section 2.2 hereof will not be deemed to have become effective
unless it has been declared effective by the Commission;
PROVIDED, HOWEVER, that if, after a Shelf Registration Statement
has been declared effective, the offering of Registrable
Preferred Securities pursuant to such Shelf Registration
Statement is interfered with by any stop order, injunction or
other order or requirement of the Commission or any other
governmental agency or court, such Shelf Registration Statement
will be deemed not to be effective during the period of such
interference, until the offering of Registrable Preferred
Securities pursuant to such Shelf Registration Statement may
legally resume.
2.5. ADDITIONAL INTEREST. If (i) after March 1, 1997 the Exchange
Offer Registration Statement, or the Shelf Registration Statement in the
event that (A) the Exchange Offer, or the making of any exchange by a
Holder, would violate applicable law or any applicable interpretation of
the staff of the Commission, (B) any action or proceeding shall have been
instituted in any court
9
<PAGE>
by or before any governmental agency with respect to the Exchange Offer
which, in the judgment of the Trust and the Company, would materially
impair the ability of the Trust to proceed with the Exchange Offer, (C)
such Exchange Offer will result in a "Tax Event" as defined in the
Indenture, or (D) there shall have been adopted or enacted any law,
statute, rule or regulation which, in the judgment of the Trust and the
Company, would materially impair the ability of the Trust to proceed with
the Exchange Offer, has not been filed with the Commission, or (ii) on or
prior to April 29, 1997 such Exchange Offer Registration Statement is not
declared effective, or (iii) on or prior to June 28, 1997 such Exchange
Offer is not consummated or a Shelf Registration Statement is not declared
effective (each, a "Registration Default"), additional interest
("Registration Penalty") will accrue on the Debentures and, accordingly,
additional Distributions will accrue on the Preferred Securities, in each
case from and including the day following such Registration Default. A
Registration Penalty will be paid semi-annually in arrears, with the first
semi-annual payment due on the first interest or distribution payment date,
as applicable, following the date on which such Registration Penalty begins
to accrue, and will accrue at a rate per annum equal to an additional
one-quarter of one percent (0.25%) per Registration Default (not to exceed
in the aggregate 0.50%) of the principal amount or liquidation amount, as
applicable. Such Registration Penalty will cease to accrue on the date on
which the Exchange Offer is consummated or the Shelf Registration Statement
is declared effective by the Commission, as applicable. In the event that a
Shelf Registration Statement is filed and declared effective, but
subsequently ceases to be effective during the Effectiveness Period for
more than 90 days, whether or not consecutive, during any 12-month period,
then a Registration Penalty will accrue at a rate per annum equal to
one-half of one percent (0.50%) of the principal amount or liquidation
amount, as applicable, from such 91st day until such time as the Shelf
Registration Statement again becomes effective. At no time will a
Registration Penalty in excess of one-half of one percent (0.50%) be
payable pursuant to the provisions of the Registration Rights Agreement.
2.6 SPECIFIC ENFORCEMENT. Without limiting the remedies available to
the Initial Purchaser and the Holders, the Trust and the Company
acknowledge that any failure by the Trust or the Company to comply with its
obligations under Section 2.1 and Section 2.2 hereof may result in material
irreparable injury to the Initial Purchaser or the Holders for which there
is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchaser or any Holder may obtain such relief as may
be required to specifically enforce the Trust's and the Company's
obligations under Section 2.1 and Section 2.2 hereof.
3. REGISTRATION PROCEDURES.
In connection with the obligations of the Trust and the Company with
respect to the Registration Statements pursuant to Sections 2.1 and 2.2 hereof,
the Trust and the Company shall:
(a) prepare and file with the Commission a Registration
Statement, within the time period specified in Section 2, on the
appropriate form under the Securities Act, which form (i) shall be
selected by the Trust, (ii) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Preferred
Securities by the selling Holders thereof and (iii) shall comply as to
form in all material respects with the requirements of the applicable
form and include or incorporate by reference all financial statements
required by the Commission to be filed therewith, and use their best
efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
10
<PAGE>
(b) prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement and such
supplements to the Prospectus as may be necessary under applicable
law; and comply with the provisions of the Securities Act with respect
to the disposition of all of the Registrable Preferred Securities or
Exchange Preferred Securities, as applicable, covered by each
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the selling Holders
thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder
of the Registrable Preferred Securities, at least five days prior to
filing, that a Shelf Registration Statement with respect to the
Registrable Preferred Securities is being filed and advise such
Holders that the distribution of the Registrable Preferred Securities
will be made in accordance with the method selected by the Holders of
a majority in aggregate principal amount of the Registrable Preferred
Securities being registered; and (ii) furnish to each Holder of the
Registrable Preferred Securities, to counsel for the Initial
Purchaser, to one firm or counsel for the Holders and to each
underwriter of an underwritten offering of the Registrable Preferred
Securities, if any, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any amendment or supplement
thereto and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules and,
if the Holder so requests, all exhibits (including those incorporated
by reference) in order to facilitate the public sale or other
disposition of the Registrable Preferred Securities; and (iii) subject
to the penultimate paragraph of Section 3, hereby consent to the use
of the Prospectus or any amendment or supplement thereto by each of
the selling Holders of the Registrable Preferred Securities in
connection with the offering and sale of the Registrable Preferred
Securities covered by the Prospectus or any amendment or supplement
thereto;
(d) use its best efforts to register or qualify the Registrable
Preferred Securities or Exchange Preferred Securities, as applicable,
under all applicable state securities or "blue sky" laws of such
jurisdiction as any Holder (or Participating Broker-Dealer with
respect to Exchange Preferred Securities) of the Registrable Preferred
Securities or Exchange Preferred Securities, as applicable, covered by
a Registration Statement and each underwriter of an underwritten
offering of the Registrable Preferred Securities shall reasonably
request by the time the applicable Registration Statement is declared
effective by the Commission, to cooperate with the Holders in
connection with any filings required to be made with the NASD, and do
any and all other acts and things which may be reasonably necessary or
advisable to enable each such Holder and underwriter to consummate the
disposition in each such jurisdiction of such Registrable Preferred
Securities owned by such Holder; PROVIDED, HOWEVER, that the Trust
shall not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d) or (ii) take any
action which would subject it or its board of trustees to general
service of process or taxation in any such jurisdiction where it is
not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
the Registrable Preferred Securities and counsel for the Initial
Purchaser promptly
11
<PAGE>
and, if requested by such Holder or counsel, confirm such advice in
writing promptly (i) when a Shelf Registration Statement has become
effective, (ii) of any request by the Commission or any state
securities authority for post-effective amendments and supplements to
a Shelf Registration Statement and Prospectus or for additional
information after the Shelf Registration Statement has become
effective, (iii) of the issuance by the Commission or any state
securities authority of any stop order suspending the effectiveness of
a Shelf Registration Statement or the initiation of any proceedings
for that purpose, (iv) if, between the effective date of a Shelf
Registration Statement and the closing of any sale of Registrable
Preferred Securities covered thereby, the representations and
warranties of the Trust and the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if
any, relating to the offering of the Registrable Preferred Securities
cease to be true and correct in all material respects, (v) of the
happening of any event or the discovery of any facts during the period
a Shelf Registration Statement is effective which makes any statement
made in such Shelf Registration Statement or the Prospectus untrue in
any material respect or which requires the making of any changes in
such Shelf Registration Statement or Prospectus in order to make the
statements therein not misleading, (vi) of the receipt by the Trust of
any notification with respect to the suspension of the qualification
of the Registrable Preferred Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose
and (vii) of any determination by the Trust or the Company that a
post-effective amendment to a Shelf Registration Statement would be
appropriate;
(f) (i) in the case of the Exchange Offer (A) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Preferred Securities for Exchange Preferred Securities for
the resale of such Exchange Preferred Securities, (B) furnish to each
broker-dealer who desires to participate in the Exchange Offer,
without charge, as many copies of each Prospectus included in the
Exchange Offer Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such
broker-dealer may reasonably request, (C) include in the Exchange
Offer Registration Statement a statement that any broker-dealer who
holds Registrable Preferred Securities acquired for its own account as
a result of market-making activities or other trading activities (a
"Participating Broker-Dealer"), and who receives Exchange Preferred
Securities for Registrable Preferred Securities pursuant to the
Exchange Offer, may be a statutory underwriter and must deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Preferred Securities, (D)
subject to the penultimate paragraph of Section 3, hereby consent to
the use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto, by any
Participating Broker-Dealer in connection with the sale or transfer of
the Exchange Preferred Securities covered by the Prospectus or any
amendment or supplement thereto, and (E) include in the transmittal
letter or similar documentation to be executed by an exchange offeree
in order to participate in the Exchange Offer (x) the following
provision:
12
<PAGE>
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Preferred Securities. If
the undersigned is a broker-dealer that will receive Exchange
Preferred Securities for its own account in exchange for
Registrable Preferred Securities, the undersigned represents that
the Registrable Preferred Securities were acquired by it as a
result of market-making or other trading activities and
acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale
of such Exchange Preferred Securities; however, by so
acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act;" and
(y) a statement to the effect that by a Participating
Broker-Dealer making the acknowledgement described in clause (x)
and by delivering a Prospectus in connection with the exchange of
Registrable Preferred Securities, the Participating Broker-Dealer
will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act; and
(ii) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, the Trust shall use its
best efforts to cause to be delivered at the request of an
entity representing the Participating Broker-Dealers (which
entity shall be one of the Initial Purchaser, unless they
elect not to act as such representative) only one, if any,
"cold comfort" letter with respect to the Prospectus in the
form existing on the last date on which exchanges will be
accepted and with respect to each subsequent amendment or
supplement, if any, effected during the period specified in
clause (D) below; and
(iii) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, the Trust shall use its
best efforts to maintain the effectiveness of the Exchange
Offer Registration Statement until June 28, 1997; and
(iv) the Trust shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer
Registration Statement after June 28, 1997, the last date
for which exchanges are accepted pursuant to the Exchange
Offer (unless such period may be extended by the Trust) and
Participating Broker-Dealers shall not be authorized by the
Trust and shall not deliver such Prospectus after such date
in connection with resales contemplated by this Section 3;
and
(v) (A) in the case of an Exchange Offer, furnish
counsel for the Initial Purchaser and (B) in the case of a
Shelf Registration, furnish one firm or counsel for the
Holders of the Registrable Preferred Securities, copies of
any request by the Commission or any state securities
authority for amendments or supplements to a Registration
Statement and Prospectus or for additional information; and
13
<PAGE>
(vi) use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration
Statement at the earliest possible moment and provide
immediate notice to each Holder of the withdrawal of any
such order.
(g) in the case of a Shelf Registration, furnish to each Holder
of the Registrable Preferred Securities, and each underwriter, if any,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules (without documents incorporated
therein by reference and all exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of the Registrable Preferred Securities to facilitate
the timely preparation and delivery of certificates representing the
Registrable Preferred Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Preferred Securities
to be in such denominations (consistent with the provisions of the
Trust Agreement), and registered in such names as the selling Holders
or the underwriters, if any, may reasonably request at least three
business days prior to the closing of any sale of the Registrable
Preferred Securities;
(i) in the case of a Shelf Registration, upon the occurrence of
any event or the discovery of any facts, each as contemplated by
Section 3(e)(ii)-(vii) hereof, use its best efforts to prepare a
supplement or post-effective amendment to the Registration Statement
or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Preferred Securities,
such Prospectus will not contain at the time of such delivery any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Trust
agrees to notify each Holder to suspend use of the Prospectus as
promptly as practicable after the occurrence or discovery of such an
event, and each Holder hereby agrees to suspend use of the Prospectus
until the Trust has amended or supplemented the Prospectus to correct
such misstatement or omission. At such time as such public disclosure
is otherwise made or the Trust determines that such disclosure is not
necessary, the Trust agrees promptly to notify each Holder of such
determination, to amend or supplement the Prospectus if necessary to
correct any untrue statement or omission therein and to furnish each
Holder such numbers of copies of the Prospectus, as amended or
supplemented, as such Holder may reasonably request;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement
or amendment or supplement to a Prospectus or any document which is to
be incorporated by reference into a Registration Statement or a
Prospectus after initial filing of a Registration Statement, provide
copies of such document to the Initial Purchaser, on behalf of such
Holders, and their counsel and make representatives of the Trust as
shall be reasonably requested by the Majority Holders of the
Registrable Securities, or the Initial Purchaser on behalf of such
Holders, available for discussion of such document and shall not at
any time file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration
Statement or a
14
<PAGE>
Prospectus or any document which is to be incorporated by reference
into a Registration Statement or a Prospectus, of which the Initial
Purchaser, on behalf of such Holders, and its counsel shall not have
previously been advised and furnished a copy or to which the Initial
Purchaser, on behalf of such Holders, or its counsel shall reasonably
object;
(k) obtain a CUSIP number for all Exchange Preferred Securities
or Registrable Preferred Securities or the Debentures, as the case may
be, not later than the effective date of a Registration Statement, and
provide the Trustee with printed certificates for the Exchange
Preferred Securities or the Registrable Preferred Securities or the
Debentures, as the case may be, in a form eligible for deposit with
the Depositary;
(l) (i) cause the Indenture and the Guarantee Agreement to be
qualified under the Trust Indenture Act of 1939 (the "TIA") in
connection with the registration of the Debentures and the Guarantee,
(ii) cooperate with the Trustee and the Holders to effect such changes
to the Indenture and the Guarantee Agreement as may be required for
the Indenture and the Guarantee Agreement to be so qualified in
accordance with the terms of the TIA and (iii) execute, and use its
best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the Commission to enable the Indenture and
the Guarantee Agreement to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the
Majority Holders) in order to expedite or facilitate the disposition
of such Registrable Preferred Securities and in such connection,
whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:
(i) make such representations and warranties to the Holders
of such Registrable Preferred Securities and the underwriters, if
any, in form, substance and scope as are customarily made by
issuers to underwriters in similar underwritten offerings as may
be reasonably requested by such underwriters;
(ii) obtain opinions of counsel to the Trust and updates
thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the holders of a majority in aggregate
principal amount of the Registrable Preferred Securities being
sold), addressed to each selling Holder and the underwriters, if
any, covering the matters customarily covered in opinions
requested in sales of securities or underwritten offerings and
such other matters as may be reasonably requested by such Holders
and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from
the Trust's independent certified public accountants addressed to
the underwriters, if any, and use its best efforts to have such
letters addressed to the selling Holders of the Registrable
Preferred Securities, such letters to be in customary
15
<PAGE>
form and covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection with similar
underwritten offerings;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders for
the purpose of soliciting purchases of the Registrable Preferred
Securities, which agreement shall be in form, substance and scope
customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the
same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and
procedures set forth in Section 5 hereof with respect to the
underwriters and all other parties to be indemnified pursuant to
said Section; and
(vi) deliver such documents and certificates as are
customarily delivered in similar offerings and as may be
reasonably requested by the Holders of a majority in aggregate
principal amount of the Registrable Preferred Securities being
sold and the managing underwriters, if any.
The above shall be done at (i) the effectiveness of such Shelf Registration
Statement (and each post-effective amendment thereto) and (ii) each closing
under any underwriting or similar agreement as and to the extent required
thereunder. In the case of any underwritten offering, the Trust shall provide
written notice to the Holders of all of the Registrable Preferred Securities of
such underwritten offering at least 30 days prior to the filing of a Prospectus
supplement for such underwritten offering. Such notice shall (x) offer each such
Holder the right to participate in such underwritten offering, (y) specify a
date, which shall be no earlier than 10 days following the date of such notice,
by which the Holder must inform the Trust of its intent to participate in such
underwritten offering and (z) include the instructions such Holder must follow
in order to participate in such underwritten offering;
(n) in the case of a Shelf Registration Statement, upon the execution
of a confidentiality agreement reasonably requested by the Trust, in
accordance with such procedural conditions as the Trust shall reasonably
impose, make available for inspection by representatives of the Holders of
the Registrable Preferred Securities and any underwriters participating in
any disposition pursuant to a Shelf Registration Statement and any one firm
or counsel or accountant retained by such Holders or underwriters, all
financial and other records, pertinent corporate documents and properties
of the Trust and the Company reasonably requested by any such persons, and
cause the respective officers, directors, employees and any other agents of
the Trust and the Company to supply all information reasonably requested by
any such representative, underwriter, special counsel or accountant in
connection with a Registration Statement;
(o) (i) a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document to the Initial
Purchaser and make such changes in any such document prior to the filing
thereof as any of the Initial Purchaser may reasonably request; and (ii) in
the case of a Shelf Registration
16
<PAGE>
Statement, a reasonable time prior to filing any Shelf Registration
Statement, any Prospectus forming a part thereof, any amendment to such
Shelf Registration Statement or amendment or supplement to such Prospectus,
provide copies of such documents to the Holders of the Registrable
Preferred Securities, to the Initial Purchaser, to one firm or counsel on
behalf of the Holders and to the underwriter or underwriters of an
underwritten offering of the Registrable Preferred Securities, if any, make
such changes in any such document prior to the filing thereof as counsel
for the Trust and counsel for the Majority Holders and the underwriter or
underwriters may reasonably agree and cause the representatives of the
Trust and the Company available for discussion of such document as shall be
reasonably requested by the Holders of the Registrable Preferred
Securities, the Initial Purchaser on behalf of such Holders or any
underwriter; PROVIDED that any party receiving any document pursuant to
this clause (ii) who does not raise any objections to the filing of such
document within five calendar days after receipt of such document shall be
deemed to have no objection to the filing of such document;
(p) in the case of a Shelf Registration Statement, use its best
efforts to cause all of the Registrable Preferred Securities to be listed
on any securities exchange on which similar securities issued by the Trust
are then listed if so requested by the Majority Holders or by the
underwriter or underwriters of an underwritten offering of Registrable
Preferred Securities, if any;
(q) in the case of a Shelf Registration Statement, use its best
efforts to cause the Registrable Preferred Securities to be rated with the
appropriate rating agencies if so requested by the Majority Holders or by
the underwriter or underwriters of an underwritten offering of Securities,
if any;
(r) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
at least 12 months which shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder; and
(s) cooperate and assist in any filings required to be made with the
NASD and, in the case of a Shelf Registration Statement, in the performance
of any due diligence investigation by any underwriter and its counsel
(including any "qualified independent underwriter" that is required to be
retained in accordance with the rules and regulations of the NASD).
In the case of a Shelf Registration Statement, the Trust may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of the Registrable Preferred Securities to furnish to the Trust such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Preferred Securities as the Trust may from time to time
reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Trust of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(ii)-(vii)
hereof, such Holder will forthwith discontinue disposition of Registrable
Preferred Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof, and, if so directed by the Trust, such Holder will deliver
to the Trust (at its expense) all copies in its possession, other than permanent
file copies then in such Holder's possession, of the Prospectus
17
<PAGE>
covering such Registrable Preferred Securities that was current at the time
of receipt of such notice. If the Trust shall give any such notice to suspend
the disposition of the Registrable Preferred Securities pursuant to a Shelf
Registration Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(ii)-(vii)
hereof, the Trust shall be deemed to have used its best efforts to keep the
Shelf Registration Statement effective during such period of suspension provided
that the Trust shall use its best efforts to file and have declared effective
(if an amendment) as soon as practicable an amendment or supplement to the Shelf
Registration Statement.
4. UNDERWRITTEN REGISTRATIONS.
If any of the Registrable Preferred Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Majority Holders and shall be reasonably
acceptable to the Trust.
No Holder of Registrable Preferred Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Preferred Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Trust and the Company agree to indemnify and hold harmless the
Initial Purchaser, each participating Holder, each Participating
Broker-Dealer, each other person who participates in an offering of the
Registrable Preferred Securities, including underwriters (as defined in the
Securities Act and referred to herein as "Underwriters"), and each person,
if any, who controls any participating Holder, Initial Purchaser or any
other participating person within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each of the foregoing
being an "Indemnitee"), as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Exchange Preferred Securities or Registrable Preferred Securities were
registered under the Securities Act, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement thereto)
or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation or investigation or proceeding by
any governmental agency or body,
18
<PAGE>
commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission if such settlement is effected with the written
consent of the Trust or the Company; and
(iii) against any and all expense whatsoever, as incurred
(including fees and disbursements of one firm or counsel chosen by the
Indemnitees), reasonably incurred in investigating, preparing or
defending against any litigation or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Trust by the Initial
Purchaser, any Holder or any Underwriter expressly for use in a Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(b) In the case of a Shelf Registration Statement, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Trust, the
Company, the Initial Purchaser, each Underwriter and the other selling
Holders, and each of their respective "controlling persons" (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the trustees of the Trust and each of the Trust's officers who
signed the Shelf Registration Statement against any and all loss,
liability, claim, damage and expense described in the indemnity contained
in Section 5(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in
the Shelf Registration Statement (or any amendment thereto) or any
Prospectus included therein (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Trust expressly for use in the Shelf Registration Statement (or any
amendment thereto) or such Prospectus (or any amendment or supplement
thereto); PROVIDED, HOWEVER, that no such Holder shall be liable for any
claims hereunder in excess of the amount of net proceeds received by such
Holder from the sale of such Holder's Registrable Preferred Securities
pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it
in respect of which indemnity may be sought hereunder, but failure so to
notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of
such action. If it so elects within a reasonable time after receipt of such
notice, an indemnifying party, jointly with any other indemnifying parties
receiving such notice, may assume the defense of such action with counsel
chosen by it and approved by the indemnified parties defendant in such
action, unless such indemnified parties reasonably object to such
assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such
indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying party or
parties be liable for the fees and expenses of more than one counsel
separate from their own counsel for all indemnified parties in
19
<PAGE>
connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 5 is
for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Trust and the Company, the
Holders and the Initial Purchaser shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by
such indemnity incurred by the Trust and the Company, the Holders and the
Initial Purchaser; PROVIDED, HOWEVER, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation. As between the Trust and the Company,
the Holders and the Initial Purchaser, such parties shall contribute to the
aggregate losses, liabilities, claims, damages and expense of the nature
contemplated by such indemnity agreement in such proportions as shall be
appropriate to reflect (i) the relative benefits received by the Trust and
the Company on the one hand, the Holders on another hand and the Initial
Purchaser on another hand, from the offering of the Exchange Preferred
Securities or Registrable Preferred Securities included in such offering,
and (ii) the relative fault of the Trust and the Company on the one hand,
the Holders on another hand and the Initial Purchaser on another hand, with
respect to the statements or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well
as any other relevant equitable considerations. The Trust and the Company,
the Holders and the Initial Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 5 were to be determined
by pro rata allocation or by any other method of allocation which does not
take into account the relevant equitable considerations. For purposes of
this Section 5, each Person, if any, who controls the Initial Purchaser or
a Holder within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchaser or such Holder, and each trustee of the Trust and
director of the Company, each officer of the Trust or the Company who
signed the Registration Statement, and each Person, if any, who controls
the Trust or the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Trust and the Company. The parties hereto agree that
any underwriting discount or commission or reimbursement of fees paid to
any Initial Purchaser pursuant to the New Purchase Agreement shall not be
deemed to be a benefit received by any Initial Purchaser in connection with
the offering of the Exchange Preferred Securities or Registrable Preferred
Securities included in such offering.
6. MISCELLANEOUS.
6.1 RULE 144 AND RULE 144A. For so long as the Trust or the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act,
the Trust and the Company each covenant that it will file any reports required
to be filed by it under Section 13(a) or 15(d) of the Exchange Act and the rules
and regulations adopted by the Commission thereunder, and that if it ceases to
be so required to file such reports (or, in the case of the Trust, based upon
the view of the staff of the Commission that it will raise no objection if it
does not comply, as a separate registrant, with the reporting requirements of
Section 13 or 15(d) of the Exchange Act), it will upon the request of any Holder
of the Registrable Preferred Securities (a) make publicly available such
information, if any, as is necessary to permit sales pursuant to Rule 144 under
the Securities Act), provided all of the other applicable provisions of Rule 144
can be met by the Holder, (b) deliver such information
20
<PAGE>
to a prospective purchaser as is necessary to permit sales pursuant to Rule
144A under the Securities Act, if sales can otherwise be made under Rule 144A,
and (c) take such further action that is reasonable in the circumstances, in
each case, to the extent required from time to time to enable such Holder to
sell its Registrable Preferred Securities without registration under the
Securities Act within the limitation of the exemptions provided by, but only to
the extent such exemptions apply, (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, (ii) Rule 144A under the Securities Act,
as such Rule may be amended from time to time, or (iii) any similar rules or
regulations hereafter adopted by the Commission. Upon the request of any Holder
of the Registrable Preferred Securities, the Trust and the Company each will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
6.2 NO INCONSISTENT AGREEMENTS. The Trust and the Company have not entered
into, and the Trust and the Company will not after the date of this Agreement
enter into, any agreement which is inconsistent with the rights granted to the
Holders of Registrable Preferred Securities in this Agreement or which otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Trust's or the Company's other issued and
outstanding securities under any such agreements.
6.3 AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the written consent of Holders of at least a majority in aggregate
principal amount of the outstanding Registrable Preferred Securities affected by
such amendment, modification, supplement, waiver or departure has been obtained
by the Trust or the Company; PROVIDED, HOWEVER, that no amendment, modification,
supplement, waiver or consent to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Preferred
Securities unless consented to in writing by such Holder.
6.4 NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if
to a Holder, at the most current address given by such Holder to the Trust by
means of a notice given in accordance with the provisions of this Section 6.4,
which address initially is, with respect to each Initial Purchaser, the address
set forth in the New Purchase Agreement; and (b) if to the Trust or the Company,
initially at the Trust's and the Company's address set forth in the New Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6.4.
All such notices and communications shall be deemed to have been duly
given; at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
6.5 SUCCESSOR AND ASSIGNS. This Agreement shall inure to the benefit of and
be binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and
21
<PAGE>
without the need for an express assignment, subsequent Holders; PROVIDED
that nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Preferred Securities in violation of the terms of the
New Purchase Agreement. If any transferee of any Holder shall acquire
Registrable Preferred Securities, in any manner, whether by operation of law or
otherwise, such Registrable Preferred Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Preferred Securities such person shall be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the New Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
6.6 THIRD PARTY BENEFICIARIES. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Trust and the
Company, on the one hand, and the Initial Purchaser, on the other hand, and
shall have the right to enforce such agreements directly to the extent they deem
such enforcement necessary or advisable to protect their rights.
6.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.8 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.
6.10 SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
6.11 EXECUTION OF AGREEMENT BY TRUST. The name "BankUnited Capital" is the
designation of the trustees of the Trust under a Declaration of Trust. All
Persons dealing with the Trust must look solely to the property and assets of
the Trust for the enforcement of any claims against the Trust; neither the
trustees, shareholders, officers, employees or agents of the Trust in their
individual capacities assume any personal liability for the obligations of the
Trust; and the respective properties of the trustees, shareholders, officers,
employees and agents of the Trust in their individual capacities shall not be
subject to the claims of any such Persons with respect to any such obligations.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BANKUNITED CAPITAL
By: _____________________________
Name:
Title:
BANKUNITED FINANCIAL CORPORATION
By: _____________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
As of the date first above
written:
Friedman, Billings, Ramsey & Co., Inc.
By Friedman, Billings, Ramsey & Co., Inc.
By: ____________________
Name:
Title:
23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of BankUnited
Financial Corporation of our report dated November 4, 1996, except as to Note
18, which is as of November 15, 1996, appearing on page 54 of BankUnited
Financial Corporation's Annual Report on Form 10-K/A for the year ended
September 30, 1996. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
Miami, Florida
March 26 1997
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of BankUnited
Financial Corporation of our report dated August 12, 1996, appearing on page 56
of Suncoast Savings and Loan Association, FSA's Annual Report on Form 10-K for
the year ended June 30, 1996. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
Miami, Florida
March 26 1997
- --------------------------------------------------------------------------------
BANKUNITED CAPITAL
50,000
10 1/4% Trust Preferred Securities
guaranteed to a limited extent by
BANKUNITED FINANCIAL CORPORATION
PURCHASE AGREEMENT
Date: December 23, 1996
- --------------------------------------------------------------------------------
<PAGE>
BANKUNITED CAPITAL
50,000
10 1/4% Trust Preferred Securities
PURCHASE AGREEMENT
December 23, 1996
Friedman, Billings, Ramsey & Co.
Raymond James & Associates, Inc.
c/o Friedman, Billings, Ramsey & Co., Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209
Ladies and Gentlemen:
BankUnited Capital (the "Issuer"), a statutory business trust created
under the Business Trust Act (the "Delaware Act") of the State of Delaware
(Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Section 3801 ET SEQ.),
proposes to issue and sell to Friedman, Billings, Ramsey & Co. ("FBR") and
Raymond James & Associates, Inc. ("Raymond James") (collectively, the "Initial
Purchasers," which term shall also include any initial purchaser substituted as
hereinafter provided in Section 9 hereof), for whom you are acting as
representatives (the "Representatives"), an aggregate of 50,000 10 1/4% Trust
Preferred Securities, Liquidation Amount $1,000 per Preferred Security (the
"Preferred Securities"). The Preferred Securities are more fully described in
the Offering Memorandum referred to below.
The Preferred Securities will be guaranteed by BankUnited Financial
Corporation (the "Company"), to the extent that the Issuer has funds therefor,
as set forth in the Offering Memorandum (as defined below), with respect to
distributions and amounts payable upon liquidation or redemption (the
"Guarantee"), pursuant to the Guarantee Agreement (the "Guarantee Agreement"),
to be dated as of the Closing Time (as defined below), executed and delivered by
the Company, as guarantor and The Bank of New York (the "Guarantee Trustee"), a
New York banking corporation ("The Bank of New York"), not in its individual
capacity but solely as trustee, for the benefit of the holders from time to time
of the Preferred Securities. The proceeds from the sale of the Preferred
Securities will be aggregated with the entire proceeds from the sale by the
Issuer to the Company of the common securities of the Issuer (the "Common
Securities") and will be used by the Issuer to purchase the 10 1/4% Junior
Subordinated Deferrable Interest Debentures Series A, due 2026 (the
"Debentures") issued by the Company. The Preferred Securities and the Common
Securities will be issued pursuant to the Amended and Restated Trust Agreement
of the Issuer, to be dated as of the Closing Time (the "Trust Agreement"), among
the Company, as Sponsor, the trustees named therein (the "Trustees") and
1
<PAGE>
the holders from time to time of the Preferred Securities and the Common
Securities, which represent undivided beneficial interests in the assets of the
Issuer. The Debentures will be issued pursuant to an Indenture, to be dated as
of the Closing Time (the "Indenture"), between the Company and The Bank of New
York, as trustee (the "Indenture Trustee"). All expenses of the Issuer will be
paid by the Company as set forth in the Agreement as to Expenses and
Liabilities, to be dated as of the Closing Time (the "Expense Agreement"). The
Preferred Securities, the Guarantee and the Debentures are collectively referred
to herein as the "Securities." This Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement, the Expense Agreement and the Registration
Rights Agreement (as defined below) are referred to collectively as the
"Operative Documents". Capitalized terms used herein without definition have the
respective meanings specified in the Offering Memorandum.
The Preferred Securities will be offered and sold to the Initial
Purchasers without registration under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act. In connection with the sale of the Preferred
Securities, the Issuer and the Company have prepared a preliminary offering
memorandum dated December 16, 1996 (the "Preliminary Offering Memorandum") and a
final offering memorandum dated the date hereof (such final offering memorandum,
in the form first furnished to the Initial Purchasers for use in connection with
the offering and sale of the Preferred Securities, or if such form is not so
used, in the form subsequently furnished for such use, the "Offering
Memorandum"), each setting forth certain information concerning the Issuer, the
Company and the Securities. The Issuer and the Company hereby confirm that they
have authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offer and resale of the Preferred Securities
by the Initial Purchasers, subject to the provisions of Section 4(c) hereof.
Unless stated to the contrary, all references herein to the Offering Memorandum
are to the Offering Memorandum at the date hereof (the "Execution Time") and are
not meant to include any amendment or supplement thereto subsequent to the
Execution Time. If the Issuer and the Company prepare a supplement dated the
date hereof to the Preliminary Offering Memorandum containing only pricing
related information, then the term "Offering Memorandum" for purposes of this
Agreement shall refer collectively to the Preliminary Offering Memorandum and
such supplement.
The Issuer and the Company understand that the Initial Purchasers
propose to make an offering of the Preferred Securities only on the terms,
subject to the conditions and in the manner set forth in the Offering Memorandum
and Section 3 hereof.
The Initial Purchasers and other holders of Securities (including
subsequent permitted transferees) will be entitled to the benefits of the
registration rights agreement, to be dated as of the Closing Time (the
"Registration Rights Agreement"), among the Issuer, the Company and the Initial
Purchasers, in the form attached hereto as Exhibit A. Pursuant to the
Registration Rights Agreement, the Issuer and the Company will agree to file
with the Securities and Exchange Commission (the "Commission") upon the terms
and conditions set forth therein either an exchange offer registration statement
or a shelf registration statement pursuant to Rule 415 under the Securities Act
relating to the exchange or resale, as the case may be, of (i) the Preferred
Securities and (ii) the Debentures by holders thereof, and to use their
reasonable best efforts to cause such registration statement to be declared
effective.
2
<PAGE>
All references in this Agreement to financial statements and schedules
and other information that is "contained", "included", "deemed included" or
"stated" in the Offering Memorandum (and all other references of like import)
shall be deemed to include all such financial statements and schedules and other
information that are, or are deemed to be, incorporated by reference in the
Offering Memorandum; and all references in this Agreement to amendments or
supplements to the Offering Memorandum shall be deemed to include the filing of
any document under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that is, or is deemed to be, incorporated by reference in the
Offering Memorandum.
Section 1. REPRESENTATIONS AND WARRANTIES. (a) The Issuer and the
Company, jointly and severally, represent and warrant to and agree with the
Initial Purchasers that:
(i) As of their respective dates, none of the Offering
Memorandum or any amendment or supplement thereto, and as of the
Closing Time, the Offering Memorandum, as amended or supplemented to
such time, contained or will contain an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that
neither the Company nor the Issuer makes any warranty or representation
with respect to any statement contained in the Offering Memorandum in
reliance upon and in conformity with information concerning the Initial
Purchasers and the plan of distribution and furnished in writing by or
on behalf of any Initial Purchaser to the Company expressly for use in
the Offering Memorandum. The documents included as Appendices,
incorporated by reference or deemed to be incorporated by reference in
the Offering Memorandum (the "Exchange Act Reports"), when they became
effective or were last amended or filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Exchange Act as applicable, and the rules and regulations (the
"Rules and Regulations") of the Commission and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
statements therein, in light of the circumstances under which they were
made, not misleading, and any further documents so filed and
incorporated by reference or deemed to be incorporated by reference in
the Offering Memorandum, when such documents become effective or are
filed with the Commission, as the case may be, shall conform in all
material respects to the requirements of the Securities Act and the
Exchange Act and the Rules and Regulations, as applicable, and shall
not contain an untrue statement of a material fact or omit to state a
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.
3
<PAGE>
(ii) Each of the Preferred Securities, the Guarantee and the
Debentures satisfy the eligibility requirements of Rule 144A(d)(3) of
the Rules and Regulations.
(iii) None of the Issuer, the Company, any of their respective
affiliates (as such term is defined in Rule 501(b) of Regulation D of
the Rules and Regulations ("Regulation D")), or any person acting on
behalf of the foregoing (other than the Initial Purchasers) has,
directly or indirectly, made or will, directly or indirectly, make
offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the registration of
the Securities under the Securities Act.
(iv) None of the Issuer, the Company or any of their
respective affiliates (as such term is defined in Rule 501(b) of
Regulation D) or any person (other than the Initial Purchasers) acting
on behalf of the foregoing has engaged or will engage, in connection
with the offering of the Securities or any security of the same class
or series as the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) of Regulation D.
The Company and the Issuer have not entered and will not enter into any
contractual arrangement with respect to the distribution of the
Securities except for this Agreement and the Registration Rights
Agreement.
(v) Assuming the accuracy of the representations and
warranties and compliance with the agreements of the Initial Purchasers
in Section 3 hereof, it is not necessary in connection with the offer,
sale and delivery of the Preferred Securities to the Initial
Purchasers, or in connection with the initial resale of the Preferred
Securities by the Initial Purchasers in accordance with this Agreement,
to register the Preferred Securities under the Securities Act or to
qualify the Indenture, the Guarantee or the Trust Agreement under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(vi) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Florida
with full power and authority to own, lease and operate its properties,
to conduct its business and to execute, deliver and perform its
obligations under each of the Operative Documents.
(vii) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than its
wholly owned subsidiaries, BankUnited, FSB (the "Bank"), BU Ventures,
Inc., BankUnited Mortgage Corporation (which has never commenced
operations), and the Bank's wholly owned subsidiaries, T&D Properties
of South Florida, Inc., Bay Holdings Inc. and SGC Mortgage Corporation
(BU Ventures, Inc., the Bank and the Bank's wholly owned subsidiaries
are collectively referred to herein as the "Subsidiaries"). Neither the
Company nor the Subsidiaries own any equity interests in any other
entities except as disclosed in the Offering Memorandum. The Company
and the Subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, with full power and
authority (corporate and other) to own and lease their properties and
conduct their respective businesses as described in the Offering
4
<PAGE>
Memorandum; the Company owns all of the outstanding capital stock of
the Bank, BU Ventures, Inc., BankUnited Mortgage Corporation, and the
Bank owns all of the outstanding capital stock of T&D Properties of
South Florida, Inc., SGC Mortgage Corporation and Bay Holdings, Inc.,
each owning said stock free and clear of all claims, liens, charges and
encumbrances.
(viii) The Company has the authorized and outstanding capital
stock as set forth under the heading Capitalization in the Offering
Memorandum; the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or
purchase securities (except as may be disclosed in the Offering
Memorandum), and conform in all material respects to the description
thereof contained in the Offering Memorandum. All issued and
outstanding shares of capital stock of the Subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable.
Except as set forth in the Noncumulative Convertible Preferred Stock,
Series C; the Noncumulative Convertible Preferred Stock, Series C-II;
as set forth in the schedule of grants of options and bonus shares to
officers, directors and employees on November 14, 1996 (a copy of which
has been provided to the Initial Purchasers); and as disclosed in the
Offering Memorandum and the financial statements of the Company, and
the related notes thereto, included in the Offering Memorandum, neither
the Company nor the Subsidiaries have outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or
to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital stock
or any such options, rights, convertible securities or obligations. The
description of the Company's stock option and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Offering Memorandum accurately and fairly
present the information required to be shown with respect to such
plans, arrangements, options and rights.
(ix) The Issuer has been duly formed and is validly existing
in good standing as a business trust under the Delaware Act with the
full power and authority to own its property and to conduct business
and to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and the Trust Agreement; the Issuer
is duly qualified to conduct business as a foreign corporation in good
standing in each jurisdiction in which such qualification is necessary;
the Issuer has no liabilities or obligations other than those arising
out of the transactions contemplated by this Agreement, the
Registration Rights Agreement and the Trust Agreement, and the Issuer
is not a party to or otherwise bound by any agreement other than those
described in the Offering Memorandum.
(x) The Company and the Subsidiaries are duly qualified in or
licensed to transact business by, and are in good standing in, each
jurisdiction in which they own or lease real property, maintain an
office or conduct their respective businesses and in
5
<PAGE>
which the failure, individually or in the aggregate with all
other failures, to be so licensed or qualified or to be in good
standing would reasonably be expected to have a material adverse effect
on the financial condition, properties, assets, business, results of
operations or prospects of the Company and the Subsidiaries taken as a
whole (a "Material Adverse Effect") and the Company has no knowledge
that any proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
(xi) This Agreement has been duly authorized, executed and
delivered by each of the Company and the Issuer and (assuming the due
authorization, execution and delivery thereof by the other parties
thereto) is a legal, valid and binding agreement of each of the Company
and the Issuer enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(the "Enforceability Exceptions") and except to the extent that the
indemnification provisions of Section 7 hereof may be limited by
federal or state securities laws and public policy considerations in
respect thereof.
(xii) The Registration Rights Agreement has been duly
authorized by each of the Company and the Issuer and, at the Closing
Time, will have been executed and delivered by each of the Issuer and
the Company and upon such execution by each of the Issuer and the
Company (assuming the due authorization, execution and delivery thereof
by the other parties thereto) the Registration Rights Agreement will
constitute a legal, valid and binding obligation of each of the Issuer
and the Company enforceable against each of the Issuer and the Company
in accordance with the terms thereof, except as enforcement thereof may
be limited by the Enforceability Exceptions, and except as any rights
to indemnity may be limited by federal and state securities laws and
public policy considerations, and will conform to all statements
relating thereto in the Offering Memorandum.
(xiii) The Trust Agreement has been duly authorized by the
Company and, at the Closing Time, will have been executed and delivered
by the Company and the Administrative Trustees (as defined in the Trust
Agreement), and assuming the due authorization, execution and delivery
of the Trust Agreement by the Delaware Trustee and the Property Trustee
(each as defined in the Trust Agreement), the Trust Agreement will, at
the Closing Time, be a legal, valid and binding obligation of the
Company and the Administrative Trustees, enforceable against the
Company and the Administrative Trustees in accordance with its terms,
except as enforcement thereof may be limited by the Enforceability
Exceptions, and will conform to all statements relating thereto in the
Offering Memorandum.
(xiv) The Guarantee Agreement has been duly authorized by the
Company and when executed and delivered by the Company, and assuming
due authorization, execution and delivery thereof by The Bank of New
York, not in its individual capacity but solely as
6
<PAGE>
trustee, will constitute a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by the
Enforceability Exceptions, and will conform to all statements relating
thereto in the Offering Memorandum.
(xv) The Expense Agreement has been duly authorized by the
Company and when executed and delivered by the Company, and assuming
due authorization, execution and delivery thereof by the Issuer, will
constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by the Enforceability Exceptions,
and will conform to all statements relating thereto in the Offering
Memorandum.
(xvi) The Preferred Securities have been duly authorized by
the Issuer and the Trust Agreement and, when executed and authenticated
in the manner provided for in the Trust Agreement and issued and
delivered pursuant to this Agreement against payment of the
consideration set forth herein, will be validly issued and (subject to
the terms of the Trust Agreement) fully paid and nonassessable
undivided beneficial interests in the assets of the Issuer, will be
entitled to the benefits of the Trust Agreement (and to the extent set
forth therein the Indenture) and will conform to all statements
relating thereto in the Offering Memorandum; the issuance of the
Preferred Securities is not subject to preemptive or other similar
rights; and holders of Preferred Securities will be entitled to the
same limitation of personal liability extended to stockholders of
private corporations for profit incorporated under the General
Corporation Law of the State of Delaware.
(xvii) The Common Securities have been duly authorized by the
Issuer and the Trust Agreement and, when executed, issued and delivered
by the Issuer to the Company against payment therefor as described in
the Offering Memorandum, will be validly issued undivided beneficial
interests in the assets of the Issuer, will be entitled to the benefits
of the Trust Agreement and will conform in all material respects to the
description thereof in the Offering Memorandum; the issuance of Common
Securities is not subject to preemptive or other similar rights; and at
the Closing Time, all of the issued and outstanding Common Securities
of the Issuer will be directly owned by the Company free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(xviii) The Indenture has been duly authorized by the Company
and when executed and delivered by the Company, and assuming due
authorization, execution and delivery thereof by the Indenture Trustee,
will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by the Enforceability Exceptions,
and will conform to all statements relating thereto in the Offering
Memorandum.
(xix) The Debentures have been duly authorized by the Company
and, when executed, authenticated, issued and delivered in the manner
provided for in the Indenture and sold and paid for as provided in the
Trust Agreement, will constitute legal, valid and
7
<PAGE>
binding obligations of the Company entitled to the benefits of
the Indenture and enforceable against the Company in accordance with
their terms, except as enforcement thereof may be limited by the
Enforceability Exceptions, and will conform to all statements relating
thereto in the Offering Memorandum.
(xx) Except as disclosed in the Offering Memorandum, upon
payment by the Issuer of the purchase price therefor, the Trustee will,
on the Closing Date, have good and valid title to all such Debentures,
free from liens, encumbrances and defects that would materially affect
the value thereof or materially interfere with the use made or to be
made thereof by the Issuer.
(xxi) Price Waterhouse, LLP ("Price Waterhouse"), who is
reporting upon the financial statements included in Appendices to the
Offering Memorandum, are and were independent public accountants as
required by the Securities Act and the Rules and Regulations during the
periods covered by the financial statements which are included in the
Offering Memorandum.
(xxii) The consolidated financial statements of the Company
and consolidated financial statements of Suncoast Savings and Loan
Association, FSA ("Suncoast") included in the Appendices, in the
Offering Memorandum present fairly the consolidated financial position
of the Company and Suncoast, as the case may be as of the dates
indicated and the consolidated results of operations and changes in
stockholders' equity of the Company and its subsidiaries or Suncoast
for the periods specified. The consolidated financial statements of the
Company and Suncoast, included in Appendices A and C, respectively, in
the Offering Memorandum have been prepared in all material respects in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except
as indicated in the notes thereto), and the supporting schedules, if
any, included in Appendices, incorporated or deemed incorporated by
reference in the Offering Memorandum present fairly in accordance with
GAAP the information required to be stated therein. The selected
consolidated financial data and the pro forma financial information of
the Company included in the Offering Memorandum present fairly the
information shown therein and have been prepared on a basis consistent
with that of the consolidated audited financial statements of the
Company (to the extent so indicated) included in the Appendices,
incorporated or deemed incorporated by reference in the Offering
Memorandum.
(xxiii) Since the respective dates as of which information is
given in the Offering Memorandum, except as may be otherwise stated in
therein, there has not been (A) any material adverse change in the
financial condition, properties, assets, business, results of
operations or prospects of the Company and the Subsidiaries taken as a
whole, (B) any transaction entered into by the Company or any of the
Subsidiaries, or into which the Company or any of the Subsidiaries
intends to enter, which is material to the Company and the Subsidiaries
taken as a whole, or (C) any obligation, contingent or otherwise
8
<PAGE>
incurred, directly or indirectly, by the Company or any of the
Subsidiaries which is material to the Company and the Subsidiaries
taken as a whole.
(xxiv) None of the Company, the Subsidiaries or the Issuer (A)
is in breach of, or in default in (nor has any event occurred which
with notice, lapse of time, or both, would constitute a breach of, or
default in) the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, bank loan or credit agreement, note, lease or other
agreement or instrument to which it is a party or by which it may be
bound or to which any of its properties may be subject (collectively,
the "Agreements and Instruments"), except for any such breaches or
defaults which, individually or in the aggregate with all other
breaches or defaults, would not have a Material Adverse Effect or have
an adverse effect on the legality, validity or enforceability of any of
the Operative Documents or (B) is in breach of, or in default under
(nor has any event occurred which with notice, lapse of time, or both
would constitute a breach of, or default under) its respective charter
or by-laws. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement by the Company and the Issuer,
the issuance, sale and delivery of the Preferred Securities and the
Common Securities by the Issuer, the issuance, sale and delivery of the
Debentures by the Company, the execution delivery and performance by
the Company of this Agreement, the Trust Agreement, the Indenture, the
Guarantee Agreement, the Expense Agreement and the Registration Rights
Agreement, the consummation by the Company and the Issuer of the
transactions contemplated hereby and thereby, compliance by the Company
and the Issuer with the terms of the foregoing and the application of
the proceeds from the sale of the Preferred Securities as contemplated
by the Offering Memorandum (A) have been duly authorized by all
necessary corporate action on the part of the Company and the Issuer,
(B) do not and will not conflict with or result in any breach of or
constitute a default under (nor constitute any event which with notice,
lapse of time, or both would constitute a breach of, or default under)
any provision of the charter or by-laws of the Company or the
Subsidiaries or any provision of the Trust Agreement, (C) do not and
will not conflict with or result in any breach of or constitute a
default under (nor constitute any event which with notice, lapse of
time, or both would constitute a breach of, or default under) any of
the terms or provisions of, or give rise to any right to accelerate the
maturity or require the prepayment of any indebtedness under, or result
in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company, the Subsidiaries or the Issuer
under any such Agreement or Instrument (except, with respect to this
clause (C), for such conflicts, breaches, defaults, accelerations,
prepayments or liens, charges or encumbrances, which, individually or
in the aggregate with all other conflicts, breaches, defaults,
accelerations, prepayments or liens, charges or encumbrances, would not
have a Material Adverse Effect) and (D) do not and will not conflict
with, or result in any breach of or constitute a default under (nor
constitute any event which with notice, lapse of time, or both would
constitute a breach of, or default under), any federal, state or local
law, regulation or rule or any decree, judgment or order applicable to
the Company, the Subsidiaries or the Issuer.
9
<PAGE>
(xxv) No approval, authorization, consent or order of or
filing with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in connection
with the offering, issuance or sale of the Securities by the Issuer and
the Guarantee and the Debentures by the Company or is required for the
valid authorization, execution, delivery and performance by the Company
and the Issuer of the Operative Documents or the consummation by the
Company and the Issuer of the transactions contemplated therein, except
for such authorizations as may be required by the securities or "blue
sky" laws of the various states in connection with the offer and sale
of the Securities or by the federal and state securities laws in
connection with the registration obligations under the Registration
Rights Agreement.
(xxvi) The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation (the "FDIC") up to legally applicable
limits, and no proceedings for the termination or revocation of such
insurance are pending or, to the best knowledge of the Company or the
Bank, threatened.
(xxvii) Except as disclosed in the Offering Memorandum, there
are no legal or governmental actions, suits or proceedings pending or,
to the knowledge of the Company, threatened to which the Company, the
Issuer, or any of the Subsidiaries is or may be a party or of which
property owned or leased by the Company, the Issuer or any of the
Subsidiaries is or may be the subject, or related to environmental,
discrimination or financial regulatory matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or
adversely affect the transactions contemplated by this Agreement or are
likely to result in a Material Adverse Effect and no labor disturbance
by the employees of the Company or the Subsidiaries exists or is
imminent which would be expected to affect adversely such condition,
properties, business, results of operations or prospects of the
Company, the Issuer and the Subsidiaries, taken as a whole. Except as
disclosed in the Offering Memorandum, no enforcement proceeding,
whether formal or informal, has been commenced against the Company, the
Issuer or any of the Subsidiaries by the FDIC or, to the Company's, the
Issuer's, and the Subsidiaries' knowledge, any other governmental
authority, nor have any such proceedings been instituted, threatened or
recommended. Except as disclosed in the Offering Memorandum, neither
the Company, the Issuer, nor any of the Subsidiaries, or any of their
respective officers, employees or directors is a party or subject to
the provisions of any regulatory action, injunction, judgment, decree
or order of any court, regulatory body, administrative agency or other
governmental body affecting the business of the Company, the Issuer or
any of the Subsidiaries.
(xxviii) The Company, the Issuer or the Subsidiaries has good
and marketable title to all their properties and assets, free and clear
of all liens, charges, encumbrances or restrictions, except such as do
not materially adversely affect the value of such properties and assets
and do not interfere with the use made of such properties and assets by
the Company, the Issuer and the Subsidiaries as the case may be; all of
the leases and subleases material to the business of the Company, the
Issuer or the
10
<PAGE>
Subsidiaries or under which the Company, the Issuer or the
Subsidiaries holds properties described in the Offering Memorandum are
in full force and effect; and the Company, the Issuer or the
Subsidiaries have no notice of any material claim of any sort which has
been asserted by anyone adverse to the rights of the Company, the
Issuer or the Subsidiaries as owner or as lessee or sublessee under any
of the leases or subleases mentioned above, or materially affecting or
questioning the rights of the Company, the Issuer or the Subsidiaries
to the continued possession of the leased or subleased premises under
any such lease or sublease. Except as disclosed in the Offering
Memorandum and other than such leases and properties as are immaterial
in the aggregate, the Company, the Issuer or the Subsidiaries owns or
leases all such properties as are necessary to its operations as now
conducted.
(xxix) Since the respective dates as of which information is
given in the Offering Memorandum, and except as described in or
specifically contemplated by the Offering Memorandum: (i) the Company,
the Issuer and the Subsidiaries have not incurred any material
liabilities or obligations, indirect, direct or contingent, or entered
into any material verbal or written agreement or other transaction
whether or not arising in the ordinary course of business or which
would result in a material reduction in the future earnings of the
Company and the Subsidiaries (taken as a whole); (ii) there has not
been any material increase in the long-term debt of the Company, the
Issuer and the Subsidiaries (taken as a whole) or in the aggregate
dollar or principal amount of the Company's and the Subsidiaries (taken
as a whole) assets which are classified as substandard, doubtful or
loss or loans which are 90 days or more past due or real estate
acquired by foreclosure; (iv) there has not been any Material Adverse
Effect on the aggregate dollar amount of the Company's and the
Subsidiaries' (taken as a whole) deposits or their consolidated net
worth or spread; (v) there has been no material adverse change in the
Company's and the Subsidiaries relationship with its insurance
carriers, including, without limitation, cancellation or other
termination of the Company's or the Subsidiaries' fidelity bond or any
other type of insurance coverage; (vi) except as disclosed in the
Offering Memorandum there has been no material change in management of
the Company or the Subsidiaries; (vii) the Company and the Subsidiaries
have not sustained any material loss or interference with their
respective business or properties from fire, flood, windstorm,
earthquake, accident or other calamity, whether or not covered by
insurance; (viii) the Company has not paid or declared any dividends
(except for regularly scheduled Company preferred stock dividends) or
other distributions with respect to its capital stock and the Company
and the Subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; (ix) there has not been
any change in the capital stock (other than upon the sale of the Common
Shares hereunder); and (x) there has not been any material adverse
change in the condition (financial or otherwise), business, properties,
results of operations or prospects of the Company and the Subsidiaries,
taken as a whole, other than changes resulting from changes in the
economy of the Company's and the Subsidiaries' industry generally.
11
<PAGE>
(xxx) Except as disclosed in or specifically contemplated by
the Offering Memorandum, the Company and the Subsidiaries have
sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals and governmental authorizations to conduct their
businesses as now conducted; the expiration of any trademarks, trade
names, patent rights, copyrights, licenses, approvals or governmental
authorizations would not have a Material Adverse Effect; and the
Company and the Subsidiaries have no knowledge of any material
infringement by it of trademark, trade name rights, patent rights,
copyrights, licenses, trade secret or other similar rights of others,
and, to the Company's and the Subsidiaries' knowledge, there is no
claim being made against the Company or any of the Subsidiaries
regarding trademark, trade name, patent, copyright, license, trade
secret or other infringement which could have a Material Adverse
Effect.
(xxxi) The Company has not been advised, and has no reason to
believe, that either it or any of the Subsidiaries is not conducting
business in compliance with all applicable laws, rules and regulations
of the jurisdictions in which it is conducting business, including,
without limitation, all applicable local, state and federal financial
institution and environmental laws and regulations; except where
failure to be so in compliance would not have a Material Adverse
Effect. Neither the Company nor any of its affiliates (including the
Subsidiaries) is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended, or applicable regulations
promulgated thereunder. The Company is a savings and loan holding
company within the meaning of the Home Owners' Loan Act. The Bank is an
insured depository institution within the meaning of the Federal
Deposit Insurance Act, as amended.
(xxxii) Except as disclosed in the Offering Memorandum, the
Bank is not in violation of any directive from the FDIC or any other
governmental authority and the Bank is in compliance with all federal
and state laws and regulations that regulate or are concerned with its
business including, without limitation, the Financial Institutions
Recovery, Reform and Enforcement Act of 1989 ("FIRREA"), the Federal
Deposit Insurance Act (the "FDIA"), the National Housing Act (the
"NHA"), the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") and all other applicable laws and regulations where the
failure to comply would have a Material Adverse Effect.
(xxxiii) The Company and the Subsidiaries have filed or caused
to be filed all material federal, state and foreign income and
franchise tax returns and have paid all taxes shown as due thereon; and
the Company has no knowledge of any tax deficiency which has been or
might be asserted or threatened against the Company or the Subsidiaries
which would have a Material Adverse Effect.
(xxxiv) The Company and the Bank maintain insurance of the
types and in the amounts generally deemed adequate for their respective
businesses, including, but not limited to, general liability insurance,
fidelity bond insurance and insurance covering real and personal
property owned or leased by the Company or the Bank against theft,
forgery,
12
<PAGE>
damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force
and effect.
(xxxv) All material transactions between the Company and the
Bank and the officers, directors and major stockholders of the Company
that are required to be disclosed under the Exchange Act and the Rules
and Regulations have been accurately disclosed in the Offering
Memorandum; and the terms of each such transaction are fair to the
Company and no less favorable to the Company than the terms that could
have been obtained from unrelated parties, except as disclosed in the
Offering Memorandum.
(xxxvi) None of the Issuer, the Company or the Subsidiaries
are, or after giving effect to the consummation of the transactions
contemplated herein, will be, and neither the Company nor the Issuer is
directly or indirectly controlled by, or acting on behalf of any person
which is, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxxvii) The Company has not taken and will not take, directly
or indirectly, any action designed to, or that the Company reasonably
believes would cause or result in, stabilization or manipulation of the
price of the Preferred Securities.
(xxxviii) The Company has not distributed any offering
material in connection with the offering and sale of the Preferred
Securities other than the Preliminary Offering Memorandum and the
Offering Memorandum.
(xxxix) The Preferred Securities have been designated PORTAL
eligible securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD").
(xl) Other than pursuant to this Agreement or as disclosed in
the Offering Memorandum under the caption "Plan of Distribution," there
are no contracts, agreements or understandings between either the
Issuer or the Company and any person that give rise to a valid claim
against the Issuer, the Company or any Initial Purchaser for a
brokerage commission, finder's fee or other like payment.
(xli) Except as set forth in the Registration Rights Agreement
and the Noncumulative Convertible Preferred Stock, Series C and the
Noncumulative Convertible Preferred Stock, Series C-II or as described
in the Offering Memorandum, there are no contracts, agreements or
understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company owned
or to be owned by such person or to require the Company to include such
securities in the securities to be covered by either the exchange or
the shelf registration referred to in the Registration Rights
Agreement.
13
<PAGE>
(xlii) The Company and the Subsidiaries have all necessary
licenses, authorizations, consents and approvals and has made all
necessary filings required under any federal, state, local or foreign
law, regulation or rule, and has obtained all necessary authorizations,
consents and approvals from other persons, in order to conduct its
respective business, except where any failures to obtain any such
licenses, authorizations, consents or approvals, or to make any such
filings, would not, individually or in the aggregate with all other
such failures, reasonably be expected to have a Material Adverse
Effect; neither the Company nor the Subsidiaries are in violation of,
or in default under, any such license, authorization, consent or
approval or any federal, state, local or foreign law, regulation or
rule or any decree, order or judgment applicable to the Company or the
Subsidiaries the effect of which, individually or in the aggregate with
all other violations and defaults, would reasonably be expected to have
a Material Adverse Effect.
(xliii) The Company is duly registered as a unitary savings
and loan holding company under the Home Owners Loan Act, as amended;
the deposit accounts of each of the Company's banking subsidiaries are
insured by the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation ("FDIC") to the fullest extent permitted
by law and the rules and regulations of the FDIC, and proceedings for
the termination of such insurance are pending or, to the best of the
Company's knowledge, threatened; and neither the Company nor the
Subsidiaries are a party to or otherwise the subject of any consent
decree, memorandum of understanding, written commitment or other
written supervisory agreement with the Office of Thrift Supervision,
Department of the Treasury ("OTS") or any other federal or state
authority or agency charged with the supervision or insurance of
depositary institutions or their holding companies.
(xliv) The Company has not relied upon the Representatives or
legal counsel for the Representatives for any legal, tax or accounting
advice in connection with the Offering except as to the qualifications
of the Preferred Securities under applicable state securities laws.
(b) Any certificate signed by any officer of the Company or by any
trustee of the Issuer and delivered to you or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company and the
Issuer to each Initial Purchaser as to the matters covered thereby.
Section 2. SALE AND DELIVERY TO THE INITIAL PURCHASERS; CLOSING. (a) On
the basis of the representations and warranties herein contained, and subject to
the terms and conditions herein set forth, the Issuer agrees to sell to each
Initial Purchaser, and each Initial Purchaser agrees, severally and not jointly,
to purchase from the Issuer, at the purchase price of $1,000 per Preferred
Security, an aggregate of 50,000 Preferred Securities.
(b) As compensation to the Initial Purchasers for their commitments
hereunder and in view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Debentures, the Company hereby agrees to
pay at the Closing Time to the
14
<PAGE>
Representatives a commission equal to 3% of the aggregate public offering price
of the Preferred Securities sold, of which $375,000 shall be paid to Raymond
James and the balance to FBR, by wire transfer of immediately available funds to
their respective bank accounts.
(c) Payment of the purchase price for, and delivery of certificates
for, the Preferred Securities shall be made at the offices of Silver, Freedman &
Taff, L.L.P., 1100 New York Avenue, N.W., 7th Floor, Washington, D.C. 20005, at
10:00 a.m., New York City time, on December 27, 1996 or such later date and time
not more than two full business days thereafter as you, the Company and the
Issuer shall mutually determine (such date and time of payment and delivery
being herein called the "Closing Time"). Payment shall be made to the Company by
wire transfer of immediately available funds to a bank account designated by the
Company against delivery to the Representatives for the respective accounts of
the Initial Purchasers of the Preferred Securities.
(d) Certificates for the Preferred Securities shall be in such
denominations and registered in such names as you may request in writing at
least two full business days before the Closing Time. The certificates for the
Preferred Securities will be made available in Washington, D.C. for examination
and packaging by you not later than 10:00 A.M. on the business day immediately
prior to the Closing Time.
(e) It is understood that each Initial Purchaser has authorized you,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Preferred Securities that it has agreed to purchase.
You, individually and not as Representatives, may (but shall not be obligated
to) make payment of the purchase price for the Preferred Securities to be
purchased by any Initial Purchaser whose funds shall not have been received by
the Closing Time, but such payment shall not relieve such Initial Purchaser from
its obligations hereunder.
Section 3. RESALE OF THE SECURITIES. Each Initial Purchaser severally
and not jointly represents and warrants to, and agrees with, the Issuer and the
Company that:
(a) it is a "Qualified Institutional Buyer" as defined in Rule 144A of
the Rules and Regulations (a "Qualified Institutional Buyer") and an "accredited
investor" within the meaning of Rule 501(a) of Regulation D (an "Accredited
Investor");
(b) it has not offered or sold, and will not offer or sell, any
Preferred Securities (which for purposes of this Section 3 includes the
Guarantee, unless the context requires otherwise) except to persons whom it
reasonably believes to be (i) in the case of offers inside the United States (A)
Qualified Institutional Buyers or (B) "accredited investors" that, prior to
their purchase of the Preferred Securities, deliver to it a letter demonstrating
such investor status or (ii) in the case of offers and sales outside the United
States, to persons other than U.S. persons ("foreign purchasers", which term
shall include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for foreign beneficial owners (other than an
estate or trust));
15
<PAGE>
(c) it has not made and will not make offers or sales of the Preferred
Securities in the United States by means of any form of general solicitation or
general advertising (within the meaning of Regulation D) or in any manner
involving a public offering (within the meaning of Section 4(2) under the
Securities Act) in the United States prior to the effectiveness of a
registration statement with respect to the Securities;
(d) it has not made and will not make offers or sales of the Preferred
Securities to, or for the account or benefit of, U.S. persons as part of its
distribution at any time, or otherwise until one year after the Closing Time,
except in accordance with the Securities Act and the Rules and Regulations
thereunder or pursuant to an exemption from the registration requirements of the
Securities Act; and
(e) with respect to offers and sales outside the United States:
(i) it understands that no action has been or will be taken in
any jurisdiction by the Issuer or the Company that would permit a
public offering of the Securities, or possession or distribution of the
Offering Memorandum or any other offering or publicity material
relating to the Securities, in any country or jurisdiction where action
for that purpose is required;
(ii) it will comply with all applicable laws and regulations
in each jurisdiction in which it acquires, offers, sells or delivers
Securities or has in its possession or distributes the Offering
Memorandum or any such other material, in all cases at its own expense;
(iii) the Securities have not been and will not be registered
under the Securities Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons,
except pursuant to an exemption from the registration requirements of
the Securities Act.
Section 4. CERTAIN COVENANTS OF THE ISSUER AND THE COMPANY. The Issuer
and the Company covenant with each Initial Purchaser as follows:
(a) The Issuer and the Company will promptly deliver to the Initial
Purchasers and counsel for the Initial Purchasers, without charge, as many
copies of the Preliminary Offering Memorandum, the Offering Memorandum, any
amendments or supplements thereto, the documents incorporated or deemed
incorporated by reference in the Offering Memorandum and the Operative Documents
as the Initial Purchasers and their counsel may reasonably request.
(b) The Company and the Issuer will give the Initial Purchasers timely
notice of their intention to prepare any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum or to file with the
Commission any document incorporated by reference in the Offering Memorandum,
will furnish the Initial Purchasers and counsel to the Initial Purchasers with
copies of any such amendment, supplement or document and will obtain the
16
<PAGE>
consent of the Initial Purchasers to any such amendment or supplement or to
any such filing (which consent shall not be unreasonably withheld or delayed).
(c) If at any time prior to completion of the distribution of the
Preferred Securities (which for purposes of this Section 4 includes the
Guarantee, unless the context otherwise requires) by the Initial Purchasers to
purchasers who are not their affiliates (as determined by you) any event shall
occur or condition exist as a result of which it is necessary, in the reasonable
opinion of the Initial Purchasers, counsel for the Initial Purchasers or counsel
for the Company, to amend or supplement the Offering Memorandum in order that
the Offering Memorandum, as then amended or supplemented, will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading or if, in
the reasonable opinion of the Initial Purchasers, counsel to the Initial
Purchasers or counsel to the Company, such amendment or supplement is necessary
to comply with applicable law, the Issuer and the Company will, subject to
paragraph (b) of this Section 4, promptly prepare such amendment or supplement
as may be necessary to correct such untrue statement or omission or to effect
such compliance (in form and substance reasonably agreed upon by counsel to the
Initial Purchasers), so that as so amended or supplemented, the statements in
the Offering Memorandum will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a purchaser, not misleading or so that such Offering Memorandum as so amended
or supplemented will comply with applicable law, as the case may be, and furnish
to the Initial Purchasers such number of copies of such amendment or supplement
as the Initial Purchasers may reasonably request. The Issuer and the Company
agree to notify the Initial Purchasers in writing to suspend use of the Offering
Memorandum as promptly as practicable after the occurrence of an event specified
in this paragraph (c), and the Initial Purchasers hereby agree upon receipt of
such notice from the Issuer and the Company to suspend use of the Offering
Memorandum until the Issuer and the Company have amended or supplemented the
Offering Memorandum to correct such misstatement or omission or to effect such
compliance.
(d) Notwithstanding any provision of paragraph (b) or (e) of this
Section 4 to the contrary, however, the Issuer's and the Company's obligations
under paragraphs (b) and (c) of this Section 4 and the Initial Purchasers'
obligations under paragraph (c) of this Section 4 shall terminate on the earlier
to occur of (i) the effective date of an exchange or shelf registration
statement with respect to the Securities filed pursuant to the Registration
Rights Agreement and (ii) the date upon which the Initial Purchasers and their
affiliates cease to hold Securities acquired as part of their initial
distribution, but in any event (in the case of this clause (ii)) not later than
one year from the Closing Time.
(e) Neither the Company, the Issuer nor any of their respective
affiliates (as defined in Rule 501(b) of Regulation D), nor any person acting on
behalf of the foregoing, will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities prior to the effectiveness of a registration
17
<PAGE>
statement with respect to the Securities. No covenant is made hereby with
respect to the conduct of the Initial Purchasers or their affiliates (as such
term is defined in Rule 501(b) of Regulation D).
(f) Neither the Company nor any of its affiliates (as defined in Rule
501(b) of Regulation D), including without limitation the Issuer, will, directly
or indirectly, make offers or sales of any security, or solicit offers to buy
any security, under circumstances that would require the registration of the
Securities under the Securities Act.
(g) So long as any of the Securities are "restricted securities" within
the meaning of Rule 144(a)(3) of the Rules and Regulations, the Company will,
during any period in which it is not subject to and in compliance with Section
13 or 15(d) of the Exchange Act, provide to each holder of such restricted
securities and to each prospective purchaser (as designated by such holder) of
such restricted securities, upon the request of such holder or prospective
purchaser, any information required to be provided by Rule 144A(d)(4) of the
Rules and Regulations. This covenant is intended to be for the benefit of the
holders, and the prospective purchasers designated by such holders, from time to
time of such restricted securities.
(h) Each Preferred Security (and each Debenture distributed to holders
of Preferred Securities pursuant to the terms of the Trust Agreement) will bear
a legend (and with respect to the Debentures a similar legend) substantially in
the following form until such legend shall no longer be necessary or advisable
because the Preferred Securities (and the Debentures) are no longer subject to
the restrictions on transfer described herein:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE SERIES A ISSUER AND THE COMPANY
THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR
TO THE THIRD ANNIVERSARY OF THE LATER OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR
SECURITY HERETO) AND THE LAST DAY ON WHICH THE SERIES A ISSUER OR ANY AFFILIATE
OF THE SERIES A ISSUER WAS THE OWNER HEREOF (OR ANY PREDECESSOR SECURITY HERETO)
OR (Y) THEREAFTER, BY ANY HOLDER THAT WAS AN AFFILIATE OF THE SERIES A ISSUER
AND THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE SERIES A ISSUER OR ANY SUBSIDIARY
THEREOF, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE UPON RULE 144A (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFER OR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (4)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE HOLDER, BY PURCHASING THIS SECURITY, IS DEEMED TO REPRESENT
THAT IT (X) IS NOT ITSELF, AND
18
<PAGE>
IS NOT ACQUIRING THE SECURITY WITH THE ASSETS OF, (i) AN "EMPLOYEE
BENEFIT PLAN" (WITHIN THE MEANING OF SECTION 3(3) OF ERISA), A "PLAN" (WITHIN
THE MEANING OF SECTION 4975(e)(i) OF THE INTERNAL REVENUE CODE), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF INVESTMENT IN THE
ENTITY BY SUCH AN "EMPLOYEE BENEFIT PLAN" OR "PLAN" AND THE APPLICATION OF U.S.
DEPARTMENT OF LABOR REGULATION SECTION 2510.3-101 OR (ii) A "GOVERNMENTAL PLAN"
(WITHIN THE MEANING OF SECTION 3(32) OF ERISA) OR (Y)(i) IS ITSELF, OR IS
ACQUIRING THE SECURITY WITH THE ASSETS OF, AN "INVESTMENT FUND" (WITHIN THE
MEANING OF PART V(b) OF U.S. DEPARTMENT OF LABOR PTE 84-14) MANAGED BY A
"QUALIFIED PROFESSIONAL ASSET MANAGER" (WITHIN THE MEANING OF PART V(a) OF PTE
84-14) WHICH HAS MADE OR PROPERLY AUTHORIZED THE DECISION FOR SUCH FUND TO
PURCHASE THE SECURITIES, UNDER CIRCUMSTANCES SUCH THAT PTE 84-14 IS APPLICABLE
TO THE PURCHASE AND HOLDING OF SUCH SECURITIES, (ii) IS AN INSURANCE COMPANY
POOLED SEPARATE ACCOUNT PURCHASING SECURITIES PURSUANT TO SECTION I OF U.S.
DEPARTMENT OF LABOR PTE 90-1 OR A BANK COLLECTIVE INVESTMENT FUND PURCHASING
PURSUANT TO SECTION I OF U.S. DEPARTMENT OF LABOR PTE 91-38, AND IN EITHER CASE,
NO "PLAN" OR "EMPLOYEE BENEFIT PLAN" NOT PURCHASING PURSUANT TO PTE 84-14 OWNS
MORE THAN 10% OF THE ASSETS OF SUCH ACCOUNT OR COLLECTIVE FUND (WHEN AGGREGATED
WITH OTHER PLANS OF THE SAME EMPLOYER OR EMPLOYEE ORGANIZATION), (iii) IS AN
INSURANCE COMPANY USING THE ASSETS OF THE GENERAL ASSET ACCOUNT OF THE INSURANCE
COMPANY TO PURCHASE THE SECURITIES PURSUANT TO SECTION I OF U.S. DEPARTMENT OF
LABOR PTE 95-60, IN WHICH CASE THE RESERVES AND LIABILITIES FOR THE GENERAL
ACCOUNT CONTRACTS HELD BY OR ON BEHALF OF ANY PLAN, TOGETHER WITH ANY OTHER
PLANS MAINTAINED BY THE SAME EMPLOYER (OR AFFILIATES) OR EMPLOYEE ORGANIZATION,
DO NOT EXCEED 10% OF THE TOTAL RESERVES AND LIABILITIES OF THE INSURANCE COMPANY
GENERAL ACCOUNT (EXCLUSIVE OF LIABILITIES), PLUS SURPLUS AS SET FORTH IN THE
NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS' ANNUAL STATEMENT FILED WITH THE
STATE OF DOMICILE OF THE INSURER OR (iv) IS A PLAN ACQUIRING THE SERIES A
PREFERRED SECURITIES WITH ASSETS OVER WHICH AN IN-HOUSE ASSET MANAGER (WITHIN
THE MEANING OF PART IV(a) OF PTE 96-23) HAS DISCRETIONARY AUTHORITY, UNDER
CIRCUMSTANCES SUCH THAT PTE 96-23 IS APPLICABLE TO THE PURCHASE AND HOLDING OF
SUCH SECURITIES. THE HOLDER HEREOF FURTHER AGREES FOR THE BENEFIT OF THE SERIES
A ISSUER THAT IT WILL NOTIFY ANY PURCHASER HEREOF OF THE RESALE RESTRICTIONS
REFERRED TO ABOVE. AN ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT IT
WILL FURNISH TO THE SERIES A ISSUER AND THE PROPERTY TRUSTEE SUCH CERTIFICATES,
LEGAL OPINIONS AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE SERIES A ISSUER THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) A PERSON THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT THAT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT. THE SERIES A PREFERRED SECURITIES WILL BE
ISSUED, AND MAY BE TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF
NOT LESS THAN $100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF SERIES A
PREFERRED SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN
$100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SERIES A PREFERRED
SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF
DISTRIBUTIONS ON SUCH SERIES A PREFERRED SECURITIES, AND SUCH
19
<PAGE>
TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH
SERIES A PREFERRED SECURITIES."
(i) The Company will, or will cause the Issuer to, arrange for the
registration and qualification of the Preferred Securities for offering and sale
under the applicable securities or "blue sky" laws of such states and other U.S.
jurisdictions as the Initial Purchasers may reasonably designate in connection
with the resale of Preferred Securities as contemplated by this Agreement and
the Offering Memorandum and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Preferred
Securities; PROVIDED that the Company shall not be required to (i) qualify as a
foreign corporation, (ii) consent to the service of process under the laws of
any such state (except service of process with respect to the offering and sale
of the Preferred Securities), (iii) subject itself to taxation in any such
jurisdiction or (iv) make any change to its certificate of incorporation or
by-laws in connection with such qualification. The Company shall, or shall cause
the Issuer to, promptly advise the Initial Purchasers of the receipt by the
Company or the Issuer, as the case may be, of any notification with respect to
the suspension of the qualification or exemption from qualification of the
Preferred Securities for offering or sale in any jurisdiction or the institution
of any proceeding for such purpose.
(j) The Issuer will use the proceeds received from the sale of the
Preferred Securities and the Company will use the proceeds received from the
issue and sale of the Debentures in the manner specified in the Offering
Memorandum under the caption "Use of Proceeds."
(k) Neither the Issuer nor the Company shall, directly or indirectly,
for a period commencing on the date hereof and ending on the 180th day after the
date hereof, except with the prior written consent of FBR, offer to sell,
pledge, sell, grant any option, warrant or other right to purchase, or otherwise
transfer or dispose of (or agree to do any of the foregoing) (a) any trust
certificates or other securities of the Issuer, (b) any preferred stock or any
other security of the Company that is substantially similar to the Preferred
Securities or (c) any other securities which are convertible into, or
exercisable or exchangeable for, any of the securities described in (a) and (b)
above. The foregoing sentence shall not apply to (i) the issuance of the Common
Securities to the Company by the Issuer, (ii) the issuance of the Preferred
Securities being sold hereunder and the sale thereof pursuant hereto or (iii)
the issuance of the Debentures to the Issuer by the Company.
(l) The Company agrees that no future offer and sale of securities of
the Company of any class will be made if, as a result of the doctrine of
"integration" referred to in Rule 502 of Regulation D, such offer and sale could
reasonably have been expected, at the time of such sale, based upon public laws,
Commission releases and Commission no-action letters, to render invalid the
exemption from the registration requirements of the Securities Act relied upon
in connection with the transactions contemplated by this Agreement.
(m) In connection with the original distribution of the Preferred
Securities, the Company agrees that, prior to any offer or resale of the
Preferred Securities by the Initial
20
<PAGE>
Purchasers, the Initial Purchasers and counsel for the Initial Purchasers shall
have the right to make, and promptly receive from the Company adequate
information with respect to, reasonable inquiries into the business of the
Company and its subsidiaries.
Section 5. PAYMENT OF EXPENSES. The Company will pay all costs and
expenses incident to the performance of the obligations under this Agreement of
the Company and the Issuer, including (a) the preparation and printing of the
Preliminary Offering Memorandum and the Offering Memorandum (including financial
statements, exhibits and documents included as Exhibits or incorporated by
reference therein) and any amendments or supplements thereto, and the cost of
delivery thereto to the Initial Purchasers, (b) the preparation, issuance,
printing and distribution of the Preferred Securities and any survey of state
securities or "blue sky" laws or legal investment memoranda ("Blue Sky Survey"),
(c) the delivery of the Preferred Securities to the Initial Purchasers,
including any stock transfer taxes payable upon the sale of the Preferred
Securities to the Initial Purchasers, (d) the fees and disbursements of the
Company's and the Issuer's counsel and accountants (e) the reasonable
out-of-pocket expenses of the Initial Purchasers up to $150,000 (including up to
$125,000 of the fees and disbursements of the Initial Purchasers' counsel) (f)
the qualification of the Preferred Securities under the applicable state
securities or "blue sky" laws in accordance with Section 4(i) hereof, including
all filing fees and reasonable fees and disbursement of counsel for the Initial
Purchasers in connection therewith and in connection with the Blue Sky Survey,
(g) any filing fees in connection with any filing for review of the offering
with the NASD, (h) any fees charged by rating agencies for rating the Preferred
Securities, (i) the fees and expenses of the Indenture Trustee, the Property
Trustee, the Guarantee Trustee and the Delaware Trustee, including reasonable
fees and disbursements of counsel for such trustees, (j) all listing fees and
reasonable expenses in connection with the application for designation of the
Preferred Securities as PORTAL eligible securities and (k) the cost of
qualifying the Preferred Securities with The Depository Trust Company.
If the sale of the Preferred Securities provided for herein is not
consummated because this Agreement is terminated pursuant to Section 8 hereof or
because any condition to the obligations of the Initial Purchasers set forth in
Section 6 hereof is not satisfied, other than by reason of a default by the
Initial Purchasers in payment for the Preferred Securities at the Closing Time,
the Company shall reimburse the Initial Purchasers promptly upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursement of
counsel to the Initial Purchasers) that shall have been incurred by them in
connection with the proposed purchase and sale of the Preferred Securities
however, such expenses shall be limited, as set forth above, in the proceeding
paragraph of this section.
Section 6. CONDITIONS OF INITIAL PURCHASERS' OBLIGATION. The
obligations of the several Initial Purchasers to purchase and pay for the
Preferred Securities that they have respectively agreed to purchase pursuant to
this Agreement are subject to the following conditions:
(a) The Company shall furnish to the Initial Purchasers at the Closing
Time an opinion of Stuzin & Camner, P.A., special counsel for the Company,
addressed to each of the Initial
21
<PAGE>
Purchasers and dated the day of the Closing Time and in form reasonably
satisfactory to Silver, Freedman & Taff, L.L.P., counsel for the Initial
Purchasers, to the effect that:
(i) This Agreement and the Registration Rights Agreement have
been duly authorized, executed and delivered by the Company.
(ii) Each of the Trust Agreement, the Guarantee Agreement and
the Expense Agreement has been duly authorized, executed and delivered
by the Company and constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its
terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(iii) The Indenture has been duly authorized, executed and
delivered by the Company and, when duly authorized, executed and
delivered by the Indenture Trustee will constitute a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
(iv) The Debentures have been duly authorized, executed,
issued and delivered by the Company and, when the Debentures have been
duly authenticated by the Indenture Trustee and paid for by the Issuer,
will constitute legal, valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(v) The terms of the Registration Rights Agreement, the
Indenture, the Trust Agreement, the Guarantee, the Expense Agreement,
the Preferred Securities, the Debentures and the Common Securities have
been reviewed by such counsel and conform in all material respects to
the descriptions thereof in the Offering Memorandum.
(vi) When the Preferred Securities, the Guarantee and the
Debentures are issued and delivered pursuant to this Agreement, such
securities will not be of the same class (within the meaning of Rule
144A of the Rules and Regulations) as securities of the Company listed
on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated interdealer quotation
system.
(vii) Assuming the accuracy of the representations and
warranties and compliance with the agreements of the Initial Purchasers
in Section 3 hereof, the offer, sale and delivery of the Preferred
Securities to the Initial Purchasers in the manner contemplated by this
Agreement and the Offering Memorandum and the initial resale of the
Preferred Securities by the Initial Purchasers in the manner
contemplated in the
22
<PAGE>
Offering Memorandum and this Agreement do not require registration
under the Securities Act, and, on or before the date hereof, none of
the Indenture, the Trust Agreement or the Guarantee Agreement is
required to be qualified under the Trust Indenture Act, it being
understood that such counsel need express no opinion as to any
subsequent resale of any Preferred Securities.
(viii) Neither the Issuer nor the Company is required to be
registered as an "investment company" under the 1940 Act.
(ix) No approval, authorization, consent or order of or filing
with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in connection
with the offering, issuance or sale of the Securities by the Issuer or
is required for the valid authorization, execution, delivery and
performance by the Issuer of the Operative Documents to which it is a
party or the consummation by the Issuer of the transactions
contemplated therein, except for such authorizations as may be required
by the securities or "blue sky" laws of the various states in
connection with the offer and sale of the Securities or by the federal
and state securities laws in connection with the registration
obligations under the Registration Rights Agreement.
(x) The execution and delivery by the Company of, and the
performance by the Company under, this Agreement, the Trust Agreement,
the Indenture, the Guarantee, the Expense Agreement and the
Registration Rights Agreement, the consummation by the Company of the
transactions contemplated hereby and thereby, the filing of the
certificate of trust of the Issuer with the Secretary of State of the
State of Delaware, compliance by the Company with the terms of the
foregoing and the application of the proceeds from the sale of the
Preferred Securities as contemplated by the Offering Memorandum do not
and will not (A) violate the charter or by-laws of the Company or any
Subsidiaries or (B) violate any federal law of the United States or law
of the State of New York applicable to the Company or its Material
Subsidiaries or the General Corporation Law of the State of Delaware;
PROVIDED that, insofar as the performance by the Company of its
obligations under the Indenture and the Debentures is concerned, such
counsel need express no opinion as to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights.
(xi) The execution and delivery by the Issuer of, and the
performance by the Issuer of its obligations under, this Agreement and
the Registration Rights Agreement, the issuance and sale of the
Preferred Securities by the Issuer in accordance with the terms of this
Agreement, and the consummation by the Issuer of the other transactions
contemplated hereby and thereby, will not (i) violate any federal law
of the United States or law of the State of New York or the State of
Delaware applicable to the Issuer or (ii) conflict with the Guarantee
Agreement or the Indenture, except that such counsel need express no
opinion in this paragraph (xii) with respect to any state securities or
"blue sky" laws.
23
<PAGE>
(xii) The Company and each Subsidiary other than BankUnited,
FSB, has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Florida,
with full corporate power and authority to own its properties and
conduct is business as described in the Offering Memorandum.
(xiii) BankUnited, FSB is a federally chartered savings bank
duly organized under the laws of the United States, its deposits are
insured by the FDIC and is authorized to do business as a federally
chartered savings bank under the laws of the United States, and has all
corporate power and authority to own its properties and conduct its
business as presently conducted, except where the failure to have such
corporate power and authority would not, individually or in the
aggregate with all other failures, have a Material Adverse Effect.
(xiv) Each of the Company and the Subsidiaries are duly
qualified or licensed and in good standing as a foreign corporation in
each jurisdiction in which the ownership or leasing of its properties
or character of its operations makes such qualification necessary,
except where failure to obtain such qualification, license or good
standing would not, individually or in the aggregate with all other
failures, have a Material Adverse Effect.
(xv) All of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and were not issued in violation of the preemptive
rights of any other stockholder of the Company; and all of the issued
and outstanding shares of capital stock of each of the Company's
Material Subsidiaries are owned of record by the Company or one or more
of its subsidiaries, and all shares of such capital stock are duly and
validly issued, fully paid and non-assessable (except to the extent
provided in 12 U.S.C. Section 55 or any comparable provision of state
law).
(xvi) The Company has an authorized capitalization as set
forth in the Offering Memorandum.
(xvii) No approval, authorization, consent or order of or
filing with any federal or District of Columbia governmental or
regulatory commission, board, body, authority or agency is required in
connection with the offering, issuance or sale of the Guarantee and the
Debentures by the Company or is required for the valid authorization,
execution, delivery and performance by the Company of the Operative
Documents or the consummation by the Company of the transactions
contemplated therein, other than such authorizations as may be required
by the securities or "blue sky" laws of the various states in
connection with the offer and sale of the Guarantee and the Debentures
or by the federal and state securities laws in connection with the
registration obligations under the Registration Rights Agreement.
(xviii) The execution and delivery by the Company of, and the
performance by the Company under, this Agreement, the Trust Agreement,
the Indenture, the Debentures, the
24
<PAGE>
Guarantee, the Expense Agreement and the Registration Rights Agreement,
the consummation by the Company of the transactions contemplated hereby
and thereby, the filing of the certificate of trust of the Issuer with
the Secretary of State of the State of Delaware, compliance by the
Company with the terms of the foregoing and the application of the
proceeds from the sale of the Preferred Securities as contemplated by
the Offering Memorandum do not and will not (A) conflict with or result
in any breach of, or constitute a default under (nor constitute any
event which with notice, lapse of time, or both would constitute a
breach of or default under), (1) any provision of any Agreement or
Instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which any of them or their respective
properties may be bound or affected, except any such breaches or
defaults as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or (2) any federal or New
York law, regulation or rule or the General Corporation Law of the
State of Delaware or Florida, or any decree, judgment or order of any
federal or state governmental authority known to such counsel
applicable to the Company or any of its Material Subsidiaries; (B) to
the best of such counsel's knowledge result in, or require the creation
or imposition of, any material lien upon or with respect to any of the
properties now owned or hereafter acquired by the Company or any of its
Subsidiaries.
(xix) To the best of such counsel's knowledge, neither the
Company nor any of its Subsidiaries is in breach of, or in default
under (nor has any event occurred which with notice, lapse of time, or
both would constitute a breach of, or default under), (A) any Agreement
or Instrument to which the Company or any of its subsidiaries is a
party or by which any of them or their respective properties may be
bound or affected or (B) any law, regulation or rule or any decree,
judgment or order applicable to the Company or any of its subsidiaries,
except any such breaches or defaults of a type referred to in (A) or
(B) above which would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect or a material adverse
effect on the ability of the Company to consummate the transactions
contemplated by this Agreement, the Trust Agreement, the Indenture, the
Debentures, the Guarantee, the Expense Agreement and the Registration
Rights Agreement.
(xx) To the best of such counsel's knowledge, there are no
Agreements of a character which are required to be summarized or
described in the Offering Memorandum which have not been so filed,
summarized or described.
(xxi) To the best of such counsel's knowledge, there are no
actions, suits or proceedings pending or threatened against the Company
or any of its subsidiaries or any of their respective properties, at
law or in equity or before or by any court, governmental authority or
administrative or regulatory authority which are required to be
summarized or described in the Offering Memorandum but are not so
summarized or described.
(xxii) The Company is duly registered as a unitary savings and
loan holding company under the Home Owners Loan Act, as amended; the
deposit accounts of each of
25
<PAGE>
the Company's banking subsidiaries is insured by the Savings
Association Insurance Fund of the FDIC to the fullest extent permitted
by law and the rules and regulations of the FDIC, and no proceedings
for the termination of such insurance are pending or, to the best of
such counsel's knowledge, threatened; and neither the Company nor any
of its Subsidiaries is party to or otherwise the subject of any consent
decree, memorandum of understanding, or written agreement as defined in
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
(12 U.S.C. 1818(e)(1)(A)(i)).
In addition, such counsel shall state that, as counsel to the
Company, they reviewed the Offering Memorandum and the documents
incorporated or deemed incorporated by reference therein (the "Exchange
Act Documents"), participated in the preparation of the Offering
Memorandum and the Exchange Act Documents and in discussions with the
Initial Purchasers and representatives of the Company, its special
counsel and its independent public accountants and advised the Company
as to the requirements of the Securities Act and the applicable rules
and regulations thereunder. Such counsel shall also state that they
reviewed certificates of certain officers of the Company, and the
letter from the Company's independent accountants. Such counsel shall
state that nothing came to their attention that has caused them to
believe that any part of the Offering Memorandum (including the
Exchange Act Documents) contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
Such counsel may also state that the limitations inherent in
the independent verification of factual matters are such, however, that
they do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering Memorandum or any
amendment or supplement thereto, except for those made under the
captions "BankUnited Financial Corporation," "Description of the Series
A Guarantee," "Relationship Among the Series A Preferred Securities,
the Series A Subordinated Debentures, the Expense Agreement and the
Series A Guarantee", "Certain Federal Income Tax Consequences" and
"ERISA Considerations", in the Offering Memorandum, and any comparable
provisions in any amendment or supplement to the Offering Memorandum
insofar as they relate to provisions of documents or legal matters
therein described. Also, such counsel may state that they do not
express any opinion or belief as to the financial statements and
schedules or other financial and statistical data contained in the
Offering Memorandum.
Such counsel may rely as to certain matters on information
obtained from public officials, officers of the Company and other
sources believed by such counsel to be responsible, and shall assume
that the Indenture has been duly authorized, executed and delivered by
the Trustee, that the Trustee's certificates of authentication of the
Debentures have been duly manually signed by one of the Trustee's
authorized officers, and that the signatures on all documents examined
by such counsel are genuine, assumptions which they will not have
independently verified.
26
<PAGE>
The foregoing opinion of such counsel may be limited to the
federal laws of the United States, the laws of the State of Florida,
the laws of the State of New York and the General Corporation Law of
the State of Delaware, and may state that such counsel expresses no
opinion as to the effect of the laws of any other jurisdiction.
Such counsel may state that their opinion is delivered to the
Initial Purchasers as counsel for the Company and is solely for the
Initial Purchasers' and their counsel's benefit.
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the Securities as
counsel for the Initial Purchasers may reasonably request. In giving
such opinion, such counsel may rely, as to all matters governed by the
laws of the State of Delaware, on the opinion delivered pursuant to
Section 6(f) hereof by Richards, Layton & Finger, P.A., and as to all
matters governed by other laws, such counsel may rely on the opinion of
other counsel acceptable to Silver, Freedman & Taff, L.L.P., so long as
such other counsel's opinion is delivered to the Initial Purchasers and
specifically indicates that it has been prepared for the benefit of the
Initial Purchasers and their counsel. In addition, in giving such
opinion, such counsel may state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries,
certificates of trustees of the Issuer and certificates of public
officials, PROVIDED that such certificates have been delivered to the
Initial Purchasers.
(b) At the Closing Time, you shall have received a signed opinion of
Richards, Layton & Finger, P.A. counsel to the Delaware Trustee, dated as of the
Closing Time, addressed to each of the Initial Purchasers, in form and substance
reasonably satisfactory to Silver, Freedman & Taff, L.L.P., to the effect that:
(i) The Bank of New York (Delaware), a Delaware banking
corporation, has been duly incorporated and is validly existing in good
standing as a banking corporation under the laws of the State of
Delaware and has the corporate power to act as Trustee of a Delaware
business trust under the laws of the State of Delaware, 12 DEL. Section
3801 ET SEQ.
(c) At the Closing Time, you shall have received a signed opinion of
Emmet, Marvin & Martin LLP, counsel to The Bank of New York, dated as of the
Closing Time, addressed to each of the Initial Purchasers, in form and substance
reasonably satisfactory to Silver, Freedman & Taff, L.L.P., to the effect that:
(i) The Trustee is a banking corporation duly incorporated and
validly existing under the laws of the State of New York.
(ii) The execution, delivery and performance by The Bank of
New York, as property trustee (the "Property Trustee") of the Trust
Agreement, the execution, delivery and performance by The Bank of New
York, as Guarantee Trustee, of the Guarantee
27
<PAGE>
Agreement and the execution, delivery and performance by The Bank of
New York, as the Indenture Trustee, of the Indenture have been duly
authorized by all necessary corporate action on the part of the
Property Trustee, the Guarantee Trustee and the Indenture Trustee,
respectively. The Trust Agreement, the Guarantee Agreement and the
Indenture have been duly executed and delivered by the Property
Trustee, the Guarantee Trustee and the Indenture Trustee, respectively,
and constitute the legal, valid and binding obligations of the Property
Trustee, the Guarantee Trustee and the Indenture Trustee, respectively,
enforceable against the Property Trustee, the Guarantee and the
Indenture Trustee, respectively, in accordance with their terms, except
as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, receivership or
similar laws relating to the enforcement of creditors' rights
generally, and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(iii) The execution, delivery and performance of the Trust
Agreement, the Guarantee Agreement and the Indenture by the Property
Trustee, the Guarantee Trustee and the Indenture Trustee, respectively,
do not conflict with or constitute a breach of the applicable
organizational documents or by-laws of the Property Trustee, the
Guarantee Trustee or the Indenture Trustee, respectively, or the terms
of any indenture or other agreement or instrument known to such counsel
and to which the Property Trustee, the Guarantee Trustee or the
Indenture Trustee, respectively, is a party or is bound or any
judgement, order or decree known to such counsel to be applicable to
the Property Trustee, the Guarantee Trustee or the Indenture Trustee,
respectively, of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Property
Trustee, the Guarantee Trustee or the Indenture Trustee, respectively.
(iv) No consent, approval or authorization of, or registration
with or notice to, any federal or New York State banking authority is
required for the execution, delivery or performance by the Property
Trustee, the Guarantee Trustee or the Indenture Trustee of the Trust
Agreement, the Guarantee Agreement or the Indenture, respectively.
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the Securities as
counsel for the Initial Purchasers may reasonably request. In giving
such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of Delaware, the
law of the State of New York and the federal law of the United States,
upon the opinions of counsel satisfactory to counsel for the Initial
Purchasers. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its
subsidiaries, certificates of trustees of the Issuer and certificates
of public officials; PROVIDED that such certificates have been
delivered to the Initial Purchasers.
28
<PAGE>
(d) At the Closing Time, you shall have received a signed opinion of
Kronish, Lieb, Weiner & Hellman LLP, special United States tax counsel to the
Company and the Issuer, dated as of the Closing Time, addressed to each of the
Initial Purchasers, in form and substance reasonably satisfactory to counsel for
the Initial Purchasers, to the effect that:
(i) The Issuer will not be characterized as an association
taxable as a corporation for United States federal income tax purposes.
(ii) The Debentures will constitute indebtedness of the
Company.
(iii) Subject to the qualifications set forth therein, the
statements made in the Offering Memorandum under the caption "Certain
Federal Income Tax Consequences" fairly present in all material
respects the principal United States federal income tax consequences of
an investment in the Preferred Securities.
(iv) The statements made in the Offering Memorandum under the
captions "Certain Federal Income Tax Consequences", "Risk Factors -
Right to Defer Interest Payment Obligation; Tax Consequences; Market
Price Consequences" and "Risk Factors - Possible Tax Law Changes
Affecting The Series A Preferred Securities" fairly present and
constitute a fair and accurate summary of the legal matters and
conclusions addressed therein in all material respects.
(e) At the Closing Time, you shall have received a signed opinion of
Richards, Layton & Finger, P.A., special Delaware counsel to the Issuer and the
Company, dated as of the Closing Time, together with signed or reproduced copies
of such opinion for each of the other Initial Purchasers, in form and substance
reasonably satisfactory to counsel for the Initial Purchasers, to the effect set
forth below.
(i) The Issuer has been duly created and is validly existing
in good standing as a business trust under the Delaware Act, and all
filings required under the laws of the State of Delaware with respect
to the creation and valid existence of the Issuer as a business trust
have been made.
(ii) Under the Delaware Act and the Trust Agreement, the
Issuer has the trust power and authority to own its property and
conduct its business, all as described in the Offering Memorandum.
(iii) The Trust Agreement constitutes a valid and binding
obligation of the Company and the Trustees, and is enforceable against
the Company and the Trustees, in accordance with its terms, subject, as
to enforcement, to the effect upon the Trust Agreement of (i)
bankruptcy, insolvency, moratorium, receivership, reorganization,
liquidation, fraudulent conveyance or transfer and other similar laws
relating to the rights and remedies of creditors generally, (ii)
principles of equity, including applicable law relating to fiduciary
duties (regardless of whether considered and applied in a
29
<PAGE>
proceeding in equity or at law), and (iii) the effect of applicable
public policy on the enforceability of provisions relating to
indemnification or contribution.
(iv) Under the Delaware Act and the Trust Agreement, the
Issuer has the trust power and authority (i) to execute and deliver,
and to perform its obligations under, this Agreement and the
Registration Rights Agreement and (ii) to issue and perform its
obligations under the Preferred Securities.
(v) Under the Delaware Act and the Trust Agreement, the
execution and delivery by the Issuer of this Agreement and the
Registration Rights Agreement, and the performance by the Issuer of its
obligations hereunder and thereunder, have been duly authorized by all
necessary trust action on the part of the Issuer.
(vi) The Preferred Securities have been duly authorized by the
Trust Agreement and are duly and validly issued and, subject to the
qualifications set forth herein, fully paid and nonassessable undivided
beneficial interests in the assets of the Issuer and are entitled to
the benefits of the Trust Agreement. The holders of the Preferred
Securities, as beneficial owners of the Trust, will be entitled to the
same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General Corporation
Law of the State of Delaware. Such counsel may note that the holders of
Preferred Securities may be obligated, pursuant to the Trust Agreement,
(i) to provide indemnity and/or security in connection with and pay
taxes or governmental charges arising from transfers or exchanges of
certificates for Preferred Securities and the issuance of replacement
certificates for Preferred Securities, and (ii) to provide security or
indemnity in connection with requests of or directions to the Property
Trustee to exercise its rights and powers under the Trust Agreement.
(vii) Under the Delaware Act and the Trust Agreement, the
issuance of the Preferred Securities is not subject to preemptive
rights.
(viii) The issuance and sale by the Issuer of the Preferred
Securities, the execution, delivery and performance by the Issuer of
this Agreement and the Registration Rights Agreement, the consummation
by the Issuer of the transactions contemplated hereby and thereby and
compliance by the Issuer with its obligations hereunder and thereunder,
and the performance by the Company, as sponsor, of its obligations
under the Trust Agreement (A) do not violate (i) any of the provisions
of the certificate of trust of the Issuer or the Trust Agreement or
(ii) any applicable Delaware law or Delaware administrative regulation
(except that such counsel need express no opinion with respect to the
securities laws of the State of Delaware) and (B) do not require any
consent, approval, license, authorization or validation of, or filing
or registration with, any Delaware legislative, administrative or
regulatory body under the laws or administrative regulations of the
State of Delaware (except that such counsel need express no opinion
with respect to the securities laws of the State of Delaware).
30
<PAGE>
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the Securities as
counsel for the Initial Purchasers may reasonably request. In giving
such opinion, such counsel may state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its
subsidiaries, certificates of trustees of the Issuer and certificates
of public officials; PROVIDED that such certificates have been
delivered to the Initial Purchasers.
(f) At the Closing Time, you shall have received the favorable opinion
of Silver, Freedman, & Taff, L.L.P., counsel for the Initial Purchasers, dated
as of the Closing Time, addressed to each of the Initial Purchasers, to the
effect that the opinions delivered pursuant to Sections 6(a), 6(b), 6(c), 6(d)
and 6(e) appear on their face to be appropriately responsive to the requirements
of this Agreement. In giving such opinion, such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the federal law of the
United States, upon the opinions of counsel satisfactory to you. Such counsel
may also state that they have relied, to the extent they deem proper, upon
certificates of officers of the Company and certificates of public officials.
(g) At the Closing Time, (i) the Offering Memorandum, as it may then be
amended or supplemented, shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, (ii) except as may be disclosed in the Offering
Memorandum, there shall not have been, since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the financial condition, properties, assets, business, results of operations or
prospects of the Company and its subsidiaries and the Issuer taken as a whole,
(iii) each of the Company and the Issuer shall have complied in all material
respects with all agreements and satisfied in all material respects all
conditions on its part to be performed or satisfied at or prior to the Closing
Time and (iv) the representations and warranties of the Company and the Issuer
set forth in Section 1(a) shall be accurate in all material respects as though
expressly made at and as of the Closing Time. At the Closing Time, you shall
have received a certificate of (x) the Chief Executive Officer or an Executive
Vice President of the Company and (y) the Chief Financial Officer of the
Company, dated as of the Closing Time, to such effect. At the Closing Time, you
shall also have received a certificate signed by an Administrative Trustee,
dated as of the Closing Time, to such effect.
(h) At the time that this Agreement is executed by the Company, you
shall have received from Price Waterhouse a letter, dated such date, in form and
substance reasonably satisfactory to you and Price Waterhouse confirming that
they are independent public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and regulations
thereunder, and otherwise satisfactory to you.
(i) At the Closing Time, you shall have received from Price Waterhouse
a letter, in form and substance reasonably satisfactory to you and Price
Waterhouse and dated as of
31
<PAGE>
the Closing Time, to the effect that they reaffirm the statements made in the
letters furnished pursuant to Section 6(i) hereof, except that the specified
date referred to shall be a date not more than five days prior to the Closing
Time.
(j) At the Closing Time, counsel for the Initial Purchasers shall have
been furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the issuance
and sale of the Securities as contemplated in this Agreement and in order to
evidence the accuracy and completeness of any of representations, warranties or
statements of the Company and the Issuer, the performance of any of the
covenants of the Company and the Issuer, or the fulfillment of any of the
conditions herein contained; and all proceedings by the Company and the Issuer
at or prior to the Closing Time in connection with the authorization, issuance
and the sale of the Securities as contemplated in this Agreement shall be
reasonably satisfactory in form and substance to you and to counsel for the
Initial Purchasers.
(k) At the Closing Time, the Issuer and the Company shall have executed
and delivered the Registration Rights Agreement, and the Registration Rights
Agreement shall be in full force and effect.
(l) At the Closing time, there shall not be any pending or threatened
legal or governmental proceedings against the Company or the Issuer with respect
to any of the transactions contemplated in this Agreement.
(m) The Preferred Securities shall have been approved by the NASD as
being eligible for trading in the PORTAL market.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, this Agreement may be
terminated by you on notice to the Company and the Issuer at any time at or
prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 5 hereof.
Notwithstanding any such termination, the provisions of Section 7 hereof shall
remain in effect. FBR may in its sole discretion waive on behalf of the Initial
Purchasers compliance with any conditions to the obligations of the Initial
Purchasers hereunder.
Section 7. INDEMNIFICATION
(a) The Company and the Issuer, jointly and severally, agree to
indemnify, defend and hold harmless each Initial Purchaser, and any person who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any loss, expense, liability or
claim (including the reasonable cost of investigation) which, jointly or
severally, any such Initial Purchaser or controlling person may incur arising
out of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering Memorandum or in the
Offering Memorandum (or any amendment or supplement thereto or any Exchange Act
Document) or, arises out of or is based upon any
32
<PAGE>
omission or alleged omission to state a material fact necessary to make the
statements made in such Preliminary Offering Memorandum or in such Offering
Memorandum (or any amendment or supplement thereto or any Exchange Act Document)
not misleading, except insofar as any such loss, expense, liability or claim
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in and in conformity with information furnished in
writing by or on behalf of any Initial Purchaser to the Company expressly for
use with reference to such Initial Purchaser in such Preliminary Offering
Memorandum or in such Offering Memorandum (or any amendment or supplement
thereto) or arises out of or is based upon any omission or alleged omission to
state a material fact in connection with such information necessary to make such
information not misleading; PROVIDED FURTHER that the foregoing indemnification
with respect to any Preliminary Offering Memorandum shall not inure to the
benefit of any Initial Purchaser (or any person controlling such Initial
Purchaser) from whom the person asserting any such losses, claims, damages or
liabilities purchased any of the Preferred Securities if a copy of the Offering
Memorandum (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Initial Purchaser in the initial resale to such person, if such is required
by law, at or prior to the written confirmation of the sale of such Preferred
Securities to such person and if the Offering Memorandum (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability, unless such failure resulted from non-compliance by the
Company with Section 4(c). For purposes of the last proviso to the immediately
preceding sentence, the term "Offering Memorandum" shall not be deemed to
include the documents incorporated therein by reference, and no Initial
Purchaser shall be obligated to send or give any supplement or amendment to any
document incorporated by reference in any Preliminary Offering Memorandum or the
Offering Memorandum to any person.
If any action is brought against an Initial Purchaser or controlling
person in respect of which indemnity may be sought against the Company or the
Issuer pursuant to the foregoing paragraph, such Initial Purchaser shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment of
counsel and payment of expenses. Such Initial Purchaser or controlling person
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 Initial
Purchaser or such controlling person 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 employed counsel to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by the Company and paid as incurred (it being
understood, however, that the Company shall not be liable for the expenses of
more than one separate counsel in any one action or series of related actions in
the same jurisdiction representing the indemnified parties who are parties to
such action). 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.
33
<PAGE>
(b) Each Initial Purchaser severally agrees to indemnify, defend and
hold harmless the Company and the Issuer, their respective directors and
officers and any person who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act from and against any loss,
expense, liability of claim (including the reasonable cost of investigation)
which, jointly or severally, the Company or any such person arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
contained in and in conformity with information furnished in writing by or on
behalf of such Initial Purchaser to the Company expressly for use with reference
to such Initial Purchaser in the Offering Memorandum (or in the Offering
Memorandum as amended or supplemented), or arises out of or is based upon any
omission or alleged omission to state a material fact in connection with such
information necessary to make such information not misleading.
If any action is brought against the Company, the Issuer or any such
person in respect of which indemnity may be sought against any Initial Purchaser
pursuant to the foregoing paragraph, the Company, the Issuer or such person
shall promptly notify such Initial Purchaser in writing of the institution of
such action and such Initial Purchaser shall assume the defense of such action,
including the employment of counsel and payment of expenses. The Company, the
Issuer or such person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of the
Company, the Issuer or such person unless the employment of such counsel shall
have been authorized in writing by such Initial Purchaser in connection with the
defense of such action or such Initial Purchaser shall not have employed counsel
to have charge of the defense of such action or such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to such
Initial Purchaser (in which case such Initial Purchaser shall not have the right
to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by such
Initial Purchaser and paid as incurred (it being understood, however, that such
Initial Purchaser shall not be liable for the expenses of more than one separate
counsel in any one action or series of related actions in the same jurisdiction
representing the Indemnified parties who are parties to such action). Anything
in this paragraph to the contrary notwithstanding, no Initial Purchaser shall be
liable for any settlement of any such claim or action affected without the
written consent of such Initial Purchaser.
(c) If the indemnification provided in this Section 7 is unavailable to
an indemnified party under subsections (a) and (b) of this Section 7 in respect
of any losses, expenses, liabilities or claims referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, expenses, liabilities or claims (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Issuer on the one hand and the Initial Purchaser on the other hand from the
offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Issuer on the one hand and of the
Initial Purchasers on the other in connection with the statements or omissions
which resulted in such losses, expenses,
34
<PAGE>
liabilities or claims, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Issuer on the one hand and
the Initial Purchasers on the other shall be deemed to be in the same proportion
as the total proceeds from the offering of the Securities (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
and the Issuer bear to the underwriting discounts and commissions received by
the Initial Purchasers. The relative fault of the Company and the Issuer on the
one hand and of the Initial Purchasers on the other shall be determined by
reference to, among other things, whether the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission relates to
information supplied by the Company, the Issuer or by the Initial Purchasers and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any claim
or action.
(d) The Company, the Issuer and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in subsection (c)
above. Notwithstanding the provisions of this Section 7, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities distributed by it exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute pursuant to this Section 7 are several in
proportion to their respective underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in this Section
7, and the covenants, warranties and representations of the Company and the
Issuer contained in this Agreement, shall remain in full force and effect
regardless of any investigation made by or on behalf of any Initial Purchaser,
or any person who controls any Initial Purchaser within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, or by or on behalf of the
Company, its directors and officers or any person who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and shall survive any termination of this Agreement or the issuance and delivery
of the Securities. The Company and each Initial Purchaser agree promptly to
notify the others of the commencement of any litigation or proceeding against it
and, in the case of the Company, against any of the Company's officers and
directors, in connection with the issuance and sale of the Securities, or in
connection with the Offering Memorandum.
Section 8. TERMINATION OF AGREEMENT. The obligations of the several
Initial Purchasers hereunder shall be subject to termination in the absolute
discretion of the Initial Purchasers if,
35
<PAGE>
at any time prior to the time of purchase, trading in securities on the New York
Stock Exchange shall have been suspended or minimum prices shall have been
established on the New York Stock Exchange, or if a banking moratorium shall
have been declared either by the United States or New York State authorities, or
if the United States shall have declared war in accordance with its
constitutional processes or there shall have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on the financial markets of the United States
as, in the reasonable judgment of the Initial Purchasers, to make it
impracticable to market the Securities.
If the Initial Purchasers elect to terminate this Agreement as provided
in this Section 8, the Company shall be notified promptly in writing delivered
by facsimile or telegram.
If the sale to the Initial Purchasers of the Securities, as
contemplated by this Agreement, is not carried out by the Initial Purchasers for
any reason permitted under this Agreement or if such sale is not carried out
because the Company shall be unable to comply with any of the terms of this
Agreement, the Company shall not be under any obligation or liability hereunder
or thereunder (except to the extent provided in Sections 5 and 7 hereof), and
the Initial Purchasers shall be under no obligation or liability to the Company
under this Agreement (except to the extent provided in Section 7 hereof) or to
one another hereunder.
This Agreement may also terminate pursuant to the provisions of Section
6 with the effect stated in such Section.
Section 9. DEFAULT BY ONE OR MORE OF THE INITIAL PURCHASERS. If one or
more of the Initial Purchasers shall fail at the Closing Time to purchase the
Preferred Securities that it or they are obligated to purchase pursuant to this
Agreement (the "Defaulted Securities"), you shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Initial Purchasers, or any other initial purchasers, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms set forth in this Agreement; if, however, you have not
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Preferred Securities, the non-defaulting Initial Purchasers
shall be obligated to purchase the full amount thereof in the proportions that
their respective Initial Share underwriting obligation proportions bear to the
underwriting obligation proportions of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Preferred Securities, this Agreement shall terminate without liability
on the part of any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
36
<PAGE>
In the event of any such default that does not result in a termination
of this Agreement, either you or the Company shall have the right to postpone
the Closing Time for a period not exceeding seven days in order to effect any
required changes in the Offering Memorandum or in any other documents or
arrangements. As used herein, the term "Initial Purchaser" includes any person
substituted for an Initial Purchaser under this Section 9.
Section 10. NOTICES. All notices and other communications under the
Agreement shall be in writing and shall be deemed to have been duly given, upon
receipt, if delivered, mailed or transmitted by any standard form of
telecommunication. Notices to you or the Initial Purchasers shall be directed to
you at FBR, Potomac Tower, 1001 19th Street North, 10th Floor, Arlington,
Virginia 22209 (telecopier no.: (703) 312-9698), attention: James Kleeblatt,
with a copy to Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W. 7th
Floor, Washington, D.C. 20005 (telecopier no.: (202) 682-0354), attention: Dave
M. Muchnikoff, P.C. or Martin L. Meyrowitz, P.C.; and notices to the Company
shall be directed to if at BankUnited Financial Corporation, 255 Alhambra
Circle, Coral Gables, Florida 33134, (telecopier no.: (305) 569- 2057),
attention of Sam Milne, with a copy to Stuzin & Camner, 550 Biltmore Way, Coral
Gables, Florida 33134 (telecopier no.: (305) 442-2389), attention: Marsha
Bilzin, Esq.
Section 11. PARTIES. This Agreement is made solely for the benefit of
the several Initial Purchasers, the Company and the Issuer and, to the extent
expressed, any person who controls the Company, the Issuer or any of the Initial
Purchasers within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and the directors of the Company and the Issuer, their
officers, employees and trustees, and their respective executors,
administrators, successors and assigns and, subject to the provisions of Section
9 hereof, no other person shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" shall not include any
purchaser, as such purchaser, from any of the several Initial Purchasers of the
Securities. All of the obligations of the Initial Purchasers hereunder are
several and not joint.
Section 12. REPRESENTATION OF INITIAL PURCHASERS. You will act for the
several Initial Purchasers in connection with the transactions contemplated by
this Agreement, and any action under or in respect of this Agreement taken by
you as Representatives will be binding upon all the Initial Purchasers.
Section 13. GOVERNING LAW AND TIME. This Agreement shall be governed by
the laws of the State of Florida, without giving effect to the provisions
thereof relating to conflicts of law. Specified times of the day refer to New
York City time.
Section 14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
37
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, the Issuer and the
several Initial Purchasers in accordance with its terms.
Very truly yours,
BANKUNITED CAPITAL
By: BankUnited Financial Corporation
as sponsor
By:______________________________________
Name:
Title:
BANKUNITED FINANCIAL CORPORATION
By:______________________________________
Name:
Title:
Confirmed and accepted as of
the date first above written:
BY: FRIEDMAN, BILLINGS, RAMSEY & CO.
________________________________
Name:
Title:
BY: RAYMOND JAMES & ASSOCIATES, INC.
________________________________
Name: Fred E. Whaley
Title: Managing Director
38
================================================================================
BANKUNITED CAPITAL
20,000
10 1/4% Trust Preferred Securities
guaranteed to a limited extent by
BANKUNITED FINANCIAL CORPORATION
PURCHASE AGREEMENT
Date: March 18, 1997
- --------------------------------------------------------------------------------
<PAGE>
BANKUNITED CAPITAL
20,000
10 1/4% Trust Preferred Securities
PURCHASE AGREEMENT
Friedman, Billings, Ramsey & Co.
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209
Ladies and Gentlemen:
BankUnited Capital (the "Issuer"), a statutory business trust created
under the Business Trust Act (the "Delaware Act") of the State of Delaware
(Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Section 3801 ET SEQ.),
proposes to issue and sell to Friedman, Billings, Ramsey & Co. ("FBR") the
"Initial Purchaser," an aggregate of 20,000 10 1/4% Trust Preferred Securities,
Liquidation Amount $1,000 per Preferred Security (the "Preferred Securities").
The Preferred Securities are more fully described in the Offering Memorandum
referred to below.
The Preferred Securities will be guaranteed by BankUnited Financial
Corporation (the "Company"), to the extent that the Issuer has funds therefor,
as set forth in the Offering Memorandum (as defined below), with respect to
distributions and amounts payable upon liquidation or redemption (the
"Guarantee"), pursuant to the Guarantee Agreement dated as of December 30, 1996,
to be amended and dated as of the Closing Time (as defined below) (the
"Guarantee Agreement"), executed and delivered by the Company, as guarantor and
The Bank of New York (the "Guarantee Trustee"), a New York banking corporation
("The Bank of New York"), not in its individual capacity but solely as trustee,
for the benefit of the holders from time to time of the Preferred Securities.
The proceeds from the sale of the Preferred Securities will be aggregated with
the entire proceeds from the sale by the Issuer to the Company of the common
securities of the Issuer (the "Common Securities") and will be used by the
Issuer to purchase the 10 1/4% Junior Subordinated Deferrable Interest
Debentures Series A, due 2026 (the "Debentures") issued by the Company. The
Preferred Securities and the Common Securities will be issued pursuant to the
Amended and Restated Trust Agreement of the Issuer dated December 30, 1996, to
be amended and dated as of the Closing Time (the "Trust Agreement"), among the
Company, as Sponsor, the trustees named therein (the "Trustees") and the holders
from time to time of the Preferred Securities and the Common Securities, which
represent undivided beneficial interests in the assets of the Issuer. The
Debentures will be issued pursuant to an Indenture dated December 30, 1996, to
be supplemented and dated as of the Closing Time (the "Indenture"), between the
Company and The Bank of New York, as trustee (the "Indenture
<PAGE>
Trustee"). All expenses of the Issuer will be paid by the Company as set forth
in the Agreement as to Expenses and Liabilities, dated as of December 30, 1996
(the "Expense Agreement"). The Preferred Securities, the Guarantee and the
Debentures are collectively referred to herein as the "Securities." This
Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement, the
Expense Agreement and the Registration Rights Agreement (as defined below) are
referred to collectively as the "Operative Documents". Capitalized terms used
herein without definition have the respective meanings specified in the Offering
Memorandum.
In order to authorize the Issuer to issue the Preferred Securities, the
Issuer and the Company solicited and received the requested number of consents
from the holders of previously issued Preferred Securities to amend, supplement
and waive certain provisions of the Operative Documents under which said
Preferred Securities were issued (the "Consent Solicitation").
The Preferred Securities will be offered and sold to the Initial
Purchaser without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act. In connection with the sale of the Preferred
Securities, the Issuer and the Company have prepared a preliminary offering
memorandum supplement dated February 28, 1997 (the "Preliminary Offering
Memorandum ") and a final offering memorandum dated the date hereof (such final
offering memorandum, in the form first furnished to the Initial Purchaser for
use in connection with the offering and sale of the Preferred Securities, or if
such form is not so used, in the form subsequently furnished for such use, the
"Offering Memorandum"), each setting forth certain information concerning the
Issuer, the Company and the Securities. The Issuer and the Company hereby
confirm that they have authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offer and resale of the
Preferred Securities by the Initial Purchaser, subject to the provisions of
Section 4(c) hereof. Unless stated to the contrary, all references herein to the
Offering Memorandum are to the Offering Memorandum at the date hereof (the
"Execution Time") and are not meant to include any amendment or supplement
thereto subsequent to the Execution Time. If the Issuer and the Company prepare
a supplement dated the date hereof to the Preliminary Offering Memorandum
containing only pricing related information, then the term "Offering Memorandum"
for purposes of this Agreement shall refer collectively to the Preliminary
Offering Memorandum and such supplement.
The Issuer and the Company understand that the Initial Purchaser
proposes to make an offering of the Preferred Securities only on the terms,
subject to the conditions and in the manner set forth in the Offering Memorandum
and Section 3 hereof.
The Initial Purchaser and other holders of Securities (including
subsequent permitted transferees) will be entitled to the benefits of the
registration rights agreement, to be dated as of the Closing Time (the
"Registration Rights Agreement"), among the Issuer, the Company and the Initial
Purchaser, in the form attached hereto as Exhibit A. Pursuant to the
Registration Rights Agreement, the Issuer and the Company will agree to file
with the Securities and Exchange Commission (the "Commission") upon the terms
and conditions set forth therein either an exchange offer registration statement
or a shelf registration statement pursuant to Rule 415 under
2
<PAGE>
the Securities Act relating to the exchange or resale, as the case may be, of
(i) the Preferred Securities and (ii) the Debentures by holders thereof, and to
use their reasonable best efforts to cause such registration statement to be
declared effective.
All references in this Agreement to financial statements and schedules
and other information that is "contained", "included", "deemed included" or
"stated" in the Offering Memorandum (and all other references of like import)
shall be deemed to include all such financial statements and schedules and other
information that are, or are deemed to be, incorporated by reference in the
Offering Memorandum; and all references in this Agreement to amendments or
supplements to the Offering Memorandum shall be deemed to include the filing of
any document under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that is, or is deemed to be, incorporated by reference in the
Offering Memorandum.
Section 1. REPRESENTATIONS AND WARRANTIES. (a) The Issuer and the
Company, jointly and severally, represent and warrant to and agree with the
Initial Purchaser that:
(i) As of their respective dates, none of the Offering
Memorandum or any amendment or supplement thereto, and as of the
Closing Time, the Offering Memorandum, as amended or supplemented to
such time, contained or will contain an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that
neither the Company nor the Issuer makes any warranty or representation
with respect to any statement contained in the Offering Memorandum in
reliance upon and in conformity with information concerning the Initial
Purchaser and the plan of distribution and furnished in writing by or
on behalf of the Initial Purchaser to the Company expressly for use in
the Offering Memorandum. The documents included as Appendices,
incorporated by reference or deemed to be incorporated by reference in
the Offering Memorandum (the "Exchange Act Reports"), when they became
effective or were last amended or filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Exchange Act as applicable, and the rules and regulations (the
"Rules and Regulations") of the Commission and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
statements therein, in light of the circumstances under which they were
made, not misleading, and any further documents so filed and
incorporated by reference or deemed to be incorporated by reference in
the Offering Memorandum, when such documents become effective or are
filed with the Commission, as the case may be, shall conform in all
material respects to the requirements of the Securities Act and the
Exchange Act and the Rules and Regulations, as applicable, and shall
not contain an untrue statement of a material fact or omit to state a
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.
(ii) Each of the Preferred Securities, the Guarantee and the
Debentures satisfy the eligibility requirements of Rule 144A(d)(3) of
the Rules and Regulations.
3
<PAGE>
(iii) None of the Issuer, the Company, any of their respective
affiliates (as such term is defined in Rule 501(b) of Regulation D of
the Rules and Regulations ("Regulation D")), or any person acting on
behalf of the foregoing (other than the Initial Purchaser) has,
directly or indirectly, made or will, directly or indirectly, make
offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the registration of
the Securities under the Securities Act.
(iv) None of the Issuer, the Company or any of their
respective affiliates (as such term is defined in Rule 501(b) of
Regulation D) or any person (other than the Initial Purchaser) acting
on behalf of the foregoing has engaged or will engage, in connection
with the offering of the Securities or any security of the same class
or series as the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) of Regulation D.
The Company and the Issuer have not entered and will not enter into any
contractual arrangement with respect to the distribution of the
Securities except for this Agreement and the Registration Rights
Agreement.
(v) Assuming the accuracy of the representations and
warranties and compliance with the agreement of the Initial Purchaser
in Section 3 hereof, it is not necessary in connection with the offer,
sale and delivery of the Preferred Securities to the Initial Purchaser,
or in connection with the initial resale of the Preferred Securities by
the Initial Purchaser in accordance with this Agreement, to register
the Preferred Securities under the Securities Act or to qualify the
Indenture, the Guarantee or the Trust Agreement under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(vi) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Florida
with full power and authority to own, lease and operate its properties,
to conduct its business and to execute, deliver and perform its
obligations under each of the Operative Documents.
(vii) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than its
wholly owned subsidiaries, BankUnited, FSB (the "Bank"), BU Ventures,
Inc., BankUnited Mortgage Corporation (which has never commenced
operations), and the Bank's wholly owned subsidiaries, T&D Properties
of South Florida, Inc., Bay Holdings Inc. and SGC Mortgage Corporation
(BU Ventures, Inc., the Bank and the Bank's wholly owned subsidiaries
are collectively referred to herein as the "Subsidiaries"). Neither the
Company nor the Subsidiaries own any equity interests in any other
entities except as disclosed in the Offering Memorandum. The Company
and the Subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, with full power and
authority (corporate and other) to own and lease their properties and
conduct their respective businesses as described in the Offering
Memorandum; the Company owns all of the outstanding capital stock of
the Bank, BU Ventures, Inc., BankUnited Mortgage Corporation, and the
Bank owns all of the outstanding capital stock of T&D Properties of
South Florida, Inc., SGC Mortgage
4
<PAGE>
Corporation and Bay Holdings, Inc., each owning said stock free and
clear of all claims, liens, charges and encumbrances.
(viii) The Company has the authorized and outstanding capital
stock as set forth under the heading Capitalization in the Offering
Memorandum; the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued, are fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities (except as may be disclosed in the Offering Memorandum), and
conform in all material respects to the description thereof contained
in the Offering Memorandum. All issued and outstanding shares of
capital stock of the Subsidiaries have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in the
Noncumulative Convertible Preferred Stock, Series C; the Noncumulative
Convertible Preferred Stock, Series C-II; as set forth in the schedule
of grants of options and bonus shares to officers, directors and
employees on November 14, 1996 (a copy of which has been provided to
the Initial Purchaser); and as disclosed in the Offering Memorandum and
the financial statements of the Company, and the related notes thereto,
included in the Offering Memorandum, neither the Company nor the
Subsidiaries have outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description
of the Company's stock option and other stock plans or arrangements,
and the options or other rights granted and exercised thereunder, set
forth in the Offering Memorandum accurately and fairly present the
information required to be shown with respect to such plans,
arrangements, options and rights.
(ix) The Issuer has been duly formed and is validly existing
in good standing as a business trust under the Delaware Act with the
full power and authority to own its property and to conduct business
and to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and the Trust Agreement; the Issuer
is duly qualified to conduct business as a foreign corporation in good
standing in each jurisdiction in which such qualification is necessary;
the Issuer has no liabilities or obligations other than those arising
out of the transactions contemplated by this Agreement, the
Registration Rights Agreement and the Trust Agreement, and the Issuer
is not a party to or otherwise bound by any agreement other than those
described in the Offering Memorandum.
(x) The Company and the Subsidiaries are duly qualified in or
licensed to transact business by, and are in good standing in, each
jurisdiction in which they own or lease real property, maintain an
office or conduct their respective businesses and in which the failure,
individually or in the aggregate with all other failures, to be so
licensed or qualified or to be in good standing would reasonably be
expected to have a material adverse effect on the financial condition,
properties, assets, business, results of operations or prospects of the
Company and the Subsidiaries taken as a whole (a "Material Adverse
5
<PAGE>
Effect") and the Company has no knowledge that any proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(xi) This Agreement has been duly authorized, executed and
delivered by each of the Company and the Issuer and (assuming the due
authorization, execution and delivery thereof by the other parties
thereto) is a legal, valid and binding agreement of each of the Company
and the Issuer enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(the "Enforceability Exceptions") and except to the extent that the
indemnification provisions of Section 7 hereof may be limited by
federal or state securities laws and public policy considerations in
respect thereof.
(xii) The Registration Rights Agreement has been duly
authorized by each of the Company and the Issuer and, at the Closing
Time, will have been executed and delivered by each of the Issuer and
the Company and upon such execution by each of the Issuer and the
Company (assuming the due authorization, execution and delivery thereof
by the other parties thereto) the Registration Rights Agreement will
constitute a legal, valid and binding obligation of each of the Issuer
and the Company enforceable against each of the Issuer and the Company
in accordance with the terms thereof, except as enforcement thereof may
be limited by the Enforceability Exceptions, and except as any rights
to indemnity may be limited by federal and state securities laws and
public policy considerations, and will conform to all statements
relating thereto in the Offering Memorandum.
(xiii) The Trust Agreement has been duly authorized by the
Company and, at the Closing Time, will have been executed and delivered
by the Company and the Administrative Trustees (as defined in the Trust
Agreement), and assuming the due authorization, execution and delivery
of the Trust Agreement by the Delaware Trustee and the Property Trustee
(each as defined in the Trust Agreement), the Trust Agreement will, at
the Closing Time, be a legal, valid and binding obligation of the
Company and the Administrative Trustees, enforceable against the
Company and the Administrative Trustees in accordance with its terms,
except as enforcement thereof may be limited by the Enforceability
Exceptions, and will conform to all statements relating thereto in the
Offering Memorandum.
(xiv) The Guarantee Agreement has been duly authorized by the
Company and when executed and delivered by the Company, and assuming
due authorization, execution and delivery thereof by The Bank of New
York, not in its individual capacity but solely as trustee, will
constitute a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by the Enforceability Exceptions,
and will conform to all statements relating thereto in the Offering
Memorandum.
6
<PAGE>
(xv) The Expense Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited
by the Enforceability Exceptions, and conforms to all statements
relating thereto in the Offering Memorandum.
(xvi) The Preferred Securities have been duly authorized by
the Issuer and the Trust Agreement and, when executed and authenticated
in the manner provided for in the Trust Agreement and issued and
delivered pursuant to this Agreement against payment of the
consideration set forth herein, will be validly issued and (subject to
the terms of the Trust Agreement) fully paid and nonassessable
undivided beneficial interests in the assets of the Issuer, will be
entitled to the benefits of the Trust Agreement (and to the extent set
forth therein the Indenture) and will conform to all statements
relating thereto in the Offering Memorandum; the issuance of the
Preferred Securities is not subject to preemptive or other similar
rights; and holders of Preferred Securities will be entitled to the
same limitation of personal liability extended to stockholders of
private corporations for profit incorporated under the General
Corporation Law of the State of Delaware.
(xvii) The Common Securities have been duly authorized by the
Issuer and the Trust Agreement and, when executed, issued and delivered
by the Issuer to the Company against payment therefor as described in
the Offering Memorandum, will be validly issued undivided beneficial
interests in the assets of the Issuer, will be entitled to the benefits
of the Trust Agreement and will conform in all material respects to the
description thereof in the Offering Memorandum; the issuance of Common
Securities is not subject to preemptive or other similar rights; and at
the Closing Time, all of the issued and outstanding Common Securities
of the Issuer will be directly owned by the Company free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(xviii) The Indenture has been duly authorized by the Company
and when executed and delivered by the Company, and assuming due
authorization, execution and delivery thereof by the Indenture Trustee,
will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by the Enforceability Exceptions,
and will conform to all statements relating thereto in the Offering
Memorandum.
(xix) The Debentures have been duly authorized by the Company
and, when executed, authenticated, issued and delivered in the manner
provided for in the Indenture and sold and paid for as provided in the
Trust Agreement, will constitute legal, valid and binding obligations
of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by the Enforceability Exceptions,
and will conform to all statements relating thereto in the Offering
Memorandum.
(xx) Except as disclosed in the Offering Memorandum, upon
payment by the Issuer of the purchase price therefor, the Trustee will,
on the Closing Date, have good and valid title to all such Debentures,
free from liens, encumbrances and defects that would
7
<PAGE>
materially affect the value thereof or materially interfere with the
use made or to be made thereof by the Issuer.
(xxi) Price Waterhouse, LLP ("Price Waterhouse"), who is
reporting upon the financial statements included in Appendices to the
Offering Memorandum, are and were independent public accountants as
required by the Securities Act and the Rules and Regulations during the
periods covered by the financial statements which are included in the
Offering Memorandum.
(xxii) The consolidated financial statements of the Company
and consolidated financial statements of Suncoast Savings and Loan
Association, FSA ("Suncoast") included in the Appendices, in the
Offering Memorandum present fairly the consolidated financial position
of the Company and Suncoast, as the case may be as of the dates
indicated and the consolidated results of operations and changes in
stockholders' equity of the Company and its subsidiaries or Suncoast
for the periods specified. The consolidated financial statements of the
Company and Suncoast, included in Appendices A and C, respectively, in
the offering memorandum dated December 23, 1996 and of the Company
included as Appendix A to the offering circular supplement dated
February 28, 1997 have been prepared in all material respects in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except
as indicated in the notes thereto), and the supporting schedules, if
any, included in Appendices, incorporated or deemed incorporated by
reference in the Offering Memorandum present fairly in accordance with
GAAP the information required to be stated therein. The selected
consolidated financial data and the pro forma financial information of
the Company included in the Offering Memorandum present fairly the
information shown therein and have been prepared on a basis consistent
with that of the consolidated audited financial statements of the
Company (to the extent so indicated) included in the Appendices,
incorporated or deemed incorporated by reference in the Offering
Memorandum.
(xxiii) Since the respective dates as of which information is
given in the Offering Memorandum, except as may be otherwise stated
therein, there has not been (A) any material adverse change in the
financial condition, properties, assets, business, results of
operations or prospects of the Company and the Subsidiaries taken as a
whole, (B) any transaction entered into by the Company or any of the
Subsidiaries, or into which the Company or any of the Subsidiaries
intends to enter, which is material to the Company and the Subsidiaries
taken as a whole, or (C) any obligation, contingent or otherwise
incurred, directly or indirectly, by the Company or any of the
Subsidiaries which is material to the Company and the Subsidiaries
taken as a whole.
(xxiv) None of the Company, the Subsidiaries or the Issuer (A)
is in breach of, or in default in (nor has any event occurred which
with notice, lapse of time, or both, would constitute a breach of, or
default in) the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, bank loan or credit agreement, note, lease or other
agreement or instrument to which
8
<PAGE>
it is a party or by which it may be bound or to which any of its
properties may be subject (collectively, the "Agreements and
Instruments"), except for any such breaches or defaults which,
individually or in the aggregate with all other breaches or defaults,
would not have a Material Adverse Effect or have an adverse effect on
the legality, validity or enforceability of any of the Operative
Documents or (B) is in breach of, or in default under (nor has any
event occurred which with notice, lapse of time, or both would
constitute a breach of, or default under) its respective charter or
by-laws. The execution, delivery and performance of this Agreement and
the Registration Rights Agreement by the Company and the Issuer, the
issuance, sale and delivery of the Preferred Securities and the Common
Securities by the Issuer, the issuance, sale and delivery of the
Debentures by the Company, the execution delivery and performance by
the Company of this Agreement, the Trust Agreement, the Indenture, the
Guarantee Agreement, the Expense Agreement and the Registration Rights
Agreement, the consummation by the Company and the Issuer of the
transactions contemplated hereby and thereby, compliance by the Company
and the Issuer with the terms of the foregoing and the application of
the proceeds from the sale of the Preferred Securities as contemplated
by the Offering Memorandum (A) have been duly authorized by all
necessary corporate action on the part of the Company and the Issuer,
(B) do not and will not conflict with or result in any breach of or
constitute a default under (nor constitute any event which with notice,
lapse of time, or both would constitute a breach of, or default under)
any provision of the charter or by-laws of the Company or the
Subsidiaries or any provision of the Operative Documents, (C) do not
and will not conflict with or result in any breach of or constitute a
default under (nor constitute any event which with notice, lapse of
time, or both would constitute a breach of, or default under) any of
the terms or provisions of, or give rise to any right to accelerate the
maturity or require the prepayment of any indebtedness under, or result
in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company, the Subsidiaries or the Issuer
under any such Agreement or Instrument (except, with respect to this
clause (C), for such conflicts, breaches, defaults, accelerations,
prepayments or liens, charges or encumbrances, which, individually or
in the aggregate with all other conflicts, breaches, defaults,
accelerations, prepayments or liens, charges or encumbrances, would not
have a Material Adverse Effect) and (D) do not and will not conflict
with, or result in any breach of or constitute a default under (nor
constitute any event which with notice, lapse of time, or both would
constitute a breach of, or default under), any federal, state or local
law, regulation or rule or any decree, judgment or order applicable to
the Company, the Subsidiaries or the Issuer.
(xxv) No approval, authorization, consent or order of or
filing with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in connection
with the offering, issuance or sale of the Securities by the Issuer and
the Guarantee and the Debentures by the Company or is required for the
valid authorization, execution, delivery and performance by the Company
and the Issuer of the Operative Documents or the consummation by the
Company and the Issuer of the transactions contemplated therein, except
for such authorizations as may be required by the securities or "blue
sky" laws of the various states in connection with the offer and sale
9
<PAGE>
of the Securities or by the federal and state securities laws in
connection with the registration obligations under the Registration
Rights Agreement.
(xxvi) The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation (the "FDIC") up to legally applicable
limits, and no proceedings for the termination or revocation of such
insurance are pending or, to the best knowledge of the Company or the
Bank, threatened.
(xxvii) Except as disclosed in the Offering Memorandum, there
are no legal or governmental actions, suits or proceedings pending or,
to the knowledge of the Company, threatened to which the Company, the
Issuer, or any of the Subsidiaries is or may be a party or of which
property owned or leased by the Company, the Issuer or any of the
Subsidiaries is or may be the subject, or related to environmental,
discrimination or financial regulatory matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or
adversely affect the transactions contemplated by this Agreement or are
likely to result in a Material Adverse Effect and no labor disturbance
by the employees of the Company or the Subsidiaries exists or is
imminent which would be expected to affect adversely such condition,
properties, business, results of operations or prospects of the
Company, the Issuer and the Subsidiaries, taken as a whole. Except as
disclosed in the Offering Memorandum, no enforcement proceeding,
whether formal or informal, has been commenced against the Company, the
Issuer or any of the Subsidiaries by the FDIC or, to the Company's, the
Issuer's, and the Subsidiaries' knowledge, any other governmental
authority, nor have any such proceedings been instituted, threatened or
recommended. Except as disclosed in the Offering Memorandum, neither
the Company, the Issuer, nor any of the Subsidiaries, or any of their
respective officers, employees or directors is a party or subject to
the provisions of any regulatory action, injunction, judgment, decree
or order of any court, regulatory body, administrative agency or other
governmental body affecting the business of the Company, the Issuer or
any of the Subsidiaries.
(xxviii) The Company, the Issuer or the Subsidiaries has good
and marketable title to all their properties and assets, free and clear
of all liens, charges, encumbrances or restrictions, except such as do
not materially adversely affect the value of such properties and assets
and do not interfere with the use made of such properties and assets by
the Company, the Issuer and the Subsidiaries as the case may be; all of
the leases and subleases material to the business of the Company, the
Issuer or the Subsidiaries or under which the Company, the Issuer or
the Subsidiaries holds properties described in the Offering Memorandum
are in full force and effect; and the Company, the Issuer or the
Subsidiaries have no notice of any material claim of any sort which has
been asserted by anyone adverse to the rights of the Company, the
Issuer or the Subsidiaries as owner or as lessee or sublessee under any
of the leases or subleases mentioned above, or materially affecting or
questioning the rights of the Company, the Issuer or the Subsidiaries
to the continued possession of the leased or subleased premises under
any such lease or sublease. Except as disclosed in the Offering
Memorandum and other than such leases and properties
10
<PAGE>
as are immaterial in the aggregate, the Company, the Issuer or the
Subsidiaries owns or leases all such properties as are necessary to its
operations as now conducted.
(xxix) Since the respective dates as of which information is
given in the Offering Memorandum, and except as described in or
specifically contemplated by the Offering Memorandum: (i) the Company,
the Issuer and the Subsidiaries have not incurred any material
liabilities or obligations, indirect, direct or contingent, or entered
into any material verbal or written agreement or other transaction
whether or not arising in the ordinary course of business or which
would result in a material reduction in the future earnings of the
Company and the Subsidiaries (taken as a whole); (ii) there has not
been any material increase in the long-term debt of the Company, the
Issuer and the Subsidiaries (taken as a whole) or in the aggregate
dollar or principal amount of the Company's and the Subsidiaries (taken
as a whole) assets which are classified as substandard, doubtful or
loss or loans which are 90 days or more past due or real estate
acquired by foreclosure; (iv) there has not been any Material Adverse
Effect on the aggregate dollar amount of the Company's and the
Subsidiaries' (taken as a whole) deposits or their consolidated net
worth or spread; (v) there has been no material adverse change in the
Company's and the Subsidiaries relationship with its insurance
carriers, including, without limitation, cancellation or other
termination of the Company's or the Subsidiaries' fidelity bond or any
other type of insurance coverage; (vi) except as disclosed in the
Offering Memorandum there has been no material change in management of
the Company or the Subsidiaries; (vii) the Company and the Subsidiaries
have not sustained any material loss or interference with their
respective business or properties from fire, flood, windstorm,
earthquake, accident or other calamity, whether or not covered by
insurance; (viii) the Company has not paid or declared any dividends
(except for regularly scheduled Company preferred stock dividends) or
other distributions with respect to its capital stock and the Company
and the Subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; (ix) there has not been
any change in the capital stock (other than upon the sale of the Common
Shares hereunder); and (x) there has not been any material adverse
change in the condition (financial or otherwise), business, properties,
results of operations or prospects of the Company and the Subsidiaries,
taken as a whole, other than changes resulting from changes in the
economy of the Company's and the Subsidiaries' industry generally.
(xxx) Except as disclosed in or specifically contemplated by
the Offering Memorandum, the Company and the Subsidiaries have
sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals and governmental authorizations to conduct their
businesses as now conducted; the expiration of any trademarks, trade
names, patent rights, copyrights, licenses, approvals or governmental
authorizations would not have a Material Adverse Effect; and the
Company and the Subsidiaries have no knowledge of any material
infringement by it of trademark, trade name rights, patent rights,
copyrights, licenses, trade secret or other similar rights of others,
and, to the Company's and the Subsidiaries' knowledge, there is no
claim being made against the Company or any of the Subsidiaries
regarding trademark, trade name, patent, copyright, license, trade
secret or other infringement which could have a Material Adverse
Effect.
11
<PAGE>
(xxxi) The Company has not been advised, and has no reason to
believe, that either it or any of the Subsidiaries is not conducting
business in compliance with all applicable laws, rules and regulations
of the jurisdictions in which it is conducting business, including,
without limitation, all applicable local, state and federal financial
institution and environmental laws and regulations; except where
failure to be so in compliance would not have a Material Adverse
Effect. Neither the Company nor any of its affiliates (including the
Subsidiaries) is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended, or applicable regulations
promulgated thereunder. The Company is a savings and loan holding
company within the meaning of the Home Owners' Loan Act. The Bank is an
insured depository institution within the meaning of the Federal
Deposit Insurance Act, as amended.
(xxxii) Except as disclosed in the Offering Memorandum, the
Bank is not in violation of any directive from the FDIC or any other
governmental authority and the Bank is in compliance with all federal
and state laws and regulations that regulate or are concerned with its
business including, without limitation, the Financial Institutions
Recovery, Reform and Enforcement Act of 1989 ("FIRREA"), the Federal
Deposit Insurance Act (the "FDIA"), the National Housing Act (the
"NHA"), the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") and all other applicable laws and regulations where the
failure to comply would have a Material Adverse Effect.
(xxxiii) The Company and the Subsidiaries have filed or caused
to be filed all material federal, state and foreign income and
franchise tax returns and have paid all taxes shown as due thereon; and
the Company has no knowledge of any tax deficiency which has been or
might be asserted or threatened against the Company or the Subsidiaries
which would have a Material Adverse Effect.
(xxxiv) The Company and the Bank maintain insurance of the
types and in the amounts generally deemed adequate for their respective
businesses, including, but not limited to, general liability insurance,
fidelity bond insurance and insurance covering real and personal
property owned or leased by the Company or the Bank against theft,
forgery, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force
and effect.
(xxxv) All material transactions between the Company and the
Bank and the officers, directors and major stockholders of the Company
that are required to be disclosed under the Exchange Act and the Rules
and Regulations have been accurately disclosed in the Offering
Memorandum; and the terms of each such transaction are fair to the
Company and no less favorable to the Company than the terms that could
have been obtained from unrelated parties, except as disclosed in the
Offering Memorandum.
(xxxvi) None of the Issuer, the Company or the Subsidiaries
are, or after giving effect to the consummation of the transactions
contemplated herein, will be, and neither the Company nor the Issuer is
directly or indirectly controlled by, or acting on behalf of
12
<PAGE>
any person which is, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act").
(xxxvii) The Company has not taken and will not take, directly
or indirectly, any action designed to, or that the Company reasonably
believes would cause or result in, stabilization or manipulation of the
price of the Preferred Securities.
(xxxviii) The Company has not distributed any offering
material in connection with the offering and sale of the Preferred
Securities other than the Preliminary Offering Memorandum and the
Offering Memorandum.
(xxxix) The Preferred Securities have been designated PORTAL
eligible securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD").
(xl) Other than pursuant to this Agreement or as disclosed in
the Offering Memorandum under the caption "Plan of Distribution," there
are no contracts, agreements or understandings between either the
Issuer or the Company and any person that give rise to a valid claim
against the Issuer, the Company or the Initial Purchaser for a
brokerage commission, finder's fee or other like payment.
(xli) Except as set forth in the Registration Rights Agreement
and the Noncumulative Convertible Preferred Stock, Series C and the
Noncumulative Convertible Preferred Stock, Series C-II or as described
in the Offering Memorandum, there are no contracts, agreements or
understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company owned
or to be owned by such person or to require the Company to include such
securities in the securities to be covered by either the exchange or
the shelf registration referred to in the Registration Rights
Agreement.
(xlii) The Company and the Subsidiaries have all necessary
licenses, authorizations, consents and approvals and has made all
necessary filings required under any federal, state, local or foreign
law, regulation or rule, and has obtained all necessary authorizations,
consents and approvals from other persons, in order to conduct its
respective business, except where any failures to obtain any such
licenses, authorizations, consents or approvals, or to make any such
filings, would not, individually or in the aggregate with all other
such failures, reasonably be expected to have a Material Adverse
Effect; neither the Company nor the Subsidiaries are in violation of,
or in default under, any such license, authorization, consent or
approval or any federal, state, local or foreign law, regulation or
rule or any decree, order or judgment applicable to the Company or the
Subsidiaries the effect of which, individually or in the aggregate with
all other violations and defaults, would reasonably be expected to have
a Material Adverse Effect.
13
<PAGE>
(xliii) The Company is duly registered as a unitary savings
and loan holding company under the Home Owners Loan Act, as amended;
the deposit accounts of each of the Company's banking subsidiaries are
insured by the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation ("FDIC") to the fullest extent permitted
by law and the rules and regulations of the FDIC, and proceedings for
the termination of such insurance are not pending or, to the best of
the Company's knowledge, threatened; and neither the Company nor the
Subsidiaries are a party to or otherwise the subject of any consent
decree, memorandum of understanding, written commitment or other
written supervisory agreement with the Office of Thrift Supervision,
Department of the Treasury ("OTS") or any other federal or state
authority or agency charged with the supervision or insurance of
depositary institutions or their holding companies.
(xliv) The Company has not relied upon the Initial Purchaser
or legal counsel for the Initial Purchaser for any legal, tax or
accounting advice in connection with the Offering except as to the
qualifications of the Preferred Securities under applicable state
securities laws.
(xlv) The Issuer has received the required number of consents
to amend, supplement and waive all provisions of the Operative
Documents necessary for the Company and the Issuer to perform its
obligations under this Agreement.
(b) Any certificate signed by any officer of the Company or by any
trustee of the Issuer and delivered to you or to counsel for the Initial
Purchaser shall be deemed a representation and warranty by the Company and the
Issuer to the Initial Purchaser as to the matters covered thereby.
Section 2. SALE AND DELIVERY TO THE INITIAL PURCHASER; CLOSING. (a) On
the basis of the representations and warranties herein contained, and subject to
the terms and conditions herein set forth, the Issuer agrees to sell to the
Initial Purchaser, and the Initial Purchaser agrees, to purchase from the
Issuer, at the purchase price of $985.00 per Preferred Security, the Preferred
Securities.
(b) As compensation to the Initial Purchaser for its commitments
hereunder and in view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Debentures, the Company hereby agrees to
pay at the Closing Time to the Initial Purchaser a commission equal to 3% of the
aggregate offering price of the Preferred Securities sold.
(c) Payment of the purchase price for, and delivery of certificates
for, the Preferred Securities shall be made at the offices of Silver, Freedman &
Taff, L.L.P., 1100 New York Avenue, N.W., 7th Floor, Washington, D.C. 20005, at
10:00 a.m., New York City time, on March 24, 1997 or such later date and time
not more than two full business days thereafter as you, the Company and the
Issuer shall mutually determine (such date and time of payment and delivery
being herein called the "Closing Time"). Payment shall be made to the Company,
net of the compensation due the Initial Purchaser pursuant to Section 2(b) and
net of any expenses due the Initial Purchaser to the extent such expenses are
determinable at the Closing Time, by wire transfer of immediately available
funds to a bank account designated by the Company against delivery to the
account of the Initial Purchaser of the Preferred Securities.
14
<PAGE>
(d) Certificates for the Preferred Securities shall be in such
denominations and registered in such names as the Initial Purchaser may request
in writing at least two full business days before the Closing Time. The
certificates for the Preferred Securities will be made available in Washington,
D.C. for examination and packaging by you not later than 10:00 A.M. on the
business day immediately prior to the Closing Time.
Section 3. RESALE OF THE SECURITIES. The Initial Purchaser represents
and warrants to, and agrees with, the Issuer and the Company that:
(a) it is a "Qualified Institutional Buyer" as defined in Rule 144A of
the Rules and Regulations (a "Qualified Institutional Buyer") and an "accredited
investor" within the meaning of Rule 501(a) of Regulation D (an "Accredited
Investor");
(b) it has not offered or sold, and will not offer or sell, any
Preferred Securities (which for purposes of this Section 3 includes the
Guarantee, unless the context requires otherwise) except to persons whom it
reasonably believes to be (i) in the case of offers inside the United States (A)
Qualified Institutional Buyers or (B) "accredited investors" that, prior to
their purchase of the Preferred Securities, deliver to it a letter demonstrating
such investor status or (ii) in the case of offers and sales outside the United
States, to persons other than U.S. persons ("foreign purchasers", which term
shall include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for foreign beneficial owners (other than an
estate or trust));
(c) it has not made and will not make offers or sales of the Preferred
Securities in the United States by means of any form of general solicitation or
general advertising (within the meaning of Regulation D) or in any manner
involving a public offering (within the meaning of Section 4(2) under the
Securities Act) in the United States prior to the effectiveness of a
registration statement with respect to the Securities;
(d) it has not made and will not make offers or sales of the Preferred
Securities to, or for the account or benefit of, U.S. persons as part of its
distribution at any time, or otherwise until one year after the Closing Time,
except in accordance with the Securities Act and the Rules and Regulations
thereunder or pursuant to an exemption from the registration requirements of the
Securities Act; and
(e) with respect to offers and sales outside the United States:
(i) it understands that no action has been or will be taken in
any jurisdiction by the Issuer or the Company that would permit a
public offering of the Securities, or possession or distribution of the
Offering Memorandum or any other offering or publicity material
relating to the Securities, in any country or jurisdiction where action
for that purpose is required;
(ii) it will comply with all applicable laws and regulations
in each jurisdiction in which it acquires, offers, sells or delivers
Securities or has in its possession or
15
<PAGE>
distributes the Offering Memorandum or any such other material, in all
cases at its own expense;
(iii) the Securities have not been and will not be registered
under the Securities Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons,
except pursuant to an exemption from the registration requirements of
the Securities Act.
Section 4. CERTAIN COVENANTS OF THE ISSUER AND THE COMPANY. The Issuer
and the Company covenant with the Initial Purchaser as follows:
(a) The Issuer and the Company will promptly deliver to the Initial
Purchaser and counsel for the Initial Purchaser, without charge, as many copies
of the Preliminary Offering Memorandum, the Offering Memorandum, any amendments
or supplements thereto, the documents incorporated or deemed incorporated by
reference in the Offering Memorandum and the Operative Documents as the Initial
Purchaser and their counsel may reasonably request.
(b) The Company and the Issuer will give the Initial Purchaser timely
notice of their intention to prepare any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum or to file with the
Commission any document incorporated by reference in the Offering Memorandum,
will furnish the Initial Purchaser and counsel to the Initial Purchaser with
copies of any such amendment, supplement or document and will obtain the consent
of the Initial Purchaser to any such amendment or supplement or to any such
filing (which consent shall not be unreasonably withheld or delayed).
(c) If at any time prior to completion of the distribution of the
Preferred Securities (which for purposes of this Section 4 includes the
Guarantee, unless the context otherwise requires) by the Initial Purchaser to
purchasers who are not their affiliates (as determined by you) any event shall
occur or condition exist as a result of which it is necessary, in the reasonable
opinion of the Initial Purchaser, counsel for the Initial Purchaser or counsel
for the Company, to amend or supplement the Offering Memorandum in order that
the Offering Memorandum, as then amended or supplemented, will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading or if, in
the reasonable opinion of the Initial Purchaser, counsel to the Initial
Purchaser or counsel to the Company, such amendment or supplement is necessary
to comply with applicable law, the Issuer and the Company will, subject to
paragraph (b) of this Section 4, promptly prepare such amendment or supplement
as may be necessary to correct such untrue statement or omission or to effect
such compliance (in form and substance reasonably agreed upon by counsel to the
Initial Purchaser), so that as so amended or supplemented, the statements in the
Offering Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances existing at the time it is delivered to a
purchaser, not misleading or so that such Offering Memorandum as so amended or
supplemented will comply with applicable law, as the case may be, and furnish to
the Initial Purchaser such number of copies of such amendment or supplement as
the Initial Purchaser may reasonably
16
<PAGE>
request. The Issuer and the Company agree to notify the Initial Purchaser in
writing to suspend use of the Offering Memorandum as promptly as practicable
after the occurrence of an event specified in this paragraph (c), and the
Initial Purchaser hereby agrees upon receipt of such notice from the Issuer and
the Company to suspend use of the Offering Memorandum until the Issuer and the
Company have amended or supplemented the Offering Memorandum to correct such
misstatement or omission or to effect such compliance.
(d) Notwithstanding any provision of paragraph (b) or (e) of this
Section 4 to the contrary, however, the Issuer's and the Company's obligations
under paragraphs (b) and (c) of this Section 4 and the Initial Purchaser's
obligations under paragraph (c) of this Section 4 shall terminate on the earlier
to occur of (i) the effective date of an exchange or shelf registration
statement with respect to the Securities filed pursuant to the Registration
Rights Agreement and (ii) the date upon which the Initial Purchaser and its
affiliates cease to hold Securities acquired as part of their initial
distribution, but in any event (in the case of this clause (ii)) not later than
one year from the Closing Time.
(e) Neither the Company, the Issuer nor any of their respective
affiliates (as defined in Rule 501(b) of Regulation D), nor any person acting on
behalf of the foregoing, will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities prior to the effectiveness of a registration
statement with respect to the Securities. No covenant is made hereby with
respect to the conduct of the Initial Purchaser or its affiliates (as such term
is defined in Rule 501(b) of Regulation D).
(f) Neither the Company nor any of its affiliates (as defined in Rule
501(b) of Regulation D), including without limitation the Issuer, will, directly
or indirectly, make offers or sales of any security, or solicit offers to buy
any security, under circumstances that would require the registration of the
Securities under the Securities Act.
(g) So long as any of the Securities are "restricted securities" within
the meaning of Rule 144(a)(3) of the Rules and Regulations, the Company will,
during any period in which it is not subject to and in compliance with Section
13 or 15(d) of the Exchange Act, provide to each holder of such restricted
securities and to each prospective purchaser (as designated by such holder) of
such restricted securities, upon the request of such holder or prospective
purchaser, any information required to be provided by Rule 144A(d)(4) of the
Rules and Regulations. This covenant is intended to be for the benefit of the
holders, and the prospective purchasers designated by such holders, from time to
time of such restricted securities.
(h) Each Preferred Security (and each Debenture distributed to holders
of Preferred Securities pursuant to the terms of the Trust Agreement) will bear
a legend (and with respect to the Debentures a similar legend) substantially in
the following form until such legend shall no longer be necessary or advisable
because the Preferred Securities (and the Debentures) are no longer subject to
the restrictions on transfer described herein:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
17
<PAGE>
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE SERIES A ISSUER AND THE
COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
(X) PRIOR TO THE THIRD ANNIVERSARY OF THE LATER OF THE ISSUANCE HEREOF (OR ANY
PREDECESSOR SECURITY HERETO) AND THE LAST DAY ON WHICH THE SERIES A ISSUER OR
ANY AFFILIATE OF THE SERIES A ISSUER WAS THE OWNER HEREOF (OR ANY PREDECESSOR
SECURITY HERETO) OR (Y) THEREAFTER, BY ANY HOLDER THAT WAS AN AFFILIATE OF THE
SERIES A ISSUER AND THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE SERIES A ISSUER
OR ANY SUBSIDIARY THEREOF, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE UPON RULE 144A (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFER OR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (4)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE HOLDER, BY PURCHASING THIS SECURITY, IS DEEMED TO REPRESENT
THAT IT (X) IS NOT ITSELF, AND IS NOT ACQUIRING THE SECURITY WITH THE ASSETS OF,
(i) AN "EMPLOYEE BENEFIT PLAN" (WITHIN THE MEANING OF SECTION 3(3) OF ERISA), A
"PLAN" (WITHIN THE MEANING OF SECTION 4975(e)(i) OF THE INTERNAL REVENUE CODE),
OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF INVESTMENT
IN THE ENTITY BY SUCH AN "EMPLOYEE BENEFIT PLAN" OR "PLAN" AND THE APPLICATION
OF U.S. DEPARTMENT OF LABOR REGULATION SECTION 2510.3-101 OR (ii) A
"GOVERNMENTAL PLAN" (WITHIN THE MEANING OF SECTION 3(32) OF ERISA) OR (Y)(i) IS
ITSELF, OR IS ACQUIRING THE SECURITY WITH THE ASSETS OF, AN "INVESTMENT FUND"
(WITHIN THE MEANING OF PART V(b) OF U.S. DEPARTMENT OF LABOR PTE 84-14) MANAGED
BY A "QUALIFIED PROFESSIONAL ASSET MANAGER" (WITHIN THE MEANING OF PART V(a) OF
PTE 84-14) WHICH HAS MADE OR PROPERLY AUTHORIZED THE DECISION FOR SUCH FUND TO
PURCHASE THE SECURITIES, UNDER CIRCUMSTANCES SUCH THAT PTE 84-14 IS APPLICABLE
TO THE PURCHASE AND HOLDING OF SUCH SECURITIES, (ii) IS AN INSURANCE COMPANY
POOLED SEPARATE ACCOUNT PURCHASING SECURITIES PURSUANT TO SECTION I OF U.S.
DEPARTMENT OF LABOR PTE 90-1 OR A BANK COLLECTIVE INVESTMENT FUND PURCHASING
PURSUANT TO SECTION I OF U.S. DEPARTMENT OF LABOR PTE 91-38, AND IN EITHER CASE,
NO "PLAN" OR "EMPLOYEE BENEFIT PLAN" NOT PURCHASING PURSUANT TO PTE 84-14 OWNS
MORE THAN 10% OF THE ASSETS OF SUCH ACCOUNT OR COLLECTIVE FUND (WHEN AGGREGATED
WITH OTHER PLANS OF THE SAME EMPLOYER OR EMPLOYEE ORGANIZATION), (iii) IS AN
18
<PAGE>
INSURANCE COMPANY USING THE ASSETS OF THE GENERAL ASSET ACCOUNT OF THE INSURANCE
COMPANY TO PURCHASE THE SECURITIES PURSUANT TO SECTION I OF U.S. DEPARTMENT OF
LABOR PTE 95-60, IN WHICH CASE THE RESERVES AND LIABILITIES FOR THE GENERAL
ACCOUNT CONTRACTS HELD BY OR ON BEHALF OF ANY PLAN, TOGETHER WITH ANY OTHER
PLANS MAINTAINED BY THE SAME EMPLOYER (OR AFFILIATES) OR EMPLOYEE ORGANIZATION,
DO NOT EXCEED 10% OF THE TOTAL RESERVES AND LIABILITIES OF THE INSURANCE COMPANY
GENERAL ACCOUNT (EXCLUSIVE OF LIABILITIES), PLUS SURPLUS AS SET FORTH IN THE
NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS' ANNUAL STATEMENT FILED WITH THE
STATE OF DOMICILE OF THE INSURER OR (iv) IS A PLAN ACQUIRING THE SERIES A
PREFERRED SECURITIES WITH ASSETS OVER WHICH AN IN-HOUSE ASSET MANAGER (WITHIN
THE MEANING OF PART IV(a) OF PTE 96-23) HAS DISCRETIONARY AUTHORITY, UNDER
CIRCUMSTANCES SUCH THAT PTE 96-23 IS APPLICABLE TO THE PURCHASE AND HOLDING OF
SUCH SECURITIES. THE HOLDER HEREOF FURTHER AGREES FOR THE BENEFIT OF THE SERIES
A ISSUER THAT IT WILL NOTIFY ANY PURCHASER HEREOF OF THE RESALE RESTRICTIONS
REFERRED TO ABOVE. AN ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT IT
WILL FURNISH TO THE SERIES A ISSUER AND THE PROPERTY TRUSTEE SUCH CERTIFICATES,
LEGAL OPINIONS AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE SERIES A ISSUER THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) A PERSON THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT THAT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT. THE SERIES A PREFERRED SECURITIES WILL BE
ISSUED, AND MAY BE TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF
NOT LESS THAN $100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF SERIES A
PREFERRED SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN
$100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SERIES A PREFERRED
SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF
DISTRIBUTIONS ON SUCH SERIES A PREFERRED SECURITIES, AND SUCH TRANSFEREE SHALL
BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SERIES A PREFERRED SECURITIES."
(i) The Company will, or will cause the Issuer to, arrange for the
registration and qualification of the Preferred Securities for offering and sale
under the applicable securities or "blue sky" laws of such states and other U.S.
jurisdictions as the Initial Purchaser may reasonably designate in connection
with the resale of Preferred Securities as contemplated by this Agreement and
the Offering Memorandum and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Preferred
Securities; PROVIDED that the Company shall not be required to (i) qualify as a
foreign corporation, (ii) consent to the service of process
19
<PAGE>
under the laws of any such state (except service of process with respect to the
offering and sale of the Preferred Securities), (iii) subject itself to taxation
in any such jurisdiction or (iv) make any change to its certificate of
incorporation or by-laws in connection with such qualification. The Company
shall, or shall cause the Issuer to, promptly advise the Initial Purchaser of
the receipt by the Company or the Issuer, as the case may be, of any
notification with respect to the suspension of the qualification or exemption
from qualification of the Preferred Securities for offering or sale in any
jurisdiction or the institution of any proceeding for such purpose.
(j) The Issuer will use the proceeds received from the sale of the
Preferred Securities and the Company will use the proceeds received from the
issue and sale of the Debentures in the manner specified in the Offering
Memorandum under the caption "Use of Proceeds."
(k) Neither the Issuer nor the Company shall, directly or indirectly,
for a period commencing on the date hereof and ending on the 180th day after the
date hereof, except with the prior written consent of FBR, offer to sell,
pledge, sell, grant any option, warrant or other right to purchase, or otherwise
transfer or dispose of (or agree to do any of the foregoing) (a) any trust
certificates or other securities of the Issuer, (b) any preferred stock or any
other security of the Company that is substantially similar to the Preferred
Securities or (c) any other securities which are convertible into, or
exercisable or exchangeable for, any of the securities described in (a) and (b)
above. The foregoing sentence shall not apply to (i) the issuance of the Common
Securities to the Company by the Issuer, (ii) the issuance of the Preferred
Securities being sold hereunder and the sale thereof pursuant hereto or (iii)
the issuance of the Debentures to the Issuer by the Company.
(l) The Company agrees that no future offer and sale of securities of
the Company of any class will be made if, as a result of the doctrine of
"integration" referred to in Rule 502 of Regulation D, such offer and sale could
reasonably have been expected, at the time of such sale, based upon public laws,
Commission releases and Commission no-action letters, to render invalid the
exemption from the registration requirements of the Securities Act relied upon
in connection with the transactions contemplated by this Agreement.
(m) In connection with the original distribution of the Preferred
Securities, the Company agrees that, prior to any offer or resale of the
Preferred Securities by the Initial Purchaser, the Initial Purchaser and counsel
for the Initial Purchaser shall have the right to make, and promptly receive
from the Company adequate information with respect to, reasonable inquiries into
the business of the Company and its subsidiaries.
Section 5. PAYMENT OF EXPENSES. The Company will pay all costs and
expenses incident to the performance of the obligations under this Agreement of
the Company and the Issuer, including (a) the preparation and printing of the
Preliminary Offering Memorandum and the Offering Memorandum (including financial
statements, exhibits and documents included as Exhibits or incorporated by
reference therein) and any amendments or supplements thereto, and the cost of
delivery thereto to the Initial Purchaser, (b) the preparation, issuance,
printing and distribution of the Preferred Securities and any survey of state
securities or "blue sky" laws or legal investment memoranda ("Blue Sky Survey"),
(c) the delivery of the Preferred Securities to
20
<PAGE>
the Initial Purchaser, including any stock transfer taxes payable upon the sale
of the Preferred Securities to the Initial Purchaser, (d) the fees and
disbursements of the Company's and the Issuer's counsel and accountants (e) the
reasonable out-of-pocket expenses of the Initial Purchaser up to $60,000
(including up to $50,000 of the fees and disbursements of the Initial
Purchaser's counsel) of which $25,000 has been paid prior to the execution of
this Agreement (f) the qualification of the Preferred Securities under the
applicable state securities or "blue sky" laws in accordance with Section 4(i)
hereof, including all filing fees and reasonable fees and disbursement of
counsel for the Initial Purchaser in connection therewith and in connection with
the Blue Sky Survey, (g) any filing fees in connection with any filing for
review of the offering with the NASD, (h) any fees charged by rating agencies
for rating the Preferred Securities, (i) the fees and expenses of the Indenture
Trustee, the Property Trustee, the Guarantee Trustee and the Delaware Trustee,
including reasonable fees and disbursements of counsel for such trustees, (j)
all listing fees and reasonable expenses in connection with the application for
designation of the Preferred Securities as PORTAL eligible securities and (k)
the cost of qualifying the Preferred Securities with The Depository Trust
Company.
If the sale of the Preferred Securities provided for herein is not
consummated because this Agreement is terminated pursuant to Section 8 hereof or
because any condition to the obligations of the Initial Purchaser set forth in
Section 6 hereof is not satisfied, other than by reason of a default by the
Initial Purchaser in payment for the Preferred Securities at the Closing Time,
the Company shall reimburse the Initial Purchaser promptly upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursement of
counsel to the Initial Purchaser) that shall have been incurred by them in
connection with the proposed purchase and sale of the Preferred Securities,
however, such expenses shall be limited, as set forth above, in the proceeding
paragraph of this section.
Section 6. CONDITIONS OF INITIAL PURCHASER'S OBLIGATION. The obligation
of the Initial Purchaser to purchase and pay for the Preferred Securities
pursuant to this Agreement is subject to the following conditions:
(a) The Company shall furnish to the Initial Purchaser at the Closing
Time an opinion of Stuzin & Camner, P.A., special counsel for the Company,
addressed to the Initial Purchaser and dated the day of the Closing Time and in
form reasonably satisfactory to Silver, Freedman & Taff, L.L.P., counsel for the
Initial Purchaser, to the effect that:
(i) This Agreement and the Registration Rights Agreement have
been duly authorized, executed and delivered by the Company.
(ii) Each of the Trust Agreement, the Guarantee Agreement and
the Expense Agreement has been duly authorized, executed and delivered
by the Company and constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its
terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
21
<PAGE>
(iii) The Indenture has been duly authorized, executed and
delivered by the Company and, when duly authorized, executed and
delivered by the Indenture Trustee will constitute a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
(iv) The Debentures have been duly authorized, executed,
issued and delivered by the Company and, when the Debentures have been
duly authenticated by the Indenture Trustee and paid for by the Issuer,
will constitute legal, valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(v) The terms of the Registration Rights Agreement, the
Indenture, the Trust Agreement, the Guarantee, the Expense Agreement,
the Preferred Securities, the Debentures and the Common Securities have
been reviewed by such counsel and conform in all material respects to
the descriptions thereof in the Offering Memorandum.
(vi) When the Preferred Securities, the Guarantee and the
Debentures are issued and delivered pursuant to this Agreement, such
securities will not be of the same class (within the meaning of Rule
144A of the Rules and Regulations) as securities of the Company listed
on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated interdealer quotation
system.
(vii) Assuming the accuracy of the representations and
warranties and compliance with the agreement of the Initial Purchaser
in Section 3 hereof, the offer, sale and delivery of the Preferred
Securities to the Initial Purchaser in the manner contemplated by this
Agreement and the Offering Memorandum and the initial resale of the
Preferred Securities by the Initial Purchaser in the manner
contemplated in the Offering Memorandum and this Agreement do not
require registration under the Securities Act, and, on or before the
date hereof, none of the Indenture, the Trust Agreement or the
Guarantee Agreement is required to be qualified under the Trust
Indenture Act, it being understood that such counsel need express no
opinion as to any subsequent resale of any Preferred Securities.
(viii) Neither the Issuer nor the Company is required to be
registered as an "investment company" under the 1940 Act.
(ix) No approval, authorization, consent or order of or filing
with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in connection
with the offering, issuance or sale of the Securities by the Issuer or
is required for the valid authorization, execution, delivery and
performance by the Issuer of the Operative Documents to which it is a
party or the consummation by the Issuer of the transactions
contemplated therein, except for such authorizations as may be required
22
<PAGE>
by the securities or "blue sky" laws of the various states in
connection with the offer and sale of the Securities or by the federal
and state securities laws in connection with the registration
obligations under the Registration Rights Agreement.
(x) The execution and delivery by the Company of, and the
performance by the Company under, this Agreement, the Trust Agreement,
the Indenture, the Guarantee, the Expense Agreement and the
Registration Rights Agreement, the consummation by the Company of the
transactions contemplated hereby and thereby, the filing of the
certificate of trust of the Issuer with the Secretary of State of the
State of Delaware, compliance by the Company with the terms of the
foregoing and the application of the proceeds from the sale of the
Preferred Securities as contemplated by the Offering Memorandum do not
and will not (A) violate the charter or by-laws of the Company or any
Subsidiaries or (B) violate any federal law of the United States or law
of the State of New York applicable to the Company or its Material
Subsidiaries or the General Corporation Law of the State of Delaware;
PROVIDED that, insofar as the performance by the Company of its
obligations under the Indenture and the Debentures is concerned, such
counsel need express no opinion as to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights.
(xi) The execution and delivery by the Issuer of, and the
performance by the Issuer of its obligations under, this Agreement and
the Registration Rights Agreement, the issuance and sale of the
Preferred Securities by the Issuer in accordance with the terms of this
Agreement, and the consummation by the Issuer of the other transactions
contemplated hereby and thereby, will not (i) violate any federal law
of the United States or law of the State of New York or the State of
Delaware applicable to the Issuer or (ii) conflict with the Guarantee
Agreement or the Operative Documents, except that such counsel need
express no opinion in this paragraph (xii) with respect to any state
securities or "blue sky" laws.
(xii) The Company and each Subsidiary other than BankUnited,
FSB, has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Florida,
with full corporate power and authority to own its properties and
conduct is business as described in the Offering Memorandum.
(xiii) BankUnited, FSB is a federally chartered savings bank
duly organized under the laws of the United States, its deposits are
insured by the FDIC and is authorized to do business as a federally
chartered savings bank under the laws of the United States, and has all
corporate power and authority to own its properties and conduct its
business as presently conducted, except where the failure to have such
corporate power and authority would not, individually or in the
aggregate with all other failures, have a Material Adverse Effect.
(xiv) Each of the Company and the Subsidiaries are duly
qualified or licensed and in good standing as a foreign corporation in
each jurisdiction in which the ownership or leasing of its properties
or character of its operations makes such qualification necessary,
23
<PAGE>
except where failure to obtain such qualification, license or good
standing would not, individually or in the aggregate with all other
failures, have a Material Adverse Effect.
(xv) All of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and were not issued in violation of the preemptive
rights of any other stockholder of the Company; and all of the issued
and outstanding shares of capital stock of each of the Company's
Material Subsidiaries are owned of record by the Company or one or more
of its subsidiaries, and all shares of such capital stock are duly and
validly issued, fully paid and non-assessable (except to the extent
provided in 12 U.S.C. ss.55 or any comparable provision of state law).
(xvi) The Company has an authorized capitalization at each
date as set forth in the Offering Memorandum.
(xvii) No approval, authorization, consent or order of or
filing with any federal or District of Columbia governmental or
regulatory commission, board, body, authority or agency is required in
connection with the offering, issuance or sale of the Guarantee and the
Debentures by the Company or is required for the valid authorization,
execution, delivery and performance by the Company of the Operative
Documents or the consummation by the Company of the transactions
contemplated therein, other than such authorizations as may be required
by the securities or "blue sky" laws of the various states in
connection with the offer and sale of the Guarantee and the Debentures
or by the federal and state securities laws in connection with the
registration obligations under the Registration Rights Agreement.
(xviii) The execution and delivery by the Company of, and the
performance by the Company under, this Agreement, the Trust Agreement,
the Indenture, the Debentures, the Guarantee, the Expense Agreement and
the Registration Rights Agreement, the consummation by the Company of
the transactions contemplated hereby and thereby, the filing of the
certificate of trust of the Issuer with the Secretary of State of the
State of Delaware, compliance by the Company with the terms of the
foregoing and the application of the proceeds from the sale of the
Preferred Securities as contemplated by the Offering Memorandum do not
and will not (A) conflict with or result in any breach of, or
constitute a default under (nor constitute any event which with notice,
lapse of time, or both would constitute a breach of or default under),
(1) any provision of any Agreement or Instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
any of them or their respective properties may be bound or affected,
except any such breaches or defaults as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect
or (2) any federal or New York law, regulation or rule or the General
Corporation Law of the State of Delaware or Florida, or any decree,
judgment or order of any federal or state governmental authority known
to such counsel applicable to the Company or any of its Material
Subsidiaries; (B) to the best of such counsel's knowledge result in, or
require the creation or imposition of, any material lien upon or with
respect to any of the properties now owned or hereafter acquired by the
Company or any of its Subsidiaries.
24
<PAGE>
(xix) To the best of such counsel's knowledge, neither the
Company nor any of its Subsidiaries is in breach of, or in default
under (nor has any event occurred which with notice, lapse of time, or
both would constitute a breach of, or default under), (A) any Agreement
or Instrument to which the Company or any of its subsidiaries is a
party or by which any of them or their respective properties may be
bound or affected or (B) any law, regulation or rule or any decree,
judgment or order applicable to the Company or any of its subsidiaries,
except any such breaches or defaults of a type referred to in (A) or
(B) above which would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect or a material adverse
effect on the ability of the Company to consummate the transactions
contemplated by this Agreement, the Trust Agreement, the Indenture, the
Debentures, the Guarantee, the Expense Agreement and the Registration
Rights Agreement.
(xx) To the best of such counsel's knowledge, there are no
Agreements of a character which are required to be summarized or
described in the Offering Memorandum which have not been so filed,
summarized or described.
(xxi) To the best of such counsel's knowledge, there are no
actions, suits or proceedings pending or threatened against the Company
or any of its subsidiaries or any of their respective properties, at
law or in equity or before or by any court, governmental authority or
administrative or regulatory authority which are required to be
summarized or described in the Offering Memorandum but are not so
summarized or described.
(xxii) The Company is duly registered as a unitary savings and
loan holding company under the Home Owners Loan Act, as amended; the
deposit accounts of each of the Company's banking subsidiaries is
insured by the Savings Association Insurance Fund of the FDIC to the
fullest extent permitted by law and the rules and regulations of the
FDIC, and no proceedings for the termination of such insurance are
pending or, to the best of such counsel's knowledge, threatened; and
neither the Company nor any of its Subsidiaries is party to or
otherwise the subject of any consent decree, memorandum of
understanding, or written agreement as defined in the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (12 U.S.C.
1818(e)(1)(A)(i)).
In addition, such counsel shall state that, as counsel to the
Company, they reviewed the Offering Memorandum and the documents
incorporated or deemed incorporated by reference therein (the "Exchange
Act Documents"), participated in the preparation of the Offering
Memorandum and the Exchange Act Documents and in discussions with the
Initial Purchaser and representatives of the Company, its special
counsel and its independent public accountants and advised the Company
as to the requirements of the Securities Act and the applicable rules
and regulations thereunder. Such counsel shall also state that they
reviewed certificates of certain officers of the Company, and the
letter from the Company's independent accountants. Such counsel shall
state that nothing came to their attention that has caused them to
believe that any part of the Offering Memorandum (including the
Exchange Act Documents) contained any untrue statement of a material
fact
25
<PAGE>
or omitted to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
Such counsel may also state that the limitations inherent in
the independent verification of factual matters are such, however, that
they do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering Memorandum or any
amendment or supplement thereto, except for those made under the
captions "BankUnited Financial Corporation," "Description of the Series
A Guarantee," "Relationship Among the Series A Preferred Securities,
the Series A Subordinated Debentures, the Expense Agreement and the
Series A Guarantee", "Certain Federal Income Tax Consequences" and
"ERISA Considerations", in the Offering Memorandum, and any comparable
provisions in any amendment or supplement to the Offering Memorandum
insofar as they relate to provisions of documents or legal matters
therein described. Also, such counsel may state that they do not
express any opinion or belief as to the financial statements and
schedules or other financial and statistical data contained in the
Offering Memorandum.
Such counsel may rely as to certain matters on information
obtained from public officials, officers of the Company and other
sources believed by such counsel to be responsible, and shall assume
that the Indenture has been duly authorized, executed and delivered by
the Trustee, that the Trustee's certificates of authentication of the
Debentures have been duly manually signed by one of the Trustee's
authorized officers, and that the signatures on all documents examined
by such counsel are genuine, assumptions which they will not have
independently verified.
The foregoing opinion of such counsel may be limited to the
federal laws of the United States, the laws of the State of Florida,
the laws of the State of New York and the General Corporation Law of
the State of Delaware, and may state that such counsel expresses no
opinion as to the effect of the laws of any other jurisdiction.
Such counsel may state that their opinion is delivered to the
Initial Purchaser as counsel for the Company and is solely for the
Initial Purchaser and their counsel's benefit.
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the Securities as
counsel for the Initial Purchaser may reasonably request. In giving
such opinion, such counsel may rely, as to all matters governed by the
laws of the State of Delaware, on the opinion delivered pursuant to
Section 6(f) hereof by Richards, Layton & Finger, P.A., and as to all
matters governed by other laws, such counsel may rely on the opinion of
other counsel acceptable to Silver, Freedman & Taff, L.L.P., so long as
such other counsel's opinion is delivered to the Initial Purchaser and
specifically indicates that it has been prepared for the benefit of the
Initial Purchaser and its counsel. In addition, in giving such opinion,
such counsel may state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries,
26
<PAGE>
certificates of trustees of the Issuer and certificates of public
officials, PROVIDED that such certificates have been delivered to the
Initial Purchaser.
(b) At the Closing Time, you shall have received a signed opinion of
Richards, Layton & Finger, P.A. counsel to the Delaware Trustee, dated as of the
Closing Time, addressed to the Initial Purchaser, in form and substance
reasonably satisfactory to Silver, Freedman & Taff, L.L.P., to the effect that:
(i) The Bank of New York (Delaware), a Delaware banking
corporation, has been duly incorporated and is validly existing in good
standing as a banking corporation under the laws of the State of
Delaware and has the corporate power to act as Trustee of a Delaware
business trust under the laws of the State of Delaware, 12 DEL. ss.
3801 ET SEQ.
(c) At the Closing Time, you shall have received a signed opinion of
Emmet, Marvin & Martin LLP, counsel to The Bank of New York, dated as of the
Closing Time, addressed to the Initial Purchaser, in form and substance
reasonably satisfactory to Silver, Freedman & Taff, L.L.P., to the effect that:
(i) The Trustee is a banking corporation duly incorporated and
validly existing under the laws of the State of New York.
(ii) The execution, delivery and performance by The Bank of
New York, as property trustee (the "Property Trustee") of the Trust
Agreement, the execution, delivery and performance by The Bank of New
York, as Guarantee Trustee, of the Guarantee Agreement and the
execution, delivery and performance by The Bank of New York, as the
Indenture Trustee, of the Indenture have been duly authorized by all
necessary corporate action on the part of the Property Trustee, the
Guarantee Trustee and the Indenture Trustee, respectively. The Trust
Agreement, the Guarantee Agreement and the Indenture have been duly
executed and delivered by the Property Trustee, the Guarantee Trustee
and the Indenture Trustee, respectively, and constitute the legal,
valid and binding obligations of the Property Trustee, the Guarantee
Trustee and the Indenture Trustee, respectively, enforceable against
the Property Trustee, the Guarantee and the Indenture Trustee,
respectively, in accordance with their terms, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, receivership or similar laws
relating to the enforcement of creditors' rights generally, and by
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(iii) The execution, delivery and performance of the Trust
Agreement, the Guarantee Agreement and the Indenture by the Property
Trustee, the Guarantee Trustee and the Indenture Trustee, respectively,
do not conflict with or constitute a breach of the applicable
organizational documents or by-laws of the Property Trustee, the
Guarantee Trustee or the Indenture Trustee, respectively, or the terms
of any indenture or other agreement or instrument known to such counsel
and to which the Property Trustee, the Guarantee Trustee or the
Indenture Trustee, respectively, is a party or is bound or any
27
<PAGE>
judgement, order or decree known to such counsel to be applicable to
the Property Trustee, the Guarantee Trustee or the Indenture Trustee,
respectively, of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Property
Trustee, the Guarantee Trustee or the Indenture Trustee, respectively.
(iv) No consent, approval or authorization of, or registration
with or notice to, any federal or New York State banking authority is
required for the execution, delivery or performance by the Property
Trustee, the Guarantee Trustee or the Indenture Trustee of the Trust
Agreement, the Guarantee Agreement or the Indenture, respectively.
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the Securities as
counsel for the Initial Purchaser may reasonably request. In giving
such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of Delaware, the
law of the State of New York and the federal law of the United States,
upon the opinions of counsel satisfactory to counsel for the Initial
Purchaser. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its
subsidiaries, certificates of trustees of the Issuer and certificates
of public officials; PROVIDED that such certificates have been
delivered to the Initial Purchaser.
(d) At the Closing Time, you shall have received a signed opinion of
Kronish, Lieb, Weiner & Hellman LLP, special United States tax counsel to the
Company and the Issuer, dated as of the Closing Time, addressed to the Initial
Purchaser, in form and substance reasonably satisfactory to counsel for the
Initial Purchaser, to the effect that:
(i) The Issuer will not be characterized as an association
taxable as a corporation for United States federal income tax purposes.
(ii) The Debentures will constitute indebtedness of the
Company.
(iii) Subject to the qualifications set forth therein, the
statements made in the Offering Memorandum under the captions "Certain
Federal Income Tax Consequences" and "Certain Federal Income Tax
Consequences Applicable to Additional Series A Preferred Securities",
fairly present in all material respects the principal United States
federal income tax consequences of an investment in the Preferred
Securities.
(iv) The statements made in the Offering Memorandum under the
captions "Certain Federal Income Tax Consequences", "Certain Federal
Income Tax Consequences Applicable to Additional Series A Preferred
Securities", "Risk Factors Right to Defer Interest Payment Obligation;
Tax Consequences; Market Price Consequences" and "Risk Factors -
Possible Tax Law Changes Affecting The Series A Preferred Securities"
fairly present and constitute a fair and accurate summary of the legal
matters and conclusions addressed therein in all material respects.
28
<PAGE>
(e) At the Closing Time, you shall have received a signed opinion of
Richards, Layton & Finger, P.A., special Delaware counsel to the Issuer and the
Company, dated as of the Closing Time, together with signed or reproduced copies
of such opinion for the Initial Purchaser, in form and substance reasonably
satisfactory to counsel for the Initial Purchaser, to the effect set forth
below.
(i) The Issuer has been duly created and is validly existing
in good standing as a business trust under the Delaware Act, and all
filings required under the laws of the State of Delaware with respect
to the creation and valid existence of the Issuer as a business trust
have been made.
(ii) Under the Delaware Act and the Trust Agreement, the
Issuer has the trust power and authority to own its property and
conduct its business, all as described in the Offering Memorandum.
(iii) The Trust Agreement constitutes a valid and binding
obligation of the Company and the Trustees, and is enforceable against
the Company and the Trustees, in accordance with its terms, subject, as
to enforcement, to the effect upon the Trust Agreement of (i)
bankruptcy, insolvency, moratorium, receivership, reorganization,
liquidation, fraudulent conveyance or transfer and other similar laws
relating to the rights and remedies of creditors generally, (ii)
principles of equity, including applicable law relating to fiduciary
duties (regardless of whether considered and applied in a proceeding in
equity or at law), and (iii) the effect of applicable public policy on
the enforceability of provisions relating to indemnification or
contribution.
(iv) Under the Delaware Act and the Trust Agreement, the
Issuer has the trust power and authority (i) to execute and deliver,
and to perform its obligations under, this Agreement and the
Registration Rights Agreement and (ii) to issue and perform its
obligations under the Preferred Securities.
(v) Under the Delaware Act and the Trust Agreement, the
execution and delivery by the Issuer of this Agreement and the
Registration Rights Agreement, and the performance by the Issuer of its
obligations hereunder and thereunder, have been duly authorized by all
necessary trust action on the part of the Issuer.
(vi) The Preferred Securities have been duly authorized by the
Trust Agreement and are duly and validly issued and, subject to the
qualifications set forth herein, fully paid and nonassessable undivided
beneficial interests in the assets of the Issuer and are entitled to
the benefits of the Trust Agreement. The holders of the Preferred
Securities, as beneficial owners of the Trust, will be entitled to the
same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General Corporation
Law of the State of Delaware. Such counsel may note that the holders of
Preferred Securities may be obligated, pursuant to the Trust Agreement,
(i) to provide indemnity and/or security in connection with and pay
taxes or governmental charges arising from transfers or exchanges of
certificates for Preferred Securities and the issuance
29
<PAGE>
of replacement certificates for Preferred Securities, and (ii) to
provide security or indemnity in connection with requests of or
directions to the Property Trustee to exercise its rights and powers
under the Trust Agreement.
(vii) Under the Delaware Act and the Trust Agreement, the
issuance of the Preferred Securities is not subject to preemptive
rights.
(viii) The issuance and sale by the Issuer of the Preferred
Securities, the execution, delivery and performance by the Issuer of
this Agreement and the Registration Rights Agreement, the consummation
by the Issuer of the transactions contemplated hereby and thereby and
compliance by the Issuer with its obligations hereunder and thereunder,
and the performance by the Company, as sponsor, of its obligations
under the Trust Agreement (A) do not violate (i) any of the provisions
of the certificate of trust of the Issuer or the Trust Agreement or
(ii) any applicable Delaware law or Delaware administrative regulation
(except that such counsel need express no opinion with respect to the
securities laws of the State of Delaware) and (B) do not require any
consent, approval, license, authorization or validation of, or filing
or registration with, any Delaware legislative, administrative or
regulatory body under the laws or administrative regulations of the
State of Delaware (except that such counsel need express no opinion
with respect to the securities laws of the State of Delaware).
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the Securities as
counsel for the Initial Purchaser may reasonably request. In giving
such opinion, such counsel may state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its
subsidiaries, certificates of trustees of the Issuer and certificates
of public officials; PROVIDED that such certificates have been
delivered to the Initial Purchaser.
(f) At the Closing Time, you shall have received the favorable opinion
of Silver, Freedman, & Taff, L.L.P., counsel for the Initial Purchaser, dated as
of the Closing Time, addressed to the Initial Purchaser, to the effect that the
opinions delivered pursuant to Sections 6(a), 6(b), 6(c), 6(d) and 6(e) appear
on their face to be appropriately responsive to the requirements of this
Agreement. In giving such opinion, such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the federal law of the United
States, upon the opinions of counsel satisfactory to you. Such counsel may also
state that they have relied, to the extent they deem proper, upon certificates
of officers of the Company and certificates of public officials.
(g) At the Closing Time, (i) the Offering Memorandum and the Consent
Solicitation documents, as they may then be amended or supplemented, shall not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, (ii)
except as may be disclosed in the Offering Memorandum and the Consent
Solicitation documents, there shall not have been, since the respective dates as
of which
30
<PAGE>
information is given in the Offering Memorandum and the Consent Solicitation
documents, any material adverse change in the financial condition, properties,
assets, business, results of operations or prospects of the Company and its
subsidiaries and the Issuer taken as a whole, (iii) each of the Company and the
Issuer shall have complied in all material respects with all agreements and
satisfied in all material respects all conditions on its part to be performed or
satisfied at or prior to the Closing Time and (iv) the representations and
warranties of the Company and the Issuer set forth in Section 1(a) shall be
accurate in all material respects as though expressly made at and as of the
Closing Time. At the Closing Time, you shall have received a certificate of (x)
the Chief Executive Officer or an Executive Vice President of the Company and
(y) the Chief Financial Officer of the Company, dated as of the Closing Time, to
such effect. At the Closing Time, you shall also have received a certificate
signed by an Administrative Trustee, dated as of the Closing Time, to such
effect.
(h) At the time that this Agreement is executed by the Company, you
shall have received from Price Waterhouse a letter, dated such date, in form and
substance reasonably satisfactory to you and Price Waterhouse confirming that
they are independent public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and regulations
thereunder, and otherwise satisfactory to you.
(i) At the Closing Time, you shall have received from Price Waterhouse
a letter, in form and substance reasonably satisfactory to you and Price
Waterhouse and dated as of the Closing Time, to the effect that they reaffirm
the statements made in the letters furnished pursuant to Section 6(i) hereof,
except that the specified date referred to shall be a date not more than five
days prior to the Closing Time.
(j) At the Closing Time, counsel for the Initial Purchaser shall have
been furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the issuance
and sale of the Securities as contemplated in this Agreement and in order to
evidence the accuracy and completeness of any of representations, warranties or
statements of the Company and the Issuer, the performance of any of the
covenants of the Company and the Issuer, or the fulfillment of any of the
conditions herein contained; and all proceedings by the Company and the Issuer
at or prior to the Closing Time in connection with the authorization, issuance
and the sale of the Securities as contemplated in this Agreement shall be
reasonably satisfactory in form and substance to you and to counsel for the
Initial Purchaser.
(k) At the Closing Time, the Issuer and the Company shall have executed
and delivered the Registration Rights Agreement, and the Registration Rights
Agreement shall be in full force and effect.
(l) At the Closing time, there shall not be any pending or threatened
legal or governmental proceedings against the Company or the Issuer with respect
to any of the transactions contemplated in this Agreement.
(m) The Preferred Securities shall have been approved by the NASD as
being eligible for trading in the PORTAL market.
31
<PAGE>
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, this Agreement may be
terminated by you on notice to the Company and the Issuer at any time at or
prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 5 hereof.
Notwithstanding any such termination, the provisions of Section 7 hereof shall
remain in effect. The Initial Purchaser may in its sole discretion waive
compliance with any conditions to its obligations hereunder.
Section 7. INDEMNIFICATION
(a) The Company and the Issuer, jointly and severally, agree to
indemnify, defend and hold harmless the Initial Purchaser, and any person who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any loss, expense, liability or
claim (including the reasonable cost of investigation) which, jointly or
severally, the Initial Purchaser or controlling person may incur arising out of
or is based upon any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Offering Memorandum or in the Offering
Memorandum (or any amendment or supplement thereto or any Exchange Act Document)
or, arises out of or is based upon any omission or alleged omission to state a
material fact necessary to make the statements made in such Preliminary Offering
Memorandum or in such Offering Memorandum (or any amendment or supplement
thereto or any Exchange Act Document) not misleading, except insofar as any such
loss, expense, liability or claim arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in and in
conformity with information furnished in writing by or on behalf of the Initial
Purchaser to the Company expressly for use with reference to the Initial
Purchaser in such Preliminary Offering Memorandum or in such Offering Memorandum
(or any amendment or supplement thereto) or arises out of or is based upon any
omission or alleged omission to state a material fact in connection with such
information necessary to make such information not misleading; PROVIDED FURTHER
that the foregoing indemnification with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of the Initial Purchaser (or any
person controlling the Initial Purchaser) from whom the person asserting any
such losses, claims, damages or liabilities purchased any of the Preferred
Securities if a copy of the Offering Memorandum (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of the Initial Purchaser in the initial resale
to such person, if such is required by law, at or prior to the written
confirmation of the sale of such Preferred Securities to such person and if the
Offering Memorandum (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage or liability, unless such failure
resulted from non-compliance by the Company with Section 4(c). For purposes of
the last proviso to the immediately preceding sentence, the term "Offering
Memorandum" shall not be deemed to include the documents incorporated therein by
reference, and the Initial Purchaser shall not be obligated to send or give any
supplement or amendment to any document incorporated by reference in any
Preliminary Offering Memorandum or the Offering Memorandum to any person.
If any action is brought against the Initial Purchaser or controlling
person in respect of which indemnity may be sought against the Company or the
Issuer pursuant to the foregoing
32
<PAGE>
paragraph, the Initial Purchaser shall promptly notify the Company in writing of
the institution of such action and the Company shall assume the defense of such
action, including the employment of counsel and payment of expenses. The Initial
Purchaser or controlling person shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of the Initial Purchaser or such controlling person 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
employed counsel to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
Company and paid as incurred (it being understood, however, that the Company
shall not be liable for the expenses of more than one separate counsel in any
one action or series of related actions in the same jurisdiction representing
the indemnified parties who are parties to such action). 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.
(b) The Initial Purchaser agrees to indemnify, defend and hold harmless
the Company and the Issuer, their respective directors and officers and any
person who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any loss, expense, liability of
claim (including the reasonable cost of investigation) which, jointly or
severally, the Company or any such person arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact contained in and
in conformity with information furnished in writing by or on behalf of the
Initial Purchaser to the Company expressly for use with reference to the Initial
Purchaser in the Offering Memorandum (or in the Offering Memorandum as amended
or supplemented), or arises out of or is based upon any omission or alleged
omission to state a material fact in connection with such information necessary
to make such information not misleading.
If any action is brought against the Company, the Issuer or any such
person in respect of which indemnity may be sought against the Initial Purchaser
pursuant to the foregoing paragraph, the Company, the Issuer or such person
shall promptly notify the Initial Purchaser in writing of the institution of
such action and the Initial Purchaser shall assume the defense of such action,
including the employment of counsel and payment of expenses. The Company, the
Issuer or such person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of the
Company, the Issuer or such person unless the employment of such counsel shall
have been authorized in writing by the Initial Purchaser in connection with the
defense of such action or the Initial Purchaser shall not have employed counsel
to have charge of the defense of such action or such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it which are different from or additional to those available to the Initial
Purchaser (in which case the Initial Purchaser shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
Initial Purchaser and paid as incurred (it being understood, however, that the
Initial Purchaser shall not be liable for the
33
<PAGE>
expenses of more than one separate counsel in any one action or series of
related actions in the same jurisdiction representing the Indemnified parties
who are parties to such action). Anything in this paragraph to the contrary
notwithstanding, the Initial Purchaser shall not be liable for any settlement of
any such claim or action affected without the written consent of the Initial
Purchaser.
(c) If the indemnification provided in this Section 7 is unavailable to
an indemnified party under subsections (a) and (b) of this Section 7 in respect
of any losses, expenses, liabilities or claims referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, expenses, liabilities or claims (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Issuer on the one hand and the Initial Purchaser on the other hand from the
offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Issuer on the one hand and of the
Initial Purchaser on the other in connection with the statements or omissions
which resulted in such losses, expenses, liabilities or claims, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Issuer on the one hand and the Initial Purchaser on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering of the Securities (net of underwriting discounts and commissions but
before deducting expenses) received by the Company and the Issuer bear to the
underwriting discounts and commissions received by the Initial Purchaser. The
relative fault of the Company and the Issuer on the one hand and of the Initial
Purchaser on the other shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission relates to information supplied by the Company, the
Issuer or by the Initial Purchaser and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages and liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any claim or action.
(d) The Company, the Issuer and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in subsection
(c) above. Notwithstanding the provisions of this Section 7, the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total price at which the Securities distributed by it exceeds the
amount of any damages which such Initial Purchaser has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnity and contribution agreements contained in this Section
7, and the covenants, warranties and representations of the Company and the
Issuer contained in this Agreement, shall remain in full force and effect
regardless of any investigation made by or on
34
<PAGE>
behalf of the Initial Purchaser, or any person who controls the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, or by or on behalf of the Company, its directors and officers or
any person who controls the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, and shall survive any termination of this
Agreement or the issuance and delivery of the Securities. The Company and the
Initial Purchaser agree promptly to notify the other of the commencement of any
litigation or proceeding against it and, in the case of the Company, against any
of the Company's officers and directors, in connection with the issuance and
sale of the Securities, or in connection with the Offering Memorandum.
Section 8. TERMINATION OF AGREEMENT. The obligations of the Initial
Purchaser hereunder shall be subject to termination in the absolute discretion
of the Initial Purchaser if, at any time prior to the time of purchase, trading
in securities on the New York Stock Exchange shall have been suspended or
minimum prices shall have been established on the New York Stock Exchange, or if
a banking moratorium shall have been declared either by the United States or New
York State authorities, or if the United States shall have declared war in
accordance with its constitutional processes or there shall have occurred any
material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on the
financial markets of the United States as, in the reasonable judgment of the
Initial Purchaser, to make it impracticable to market the Securities.
If the Initial Purchaser elects to terminate this Agreement as provided
in this Section 8, the Company shall be notified promptly in writing delivered
by facsimile or telegram.
If the sale to the Initial Purchaser of the Securities, as contemplated
by this Agreement, is not carried out by the Initial Purchaser for any reason
permitted under this Agreement or if such sale is not carried out because the
Company shall be unable to comply with any of the terms of this Agreement, the
Company shall not be under any obligation or liability hereunder or thereunder
(except to the extent provided in Sections 5 and 7 hereof), and the Initial
Purchaser shall be under no obligation or liability to the Company under this
Agreement (except to the extent provided in Section 7 hereof) or to one another
hereunder.
This Agreement may also terminate pursuant to the provisions of Section
6 with the effect stated in such Section.
Section 9. NOTICES. All notices and other communications under the
Agreement shall be in writing and shall be deemed to have been duly given, upon
receipt, if delivered, mailed or transmitted by any standard form of
telecommunication. Notices to the Initial Purchaser shall be directed to FBR,
Potomac Tower, 1001 19th Street North, 10th Floor, Arlington, Virginia 22209
(telecopier no.: (703) 312-9698), attention: James Kleeblatt, with a copy to
Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W. 7th Floor,
Washington, D.C. 20005 (telecopier no.: (202) 682-0354), attention: Dave M.
Muchnikoff, P.C. or Martin L. Meyrowitz, P.C.; and notices to the Company shall
be directed to if at BankUnited Financial Corporation, 255 Alhambra Circle,
Coral Gables, Florida 33134, (telecopier no.: (305) 569- 2057), attention of Sam
Milne,
35
<PAGE>
with a copy to Stuzin & Camner, 550 Biltmore Way, Coral Gables, Florida 33134
(telecopier no.: (305) 442-2389), attention: Marsha Bilzin, Esq.
Section 10. PARTIES. This Agreement is made solely for the benefit of
the Initial Purchaser, the Company and the Issuer and, to the extent expressed,
any person who controls the Company, the Issuer or the Initial Purchaser within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, and the directors of the Company and the Issuer, their officers, employees
and trustees, and their respective executors, administrators, successors and
assigns and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include the
purchaser, as such purchaser, from any Initial Purchaser of the Securities.
Section 11. GOVERNING LAW AND TIME. This Agreement shall be governed by
the laws of the State of Florida, without giving effect to the provisions
thereof relating to conflicts of law. Specified times of the day refer to New
York City time.
Section 12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
36
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, the Issuer and the
Initial Purchaser in accordance with its terms.
Very truly yours,
BANKUNITED CAPITAL
By: BankUnited Financial Corporation
as sponsor
By: ---------------------------------
Name:
Title:
BANKUNITED FINANCIAL CORPORATION
By: ---------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
BY: FRIEDMAN, BILLINGS, RAMSEY & CO.
-------------------------------
Name:
Title:
37
EXHIBIT G
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT, dated as of December 30, 1996, between BankUnited Financial
Corporation, a Florida corporation (the "Corporation") having its principal
office at 255 Alhambra Circle, Coral Gables, Florida 33134, and BankUnited
Capital, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities, Series A (the
"Common Securities") to and receive debentures from the Corporation and to issue
and sell 10 1/4% Trust Preferred Securities, Series A (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Trust Agreement of the Trust, dated as of December 30,
1996, as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Corporation will directly or indirectly own all of the Common
Securities of the Trust and will issue the debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Corporation hereby agrees shall benefit
the Corporation and which purchase the Corporation acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Corporation and
Trust hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by the Corporation.
Subject to the terms and conditions hereof, the Corporation hereby
irrevocably and unconditionally guarantees to each person or entity to whom the
Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the
full payment, when and as due, of any and all Obligations (as hereinafter
defined) to such Beneficiaries. As used herein, "Obligations" means any costs,
expenses or liabilities of the Trust, other than obligations of the Trust to pay
to holders of any Preferred Securities or other similar interests in the Trust
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect upon
the later of (a) the date on which full payment has been made of all amounts
payable to all holders of all the Preferred Securities (whether upon redemption,
liquidation, exchange or otherwise) and (b) the
G-1
<PAGE>
date on which there are no Beneficiaries remaining; provided, however, that this
Agreement shall continue to be effective or shall be reinstated, as the case may
be, if at any time any holder of Preferred Securities or any Beneficiary must
restore payment of any sums paid under the Preferred Securities, under any
Obligation, under the Guarantee Agreement dated the date hereof by the
Corporation and The Bank of New York, as guarantee trustee or under this
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
Section 1.3. Waiver of Notice.
The Corporation hereby waives notice of acceptance of this Agreement and of
any Obligation to which it applies or may apply, and the Corporation hereby
waives presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of the Corporation
under this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or
any portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the
obligations;
(b) any failure, omission, delay or lack of diligence on the part
of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with respect
to the Obligations or any action on the part of the Trust granting
indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition
or readjustment of debt of, or other similar proceedings affecting,
the Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Corporation with respect to the happening of any of, the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against the Corporation
and the Corporation waives any right or remedy to require that any action be
brought against the Trust or any other person or entity before proceeding
against the Corporation.
Section 1.6. Subrogation.
The Corporation shall be subrogated to all (if any) rights of the Trust in
respect of any amounts paid to the Beneficiaries by the Corporation under this
Agreement; provided, however,
G-2
<PAGE>
that the Corporation shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Agreement, if, at the
time of any such payment, any amounts are due and unpaid under this Agreement.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives of the Corporation
and shall inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
So long as there remains arty Beneficiary or any Preferred Securities are
outstanding, this Agreement shall not be modified or amended in any manner
adverse to such Beneficiary or to the holders of the Preferred Securities.
Section 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail) or by registered or
certified mail, addressed as follows (and if so given, shall be deemed given
when mailed:
BankUnited Capital
c/o The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Facsimile No.: (305) 569-2057
Attention: Treasurer
Section 2.4. Choice of Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
G-3
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
BANKUNITED FINANCIAL CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
BANKUNITED CAPITAL
By:_____________________________
Name:___________________________
Title:__________________________
G-4
