As filed with the Securities and Exchange Commission on March 6, 1998
Registration No. 333-28677
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BANKUNITED FINANCIAL CORPORATION BANKUNITED CAPITAL III
- -------------------------------- ------------------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
FLORIDA 65-0377773 DELAWARE APPLIED FOR
- ------------- -------------------- ------------- -------------------
(State or other (I.R.S. Employer (State or other (I.R.S. Employer
jurisdiction of Identification No.) jurisdiction of Identification No.)
incorporation or incorporation or
organization) organization)
255 Alhambra Circle 255 Alhambra Circle
Coral Gables, Floridal 33134 Coral Gables, Floridal 33134
(305) 569-2000 (305) 569-2000
- ------------------------------------ ------------------------------------
(Address, including, ZIP Code, (Address, including, ZIP Code,
and telephone number, including and telephone number, including
area code, of registrant's principal area code, of registrant's principal
executive offices) executive offices)
Alfred R. Camner
Chairman of the Board
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
(305) 569-2000
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(Name, address, including ZIP Code, and telephone
number, including area code, of agent for service)
Copies to:
Marsha D. Bilzin, Esq. Michael L. Fitzgerald, Esq.
Stuzin and Camner, Brown & Wood LLP
Professional Association One World Trade Center
550 Biltmore Way, Suite 700 New York, New York 10048
Coral Gables, Florida 33134 (212) 839-5393
(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 any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box |_|.
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box |_|.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering |_|.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering |_|.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box |_|.
<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(1) per share price fee(2)
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<S> <C> <C> <C> <C>
___% Trust Preferred Securities, of BankUnited Capital III 4,140,000(3) $25.00 $103,500,000 (2)
- ----------------------------------------------------------------------------------------------------------------------------------
___% Junior Subordinated Deferrable Interest Debentures of N/A
BankUnited Financial Corporation (4)
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BankUnited Financial Corporation Guarantee with respect to Trust N/A
Preferred Securities, (5)
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Total(5)................................................... 4,140,000 $103,500,000 (2)
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<FN>
(1) This Registration Statement is deeemed to cover the Junior Subordinated
Debentures of BankUnited Financial Corporation under the Indenture, the
rights of holders of Preferred Securities of BankUnited Capital III under a
trust agreement, the rights of holders of the Preferred Securities under the
Guarantee, the Expense Agreement entered into by BankUnited Financial
Corporation and certain backup undertakings as described herein.
(2) The registration fee was paid upon the filing of the Registration Statement
on June 6, 1997. This section is included solely to increase the number of
shares being registered from 3,450,000 to 4,140,000.
(3) Include up to 540,000 additional Trust Preferred Securities which may be
acquired by the Underwrwiters to cover over-allotments, if any.
(4) The ___% Junior Subordinated Deferrable Interest Debentures (the "Junior
Subordinated Debentures") will be purchased by BankUnited Capital III with
the proceeds of the sale of the Trust Preferred Securities, (the "Preferred
Securities"). No separate consideration will be received for the Junior
Subordinated Debentures distributed upon any liquidation of BankUnited
Capital III.
(5) No separate consideration will be received for the BankUnited Financial
Corporation Guarantee (the "Guarantee").
</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
PROSPECTUS DATED MARCH 6, 1998
[LOGO]
3,600,000 Trust Preferred Securities
BANKUNITED CAPITAL III
____% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security)
guaranteed, to the extent set forth herein, by
BANKUNITED FINANCIAL CORPORATION
The ____% Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent beneficial interests in BankUnited Capital
III, a trust created under the laws of the State of Delaware (the "Trust
Issuer"). BankUnited Financial Corporation, a Florida corporation (the "Company"
or "BankUnited"), will be the owner of all of the beneficial interests
represented by common securities of the Trust Issuer (the "Common Securities"
and, collectively with the Preferred Securities, the "Trust Securities"). The
Bank of New York is the Property Trustee of the Trust Issuer. The Trust Issuer
exists for the sole purpose of issuing the Trust Securities and investing the
proceeds from the sale thereof in ___% Junior Subordinated Deferrable Interest
Debentures (the "Junior Subordinated Debentures") to be issued by the Company.
The Junior Subordinated Debentures will mature on March 31, 2028 (the "Stated
Maturity"). The Preferred Securities will have a preference over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise. See "Description of the
Preferred Securities--Subordination of the Common Securities."
(CONTINUED ON THE FOLLOWING PAGES)
Application will be made to list the Preferred Securities on the New
York Stock. See "Risk Factors--Absence of Prior Public Market for the Preferred
Securities; Trading Price and Tax Considerations."
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SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
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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.
<PAGE>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) COMMISSION(2) TRUST ISSUER(3)(4)
Per Preferred Security $25.00 (3) $
Total(5) $90,000,000 (3) $
(1) Plus accumulated distributions, if any, from the closing date.
(2) The Trust Issuer and the Company have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures of
the Company, the Company has agreed to pay the Underwriters, as
compensation for their arranging the investment of such proceeds in the
Junior Subordinated Debentures, $ per Preferred Security, or $ in the
aggregate ($ in the aggregate if the over-allotment option is exercised
in full). See "Underwriting."
(4) Before deducting expenses payable by the Company, estimated to be
approximately $ .
(5) The Trust Issuer and the Company have granted the Underwriters a 30-day
option to purchase up to 540,000 additional Preferred Securities on the
same terms and conditions set forth above solely to cover
over-allotments, if any. If this option is exercised in full, the total
Price to Public and Proceeds to Trust Issuer will be $__________. See
"Underwriting."
The Securities are offered by the Underwriters subject to receipt
and acceptance by them, prior sale and the Underwriters' right to reject any
order in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Preferred Securities will be made in
book-entry form through the book-entry facilities of The Depository Trust
Company on or about _________, 1998 against payment therefor in immediately
available funds.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
The date of this Prospectus is _______, 1998
<PAGE>
(continued from the previous page)
The Preferred Securities will be represented by one or more
global securities registered in the name of a nominee of The Depository Trust
Company, as depository ("DTC"). Beneficial interests in the global securities
will be shown on, and transfer thereof will be effected only through, records
maintained by DTC and its participants. Except as described under "Description
of Preferred Securities," Preferred Securities in definitive form will not be
issued and owners of beneficial interests in the global securities will not be
considered holders of the Preferred Securities. Settlement for the Preferred
Securities will be made in immediately available funds. The Preferred Securities
will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity for the Preferred Securities will therefore settle in
immediately available funds.
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions accumulating from the date of
original issuance and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing June 30, 1998, at the
annual rate of ___% of the Liquidation Amount (as defined herein) of $25 per
Preferred Security ("Distributions"). Subject to certain exceptions, the Company
has the right to defer payment of interest on the Junior Subordinated Debentures
at any time or from time to time for a period not exceeding 20 consecutive
quarters with respect to each deferral period (each, an "Extension Period"),
provided that no Extension Period may extend beyond the Stated Maturity of the
Junior 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 ___%, compounded quarterly, 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
Junior Subordinated Debentures are so deferred, Distributions on the 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 securities of the
Company that rank PARI PASSU with or junior to the Junior Subordinated
Debentures.
During an Extension Period, interest on the Junior Subordinated
Debentures would continue to accrue (and the amount of Distributions to which
holders of the Preferred Securities are entitled would accumulate) at the rate
of ___% per annum, compounded quarterly, and holders of the Preferred Securities
would be required to include interest income in their gross income for United
States federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments. The Company
believes that the mere existence of its right to defer interest payments should
not cause the Preferred Securities to be issued with original issue discount for
federal income tax purposes. However, it is possible that the Internal Revenue
Service could take the position that the likelihood of deferral was not a remote
contingency within the meaning of applicable Treasury Regulations. See
"Description of the Junior Subordinated Debentures--Right to Defer Interest
Payment Obligation" and "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount."
The Company and the Trust Issuer believe that, taken together,
the obligations of the Company under the Guarantee, the Trust Agreement, the
Junior Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein), constitute in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of all of the Trust Issuer's
obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures, the Expense Agreement
and the Guarantee--Full and Unconditional Guarantee." The Guarantee of the
Company (the "Guarantee") guarantees the payment of Distributions and payments
on liquidation or redemption of the Preferred Securities, but only in each case
to the extent of funds held by the Trust Issuer, as described herein. See
"Description of the Guarantee." If the Company does not
ii
<PAGE>
make interest payments on the Junior Subordinated Debentures held by the Trust
Issuer, the Trust Issuer will have insufficient funds to pay Distributions on
the Preferred Securities. The Guarantee does not cover payment of Distributions
when the Trust Issuer does not have sufficient funds to pay such Distributions.
In such event, a holder of the Preferred Securities may institute a legal
proceeding directly against the Company to enforce payment of amounts equal to
such Distributions to such holder. See "Description of the Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of the Preferred
Securities." The obligations of the Company under the Guarantee and the Junior
Subordinated Debentures are subordinate and junior in right of payment to all
Senior Debt (as defined in "Description of the Junior Subordinated
Debentures--Subordination") of the Company.
The Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Junior Subordinated Debentures at their
Stated Maturity or their earlier redemption. Subject to regulatory approval, if
then required under applicable capital guidelines or regulatory policies, the
Junior Subordinated Debentures are redeemable prior to their Stated Maturity at
the option of the Company (i) on or after March 31, 2003, in whole or in part
from time to time at a redemption price (the "Optional Redemption Price") equal
to the accrued and unpaid interest on the Junior Subordinated Debentures so
redeemed to the date of redemption plus 100% of the principal amount thereof, or
(ii) prior to March 31, 2003 in whole (but not in part), within 180 days
following the occurrence and continuation of a Tax Event, an Investment Company
Event or a Capital Treatment Event (each as defined herein) at a redemption
price (the "Special Event Redemption Price") equal to the greater of (A) 100% of
the principal amount thereof or (B) the sum, as determined by a Quotation Agent
(as defined herein), of the present values of 100% of the principal amount of
Junior Subordinated Debentures, together with scheduled payments of interest on
the Junior Subordinated Debentures from the prepayment date to and including
March 31, 2003, discounted to the prepayment date on a quarterly basis (assuming
a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
(as defined herein) plus accrued interest thereon to the date of prepayment.
Either of the Optional Redemption Price or the Special Event Redemption Price
are referred to as the "Redemption Price." See "Description of the Junior
Subordinated Debentures--Redemption or Exchange."
The Junior Subordinated Debentures will be unsecured and
subordinated to all Senior Debt of the Company. At December 31, 1997, the
Company had no outstanding Senior Debt, but did have outstanding $72.8 million
of 10 1/4% Junior Subordinated Deferrable Interest Debentures and $47.8 million
of 9.60% Junior Subordinated Deferrable Interest Debentures which rank PARI
PASSU with the Junior Subordinated Debentures offered pursuant to this
Prospectus. There is no limitation on the amount of Senior Debt, or additional
subordinated debt which is PARI PASSU with the Junior Subordinated Debentures,
which the Company may issue. The Company expects from time to time to incur
additional indebtedness constituting Senior Debt or debt which is PARI PASSU.
See "Description of the Junior Subordinated Debentures--Subordination."
The Company, as the holder of the Common Securities, will have
the right at any time to terminate the Trust Issuer. The ability of the Company
to do so may be subject to the Company's prior receipt of regulatory approval.
In the event of the termination of the Trust Issuer, after satisfaction of
liabilities to creditors of the Trust Issuer as required by applicable law, the
holders of the Preferred Securities will be entitled to receive a Liquidation
Amount of $25 per Preferred Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a distribution of
such amount in Junior Subordinated Debentures, subject to certain exceptions.
See "Description of the Preferred Securities--Liquidation Distribution upon
Termination."
The Company will provide to the holders of the Preferred
Securities annual reports containing financial statements audited by the
Company's independent auditors. The Company will also furnish annual reports on
Form 10-K free of charge to holders of the Preferred Securities who so request
in writing addressed to the Secretary of the Company.
iii
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE
OF THE PREFERRED SECURITIES OFFERED HEREBY, INCLUDING OVER-
ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING
TRANSACTIONS AND PENALTY BIDS. ANY OF THE FOREGOING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT NOTICE. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
iv
<PAGE>
[MAP OF FLORIDA INDICATING BANKUNITED BRANCH OFFICES]
v
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS'
OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED.
BANKUNITED FINANCIAL CORPORATION
GENERAL
The Company is a Florida corporation organized for the purpose of
becoming the savings and loan holding company for BankUnited, FSB (the "Bank").
This holding company reorganization, together with the Bank's conversion from a
Florida-chartered stock savings bank (which was founded in 1984) to a federally
chartered stock savings bank, became effective on March 5, 1993. At December 31,
1997, the Company had $1.4 billion in deposits, $145.6 million in stockholders'
equity, and $3.0 billion in assets. Based on the latest available information on
asset size, the Company is the second largest publicly held financial
institution headquartered in Florida. Principally through internal growth and
also as a result of the acquisition of Suncoast Savings and Loan Association,
FSA ("Suncoast") on November 15, 1996, the Company's total assets increased by
$2.2 billion from September 30, 1996 to December 31, 1997.
The Company currently has 18 branch offices in Miami-Dade,
Broward and Palm Beach Counties, Florida ("South Florida") (not including two,
scheduled to be closed shortly, that were part of the recent acquisition of
Consumers Savings Bank) and anticipates opening approximately 6 more branch
offices by September 30, 1998, in its market area, either by acquisition or de
novo branching, and may expand into other parts of Florida. 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 Florida single-family residential
mortgage loans, and to a lesser extent, to purchase and originate commercial
real estate, commercial business and consumer loans. The Company also invests in
tax certificates and other permitted investments. 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 non-interest overhead expenses incurred in
operations.
On January 23, 1998 the Company acquired Consumers Bancorp, Inc.
and merged its wholly owned subsidiary, Consumers Savings Bank ("Consumers"), a
Florida-chartered savings and loan with assets of $101.2 million and deposits of
$84.2 million at December 31, 1997, into the Bank. On December 30, 1997, the
Company signed a definitive agreement to acquire Central Bank ("Central"), a
Florida-chartered commercial bank with assets of $96.9 million and deposits of
$72.8 million at December 31, 1997, and four branch offices in Miami-Dade
County. These mergers increase the Company's deposit market share, particularly
in Miami-Dade County, while permitting the Company to compete more effectively
with larger super-regional financial institutions in South Florida. See
"Business Strategy-Acquisitions and Branching Activity" for a further discussion
of these acquisitions.
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
1
<PAGE>
Deposit Insurance Corporation (the "FDIC"). Deposits at the Bank are insured by
the Savings Association Insurance Fund of the FDIC (the "SAIF") to the maximum
extent permitted by law.
The Company's executive offices are located at 255 Alhambra
Circle, Coral Gables, Florida 33134, and its telephone number is (305) 569-2000.
BUSINESS STRATEGY
OPERATING PLAN. The Company's operating plan emphasizes (i)
rapidly expanding the Company's deposit base by providing convenient locations,
competitive rates and personalized service in its market area and continuing the
expansion of the Company's branch network through de novo branching or the
acquisition of branches of, and mergers with, existing financial institutions;
(ii) concentrating lending activities on purchasing single-family residential
mortgage loans and originating such loans as favorable market opportunities
arise; (iii) maintaining the Company's commercial and multi-family real estate,
commercial business and real estate construction lending; (iv) increasing
non-interest income, and (v) maintaining asset quality.
DEPOSIT OPPORTUNITIES. The Company focuses on attracting
depositors with convenient locations, competitive rates and personalized
service. As the super-regional banking companies acquire and close branches, the
Company has identified certain locations for potential expansion. The Company
emphasizes personalized service by a local financial institution to
differentiate itself from the super-regionals that do business in the South
Florida market. For the year ended December 31, 1997, deposits at the Company's
branches increased by $566 million, or 64% from December 31, 1996.
RESIDENTIAL MORTGAGE LOAN PURCHASES. Since inception in 1984,
BankUnited's primary source of earning assets has been the purchase of
single-family residential mortgages in the secondary market. Management believes
BankUnited has developed an expertise in making such purchases including
re-underwriting each loan purchased. The anticipated future growth in
BankUnited's assets will be primarily through the purchase of single-family
residential mortgages. Single-family residential mortgages are considered to
involve less credit risk than other types of loans, and 93.4% of the Company's
loan portfolio consists of such mortgages.
COMMERCIAL LOAN PRODUCT AVAILABILITY. BankUnited believes the
rapid consolidation of the South Florida banking market has created and will
continue to create opportunities to originate commercial real estate loans
generally between $250,000 and $5 million to small- to medium-sized companies.
BankUnited has hired seasoned loan officers to take advantage of these
opportunities. In connection with the product diversification of its loan
portfolio, the Company recently signed a definitive agreement to acquire
Central, which has a loan portfolio that includes $11.9 million of commercial
real estate loans and $7.3 million of commercial loans.
INCREASING NON-INTEREST INCOME. In order to increase non-interest
income, the Company initiated a program to originate and sell, on a periodic
basis, packages of adjustable rate residential mortgage loans, servicing
retained. In September 1997 the Company sold its first package totalling $30.1
million of loans, generating a pre-tax gain of approximately $523,000, and in
December 1997 sold its second package of loans totalling $25.4 million,
generating a pre-tax gain of approximately $689,000.
2
<PAGE>
"In November 1997, the Company's subsidiary, BUFC Financial Services, Inc.
("Financial Services") initiated a program to sell annuity products in the
Bank's branch offices. Financial Services plans to expand its range of products
to include variable annuity products within the next several months. The Company
has also established a subsidiary to broker, with other financial institutions,
newly originated commercial loans that do not meet the Bank's underwriting
and/or investment criteria. Additionally, the Company will periodically bid on
and may purchase private or agency packages of residential loan servicing. The
Company believes that these activities will increase non-interest income.
MAINTAINING ASSET QUALITY. The Company has historically been able
to maintain asset quality as shown by its relatively low level of non-performing
assets to total assets and net charge-offs over the last five years.
Approximately 93.4% of the Company's loan portfolio is in one-to-four family
mortgages which are generally considered to involve a lower degree of credit
risk than other types of loans. At December 31, 1997, the Company's
non-performing loans as a percentage of total loans was 0.39%. See "Risk
Factors--Risks Associated with the Company's ARMs," "--Composition of
Residential and Commercial Real Estate Loan Portfolio" and "--Allowance for Loan
Losses."
ACQUISITIONS AND BRANCHING ACTIVITY. The Company has acquired, is
acquiring and will continue to acquire financial institutions and branches in
South Florida. In connection with this activity, the Company periodically has
discussions with and receives financial information on other financial
institutions which may lead to the acquisition of all or part of that financial
institution by the Company.
On January 23, 1998 the Company acquired Consumers Bancorp, Inc.
and merged its wholly owned subsidiary, Consumers, a Florida-chartered savings
and loan with assets of $101.2 million and deposits of $84.2 million at December
31, 1997, into the Bank. Two of Consumers' existing branch offices are being
consolidated into the Bank's branch offices. A branch which was under lease, but
not yet opened, in south Miami-Dade County, will be opened by the Bank within
the next several months.
On December 30, 1997, the Company signed a definitive agreement
to acquire Central, a Florida-chartered commercial bank with assets of $96.9
million and deposits of $72.8 million at December 31, 1997, and four branch
offices in Miami-Dade County. Central's loan portfolio includes $11.9 million of
commercial real estate loans, $7.3 million of commercial loans, and $21.9
million of installment loans. In addition, 34.6% of Central's deposits are
non-interest bearing demand deposit accounts. It is anticipated that the
acquisition of Central, with its somewhat greater emphasis on commercial
customers, will better position the Company to further develop its commercial
business.
On November 15, 1996, the Company acquired Suncoast, a federally
chartered savings association with assets of $409.4 million at September 30,
1996, and merged Suncoast into the Bank. Of Suncoast's six branch offices in
South Florida, five continue to operate and one has been consolidated with an
existing Bank branch office. Additionally, as part of the Suncoast acquisition,
the Company acquired approximately $95.8 million in commercial real estate loans
and $14.1 million in real estate construction loans. See "Commercial Real Estate
Lending," "--Real Estate Construction Lending," and "Commercial Business
Lending."
On March 29, 1996, the Company acquired the Bank of Florida with
total assets of $28.1 million which was merged into the Bank's South Miami
branch.
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<PAGE>
These mergers increase the Company's deposit market share, in
Miami-Dade and Broward counties, while permitting the Company to compete more
effectively with larger super-regional financial institutions in South Florida.
In order to maximize cost savings, as part of its acquisition
program, the Company integrates the operations of acquired entities and converts
the data processing systems of such entities into its own as rapidly as
possible. For instance, Suncoast's data processing systems were converted to the
Bank's systems within one month of acquisition. The final conversion for
Consumers is expected to take place within six weeks after acquisition.
The Bank also opened branch offices in Delray Beach and West Palm
Beach in 1996, Boca Hamptons, Aventura and Coconut Creek in 1997, and Miami
Airport-West in January 1998. The Company currently has additional branches
under construction in Plantation, south Miami-Dade (discussed above) and Lake
Worth. It is expected that approximately 3 other branch offices will also be
opened or acquired before September 30, 1998.
PREFERRED STOCK RESTRUCTURING; CONVERSION TO COMMON STOCK. In
February 1998, the Company redeemed the outstanding shares of its 8%
Noncumulative Convertible Preferred Stock, Series 1993 (the "Series 1993
Preferred Stock") at $10.00 per share. Holders of shares of the Series 1993
Preferred Stock had the right to convert them to shares of the Company's Class A
Common Stock (the "Class A Common Stock") at a conversion rate of one share of
Class A Common Stock for each share of Series 1993 Preferred Stock. Holders of
712,464 shares of Series 1993 Preferred Stock exercised their conversion right,
which resulted in the issuance of 712,464 additional shares of Class A Common
Stock, and 31,406 shares of Series 1993 Preferred Stock were redeemed.
In October 1997, BankUnited redeemed the outstanding shares of
its 8% Noncumulative Convertible Preferred Stock, Series 1996 (the "Series 1996
Preferred Stock") at $15.00 per share. Holders of the shares of Series 1996
Preferred Stock had the right to convert them to shares of Class A Common Stock,
at a conversion rate of approximately 1.67 shares of Class A Common Stock for
each share of Series 1996 Preferred Stock. Holders of 927,204 shares of Series
1996 Preferred Stock exercised their conversion right, which resulted in the
issuance of 1,548,410 additional shares of BankUnited Class A Common Stock, and
5,696 shares of Series 1996 Preferred Stock were redeemed.
In August 1997, the Company purchased 448,583 shares of its 9%
Noncumulative Perpetual Preferred Stock (the "9% Preferred Stock") at $10.25 per
share. The purchase was made pursuant to a tender offer which expired on August
15, 1997. After the purchase, 701,417 shares of 9% Preferred Stock were still
outstanding. Pursuant to its terms, that stock may be redeemed by the Company
after September 30, 1998 at the stated redemption price.
4
<PAGE>
THE TRUST ISSUER
The Trust 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 June 6, 1997. The trust agreement will be amended and restated in its
entirety (as so amended and restated, the "Trust Agreement"). All of the Common
Securities will be owned by the Company. The Company will acquire Common
Securities in an aggregate Liquidation Amount equal to 4% of the aggregate
Liquidation Amount of the Preferred Securities. The Trust Issuer exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using
the proceeds from the sale of the Trust Securities to acquire Junior
Subordinated Debentures issued by the Company and (iii) engaging in only those
other activities necessary, advisable or incidental thereto (such as registering
the transfer of the Trust Securities). Accordingly, the Junior Subordinated
Debentures will be the sole assets of the Trust Issuer, and payments under the
Junior Subordinated Debentures will be the sole revenue of the Trust Issuer. The
principal executive office of the Trust Issuer is 255 Alhambra Circle, Coral
Gables, Florida 33134 and its telephone number is (305) 569-2000.
THE OFFERING
THE TRUST ISSUER................ BankUnited Capital III, a Delaware statutory
business trust (the "Trust Issuer"). The
sole assets of the Trust Issuer will be the
Junior Subordinated Debentures.
SECURITIES OFFERED.............. 3,600,000 shares of ___% Cumulative Trust
Preferred Securities (the "Preferred
Securities"), evidencing preferred undivided
beneficial interests in the assets of the
Trust Issuer, which will consist only of the
Junior Subordinated Debentures.
OFFERING PRICE.................. $25 per Preferred Security (Liquidation
Amount $25).
DISTRIBUTIONS................... Holders of the Preferred Securities will be
entitled to receive cumulative cash
Distributions at an annual rate of ___% of
the Liquidation Amount of $25 per Preferred
Security, accumulating from the date of
original issuance and payable quarterly in
arrears on March 31, June 30, September 30
and December 31 of each year, commencing on
June 30, 1998. The distribution rate and the
distribution and other payment dates for the
Preferred Securities will correspond to the
interest rate and interest and other payment
dates on the Junior Subordinated Debentures.
See "Description of the Preferred
Securities."
5
<PAGE>
JUNIOR SUBORDINATED DEBENTURES... The Trust Issuer will invest the proceeds
from the issuance of the Trust Securities in
an equivalent amount of the Junior
Subordinated Debentures. The Junior
Subordinated Debentures will mature on March
31, 2028. The Junior Subordinated Debentures
will rank subordinate and junior in right of
payment to all Senior Debt of the Company.
At December 31, 1997, the Company had no
outstanding Senior Debt, but did have
outstanding $72.8 million of 10 1/4% Junior
Subordinated Deferrable Interest Debentures
and $47.8 million of 9.60% Junior
Subordinated Deferrable Interest Debentures
which rank PARI PASSU with the Junior
Subordinated Debentures. There is no
limitation on the amount of Senior Debt, or
subordinated debt which is PARI PASSU with
the Junior Subordinated Debentures, which
the Company may issue. The Company expects
from time to time to incur additional
indebtedness constituting Senior Debt. In
addition, because the Company is a holding
company, the Company's obligations under the
Junior Subordinated Debentures will
effectively be subordinated to all existing
and future liabilities and obligations of
its subsidiaries, including the Bank. See
"Risk Factors-- Subordination of the
Guarantee and the Junior Subordinated
Debentures," "Risk Factors--Source of
Payments to Holders of Preferred Securities"
and "Description of the Junior Subordinated
Debentures-- Subordination."
GUARANTEE...................... Payments of Distributions out of funds held
by the Trust Issuer, and payments on
liquidation of the Trust Issuer or the
redemption of the Preferred Securities, are
guaranteed by the Company to the extent the
Trust Issuer has funds available therefor.
The Company and the Trust Issuer believe
that, taken together, the obligations of the
Company under the Guarantee, the Trust
Agreement, the Junior Subordinated
Debentures, the Indenture and the Expense
Agreement, constitute, in the aggregate, a
full and unconditional guarantee, on a
subordinated basis, of all of the Trust
Issuer's obligations under the Preferred
Securities. See "Description of the
Guarantee" and "Relationship Among the
Preferred Securities, the Junior
Subordinated Debentures, the Expense
Agreement and the Guarantee." The
obligations of the Company under the
Guarantee are subordinate and junior in
right of payment to all Senior Debt of the
Company. See "Risk Factors--Subordination of
the Guarantee and the Junior Subordinated
Debentures" and "Description of the
Guarantee."
6
<PAGE>
RIGHT TO DEFER INTEREST PAYMENTS... 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 during the term of the
Junior Subordinated Debentures to defer the
payment of interest at any time or from time
to time for a period not exceeding 20
consecutive quarters with respect to each
Extension Period, PROVIDED that no Extension
Period may extend beyond the Stated Maturity
of the Junior Subordinated Debentures. At
the end of such Extension Period, the
Company must pay all interest then accrued
and unpaid (together with interest thereon
at the annual rate of ___%, compounded
quarterly, to the extent permitted by
applicable law). During an Extension Period,
interest will continue to accrue and holders
of the Junior Subordinated Debentures (or
holders of the Preferred Securities, while
outstanding) will be required to accrue
interest income for United States federal
income tax purposes in advance of receipt of
payment of such deferred interest. See
"Certain Federal Income Tax
Consequences--Interest Income and 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 right of
payment to the Junior 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 right of payment to
the Junior Subordinated Debentures (other
than (a) the reclassification of any class
of the Company's capital stock into another
class of capital stock, (b) dividends or
distributions payable in common stock of the
Company, (c) 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, (d) payments under
the Guarantee and (e) 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
7
<PAGE>
Company may further defer the payment of
interest on the Junior Subordinated
Debentures, PROVIDED that no Extension
Period may exceed 20 consecutive quarters or
extend beyond the Stated Maturity of the
Junior Subordinated Debentures. There is no
limitation on the number of times that the
Company may elect to begin an Extension
Period. See "Description of the Junior
Subordinated Debentures--Right to Defer
Interest Payment Obligation" and "Certain
Federal Income Tax Consequences--Interest
Income and Original Issue Discount."
The Company has no current intention of
exercising its right to defer payments of
interest by extending the interest payment
period on the Junior Subordinated
Debentures. However, should the Company
elect to exercise such right in the future,
the market price of the Preferred Securities
is likely to be adversely affected. As a
result of the existence of the Company's
right to defer interest payments, the market
price of the Preferred Securities may be
more volatile than the market prices of
other similar securities that do not provide
for such optional deferrals.
REDEMPTION.................... The Junior Subordinated Debentures are
subject to redemption prior to their Stated
Maturity at the option of the Company (i) on
or after March 31, 2003, in whole or in part
from time to time at a redemption price (the
"Optional Redemption Price") equal to the
accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the
date of redemption plus 100% of the
principal amount thereof, or (ii) prior to
March 31, 2003 in whole (but not in part),
within 180 days following the occurrence and
continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event
(each as defined herein) in each case at a
redemption price (the "Special Event
Redemption Price") equal to the greater of
(A) 100% of the principal amount thereof or
(B) the sum, as determined by a Quotation
Agent (as defined herein), of the present
values of 100% of the principal amount of
Junior Subordinated Debentures, together
with scheduled payments of interest on the
Junior Subordinated Debentures from the
prepayment date to and including March 31,
2003, discounted to the prepayment date on a
quarterly basis (assuming a 360-day year
consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined herein)
plus, in each case, accrued interest thereon
to the date of redemption. Either of the
Optional Redemption Price or the Special
Event Redemption Price are referred to as
the "Redemption Price."
8
<PAGE>
If the Junior Subordinated Debentures are
redeemed prior to their Stated Maturity, the
Trust Issuer must apply the proceeds of such
redemption to redeem a Like Amount (as
defined herein) of the Preferred Securities
and the Common Securities. The Preferred
Securities will be redeemed upon repayment
of the Junior Subordinated Debentures at
their Stated Maturity. See "Description of
the Preferred Securities--Redemption."
DISTRIBUTION OF THE JUNIOR
SUBORDINATED DEBENTURES UPON
LIQUIDATION OF THE TRUST ISSUER.. The Company will have the right at any time
to terminate the Trust Issuer and, after
satisfaction of creditors of the Trust
Issuer, if any, as provided by applicable
law, cause the Junior Subordinated
Debentures to be distributed to the holders
of the Preferred Securities and the Common
Securities in exchange therefor upon
liquidation of the Trust Issuer. The ability
of the Company to do so may be subject to
the Company's prior receipt of regulatory
approval.
In the event of the liquidation of the Trust
Issuer, after satisfaction of the claims of
creditors of the Trust Issuer, if any, as
provided by applicable law, the holders of
the Preferred Securities will be entitled to
receive a Liquidation Amount of $25 per
Preferred Security plus accumulated and
unpaid Distributions thereon to the date of
payment, which may be in the form of a
distribution of a Like Amount (as defined
herein) of the Junior Subordinated
Debentures, subject to certain exceptions as
described herein. See "Description of the
Preferred Securities--Liquidation of the
Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders."
VOTING RIGHTS.................... Except in limited circumstances, the holders
of the Preferred Securities will have no
voting rights. See "Description of the
Preferred Securities--Voting Rights;
Amendment of the Trust Agreement."
USE OF PROCEEDS.................. All of the proceeds from the sale of the
Preferred Securities will be used by the
Trust Issuer to purchase Junior Subordinated
Debentures. The Company intends that the
proceeds from the sale of such Junior
Subordinated Debentures will be used for
general corporate purposes, including, but
not limited to, acquisitions by either the
9
<PAGE>
Company or the Bank, expansion of the
Company's or the Bank's operations, and
capital contributions to the Bank to support
growth and for working capital and for other
general corporate purposes. See "Use of
Proceeds."
RISK FACTORS..................... An investment in the Preferred Securities
involves substantial risks that should be
considered by prospective purchasers. In
addition, because holders of the Preferred
Securities may receive Junior Subordinated
Debentures on termination of the Trust
Issuer, and because payments on the Junior
Subordinated Debentures are the sole source
of funds for Distributions on and
redemptions of the Preferred Securities,
prospective purchasers of the Preferred
Securities are also making an investment
decision with regard to the Junior
Subordinated Debentures and should carefully
review all of the information regarding the
Junior Subordinated Debentures contained
herein. See "Risk Factors" and "Description
of the Junior Subordinated Debentures."
NEW YORK STOCK EXCHANGE.......... Application will be made to list the
Preferred Securities on the New York Stock
Exchange.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The information at or for the three months ended December 31,
1997 and 1996 is derived from unaudited financial statements which, in the
opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results for such
periods. The results for the three months ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the entire year.
The summary consolidated financial information should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto contained
in the Company's Annual Report on Form 10-K/A for the fiscal year ended
September 30, 1997 attached as Appendix A to this Prospectus; and the Company's
December 31, 1997 Operating Results and Financial Information attached as
Appendix B to this Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
DECEMBER 31,
-------------------------
1997 1996 1997
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATIONS DATA:
Interest income..................................................... $ 41,450 $ 19,491 $ 108,774
Interest expense.................................................... 32,083 12,415 75,960
--------------- --------------- ---------------
Net interest income before provision (credit) for loan losses....... 9,367 7,076 32,814
Provision (credit) for loan losses.................................. 650 250 1,295
--------------- --------------- ---------------
Net interest income after provision (credit) for loan losses........ 8,717 6,826 31,519
--------------- --------------- ---------------
Non-interest income:
Service fees........................................................ 452 575 2,993
Gain on sales of loans and mortgage-backed
securities, net................................................... 1,115 (11) 819
Gain (loss) on sales of other assets, net(1)........................ -- -- 1
Other............................................................... 77 36 247
--------------- --------------- ---------------
Total non-interest income...................................... 1,644 600 4,060
--------------- --------------- ---------------
Non-interest expense:
Employee compensation and benefits................................ 2,480 1,915 8,880
Occupancy and equipment........................................... 886 886 3,568
Insurance (2)..................................................... 255 361 948
Professional fees................................................. 622 222 1,605
Other............................................................. 2,782 1,421 7,964
--------------- --------------- ---------------
Total non-interest expense..................................... 7,025 4,805 22,947
--------------- --------------- ---------------
Income before income taxes and preferred stock dividends ........... 3,336 2,621 12,632
Provision for income taxes (3)...................................... 1,361 1,022 5,033
--------------- --------------- ---------------
Net income before preferred stock dividends......................... 1,975 1,599 7,599
Preferred stock dividends........................................... 332 672 2,890
--------------- --------------- ---------------
Net income after preferred stock dividends.......................... $ 1,643 $ 927 $ 4,709
=============== =============== ===============
FINANCIAL CONDITION DATA:
Total assets........................................................ $ 3,028,776 $ 1,329,044 $ 2,145,406
Loans receivable, net, and mortgage-backed securities(4)............ 2,674,718 1,132,882 1,781,652
Investments, overnight deposits, tax certificates,
repurchase agreements, certificates of deposits and other
interest-earning assets............................................ 176,091 124,950 186,955
Total liabilities................................................... 2,883,145 1,230,889 2,045,761
Deposits............................................................ 1,444,102 878,166 1,195,892
Borrowings.......................................................... 1,291,466 289,259 701,484
Trust Preferred Securities.......................................... 116,000 50,000 116,000
Total stockholders' equity.......................................... 145,631 98,155 99,645
Common stockholders' equity......................................... 129,719 60,051 75,649
PER COMMON SHARE DATA:
Basic earnings per common share(5).................................. $ .13 $ .14 $ .57
=============== =============== ===============
Diluted earnings per common share(5)................................ $ .12 $ .13 $ .54
=============== =============== ===============
Weighted average number of common shares outstanding
during the period:
Basic(5).......................................................... 13,012,118 6,806,379 8,210,890
Diluted(5)........................................................ 14,041,609 7,957,657 8,955,572
Equity per common share............................................. $ 9.13 $ 7.59 $ 7.94
Fully converted tangible equity per common share.................... $ 8.19 $ 6.56 $ 6.88
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income..................................................$ 52,132 $ 39,419 $ 30,421 $ 25,722
Interest expense................................................. 34,622 26,305 16,295 12,210
--------------- --------------- --------------- ------------
Net interest income before provision (credit) for loan losses.... 17,510 13,114 14,126 13,512
Provision (credit) for loan losses............................... (120 1,221 1,187 1,052
--------------- --------------- --------------- ------------
Net interest income after provision (credit) for loan losses..... 17,630 11,893 12,939 12,460
--------------- --------------- --------------- ------------
Non-interest income:
Service fees..................................................... 597 423 358 221
Gain on sales of loans and mortgage-backed
securities, net................................................ 5 239 150 1,496
Gain (loss) on sales of other assets, net(1)..................... (6 9,569 -- --
Other............................................................ 53 6 46 2
--------------- --------------- --------------- ------------
Total non-interest income................................... 649 10,237 554 1,719
--------------- --------------- --------------- ------------
Non-interest expense:
Employee compensation and benefits............................. 4,275 3,997 3,372 2,721
Occupancy and equipment........................................ 1,801 1,727 1,258 978
Insurance (2).................................................. 3,610 1,027 844 835
Professional fees.............................................. 929 1,269 833 543
Other.......................................................... 3,421 4,129 3,579 2,746
--------------- --------------- --------------- ------------
Total non-interest expense.................................. 14,036 12,149 9,886 7,823
--------------- --------------- --------------- ------------
Income before income taxes and preferred stock dividends ........ 4,243 9,981 3,607 6,356
Provision for income taxes (3)................................... 1,657 3,741 1,328 2,318
--------------- --------------- --------------- ------------
Net income before preferred stock dividends...................... 2,586 6,240 2,279 4,038
Preferred stock dividends........................................ 2,145 2,210 2,069 1,513
--------------- --------------- --------------- ------------
Net income after preferred stock dividends.......................$ 441 $ 4,030 $ 210 $ 2,525
--------------- =============== =============== ============
FINANCIAL CONDITION DATA:
Total assets.....................................................$ 824,360 $ 608,415 $ 551,075 $ 435,378
Loans receivable, net, and mortgage-backed securities(4)......... 716,550 506,132 470,154 313,899
Investments, overnight deposits, tax certificates,
repurchase agreements, certificates of deposits and other
interest-earning assets......................................... 87,662 88,768 64,783 100,118
Total liabilities................................................ 755,249 562,670 509,807 397,859
Deposits......................................................... 506,106 310,074 347,795 295,108
Borrowings....................................................... 237,775 241,775 158,175 97,775
Trust Preferred Securities....................................... - - - --
Total stockholders' equity....................................... 69,111 45,745 41,268 30,273
Common stockholders' equity...................................... 44,807 21,096 16,667 17,162
PER COMMON SHARE DATA:
Basic earnings per common share(5)...............................$ .10 $ 1.99 $ .11 $ 1.67
=============== =============== =============== ============
Diluted earnings per common share(5).............................$ .10 $ 1.26 $ .10 $ 1.00
--------------- =============== =============== ============
Weighted average number of common shares outstanding
during the period:
Basic(5)....................................................... 4,306,042 2,021,601 1,957,210 1,509,264
Diluted(5)..................................................... 4,558,521 4,158,564 2,175,210 3,239,618
Equity per common share..........................................$ 7.85 $ 10.20 $ 8.33 $ 8.86
Fully converted tangible equity per common share.................$ 7.13 $ 8.15 $ 7.39 $ 7.57
</TABLE>
(Continued on next page)
11
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS AT OR FOR THE FISCAL YEARS
ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------- --------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
SELECTED FINANCIAL RATIOS
PERFORMANCE RATIOS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Return on average assets (6)(7).............................. .33% .62% .51% .36% 1.10% .46% 1.12%
Return on average common equity(6)........................... 6.31 9.55 9.34 1.30 22.60 1.21 18.55
Return on average total equity(6)............................ 5.87 8.08 8.06 4.30 14.70 5.84 14.07
Interest rate spread(6)...................................... 1.39 2.59 2.07 2.10 2.12 2.78 3.59
Net interest margin(6)....................................... 1.66 2.86 2.31 2.51 2.39 3.01 3.87
Dividend payout ratio(8)..................................... 16.81 42.02 38.03 82.95 35.42 96.79 40.66
Ratio of earnings to combined fixed charges and
preferred stock dividends(9):
Excluding interest on deposits............................ 1.18 1.32 1.26 1.05 1.52 1.07 1.87
Including interest on deposits............................ 1.09 1.11 1.10 1.02 1.21 1.03 1.27
Total loans, net, and mortgage-backed securities to
total deposits............................................185.22 129.00 148.98 141.58 163.13 134.40 109.65
Non-interest expenses to average assets...................... 1.17 1.85 1.55 1.97 2.14 2.04 2.18
Efficiency ratio(10)......................................... 57.43 59.37 57.56 61.11(11) 85.50(11) 66.06 45.17
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans................. .39% .70% .72% .99% 1.02% 1.07% 1.54%
Ratio of non-performing assets to total loans, real estate
owned and tax certificates................................. .45 .86 .79 1.14 1.35 1.41 1.78
Ratio of non-performing assets to total assets............... .40 .70 .67 .95 1.10 1.17 1.46
Ratio of charge-offs to total loans(6)....................... .002 .03 .03 .08 .13 .39 .07
Ratio of loan loss allowance to total loans.................. .16 .28 .21 .34 .32 .20 .38
Ratio of loan loss allowance to non-performing loans......... 40.78 39.60 28.96 33.74 31.54 18.89 24.70
CAPITAL RATIOS:
Ratio of average common equity to average total assets....... 4.35% 3.74% 3.40% 4.78% 3.14% 3.58% 3.79%
Ratio of average total equity to average total assets........ 5.62 7.62 6.36 8.44 7.47 8.05 7.99
Tangible capital-to-assets ratio(12)......................... 7.11 7.80 8.07 7.01 7.09 6.65 7.56
Core capital-to-assets ratio(12)............................. 7.11 7.80 8.07 7.01 7.09 6.65 7.56
Risk-based capital-to-assets ratio(12)....................... 12.89 14.63 11.27 14.19 15.79 14.13 15.85
<FN>
(1) 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.
(2) In 1996 the Company recorded a one-time SAIF special assessment of $2.6
million ($1.6 million after tax).
(3) Amount reflects expense from change in accounting principle of $194,843
for fiscal 1994. See Note 15 to Consolidated Financial Statements.
(4) Does not include mortgage loans held for sale.
(5) Earnings per share for all periods presented before December 31, 1997
have been restated in accordance with Financial Accounting Standard
128.
(6) Calculated on an annualized basis.
(7) Return on average assets is calculated before payment of preferred
stock dividends.
(8) 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.
(9) 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.
(10) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income by net interest income.
(11) These efficiency ratios have been adjusted to exclude the impact of the
one-time SAIF special assessment in 1996 and the gain on the sale of
the Company's branches in 1995. If these ratios were not adjusted, the
ratios would have been 76.45 in 1996 and 14.58 in 1995.
(12) Regulatory capital ratio of the Bank.
</FN>
</TABLE>
12
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE PREFERRED SECURITIES INVOLVES A HIGH DEGREE
OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE
OTHER INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
THE FOLLOWING FACTORS IN EVALUATING THE COMPANY, ITS BUSINESS AND THE TRUST
ISSUER BEFORE PURCHASING THE PREFERRED SECURITIES OFFERED HEREBY. PROSPECTIVE
INVESTORS SHOULD NOTE, IN PARTICULAR, THAT THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), THAT INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, OR IN THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN, THE WORD "ANTICIPATE," "BELIEVE,"
"ESTIMATE," "MAY," "INTEND" AND "EXPECT" AND SIMILAR EXPRESSIONS IDENTIFY
CERTAIN OF SUCH FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE CONTEMPLATED, EXPRESSED OR
IMPLIED BY THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. THE CONSIDERATIONS
LISTED BELOW REPRESENT CERTAIN IMPORTANT FACTORS THE COMPANY BELIEVES COULD
CAUSE SUCH RESULTS TO DIFFER. THESE CONSIDERATIONS ARE NOT INTENDED TO REPRESENT
A COMPLETE LIST OF THE GENERAL OR SPECIFIC RISKS THAT MAY AFFECT THE COMPANY AND
THE TRUST ISSUER. IT SHOULD BE RECOGNIZED THAT OTHER RISKS, INCLUDING GENERAL
ECONOMIC FACTORS AND EXPANSION STRATEGIES, MAY BE SIGNIFICANT, PRESENTLY OR IN
THE FUTURE, AND THE RISKS SET FORTH BELOW MAY AFFECT THE COMPANY AND THE TRUST
ISSUER TO A GREATER EXTENT THAN INDICATED.
RISK FACTORS RELATING TO THE COMPANY
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Bank's profitability is dependent to a large extent on its
net interest income, which is the difference between its income on
interest-earning assets and its expense on interest-bearing liabilities. The
Bank, like most financial institutions, is affected by changes in general
interest rate levels and by other economic factors beyond its control. Interest
rate risk arises from mismatches (i.e., the interest sensitivity gap) between
the dollar amount of repricing or maturing assets and liabilities, and is
measured in terms of the ratio of the interest rate sensitivity gap to total
assets. More assets than liabilities repricing or maturing over a given time
frame is considered asset-sensitive and is reflected as a positive gap, and more
liabilities than assets repricing or maturing over a given time frame is
considered liability-sensitive and is reflected as a negative gap. An
asset-sensitive position (i.e., a positive gap) will generally enhance earnings
in a rising interest rate environment and will reduce earnings in a falling
interest rate environment, while a liability-sensitive position (i.e., a
negative gap) will generally enhance earnings in a falling interest rate
environment and reduce earnings in a rising interest rate environment.
Fluctuations in interest rates are not predictable or controllable. At September
30, 1997, the Bank had a one year cumulative positive gap of 4.9%. This positive
one year gap position may, as noted above, have a negative impact on earnings in
a falling interest rate environment. There can be no assurances of the Company's
ability to continue to achieve positive net interest income. See
"Business--Factors Affecting Earnings--Asset and Liability Management" and
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"Quantitative and Qualitative Disclosure About Market Risk" contained in
Appendix A to this Prospectus.
RISKS ASSOCIATED WITH THE COMPANY'S ADJUSTABLE RATE MORTGAGE LOANS
The Company has purchased and intends to continue to purchase a
significant amount of residential mortgage loans. During the three months ended
December 31, 1997 and the year ended September 30, 1997, the Company purchased
$1.1 billion and $913.7 million, respectively, of one-to-four family residential
loans, of which $1.1 billion and $728.2 million, respectively, were adjustable
rate mortgage loans ("ARMs"). At December 31, 1997 the Company's residential
loan portfolio included $2.0 billion of ARMs (77.9% of the Company's gross loan
portfolio). The ARMs purchased by the Company generally have annual interest
rate adjustment caps that limit rate increases or decreases to 2% per year.
Further, the ARMs purchased by the Company provide for initial rates of interest
below the rates which would prevail were the contractual index and margin used
for repricing applied initially (the "teaser rate period"). Although the Company
attempts to mitigate the risk of default on these loans by requiring that
borrowers qualify for the loan based upon the fully indexed rate, nonetheless
these loans are subject to increased risk of delinquency or default as the
higher, fully indexed rate of interest subsequently comes into effect upon
repricing. As a result, management believes that the Company's net interest
margin could be negatively impacted in a rapidly rising interest rate
environment by increased delinquencies and defaults.
Also, if market interest rates rise rapidly, the annual and
lifetime interest rate adjustment caps on the ARMs may limit the increase in the
interest rates on the ARMs relative to the increase in market interest rates,
and yields on ARMs with teaser rates may be limited to repricing at interest
rates below the contractual index plus the margin. At December 31, 1997, $1.2
billion of the Company's ARM loans (46.2% of the Company's gross loan portfolio)
were in the teaser rate period with an average teaser rate of 6.39% and an
average fully indexed rate of 8.28%. Rapid increases in market interest rates
may not be fully reflected in loans which are in the teaser rate period and may,
accordingly, have a negative impact on the Company's net interest margin.
REFINANCING RISKS
As of December 31, 1997, 93.4% of the Company's loans receivable
were single-family residential mortgages that generally have an imbedded option
that allows the borrower to prepay the loan at any time without penalty. A
substantial portion of these loans have been purchased by the Company in the
secondary market at a premium.
In the current interest rate environment, when long-term interest
rates are generally low on a historical basis and the spread between short-term
rates and long-term rates is relatively narrow, prepayments of ARMs and higher
fixed-rate mortgages tend to accelerate. In addition, at December 31, 1997, $1.2
billion of the Company's ARMs had teaser rates, substantially all of which will
be subject to interest rate adjustments within the next twelve months. Teaser
rate loans also may tend to be prepaid near the end of the teaser period in the
current interest rate environment.
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Premiums and net deferred origination costs, which at December
31, 1997 were $33.0 million, are recognized as a reduction 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 experience.
(See Note 1 to the Company's Consolidated Financial Statements and Notes thereto
contained in the Company's Annual Report on Form 10-K/A for the fiscal year
ended September 30, 1997 attached as Appendix A to this Prospectus.) As
prepayments accelerate, the Company's historical prepayment experience changes,
resulting in a shortening of the estimated life of the loan portfolio, and a
greater reduction in interest income. Accelerated prepayments could, therefore,
have a material adverse effect on the Company's results of operations.
In addition, the Company would likely apply the proceeds of any
prepaid loans to the purchase of ARMs with teaser rates (possibly with lower
teaser rates), thereby increasing the duration of the teaser period for the
Company's loan portfolio. Also, no assurance can be given that the Company will
be able to reinvest, on satisfactory terms, the proceeds of loan prepayments.
AVAILABILITY OF MORTGAGE LOANS
The Company's net income will depend significantly on its ability
to acquire mortgage loans on acceptable terms and at favorable spreads over the
Company's borrowing costs. If the Company is unable to acquire mortgage loans,
its results of operations will be adversely affected.
In acquiring mortgage loans, the Company will compete with REITs,
investment banking firms, savings and loan associations, banks, mortgage
bankers, insurance companies, mutual funds, other lenders, FNMA, FHLMC, GNMA and
other entities purchasing mortgage loans, some of which have greater financial
resources than the Company. Increased competition for the acquisition of
eligible mortgage loans or a diminution in the supply could result in higher
prices and, thus, lower yields on such mortgage loans that could further narrow
the yield spread over borrowing costs.
The availability of mortgage loans meeting the Company's criteria
is dependent upon, among other things, the size and level of activity in the
residential real estate lending market, which depend on various factors,
including the level of interest rates, regional and national economic conditions
and inflation and deflation in residential real estate values. To the extent the
Company is unable to acquire a sufficient volume of mortgage loans meeting its
criteria, the Company's results of operations would be adversely affected.
COMPOSITION OF RESIDENTIAL AND COMMERCIAL LOAN PORTFOLIO
GEOGRAPHIC CONCENTRATION. Most of the loans in the Company's
portfolio are secured by real estate. At September 30, 1997, 33.95% of the
Company's gross loans receivable were secured by properties located in Florida,
13.88% by properties located in California and the balance throughout the
country. Therefore, 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
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purchasers, and natural disasters. 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 may have current loan to value ratios
that are higher than those when the loans were originated. In addition, both
Florida and California are states that are subject to natural disasters such as
hurricanes, earthquakes and flooding. In the event a property securing the loan
incurs damage as a result of a natural disaster that is not covered by
homeowner's insurance, the Company's results of operations may be negatively
impacted. Damage from windstorm and flooding is generally covered by homeowner's
insurance, but earthquake damage is frequently not insured. See
"Business--Lending Activities--Loan Portfolio" 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) loans, and
originating real estate construction and commercial business loans. These
lending categories are generally considered to involve a higher degree of credit
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. At December 31, 1997, the Company had a balance of
$165.1 million in commercial real estate loans, $5.6 million in construction
loans and $9.0 million in commercial business loans. The payment experience on
multi-family residential and commercial real estate loans typically is dependent
on the successful operation of the project (as opposed to a desire by the
borrower to continue to occupy the residence), and thus such loans may be
adversely affected to a greater extent by adverse conditions in the real estate
markets or in the economy generally. In addition to the foregoing, multi-family
residential and commercial real estate loans which are not fully amortizing over
their maturity and which have a balloon payment due at their stated maturity, as
would generally be the case with the Company's multi-family residential and
commercial real estate loans, involve a greater degree of risk than fully
amortizing loans. The ability of a borrower to make a balloon payment typically
will depend on its ability to either refinance the loan or timely sell the
underlying property.
If commercial properties are foreclosed upon, the Company may
encounter environmental problems with the properties. There is a risk that
hazardous substances or wastes, contaminants, pollutants or other
environmentally restricted substances could be discovered on the real estate
owned (primarily in the case of properties securing multi-family residential and
commercial real estate loans). In such event, the Company might be required to
remove such substances from the affected properties or to engage in abatement
procedures at its cost and expense. There can be no assurance that the cost of
such removal or abatement would not substantially exceed the value of the
affected properties or the loans secured by such properties; that the Company
would have adequate remedies against the prior owners or other responsible
parties; or that the Company would be able to resell the affected properties
either prior to or following completion of any such removal or abatement
procedures. If such environmental problems are discovered prior to foreclosure,
the Company generally would not foreclose on the related loan; however, the
value of such property as collateral will generally be substantially reduced and
the Company may suffer a loss upon collection of the loan as a result.
Risk of loss on a construction loan is dependent largely upon the
concurrence of the initial estimate of the property's value at completion of
construction and the estimated cost (including interest)
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of construction, as well as the availability of permanent take-out financing.
During the construction phase, a number of factors could result in delays and
cost overruns. If the estimate of value proves to be inaccurate, the Company may
be confronted, at or prior to the maturity of the loan, with a project which,
when completed, has a value which is insufficient to ensure full repayment.
Unlike residential mortgage loans, which generally are made on
the basis of the borrower's ability to repay the loan from the borrower's
employment and other income and which are secured by real property the value of
which tends to be more easily ascertainable, commercial business loans are of
higher risk and typically are made on the basis of the borrower's ability to
make repayment from the cash flow of the borrower's business. As a result, the
availability of funds for the repayment of commercial business loans may be
substantially dependent on the success of the business itself. Further, the
collateral securing the loans may depreciate over time, may be difficult to
appraise, and may fluctuate in value based on the success of the business.
Accordingly, there can be no assurance that the Company's
commercial real estate, multi-family residential, real estate construction, and
commercial business loans will not be adversely affected by these and the other
risks related to such loans. See "Business--Lending Activities--Commercial Real
Estate Lending," "--Real Estate Construction Lending," and "--Commercial
Business Lending" contained in Appendix A to this Prospectus.
RISKS ASSOCIATED WITH LOANS HELD FOR SALE. The Company recently
initiated a program to sell packages of adjustable rate residential loans,
servicing retained, currently originated through its correspondent loan program.
These loans, when originated, will be classified as held for sale and be subject
to a lower of cost or market adjustment, on a quarterly basis, depending on
market conditions. As of December 31, 1997, the Company had $92.2 million of
mortgages held for sale. Since the Company does not currently intend to hedge
its held for sale loan portfolio, this portfolio will be subject to adjustments,
based on market conditions, which may adversely affect the Company's results of
operations.
ALLOWANCE FOR LOAN LOSSES
Industry experience indicates that a portion of the Company's
loans will become delinquent and a portion of the loans will require partial or
entire charge-off. Regardless of the underwriting criteria utilized by the
Company, losses may be experienced as a result of various factors beyond the
Company's control, including, among other things, changes in market conditions
affecting the value of properties and problems affecting the credit of the
borrower. The Company's determination of the adequacy of its allowance for loan
losses is based on various considerations, including an analysis of the risk
characteristics of various classifications of loans, previous loan loss
experience, specific loans which would have loan loss potential, delinquency
trends, estimated fair value of the underlying collateral, current economic
conditions, the views of the Company's regulators, and geographic and industry
loan concentrations. Further, a significant amount of the Company's loan
portfolio was originated, purchased or acquired over the last three years and,
therefore, may be considered to be subject to a greater likelihood of
delinquency. If delinquency levels were to increase, whether as a result of
adverse general economic conditions, especially in Florida and California where
the Company's exposure is greatest, or
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otherwise, the allowance for loan losses as determined by the Company may not be
adequate. As of December 31, 1997 the Company's allowance for loan losses was
$4.3 million or 0.16% of total loans. There can be no assurance that the
allowance will be adequate to cover loan losses or that the Company will not
experience significant losses in its loan portfolios which may require
significant increases to the provision for loan losses in the future. See
"Business--Lending Activities--Loan Portfolio Quality" contained in Appendix A
to this Prospectus.
RECENT RAPID GROWTH AND INCREASED OPERATING EXPENSES
During the past 18 months, the Company has experienced rapid and
significant growth. The growth and expansion of operations through mergers and
acquisitions and internal growth has resulted in a significant increase in
assets, loans and deposits, as well as increases in net interest income,
non-interest income and non-interest expenses. Total assets of the Company have
increased from $824 million at September 30, 1996 to $3.0 billion at December
31, 1997. The Bank's loan portfolio increased from $646 million at September 30,
1996 to $2.6 billion at December 31, 1997. Much of this growth is attributable
to the purchase of wholesale residential loans and, to a lesser extent, to the
acquisition of Suncoast.
In connection with such expansion and growth, the Company has
hired 145 additional employees since September 30, 1996. Employee compensation
and benefits increased 107.7% from $4.3 million to $8.9 million over the last
fiscal year and occupancy and equipment costs increased 98.1% from $1.8 million
to $3.6 million during the same period. Such increased expenses were primarily
attributable to internal growth, including the opening of new branch offices,
and growth as a result of the acquisitions. Expenses associated with such growth
and with additional future growth may have an adverse impact on earnings.
There can be no assurance that the Company will continue to
experience rapid growth, or any growth in the future and, to the extent that it
does experience continued growth, there is no assurance that the Company will be
able to adequately and profitably manage such growth.
ACCOUNTING FOR ACQUISITIONS
Acquisitions are accounted for either as a "purchase" or as a
"pooling of interests." The consideration utilized is one of many factors
considered in determining the accounting treatment of an acquisition. If cash
represents at least 10% of the consideration, the acquisition will generally be
accounted for as a "purchase." If Class A Common Stock represents 90% or more of
the consideration and all other required conditions relating to the parties and
the transaction are met, the acquisition will be accounted for as a "pooling of
interests." Under the "purchase" method, the assets and liabilities are recorded
by the acquiror at their fair market values and any difference between the
purchase price and the fair value of the tangible and identifiable intangible
assets and liabilities is recorded as goodwill. Goodwill is generally amortized
over a period generally not exceeding 25 years and such amortization of goodwill
will reduce earnings. Under the "pooling of interests" method, the historical
values of the assets, liabilities and shareholders' equity of the combining
companies are consolidated, no goodwill
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is recorded and accordingly, the earnings of the resulting entity are not
impacted by the amortization of goodwill. The Company intends to actively pursue
acquisitions. If an acquisition is made and accounted for as a "purchase" rather
than a "pooling of interests," it is likely that such acquisition will result in
the creation of goodwill and accordingly, future results will reflect the
amortization of any goodwill recorded.
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 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
could result in the Company either attracting fewer deposits or in requiring 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--Market Area and Competition" contained in
Appendix A to this Prospectus.
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and
examination by the OTS as its chartering authority and primary federal
regulator, and by the FDIC, which insures its deposits up to applicable limits.
The Bank is a member of the FHLB of Atlanta and is subject to certain limited
regulation by the Federal Reserve Board. As the holding company of the Bank, the
Company is also subject to regulation and oversight by the OTS. Such regulation
and supervision governs the activities in which an institution may engage and is
intended primarily for the protection of the FDIC insurance funds and
depositors. Regulatory authorities have been granted extensive discretion in
connection with their supervisory and enforcement activities and regulations
have been implemented which have increased capital requirements, increased
insurance premiums and have resulted in increased administrative, professional
and compensation expenses. Any change in the regulatory structure or the
applicable statutes or regulations could have a material impact on the Company
and the Bank and their operations. Additional legislation and regulations may be
enacted or adopted in the future which could significantly affect the powers,
authority and operations of the Bank and the Bank's competitors which
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in turn could have a material adverse effect on the Bank and its operations. See
"Regulation" contained in Appendix A to this Prospectus.
RISK FACTORS RELATING TO THE OFFERING
SUBORDINATION OF THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued by the
Company for the benefit of the holders of the Preferred Securities and under the
Junior Subordinated Debentures issued to the Trust Issuer will be unsecured and
will rank subordinate and junior in right of payment to all Senior Debt of the
Company. At December 31, 1997, the Company had no outstanding Senior Debt, but
did have outstanding $72.8 million of 10 1/4% Junior Subordinated Deferrable
Interest Debentures and $47.8 million of 9.60% Junior Subordinated Deferrable
Interest Debentures which rank PARI PASSU with the Junior Subordinated
Debentures. There is no limitation on the amount of Senior Debt, or subordinated
debt which is PARI PASSU with the Junior Subordinated Debentures, which the
Company may issue. 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 Preferred Securities to
benefit indirectly from such distribution), is subject to the prior claims of
creditors of that subsidiary (including depositors in the Bank), except to the
extent that the Company may itself be recognized as a creditor of that
subsidiary. If the Company is a creditor of a subsidiary, the claims of the
Company would be subject to any prior security interest in the assets of the
subsidiary and any indebtedness of the subsidiary senior to that of the Company.
Accordingly, the Junior Subordinated Debentures and the Guarantee will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, including the Bank. At December 31, 1997 the Bank had liabilities
of $2.9 billion (including $1.4 billion in deposits). Only the capital stock of
the Company is currently junior in right of payment to the Junior Subordinated
Debentures to be issued to the Trust Issuer. Holders of the Junior Subordinated
Debentures will be able to look only to the assets of the Company for payments
on the Junior Subordinated Debentures. None of the Indenture, the 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. The Company expects from time to time to incur additional indebtedness
constituting Senior Debt. See "Description of the Guarantee--Status of the
Guarantee" and "Description of the Junior Subordinated
Debentures--Subordination."
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
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. Since the Company is without significant
assets other than the capital stock of the Bank, the ability of the Company to
pay interest on the principal of the Junior Subordinated Debentures to the Trust
Issuer (and consequently, the Trust Issuer's ability to pay Distributions on the
Preferred Securities and the Company's ability to pay its obligations under the
Guarantee) will be dependent on the ability of the Bank to pay dividends to the
Company in amounts
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sufficient to service the Company's obligations. The Company is currently
obligated to pay interest semi-annually on its outstanding 10 1/4% Junior
Subordinated Deferrable Interest Debentures and quarterly on its outstanding
9.60% Junior Subordinated Deferrable Interest Debentures and may become
obligated to make other payments with respect to securities issued by the
Company in the future which are PARI PASSU or have a preference over the Junior
Subordinated Debentures issued to the Trust Issuer with respect to the payment
of principal, interest or dividends. There is no restriction on the ability of
the Company to issue, or limitations on the amount of securities which the
Company may issue, which are PARI PASSU or have a preference over the Junior
Subordinated Debentures issued to the Trust Issuer, nor is there any restriction
on the ability of the Bank to issue additional capital stock or incur additional
indebtedness.
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 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 I 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, but there is no assurance that the Bank
will continue to so qualify.
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 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 Junior Subordinated Debentures, at any time or from
time to time, for a period not exceeding 20 consecutive quarters with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral, quarterly Distributions on the Preferred Securities by the Trust
Issuer would also be deferred (and the amount of Distributions to which holders
of the Preferred Securities are entitled would accumulate additional
Distributions thereon at the rate of ___% per annum, compounded quarterly from
the relevant payment date for such Distributions)
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during any such Extension Period. During any such Extension Period, the Company
may not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock (other than (a) the reclassification of any class of the
Company's capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's common stock, (c) any
declaration of a dividend in connection with the implementation of a shareholder
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 and (d) purchases
of the Company's common stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
(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 Junior 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 Junior Subordinated Debentures (other than
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the Junior Subordinated Debentures or any of the Preferred Securities.
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 20
consecutive quarters or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any Extension Period and the
payment of all interest then accrued and unpaid on the Junior Subordinated
Debentures (together with interest thereon at the annual rate of ___%,
compounded quarterly 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 so
long as no event of default under the Indenture has occurred and is continuing.
See "Description of the Preferred Securities--Distributions" and "Description of
the Junior Subordinated Debentures--Right to Defer Interest Payment Obligation."
If an Extension Period were to occur, a holder of the Preferred
Securities would continue to accrue income (in the form of original issue
discount) for United States federal income tax purposes in respect of its PRO
RATA share of the interest accruing on the Junior Subordinated Debentures held
by the Trust Issuer. As a result, a holder of the Preferred Securities would be
required to include such income in gross income for United States federal income
tax purposes in advance of the receipt of cash and would not receive the cash
related to such income from the Trust Issuer if the holder disposed of the
Preferred Securities prior to the record date for the payment of Distributions.
See "Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount" and "--Sales or Redemption of the Preferred Securities."
The Company has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debentures. However,
should the Company elect to exercise such right in the future, the market price
of the Preferred Securities would likely be adversely affected. A holder that
disposed of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continued
to hold its Preferred Securities. In addition, as a result of the existence of
the Company's right to defer interest payments, the market price of the
Preferred Securities may be more volatile than the market prices of other
similar securities that are not subject to such deferrals.
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SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
If a Tax Event (as defined herein) occurs, then the Company will
have the right prior to the termination of the Trust Issuer, to advance the
Stated Maturity of the Junior Subordinated Debentures to the minimum extent
required in order to allow for the payments of interest in respect of the Junior
Subordinated Debentures to continue to be tax deductible, but in no event shall
the resulting maturity of the Junior Subordinated Debentures be less than 15
years from the date of original issuance thereof. The exercise of such right may
be subject to the Company having received prior regulatory approval. See
"Description of the Junior Subordinated Debentures-General."
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT
The Company has the right, but not the obligation, to redeem the
Junior Subordinated Debentures prior to March 31, 2003 in whole (but not in
part) within 180 days following the occurrence and continuation of a Tax Event,
an Investment Company Event or a Capital Treatment Event, and, therefore, cause
a mandatory redemption of the Preferred Securities. The exercise of such right
may be subject to the Company having received prior regulatory approval.
A "Tax Event" means the receipt by the Trust 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 Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust 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 Junior Subordinated Debentures,
(ii) interest payable by the Company on the Junior 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 Trust 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,
assessments or other governmental charges. The Company must request and receive
an opinion with regard to such matters within a reasonable period of time after
it becomes aware of the possible occurrence of any of the events described in
clauses (i) through (iii) above.
"Investment Company Event" means the receipt by the Trust Issuer
of an opinion of counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, the Trust Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
which change occurs or becomes effective on or after the date of original
issuance of the Preferred Securities.
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"Capital Treatment Event" means the reasonable determination by
the Company that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such proposed change, pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred Securities,
there is more than an insubstantial risk that the Company will not be entitled
to treat an amount equal to the Liquidation Amount of the Preferred Securities
as "Tier 1 Capital" (or the then equivalent thereof) for purposes of applicable
capital adequacy guidelines of the Federal Reserve (or any successor regulatory
authority with jurisdiction over bank holding companies), or any capital
adequacy guidelines as then in effect and applicable to the Company.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES; REDEMPTION
AND TAX CONSEQUENCES
The Company has the right at any time to dissolve, wind-up or
terminate the Trust Issuer and, after the satisfaction of liabilities to
creditors of the Trust Issuer as required by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities in exchange therefor in liquidation of the Trust Issuer. The exercise
of such right may be subject to the Company having received prior regulatory
approval. The Company will have the right, in certain circumstances, to redeem
the Junior Subordinated Debentures in whole or in part, in lieu of a
distribution of the Junior Subordinated Debentures by the Trust Issuer, in which
event the Trust Issuer will redeem the Preferred Securities on a pro rata basis
to the same extent as the Junior Subordinated Debentures are redeemed by the
Company. Any such distribution or redemption prior to the Stated Maturity will
be subject to prior regulatory approval if then required under applicable
capital guidelines or regulatory policies. See "Description of the Preferred
Securities--Liquidation of the Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders" and "Description of the Subordinated
Debenture--Redemption or Exchange."
Under current United States federal income tax law, a
distribution of Junior Subordinated Debentures upon the dissolution of the Trust
Issuer would not be a taxable event to holders of the Preferred Securities. If,
however, the Trust Issuer were characterized as an association taxable as a
corporation at the time of the dissolution of the Trust Issuer, the distribution
of the Junior Subordinated Debentures would constitute a taxable event to
holders of Preferred Securities and could give rise to a tax liability for the
Trust Issuer as well. Moreover, any redemption of the Preferred Securities for
cash would be a taxable event to such holders. See "Certain Federal Income Tax
Consequences--Distribution of the Junior Subordinated Debentures to Holders of
the Preferred Securities" and "--Sales or Redemption of the Preferred
Securities."
There can be no assurance as to the market prices for the
Preferred Securities or the Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities upon a dissolution or
liquidation of the Trust Issuer. The Preferred Securities or the Junior
Subordinated Debentures may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby. Because holders of
Preferred Securities may receive Junior Subordinated Debentures as a result of
the
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liquidation of the Trust, and because payments on the Junior Subordinated
Debentures are the sole source of funds for Distributions and redemptions of the
Preferred Securities, prospective purchasers of Preferred Securities are also
making an investment decision with regard to the Junior Subordinated Debentures
and should carefully review all the information regarding the Junior
Subordinated Debentures contained herein.
If the Junior Subordinated Debentures are distributed to the
holders of Preferred Securities upon the liquidation of the Trust Issuer, the
Company will use its reasonable efforts to list the Junior Subordinated
Debentures on the New York Stock Exchange or such stock exchanges, if any, on
which the Preferred Securities are then listed.
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred
Securities the following payments, to the extent not paid by the Trust Issuer:
(i) any accumulated and unpaid Distributions required to be paid on the
Preferred Securities, to the extent that the Trust Issuer has funds on hand
available therefor at such time, (ii) the redemption price with respect to any
Preferred Securities called for redemption, to the extent that the Trust Issuer
has funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Trust Issuer (unless
the Junior Subordinated Debentures are distributed to holders of the Preferred
Securities in exchange therefor), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment, to the extent that the Trust Issuer has funds on hand available
therefor at such time, and (b) the amount of assets of the Trust Issuer
remaining available for distribution to holders of the Preferred Securities
after payment of creditors of the Trust Issuer as required by applicable law.
If the Company were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust Issuer would lack
funds for the payment of Distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. The holders of not less than a majority in aggregate Liquidation Amount
of the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Preferred Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Trust Issuer, the Guarantee Trustee or any other
person or entity. In the event 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 Junior Subordinated
Debentures on the applicable payment date, a holder of the 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 Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). The exercise by the Company of its right, as described herein, to
defer the payment of interest on the Junior Subordinated Debentures does not
constitute an event of default under the Indenture. In connection with any
Direct Action, the Company will have a right of set-off under the Indenture to
the extent of any
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payment made by the Company to such holder of the Preferred Securities in the
Direct Action. Except as described herein, holders of the Preferred Securities
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. The Bank of New York will act as
the guarantee trustee under the Guarantee (the "Guarantee Trustee") and will
hold the Guarantee for the benefit of the holders of the Preferred Securities.
The Bank of New York will also act as Debenture Trustee for the Junior
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 Junior Subordinated Debentures--Enforcement of Certain
Rights by Holders of the Preferred Securities," "Description of the Junior
Subordinated Debentures--Debenture Events of Default" and "Description of the
Guarantee." The Trust Agreement provides that each holder of the Preferred
Securities by acceptance thereof agrees to the provisions of the Guarantee and
the Indenture.
LIMITED COVENANTS
The covenants in the Indenture are limited and there are no
covenants in the Trust Agreement. As a result, neither the Indenture nor the
Trust Agreement protects holders of Junior Subordinated Debentures or Preferred
Securities, respectively, in the event of a material adverse change in the
Company's financial condition or results of operations or limits the ability of
the Company or any subsidiary to incur or assume additional indebtedness or
other obligations. Additionally, neither the Indenture nor the Trust Agreement
contains any financial ratios or specified levels of liquidity to which the
Company must adhere. Therefore, the provisions of these governing instruments
should not be considered a significant factor in evaluating whether the Company
will be able to or will comply with its obligations under the Junior
Subordinated Debentures or the Guarantee.
LIMITED VOTING RIGHTS
Holders of the Preferred Securities will generally have limited
voting rights relating only to the modification of the Preferred Securities and
the exercise of the Trust Issuer's rights as holder of the Junior Subordinated
Debentures and the Guarantee. Holders of the Preferred Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee, the
Delaware Trustee or the Administrative Trustees, as such voting rights are
vested exclusively in the Company, as the holder of the 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 Preferred Securities to ensure that the Trust
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 Preferred Securities--Voting Rights; Amendment
of the Trust Agreement" and "--Removal of the Trust Issuer Trustees."
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ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND
TAX CONSIDERATIONS
There is no current public market for the Preferred Securities.
Application will be made to list the Preferred Securities on the New York Stock
Exchange. The Company has been advised that the Underwriters intend to make a
market in the Preferred Securities. However, the Underwriters are not obligated
to do so and such market making may be discontinued at any time. Therefore,
there is no assurance that an active trading market will develop for the
Preferred Securities or, if such market develops, that it will be maintained or
that the market price will equal or exceed the public offering price set forth
on the cover page of this Prospectus. Accordingly, holders of Preferred
Securities may experience difficulty reselling them or may be unable to sell
them at all. The public offering price for the Preferred Securities has been
determined through negotiations between the Company and the Underwriters. Prices
for the Preferred Securities will be determined in the marketplace and may be
influenced by many factors, including prevailing interest rates, the liquidity
of the market for the Preferred Securities, investor perceptions of the Company
and general industry and economic conditions.
Further, should the Company exercise its option to defer any
payment of interest on the Junior Subordinated Debentures, the Preferred
Securities would be likely to trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. In the event of such a deferral, a holder of Preferred
Securities that disposed of its Preferred Securities between record dates for
payments of Distributions (and consequently did not receive a Distribution from
the Trust Issuer for the period prior to such disposition) would nevertheless be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income and to
add such amount to the adjusted tax basis of the Preferred Securities disposed
of. Such holder would recognize a capital loss to the extent the selling price
(which might not fully reflect the value of accrued but unpaid interest) was
less than its adjusted tax basis (which would include all accrued but unpaid
interest). Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "Certain Federal Income Tax Consequences--Sales or Redemption of the
Preferred Securities."
PREFERRED SECURITIES AND JUNIOR SUBORDINATED DEBENTURES ARE NOT INSURED
The Preferred Securities and Junior Subordinated Debentures are
not insured by the Bank Insurance Fund or the Savings Association Insurance Fund
of the Federal Deposit Insurance Corporation or by any other governmental
agency.
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BANKUNITED FINANCIAL CORPORATION
GENERAL
The Company is a Florida corporation organized for the purpose of
becoming the savings and loan holding company for the Bank. This holding company
reorganization, together with the Bank's conversion from a Florida-chartered
stock savings bank (which was founded in 1984) to a federally chartered stock
savings bank, became effective on March 5, 1993. At December 31, 1997, the
Company had $1.4 billion in deposits, $145.6 million in stockholders' equity,
and $3.0 billion in assets. Based on the latest available information on asset
size, the Company is the second largest publicly held financial institution
headquartered in Florida. Principally through internal growth and also as a
result of the acquisition of Suncoast on November 15, 1996, the Company's total
assets increased by $2.2 billion from September 30, 1996 to December 31, 1997.
The Company currently has 18 branch offices in South Florida (not
including two, scheduled to be closed shortly, that were part of the recent
acquisition of Consumers Savings Bank) and anticipates opening approximately 6
more branch offices by September 30, 1998, in its market area, either by
acquisition or de novo branching, and may expand into other parts of Florida.
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 Florida single-family
residential mortgage loans, and to a lesser extent, to purchase and originate
commercial real estate, commercial business and consumer loans. The Company also
invests in tax certificates and other permitted investments. 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 non-interest overhead expenses
incurred in operations.
On January 23, 1998 the Company acquired Consumers Bancorp, Inc.
and merged its wholly owned subsidiary, Consumers, a Florida-chartered savings
and loan with assets of $101.2 million and deposits of $84.2 million at December
31, 1997, into the Bank. On December 30, 1997, the Company signed a definitive
agreement to acquire Central, a Florida-chartered commercial bank with assets of
$96.9 million and deposits of $72.8 million at December 31, 1997, and four
branch offices in Miami-Dade County. These mergers increase the Company's
deposit market share, particularly in Miami-Dade County, while permitting the
Company to compete more effectively with larger super-regional financial
institutions in South Florida. See "Business Strategy-Acquisitions and Branching
Activity" for a further discussion of these acquisitions.
The Bank is a member of the Federal Home Loan Bank system and is
subject to comprehensive regulation, examination and supervision by the OTS and
the FDIC. Deposits at the Bank are insured by the SAIF to the maximum extent
permitted by law.
The Company's executive offices are located at 255 Alhambra
Circle, Coral Gables, Florida 33134, and its telephone number is (305) 569-2000.
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BUSINESS STRATEGY
OPERATING PLAN. The Company's operating plan emphasizes (i)
rapidly expanding the Company's deposit base by providing convenient locations,
competitive rates and personalized service in its market area and continuing the
expansion of the Company's branch network through de novo branching or the
acquisition of branches of, and mergers with, existing financial institutions;
(ii) concentrating lending activities on purchasing single-family residential
mortgage loans and originating such loans as favorable market opportunities
arise; (iii) maintaining the Company's commercial and multi-family real estate,
commercial business and real estate construction lending; (iv) increasing
non-interest income, and (v) maintaining asset quality.
DEPOSIT OPPORTUNITIES. The Company focuses on attracting
depositors with convenient locations, competitive rates and personalized
service. As the super-regional banking companies acquire and close branches, the
Company has identified certain locations for potential expansion. The Company
emphasizes personalized service by a local financial institution to
differentiate itself from the super-regionals that do business in the South
Florida market. For the year ended December 31, 1997, deposits at the Company's
branches increased by $566 million, or 64% from December 31, 1996.
RESIDENTIAL MORTGAGE LOAN PURCHASES. Since inception in 1984,
BankUnited's primary source of earning assets has been the purchase of
single-family residential mortgages in the secondary market. Management believes
BankUnited has developed an expertise in making such purchases including
re-underwriting each loan purchased. The anticipated future growth in
BankUnited's assets will be primarily through the purchase of single-family
residential mortgages. Single-family residential mortgages are considered to
involve less credit risk than other types of loans, and 93.4% of the Company's
loan portfolio consists of such mortgages.
COMMERCIAL LOAN PRODUCT AVAILABILITY. BankUnited believes the
rapid consolidation of the South Florida banking market has created and will
continue to create opportunities to originate commercial real estate loans
generally between $250,000 and $5 million to small- to medium-sized companies.
BankUnited has hired seasoned loan officers to take advantage of these
opportunities. In connection with the product diversification of its loan
portfolio, the Company recently signed a definitive agreement to acquire Central
which has a loan portfolio that includes $11.9 million of commercial real estate
loans and $7.3 million of commercial loans.
INCREASING NON-INTEREST INCOME. In order to increase non-interest
income, the Company initiated a program to originate and sell, on a periodic
basis, packages of adjustable rate residential mortgage loans, servicing
retained. In September 1997 the Company sold its first package totalling $30.1
million of loans, generating a pre-tax gain of approximately $523,000, and in
December 1997 sold its second package of loans totalling $25.4 million,
generating a pre-tax gain of approximately $689,000. In November 1997, the
Company's subsidiary, Financial Services initiated a program to sell annuity
products in the Bank's branch offices. Financial Services plans to expand its
range of products to include variable annuity products within the next several
months. The Company has also established a subsidiary to broker, with other
financial institutions, newly originated commercial loans that do not meet the
Bank's underwriting and/or investment criteria. Additionally, the Company will
periodically bid on and may purchase private
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or agency packages of residential loan servicing. The Company believes that
these activities will increase non-interest income.
MAINTAINING ASSET QUALITY. The Company has historically been able
to maintain asset quality as shown by its relatively low level of non-performing
assets to total assets and net charge-offs over the last five years.
Approximately 93.4% of the Company's loan portfolio is in one-to-four family
mortgages which are generally considered to involve a lower degree of credit
risk than other types of loans. At December 31, 1997, the Company's
non-performing loans as a percentage of total loans was 0.39%. See "Risk
Factors--Risks Associated with the Company's ARMs," "--Composition of
Residential and Commercial Real Estate Loan Portfolio" and "--Allowance for Loan
Losses."
ACQUISITIONS AND BRANCHING ACTIVITY. The Company has acquired, is
acquiring and will continue to acquire financial institutions and branches in
South Florida. In connection with this activity, the Company periodically has
discussions with and receives financial information on other financial
institutions which may lead to the acquisition of all or part of that financial
institution by the Company.
On January 23, 1998 the Company acquired Consumers Bancorp, Inc.
and merged its wholly owned subsidiary, Consumers, a Florida-chartered savings
and loan with assets of $101.2 million and deposits of $84.2 million at December
31, 1997, into the Bank. Two of Consumers' existing branch offices are being
consolidated into the Bank's branch offices. A branch which was under lease, but
not yet opened, in south Miami-Dade County, will be opened by the Bank within
the next several months.
On December 30, 1997, the Company signed a definitive agreement
to acquire Central, a Florida-chartered commercial bank with assets of $96.9
million and deposits of $72.8 million at December 31, 1997, and four branch
offices in Miami-Dade County. Central's loan portfolio includes $11.9 million of
commercial real estate loans, $7.3 million of commercial loans, and $21.9
million of installment loans. In addition, 34.6% of Central's deposits are
non-interest bearing demand deposit accounts. It is anticipated that the
acquisition of Central, with its somewhat greater emphasis on commercial
customers, will better position the Company to further develop its commercial
business.
On November 15, 1996, the Company acquired Suncoast, a federally
chartered savings association with assets of $409.4 million at September 30,
1996, and merged Suncoast into the Bank. Of Suncoast's six branch offices in
South Florida, five continue to operate and one has been consolidated with an
existing Bank branch office. Additionally, as part of the Suncoast acquisition,
the Company acquired approximately $95.8 million in commercial real estate loans
and $14.1 million in real estate construction loans. See "Commercial Real Estate
Lending," "--Real Estate Construction Lending," and "Commercial Business
Lending."
On March 29, 1996, the Company acquired the Bank of Florida with
total assets of $28.1 million which was merged into the Bank's South Miami
branch.
These mergers increase the Company's deposit market share, in
Miami-Dade and Broward counties, while permitting the Company to compete more
effectively with larger super-regional financial institutions in South Florida.
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In order to maximize cost savings, as part of its acquisition
program, the Company integrates the operations of acquired entities and converts
the data processing systems of such entities into its own as rapidly as
possible. For instance, Suncoast's data processing systems were converted to the
Bank's systems within one month of acquisition. The final conversion for
Consumers is expected to take place within six weeks after acquisition.
The Bank also opened branch offices in Delray Beach and West Palm
Beach in 1996, Boca Hamptons, Aventura and Coconut Creek in 1997, and Miami
Airport-West in January 1998. The Company currently has additional branches
under construction in Plantation, south Miami-Dade (discussed above) and Lake
Worth. It is expected that approximately 3 other branch offices will also be
opened or acquired before September 30, 1998.
PREFERRED STOCK RESTRUCTURING; CONVERSION TO COMMON STOCK. In
February 1998, the Company redeemed the outstanding shares of its Series 1993
Preferred Stock at $10.00 per share. Holders of shares of the Series 1993
Preferred Stock had the right to convert them to shares of the Company's Class A
Common Stock at a conversion rate of one share of Class A Common Stock for each
share of Series 1993 Preferred Stock. Holders of 712,464 shares of Series 1993
Preferred Stock exercised their conversion right, which resulted in the issuance
of 712,464 additional shares of Class A Common Stock, and 31,406 shares of
Series 1993 Preferred Stock were redeemed.
In October 1997, BankUnited redeemed the outstanding shares of
its 8% Noncumulative Convertible Preferred Stock, Series 1996 (the "Series 1996
Preferred Stock") at $15.00 per share. Holders of the shares of Series 1996
Preferred Stock had the right to convert them to shares of Class A Common Stock,
at a conversion rate of approximately 1.67 shares of Class A Common Stock for
each share of Series 1996 Preferred Stock. Holders of 927,204 shares of Series
1996 Preferred Stock exercised their conversion right, which resulted in the
issuance of 1,548,410 additional shares of BankUnited Class A Common Stock, and
5,696 shares of Series 1996 Preferred Stock were redeemed.
In August 1997, the Company purchased 448,583 shares of its 9%
Noncumulative Perpetual Preferred Stock (the "9% Preferred Stock") at $10.25 per
share. The purchase was made pursuant to a tender offer which expired on August
15, 1997. After the purchase, 701,417 shares of 9% Preferred Stock were still
outstanding. Pursuant to its terms, that stock may be redeemed by the Company
after September 30, 1998 at the stated redemption price.
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THE TRUST ISSUER
BANKUNITED CAPITAL III
The Trust Issuer, BankUnited Capital III, 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 June 6, 1997. The trust agreement will be amended and
restated in its entirety (as so amended and restated, the "Trust Agreement").
The Trust Issuer exists for the exclusive purposes of (i) issuing and selling
the Trust Securities, (ii) using the proceeds from the sale of the Trust
Securities to acquire Junior Subordinated Debentures issued by the Company and
(iii) engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of the Trust Securities). Accordingly,
the Junior Subordinated Debentures will be the sole assets of the Trust Issuer,
and payments under the Junior Subordinated Debentures will be the sole revenue
of the Trust Issuer.
All of the Common Securities will be owned by the Company. The
Common Securities will rank PARI PASSU, and payments will be made thereon PRO
RATA, with the Preferred Securities, except that upon the occurrence and
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
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Preferred Securities. See "Description of the Preferred
Securities--Subordination of the Common Securities." The Company will acquire
the Common Securities in an aggregate Liquidation Amount equal to 4% of the
aggregate Liquidation Amount of the Preferred Securities. The Trust Issuer has a
term of 32 years, but may terminate earlier as provided in the Trust Agreement.
The Trust Issuer's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Common Securities. The trustees for
the Trust Issuer will be 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 "Trust 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 Guarantee and the Indenture. See
"Description of the Guarantee" and "Description of the Junior Subordinated
Debentures." The holder of the Common Securities or the holders of a majority in
Liquidation Amount of the 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 Preferred Securities have the right to vote to appoint, remove or replace
the Administrative Trustees; such voting rights are vested exclusively in the
Company as the holder of the Common Securities. The duties and obligations of
the Trust Issuer Trustees are governed by the Trust Agreement. The Company will
pay all fees and expenses related to the Trust Issuer and the offering of the
Preferred Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Trust Issuer pursuant to the Expense Agreement.
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USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities
will be used by the Trust Issuer to purchase Junior Subordinated Debentures. The
Company intends that the proceeds from the sale of such Junior Subordinated
Debentures will be used for general corporate purposes, including, but not
limited to, acquisitions by either the Company or the Bank, expansion of the
Company's or the Bank's operations, and capital contributions to the Bank to
support growth and for working capital and for other general corporate purposes.
MARKET FOR THE PREFERRED SECURITIES
Application will be made to list the Preferred Securities on the
New York Stock Exchange. Although the Underwriters have informed the Company
that they presently intend to make a market in the Preferred Securities, the
Underwriters are not obligated to do so and any such market making may be
discontinued at any time. Accordingly, there is no assurance that an active and
liquid trading market will develop or, if developed, that such a market will be
sustained. The offering price and distribution rate have been determined by
negotiations among representatives of the Company and the Underwriters, and the
offering price of the Preferred Securities may not be indicative of the market
price following the offering. See "Underwriting."
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust Issuer will be
treated as a subsidiary of the Company and, accordingly, the Trust Issuer's
financial statements will be included in the consolidated financial statements
of the Company. The Preferred Securities will be presented as a separate line
item in the consolidated statements of financial condition of the Company under
the caption "Company Obligated Mandatorily Redeemable Trust Preferred Securities
of Subsidiary Trusts Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Company" and appropriate disclosures about the 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 Preferred Securities as a component of interest
expense in the consolidated statements of operations.
In its future financial reports, the Company will (i) present the
Preferred Securities on the Company's statements of financial condition as a
separate line item entitled "Company Obligated Mandatorily Redeemable Trust
Preferred Securities of Subsidiary Trusts 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 Trust Issuer are
the Junior Subordinated Debentures specifying the principal amount, interest
rate and maturity date of Junior Subordinated Debentures held; and (iii)
include, in an audited footnote to the financial statements, disclosure that (a)
the Trust Issuer is wholly owned, (b) the sole assets of the Trust Issuer are
its Junior Subordinated Debentures, and (c) the obligations of the Company under
the Junior Subordinated Debentures, the Indenture, the Trust Agreement and the
Guarantee, in the aggregate, constitute a full and unconditional guarantee by
the Company of the Trust Issuer's obligations under the Preferred Securities.
33
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of
the Company as of December 31, 1997, as adjusted to give effect to the
consummation of (i) the acquisition and merger of Consumers and the issuance of
527,112 shares of Class A Common Stock in connection therewith, (ii) the
conversion to Class A Common Stock of 712,464 shares of its currently
outstanding Series 1993 Preferred Stock and the redemption of 31,406 remaining
shares, (iii) the acquisition and merger of Central Bank and the issuance of an
estimated 1,867,500 shares of Class A Common Stock in connection therewith
(based upon the maximum that could be issued), and (iv) the issuance and sale of
the Preferred Securities offered hereby. The following data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto of the
Company contained in Appendix A and Appendix B to this Prospectus.
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
------ --------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Deposits.......................................................................$ 1,444,102 $ 1,601,177
Securities sold under agreements to repurchase................................. 30,000 38,334
FHLB advances.................................................................. 1,261,466 1,269,466
Company Obligated Mandatorily Redeemable Trust Preferred Securities of
Subsidiary Trusts Holding Solely Junior Subordinated Deferrable
Interest Debentures of the Company (2)...................................... 116,000 206,000
--------------------- ------------------
Total deposits and borrowed funds......................................... 2,851,568 3,114,977
--------------------- ------------------
Stockholders' equity:
Preferred Stock, Series B, 8% Convertible and 9% Perpetual, $.01 par value;
authorized--10,000,000 shares; issued and outstanding--
1,644,805 shares as of December 31, 1997 and 900,935 shares as adjusted(1). 16 9
Class A Common Stock, $.01 par value; authorized--30,000,000 shares;
issued and outstanding-13,923,022 shares as of December 31, 1997 and
17,030,098 shares as adjusted.............................................. 139 170
Class B Common Stock, $.01 par value; authorized--3,000,000 shares,
issued and outstanding-285,958 shares as of December 31, 1997 and as
adjusted.................................................................... 3 3
Additional paid-in capital.................................................... 131,149 141,936
Retained earnings............................................................. 13,632 19,870
Net unrealized gains on securities available for sale, net of tax............. 692 831
--------------------- ------------------
Total stockholders' equity................................................. 145,631 162,819
--------------------- ------------------
Total deposits, borrowed funds and stockholders' equity....................$ 2,997,199 $ 3,277,796
===================== ==================
<FN>
(1) Such shares had an aggregate liquidation preference of $8.5 million at
December 31, 1997 and $58.5 million as adjusted.
(2) As described herein, for the Preferred Securities offered hereby, the
sole asset of the Trust Issuer will be $104 million aggregate principal
amount of the Junior Subordinated Debentures issued by the Company to
the Trust Issuer. The Junior Subordinated Debentures will bear interest
at the annual rate of ____% of the principal amount thereof, payable
quarterly and will mature on March 31, 2028. The Company owns all of
the Common Securities of the Trust Issuer.
</FN>
</TABLE>
34
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The information at or for the three months ended December 31,
1997 and 1996 is derived from unaudited financial statements which, in the
opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results for such
periods. The results for the three months ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the entire year.
The summary consolidated financial information should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto contained
in the Company's Annual Report on Form 10-K/A for the fiscal year ended
September 30, 1997 attached as Appendix A to this Prospectus; and the Company's
December 31, 1997 Operating Results and Financial Information attached as
Appendix B to this Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED AT OR FOR THE FISCAL YEARS
DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income...............................................$ 41,450 $ 19,491 $ 108,774 $ 52,132
Interest expense.............................................. 32,083 12,415 75,960 34,622
--------------- --------------- --------------- ---------------
Net interest income before provision (credit) for loan losses. 9,367 7,076 32,814 17,510
Provision (credit) for loan losses............................ 650 250 1,295 (120)
--------------- --------------- --------------- ---------------
Net interest income after provision (credit) for loan losses.. 8,717 6,826 31,519 17,630
--------------- --------------- --------------- ---------------
Non-interest income:
Service fees.................................................. 452 575 2,993 597
Gain on sales of loans and mortgage-backed
securities, net............................................. 1,115 (11) 819 5
Gain (loss) on sales of other assets, net(1).................. -- -- 1 (6)
Other......................................................... 77 36 247 53
--------------- --------------- --------------- ---------------
Total non-interest income................................ 1,644 600 4,060 649
--------------- --------------- --------------- ---------------
Non-interest expense:
Employee compensation and benefits.......................... 2,480 1,915 8,880 4,275
Occupancy and equipment..................................... 886 886 3,568 1,801
Insurance (2)............................................... 255 361 948 3,610
Professional fees........................................... 622 222 1,605 929
Other....................................................... 2,782 1,421 7,964 3,421
--------------- --------------- --------------- ---------------
Total non-interest expense............................... 7,025 4,805 22,947 14,036
--------------- --------------- --------------- ---------------
Income before income taxes and preferred stock dividends ..... 3,336 2,621 12,632 4,243
Provision for income taxes (3)................................ 1,361 1,022 5,033 1,657
--------------- --------------- --------------- ---------------
Net income before preferred stock dividends................... 1,975 1,599 7,599 2,586
Preferred stock dividends..................................... 332 672 2,890 2,145
--------------- --------------- --------------- ---------------
Net income after preferred stock dividends....................$ 1,643 $ 927 $ 4,709 $ 441
=============== =============== =============== ---------------
FINANCIAL CONDITION DATA:
Total assets..................................................$ 3,028,776 $ 1,329,044 $ 2,145,406 $ 824,360
Loans receivable, net, and mortgage-backed securities(4)...... 2,674,718 1,132,882 1,781,652 716,550
Investments, overnight deposits, tax certificates,
repurchase agreements, certificates of deposits and other
interest-earning assets...................................... 176,091 124,950 186,955 87,662
Total liabilities............................................. 2,883,145 1,230,889 2,045,761 755,249
Deposits...................................................... 1,444,102 878,166 1,195,892 506,106
Borrowings.................................................... 1,291,466 289,259 701,484 237,775
Trust Preferred Securities.................................... 116,000 50,000 116,000 -
Total stockholders' equity.................................... 145,631 98,155 99,645 69,111
Common stockholders' equity................................... 129,719 60,051 75,649 44,807
PER COMMON SHARE DATA:
Basic earnings per common share(5)............................$ .13 $ .14 $ .57 $ .10
=============== =============== =============== ===============
Diluted earnings per common share(5)..........................$ .12 $ .13 $ .54 $ .10
=============== =============== =============== ---------------
Weighted average number of common shares outstanding
during the period:
Basic(5)..................................................... 13,012,118 6,806,379 8,210,890 4,306,042
Diluted(5)................................................... 14,041,609 7,957,657 8,955,572 4,558,521
Equity per common share.......................................$ 9.13 $ 7.59 $ 7.94 $ 7.85
Fully converted tangible equity per common share..............$ 8.19 $ 6.56 $ 6.88 $ 7.13
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1995 1994 1993
---- ---- ----
OPERATIONS DATA:
<S> <C> <C> <C>
Interest income................................................... $ 39,419 $ 30,421 $ 25,722
Interest expense.................................................. 26,305 16,295 12,210
--------------- --------------- ------------
Net interest income before provision (credit) for loan losses..... 13,114 14,126 13,512
Provision (credit) for loan losses................................ 1,221 1,187 1,052
--------------- --------------- ------------
Net interest income after provision (credit) for loan losses...... 11,893 12,939 12,460
--------------- --------------- ------------
Non-interest income:
Service fees...................................................... 423 358 221
Gain on sales of loans and mortgage-backed
securities, net................................................. 239 150 1,496
Gain (loss) on sales of other assets, net(1)...................... 9,569 -- --
Other............................................................. 6 46 2
--------------- --------------- ------------
Total non-interest income.................................... 10,237 554 1,719
--------------- --------------- ------------
Non-interest expense:
Employee compensation and benefits.............................. 3,997 3,372 2,721
Occupancy and equipment......................................... 1,727 1,258 978
Insurance (2)................................................... 1,027 844 835
Professional fees............................................... 1,269 833 543
Other........................................................... 4,129 3,579 2,746
--------------- --------------- ------------
Total non-interest expense................................... 12,149 9,886 7,823
--------------- --------------- ------------
Income before income taxes and preferred stock dividends ......... 9,981 3,607 6,356
Provision for income taxes (3).................................... 3,741 1,328 2,318
--------------- --------------- ------------
Net income before preferred stock dividends....................... 6,240 2,279 4,038
Preferred stock dividends......................................... 2,210 2,069 1,513
--------------- --------------- ------------
Net income after preferred stock dividends........................ $ 4,030 $ 210 $ 2,525
=============== =============== ============
FINANCIAL CONDITION DATA:
Total assets...................................................... $ 608,415 $ 551,075 $ 435,378
Loans receivable, net, and mortgage-backed securities(4).......... 506,132 470,154 313,899
Investments, overnight deposits, tax certificates,
repurchase agreements, certificates of deposits and other
interest-earning assets.......................................... 88,768 64,783 100,118
Total liabilities................................................. 562,670 509,807 397,859
Deposits.......................................................... 310,074 347,795 295,108
Borrowings........................................................ 241,775 158,175 97,775
Trust Preferred Securities........................................ - - --
Total stockholders' equity........................................ 45,745 41,268 30,273
Common stockholders' equity....................................... 21,096 16,667 17,162
PER COMMON SHARE DATA:
Basic earnings per common share(5)................................ $ 1.99 $ .11 $ 1.67
=============== =============== ============
Diluted earnings per common share(5).............................. $ 1.26 $ .10 $ 1.00
=============== =============== ============
Weighted average number of common shares outstanding
during the period:
Basic(5)......................................................... 2,021,601 1,957,210 1,509,264
Diluted(5)....................................................... 4,158,564 2,175,210 3,239,618
Equity per common share........................................... $ 10.20 $ 8.33 $ 8.86
Fully converted tangible equity per common share.................. $ 8.15 $ 7.39 $ 7.57
</TABLE>
(Continued on next page)
35
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
DECEMBER 31, AT OR FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
------------- ------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS
PERFORMANCE RATIOS:
Return on average assets(6)(7)................................... .33% .62% .51% .36% 1.10% .46% 1.12%
Return on average common equity(6)............................... 6.31 9.55 9.34 1.30 22.60 1.21 18.55
Return on average total equity(6)................................ 5.87 8.08 8.06 4.30 14.70 5.84 14.07
Interest rate spread(6).......................................... 1.39 2.59 2.07 2.10 2.12 2.78 3.59
Net interest margin(6)........................................... 1.66 2.86 2.31 2.51 2.39 3.01 3.87
Dividend payout ratio(8)......................................... 16.81 42.02 38.03 82.95 35.42 96.79 40.66
Ratio of earnings to combined fixed charges and preferred
stock dividends(9):
Excluding interest on deposits................................ 1.18 1.32 1.26 1.05 1.52 1.07 1.87
Including interest on deposits................................ 1.09 1.11 1.10 1.02 1.21 1.03 1.27
Total loans, net, and mortgage-backed securities to
total deposits................................................185.22 129.00 148.98 141.58 163.13 134.40 109.65
Non-interest expenses to average assets.......................... 1.17 1.85 1.55 1.97 2.14 2.04 2.18
Efficiency ratio(10)............................................. 57.43 59.37 57.56 61.11(11) 85.50(11) 66.06 45.17
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans..................... .39% .70% .72% .99% 1.02% 1.07% 1.54%
Ratio of non-performing assets to total loans, real estate
owned and tax certificates..................................... .45 .86 .79 1.14 1.35 1.41 1.78
Ratio of non-performing assets to total assets................... .40 .70 .67 .95 1.10 1.17 1.46
Ratio of charge-offs to total loans(6)........................... .002 .03 .03 .08 .13 .39 .07
Ratio of loan loss allowance to total loans...................... .16 .28 .21 .34 .32 .20 .38
Ratio of loan loss allowance to non-performing loans............. 40.78 39.60 28.96 33.74 31.54 18.89 24.70
CAPITAL RATIOS:
Ratio of average common equity to average total assets........... 4.35% 3.74% 3.40% 4.78% 3.14% 3.58% 3.79%
Ratio of average total equity to average total assets............ 5.62 7.62 6.36 8.44 7.47 8.05 7.99
Tangible capital-to-assets ratio(12)............................. 7.11 7.80 8.07 7.01 7.09 6.65 7.56
Core capital-to-assets ratio(12)................................. 7.11 7.80 8.07 7.01 7.09 6.65 7.56
Risk-based capital-to-assets ratio(12)........................... 12.89 14.63 11.27 14.19 15.79 14.13 15.85
<FN>
- ------------------------------------
(1) 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.
(2) In 1996 the Company recorded a one-time SAIF special assessment of $2.6
million ($1.6 million after tax).
(3) Amount reflects expense from change in accounting principle of $194,843
for fiscal 1994. See Note 15 to Consolidated Financial Statements.
(4) Does not include mortgage loans held for sale.
(5) Earnings per share for all periods presented before December 31, 1997
have been restated in accordance with Financial Accounting Standard
128.
(6) Calculated on an annualized basis.
(7) Return on average assets is calculated before payment of preferred
stock dividends.
(8) 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.
(9) 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.
(10) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income by net interest income.
(11) These efficiency ratios have been adjusted to exclude the impact of the
on-time SAIF special assessment in 1996 and the gain on the sale of the
Company's branches in 1995. If these ratios were not adjusted, the
ratios would have been 76.45 in 1996 and 14.58 in 1995.
(12) Regulatory capital ratio of the Bank.
</FN>
</TABLE>
36
<PAGE>
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 as of and for the three
month periods ended December 31, 1997 and 1996. 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, 1997 attached as Appendix A to this Prospectus and the
Company's December 31, 1997 Operating Results and Financial Information attached
as Appendix B to this Prospectus. Reference is also made to Appendix A for
review of the consolidated operating results and financial condition of the
Company as of and for the years ended September 30, 1997, 1996 and 1995.
The following discussion and analysis contains forward looking statements.
Additional written or oral forward looking statements may be made by the Company
from time to time in filings with the Securities and Exchange Commission or
otherwise. Such forward looking statements are within the meaning of that term
in Section 27A of the Securities Act of 1933, as amended, (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such statements may include, but not be limited to, projections
of income, borrowing costs, prepayment rates, and plans for future operations or
acquisitions, as well as assumptions relating to the foregoing. The words
"believe," "expect," "anticipate," "estimate," "project," "intend," and similar
expressions identify forward looking statements that are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward looking statements.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1997 TO
DECEMBER 31, 1997.
ASSETS
Total assets increased by $883 million, or 41.2%, from $2.1 billion at September
30, 1997, to $3.0 billion at December 31, 1997, principally due to the purchase
of $1.1 billion of residential mortgages as discussed more fully below.
The Company's short-term investments, primarily consisting of Federal Home Loan
Bank ("FHLB") overnight deposits, and securities purchased under agreements to
resell decreased by $29.1 million, or 36.7%, to $50.3 million at December 31,
1997, from $79.4 million at September 30, 1997 as a result of the Company's
acquisition of residential mortgages.
Mortgage-backed securities available for sale decreased $24.5 million or 22.5%
from $108.9 million at September 30, 1997 to $84.4 million at December 31, 1997,
due primarily to repayments and to sales of such securities as management took
advantage of the declining interest rate environment.
The Company's net loans receivable increased by $918 million, or 55.3%, to $2.6
billion at December 31, 1997, from $1.7 billion at September 30, 1997, primarily
due to the purchase of $1.1 billion of residential loans. Of these loans
purchased, $822 million, or 79.3%, were one year adjustable rate mortgages with
an initial rate below the fully indexed rate. These loans were purchased
primarily to leverage the additional
37
<PAGE>
capital ($43.9 million in net proceeds) obtained from the issuance of 3.68
million shares of Class A Common Stock during the quarter. (See "Capital"
below).
During the three months ended December 31, 1997, the Company sold $27.9 million
of loans and recorded a gain of $692,000 on the sales.
Non-performing assets as of December 31, 1997 were $12.2 million which
represents a decrease of $2.1 million or 14.8% from $14.3 million as of
September 30, 1997. Non-performing assets as a percentage of total assets
declined 27 basis points from .67% as of September 30, 1997 to .40% as of
December 31, 1997 due not only to the decline in non-performing assets but also
to the increase in total assets.
The allowance for loan losses increased $611,000 from $3.7 million as of
September 30, 1997 to $4.3 million as of December 31, 1997. The increase was
attributable to additional provision for loan losses resulting primarily from
the growth of the loan portfolio.
38
<PAGE>
The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated.
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(Dollars in thousands)
Non-accrual loans (1) $9,365 $10,866
Restructured loans 1,190 1,888
Loans past due 90 days and still accruing -- --
---------- --------
Total non-performing loans 10,555 12,754
Non-accrual tax certificates 872 958
REO 780 611
--------- -------
Total non-performing assets $12,207 $14,323
======= =======
Allowance for tax certificates losses $ 713 $ 697
Allowance for loan losses 4,304 3,693
------ ------
Total allowance $5,017 $4,390
====== ======
Non-performing assets as a percentage of
total assets .40% .67%
Non-performing loans as a percentage of
total loans .39% .72%
Allowance for loan losses as a percentage of
total loans .16% .21%
Allowance for loan losses as a percentage of
non-performing loans 40.78% 28.96%
Net charge-offs as a percentage of
average total loans .002% .04%
- -----------
(1) In addition to the above, management had concerns as to the borrower's
ability to comply with present repayment terms on $1,410,000 and
$1,878,000 of accruing loans as of December 31, 1997 and September 30,
1997, respectively. Management estimates the loss, if any, on these
loans will not be significant.
LIABILITIES
Deposits increased by $248 million, or 20.7%, to $1.44 billion at December 31,
1997 from $1.20 billion at September 30, 1997. Management believes this increase
is attributable to the Company's offering competitive interest rates and
personalized service in a market area dominated by super-regional banks and to
continued industry consolidation.
During the quarter, the Company opened two de novo branch offices and during
January 1998 opened a third branch office. The Company has announced that it has
signed leases for three additional de novo branch offices and has plans to open
as many as six more during the next twelve months.
39
<PAGE>
FHLB advances were $1.26 billion at December 31, 1997, up $590 million from $671
million at September 30, 1997. This increase was used to fund, together with
other liquidity sources, the loan purchases. (See "Discussion of Financial
Condition Changes from September 30, 1997 to December 31, 1997 - Assets").
CAPITAL
The Company's total stockholders' equity was $145.6 million at December 31,
1997, an increase of $46.0 million, or 46.1%, from $99.6 million at September
30, 1997. The increase is due primarily to the issuance of 3.68 million shares
of Class A Common Stock pursuant to a public stock offering. The net proceeds
from the offering were $43.9 million.
In September 1997, the Company exercised its right to call all the outstanding
shares of its 8% Noncumulative Convertible Preferred Stock, Series 1996,
effective October 10, 1997. As a result 927,204 shares (387,709 shares as of
September 30, 1997) converted to 1,548,410 shares of Class A Common Stock at a
ratio of approximately 1.67 shares of common stock for each share of preferred.
The remaining 5,696 shares of preferred stock were redeemed at $15 per share.
In January 1998, the Company called its 743,870 shares of its 8% Noncumulative
Convertible Preferred Stock, Series 1993 effective February 20, 1998 at $10.00
per share. Management expects substantially all shares of the preferred stock to
be converted into common stock at a ratio of one for one.
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, as defined, of not less than 4.0% of
its net withdrawal deposit accounts plus short term borrowings. As of December
31, 1997 the Bank had liquid assets of 5.08%, which was in compliance with this
requirement.
The Company is in the process of securitizing certain purchased residential
mortgages in its portfolio. The securitization will give the Bank the capability
of borrowing, on a secured basis, additional funds which may be used to fund
additional loan purchases or repay a portion of FHLB advances.
The Company periodically has discussions with and reviews financial information
on other financial institutions which may lead to the acquisition of all or part
of that financial institution by the Company.
YEAR 2000
Data processing for the Company's major applications is performed by two third
party service bureaus. Both have indicated that their systems will be year 2000
compliant. Consequently, management does not anticipate that the year 2000 issue
will be material to the Company's operations or financial condition.
40
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31,
1997 AND 1996.
NET INCOME AFTER PREFERRED STOCK DIVIDENDS
The Company had net income after preferred stock dividends of $1.64 million for
the three months ended December 31, 1997, compared to net income after preferred
stock dividends of $927,000 for the three months ended December 31, 1996, or an
increase of 77.2%. All major categories of income and expense increased
significantly in the three months ended December 31, 1997 as compared to the
three months ended December 31, 1996 and reflect the significant growth the
Company has experienced in the last year. Below is a more detailed discussion of
each major category of income and expenses. Despite the increase in net income
after preferred stock dividends, basic and diluted earnings per share each
declined by $.01 per share due to the increase in the average number of shares
outstanding over the period due to the common stock offering and the common
stock issued in connection with the Suncoast acquisition.
NET INTEREST INCOME
Net interest income increased $2.29 million, or 32.3%, to $9.37 million for the
three months ended December 31, 1997 from $7.08 million for the three months
ended December 31, 1996. This increase is attributable to an increase in average
earning assets of $1.32 billion, or 132%, to $2.32 billion for the three months
ended December 31, 1997 from $998.3 million for the three months ended December
31, 1996, offset by a decline in the net interest spread of 120 basis points.
The increase in average earning assets is due primarily to loan purchases;
approximately $200 million of the increase in average earning assets is a result
of the acquisition of Suncoast Savings on November 15, 1996. The decline in the
interest rate spread of 120 basis points from 2.59% for the three months ended
December 31, 1996 to 1.39% for the three months ended December 31, 1997 is due
to a decline in the yield on interest earning assets of 65 basis points and an
increase in the rate paid on interest bearing liabilities of 55 basis points,
each for the reasons discussed below.
The increase in interest income of $21.96 million, or 113%, to $41.45 million
for the three months ended December 31, 1997 from $19.49 million for the three
months ended December 31, 1996, reflects increases in interest and fees on loans
of $20.27 million.
This increase in interest and fees on loans is due to an increase in average
loans outstanding of $1.24 billion, or 150% to $2.07 billion for the three
months ended December 31, 1997 from $830 million for the three months ended
December 31, 1996 which resulted from purchases of residential mortgages in the
secondary market. Because many of the loans purchased are adjustable-rate
mortgages in the "teaser" period, the yield on loans declined from 7.97% for the
three months ended December 31, 1996 to 7.10% for the three months ended
December 31, 1997. This 87 basis point drop in the yield earned on loans caused
the yield on all interest earning assets to decline 65 basis points from 7.78%
to 7.13%.
The increase in interest expense of $19.67 million, or 158%, to $32.08 million
for the three months ended December 31, 1997 from $12.42 million for the three
months ended December 31, 1996 primarily reflects an increase in interest
expense on interest bearing deposits of $8.70 million, or 98%, from $8.88
million for the three months ended December 31, 1996, to $17.58 million for the
three months ended December 31, 1997, an increase in interest expense on FHLB
advances and other borrowings of $8.09 million from $3.51 million for the three
months ended December 31, 1996 to $11.59 million for the three months ended
December 31, 1997, and an increase in preferred dividends of Trust Subsidiary of
$2.88 million to $2.91 million for the three months ended December 31, 1997. The
increase in each of these categories reflects
41
<PAGE>
significant increases in the average balance for each category. The increase in
the average balances in interest bearing deposits, FHLB advances and other
borrowings were used to fund loan purchases. The proceeds from the Trust
Preferred Securities were contributed as capital to the Bank to fund its growth.
Of the $599 million growth in average interest bearing deposits, $504 million,
or 84% was in certificates of deposits. Because the growth in interest bearing
liabilities was concentrated in the higher costing categories of certificates of
deposits, FHLB advances and other borrowings, and preferred dividends of the
Trust Subsidiary, the rate paid on interest bearing liabilities increased 55
basis points from 5.19% for the three months ended December 31, 1996 to 5.74%
for the three months ended December 31, 1997.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended December 31, 1997 was
$650,000 as compared to $250,000 for the three months ended December 31, 1996.
This increase is related to the strong loan growth in the three months ended
December 31, 1997.
The provision for loan losses represents management's estimate of the charge to
operations after reviewing the nature, volume, delinquency status, and inherent
risk in the loan portfolio in relation to the allowance for loan losses. No
assurance can be given that such reserve will prove to be adequate.
NON-INTEREST INCOME
Non-interest income for the three months ended December 31, 1997 was $1.6
million compared with $600,000 for the three months ended December 31, 1996, an
increase of $1.0 million. This increase is due to the gain on sale of loans and
mortgage-backed securities of $1.1 million recorded in the three months ended
December 31, 1997.
NON-INTEREST EXPENSES
Operating expenses increased $2.2 million, or 46.2%, to $7.03 million for the
three months ended December 31, 1997 compared to $4.81 million for the three
months ended December 31, 1996. The increase in expenses is attributable to the
rapid growth and branch office expansion the Company has experienced.
INCOME TAXES
The income tax provision was $1.36 million for the three months ended December
31, 1997, compared to $1.02 million for the three months ended December 31,
1996. The increase in income taxes is the result of the Company's higher pre-tax
earnings during the three months ended December 31, 1997, compared to the three
months ended December 31, 1996.
PREFERRED STOCK DIVIDENDS
Preferred stock dividends for the three months ended December 31, 1997 were
$332,000, a decrease of $340,000, as compared to $672,000 for the three months
ended December 31, 1996. This decrease is the result of the conversion to common
stock of Noncumulative Convertible Preferred Stock, Series C, C II and Series
1996 as well as the purchase by the Company of 452,883 shares of the 9%
Noncumulative Perpetual Preferred Stock.
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<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
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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1997 1996
----------------------------------------- ------------------------------------------
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 $2,071,826 $ 36,893 7.10% $830,157 $ 16,616 7.97%
Mortgage-backed securities 113,910 2,192 7.70 78,721 1,309 6.65
Short-term investments (1) 28,383 420 5.79 33,021 467 5.53
Tax certificates 44,198 831 7.52 36,681 756 8.24
Long-term investments and
FHLB stock, net 62,062 1,114 7.14 19,736 343 6.89
--------------- ------------ ---- -------------- ------------- ----
Total interest-earning assets 2,320,379 41,450 7.13 998,316 19,491 7.78
--------------- ------- ---- -------- ------------- ----
Interest-bearing liabilities:
NOW/money market 106,372 748 2.79 73,103 413 2.24
Savings 168,177 1,991 4.70 106,209 1,254 4.68
Certificates of deposit 1,023,980 14,845 5.75 519,785 7,215 5.51
Trust Preferred securities 116,000 2,908 10.03 1,087 28 10.30
FHLB advances and other
borrowings 792,391 11,591 5.72 245,520 3,505 5.59
-------- ------------ ---- -------- -------- ----
Total interest-bearing
liabilities 2,206,920 32,083 5.74 945,704 12,415 5.19
--------- ------------ ---- ---------- ------------- ----
Excess of interest-earning assets
over interest-bearing liabilities $ 113,459 $ 52,612
========= ==============
Net interest income $ 9,367 $ 7,076
======= ============
Interest rate spread 1.39% 2.59%
===== =====
Net interest margin 1.66% 2.86%
===== =====
Ratio of interest-earning assets to
interest-bearing liabilities 105.14% 105.56%
======= =======
</TABLE>
- ---------------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
43
<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,
------------------------------------------------
1997 VS. 1996
------------------------------------------------
INCREASE (DECREASE) DUE TO
------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE/
VOLUME RATE RATE/VOLUME (DECREASE)
------ ---- ----------- ----------
(Dollars in thousands)
Interest income attributable to:
<S> <C> <C> <C> <C>
Loans $ 24,186 $ (1,384) $ (2,526) $ 20,276
Mortgage-backed securities 585 206 92 883
Short-term investments (1) (66) 22 (3) (47)
Tax certificates 155 (66) (14) 75
Long-term investments and FHLB
stock 730 13 29 772
------- ------- --------- --------
Total interest-earning assets 25,590 (1,209) (2,422) 21,959
------ ------- --------- -------
Interest expense attributable to:
NOW/money market 188 101 46 335
Savings 732 3 2 737
Certificates of deposit 6,999 321 310 7,630
Trust Preferred securities 2,960 (1) (79) 2,880
FHLB advances and other
borrowings 7,785 75 226 8,086
-------- --------- -------- --------
Total interest-bearing liabilities 18,664 499 505 19,668
------- -------- -------- -------
Increase (decrease) in net interest income $ 6,926 $(1,708) $(2,927) $ 2,291
=========== =========== ======== =======
</TABLE>
- ------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
44
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
GENERAL
The following is a summary of certain terms and provisions of the
Preferred Securities. This summary of certain terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Trust Agreement. Where particular
defined terms of the Trust Agreement are referred to, but not defined herein,
such defined terms are incorporated herein by reference. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
DISTRIBUTIONS
The Preferred Securities represent preferred undivided beneficial
interests in the assets of the Trust Issuer. Distributions on such Preferred
Securities will be payable at the annual rate of ___% of the stated Liquidation
Amount of $25, payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year, to the holders of the Preferred Securities on the
relevant record dates. The record date will be the 15th day of the month in
which the relevant Distribution payment date occurs. Distributions will
accumulate from the date of the initial issuance of the Preferred Securities and
are cumulative. The first Distribution payment date for the Preferred Securities
will be June 30, 1998. The amount of Distributions payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which Distributions are payable on the Preferred Securities is
not a Business Day, then payment of the Distributions payable on such date will
be made on the next succeeding day that is a Business Day (and without any
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 (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 executive order to remain closed or a day on
which the principal 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 Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral of interest, quarterly Distributions on the Preferred Securities
by the Trust Issuer will also be deferred during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of ___%
thereof, compounded quarterly from the relevant payment date for such
Distributions, to the extent permitted by applicable law. The term
"Distributions" as used herein, shall include any such additional Distributions
and shall include amounts paid in respect of any Special Event Redemption
Price. During any such
45
<PAGE>
Extension Period, the Company may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock, (other than (a) the
reclassification of any class of the Company's capital stock into another class
of capital stock, (b) dividends or distributions payable in any class of the
Company's common stock, (c) any declaration of a dividend in connection with the
implementation of a shareholder 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 and (d) purchases of the Company's common stock related to the
rights under any of the Company's benefit plans for its or its subsidiaries'
directors, officers or employees), (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 Junior
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 Junior
Subordinated Debentures (other than payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the Junior Subordinated Debentures
or any of the Preferred Securities. Prior to the termination of any such
Extension Period, the Company may further defer the payment of interest on the
Junior Subordinated Debentures, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Junior
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 ___%, compounded quarterly, 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 Junior Subordinated Debentures--Right
to Defer Interest Payment Obligation" and "Certain Federal Income Tax
Consequences-Interest Income and Original Issue Discount."
The revenue of the Trust Issuer available for distribution to
holders of its Preferred Securities will be limited to payments under the Junior
Subordinated Debentures in which the Trust Issuer will invest the proceeds from
the issuance and sale of its Trust Securities. See "Description of the Junior
Subordinated Debentures." If the Company does not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (if and to the extent the Trust 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 the Guarantee."
The Company has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debentures.
SUBORDINATION OF THE COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the
Preferred Securities and Common Securities, as applicable, shall be made PRO
RATA based on the Liquidation Amount of the Preferred Securities and the Common
Securities; PROVIDED, HOWEVER, that if on any Distribution Date or Redemption
Date (as defined herein) 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 Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall
46
<PAGE>
be made unless payment in full in cash of all accumulated and unpaid
Distributions on all of the outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or, in the case of payment
of the Redemption Price, the full amount of such Redemption Price on all of the
outstanding Preferred Securities then called for redemption 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 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 Common Securities will be deemed to have waived any right to act with
respect to any such event of default under the Trust Agreement until the effect
of all such events of default with respect to the Preferred Securities 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 Preferred Securities and not on behalf of the Company as holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
REDEMPTION
The Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Junior 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 Trust 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 Trust Securities plus accumulated and unpaid Distributions thereon (the
"Redemption Price") to the date of redemption (the "Redemption Date").
The Company has the option to redeem the Junior Subordinated
Debentures prior to maturity on or after March 31, 2003, in whole or in part
from time to time, and thereby cause a mandatory redemption of a Like Amount of
the Trust Securities. Any time that a Tax Event, an Investment Company Event or
a Capital Treatment Event (each as defined below) shall occur and be continuing,
the Company has the right to redeem the Junior Subordinated Debentures in whole
(but not in part) within 180 days following the occurrence of such event and
thereby cause a mandatory redemption of the Preferred Securities in whole (but
not in part). For a fuller description of the Stated Maturity and redemption
provisions of the Junior Subordinated Debentures, see "Description of the Junior
Subordinated Debentures--Redemption or Exchange."
REDEMPTION PROCEDURES
Trust 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 Junior Subordinated
Debentures. Redemptions of the Trust Securities shall be made and the Redemption
Price shall be paid on each Redemption Date only to the extent that the Trust
Issuer has funds on hand
47
<PAGE>
available for the payment of such Redemption Price. See also "--Subordination of
the Common Securities."
If the Trust Issuer gives a notice of redemption in respect of
the Trust 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 the 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 thereof upon surrender of their certificates evidencing
such Trust Securities. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for the Trust Securities called for redemption
shall be payable to the holders of 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 the holders of such Trust Securities so called for redemption will
cease, except the right of the holders of such Trust Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such Trust
Securities will cease to be outstanding.
In the event that any date fixed for redemption of the Trust
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 Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust Issuer or by the
Company pursuant to the Guarantee as described under "Description of the
Guarantee," Distributions on such Trust Securities will continue to accumulate
at the then applicable rate, from the Redemption Date originally established by
the Trust Issuer 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.
Subject to applicable law (including, without limitation, United
States federal securities law) and the provisions of the Trust Agreement, the
Company or its subsidiaries may at any time and from time to time purchase
outstanding Preferred Securities by private agreement.
Payment of the Redemption Price on the Trust Securities and any
distribution of the Junior Subordinated Debentures to holders of the Trust
Securities shall be made to the applicable recordholders thereof as they appear
on the register for the Trust Securities on the relevant record date, which date
shall be the date at least 15 days prior to the Redemption Date or liquidation
date, as applicable.
If less than all of the Preferred Securities and Common
Securities issued by the Trust Issuer are to be redeemed on a Redemption Date,
then the aggregate Liquidation Amount of the Preferred Securities and Common
Securities to be redeemed shall be allocated PRO RATA to the Preferred
Securities and the Common Securities based upon the relative Liquidation Amounts
of such classes. 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, or if the Preferred Securities are then held in the form of a global
preferred security in accordance with DTC's customary procedures. The Property
Trustee shall promptly notify the trust
48
<PAGE>
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 the Trust
Agreement, unless the context otherwise requires, all provisions relating to the
redemption of the Preferred Securities shall relate, in the case of the
Preferred Securities redeemed or to be redeemed only in part, to the portion of
the aggregate Liquidation Amount of the 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 Preferred
Securities to be redeemed at its registered address. Unless the Company defaults
in payment of the Redemption Price on the Junior Subordinated Debentures, on and
after the Redemption Date interest will cease to accrue on the Junior
Subordinated Debentures or portions thereof called for redemption.
LIQUIDATION OF THE TRUST ISSUER AND DISTRIBUTION OF THE JUNIOR SUBORDINATED
DEBENTURES TO HOLDERS
The Company has the right at any time to terminate the Trust
Issuer and, after satisfaction of the liabilities of creditors of the Trust
Issuer as provided by applicable law, cause Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities and Common Securities in
exchange therefor upon liquidation of the Trust Issuer.
After the liquidation date fixed for any distribution of the
Junior Subordinated Debentures for Preferred Securities (i) such Preferred
Securities will no longer be deemed to be outstanding, and (ii) DTC or its
nominee, as the registered holder of Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution with respect to
Preferred Securities held by DTC or its nominee, (iii) any certificates
representing the Preferred Securities not held by DTC or its nominee will be
deemed to represent Junior Subordinated Debentures having a principal amount
equal to the stated Liquidation Amount of such Preferred Securities, and bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such series of the 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 Junior Subordinated Debentures should not
be a taxable event to holders of the Preferred Securities. Should there be a
change in law, a change in legal interpretation, a Tax Event or other
circumstances, however, the distribution could be a taxable event to holders of
the Preferred Securities. See "Certain Federal Income Tax
Consequences--Distribution of the Junior Subordinated Debentures to Holders of
the Preferred Securities."
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Trust Agreement, the Trust 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
49
<PAGE>
liquidation of the Company, subject in certain instances to any such event
remaining in effect for a period of 60 or 90 days; (ii) the distribution of a
Like Amount of the Junior Subordinated Debentures to the holders of its
Preferred Securities, if the Company, as depositor, has given written direction
to the Property Trustee to terminate the Trust Issuer (which direction is
optional and wholly within the discretion of the Company, as depositor); (iii)
redemption of all of the Preferred Securities as described under "Description of
the Preferred Securities-Redemption;" and (iv) the entry of an order for the
dissolution of the Trust Issuer by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii)
or (iv) of the preceding paragraph, the Trust Issuer shall be liquidated by the
Trust Issuer Trustees as expeditiously as the Trust Issuer Trustees determine to
be possible by distributing, after satisfaction of liabilities to creditors of
the Trust Issuer, if any, as provided by applicable law, to the holders of the
Trust Securities a Like Amount of the Junior 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
Trust Issuer available for distribution to holders, after satisfaction of
liabilities to creditors of the Trust Issuer, if any, as provided by applicable
law, an amount equal to, in the case of holders of the Trust 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 Trust Issuer has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust Issuer on Preferred Securities shall be paid on a PRO RATA basis. The
Company, as the holder of the Common Securities, will be entitled to receive
distributions upon any such liquidation PRO RATA with the holders of the
Preferred Securities, except that if an event of default under the Indenture has
occurred and is continuing, the Preferred Securities shall have a priority over
the 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 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 Junior Subordinated Debentures--Debenture
Events of Default"); or
(ii) default 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 in the payment of any Redemption Price of any
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 Trust Issuer Trustees in
the Trust Agreement (other than a covenant or
50
<PAGE>
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 Trust Issuer 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" 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 Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such 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 Preferred Securities shall have a preference over the Common
Securities as described above. See "--Subordination of the Common Securities"
and "--Liquidation Distribution Upon Termination."
REMOVAL OF THE TRUST ISSUER TRUSTEES
Unless an event of default under the Indenture shall have
occurred and be continuing, any Trust Issuer Trustee may be removed at any time
by the holder of the 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 Preferred Securities. In no event will the holders of
the Preferred Securities have the right to vote to appoint, remove or replace
the Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of any
Trust 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 (as defined in the Trust Agreement) may at the time be
located, the Company, as the holder of the 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
51
<PAGE>
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 TRUST 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 Trust Issuer Trustee shall be
a party or any entity succeeding to all or substantially all the corporate trust
business of such Trust Issuer Trustee, shall be the successor of such Trust
Issuer Trustee under the Trust Agreement, provided such entity shall be
otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST ISSUER
The Trust 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 Trust Issuer may, at
the request of the Company, with the consent of the Administrative Trustees and
without the consent of the holders of the Preferred Securities, the Property
Trustee or the Delaware Trustee, merge with or into, consolidate, amalgamate, 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 Trust Issuer with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Preferred Securities 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 Junior Subordinated Debentures, (iii) the Successor Securities are
registered or listed, or any Successor Securities will be registered or listed
upon notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then registered or listed
(including, if applicable, the New York Stock Exchange), 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 Issuer, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion from independent counsel to the Trust 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 Preferred
Securities (including any Successor Securities) in any material respect and (b)
following such merger, consolidation, amalgamation, replacement,
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conveyance, transfer or lease, neither the Trust 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 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 Guarantee. Notwithstanding the foregoing, the Trust
Issuer 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 Issuer or the successor entity to be classified as other
than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities will have no voting
rights.
The Trust Agreement may be amended from time to time by the
Company, the Property Trustee and the Administrative Trustees, without the
consent of the holders of the Preferred Securities, (i) with respect to
acceptance of appointment of a successor trustee, (ii) to 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 (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as shall be necessary to ensure that the Trust Issuer will be classified for
United States federal income tax purposes as a grantor trust at all times that
the Preferred Securities are outstanding or to ensure that the Trust Issuer will
not be required to register as an "investment company" under the Investment
Company Act; PROVIDED, however, that in the case of clause (ii), such action
shall not adversely affect in any material respect the interests of any holder
of the Preferred Securities, and any amendments of the Trust Agreement shall
become effective when notice thereof is given to the holders of the Preferred
Securities. The Trust Agreement may be amended by the Trust Issuer Trustees and
the Company with (i) the consent of holders representing not less than a
majority (based upon Liquidation Amounts) of the outstanding Trust Securities
and (ii) receipt by the Trust Issuer Trustees of an opinion of counsel to the
effect that such amendment or the exercise of any power granted to the Trust
Issuer Trustees in accordance with such amendment will not affect the Trust
Issuer's status as a grantor trust for United States federal income tax purposes
or the Trust Issuer's exemption from status as an "investment company" under the
Investment Company Act, PROVIDED that without the consent of each holder of the
Trust Securities, the Trust Agreement may not be amended to (a) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date or (b) restrict the right of a
holder of the Trust Securities to institute suit for the enforcement of any such
payment on or after such date.
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So long as the Junior Subordinated Debentures are held by the
Property Trustee, the Trust 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 Junior Subordinated Debentures, (ii) waive any past
default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior Subordinated
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Junior 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 Preferred Securities; PROVIDED, however,
that where a consent under the Indenture would require the consent of each
holder of the Junior Subordinated Debentures affected thereby, no such consent
shall be given by the Property Trustee without the prior consent of each holder
of the Preferred Securities. The Trust Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the holders of the
Preferred Securities except by subsequent vote of the holders of the Preferred
Securities. The Property Trustee shall notify each holder of the Preferred
Securities of any notice of default received with respect to the Junior
Subordinated Debentures. In addition to obtaining the foregoing approvals of the
holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trust Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that the Trust 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 Preferred Securities may
be given at a meeting of holders of the 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 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 Preferred Securities in
the manner set forth in the Trust Agreement.
No vote or consent of the holders of the Preferred Securities
will be required for the Trust Issuer to redeem and cancel the Preferred
Securities in accordance with the Trust Agreement.
Notwithstanding that holders of the Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities that are owned by the Company, the Trust Issuer
Trustees or any affiliate of the Company or the Trust 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 Preferred Securities in the event of
any liquidation of the Trust Issuer is $25 per Preferred Security plus
accumulated and unpaid Distributions, which may be in the form of a distribution
of such amount in Junior Subordinated Debentures, subject to certain exceptions.
See "--Liquidation Distribution Upon Termination."
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EXPENSES AND TAXES
In the Indenture, the Company, as borrower, has agreed to pay all
debts and other obligations (other than with respect to the Preferred
Securities) and all costs and expenses of the Trust Issuer (including costs and
expenses relating to the organization of the Trust Issuer, the fees and expenses
of the Trust Issuer Trustee and the costs and expenses relating to the operation
of the Trust Issuer) and to pay any and all taxes and all costs and expenses
with respect thereto (other than United States withholding taxes) to which the
Trust Issuer might become subject. The foregoing obligations of the Company
under the Indenture are for the benefit of, and shall be enforceable by, any
person to whom any such debts, obligations, costs, expenses and taxes are owed
(a "Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Company directly against the
Company, and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against the Trust Issuer or any other
person before proceeding against the Company. The Company has also agreed in the
Indenture to execute such additional agreements as may be necessary or desirable
to give full effect to the foregoing.
BOOK ENTRY, DELIVERY AND FORM
The Preferred Securities will be issued in the form of one or
more fully registered global securities which will be deposited with, or on
behalf of, DTC and registered in the name of DTC's nominee. Unless and until it
is exchangeable in whole on in part for the Preferred Securities in definitive
form, a global security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC
or any such nominee to a successor of such Depository or a nominee of such
successor.
Ownership of beneficial interests in a global security will be
limited to persons that have accounts with DTC or its nominee ("Participants")
or persons that may hold interests through Participants. The Company expects
that, upon the issuance of a global security, DTC will credit, on its book-entry
registration and transfer system, the Participants' accounts with their
respective principal amounts of the Preferred Securities represented by such
global security. Ownership of beneficial interests in such global security will
be shown on, and the transfer of such ownership interests will be effected only
through, records maintained by DTC (with respect to interests of Participants)
and on the records of Participants (with respect to interests of Persons held
through Participants). Beneficial owners will not receive written confirmation
from DTC of their purchase, but are expected to receive written confirmations
from the Participants through which the beneficial owner entered into the
transaction. Transfers of ownership interests will be accomplished by entries on
the books of Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a
global security, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Preferred Securities represented by such global
security for all purposes under the Junior Subordinated Indenture. Except as
provided below, owners of beneficial interests in a global security will not be
entitled to receive physical delivery of the Preferred Securities in definitive
form and will not be considered the owners or holders thereof under the Junior
Subordinated Indenture. Accordingly, each person owning a
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beneficial interest in such a global security must rely on the procedures of DTC
and, if such person is not a Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a holder
of Preferred Securities under the Junior Subordinated Indenture. The Company
understands that, under DTC's existing practices, in the event that the Company
requests any action of holders, or an owner of a beneficial interest in such a
global security desires to take any action which a holder is entitled to take
under the Junior Subordinated Indenture, DTC would authorize the Participants
holding the relevant beneficial interests to take such action, and such
Participants would authorize beneficial owners owning through such Participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them. Redemption notices will also be sent to DTC. If less
than all of the Preferred Securities are being redeemed, the Company understands
that it is DTC's existing practice to determine by lot the amount of the
interest of each Participant to be redeemed.
Distributions on the Preferred Securities registered in the name
of DTC or its nominee will be made to DTC or its nominee, as the case may be, as
the registered owner of the global security representing such Preferred
Securities. None of the Company, the Trust Issuer Trustees, the Administrators,
any Paying Agent or any other agent of the Company or the Trust Issuer Trustees
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the global
security for such Preferred Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Disbursements of Distributions to Participants shall be the responsibility of
DTC. DTC's practice is to credit Participants' accounts on a payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payable date. Payments
by Participants to beneficial owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Company, the Trust Issuer
Trustees, the Paying Agent or any other agent of the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities
depository with respect to the Preferred Securities at any time by giving
reasonable notice to the Company or the Trust Issuer Trustees. If DTC notifies
the Company that it is unwilling to continue as such, or if it is unable to
continue or ceases to be a clearing agency registered under the Exchange Act and
a successor depository is not appointed by the Company within ninety days after
receiving such notice or becoming aware that DTC is no longer so registered, the
Company will issue the Preferred Securities in definitive form upon registration
of transfer of, or in exchange for, such global security. In addition, the
Company may at any time and in its sole discretion determine not to have the
Preferred Securities represented by one or more global securities and, in such
event, will issue Preferred Securities in definitive form in exchange for all of
the global securities representing such Preferred Securities.
DTC has advised the Company and the Trust Issuer as follows: DTC
is a limited purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions
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between Participants through electronic book entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Certain of such Participants (or their representatives), together with other
entities, own DTC. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Preferred Securities will be made by the
Underwriters in immediately available funds.
Secondary trading in preferred securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Preferred
Securities will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in the Preferred Securities will therefore be required
by DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Preferred Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made to
DTC, which will credit the relevant accounts at DTC on the applicable
Distribution Dates or, if the Preferred Securities are not held by DTC, such
payments will be made by check mailed to the address of the holder entitled
thereto. as such address appears on the securities register for the Trust
Securities. The paying agent (the "Paying Agent") will initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable to
the Administrators. The Paying Agent will be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee and the Administrators. If
the Property Trustee is no longer the Paying Agent, the Property Trustee will
appoint a successor (which must be a bank or trust company reasonably acceptable
to the Administrators) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer
agent for the Preferred Securities. Registration of transfers of Preferred
Securities will be effected without charge by or on behalf of the Trust Issuer,
except for the payment of any tax or other governmental charges that may be
imposed in connection with any transfer or exchange or the giving of such
indemnity as the Trust Issuer may require with respect thereto. In the event of
any redemption, the Trust Issuer will not be required to (i) issue, register the
transfer of, or exchange any Preferred Securities during a period beginning at
the opening of business 15 days before the date of mailing of a notice of
redemption of any Preferred Securities called for redemption and ending at the
close of business on the day of such mailing; or (ii) register the transfer of
or exchange any Preferred Securities so selected for redemption, in whole or in
part, except the unredeemed portion of any such Preferred Securities being
redeemed in part.
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INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during
the continuance of an Event of Default, undertakes to perform only such duties
as are specifically set forth in the Trust Agreement and, 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 Trust
Securities unless it is offered reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of Preferred
Securities are entitled under the Trust Agreement to vote, and the Company has
not given written instructions to the Property Trustee under the Trust
Agreement, then the Property Trustee will take such action as it deems advisable
and in the best interests of the holders of the Preferred 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 Trust Issuer in such a way that the
Trust 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 Junior 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 of the Trust Issuer
or the Trust Agreement, that the Company and the Administrative Trustees
determine in their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar
rights.
The Trust Agreement and the Preferred Securities will be governed
by, and construed in accordance with, the internal laws of the State of
Delaware.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under an
Indenture (the "Indenture") between the Company and The Bank of New York, as
trustee (the "Debenture Trustee"). The Indenture will be qualified as an
Indenture under the Trust Indenture Act. This summary of certain terms and
provisions of the Junior Subordinated Debentures and the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture, and to the Trust Indenture Act. Wherever particular
defined terms of the Indenture are referred to, but not defined herein, such
defined terms are incorporated herein by reference. The form of the Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
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GENERAL
Concurrently with the issuance of the Preferred Securities, the
Trust Issuer will invest the proceeds thereof, together with the consideration
paid by the Company for the Common Securities, in the Junior Subordinated
Debentures. The Junior Subordinated Debentures will bear interest at the annual
rate of %, from the date of original issuance payable quarterly in arrears on
March 31, June 30, September 30, and December 31 of each year (each, an
"Interest Payment Date"), commencing June 30, 1998, to the person in whose name
each 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 Trust Issuer, the
Junior Subordinated Debentures will be held in the name of the Property Trustee
in trust for the benefit of the holders of the Preferred Securities. The amount
of interest payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which interest is
payable on the Junior 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 % thereof,
compounded quarterly from the relevant Interest Payment Date. The term
"interest" as used herein shall include quarterly interest payments, interest on
quarterly interest payments not paid on the applicable Interest Payment Date and
Additional Sums, as applicable.
The Junior Subordinated Debentures will mature on March 31, 2028
(such date, as it may be shortened as hereinafter described, the "Stated
Maturity"). If a Tax Event (as defined herein) occurs, then the Company will
have the right prior to the termination of the Trust Issuer, subject to the
Company having received prior regulatory approval if then required under
applicable capital guidelines or regulatory policies, to advance the Stated
Maturity of the Junior Subordinated Debentures to the minimum extent required in
order to allow for the payments of interest in respect of the Junior
Subordinated Debentures to continue to be tax deductible, but in no event shall
the resulting maturity of the Junior Subordinated Debentures be less than 15
years from the date of original issuance thereof. The Stated Maturity shall be
advanced only if, in the opinion of counsel to the Company experienced in such
matters, (a) after advancing the Stated Maturity, interest paid on the Junior
Subordinated Debentures will be deductible for United States federal income tax
purposes and (b) advancing the Stated Maturity will not result in a taxable
event to holders of the Trust Securities.
In the event that the Company elects to shorten the Stated
Maturity of the Junior Subordinated Debentures as the result of the occurrence
of a Tax Event, it will give notice thereof to the Debenture Trustee, the Trust
Issuer and to the holders of the Junior Subordinated Debentures no more than 180
days and no less than 90 days prior to the effectiveness thereof.
The Junior 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,
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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 Junior Subordinated Debentures
will be effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, and holders of the Junior Subordinated Debentures should
look only to the assets of the Company for payments on the Junior 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.
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 Junior Subordinated Debentures to defer
the payment of interest on the Junior Subordinated Debentures for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
PROVIDED that no Extension Period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. At the end of each Extension Period, the Company
must pay all interest then accrued and unpaid on the Junior Subordinated
Debentures (together with interest on such unpaid interest at the annual rate of
____%, compounded quarterly from the relevant Interest Payment Date, to the
extent permitted by applicable law). During an Extension Period, interest would
continue to accrue and holders of the Junior Subordinated Debentures would be
required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
During any such Extension Period, the Company may not (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (other
than (a) the reclassification of any class of the Company's capital stock into
another class of capital stock, (b) dividends or distributions payable in any
class of the Company's common stock, (c) any declaration of a dividend in
connection with the implementation of a shareholder 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 and (d) purchases of the Company's common stock
related to the rights under any of the Company's benefit plans for its or its
subsidiaries' directors, officers or employees), 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 Junior 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 Junior Subordinated Debentures (other than payments under the Guarantee), or
(iii) redeem, purchase or acquire less than all of the Junior Subordinated
Debentures or any of the Preferred Securities. 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 20 consecutive quarters or extend
beyond the Stated Maturity of the Junior 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 _____%,
compounded quarterly, to the extent permitted by
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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 Junior 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 give notice of the record date, or
the date such Distributions are payable, to the New York Stock Exchange or other
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. The
Debenture Trustee shall give notice of the Company's election to begin a new
Extension Period to the holders of the 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 Trust Issuer or the Property Trustee is required to pay
any additional taxes, duties or other governmental charges, the Company will pay
such additional amounts (the "Additional Sums") on the Junior Subordinated
Debentures as shall be required so that the Distributions payable by the Trust
Issuer shall not be reduced as a result of any such additional taxes, duties or
other governmental charges.
REDEMPTION OR EXCHANGE
The Company will have the right to redeem the Junior Subordinated
Debentures prior to maturity (i) on or after March 31, 2003, in whole or in part
from time to time at a redemption price (the "Optional Redemption Price") equal
to the accrued and unpaid interest on the Junior Subordinated Debentures so
redeemed to the date of redemption plus 100% of the principal amount thereof, or
(ii) prior to March 31, 2003 in whole (but not in part), within 180 days
following the occurrence and continuation of a Tax Event, an Investment Company
Event or a Capital Treatment Event, in each case at a redemption price (the
"Special Event Redemption Price") equal to the greater of (A) 100% of the
principal amount thereof or (B) the sum, as determined by a Quotation Agent (as
defined herein), of the present values of 100% of the principal amount of Junior
Subordinated Debentures, together with scheduled payments of interest on the
Junior Subordinated Debentures from the prepayment date to and including March
31, 2003, discounted to the prepayment date on a quarterly basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
(as defined herein) plus, in each case, accrued interest thereon to the date of
redemption. Either of the Optional Redemption Price or the Special Event
Redemption Price are referred to as the "Redemption Price." Any such redemption
prior to the Stated Maturity will be subject to prior regulatory approval if
then required.
"Investment Company Event" means the receipt by the Trust Issuer
of an opinion of counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, the Trust Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act, which change occurs or becomes effective on or after
the date of original issuance of the Preferred Securities.
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"Capital Treatment Event" means the reasonable determination by
the Company that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such proposed change, pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred Securities,
there is more than an insubstantial risk that the Company will not be entitled
to treat an amount equal to the Liquidation Amount of the Preferred Securities
as "Tier 1 Capital" (or the then equivalent thereof) for purposes of applicable
capital adequacy guidelines of the Federal Reserve (or any successor regulatory
authority with jurisdiction over bank holding companies), or any capital
adequacy guidelines as then in effect and applicable to the Company. There are
currently no capital adequacy guidelines applicable to savings bank holding
companies such as the Company.
"Tax Event" means the receipt by the Trust 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 Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust Issuer is, or will be within 90 days of
the date of such opinion, subject to United Stated federal income tax with
respect to income received or accrued on the Junior Subordinated Debentures,
(ii) interest payable by the Company on the Junior 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 Trust 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,
assessments or other governmental charges.
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to that portion
of the principal amount of the Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities PRO RATA based upon the
relative Liquidation Amounts of such Trust Securities and the proceeds of which
will be used to pay the Redemption Price of such Trust Securities and (ii) with
respect to a distribution of the Junior Subordinated Debentures to holders of
the Trust Securities in exchange therefor in connection with a dissolution or
liquidation of the Trust Issuer, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures would be distributed.
"Adjusted Treasury Rate" means, with respect to any prepayment
date, 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 percentage for its principal amount) equal to the
Comparable Treasury Price for such prepayment date, calculated on the third
Business Day preceding the prepayment date, plus in each case (a) 1.25% if such
prepayment date occurs on or prior to the first anniversary of the issuance of
the Preferred Securities offered hereby and (b) 0.50% in all other cases.
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"Comparable Treasury Issue" means the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
remaining term to the Stated Maturity Date of the Junior Subordinated Debentures
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 term of the Junior Subordinated
Debentures.
"Quotation Agent" means the Reference Treasury Dealer appointed
by the Company. "Reference Treasury Dealer" means (i) [PaineWebber Incorporated]
and respective successors; provided, however, that if the foregoing shall cease
to be a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by the
Company.
"Comparable Treasury Price" means, with respect to any prepayment
date, (i) average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 P.M. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest such Reference Treasury 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 prepayment date, the average, as
determined by the Debenture Trustee, of the bid and asked price for the
Comparable Treasury Issue (expressed in each case as 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 prepayment date.
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 Junior
Subordinated Debentures to be redeemed at its registered address. Unless the
Company defaults in payment of the redemption price, on and after the redemption
date interest ceases to accrue on the Junior Subordinated Debentures or portions
thereof called for redemption.
The Junior Subordinated Debentures will not be subject to any
sinking fund.
REGISTRATION, DENOMINATION AND TRANSFER
The Junior Subordinated Debentures will initially be registered
in the name of the Trust Issuer. If the Junior Subordinated Debentures are
distributed to holders of Preferred Securities, it is anticipated that the
depository arrangements for the Junior Subordinated Debentures will be
substantially identical to those in effect for the Preferred Securities. See
"Description of Preferred Securities -- Book Entry, Delivery and Form."
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Although DTC has agreed to the procedures described above, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Junior Subordinated Debentures to be issued in definitive
form.
Payments on Junior Subordinated Debentures represented by a
global security will be made to Cede & Co., the nominee for DTC, as the
registered holder of the Junior Subordinated Debentures, as described under
"Description of Preferred Securities -- Book Entry, Delivery and Form." If
Junior Subordinated Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Junior Subordinated Debentures
will be registrable, and Junior Subordinated Debentures will be exchangeable for
Junior Subordinated Debentures of other authorized denominations of a like
aggregate principal amount, at the corporate trust office of the Debenture
Trustee in New York, New York or at the offices of any Paying Agent or transfer
agent appointed by the Company, provided that payment of interest may be made at
the option of the Company by check mailed to the address of the persons entitled
thereto. However, a holder of $1 million or more in aggregate principal amount
of Junior Subordinated Debentures may receive payments of interest (other than
interest payable at the Stated Maturity) by wire transfer of immediately
available funds upon written request to the Debenture Trustee not later than 15
calendar days prior to the date on which the interest is payable.
Junior Subordinated Debentures will be exchangeable for other
Junior Subordinated Debentures of like tenor, of any authorized denominations
and of a like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar appointed under the
Indenture or at the office of any transfer agent designated by the Company for
such purpose without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. The Company will appoint the
Debenture Trustee as securities registrar under the Indenture. The Company may
at any time designate additional transfer agents with respect to the Junior
Subordinated Debentures.
In the event of any redemption, neither the Company nor the
Debenture Trustee shall be required to (i) issue, register the transfer of or
exchange Junior Subordinated Debentures during a period beginning at the opening
of business 15 days before the date of mailing of notice of redemption of the
Junior Subordinated Debentures to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
register the transfer or exchange of any Junior Subordinated Debentures so
selected for redemption, except, in the case of any Junior Subordinated
Debentures being redeemed in part, any portion thereof not to be redeemed.
Any monies deposited with the Debenture Trustee or any paying
agent, or then held by the Company in trust, for the payment of the principal of
(and premium, if any) or interest on any Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall, at the request of the Company, be
repaid to the
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Company and the holder of such Junior Subordinated Debenture shall thereafter
look, as a general unsecured creditor, only to the Company for payment thereof.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred an event of default under
the Indenture, (ii) the Company is in default with respect to its obligations
under the Guarantee, or (iii) the Company has given notice of its election of an
Extension Period as provided in the Indenture with respect to the Junior
Subordinated Debentures and has not rescinded such notice, or such Extension
Period, or any extension thereof, is continuing, the Company will not (1)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock (other than (a) the reclassification of any class of the Company's capital
stock into another class of capital stock, (b) dividends or distributions
payable in any class of the Company's common stock, (c) any declaration of a
dividend in connection with the implementation of a shareholder 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 and (d) purchasers of the
Company's common stock related to the rights under any of the Company's benefit
plans for its or its subsidiaries' directors, officers or employees), (2) 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 Junior 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
or junior in interest to the Junior Subordinated Debentures (other than payments
under the Guarantee), or (3) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities.
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may,
without the consent of the holders of the Junior 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
Junior 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
Junior Subordinated Debentures affected, to modify the Indenture in a manner
affecting the rights of the holders of the Junior Subordinated Debentures,
PROVIDED that no such modification may, without the consent of the holder of
each outstanding Subordinated Debenture so affected, (i) change the Stated
Maturity of the Junior Subordinated Debentures, reduce the principal amount
thereof or premiums thereon or reduce the rate or extend the time of payment of
interest thereon or (ii) reduce the percentage of principal amount of the Junior
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture.
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DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following
described events with respect to the Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay interest on the Junior
Subordinated Debentures when due (subject to the deferral of certain
due dates in the case of an Extension Period); or
(ii) failure to pay any principal or redemption premium, if
any, on the Junior 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 Junior 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 Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee, provided, however, that such direction is not in conflict
with any law or the Indenture. The Debenture Trustee or the holders of not less
than 25% in aggregate outstanding principal amount of the Junior 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 Junior Subordinated Debentures may annul such
declaration and waive the default if the default (other than the non-payment of
the principal of the Junior 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 Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal, premium 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 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.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of the 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 Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the 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 Preferred Securities. If the right to bring a Direct Action is removed,
the Trust 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 Preferred Securities by the Company in
connection with a Direct Action.
The holders of the Preferred Securities will not be able to
exercise directly any remedies other than those set forth in the preceding
paragraph available to the holders of the Junior Subordinated Debentures. See
"Description of the 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 Junior 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 Junior Subordinated Debentures protection in the event of a highly leveraged
or other transaction involving the Company that may adversely affect holders of
the Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all of the
Junior 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 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 Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal and interest to the
date of the deposit or to
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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
Junior 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 the 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 Junior
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 Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any of the
Junior 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 Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect of the principal of or interest, if any, on the
Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in
respect of the Junior 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 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
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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 Junior Subordinated
Debentures or to other Debt which is PARI PASSU with, or subordinated to, the
Junior 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) any 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 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 Junior Subordinated Debentures will be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflicts of laws principles thereof.
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 Junior 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 JUNIOR SUBORDINATED DEBENTURES
As described under "Description of the Preferred
Securities--Liquidation of the Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders," under certain circumstances involving the
termination of the Trust Issuer, Junior Subordinated Debentures may be
distributed to the holders of the Preferred Securities in exchange therefor upon
liquidation of the Trust Issuer, after satisfaction of liabilities to creditors
of the Trust Issuer as provided by applicable law. Any such distribution will be
subject to receipt of prior regulatory approval if then required. If the Junior
Subordinated Debentures are distributed to the holders of Preferred Securities
upon the liquidation of the Trust Issuer, the Company will use its best efforts
to list the Junior Subordinated Debentures on the New York Stock Exchange or
such stock exchanges, if any, on which the Preferred Securities are then listed.
There can be no assurance as to the market price of any Junior Subordinated
Debentures that may be distributed to the holders of the Preferred Securities.
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PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior
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) 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 Junior Subordinated Debentures will be made to the Person in
whose name the 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
Junior 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 Junior Subordinated Debentures and remaining unclaimed for
two years after such principal or interest has become due and payable shall be
repaid to the Company upon written request of the Company on May 31 of each year
or (if then held in trust by the Company) will be discharged from such trust and
the holders of the Junior Subordinated Debentures shall thereafter look, as
general unsecured creditors, only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer
agent for the Junior Subordinated Debentures. Junior Subordinated Debentures may
be presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed) at the
office of the registrar. The Company may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts; provided that the Company maintains a transfer agent
in the place of payment. The Company may at any time designate additional
transfer agents with respect to the Junior Subordinated Debentures. In the event
of any redemption, neither the Company nor the Debenture Trustee will be
required to (i) issue, register the transfer of or exchange Junior Subordinated
Debentures during a period beginning at the opening of business 15 days before
the day of selection for redemption of Junior Subordinated Debentures and ending
at the close of business on the day of mailing of the relevant notice of
redemption, or (ii) transfer or exchange any Junior Subordinated Debentures so
selected for redemption, except, in the case of any Junior Subordinated
Debentures being redeemed in part, any portion thereof not to be redeemed.
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DESCRIPTION OF THE GUARANTEE
A Guarantee will be executed and delivered by the Company
concurrently with the issuance of the Preferred Securities for the benefit of
the holders from time to time of such Preferred Securities (the "Guarantee").
The Bank of New York will act as trustee ("Guarantee Trustee") under the
Guarantee. This summary of certain provisions of the Guarantee does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Guarantee. Wherever particular defined terms of the
Guarantee are referred to, but not defined herein, such defined terms are
incorporated herein by reference. The form of the Guarantee has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Company will irrevocably and unconditionally agree to pay in
full on a subordinated basis, to the extent set forth herein, the Guarantee
Payments (as defined below) without duplication of amounts theretofor paid by
the Trust Issuer, to the holders of the Preferred Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust
Issuer may have or assert. The following payments with respect to the Preferred
Securities, to the extent not paid by or on behalf of the Trust Issuer (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accrued and
unpaid Distributions required to be paid on the Preferred Securities, to the
extent that the Trust Issuer has funds available therefor, (ii) the Redemption
Price with respect to any Preferred Securities called for redemption, to the
extent that the Trust Issuer shall have funds available therefor, and (iii) upon
a voluntary or involuntary dissolution, winding up or termination of the Trust
Issuer (unless the Junior Subordinated Debentures are distributed to holders of
the Preferred Securities as provided in the Trust Agreement or all of the
Preferred Securities are redeemed), the lesser of (a) the Liquidation
Distribution, and (b) the amount of assets of the Trust Issuer remaining
available for distribution to holders of the Preferred Securities in liquidation
of the Trust Issuer. 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 Preferred Securities or by causing the Trust Issuer to pay such
amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated
basis of the Trust Issuer's obligations under the Preferred Securities, but will
apply only to the extent that the Trust 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 Junior
Subordinated Debentures held by the Trust Issuer, the Trust Issuer will not be
able to pay Distributions on the Preferred Securities and will not have funds
legally available therefor. The Guarantee will rank subordinate and junior in
right of payment to all Senior Debt of the Company. See "--Status of the
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
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
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otherwise. The Company expects from time to time to incur additional
indebtedness constituting Senior Debt.
The Company and the Trust Issuer believe that the Company has,
through the Guarantee, the Trust Agreement, the Junior Subordinated Debentures,
the Indenture and the Expense Agreement, taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust Issuer's obligations under the
Preferred Securities, on a subordinated basis. 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 Trust Issuer's obligations under the Preferred Securities. See
"Relationship Among the Preferred Securities, the Junior Subordinated
Debentures, the Expense Agreement and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of payment to all
Senior Debt of the Company, (ii) PARI PASSU with the most senior preferred
securities or preference stock now or hereafter issued by the Company and with
any guarantee now or hereafter entered into by the Company in respect to any
preferred securities or preference stock of any affiliate of the Company, and
(iii) senior to the Company's Common Stock.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Trust Issuer or upon
distribution to the holders of the Preferred Securities of the Junior
Subordinated Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially
adversely affect the rights of holders of the Preferred Securities (in which
case no consent of the holders of Preferred Securities will be required), the
Guarantee may not be amended without the prior approval of the holders of not
less than a majority of the aggregate Liquidation Amount of such outstanding
Preferred Securities. The manner of obtaining any such approval will be as set
forth under "Description of the 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 Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the 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 majority in aggregate
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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 such Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under the Guarantee.
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
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 Guarantee,
undertakes to perform only such duties as are specifically set forth in the
Guarantee and, after default with respect to the Guarantee, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of the Preferred Securities unless it is
offered indemnity and security reasonably satisfactory to the Guarantee Trustee
against the costs, expenses and liabilities that might be incurred thereby. The
Guarantee 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
Guarantee Trustee reasonably believes repayment or adequate indemnity is not
reasonably assured to it.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and
effect upon (a) full payment of the Redemption Price of the Preferred
Securities, (b) full payment of the amounts payable upon liquidation of the
Trust Issuer, or (c) distribution of the Junior Subordinated Debentures to the
holders of the Preferred Securities in exchange therefor. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the Preferred Securities must restore payment of any sums
paid under the Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance
with the laws of the State of New York, without regard to conflicts of laws
principles thereof.
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 person or entity to whom the
Trust Issuer becomes indebted or liable, the full payment of any costs, expenses
or liabilities of the Trust Issuer, other than obligations of the Trust Issuer
to pay to the holders of the
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Preferred Securities the amounts due such holders pursuant to the terms of the
Preferred Securities. Third party creditors of the Trust Issuer may proceed
directly against the Company under the Expense Agreement, regardless of whether
such creditors had notice of the Expense Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES, THE EXPENSE
AGREEMENT AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Trust 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 Guarantee." The Company and the Trust
Issuer believe that, taken together, the Company's obligations under the Junior
Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the Preferred Securities, on a subordinated basis. 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 Trust Issuer's obligations under the Preferred Securities. If and to the
extent that the Company does not make payments on the Junior Subordinated
Debentures, the Trust Issuer will not pay Distributions or other amounts due on
its Preferred Securities. The Guarantee does not cover payment of Distributions
when the Trust Issuer does not have sufficient funds to pay such Distributions.
In such event, the remedy of a holder of the 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 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 Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate stated Liquidation Amount
of the Preferred Securities and Common Securities; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
Preferred Securities; (iii) the Company shall pay for all and any costs,
expenses and liabilities of the Trust Issuer except the Trust Issuer's
obligations to holders of its Preferred Securities; and (iv) the Trust Agreement
further provides that the Trust Issuer will not engage in any activity that is
not consistent with the limited purposes of the Trust 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 Guarantee.
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ENFORCEMENT RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES
A holder of a Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Trust
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 Junior 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 Junior Subordinated
Debentures would constitute an event of default under the Indenture.
LIMITED PURPOSE OF THE TRUST ISSUER
The Preferred Securities evidence a preferred undivided
beneficial interest in the Trust Issuer, and the Trust Issuer exists for the
sole purpose of issuing its Preferred Securities and Common Securities and
investing the proceeds thereof in Junior Subordinated Debentures. A principal
difference between the rights of a holder of a Preferred Security and a holder
of a Subordinated Debenture is that a holder of a Subordinated Debenture is
entitled to receive from the Company the principal amount of and interest
accrued on Junior Subordinated Debentures held, while a holder of the Preferred
Securities is entitled to receive Distributions from the Trust Issuer (or from
the Company under the Guarantee) if, and to the extent, the Trust 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 Trust Issuer involving the liquidation of the Junior
Subordinated Debentures, after satisfaction of liabilities to creditors of the
Trust Issuer, if any, as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive, out of assets held by the
Trust Issuer, the Liquidation Distribution in cash. See "Description of the
Preferred Securities-Liquidation Distribution Upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Junior 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
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Trust Issuer (other than the Trust Issuer's obligations to the holders of its
Preferred Securities), the positions of a holder of such Preferred Securities
and a holder of the Junior 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.
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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
Preferred Securities. This summary addresses only the tax consequences to a
person that acquires Preferred Securities on their original issue at their
original offering price and 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 will hold 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 Preferred Securities as capital assets. Except as set forth in the
discussion below of "United States Alien Holder," the summary addresses the
United States federal income tax consequences to a person that is an individual
citizen or resident of the United States, a corporation, partnership or other
entity organized under the laws of the United States or any state thereof or the
District of Columbia, or a domestic estate or trust.
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 Trust 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 Preferred Securities. 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 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 PREFERRED
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE TRUST ISSUER AND THE JUNIOR SUBORDINATED DEBENTURES
In the opinion of Kronish Lieb, under current law, the Trust
Issuer will not be classified as an association taxable as a corporation for
United States federal income tax purposes. As a result, each beneficial owner of
Preferred Securities (a "Securityholder") will be required to include in its
gross income its PRO RATA share of the interest (or accrued original issue
discount) with respect to the Junior Subordinated Debentures. See "--Interest
Income and Original Issue Discount." No amount included in income with respect
to the Preferred Securities will be eligible for the dividends-received
deduction.
The Company, the Trust Issuer and the Securityholders (by
acceptance of beneficial interests in the Preferred Securities) will agree to
treat the Junior Subordinated Debentures as indebtedness for United Stated
federal income tax purposes. Kronish Lieb is of the opinion that, under current
law, and
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based on the representations, facts and assumptions set forth herein, the Junior
Subordinated Debentures will be classified as indebtedness for United States
federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the "Regulations"), if the
terms and conditions of a debt instrument make the likelihood that stated
interest will not be timely paid a "remote" contingency, such contingency will
be ignored in determining whether the debt instrument is issued with original
issue discount ("OID"). The Company believes that the likelihood of its
exercising its option to defer payments of interest on the Junior Subordinated
Debentures is remote, since exercising that option would prevent it from
declaring dividends on any class of its stock. Based on the foregoing, the
Company intends to take the position that the Junior Subordinated Debentures
were not issued with OID and, accordingly, a Securityholder should include in
gross income only such Securityholder's pro rata share of stated interest on the
Junior Subordinated Debentures in accordance with such Securityholder's method
of tax accounting.
The Regulations have not yet been addressed in any rulings or
other published interpretations by the Internal Revenue Service (the "IRS"). In
the opinion of Kronish Lieb, it is not unreasonable for the Company to take the
position that the Junior Subordinated Debentures will not be issued with OID.
However, it is possible the IRS could take the position that the likelihood of
deferral was not a remote contingency within the meaning of the Regulations.
Under the Regulations, if the Company were to exercise its option
to defer payments of interest after treating the Junior Subordinated Debentures
as issued without OID, the Junior Subordinated Debentures would be treated as
re-issued with OID at that time, and all stated interest (and DE MINIMIS OID, if
any) on the Junior Subordinated Debentures would thereafter be treated as OID as
long as the Junior Subordinated Debentures remained outstanding. In such event,
all of a Securityholder's income with respect to the Junior Subordinated
Debentures would be accounted for as OID on an economic accrual basis regardless
of such Securityholder's method of tax accounting, and actual distributions of
stated interest would not be includable in gross income. Consequently, a
Securityholder would be required to include OID in gross income even though the
Company would not make any actual cash payments during an Extension Period.
A Securityholder that disposed of Preferred Securities prior to
the record date for the payment of Distributions following an Extension Period
would include OID in gross income but would not receive any cash related thereto
from the Trust Issuer. Any amount of OID included in a Securityholder's gross
income (whether or not during an Extension Period) would increase such
Securityholder's tax basis in its Preferred Securities, and the amount of
Distributions not includable in gross income would reduce such Securityholder's
tax basis in its Preferred Securities.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF THE PREFERRED
SECURITIES
Under current law, a distribution by the Trust Issuer of the
Junior Subordinated Debentures as described under the caption "Description of
the Preferred Securities-Liquidation of the Trust Issuer and Distribution of the
Junior Subordinated Debentures to Holders" will be nontaxable and will result in
a
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Securityholder's receiving directly its PRO RATA share of the Junior
Subordinated Debentures previously held indirectly through the Trust Issuer,
with a holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Preferred Securities before
such distribution. A Securityholder will account for interest in respect of the
Junior Subordinated Debentures received from the Trust Issuer in the manner
described above under "--Interest Income and Original Issue Discount."
If, however, the Trust Issuer were treated as an association
taxable as a corporation, the distribution would constitute a taxable event to
holders of the Preferred Securities and could give rise to a tax liability for
the Trust Issuer as well. Under certain circumstances described herein (see
"Description of the Preferred Securities--Redemption"), the Junior Subordinated
Debentures may be redeemed by the Company for cash and the proceeds of that
redemption distributed by the Trust Issuer to Securityholders in redemption of
their Preferred Securities. Such redemption would be a taxable event to the
Securityholders.
SALES OR REDEMPTION OF THE PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of
the 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 Preferred Securities sold or so redeemed. Gain or loss recognized
by a Securityholder on Preferred Securities held for more than one year will
generally be taxable as long-term capital gain or loss. (A lower capital gains
tax rate will apply in the case of a non-corporate Securityholder if the
Preferred Securities have been held for more than 18 months.) Assuming the
Junior Subordinated Debentures are not issued with OID, a Securityholder's
amount realized on a sale of a Preferred Security will not include any amount
attributable to accrued interest with respect to the Preferred Security's PRO
RATA share of the Junior Subordinated Debentures, which amount will be treated
as ordinary income. A Securityholder's adjusted tax basis in the Preferred
Securities generally will be their initial issue price. If the Junior
Subordinated Debentures were to be treated as issued (or re-issued) with OID, as
a result of the Company's deferral of any interest payment or otherwise, a
Securityholder's tax basis in the Preferred Securities generally would be their
initial issue price, increased by OID includable in the Securityholder's gross
income to the date of disposition and decreased by the amount of the
Securityholder's Distributions not includable in gross income.
If the Company were to exercise its option to defer payments of
interest on the Junior Subordinated Debentures, the Preferred Securities might
trade at a price that did not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. A
Securityholder that disposed of its Preferred Securities between record dates
for payments of Distributions (and consequently did not receive a Distribution
from the Trust Issuer for the period prior to such disposition) would
nevertheless be required to include in income as ordinary income accrued OID on
the Junior Subordinated Debentures through the date of disposition and to add
such amount to its adjusted tax basis in its Preferred Securities disposed of.
Such Securityholder would recognize a capital loss on the disposition of its
Preferred Securities to the extent the selling price (which might not fully
reflect the value of accrued but unpaid interest) was less than the
Securityholder's adjusted tax basis in the Preferred Securities (which would
include OID). Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for federal income tax purposes. In addition,
the marketability of the Preferred Securities could be affected by the United
States federal income tax rules
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on the treatment of market discount. Those rules apply to a Securityholder that
acquires a Preferred Security for an amount less than its stated redemption
price at maturity. Upon a subsequent taxable disposition of that Preferred
Security, gain up to the amount of accrued market discount is treated as
ordinary income rather than capital gain. In general, market discount accrues on
a straight line basis unless the holder elects to have it accrue on an economic
accrual basis.
UNITED STATES ALIEN HOLDERS
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 current United States federal income tax law: (i) payments
by the Trust Issuer or any of its paying agents to any Securityholder that 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 Trust Issuer or
its agent, under penalties of perjury, that it is not a United States person 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
Trust 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 Trust Issuer or
its agent with a copy thereof, and (ii) a United States Alien Holder of 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 Preferred Security.
Recently adopted Treasury regulations (the "New Regulations")
provide alternative methods for satisfying the certification requirement
described in clause (i)(c) above. The New Regulations also require, in the case
of 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 applies in the case of tiered partnerships. The New
Regulations generally apply to payments made after December 31, 1998.
INFORMATION REPORTING TO SECURITYHOLDERS
Generally, income on and proceeds from the sale of the Preferred
Securities will be reported to Securityholders on Forms 1099, which should be
mailed to Securityholders by January 31 following each calendar year. In
general, interest on the Preferred Securities must be reported to United States
Alien Holders on Forms 1042-S, which would be mailed to Securityholders by March
15.
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BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the
Securityholder complies with certain certification requirements or establishes
an exemption. 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.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement dated the date hereof (the "Underwriting Agreement"), the Company and
the Trust have agreed that the Trust will sell to each of PaineWebber
Incorporated, Prudential Securities Incorporated and Friedman, Billings, Ramsey
& Co., Inc. (the "Underwriters"), and each of the Underwriters have severally
agreed to purchase from the Trust, the number of Preferred Securities set forth
opposite its name below.
NUMBER OF
UNDERWRITERS PREFERRED SECURITIES
- ------------ --------------------
PaineWebber Incorporated..........................
Prudential Securities Incorporated................
Friedman, Billings, Ramsey & Co., Inc.............
Total.............................. 3,600,000
============
In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
the Preferred Securities offered hereby if any Preferred Securities are
purchased by the Underwriters. In the event of default by an Underwriter, the
Underwriting Agreement provides that, in certain circumstances, the purchase
commitment of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company has been advised by the Underwriters that the
Underwriters propose initially to offer the Preferred Securities to the public
at the public offering price set forth on the cover page of this Prospectus, and
to certain dealers at such price less a concession not in excess of $_____ per
Preferred Security. The Underwriters may allow, and such dealers may reallow a
concession not in excess of $_____ per Preferred Security to certain brokers and
dealers. After the initial public offering, the public offering price and such
concessions may be changed by the Underwriters.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Company, the Underwriting Agreement provides that the Company will pay as
compensation ("Underwriters' Compensation") for the Underwriters' arranging the
investment therein of such proceeds $_________ per Preferred Security or
$________ in the aggregate ($________ in the aggregate if the Underwriters'
over-allotment option is exercised in full) for the accounts of the several
Underwriters.
Pursuant to the Underwriting Agreement, the Trust has granted to the
Underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to 540,000 additional Preferred Securities at the price to the
public set forth on the cover page hereof. The Underwriters may exercise such
option to purchase solely for the purpose of covering over-allotments, if any,
made in connection with the offering. The Company will pay Underwriters'
Compensation in the amount per Preferred Security set forth above with respect
to such additional Preferred Securities. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional Preferred
Securities as the number set forth next to such Underwriters' name in the
preceding table bears to the total number of Preferred Securities offered by the
Underwriters hereby.
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In connection with the offering of the Preferred Securities, the
Underwriters and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriters
create a short position for their own account by selling more Preferred
Securities than they are committed to purchase from the Trust Issuer. In such a
case, to cover all or part of the short position, the Underwriters may exercise
the over-allotment option described above or may purchase Preferred Securities
in the open market following completion of the initial offering of the Preferred
Securities. The Underwriters also may engage in stabilizing transactions in
which they bid for, and purchase, shares of the Preferred Securities at a level
above that which might otherwise prevail in the open market for the purpose of
preventing or retarding a decline in the market price of the Preferred
Securities. The Underwriters also may reclaim any selling concessions allowed to
an Underwriter or dealer if the Underwriters repurchase shares distributed by
the Underwriter or dealer. Any of the foregoing transactions may result in the
maintenance of a price for the Preferred Securities at a level above that which
might otherwise prevail in the open market. Neither the Company nor any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Preferred Securities. The Underwriters are not required to engage
in any of the foregoing transactions and, if commenced, such transactions may be
discontinued at any time without notice.
During a period of 90 days from the date of this Prospectus,
neither the Trust nor the Company will, without the prior written consent of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities or
Junior Subordinated Debentures or any debt securities substantially similar to
the Junior Subordinated Debentures or equity securities substantially similar to
the Preferred Securities (except for the Junior Subordinated Debentures and the
Preferred Securities offered hereby).
Application will be made to list the Preferred Securities on the
New York Stock Exchange. Trading of the Preferred Securities on the New York
Stock Exchange is expected to commence within a 30-day period after the date
of this Prospectus. The Underwriters have advised the Trust that it intends
to make a market in the Preferred Securities. The Underwriters will have no
obligation to make a market in the Preferred Securities, however, and may cease
market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the
Preferred Securities. In order to meet one of the requirements for listing the
Preferred Securities on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more Preferred Securities to a minimum of 400
beneficial holders.
Because the National Association of Securities Dealers, Inc.
("NASD") is expected to view the Preferred Securities as interests in a direct
participation program, the offering of the Preferred Securities is being made in
compliance with the applicable provisions of Rule 2810 of the NASD's Rules of
Conduct.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or
contribute to payments which the Underwriters may be required to make in respect
thereof.
82
<PAGE>
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the
Preferred Securities, the enforceability of the Trust Agreement and the creation
of the Trust Issuer will be passed upon by Richards, Layton & Finger, P.A.,
special Delaware counsel to the Company and the Trust Issuer. The validity of
the Guarantee and the Junior Subordinated Debentures will be passed upon for the
Company by Stuzin and Camner, P.A. Certain legal matters will be passed upon for
the Underwriters by Brown & Wood LLP. 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 Marc 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 consolidated financial statements of the Company and
subsidiaries as of September 30, 1997 and 1996 and for each of the three years
in the period ended September 30, 1997 incorporated by reference herein and
included as Appendix A to this Prospectus have been so included in reliance upon
the report of Price Waterhouse LLP, independent certified public accountants,
given on the authority of said firm as experts in auditing and accounting.
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 Securities and Exchange Commission (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
Citicorp Center, 14th Floor, Suite 1400, 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 pursuant to the informational requirements of the Exchange Act, prior
to the acquisition of Suncoast 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.
The Company and the Trust Issuer have filed with the Commission a
Registration Statement on Form S-2 (together with all amendments thereto, the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain portions of which have been
83
<PAGE>
omitted as permitted by the rules and regulations of the Commission. In
addition, certain documents filed by the Company with the Commission have been
incorporated in this Prospectus by reference. See "Incorporation of Certain
Documents by Reference." For further information with respect to the Company,
the Trust Issuer, the Preferred Securities and the Junior Subordinated
Debentures, reference is made to the Registration Statement, including the
exhibits thereto and the documents incorporated herein by reference. Any
statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission
or incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified in
its entirely by such reference. The Registration Statement may be inspected
without charge at the principal office of the Commission in Washington, D.C, and
copies of all or part of it may be obtained from the Commission upon payment of
the prescribed fees.
No separate financial statements of the Trust Issuer have been
included herein. The Company does not consider that such financial statements
would be material to holders of Preferred Securities because (i) all of the
voting securities of the Trust Issuer will be owned by the Company, a reporting
company under the Exchange Act, (ii) the Trust Issuer has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust Issuer and investing
the proceeds thereof in Junior Subordinated Debentures issued by the Company,
and (iii) the obligations of the Company described herein to provide certain
indemnities in respect of and be responsible for certain costs, expenses, debts
and liabilities of the Trust Issuer under the Indenture and pursuant to the
Trust Agreement, the guarantee issued by the Company with respect to the
Preferred Securities, the Junior Subordinated Debentures purchased by the Trust
Issuer, the related Indenture and the Expense Agreement, taken together,
constitute, in the belief of the Company and the Trust Issuer full and
unconditional guarantee of payments due on the Preferred Securities. See
"Description of the Junior Subordinated Debentures" and "Description of the
Guarantee."
The Trust Issuer is not currently subject to the information
reporting requirements of the Exchange Act and the Company does not expect that
the Trust Issuer will file reports, proxy statements and other information under
the Exchange Act with the Commission.
84
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following BankUnited documents are incorporated by reference
herein (Commission File No. 5-43936):
(1) The Company's Annual Report on Form 10-K/A for the year ended
September 30, 1997 filed with the Commission on February 27, 1997.
(2) The Company's Quarterly Report on Form 10-Q/A for the quarter
ended December 31, 1997 filed with the Commission on February 27, 1998.
(3) The Company's Current Reports on Form 8-K dated October 10,
1997, December 30, 1997, January 15, 1998, and January 23, 1998 filed with the
Commission on October 29, 1997, January 2, 1998, January 16, 1998, and February
3, 1998, respectively.
(4) The description of the Class A Common Stock contained in the
Company's Current Report on Form 8-K dated March 5, 1993, filed with the
Commission to register the Company's Class A Common stock under Section 12(g) of
the Securities Exchange Act of 1934, as amended.
Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference herein will be deemed to
be modified or superseded for purposes of this Prospectus 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 will not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus. All documents subsequently filed by the Registrant pursuant to
Sections 3(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the Offering shall be deemed to be incorporated by reference into this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN
EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL
REQUEST TO BANKUNITED FINANCIAL CORPORATION, 255 ALHAMBRA CIRCLE, CORAL GABLES,
FLORIDA 33134, ATTENTION: NANCY L. ASHTON, (305) 569-2000.
85
<PAGE>
APPENDIX A
BANKUNITED FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K/A
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1997
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)
<TABLE>
<S> <C>
FLORIDA 65-0377773
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
<TABLE>
<S> <C>
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ZIP CODE
</TABLE>
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 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/A or any
amendment to the Form 10-K/A. [ ]
The aggregate market value of the Class A Common Stock held by
non-affiliates of the Registrant, based upon the average price on February 24,
1998, was $198,412,606.* The other voting securities of the Registrant are not
publicly traded.
The shares of the Registrant's common stock outstanding as of December 26,
1997 were as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
- ----------------------------------------------- -----------------
<S> <C>
Class A Common Stock, $.01 par value 15,072,314
Class B Common Stock, $.01 par value 286,499
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive Proxy Statement for its 1997 Annual Meeting of
Stockholders was filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year covered by this Form 10-K/A
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.
- ----------------
* 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-1
<PAGE>
PART I
ITEM 1. BUSINESS
BUSINESS OF BANKUNITED FINANCIAL CORPORATION
GENERAL
BankUnited Financial Corporation (the "Company" or "BankUnited") is a
Florida corporation and the savings and loan holding company for BankUnited,
FSB (the "Bank"). The Company currently has seventeen branch offices in South
Florida and anticipates opening at least six additional branch offices by
September 30, 1998 in its market area, either by acquisition or de novo
branching, and may expand into other parts of Florida. 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 Florida single-family residential mortgage
loans, and to a lesser extent, to purchase and originate commercial real
estate, commercial business and consumer loans. The Company also invests in tax
certificates and other permitted investments. 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
deposits and borrowings and non-interest operating expenses incurred in
operations.
During the past three years the Company has redefined its strategy to
increase its emphasis on strategic product niches which management believes are
being underserved as South Florida's banks consolidate. Such product niches
include commercial business and commercial real estate lending and deposit
services for small to mid-sized businesses. The Company also focuses on
attracting depositors by stressing convenience, competitive rates and
personalized service.
The Company's operating plan emphasizes (i) rapidly expanding the
Company's deposit base by providing convenience, competitive rates and
personalized service in its market area and continuing expansion of the
Company's branch network through de novo branching or the acquisition of
branches of, and mergers with, existing financial institutions; (ii)
concentrating lending activities on purchasing single-family residential
mortgage loans and originating such loans when market opportunities are
favorable; (iii) expanding the Company's commercial and multi-family real
estate, commercial business, and real estate construction lending; (iv)
increasing non-interest income, and (v) maintaining asset quality.
The Bank is a member of the Federal Home Loan Bank of Atlanta (the "FHLB")
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 to the maximum extent permitted by law.
MARKET AREA AND COMPETITION
The Company conducts operations in South Florida, which geographic region,
at December 31, 1996, had a total of approximately $76 billion in deposits at
commercial banks, savings institutions, and credit unions (39% of the total of
$195 billion of deposits in Florida). The Company intends to continue to
establish or acquire branch offices in its market area and may expand into
other parts of Florida.
In 1995, the Company sold its three branch offices on the west coast of
Florida, including their deposits which totaled $130.3 million at the date of
sale. The sale was pursuant to a strategy designed to take advantage of
consolidation trends in banking and growth opportunities in South Florida.
Also, as part of this strategy, the Company opened additional Florida branch
offices in Boynton Beach in June 1996, West Palm Beach in September 1996, Boca
Hamptons in August 1997, Coconut Creek in October 1997 and Aventura in November
1997. On March 29, 1996, the Company acquired The Bank of Florida with total
assets of $28.1 million which was merged into the Bank and consolidated into
the Bank's
A-2
<PAGE>
South Miami branch. On November 15, 1996, the Company acquired Suncoast Savings
and Loan Association, FSA ("Suncoast"), with total assets of $409.4 million,
which was merged into the Bank. On September 19, 1997 the Company signed a
definitive agreement to acquire Consumers Bancorp and merge its subsidiary,
Consumers Savings Bank, into the Bank. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Acquisitions."
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 branch offices of
several super-regional commercial banks and savings associations that are
substantially larger and that have more extensive operations than does the
Company. In addition, many financial institutions formerly independent and
operating in South Florida have recently been acquired by larger institutions
headquartered in other parts of the state or headquartered out of state. The
Company's goal is to compete for savings and other deposits by offering
depositors a higher level of personal service, together with a wide range of
deposit products offered at competitive rates. The Company believes that this
strategy will enable it to attract depositors as the number of local
institutions 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 types 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 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 increased its 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 higher
level of personal service and to position itself as a small- to middle-market
lender servicing businesses left underserved by larger institutions.
Management's strategy has included and continues to include evaluating
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. Earnings
generated from lending activities are affected by the demand for mortgages and
other types of loans, which is in turn affected by the interest rates at which
such loans may be offered, and other factors affecting the supply of housing
and the availability of funds. Sources and costs of funds, principally deposits
and borrowings, 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, FHLB advances,
and trust preferred securities). The Company's net interest income is
significantly affected by (i) the difference between yields received on its
interest-earning assets and the rates paid on its interest-bearing liabilities
(the "interest rate spread") and (ii) the relative amounts of its
interest-earning assets and interest-bearing
A-3
<PAGE>
liabilities. When interest-earning assets equal or exceed interest-bearing
liabilities, any positive interest rate spread will generate net interest
income. When such liabilities exceed such assets, the greater the positive
interest rate spread must be in order to produce net interest 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.
The Company's exposure to interest rate risk is measured as the
sensitivity of the value of its financial instruments and net interest income
to changes in the level of interest rates. Generally, interest rate risk for a
financial institution results from differences in repricing intervals or
maturities between interest-earning assets and interest-bearing liabilities.
When such differences exist, a change in the level of interest rates will most
likely result in an increase or decrease in net interest income. The Company's
ability to manage interest rate risk depends upon a number of factors,
including competition for loans and deposits in its market area and conditions
prevailing in the secondary mortgage market.
To reduce the adverse impact of 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, 1997, 76.1% 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 strategy, and when market conditions are favorable, the
Company attempts to lengthen the maturities of its interest-bearing liabilities
(i) with longer term deposits or (ii) when advantageous, with longer term
borrowed funds.
The Company has rate-sensitive (maturing or subject to repricing within
one year) assets that exceed its rate-sensitive liabilities, resulting in a
positive cumulative one-year gap position of 4.9% of total assets as of
September 30, 1997. This imbalance, when coupled with the deregulation of the
restrictions 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. 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.
A-4
<PAGE>
GAP TABLE. The following table sets forth the amount of interest-earning
assets and interest-bearing liabilities outstanding at September 30, 1997,
which are expected to reprice or mature in each of the future time periods
shown.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
------------------------------------------
INTEREST SENSITIVITY PERIOD (1)
------------------------------------------
6 MONTHS 6 MONTHS OVER 1 -
OR LESS - 1 YEAR 5 YEARS
-------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Investments, tax certificates, Federal funds sold,
FHLB overnight deposits and other interest
earning assets, at cost ........................ $ 139,450 $ 23,108 $ 24,397
Mortgage-backed securities ........................ 24,058 7,013 46,488
Loans:
Adjustable-rate mortgages ........................ 789,494 416,262 115,574
Fixed-rate mortgages .............................. 72,257 26,124 152,548
Commercial and consumer loans ..................... 10,182 310 1,704
--------- --------- ---------
Total loans .................................... 871,933 442,696 269,826
--------- --------- ---------
Total interest-earning assets .................. 1,035,441 472,817 340,711
Total non-interest-earning assets ............... -- -- --
--------- --------- ---------
Total assets .................................... $1,035,441 $ 472,817 $ 340,711
========== ========= =========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ..................... 2,916 2,918 23,344
Passbook accounts ................................. 6,018 6,020 48,160
Certificate accounts .............................. 613,825 195,619 126,429
---------- --------- ---------
Total customer deposits ........................ 622,759 204,557 197,933
Borrowings:
FHLB advances .................................... 440,000 105,000 125,000
Trust Preferred ................................. -- -- --
Other borrowings ................................. 30,000 -- --
---------- --------- ---------
Total borrowings ................................. 470,000 105,000 125,000
---------- --------- ---------
Total interest-bearing liabilities ............... 1,092,759 309,557 322,933
Total non-interest-bearing liabilities ............ -- -- --
Shareholders' equity .............................. -- -- --
---------- --------- ---------
Total liabilities and shareholders' equity ...... $1,092,759 $ 309,557 $ 322,933
========== ========= =========
Total interest-earning assets less interest-bearing
liabilities ("GAP") .............................. $ (57,318) $ 163,260 $ 17,778
========== ========= =========
Ratio of GAP to total assets ..................... (2.67)% 7.61% .83%
========== ========= =========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities ......... $ (57,318) $ 105,942 $ 123,720
========== ========= =========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities, as a
percentage of total assets ... (2.67)% 4.94% 5.77%
========== ========= =========
<PAGE>
<CAPTION>
NON-
OVER 5- OVER 10- INTEREST
10 YEARS YEARS EARNING TOTAL
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Interest-earning assets:
Investments, tax certificates, Federal funds sold,
FHLB overnight deposits and other interest
earning assets, at cost ........................ $ -- $ -- $ -- $ 186,955
Mortgage-backed securities ........................ 19,202 23,510 -- 120,271
Loans:
Adjustable-rate mortgages ........................ -- 1,018 10,447 1,332,795
Fixed-rate mortgages .............................. 96,221 76,818 411 424,379
Commercial and consumer loans ..................... 8 30 8 12,242
--------- -------- -------- ----------
Total loans .................................... 96,229 77,866 10,866 1,769,416
--------- -------- -------- ----------
Total interest-earning assets .................. 115,431 101,376 10,866 2,076,642
Total non-interest-earning assets ............... -- -- 68,764 68,764
--------- -------- -------- ----------
Total assets .................................... $ 115,431 $101,376 $ 79,630 $2,145,406
========= ======== ======== ==========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ..................... 29,175 19,443 21,436 99,232
Passbook accounts ................................. 60,207 40,152 -- 160,557
Certificate accounts .............................. 230 -- -- 936,103
--------- -------- -------- ----------
Total customer deposits ........................ 89,612 59,595 21,436 1,195,892
Borrowings:
FHLB advances .................................... 1,484 -- -- 671,484
Trust Preferred ................................. -- 116,000 -- 116,000
Other borrowings ................................. -- -- -- 30,000
--------- -------- -------- ----------
Total borrowings ................................. 1,484 116,000 -- 817,484
--------- -------- -------- ----------
Total interest-bearing liabilities ............... 91,096 175,595 21,436 2,013,376
Total non-interest-bearing liabilities ............ -- -- 32,385 32,385
Shareholders' equity .............................. -- -- 99,645 99,645
--------- -------- -------- ----------
Total liabilities and shareholders' equity ...... $ 91,096 $175,595 $153,466 $2,145,406
========= ======== ======== ==========
Total interest-earning assets less interest-bearing
liabilities ("GAP") .............................. $ 24,335 $(74,219) $(73,836) $ --
========= ======== ======== ==========
Ratio of GAP to total assets ..................... 1.13% (3.46)% (3.44)% --
========= ======== ======== ==========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities ......... $ 148,055 $ 73,836
========= ========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities, as a
percentage of total assets ... 6.90% 3.44%
========= ========
</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 decay based upon duration estimates
utilized in the OTS Interest Rate Risk Model. 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.
A-5
<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 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 calculated by dividing
net interest income by average interest-earning assets. Non-accrual loans are
included for the appropriate periods, whereas recognition of interest on such
loans is discontinued and any remaining accrued interest receivable is
reversed, in conformity with generally accepted accounting principles and
federal regulations. The yields and net interest margins appearing in the
following table have been calculated on a pre-tax basis.
<TABLE>
<CAPTION>
AS OF
9/30/97
YIELD/RATE
-----------
(DOLLARS IN THOUSANDS)
<S> <C>
Interest-earning assets:
Loans receivable, net ............... 7.44%
Mortgage-backed securities ......... 6.86
Short-term investments (1) ......... 6.30
Tax certificates ..................... 8.09
Long-term investments and FHLB
stock, net ........................ 7.05
-----
Total interest-earning assets ...... 7.36
-----
Interest-bearing liabilities:
NOW/Money Market ..................... 2.63
Savings .............................. 4.66
Certificate of deposits ............ 5.72
Trust preferred securites ............ 10.17
FHLB advances and other
borrowings ........................ 5.86
-----
Total interest-bearing
liabilities ..................... 5.79
-----
Excess of interest-earning assets over
interest-bearing liabilities .........
Net interest income ..................
Interest rate spread .................. 1.57%
=====
Net interest margin .................. 1.74%
=====
Ratio of interest-earning assets to
interest-bearing liabilities .........
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------
1997 1996 1995
------------------------------------- ----------------------------------- --------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE
--------------- ---------- ---------- ------------- ---------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ............... $ 1,217,181 $ 94,655 7.78% $ 540,313 $41,313 7.65% $ 419,501
Mortgage-backed securities ......... 103,389 7,035 6.80 62,711 4,250 6.78 59,204
Short-term investments (1) ......... 27,612 1,613 5.84 41,240 2,359 5.72 23,884
Tax certificates ..................... 41,162 3,171 7.70 34,831 3,018 8.66 37,377
Long-term investments and FHLB
stock, net ........................ 33,161 2,300 6.94 17,352 1,192 6.87 7,930
----------- -------- ----- --------- -------- ---- ---------
Total interest-earning assets ...... 1,422,505 108,774 7.65 696,447 52,132 7.49 547,856
----------- -------- ----- --------- -------- ---- ---------
Interest-bearing liabilities:
NOW/Money Market ..................... 91,515 2,236 2.44 33,148 775 2.34 41,196
Savings .............................. 137,912 6,342 4.60 59,965 2,627 4.38 55,950
Certificate of deposits ............ 735,008 41,558 5.65 313,521 17,389 5.55 276,564
Trust preferred securites ............ 63,008 6,473 10.27 -- -- -- --
FHLB advances and other
borrowings ........................ 335,112 19,351 5.77 235,264 13,831 5.88 144,052
----------- -------- ----- --------- -------- ---- ---------
Total interest-bearing
liabilities ..................... 1,362,555 75,960 5.58 641,898 34,622 5.39 517,762
----------- -------- ----- --------- -------- ---- ---------
Excess of interest-earning assets over
interest-bearing liabilities ......... $ 59,950 $ 54,549 $ 30,094
=========== ========= =========
Net interest income .................. $ 32,814 $17,510
======== ========
Interest rate spread .................. 2.07% 2.10%
===== ====
Net interest margin .................. 2.31% 2.51%
===== ====
Ratio of interest-earning assets to
interest-bearing liabilities ......... 104.40% 108.50% 105.81%
=========== ========= =========
<CAPTION>
YIELD/
INTEREST RATE
---------- ----------
<S> <C> <C>
Interest-earning assets:
Loans receivable, net ............... $30,171 7.19%
Mortgage-backed securities ......... 4,093 6.91
Short-term investments (1) ......... 1,491 6.25
Tax certificates ..................... 3,087 8.26
Long-term investments and FHLB
stock, net ........................ 577 7.29
-------- ----
Total interest-earning assets ...... 39,419 7.20
-------- ----
Interest-bearing liabilities:
NOW/Money Market ..................... 875 2.12
Savings .............................. 2,420 4.33
Certificate of deposits ............ 14,554 5.26
Trust preferred securites ............ -- --
FHLB advances and other
borrowings ........................ 8,456 5.87
-------- ----
Total interest-bearing
liabilities ..................... 26,305 5.08
-------- ----
Excess of interest-earning assets over
interest-bearing liabilities .........
Net interest income .................. $13,114
========
Interest rate spread .................. 2.12%
====
Net interest margin .................. 2.39%
====
Ratio of interest-earning assets to
interest-bearing liabilities .........
</TABLE>
- ---------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
A-6
<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.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
1997 V. 1996
------------------------------------------------
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 ........................... $52,842 $ 53 $ 447 $53,342
Mortgage-backed securities and
collateralized mortgage
obligations ..................... 2,757 17 11 2,785
Short-term investments (1) ...... (780) 49 (15) (746)
Tax Certificates .................. 549 (335) (61) 153
Long-term investments and
FHLB stock ..................... 1,078 28 2 1,108
------- ------ -------- -------
Total interest-earning assets ... 56,446 (188) 384 56,642
------- ------ -------- -------
Interest expense attributable to:
NOW/Money Market .................. 1,365 35 61 1,461
Savings ........................... 3,415 131 169 3,715
Certificates of Deposit ............ 23,377 338 454 24,169
Trust preferred securities ......... -- -- 6,473 6,473
FHLB advances and other
borrowings ........................ 5,855 (233) (102) 5,520
------- ------ -------- -------
Total interest-bearing
liabilities ..................... 34,012 271 7,055 41,338
------- ------ -------- -------
Increase (decrease) in net interest
income ........................... $22,434 $ (459) $ (6,671) $15,304
======= ====== ======== =======
<PAGE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1996 V. 1995
---------------------------------------------
INCREASE (DECREASE)
DUE TO
---------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE
VOLUME RATE RATE/VOLUE (DECREASE)
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans ........................... $ 8,689 $1,905 $548 $11,142
Mortgage-backed securities and
collateralized mortgage
obligations ..................... 242 (81) (4) 157
Short-term investments (1) ...... 1,088 (127) (93) 868
Tax Certificates .................. (210) 152 (11) (69)
Long-term investments and
FHLB stock ..................... 687 (33) (39) 615
------- ------ ------ -------
Total interest-earning assets ... 10,496 1,816 401 12,713
------- ------ ------ -------
Interest expense attributable to:
NOW/Money Market .................. (171) 88 (17) (100)
Savings ........................... 173 31 3 207
Certificates of Deposit ............ 1,946 785 104 2,835
Trust preferred securities ......... -- -- --
FHLB advances and other
borrowings ........................ 5,354 13 8 5,375
------- ------ ------ -------
Total interest-bearing
liabilities ..................... 7,302 917 98 8,317
------- ------ ------ -------
Increase (decrease) in net interest
income ........................... $ 3,194 $ 899 $303 $ 4,396
======= ====== ====== =======
</TABLE>
- ---------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
A-7
<PAGE>
LENDING ACTIVITIES
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 ("ARMs") and, to a lesser extent, fixed-rate
mortgage loans secured by one-to-four family residential and commercial real
estate. As of September 30, 1997, the Company's loan portfolio totaled $1.8
billion, of which $1.6 billion 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 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. As
of September 30, 1997, the remainder of the Company's loan portfolio consisted
of $130.2 million of commercial real estate loans (7.4 % of total loans);
five-or-more units residential real estate loans of $32.2 million (1.8 % of
total loans, net); $6.0 million of second mortgage loans (.3 % of total loans,
net); $1.7 million of consumer loans (.1% of total loans, net); $10.9 million
of commercial business loans (.6 % of total loans, net); and $15.5 million of
other loans (.9% of total loans, net).
At September 30, 1997, the Company's loan portfolio included $93.9 million
of residential mortgage loans to non-resident aliens. See "Residential 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,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Total loans receivable, net, at beginning of period (1) ...... $ 646,385 $ 453,350 $ 413,287
Loans originated:
Residential real estate .................................... 159,533 65,954 54,438
Commercial business and consumer ........................... 18,804 16,705 7,556
---------- --------- ---------
Total loans originated .................................... 178,337 82,659 61,994
Loans acquired in Suncoast/Bank of Florida mergers (2) ...... 341,394 8,116 --
Loans purchased (3) .......................................... 913,653 242,099 76,081
Loans sold ................................................... (39,934) (4,356) (2,449)
Principal repayments and amortization of discounts
and premiums ................................................ (271,212) (133,836) (93,787)
Loans charged off ............................................. (604) (493) (594)
Transfers to real estate owned, net ........................... (2,296) (1,154) (1,182)
---------- --------- ---------
Total loans receivable, net, at end of period(1) ............ $1,765,723 $ 646,385 $ 453,350
========== ========= =========
</TABLE>
- ----------------
(1) Includes loans held for sale.
(2) Loans acquired in the Suncoast merger included $230.7 million of
one-to-four family residential real estate loans, $95.8 million of
commercial real estate loans and $14.9 million of other types of loans.
(3) All loans purchased are one-to-four family residential real estate loans
except for the purchase of $32.0 million of commercial real estate loans
in fiscal 1996.
A-8
<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, as of the dates indicated.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------------------------
1997 1996
------------------------ ----------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------- --------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
First mortgage loans:
One-to four-family
residential loans ...... $1,559,823 88.3% $568,203 87.9%
Five or more units
residential loans ...... 32,163 1.8 12,559 2.0
Commercial ............... 130,197 7.4 49,318 7.6
Construction ............ 7,477 .4 -- --
Land ..................... 7,997 .5 2,687 .4
Second mortgages loans . 5,992 .3 2,748 .4
---------- ----- -------- -----
Total first
and second
mortgage loans ......... 1,743,649 98.7 635,515 98.3
---------- ----- -------- -----
Consumer loans ............ 1,748 .1 2,648 .4
Commercial business
loans ..................... 10,890 .6 5,822 .9
---------- ----- -------- -----
Total loans
receivable ............ 1,756,287 99.4 643,985 99.6
---------- ----- -------- -----
Deferred loan fees,
premiums and
(discounts) ............... 13,129 .8 4,558 .7
Allowance for loan losses (3,693) ( .2) (2,158) ( .3)
---------- ----- -------- -----
Loans receivable,
net ..................... $1,765,723 100.0% $646,385 100.0%
========== ===== ======== =====
<CAPTION>
1995 1994 1993
---------------------- ---------------------- -----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------ --------- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to four-family
residential loans ...... $432,472 95.4% $393,933 95.3% $298,342 96.1%
Five or more units
residential loans ...... 1,124 0.2 2,164 0.5 705 0.2
Commercial ............... 10,223 2.3 4,469 1.1 748 0.2
Construction ............ 200 0.1 -- -- 2,248 0.7
Land ..................... 450 0.1 1,095 0.3 1,099 0.4
Second mortgages loans . 2,412 0.5 2,616 0.6 623 0.2
-------- ----- -------- ----- -------- -----
Total first
and second
mortgage loans ......... 446,881 98.6 404,277 97.8 303,765 97.8
-------- ----- -------- ----- -------- -----
Consumer loans ............ 920 0.2 2,336 0.6 2,786 0.9
Commercial business
loans ..................... 3,632 0.8 4,732 1.1 3,665 1.2
-------- ----- -------- ----- -------- -----
Total loans
receivable ............ 451,433 99.6 411,345 99.5 310,216 99.9
-------- ----- -------- ----- -------- -----
Deferred loan fees,
premiums and
(discounts) ............... 3,386 0.7 2,783 0.7 1,409 0.5
Allowance for loan losses (1,469) ( 0.3) (841) ( 0.2) (1,184) ( 0.4)
-------- ----- -------- ----- -------- -----
Loans receivable,
net ..................... $453,350 100.0% $413,287 100.0% $310,441 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
The following table sets forth, as of September 30, 1997, the amount of
loans (including mortgage loans held for sale) by category and expected
principal repayments by year.
<TABLE>
<CAPTION>
OUTSTANDING AT
SEPTEMBER 30, 1997 1998 1999
-------------------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
First mortgage loans:
One-to-four family residential $1,559,823 $343,918 $257,389
Five-or-more units residential . 32,163 4,312 3,751
Commercial ........................ 130,197 68,154 19,612
Construction ..................... 7,477 5,301 1,394
Land .............................. 7,997 5,571 2,239
Second mortgage loans ............... 5,992 1,315 1,122
---------- -------- --------
Total first and second mortgage
loans ........................... 1,743,649 428,571 285,507
---------- -------- --------
Consumer loans ..................... 1,748 1,043 705
Commercial business loans ......... 10,890 7,723 3,167
---------- -------- --------
Total loans ..................... $1,756,287 $437,337 $289,379
========== ======== ========
<CAPTION>
2002- 2004- 2008 AND
2000 2001 2003 2007 THEREAFTER
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four family residential $198,224 $153,567 $213,382 $216,351 $176,992
Five-or-more units residential . 6,674 2,399 3,894 11,133 --
Commercial ........................ 11,239 11,239 9,978 9,975 --
Construction ..................... 764 18 -- -- --
Land .............................. 95 92 -- -- --
Second mortgage loans ............... 956 812 1,265 522 --
-------- -------- -------- -------- ---------
Total first and second mortgage
loans ........................... 217,952 168,127 228,519 237,981 176,992
-------- -------- -------- -------- ---------
Consumer loans ..................... -- -- -- -- --
Commercial business loans ......... -- -- -- -- --
-------- -------- -------- -------- ---------
Total loans ..................... $217,952 $168,127 $228,519 $237,981 $176,992
======== ======== ======== ======== =========
</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
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, 1997, 34.0% of the Company's gross
loans receivable (27.8% of total assets) were secured by properties located in
Florida and 13.9% of gross loans receivable (11.4% of total assets) were
secured by properties located in California. Because of this concentration,
regional economic circumstances in those states could affect the level of the
Company's non-performing loans.
A-9
<PAGE>
The following table sets forth, as of September 30, 1997 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, 1997
- ------------------------------------- -------------------
(IN THOUSANDS)
<S> <C>
Florida(l) ..................... $ 596,327
California ..................... 243,722
Illinois ........................ 95,141
Michigan ........................ 90,447
Colorado ........................ 66,069
Massachusetts .................. 61,652
Virginia ........................ 59,046
Maryland ........................ 49,529
New Jersey ..................... 48,182
Texas ........................... 39,678
Ohio ........................... 36,801
New York ........................ 34,569
Arizona ........................ 34,470
Georgia ........................ 34,273
Connecticut ..................... 33,096
Pennsylvania ..................... 28,928
Washington ..................... 27,613
North Carolina .................. 17,146
Missouri ........................ 15,677
Minnesota ........................ 12,472
Utah ........................... 11,239
Tennessee ........................ 10,822
Oregon ........................... 10,054
Nevada ........................... 9,465
South Carolina .................. 8,839
Kentucky ........................ 7,261
Indiana ........................ 7,204
Washington, DC .................. 6,873
Kansas ........................... 6,073
Wisconsin ........................ 4,913
Alabama ........................ 4,867
Oklahoma ........................ 4,273
New Mexico ..................... 3,502
Rhode Island ..................... 2,981
Louisiana ........................ 2,637
Idaho ........................... 2,612
Hawaii ........................... 2,036
Maine ........................... 1,664
Alaska ........................... 1,654
Arkansas ........................ 1,606
Mississippi ..................... 1,505
Iowa ........................... 1,216
New Hampshire .................. 1,211
Others(2) ........................ 3,912
Not secured by real estate ...... 13,030
----------
Total ........................... $1,756,287
==========
</TABLE>
- ----------------
(1) Does not include $49.3 million of tax certificates representing liens
secured by properties in Florida.
(2) Less than $1 million in any one state.
A-10
<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'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 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 Eleventh District Cost of Funds Index ("COFI"). 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 generally
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 certain 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 generally purchases or originates loans with "teaser" rates
that are below market rates during an initial period after the loan is
originated. For loans with teaser rates, the borrower's ability to repay is
determined upon fully indexed rates. The Company underwrites these loans
pursuant to its underwriting guidelines prior to purchase. As of September 30,
1997 there were approximately $538.7 million of loans with teaser 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 may 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 which 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 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.
A-11
<PAGE>
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 (except as to principal balance
and with regard to certain loans discussed below, as to the borrower's
citizenship and related factors) to 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.
At September 30, 1997, approximately $93.9 million, or 5.3%, 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).
The Company has also 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 $159.5 million in fiscal 1997 and $66.0 million for the year
ended September 30, 1996.
Beginning in the Company's fiscal 1997 fourth quarter, management began a
program to sell approximately 50% to 75% of the Company's internally generated
residential loans. In the fourth quarter, a package of residential loans
totalling $30.1 million was sold for a gain of $523,000. In addition, as part
of starting this program, the Company reclassified $93.5 million of its
internally generated portfolio of residential loans as available for sale in
the fourth quarter. It is currently the Company's intention that future loans
classified as available for sale will be identified and so classified at time
of origination. Loans held for sale as of September 30, 1997 were $104.3
million.
A-12
<PAGE>
COMMERCIAL REAL ESTATE LENDING. The Company's commercial real estate
lending division originates or purchases multi-family and commercial real
estate loans from approximately $250,000 to $5.0 million. The Company's
strategy is to promote commercial lending together with private banking, as
both areas seek to develop long-term relationships with select businesses, real
estate borrowers, and professionals. At September 30, 1997, the Company had
$130.2 million of commercial real estate loans, representing a total of 7.4% 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 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.
REAL ESTATE CONSTRUCTION LENDING. The Company makes 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. At
September 30, 1997, the Company had $7.5 million of construction loans
representing a total of .4% of the Company's loan portfolio before net items.
COMMERCIAL BUSINESS LENDING. Commercial business loans totaled $10.9
million as of September 30, 1997 representing .6 % 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 possess 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 issues 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, unless the loan is fully secured and in the process of collection. 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.
A-13
<PAGE>
As of September 30, 1997, the Company had $14.6 million in substandard
assets of which $14.3 million are included in non-performing assets.
Substandard assets consisted of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------
(IN THOUSANDS)
<S> <C>
One-to-four family residential loans ...... $10,087
Commercial real estate ..................... 2,517
Consumer and business loans ............... 150
REO ....................................... 611
Tax certificates ........................... 1,247
-------
Total Substandard Assets .................. $14,612
=======
</TABLE>
In addition, $336,000 of tax certificates, for which reserves have been
established, were classified as loss as of September 30, 1997.
The following table sets forth information regarding the Company's
allowance for loan losses for the periods indicated:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- --------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, balance (at beginning of
period) ................................................... $2,158 $1,469 $ 841 $ 1,184 $ 265
Provisions (credit) for loan losses ........................ 1,295 (120) 1,221 1,187 1,052
Allowance from Suncoast/Bank of Florida ..................... 775 183 -- -- --
Allocation from discounts on loans purchased ............... -- -- -- -- 90
Loans charged off:
One-to-four family residential loans ........................ (604) (493) (535) (1,582) (223)
Commercial and other ....................................... -- -- (59) -- --
------ ------ ------ -------- ------
Total (604) (493) (594) (1,582) (223)
------ ------ ------ -------- ------
Recoveries:
One-to-four family residential loans ........................ 48 1,119 1 52 --
Commercial and other ....................................... 21 -- -- -- --
------ ------ ------ -------- ------
Total 69 1,119 1 52 --
------ ------ ------ -------- ------
Allowance for loan losses, balance (at end of period) ...... $3,693 $2,158 $1,469 $ 841 $1,184
====== ====== ====== ======== ======
</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.
A-14
<PAGE>
The following table sets forth the allocation of general allowance for
loan losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------------------------------------------------------
1997 1996 1995
------------------------ ------------------------ -----------------------
% 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
-------- ------------- -------- ------------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to:
One-to-four family residential
mortgages ........................... $1,873 89.2% $1,381 88.6% $1,207 95.9%
Commercial and other loans ............ 1,787 10.8 739 11.4% 168 4.1%
Unallocated ........................... 33 N/A 38 N/A 94 N/A
------ ---- ------ ---- ------ ----
Total allowances for loan losses ...... $3,693 100.0% $2,158 100.0% $1,469 100.0%
====== ===== ====== ===== ====== =====
</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--Description of Financial Condition Changes for the Years Ended
September 30, 1997, 1996, and 1995--Credit Quality."
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
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.
Mortgage-backed securities are primarily acquired for their liquidity,
yield, and credit characteristics. Such securities may be used as collateral
for borrowing or pledged as collateral for certain deposits, including public
funds deposits. Mortgage-backed securities acquired include fixed and
adjustable rate agency securities (GNMA, FNMA and FHLMC), private issue
securities and collateralized mortgage obligations.
A-15
<PAGE>
The following table sets forth information regarding the Company's
investments and mortgage-backed securities as of the dates indicated. Amounts
shown are historical amortized cost. For additional information regarding the
Company's investments and mortgage-backed securities, including the carrying
values and approximate market values of such securities, see Notes 1 and 5 of
the Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
---------------------------------------------
1997 1996 1995
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal funds sold ............... $ -- $ 400 $ 400
Federal agency securities ......... 23,283 4,985 4,675
FHLB overnight deposits ............ 79,413 28,253 31,813
Tax certificates .................. 49,283 40,088 39,544
Mortgage-backed securities ......... 120,271 70,165 52,998
Other .............................. 1,377 1,711 11
--------- --------- ---------
Total investment securities ...... $ 273,627 $ 145,602 $ 129,441
========= ========= =========
Weighted average yield ............ 6.91% 7.09% 7.43%
========= ========= =========
</TABLE>
The following table sets forth information regarding the maturities of the
Company's investments as of September 30, 1997. Amounts shown are book values.
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1997
---------------------------------------------------------
AS OF WITHIN 1 THROUGH 5 THROUGH OVER
SEPTEMBER 30, 1997 1 YEAR 5 YEARS 10 YEARS 10 YEARS
------------------- -------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal agency securities ...... $ 23,283 $ -- $ 23,283 $ -- $ --
FHLB overnight deposits ......... 79,413 79,413 -- -- --
Mortgage-backed securities ...... 120,271 31,071 46,488 19,202 23,510
Tax certificates (1) ............ 49,283 49,283 -- -- --
Other ........................... 1,377 254 1,113 10 --
--------- ---------- -------- -------- --------
Total ........................... $ 273,627 $ 160,021 $ 70,884 $ 19,212 $ 23,510
========= ========== ======== ======== ========
Weighted average yield ......... 6.91% 6.97% 6.70% 7.06% 7.06%
========= ========== ======== ======== ========
</TABLE>
- ----------------
(1) Maturities are based on historical experience.
MORTGAGE LOAN SERVICING
Prior to November 1996, the Company primarily serviced mortgage loans only
for its portfolio. With the acquisition of Suncoast on November 15, 1996, the
Company acquired a servicing portfolio consisting of 19,487 loans owned by
outside investors.
Servicing agreements 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. Income from servicing is calculated
based upon the contractual servicing fee, net of amortization of the carrying
value of the loan servicing rights.
The Company is subject to certain costs and risks related to servicing
delinquent loans. Servicing agreements relating to the mortgage-backed security
programs of FNMA and FHLMC 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,
the
A-16
<PAGE>
Company recovers substantially all of the advanced funds upon cure of default
by the borrower, or through foreclosure proceedings and claims against agencies
or companies that have insured or guaranteed the loans. Certain servicing
agreements for loans sold directly to other investors require the Company to
remit funds to the loan purchaser only upon receipt of payments from the
borrower and, accordingly, the investor bears the risk of loss. The Company,
however, is subject to the risk that declines in the market rates of interest
for mortgage loans or other economic conditions will result in a revaluation of
its servicing assets as borrowers refinance or otherwise prepay higher interest
rate loans.
The following table sets forth, by category of investor, the composition
of the acquired servicing portfolios of the Company as of the dates indicated:
<TABLE>
<CAPTION>
NOVEMBER 15, 1996
SEPTEMBER 30, 1997 (SUNCOAST ACQUISITION)
-------------------------------- ----------------------------------
# OF BOOK # OF BOOK
LOANS PRINCIPAL VALUE LOANS PRINCIPAL VALUE
------- ----------- -------- -------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GNMA ........................ -- $ -- $ -- 5,791 $ 299,183 $ 4,952
FNMA ........................ 1,297 102,805 1,514 1,462 117,856 1,690
FHLMC ..................... 2,903 246,557 2,318 3,425 295,392 2,758
Private investors ......... 472 68,906 951 337 50,741 626
FDIC/RTC-subservicing ...... -- -- -- 7,087 150,317 --
Private subservicing ...... 320 14,275 -- 1,385 190,350 --
----- --------- ------ ----- ---------- -------
4,992 $432,543 $4,783 19,487 $1,103,839 $10,026
===== ========= ====== ====== ========== =======
</TABLE>
In the second quarter of 1997, the GNMA mortgage servicing portfolio was
sold at its fair market value recognized in purchase accounting. As of August
31, 1997, the Company transferred the FDIC/ RTC subservicing portfolios to a
third party servicer. These actions were taken to increase the Company's
profitability from mortgage loan servicing.
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 (including trust preferred securities) 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 instruments permit the Company to
reduce its cost of funds during periods of declining interest rates, such
savings instruments also increase the Company's vulnerability to periods of
high interest rates. There are no regulatory interest rate ceilings on the
Company's accounts.
A-17
<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,
-------------------------------------------------------------------------
1997 1996 1995
------------------------- ----------------------- -------------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------------ ---------- ---------- ---------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts:
Regular .................................... $ 160,522 4.66% $ 73,741 4.44% $ 50,327 3.04%
Holiday club .............................. 35 2.00 39 2.00 46 2.00
---------- -------- --------
Total passbook accounts .................. 160,557 73,780 50,373
---------- -------- --------
Checking:
Insured money market ........................ 20,325 4.00 16,556 3.87 7,733 2.68
NOW and non-interest-bearing accounts ...... 78,907 2.28 24,566 1.49 18,157 2.17
---------- -------- --------
Total transaction accounts ............... 99,232 41,122 25,890
---------- -------- --------
Total passbook and checking accounts ...... 259,789 114,902 76,263
---------- -------- --------
Certificates:
30-89-day certificates of deposit ......... -- -- -- -- 91 2.73
3-5-month certificates of deposit ......... 18,674 4.94 7,114 4.67 1,465 4.78
6-8-month certificates of deposit ......... 439,091 5.67 159,850 5.40 93,684 5.65
9-11-month certificates of deposit ......... 15,721 5.66 20,279 5.45 5,654 5.55
12-17-month certificates of deposit ......... 307,305 5.73 124,637 5.49 79,637 5.90
18-23-month certificates of deposit ......... 20,410 5.80 12,375 5.79 12,382 5.37
24-29-month certificates of deposit ......... 58,279 5.84 42,875 5.94 18,593 5.57
30-35-month certificates of deposit ......... 12,517 5.85 1,774 5.57 2,868 4.99
36-60-month certificates of deposit ......... 64,106 6.07 22,300 5.93 19,437 5.81
---------- -------- --------
Total certificates ........................ 936,103 391,204 233,811
---------- -------- --------
Total .................................... $1,195,892 $506,106 $310,074
========== ======== ========
Weighted average rate .................. 5.32% 5.11% 4.99%
</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, 1997 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1997
-----------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1997 1 YEAR 2 YEARS 3 YEARS 3 YEARS
------------------- ---------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificate accounts:
3.00% to 3.99% ......... $ 173 $ 173 $ -- $ -- $ --
4.00% to 4.99% ......... 17,414 17,144 270 -- --
5.00% to 5.99% ......... 706,619 637,978 59,921 5,599 3,121
6.00% to 6.99% ......... 54,220 15,892 8,793 3,478 26,057
7.00% to 7.99% ......... 814 10 47 706 51
-------- -------- ------- ------- --------
Total certificate accounts
(under $100,000) ...... $779,240 $671,197 $69,031 $9,783 $29,229
======== ======== ======= ======= ========
</TABLE>
A-18
<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, 1997 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1997
-----------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1997 1 YEAR 2 YEAR 3 YEARS 3 YEARS
------------------- ---------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Jumbo certificate accounts:
4.00% to 4.99% ........................ $ 3,317 $ 3,317 $ -- $ -- $ --
5.00% to 5.99% ........................ 135,714 125,217 9,996 401 100
6.00% to 6.99% ........................ 17,174 9,563 2,785 560 4,266
7.00% to 7.99% ........................ 658 150 100 408 --
-------- -------- ------- ------- ------
Total Jumbo certificate amounts ...... $156,863 $138,247 $12,881 $1,369 $4,366
======== ======== ======= ======= ======
</TABLE>
Of the Company's total deposits at September 30, 1997, 1996, and 1995,
13.1%, 10.5%, and 8.6%, 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 the 1997 and 1996 fiscal years, the Company opened four new branch
offices and acquired six branch offices (one of which was closed) from
Suncoast. In fiscal 1998, the Company intends to open as many as eight new
branch offices including two that opened in the first fiscal quarter. These
additional branches are part of the Company's rapid growth as it takes
advantage of the bank consolidation in South Florida.
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
securities sold under agreements to repurchase in order to increase available
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. The Bank
currently meets the qualified thrift lender test.
A-19
<PAGE>
The following tables set forth information as to the Company's borrowings
as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------------------------------------------------------------
1997 1996 1995
----------------------- ---------------------- --------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED
BALANCE RATE BALANCE RATE BALANCE AVERAGE RATE
---------- ---------- ---------- --------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PERIOD END BALANCES:
FHLB advances(l) ............... $671,484 5.87% $237,000 5.73% $241,000 5.92%
Company Obligated Mandatorily
Redeemable Trust Preferred
Securities of Subsidiary Trusts
Holding Solely Junior
Subordinated Deferrable
Interest Debentures of
the Company .................. 116,000 10.17 -- -- -- --
Subordinated notes ............ -- -- 775 9.00 775 9.00
Securities sold under agreements
to repurchase(2) ............ 30,000 5.64 -- -- -- --
-------- ----- -------- ---- -------- ----
Total borrowings ............... $817,484 6.47% $237,775 5.74% $241,775 5.93%
======== ===== ======== ==== ======== ====
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1997
--------------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- ----------------------
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(l) .................. $325,580 5.77% $234,489 5.77% $136,706 5.86%
Company Obligated Mandatorily
Redeemable Trust Preferred
Securities of Subsidiary Trusts
Holding Solely Junior Subordinated
Deferrable Interest Debentures of
the Company ..................... 63,008 10.27 -- -- -- --
Subordinated notes ............... 704 10.53 775 9.00 775 9.00
Securities sold under agreements to
repurchase(2) .................. 8,828 5.73 -- -- 6,571 5.59
-------- ----- -------- ---- -------- ----
Total borrowings .................. $398,120 6.49% $235,264 5.78% $144,052 5.86%
======== ===== ======== ==== ======== ====
</TABLE>
- ----------------
(1) The maximum amount of FHLB advances outstanding during the years ended
September 30, 1997, 1996 and 1995 was $671.5 million, $244.0 million and
$246.0 million, respectively.
(2) The maximum amount of securities sold under agreements to repurchase at any
month-end during the years ended September 30, 1997, 1996, and 1995 was
$30.0 million, $0.0 million and $33.6 million, respectively.
ACTIVITIES OF SUBSIDIARIES
T&D Properties of South Florida, Inc., a Florida corporation ("T&D"), is a
wholly owned operating subsidiary of the Bank that invests in tax certificates
and holds title to, maintains, manages and supervises the disposition of real
property acquired through tax deeds. T&D was established in 1991 for the
purpose of insulating the Bank from risk of liability concerning the
maintenance, management and disposition of real property.
A-20
<PAGE>
Bay Holdings, Inc., a Florida corporation ("Bay Holdings"), 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, 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.
BankUnited Mortgage Corporation, a Florida corporation ("BMC"), is a
wholly owned operating subsidiary of the Company that services loans secured by
real property. BMC was established for this purpose in 1996, and commenced
operations in October 1997.
BankUnited Capital, BankUnited Capital II and BankUnited Capital III (the
"Trusts") are Delaware statutory business trusts wholly owned by the Company.
BankUnited Capital was formed in 1996, and BankUnited Capital II and BankUnited
Capital III were formed in 1997, for the purpose of issuing Trust Preferred
Securities and investing the proceeds therefrom in Junior Subordinated
Debentures issued by the Company. BankUnited Capital and BankUnited Capital II
are operating, but BankUnited Capital III has not yet issued any capital stock.
BUFC Financial Services, Incorporated, a Florida corporation, is a wholly
owned operating subsidiary of the Company organized in 1997 for the purpose of
selling annuities, insurance and securities products.
BankUnited Financial Services, Inc., a Florida corporation, is a wholly
owned operating subsidiary of the Company, organized in 1997 for the purpose of
brokering loans.
EMPLOYEES
At September 30, 1997, the Company had 246 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 savings industry, which
include group medical and life insurance, a 401(k) savings plan and paid
vacations. The Company also provides a stock bonus plan, a profit sharing plan
and the two stock option plans 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.
A-21
<PAGE>
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
under the FIRREA to manage conservatorships and receiverships of insolvent
thrifts, and was succeeded by the FDIC.
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 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
I or core capital to risk-weighted assets ("Tier I 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 I 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.
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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 is 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 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 provided 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 provided for the merger of the BIF and the SAIF
on January 1, 1999 if no savings associations then exist. The special
assessment rate was 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 non-interest 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 initially reduced to 6.7 basis points, and as of June 30, 1997 to
6.3 basis points 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, 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, 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 were 6.48 basis points assessment on SAIF deposits
and 1.30 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
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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 their
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 shareholders 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 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 QTL's.
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
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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
shareholders' equity, noncumulative perpetual preferred stock and related
paid-in capital, certain qualifying nonwithdrawable accounts and pledged
deposits, and minority interests in fully consolidated subsidiaries, 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, 1997, the Bank's tangible, core and risk-based capital
ratios were 8.1%, 8.1% and 11.3% 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 IRR component from its total
capital when determining its compliance with the risk-based capital
requirements. An "above normal" level of
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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, 1997, 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 of 5% or more and Tier I 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
more; "undercapitalized" if it has total risk-based capital of less than 8%,
Tier I 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.
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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 I 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) 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 I
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.
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
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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, 1997, 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 $33.6 million investment
in stock of the FHLB of Atlanta as of September 30, 1997.
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, 1997, advances from the FHLB of Atlanta totaled $671.5 million.
The FIRREA restricted the amount of FHLB advances that a member institution may
obtain, and in some 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 1997, the Bank's liquidity ratio was 8.49%, and its
short-term liquidity ratio, which must be at least 1%, was 5.15%. Effective
November 24, 1997, OTS regulations were revised to eliminate the short-term
liquidity ratio and to reduce the liquidity ratio to 4%. The Bank is also
required to maintain cash reserve requirements at the Federal Home Loan Bank.
At September 30, 1997 this cash reserve requirement was $3.1 million.
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,
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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 1997, 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, were 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 became mandatory and were deemed to replace the regulations described
above effective July 1, 1997.
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, 1997, 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.
A-29
<PAGE>
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 prior to 1994 filed federal income tax returns on a calendar
year basis. Beginning in 1994 and continuing 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.
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. Prior to legislation enacted in August 1996, the Internal
Revenue Code (the "Code") permitted 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 was 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
without regard to any deduction allowable for any addition to the reserve for
bad debt. Certain adjustments must also be made for gains on the sale of
corporate stock and tax exempt obligations. For this purpose, the taxable
income of a savings institution for a taxable year is calculated after
utilization of net operating loss carry forwards.
In August of 1996, legislation was enacted that repealed the reserve
method of accounting (including the percentage of taxable income method) used
by many thrifts, including the Bank, to
A-30
<PAGE>
calculate their bad debt deduction for federal income tax purposes. The
legislation 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. As such, thrifts with assets whose tax basis exceeds
$500,000,000 must change to the specific charge off method in computing its bad
debt deduction. As such, the Bank must use the specific charge off method in
computing its bad debt deduction for tax years beginning after December 31,
1995.
As a result of this change in accounting method, the Bank must recapture
the excess of its January 1, 1996 bad debt reserve over the reserve in
existence on December 31, 1987. This 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, the Bank's December 31, 1987 reserve must
be recaptured into taxable income as a result of certain non-dividend
distributions. 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 difference between the taxpayer's adjusted
current earnings and AMTI (determined without regard to this preference and
prior to any deduction for net operating loss carry forwards or carry backs).
In addition, net operating loss carry forwards cannot offset more than 90% of
AMTI.
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 income tax on the Company, at a
rate of 5.5% of the Company's taxable income as determined for Florida income
tax purposes. Taxable income for this purpose is based on federal taxable
income with certain adjustments. A credit against the 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 tax liability.
FORECLOSURES
Tax legislation enacted in August of 1996 significantly changed the tax
treatment with respect to foreclosures for taxable years beginning after
December 31, 1995. Prior to this legislation, a thrift's acquisition of
property by means of foreclosure was not treated as a taxable event for federal
tax
A-31
<PAGE>
purposes. As such no gain or loss was recognized at the time of foreclosure and
no portion of the debt could be treated as worthless. In addition, prior to the
August 1996 legislation, thrift institutions were allowed a tax benefit for
write downs of foreclosed property to fair market value. Finally, for thrifts
that computed its bad debt deduction under the experience method, gains or
losses realized from the sale of foreclosed property were not taken into
account in computing taxable income, but were credited or charged to the
thrift's bad debt reserve.
As a result of the newly enacted tax legislation, thrift foreclosures are
treated as a taxable event for federal tax purposes for property acquired after
December 31, 1995. As such, a thrift may recognize gain, loss or a bad debt
deduction at the time of foreclosure depending on the method by which the
property was acquired. In addition, write downs of foreclosed property to fair
market value no longer give rise to a tax benefit. Finally, gains and losses
realized upon the sale of foreclosed property are included in taxable income of
the thrift.
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. 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 $1.3 million as of
September 30, 1997.
The following table sets forth the location of, and certain additional
information regarding, the Company's and Bank's offices and branches as of
September 30, 1997.
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS LEASE EXPIRATION DATE
LOCATION AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ------------------------------------- --------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Executive and administrative offices,
and savings branches
Aventura branch ..................... $ 11,319 1999 5,000
2984 Aventura Boulevard (2 options to renew
Aventura, Florida 33180 for 5 years each)
Boca Hamptons branch ............... 238,411 2002 2,700
9070 Kimberly Boulevard (3 options to renew
Suite 68 for 5 years each)
Boca Raton, Florida 33434
Boca Raton branch .................. 136,047 1999 2,442
21222 St. Andrews Boulevard #11 (3 options to renew
Raton, Florida 33434 for 3 years each)
Boynton Beach branch ............... 195,726 2001 2,933
117 North Congress Avenue (2 options to renew
Boynton Beach, Florida 33426 for 5 years)
Coconut Creek branch ............... 123,731 2002 2,400
4913 Coconut Creek Parkway (2 options to renew
Coconut Creek, Florida 33063 for 5 years each)
Coral Gables branch ............... 1,458,317 2001 14,097
255 Alhambra Circle (2 options to renew
Coral Gables, Florida 33134 for 5 years each)
Coral Springs branch ............... 68,272 2001 2,805
1307 University Drive (2 options to renew
Coral Springs, Florida 33071 for 5 years each)
</TABLE>
A-32
<PAGE>
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS LEASE EXPIRATION DATE
LOCATION AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ------------------------------------ --------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Deerfield Beach branch ............ 297,753 1998 4,000
and Commercial Real Estate office (2 options to renew
2201 West Hillsboro Boulevard for 5 years each)
Deerfield Beach, Florida 33442
Delray Beach branch ............... 376,256 1995 4,000
7431-39 West Atlantic Avenue (3 options to renew
Delray Beach, Florida 33446 for 5 years each)
Hallandale branch .................. 635,114 (1)(2) 4,500
501 Golden Isles
Drive Hallandale, Florida 33009
Hollywood branch .................. 34,068 2004 4,111
4350 Sheridan Street, Unit 101
Hollywood, Florida 33021
Lauderdale by the Sea branch ...... 773,301 (1) 5,000
227 Commercial Boulevard
Lauderdale by the Sea, Florida
33008
Pembroke Pines branch ............ 49,451 2001 4,059
100 South Flamingo Road (1 option to renew
Pembroke Pines, Florida 33027 for 5 years)
Pompano Beach branch ............... $708,102 (1) 5,000
1313 North Ocean Boulevard
Pompano Beach, Florida 33062
South Miami branch ............... 127,783 2002 6,701
6075 Sunset Drive (1 option to renew
South Miami, Florida 33143 for 5 years)
Tamarac branch ..................... 110,937 2002 3,531
5779 North University Drive (1 option to renew
Tamarac, Florida 33321 for 5 years)
West Airport branch ............... 283,723 2000 7,200
2410 N.W. 72nd Avenue (4 options to renew
Miami, Florida 33122 for 3 years)
West Palm Beach branch ............ 167,794 2001 3,740
2911C North Military Trail (2 options to renew
West Palm Beach, Florida 33409 for 5 years)
Mortgage Servicing office ......... 811,765 2000 32,850
Presidential Circle (2 options to renew
4000 Hollywood Boulevard for 5 years each)
Hollywood, Florida 33021
Miami Lakes Operation Center ...... -- 2002 14,880
7815 N.W. 148 Street (2 options to renew
Miami Lakes, Florida 33016 for 5 years each)
</TABLE>
A-33
<PAGE>
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS LEASE EXPIRATION DATE
LOCATION AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ----------------------------------------- --------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Hollywood Training Office ............... -- 1999 4,042
4350 Sheridan Street,
Units 200 & 201
Hollywood, Florida 33021
Mortgage Origination Office ............ 177,384 2004 2,000
255 Alhambra Circle 3rd Floor
Coral Gables, Florida 33134
Other Offices
1177 George Bush Boulevard, #200 ...... -- 1998 5,371
Delray Beach, Florida 33483 (1 option to renew
for 3 years)
4340 Sheridan Street .................. 585,855 (1)(3) 4,764
Hollywood, Florida 33021
6101 Sunset Drive ..................... -- 1998 4,000
South Miami, Florida 33143
7700 North Kendall Drive, #506 ......... -- 1998 1,129
Miami, Florida 33143
</TABLE>
- ----------------
(1) The Bank owns the facility.
(2) The Bank leases 1,400 square feet to unrelated parties
(3) The entire space is currently sub-leased to an unrelated party
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 proceedings
exist, either individually or in the aggregate, which, if determined adversely
to the Company and its subsidiaries, would have a material 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, 1997.
A-34
<PAGE>
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 53 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 (1984 to present) and
President (1984 to 1993, 1994 to present) of the Bank; Senior
Managing Director (1996 to present) and Managing Director (1973 to
1996) of Stuzin and Camner, Professional Association, attorneys-at-
law; General Counsel to CSF Holdings, Inc. and its subsidiary,
Citizens Federal Bank, a federal savings bank (1973 to 1996);
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 54 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.
James A. Dougherty 47 Director (December 1995 to present) and Chief Operating Officer
and Executive Vice President (1994 to present) of the Company;
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).
Earline G. Ford 54 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 55 Director (1993 to present) and Secretary (1993 to 1997) of the
Company; Director (1984 to present) and Secretary (1985 to 1996) of
the Bank; Vice President of Head-Beckham Insurance Agency, Inc.
(1990 to present).
Allen M. Bernkrant 67 Director of the Company (1993 to present) and the Bank (1985 to
present); 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).
Bruce D. Friesner 55 Director of the Company and the Bank (1996 to present); Director of
Loan America Financial Corporation, a national mortgage banking
company (1990 to 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 (1990 to
1997); Private investor in Miami, Florida (1993 to present); Principal,
West Laboratory School, Coral Gables, Florida (1970 to 1993).
</TABLE>
A-35
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
- ------------------------- ----- ---------------------------------------------------------------------
<S> <C> <C>
Elia J. Gusti 63 Director of the Company and the Bank (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 (1996 to present) and Secretary (1997 to present) of the
Company; Managing Director (1996 to present) of Stuzin and
Camner, Professional Association, attorneys-at-law; General Counsel
of Jefferson National Bank (1993 to 1996); Partner, Stroock Stroock
& Lavan, attorneys-at-law (1991 to 1993).
Norman E. Mains 54 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 H. Messinger, M.D. 59 Director of the Company 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 32 Director of the Company and the Bank (1995 to present); Executive
Vice President, the Beacon Council (1996 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 (formerly Southeast Bank,
N.A.) (1986 to 1992).
Anne W. Solloway 82 Director of the Company (1993 to present) and the Bank (1985 to
present); Private investor in Miami, Florida.
EXECUTIVE OFFICERS OF THE COMPANY AND/OR THE BANK
WHO ARE NOT DIRECTORS:
Clifford A. Hope 49 Executive Vice President of the Company and the Bank (1997 to
present); Banking industry consultant in private practice (1996 to
1997); Senior Vice President and Chief Accounting Officer, Citizens
Federal Bank (1987 to 1996).
Samuel A. Milne 47 Executive Vice President and Chief Financial Officer (1996 to
present) and Senior Vice President and Chief Financial Officer (1995
to 1996) of the Company and the Bank; Senior Vice President and
Chief Financial Officer, Consolidated Bank (1992 to 1995); Senior
Vice President, Southeast Bank, N.A. (1984 to 1991).
Donald Putnam 40 Executive Vice President of the Company (1997 to present) and the
Bank (1996 to present); Senior Vice President and Regional Sales
Manager, NationsBank of Florida, N.A. (1996); Senior Vice President
(1994 to 1996), and First Vice President (1987 to 1994), of Citizens
Federal Bank.
</TABLE>
----------------
All executive officers serve at the discretion of the Board of Directors
and are elected annually by the Board.
A-36
<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, 1997, there were 400 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 1997 or
1996. See Note 12 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
high 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, 1997:
1st Quarter ..................... $10.00 $ 7.875
2nd Quarter ..................... $11.25 $ 9.25
3rd Quarter ..................... $10.875 $ 8.50
4th Quarter ..................... $13.375 $ 9.625
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
</TABLE>
A-37
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE FISCAL
YEARS ENDED SEPTEMBER 30,
-----------------------------
1997 1996
------------ ----------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
OPERATIONS DATA
Interest income ................................................ $ 108,774 $ 52,132
Interest expense ............................................. 75,960 34,622
---------- ------------
Net interest income .......................................... 32,814 17,510
Provision for loan losses .................................... 1,295 (120)
---------- ------------
Net interest income after provision for loan losses ............ 31,519 17,630
---------- ------------
Non-interest income:
Service fees ................................................... 2,993 597
Gain on sales of loans and mortgage-backed
securities, net ............................................. 819 5
Gain (loss) on sales of other assets, net(1) .................. 1 (6)
Other ......................................................... 247 53
---------- ------------
Total non-interest income .................................... 4,060 649
---------- ------------
Non-interest expense:
Employee compensation and benefits ........................... 8,880 4,275
Occupancy and equipment ....................................... 3,568 1,801
Insurance(2) ................................................ 948 3,610
Professional fees ............................................. 1,605 929
Other ......................................................... 7,964 3,421
---------- ------------
Total non-interest expense ................................. 22,947 14,036
---------- ------------
Income before income taxes .................................... 12,632 4,243
Provision for income taxes(3) ................................. 5,033 1,657
---------- ------------
Net income before Preferred Stock dividends .................. 7,599 2,586
Preferred stock dividends:
Bank ......................................................... - -
Company ...................................................... 2,890 2,145
---------- ------------
Net income after Preferred Stock dividends ..................... $ 4,709 $ 441
========== ============
FINANCIAL CONDITION DATA:
Total assets ................................................... $2,145,406 $ 824,360
Loans receivable, net, and mortgage-backed securities(4) ...... 1,781,652 716,550
Investments, overnight deposits, tax certificates, reverse
purchase agreements, certificates of deposits and other
earning assets ................................................ 186,955 87,662
Total liabilities ............................................. 2,045,761 755,249
Deposits ...................................................... 1,195,892 506,106
Borrowings ................................................... 817,484 237,775
Total stockholders' equity .................................... 99,645 69,111
Common stockholders' equity .................................... 75,649 44,807
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ............................................. $ .54 $ .10
========== ============
Earnings per common share assuming full dilution ............... $ .54 $ .10
========== ============
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ...................................................... 8,679,845 4,558,521
Fully diluted ................................................ 9,030,843 4,558,521
Equity per common share ....................................... $7.94 $ 7.85
Fully converted tangible equity per common share ............. $ 6.88 $ 7.13
Cash dividends per common share
Class A ...................................................... $ - $ -
Class B ...................................................... $ - $ -
<PAGE>
<CAPTION>
AS OF OR FOR THE FISCAL YEARS ENDED
SEPTEMBER 30,
----------------------------------------
1995 1994 1993
------------- ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATIONS DATA
Interest income ................................................ $ 39,419 $ 30,421 $ 25,722
Interest expense ............................................. 26,305 16,295 12,210
----------- ----------- -----------
Net interest income .......................................... 13,114 14,126 13,512
Provision for loan losses .................................... 1,221 1,187 1,052
----------- ----------- -----------
Net interest income after provision for loan losses ............ 11,893 12,939 12,460
----------- ----------- -----------
Non-interest income:
Service fees ................................................... 423 358 221
Gain on sales of loans and mortgage-backed
securities, net ............................................. 239 150 1,496
Gain (loss) on sales of other assets, net(1) .................. 9,569 -- --
Other ......................................................... 6 46 2
----------- ----------- -----------
Total non-interest income .................................... 10,237 554 1,719
----------- ----------- -----------
Non-interest expense:
Employee compensation and benefits ........................... 3,997 3,372 2,721
Occupancy and equipment ....................................... 1,727 1,258 978
Insurance(2) ................................................ 1,027 844 835
Professional fees ............................................. 1,269 833 543
Other ......................................................... 4,129 3,579 2,746
----------- ----------- -----------
Total non-interest expense ................................. 12,149 9,886 7,823
----------- ----------- -----------
Income before income taxes .................................... 9,981 3,607 6,356
Provision for income taxes(3) ................................. 3,741 1,328 2,318
----------- ----------- -----------
Net income before Preferred Stock dividends .................. 6,240 2,279 4,038
Preferred stock dividends:
Bank ......................................................... - 198 787
Company ...................................................... 2,210 1,871 726
----------- ----------- -----------
Net income after Preferred Stock dividends ..................... $ 4,030 $ 210 $ 2,525
=========== =========== ===========
FINANCIAL CONDITION DATA:
Total assets ................................................... $ 608,415 $ 551,075 $ 435,378
Loans receivable, net, and mortgage-backed securities(4) ...... 506,132 470,154 313,899
Investments, overnight deposits, tax certificates, reverse
purchase agreements, certificates of deposits and other
earning assets ................................................ 88,768 64,783 100,118
Total liabilities ............................................. 562,670 509,807 397,859
Deposits ...................................................... 310,074 347,795 295,108
Borrowings ................................................... 241,775 158,175 97,775
Total stockholders' equity .................................... 45,745 41,268 30,273
Common stockholders' equity .................................... 21,096 16,667 17,162
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ............................................. $ 1.77 $ .10 $ 1.42
=========== =========== ===========
Earnings per common share assuming full dilution ............... $ 1.26 $ .10 $ 1.00
=========== =========== ===========
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ...................................................... 2,296,021 2,175,210 1,773,264
Fully diluted ................................................ 4,158,564 2,175,210 3,248,618
Equity per common share ....................................... $ 10.20 $ 8.33 $ 8.86
Fully converted tangible equity per common share ............. $ 8.15 $ 7.39 $ 7.57
Cash dividends per common share
Class A ...................................................... $ - $ .075 $ .094
Class B ...................................................... $ - $ .03 $ 0.38
</TABLE>
(Continued on next page)
A-38
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS
PERFORMANCE RATIOS:
Return on average assets(5) ................................. .51% .36% 1.10% .46% 1.12%
Return on average common equity .............................. 9.34 1.30 22.60 1.21 18.55
Return on average total equity .............................. 8.06 4.30 14.70 5.84 14.07
Interest rate spread ....................................... 2.07 2.10 2.12 2.78 3.59
Net interest margin .......................................... 2.31 2.51 2.39 3.01 3.87
Dividend payout ratio(6) .................................... 38.03 82.95 35.42 96.79 40.66
Ratio of earnings to combined fixed charges and preferred
stock dividends(7):
Excluding interest on deposits .............................. 1.26 1.05 1.52 1.07 1.87
Including interest on deposits .............................. 1.10 1.02 1.21 1.03 1.27
Total loans, net, and mortgage-backed securities to
total deposits ............................................. 148.98 141.58 163.13 134.40 109.65
Non-interest expenses to average assets ..................... 1.55 1.97 2.14 2.04 2.18
Efficiency ratio(8) .......................................... 57.56 76.45 14.58 66.06 45.17
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans ............... .72% .99% 1.02% 1.07% 1.54%
Ratio of non-performing assets to total loans, real estate
owned and tax certificates ................................. .79 1.14 1.35 1.41 1.78
Ratio of non-performing assets to total assets ............... .67 .95 1.10 1.17 1.46
Ratio of charge-offs to total loans ........................ .03 .08 .13 .39 .07
Ratio of loan loss allowance to total loans .................. .21 .34 .32 .20 .38
Ratio of loan loss allowance to non-performing loans ......... 28.96 33.74 31.54 18.89 24.70
CAPITAL RATIOS:
Ratio of average common equity to average total assets ...... 3.40% 4.78% 3.14% 3.58% 3.79%
Ratio of average total equity to average total assets ...... 6.36 8.44 7.47 8.05 7.99
Tangible capital-to-assets ratio(9) ........................ 8.07 7.01 7.09 6.65 7.56
Core capital-to-assets ratio(9) .............................. 8.07 7.01 7.09 6.65 7.56
Risk-based capital-to-assets ratio(9) ........................ 11.27 14.19 15.79 14.13 15.85
</TABLE>
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(1) 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.
(2) In 1996 the Company recorded a one-time SAIF special assessment of $2.6
million ($1.6 million after tax).
(3) Amount reflects expense from change in accounting principle of $194,843 for
fiscal 1994. See Note 15 to Consolidated Financial Statements.
(4) Does not include mortgage loans held for sale.
(5) Return on average assets is calculated before payment of Preferred Stock
dividends.
(6) 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.
(7) 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.
(8) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income by net interest income.
(9) Regulatory capital ratio of the Bank.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis and the related financial data
present a review of the consolidated operating results and financial condition
of BankUnited Financial Corporation (also referred to as the "Company" or
"BankUnited") for the fiscal years ended September 30, 1997, 1996 and 1995.
This discussion and analysis are presented to assist the reader in
understanding and evaluating the financial condition, results of operations and
future prospects of BankUnited, and are intended to supplement, and should be
read in conjunction with, the Consolidated Financial Statements and Notes
thereto.
BankUnited'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, BankUnited'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 BankUnited's loans and investments.
In addition to the foregoing, results of BankUnited's operations, like
those of other financial institution holding companies, are affected by
BankUnited's asset and liability management policies, as well as factors beyond
BankUnited'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 financings 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.
ACQUISITIONS
The Company has had an active acquisition program during the last two
years and expects to continue this program in the foreseeable future.
In September 1997, the Company entered into a definitive agreement to
acquire Consumers Bancorp, Inc. for approximately $11 million in a combination
of cash and stock. Consumers Bancorp, Inc. is a thrift holding company for
Consumers Savings Bank which had assets of $108.0 million and deposits of $87.8
million at September 30, 1997.
On November 15, 1996, BankUnited completed its acquisition of Suncoast.
Suncoast had total assets of $409.4 million, net loans of $335.0 million,
deposits of $298.5 million and shareholders' equity of $24.7 million as of
September 30, 1996. The cost of the acquisition to BankUnited was $27.8
million, representing the fair value of consideration given to Suncoast
shareholders as well as option and warrant holders. See Note 2 of the Notes to
Consolidated Financial Statements for additional information regarding this
acquisition.
In March 1996, BankUnited 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.
DISCUSSION OF FINANCIAL CONDITION CHANGES FOR THE YEARS ENDED SEPTEMBER 30,
1997, 1996, AND 1995
Total assets increased $1.3 billion, or 160% to $2.1 billion at September
30, 1997 from $824 million at September 30, 1996, as compared to $608 million
at September 30, 1995.
LOANS. The Company's net loans receivable increased by $1.1 billion, or
173% to $1.7 billion at September 30, 1997 from $646 million at September 30,
1996. The increase was primarily the result of the $913.7 million of
residential loans purchased in fiscal 1997, $341.4 million of loans acquired
with
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<PAGE>
Suncoast, and $178.3 million of loan originations, partially offset by
principal repayments of $271 million (net of accretion of discount and
amortization of premium).
In fiscal 1996, the Company's net loans receivable increased by $193.3
million, or 42.6%, from $453.1 million at September 30, 1995. The increase was
primarily the result of $210.1 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.
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.
Of the new loans originated or purchased during fiscal 1997 totaling $1.4
billion, $728.2 million or 51% represented adjustable-rate residential loans
("ARMs"). Of BankUnited's total net loans receivable of $1.7 billion at
September 30, 1997, $1.2 billion or 71% were ARMs. Of this amount BankUnited
had $122.3 million in ARMs 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. (See "Business--Lending
Activities--Residential Mortgage Loan Purchases and Originations.")
Loans available for sale as of September 30, 1997, were $104.3 million as
compared to no such loans available for sale as of September 30, 1996 and
$216,000 as of September 30, 1995. Beginning in the Company's fiscal 1997
fourth quarter, management began a program to sell approximately 50% to 75% of
the Company's internally generated residential loans. In the fourth quarter, a
package of residential loans totaling $30.1 million was sold for a gain of
$523,000. In addition, as part of starting this program, the Company
reclassified $93.5 million of its internally generated portfolio of residential
loans as available for sale in the fourth quarter. It is currently the
Company's intention that future loans classified as available for sale will be
identified and so classified at time of origination.
The Company also reclassified all commercial loans acquired with Suncoast
that were secured by properties outside the state of Florida totaling $10.8
million as available for sale.
CREDIT QUALITY. At September 30, 1997, non-performing assets totaled $14.3
million as compared to $7.8 million and $6.7 million at September 30, 1996 and
1995, respectively. Expressed as a percentage of total assets, non-performing
assets declined to .67% as of September 30, 1997 as compared to .95% as of
September 30, 1996 and 1.10% as of September 30, 1995. The increase in
non-performing assets in both 1997 and 1996 is due primarily to the increase in
loans.
Prior to 1993, BankUnited did not experience significant loan losses.
However, beginning in late 1993, BankUnited 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 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, BankUnited 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 1997,
BankUnited recorded a total of $2.9 million in charge offs for residential
loans secured by property in Southern California. Of these Southern California
charge offs, $1.0 million were for loans purchased from a single seller.
BankUnited instituted legal action against the seller for breach of warranty to
recover BankUnited's losses. In October 1995, this legal action was settled,
which resulted in a recovery of $1.0 million. Taking this recovery into
account, BankUnited recorded net charge offs of $2.3 million for the period
from late 1993 through September 30, 1997, of which $1.9 million or 86.9% were
for residential loans secured by real properties in Southern California.
Beginning in fiscal 1993, BankUnited began to reduce the percentage of new
loans acquired which were secured by property located in California and ceased
acquiring all but de minimis amounts of such loans in April 1994. As of
September 30, 1997 BankUnited had $243.7 million of residential loans in
California which constituted 11.4% of its assets. This compares to $125.8
million, or 15.3% of its assets
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<PAGE>
as of September 30, 1996, 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 discontinued this policy.
The allowance for loan losses was $3.7 million, $2.2 million, and $1.5
million at September 30, 1997, 1996, and 1995, respectively. The allowance for
loan losses as a percentage of total loans decreased to .21% at fiscal year end
1997, as compared to .34% at fiscal year end 1996, and .32% at fiscal year end
1995. The decrease in the allowance as a percentage of total loans reflects the
Company's recent charge-off history which shows net charge-offs (recoveries) as
a percentage of average loans of .04%, (.12%) and .14% for 1997, 1996 and 1995,
respectively. The increase in non-performing assets to $14.3 million as of
September 30, 1997 from $7.8 million as of September 30, 1996 was due to
increases in non-performing loans of $6.4 million which, as stated above,
relates to the increase in total loans. Real estate owned declined from $1.5
million as of September 30, 1995 to $632,000 as of September 30, 1996, to
$611,000 as of September 30, 1997. At September 30, 1997, $3.0 million, or
23.5%, of BankUnited's non-performing loans were secured by Southern California
properties as compared to $2.8 million, or 43.4%, as of September 30, 1996, and
$1.5 million, or 37.6% as of September 30, 1995.
Effective October 1, 1995, BankUnited 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 BankUnited's loan portfolio (primarily residential or
collateral dependent loans) and BankUnited'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
BankUnited 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
BankUnited 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. BankUnited's impaired loans within the scope of SFAS No. 114
include all non-performing loans.
BankUnited'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 loan 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 BankUnited'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.
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<PAGE>
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans(1) ........................... $ 10,866 $ 4,939 $ 3,496 $ 3,918 $ 4,225
Restructured loans(2) ........................... 1,888 1,457 1,070 533 569
Loans past due 90 days and still accruing ...... -- -- 92 -- --
-------- ------- -------- -------- --------
Total non-performing loans .................. 12,754 6,396 4,658 4,451 4,794
Non-accrual tax certificates .................. 958 800 574 -- --
Real estate owned .............................. 611 632 1,453 1,983 1,581
-------- ------- -------- -------- --------
Total non-performing assets ..................... $ 14,323 $ 7,828 $ 6,685 $ 6,434 $ 6,375
======== ======= ======== ======== ========
Allowance for losses on tax certificates ...... $ 697 $ 614 $ 569 $ 85 $ --
Allowance for loan losses ..................... 3,693 2,158 1,469 841 1,184
-------- ------- -------- -------- --------
Total allowance .............................. $ 4,390 $ 2,772 $ 2,038 $ 926 $ 1,184
======== ======= ======== ======== ========
Non-performing assets as a percentage of
total assets ................................. .67% .95% 1.10% 1.17% 1.46%
Non-performing loans as a percentage of
total loans(4) .............................. .72% .99% 1.02% 1.07% 1.54%
Allowance for loan losses as a percentage
of total loans(4) ........................... .21% .34% .32% .20% .38%
Allowance for loan losses as a percentage
of non-performing loans ..................... 28.96% 33.74% 31.54% 18.89% 24.70%
Net chargeoffs as a percentage of average
total loans ................................. .04% ( .12%) .14% .42% .08%
</TABLE>
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(1) Gross interest income that would have been recorded on non-accrual loans
had they been current in accordance with original terms was $556,000,
$217,000, $128,000, $52,000, and $295,000, for the years ended September
30, 1997, 1996, 1995, 1994, and 1993, respectively. The amount of interest
income on such non-accrual loans included in net income for years ended
September 30, 1997, 1996, and 1995 was $369,000, $145,000, and $113,000,
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 $1,878,000 and $109,000
of accruing loans as of September 30, 1997 and 1996, respectively.
Management estimates the loss, if any, on these loans will not be
significant.
(4) Based on balances prior to deductions for allowance for loan losses.
FEDERAL HOME LOAN BANK (FHLB) OVERNIGHT DEPOSITS. FHLB overnight deposits
increased to $79.4 million at September 30, 1997 from $28.3 million at
September 30, 1996 and $31.8 million at September 30, 1995. This increase is
due to increased liquidity requirements caused by the growth in the balance
sheet.
TAX CERTIFICATES. BankUnited's investment in tax certificates increased
$9.2 million, or 22.9%, to $49.3 million at September 30, 1997 from $40.1
million at September 30, 1996 and $39.5 million at September 30, 1995. The
increase was primarily the result of $42.3 million in certificate purchases
during fiscal 1997 which exceeded $33.0 million in certificate redemptions and
repayments.
INVESTMENTS. Investments held to maturity increased $14.5 million to $14.5
million as of September 30, 1997 as compared with $11,000 as of September 30,
1996 and $4.7 million as of September 30, 1995. Investments available for sale
increased $3.5 million to $10.2 million as of September 30, 1997 as compared to
$6.7 million as of September 30, 1996 and none as of September 30, 1995. The
increase in both of these categories is primarily due to the investment in
agency securities for liquidity purposes.
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<PAGE>
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities, held to maturity
were $11.4 million, $14.7 million and $50.9 million at September 30, 1997, 1996
and 1995 respectively. In fiscal 1996 the Company's portfolio decreased $36.2
million, or 71.1%, primarily as a result of BankUnited'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.
BankUnited's available for sale mortgage-backed securities portfolio
increased $53.4 million to $108.9 million as of September 30, 1997 from $55.5
million as of September 30, 1996, and $2.1 million as of September 30, 1995. In
fiscal 1997, the increase was due to $18.7 million of securities acquired with
Suncoast and purchases of $56.4 million, partially offset by maturities and pay
downs of $21.7 million. In fiscal 1996, $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.
OTHER INTEREST EARNING ASSETS. Other interest earning assets increased to
$33.6 million at September 30, 1997 from $12.2 million as of September 30, 1996
and $12.3 million as of September 30, 1995. This category primarily represents
stock in the FHLB which the Company is required to purchase as FHLB advances
increase.
OTHER ASSETS. From September 30, 1996 to September 30, 1997, Office
properties and equipment, net, mortgage servicing rights, goodwill and prepaid
and other assets increased by $4.8 million, $4.8 million, $11.8 million and
$16.7 million, respectively. These increases all relate primarily to the
acquisition of Suncoast.
Since acquiring Suncoast, the Company sold its $292 million Ginnie Mae
("GNMA") mortgage servicing portfolio for $4.7 million and transferred its
FDIC/RTC subservicing portfolio. No gain or loss was recorded on either of
these transactions.
DEPOSITS. Deposits increased by $689.8 million, or 136.3%, to $1.2 billion
at September 30, 1997 from $506.1 million at September 30, 1996. Of this
growth, $323.7 million was acquired with Suncoast; $96.6 million of the
increase represents growth in former Suncoast branches since acquisition;
$128.1 million represents growth in the four branches opened in the two years;
and $22.0 million represents deposits from the State of Florida. Management
believes this strong deposit growth was primarily attributable to BankUnited
offering competitive interest rates and personalized service. BankUnited
intends to open as many as eight branches in the 1998 fiscal year.
FHLB ADVANCES. FHLB advances were $671.5 million at September 30, 1997, up
$434.5 million from the $237.0 million at September 30, 1996. This increase was
the result of FHLB advances being used to fund the purchase of residential
loans as well as $26.5 million of advances assumed by BankUnited in connection
with the acquisition of Suncoast.
TRUST PREFERRED SECURITIES. In December 1996, BankUnited's subsidiary,
BankUnited Capital, issued $50 million of Trust Preferred Securities; in March
1997, BankUnited Capital issued an additional $20 million of Trust Preferred
Securities; and in June 1997, BankUnited's subsidiary, BankUnited Capital II,
issued $46 million of Trust Preferred Securities. The net proceeds from the
sales of the Trust Preferred Securities were $111 million. These funds may be
used for general corporate purposes, including, but not limited to,
acquisitions by either the Bank or the Company, capital contributions to
support the Bank's growth and for working capital, and the possible repurchase
of shares of the Company's preferred stock subject to acceptable market
conditions. In the year ended September 30, 1997, BankUnited contributed $85
million of additional capital to the Bank.
SUBORDINATED NOTES. On August 31, 1997, BankUnited called all outstanding
subordinated notes totaling $774,500.
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<PAGE>
STOCKHOLDERS' EQUITY. BankUnited's total stockholders' equity was $99.6
million at September 30, 1997, an increase of $30.5 million, or 44.1% from
$69.1 million at September 30, 1996. This was due primarily to the issuance of
2,199,930 shares of Class A Common Stock and 920,000 shares of 8% Noncumulative
Convertible Preferred Stock, Series 1996, in connection with the Suncoast
acquisition. The estimated value of the stock issued to acquire Suncoast was
$27.8 million.
In February 1997, the holder of BankUnited'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 1.45475 shares of Class A Common Stock for
each share of Series C preferred stock and 1.3225 shares of Class A Common
Stock for each share of Series C-II preferred stock. BankUnited had previously
exercised its right to call both classes of preferred stock. In July 1997,
BankUnited began a tender offer to purchase any and all of its outstanding
shares of 9% Preferred Stock at $10.25 per share. The offer expired on August
15, 1997, and BankUnited purchased 448,583 shares pursuant thereto. The number
of shares remaining outstanding after the tender offer is 701,417 shares.
In September 1997, the Company exercised its right to call all the
outstanding shares of its 8% Non-cumulative Convertible Preferred Stock Series
1996, effective October 10, 1997. As a result 927,204 shares (387,709 shares as
of September 30, 1997) converted to 1,548,410 Class A Common Stock at a ratio
of 12/3 shares of common stock for each share of preferred. The remaining 5,696
shares of preferred shares were redeemed at $15 per share.
In October 1997, the Company issued 3,680,000 shares of Class A Common
Stock pursuant to a public stock offering. Net proceeds from the offering were
approximately $43.9 million.
LIQUIDITY AND CAPITAL RESOURCES. BankUnited's most significant sources of
funds are deposits, 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 predictable sources of funds, deposit flows and prepayments on loans
and mortgage-backed securities are greatly influenced by general interest
rates, economic conditions and competition. BankUnited manages the pricing of
its deposits to maintain a desired balance. In addition, BankUnited 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, 1997, the Bank
had liquid assets and short-term liquid assets of 8.49% and 5.15%,
respectively, which was in compliance with these requirements, and as of
September 30, 1996, the Bank had liquid assets and short-term liquid assets of
6.75% and 3.80%, respectively. These applicable federal regulations were
revised effective November 24, 1997, eliminating the 1.0% short-term liquid
asset requirement and reducing the 5.0% liquid asset requirement to 4%.
BankUnited's primary use of funds is to purchase or originate loans and to
purchase mortgage-backed and investment securities. In fiscal 1997, 1996, and
1995, loans increased $1.1 billion, $193.0 million, and $40.1 million,
respectively, and BankUnited purchased $78.6 million, $22.7 million, and $16.6
million, respectively, of mortgage-backed and investment securities. In
addition, in 1995, BankUnited sold branches having $130.3 million of deposits.
Funding for the above came primarily from increases in deposits of $689.8
million, $196.1 million and $92.6 million (exclusive of the branch sale) in
1997, 1996 and 1995, respectively, and increases in FHLB advances and other
borrowings of $464.5 million in 1997, $52.7 million in 1996 and $83.6 million
in 1995.
Federal savings banks such as the Bank are also required to maintain
capital at levels specified by applicable minimum capital ratios. At September
30, 1997, the Bank was in compliance with all capital requirements and met the
definition of a "well capitalized" institution under applicable federal
regulations.
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<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1997
AND 1996
NET INCOME AFTER PREFERRED STOCK DIVIDENDS. BankUnited had net income
after preferred stock dividends of $4.7 million for the year ended September
30, 1997, compared to net income after preferred stock dividends of $441,000
for the year ended September 30, 1996. All major categories of income and
expense increased significantly in the year ended September 30, 1997 as
compared to the year ended September 30, 1996 and reflect the significant
growth BankUnited has experienced in the last year. A significant factor in
such growth was the acquisition of Suncoast, which was completed on November
15, 1996. BankUnited's Consolidated Statement of Operations for the year ended
September 30, 1997 reflects Suncoast's operations from the date of acquisition.
Below is a more detailed discussion of each major category of income and
expenses.
NET INTEREST INCOME. Net interest income increased $13.9 million, or
78.8%, to $31.5 million for the year ended September 30, 1997 from $17.6
million for the year ended September 30, 1996. This increase was attributable
to an increase in average interest-earning assets of $726.0 million, or 104.3%,
to $1.4 billion for the year ended September 30, 1997 from $696.4 million for
the year ended September 30, 1996. Approximately $350 million of the increase
in average interest-earning assets for the year ended September 30, 1997 was a
result of the acquisition of Suncoast. The remaining increase in average
interest-earning assets is due primarily to loan purchases. The average yield
on interest-earning assets increased 16 basis points to 7.65% for the year
ended September 30, 1997, from 7.49% for the year ended September 30, 1996. The
increase in average yield was 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 the Bank.
The increase in interest income of $56.6 million, or 108.8%, to $108.8
million for the year ended September 30, 1997 from $52.1 million for the year
ended September 30, 1996, primarily reflects increases in interest and fees on
loans of $53.3 million. The average yield on loans receivable increased to
7.78% for the year ended September 30, 1997 from 7.65% for the year ended
September 30, 1996 and the average balance of loans receivable increased $676.9
million, or 125.3%, to $1.2 billion for the year ended September 30, 1997.
Approximately $300 million of the increase in loans was due to the acquisition
of Suncoast and, as stated above, the increase in the yield on loans was also
attributed to Suncoast.
The increase in interest expense of $41.3 million, or 119.4%, to $76.0
million for the year ended September 30, 1997 from $34.6 million for the year
ended September 30, 1996 primarily reflects an increase in interest expense on
interest-bearing deposits of $29.3 million, or 141.1%, from $20.8 million for
the year ended September 30, 1996, to $50.1 million for the year ended
September 30, 1997, an increase in interest expense on FHLB advances of $5
million from $13.8 million for the year ended September 30, 1996 to $18.7
million for the year ended September 30, 1997, and interest expense of $6.5
million on Trust Preferred Securities which were issued in fiscal 1997. This
increase was due to an increase in average interest-bearing deposits of $557.8
million, or 137.2%, from $406.6 million for the year ended September 30, 1996
to $964.4 million for the year ended September 30, 1997. Approximately $250
million of this increase represents deposits acquired with Suncoast. The
average rate paid on interest-bearing deposits increased 9 basis points from
5.11% for the year ended September 30, 1996 to 5.20% for the year ended
September 30, 1997.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the year
ended September 30, 1997 was $1.3 million as compared with a credit for loan
losses of $120,000 for the year ended September 30, 1996. The credit in 1996
was due to a recovery of approximately $1 million as a result of a legal
settlement relating to certain loans previously purchased. The provision for
loan losses represents management's estimate of the charge to operations after
reviewing the nature, volume, delinquency status, and inherent risk in the loan
portfolio in relation to the allowance for loan losses. For a detailed
discussion of BankUnited's asset quality and allowance for loan losses, see
"--Description of Financial Condition Changes for the Years Ended September 30,
1997, 1996 and 1995--Credit Quality."
A-46
<PAGE>
NON-INTEREST INCOME. Non-interest income for the year ended September 30,
1997 was $4.1 million compared with $649,000 for the year ended September 30,
1996, an increase of $3.4 million. Of this increase, $1.6 million represents
loan servicing fees (net of amortization of capitalized servicing rights) from
operations acquired with Suncoast, and $819,000 represent gains on the sale of
loans and mortgage backed securities. The remaining increase was primarily
attributable to service fees on deposits reflecting the increase in the amount
of deposits outstanding.
NON-INTEREST EXPENSES. Operating expenses increased $8.9 million, or
63.5%, to $22.9 million for the year ended September 30, 1997 compared to $14.0
million for the year ended September 30, 1996. The increase in expenses was
attributable to the growth BankUnited has experienced including the expenses of
Suncoast's operations. The year ended September 30, 1996 included a one time
assessment to replenish the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation (FDIC) of $2.6 million.
INCOME TAXES. The income tax provision was $5.0 million for the year ended
September 30, 1997 compared to $1.7 million for the year ended September 30,
1996. The increase in income taxes was the result of BankUnited's higher
pre-tax earnings during the year ended September 30, 1997, compared to the year
ended September 30, 1996.
PREFERRED STOCK DIVIDENDS. Preferred stock dividends for the year ended
September 30, 1997 were $2.9 million, an increase of $745,000, as compared to
$2.1 million for the year ended September 30, 1996. 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 and retired in
October, 1997, partially offset by the conversion of the Noncumulative
Convertible Preferred Stock, Series C and C-II in February 1997.
COMPARISON OF OPERATING RESULTS FOR THE FISCAL 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
fiscal 1995 of $9.3 million ($5.8 million after tax) from the sale of
BankUnited's three branches on the west coast of Florida and the expense of a
one-time special assessment by the 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 share stock dividends declared in 1996 or 1995. In
the fourth quarter of fiscal 1994 BankUnited 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 attributed to an 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
A-47
<PAGE>
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 this regard BankUnited acquired
$110.7 million of non-residential loans 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
34 basis points to 5.12% 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 BankUnited's
branches on the west coast of Florida.
PROVISIONS FOR LOAN LOSSES. In fiscal 1996, BankUnited 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 BankUnited had
previously purchased approximately $38.7 million of loans. BankUnited
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 BankUnited's asset quality and allowance for loan
losses, see "--Description of Financial Condition Changes for the Years Ended
September 30, 1997, 1996 and 1995--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 BankUnited'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.
The reduction of operating expenses as a result of the sale of
BankUnited'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 BankUnited's growth.
Insurance expense increased 251.5% due to the one time SAIF special
assessment of $2.6 million.
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,
BankUnited recorded an additional provision on tax certificates previously
purchased, which have not been redeemed and on which BankUnited elected not to
seek tax deeds.
A-48
<PAGE>
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
from 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 BankUnited declared a special dividend in the fourth quarter of
fiscal 1995 on the Series A and Series B Noncumulative 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.
A-49
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
Set forth below is selected quarterly data for the fiscal years ended
September 30, 1997 and 1996.
<TABLE>
<CAPTION>
1997
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net interest income .................................... $7,076 $8,001 $8,842 $8,895
Provision for loan losses .............................. 250 165 280 600
Non-interest income .................................... 600 1,001 916 1,543
Non-interest expense .................................... 4,805 5,751 6,158 6,233
------- ------- ------- ------
Income before taxes and preferred stock dividends ...... 2,621 3,086 3,320 3,605
Income taxes .......................................... 1,022 1,243 1,329 1,439
------- ------- ------- ------
Net income before preferred stock dividends ............ 1,599 1,843 1,991 2,166
Preferred stock dividends .............................. 672 777 718 723
------- ------- ------- ------
Net income applicable to common stock .................. $ 927 $1,066 $1,273 $1,443
======= ======= ======= ======
Primary earnings per share .............................. $ 0.13 $ 0.12 $ 0.14 $ 0.15
======= ======= ======= ======
Fully diluted earnings per share ........................ $ 0.13 $ 0.12 $ 0.14 $ 0.15
======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
1996
------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ------------
(DOLLARS IN THOUSANDS)
<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 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.
A-50
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The business of the Company and the composition of its balance sheet
consists of investments in interest-earning assets (primarily loans,
mortgage-backed securities, and investment securities) which are primarily
funded by interest-bearing liabilities (deposits and borrowings). Such
financial instruments have varying levels of sensitivity to changes in market
interest rates resulting in market risk. Other than loans which are originated
and held for sale, all of the financial instruments of the Company are for
other than trading purposes.
Interest rate risk results when the maturity or repricing intervals and
interest rate indices of the interest-earning assets, interest-bearing
liabilities, and off-balance sheet financial instruments are different,
creating a risk that changes in the level of market interest rates will result
in disproportionate changes in the value of, and the net earnings generated
from, the Company's interest-earning assets, interest-bearing liabilities, and
off-balance sheet financial instruments. The Company's exposure to interest
rate risk is managed primarily through the Company's strategy of selecting the
types and terms of interest-earning assets and interest-bearing liabilities
which generate favorable earnings, while limiting the potential negative
effects of changes in market interest rates. Since the Company's primary source
of interest-bearing liabilities is customer deposits, the Company's ability to
manage the types and terms of such deposits may be somewhat limited by customer
preferences in the market areas in which the Company operates. Borrowings,
which include FHLB Advances, short-term borrowings, and long-term borrowings,
are generally structured with specific terms which in management's judgement,
when aggregated with the terms for outstanding deposits and matched with
interest-earning assets, mitigate the Company's exposure to interest rate risk.
The rates, terms and interest rate indices of the Company's interest-earning
assets result primarily from the Company's strategy of investing in loans and
securities (a substantial portion of which have adjustable-rate terms) which
permit the Company to limit its exposure to interest rate risk, together with
credit risk, while at the same time achieving a positive interest rate spread
from the difference between the income earned on interest-earning assets and
the cost of interest-bearing liabilities (see "Business--Factors Affecting
Earnings--Asset and Liability Management" for a further discussion of rate
sensitive assets, rate sensitive liabilities and net interest spread).
SIGNIFICANT ASSUMPTIONS UTILIZED IN MANAGING INTEREST RATE RISK
Managing the Company's exposure to interest rate risk involves significant
assumptions about the exercise of imbedded options and the relationship of
various interest rate indices of certain financial instruments.
IMBEDDED OPTIONS. A substantial portion of the Company's loans and
mortgage-backed securities are residential mortgage loans containing
significant imbedded options which permit the borrower to prepay the principal
balance of the loan prior to maturity ("prepayments") without penalty. A loan's
propensity for prepayment is dependent upon a number of factors, including, the
current interest rate and interest rate index (if any) on the loan, the
financial ability of the borrower to refinance, the economic benefit to be
obtained from refinancing, availability of refinancing at attractive terms, as
well as economic and other factors in specific geographic areas which affect
the sales and price levels of residential property. In a changing interest rate
environment, prepayments may increase or decrease on fixed- and adjustable-rate
loans depending on the current relative levels and expectations of future
short- and long-term interest rates. Since a significant portion of the
Company's loans are ARM loans, prepayments on such loans generally increase
when long-term interest rates fall or are at historically low levels relative
to short-term interest rates making fixed-rate loans more desirable.
Investment securities, other than those with early call provisions,
generally do not have significant imbedded options and repay pursuant to
specific terms until maturity. While savings and checking deposits generally
may be withdrawn upon the customer's request without prior notice, a continuing
relationship with customers resulting in future deposits and withdrawals is
generally predictable resulting in a dependable and uninterruptible source of
funds. Time deposits generally have early
A-51
<PAGE>
withdrawal penalties, while term FHLB Advances have prepayment penalties, which
discourage customer withdrawal of time deposits and prepayment of FHLB Advances
prior to maturity.
INTEREST RATE INDICES. The Company's ARM loans and mortgage-backed
securities are primarily indexed to the One Year Constant Maturity Treasury
Index or COFI (see "Business--Lending Activities"). When such loans and
mortgage-backed securities are funded by interest-bearing liabilities which are
determined by other indices, primarily deposits and FHLB Advances, a changing
interest rate environment may result in different levels of change in the
different indices leading to disproportionate changes in the value of, and the
net earnings generated from, the Company's financial instruments. Each index is
unique and is influenced by different external factors, therefore, the
historical relationships in various indices may not necessarily be indicative
of the actual change which may result in a changing interest rate environment.
INTEREST RATE RISK MEASUREMENT
In addition to periodic gap reports (see "Business--Factors Affecting
Earnings--Asset and Liability Management") comparing the sensitivity of
interest-earning assets and interest-bearing liabilities to changes in interest
rates, management also utilizes a quarterly report ("model") prepared for the
Bank by the OTS based on information provided by the Bank which measures the
Bank's exposure to interest rate risk. The model calculates the present value
of assets, liabilities, off-balance sheet financial instruments, and equity at
current interest rates, and at hypothetical higher and lower interest rates at
one percent intervals. The present value of each major category of financial
instrument is calculated by the model using estimated cash flows based on
weighted average contractual rates and terms at discount rates representing the
estimated current market interest rate for similar financial instruments. The
resulting present value of longer term fixed-rate financial instruments are
more sensitive to change in a higher or lower market interest rate scenario,
while adjustable-rate financial instruments largely reflect only a change in
present value representing the difference between the contractual and
discounted rates until the next interest rate repricing date.
A-52
<PAGE>
The following table reflects the estimated present value of
interest-earning assets, interest-bearing liabilities, and off-balance sheet
financial instruments as calculated by the OTS for the Bank as of September 30,
1997, consolidated with the estimated present values of other financial
instruments of the Company, at current interest rates and at hypothetical
higher and lower interest rates of one and two percent.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
------------------------------------------------------------------------
PRESENT VALUE
------------------------------------------------------------------------
-2% -1% CURRENT +1% +2%
------------ ------------ ------------ -------------- --------------
<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 ................................. $ 191,067 $ 189,499 $ 187,074 $ 186,141 $ 184,475
Mortgage-backed securities ............... 127,699 124,954 120,211 114,403 108,636
Loans:
Adjustable-rate mortgages ............... 1,402,745 1,392,526 1,378,638 1,359,515 1,334,774
Fixed-rate mortgages ..................... 450,068 442,009 426,906 407,384 387,172
Commercial and consumer loans ............ 12,771 12,689 12,608 12,533 12,455
---------- ---------- ---------- ---------- ----------
Total loans .............................. 1,865,584 1,847,224 1,818,152 1,779,432 1,734,401
---------- ---------- ---------- ---------- ----------
Total interest-earning assets ............ $2,184,350 $2,161,677 $2,125,437 $2,079,976 $2,027,512
========== ========== ========== ========== ==========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ............ $ 99,357 $ 99,357 $ 99,357 $ 99,357 $ 99,357
Passbook accounts ........................ 160,431 160,431 160,431 160,431 160,431
Certificate accounts ..................... 950,266 944,105 938,083 932,140 926,336
---------- ---------- ---------- ---------- ----------
Total customer deposits .................. 1,210,054 1,203,893 1,197,871 1,191,928 1,186,124
Borrowings:
FHLB advances ........................... 678,664 676,676 674,705 672,752 670,815
Trust preferred ........................... 142,791 129,923 119,010 109,035 100,538
Other borrowings ........................ 30,000 30,000 30,000 30,000 30,000
---------- ---------- ---------- ---------- ----------
Total borrowings ........................ 851,455 836,599 823,715 811,787 801,353
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities ...... $2,061,509 $2,040,492 $2,021,586 $2,003,715 $1,987,477
========== ========== ========== ========== ==========
Loan commitments ........................... $ 30,219 $ 20,174 $ 7,371 $ (8,716) $ (28,481)
========== ========== ========== ========== ==========
</TABLE>
The calculations of present value have certain shortcomings. The discount
rates utilized for loans and mortgage-backed securities are based on estimated
market interest rate levels for similar loans and securities nationwide, with
prepayment levels generally assumed based on global statistics. The unique
characteristics of the Company's loans and mortgage-backed securities may not
necessarily parallel those assumed in the model, and therefore, would likely
result in different discount rates, prepayment experiences, and present values.
The discount rates utilized for deposits and borrowings are based upon
available alternative types and sources of funds which are not necessarily
indicative of the present value of deposits and FHLB Advances since such
deposits and Advances are unique to, and have certain price and customer
relationship advantages for, depository institutions. The present values are
determined based on the discounted cash flows over the remaining estimated
lives of the financial instruments and assumes that the resulting cash flows
are reinvested in financial instruments with virtually identical terms. The
total measurement of the Company's exposure to interest rate risk as presented
in the above table may not be representative of the actual values which might
result from a higher or lower interest rate environment. A higher or lower
interest rate environment will most likely
A-53
<PAGE>
result in different investment and borrowing strategies by the Company designed
to further mitigate the effect on the value of, and the net earnings generated
from, the Company's net assets from any change in interest rates.
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 "Regulation"). 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 calculated as the net 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 net 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 present value
of an institution's total assets prior to the hypothetical 200 basis point
change will require the institution to deduct from its regulatory capital 50%
of that excess decline. Implementation of the rule has been postponed
indefinitely.
The following table presents the Bank's ratio of NPV to the present value
of total assets as of September 30, 1997, 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>
+200 $114,075 $2,061,248 5.53% (4.46)%
+100 169,500 2,104,648 8.05 (1.94)
Static 214,066 2,141,024 10.00 --
-100 244,597 2,166,744 11.29 1.29
-200 265,113 2,185,364 12.13 2.13
</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 loan. Further, in the event of a
change in interest rates, prepayment and early withdrawal levels could 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 a
significant 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 are subject to
competitive and other pressures beyond the Company's control. As a result,
certain assets and liabilities indicated as maturing or otherwise repricing
within a stated period may in fact mature or reprice at different times and at
different volumes.
A-54
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BANKUNITED FINANCIAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PAGE
-
Report of Independent Certified Public Accountants .................. 55
Consolidated Statements of Financial Condition as of September 30, 1997
and September 30, 1996 ............................................. 56
Consolidated Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995 .................................... 57
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1997, 1996 and 1995 .................................... 58
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995 .................................... 60
Notes to Consolidated Financial Statements ........................... 62
</TABLE>
A-55
<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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1997, 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.
PRICE WATERHOUSE LLP
Miami, Florida
November 12, 1997
A-56
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash .................................................................................... $ 10,571 $ 5,483
Federal Home Loan Bank overnight deposits ................................................ 79,413 28,253
Federal funds sold ..................................................................... -- 400
Tax certificates, (net of reserves of $697 and $614 at September 30, 1997 and 1996,
respectively) ........................................................................... 49,283 40,088
Investments held to maturity (market value of approximately $14,613 and $11 at
September 30, 1997 and 1996, respectively) ............................................. 14,494 11
Investments available for sale, at market ................................................ 10,166 6,685
Mortgage-backed securities, held to maturity (market value of approximately $11,292 and
$14,274 at September 30, 1997 and 1996, respectively).................................... 11,352 14,698
Mortgage-backed securities available for sale, at market ................................. 108,919 55,467
Loans receivable, net .................................................................. 1,661,381 646,385
Mortgage loans held for sale (market value of approximately $105,980 at September 30, 104,342 --
1997) .
Other interest earning assets ............................................................ 33,599 12,225
Office properties and equipment, net ................................................... 7,371 2,608
Real estate owned, net .................................................................. 611 632
Accrued interest receivable ............................................................ 16,261 7,023
Mortgage servicing rights ............................................................... 4,783 --
Goodwill ................................................................................. 14,278 2,457
Prepaid expenses and other assets ...................................................... 18,582 1,945
---------- --------
Total assets ........................................................................... $2,145,406 $824,360
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .............................................................................. $1,195,892 $506,106
Securities sold under agreements to repurchase .......................................... 30,000 --
Advances from Federal Home Loan Bank ................................................... 671,484 237,000
Company obligated mandatorily redeemable trust preferred securities of subsidiary trust
holding solely junior subordinated deferrable interest debentures of the Company ...... 116,000 --
Subordinated notes ..................................................................... -- 775
Interest payable (primarily on deposits and advances from Federal Home Loan Bank) ...... 3,844 1,244
Advance payments by borrowers for taxes and insurance ................................. 10,688 4,292
Accrued expenses and other liabilities ................................................ 17,853 5,832
---------- --------
Total liabilities ..................................................................... 2,045,761 755,249
---------- --------
Commitments and contingencies (Notes 7 and 16)
Stockholders' equity:
Preferred stock, Series B, 1993 and 1996, $0.01 par value. Authorized shares--10,000,000;
issued and outstanding shares--2,175,296 and 2,664,547 at September 30, 1997 and 1996,
respectively ........................................................................ 22 27
Class A Common Stock, $.01 par value. Authorized shares--30,000,000; issued and
outstanding shares--9,257,098 and 5,454,201 at September 30, 1997 and 1996, 92 54
respectively .
Class B Common Stock, $.01 par value. Authorized shares--3,000,000; issued and
outstanding shares--275,685 and 251,515 at September 30, 1997 and 1996, respectively 3 3
Additional paid-in capital ............................................................... 86,679 62,055
Retained earnings ........................................................................ 11,988 7,279
Net unrealized gains (losses) on securities available for sale, net of tax ............... 861 (307)
---------- --------
Total stockholders' equity ............................................................ 99,645 69,111
---------- --------
Total liabilities and stockholders' equity ............................................. $2,145,406 $824,360
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
A-57
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30:
--------------------------------------
1997 1996 1995
---------- -------------- --------
(DOLLARS IN THOUSANDS,
EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans ....................................... $ 94,655 $ 41,313 $30,171
Interest on mortgage-backed securities ........................... 7,035 4,250 4,093
Interest on short-term investments ................................. 1,613 2,359 1,491
Interest and dividends on long-term investments and other
interest-earning assets .......................................... 5,471 4,210 3,664
-------- -------- -------
Total interest income ............................................. 108,774 52,132 39,419
-------- -------- -------
Interest expense:
Interest on deposits ............................................. 50,136 20,791 17,849
Interest on borrowings ............................................. 19,351 13,831 8,456
Preferred dividends of Trust Subsidiary ........................... 6,473 -- --
-------- -------- -------
Total interest expense .......................................... 75,960 34,622 26,305
-------- -------- -------
Net interest income before provision (credit) for loan
losses ......................................................... 32,814 17,510 13,114
Provision (credit) for loan losses ................................. 1,295 (120) 1,221
-------- -------- -------
Net interest income after provision (credit) for loan losses ...... 31,519 17,630 11,893
-------- -------- -------
Non-interest income:
Service fees ...................................................... 2,993 597 423
Gain on sale of loans and mortgage-backed securities ............... 819 5 239
Gain (loss) on sale of other assets .............................. 1 (6) 9,569
Other ............................................................ 247 53 6
-------- --------- -------
Total non-interest income ....................................... 4,060 649 10,237
-------- --------- -------
Non-interest expenses:
Employee compensation and benefits ................................. 8,880 4,275 3,997
Occupancy and equipment .......................................... 3,568 1,801 1,727
Insurance ......................................................... 948 3,610 1,027
Professional fees--legal and accounting ........................... 1,605 929 1,269
Data processing ................................................... 992 340 356
Loan servicing expense ............................................. 1,796 979 765
Real estate owned operations ....................................... 301 73 559
Other operating expenses .......................................... 4,857 2,029 2,449
-------- --------- -------
Total non-interest expenses ....................................... 22,947 14,036 12,149
-------- --------- -------
Income before income taxes and preferred stock
dividends ...................................................... 12,632 4,243 9,981
Income taxes ...................................................... 5,033 1,657 3,741
-------- --------- -------
Net Income before preferred stock dividends ..................... 7,599 2,586 6,240
Preferred stock dividends of the Company ........................... 2,890 2,145 2,210
-------- --------- -------
Net income after preferred stock dividends ........................ $ 4,709 $ 441 $ 4,030
======== ========= =======
Primary earnings per share .......................................... $ 0.54 $ 0.10 $ 1.77
======== ========= =======
Fully diluted earnings per share .................................... $ 0.54 $ 0.10 $ 1.26
======== ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
A-58
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK
------------------------ -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ---------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 ......... 2,679,107 $ 27 1,787,018 $18 214,834 $ 2
Issuance of Class A and Class B
Common Stock ........................ -- -- 22,418 -- 18,232 --
Conversion of Class B Common
Stock to Class A Common
Stock .............................. -- -- 742 -- (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 18 232,324 2
Conversion of Preferred Stock
to Common Stock Class A ............ (14,560) -- 21,340 -- -- --
Issuance of Class A and Class B
Common Stock ........................ -- -- 25,210 -- 19,191 1
Underwritten public offering of
the Company's Common
Class A, net ........................ -- -- 3,565,000 36 -- --
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 54 251,515 3
Issuance of Class A and Class B
Common Stock ........................ -- -- 40,357 -- 24,423 --
Conversion of Preferred Stock
to Common Class A .................. (973,568) (10) 1,470,359 13 -- --
Conversion of Common Class B
to Common Class A .................. -- -- 253 -- (253) --
Preferred Stock, Series 9%
tender offer ........................ (448,583) (4) -- -- -- --
Issuance of Stock in connection
with the Suncoast acquisition . 920,000 9 2,199,730 22 -- --
Stock options and warrants
exercised ........................... 12,900 -- 89,004 -- -- --
Payments of dividends on the
Company's Preferred Stock ......... -- -- 3,194 3 -- --
Net change in unrealized loss on
investments available for sale . -- -- -- -- -- --
Net income for the year ended
September 30, 1997 .................. -- -- -- -- -- --
--------- ------- --------- --- ------- ---
Balance at September 30, 1997 ......... 2,175,296 $ 22 9,257,098 $92 275,685 $ 3
========= ======= ========= === ======= ===
<PAGE>
<CAPTION>
UNREALIZED
GAIN ON
SECURITIES
AVAILABLE TOTAL
PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
CAPITAL EARNINGS NET OF TAX EQUITY
------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 ......... $38,413 $ 2,808 $ -- $ 41,268
Issuance of Class A and Class B
Common Stock ........................ 222 -- -- 222
Conversion of Class B Common
Stock to Class A Common
Stock .............................. -- -- -- --
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 ......... 38,835 6,838 25 45,745
Conversion of Preferred Stock
to Common Stock Class A ............ -- -- -- --
Issuance of Class A and Class B
Common Stock ........................ 330 -- -- 331
Underwritten public offering of
the Company's Common
Class A, net ........................ 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 ......... 62,055 7,279 (307) 69,111
Issuance of Class A and Class B
Common Stock ........................ 501 -- -- 501
Conversion of Preferred Stock
to Common Class A .................. (3) -- -- --
Conversion of Common Class B
to Common Class A .................. -- -- -- --
Preferred Stock, Series 9%
tender offer ........................ (4,481) -- -- (4,485)
Issuance of Stock in connection
with the Suncoast acquisition . 27,781 -- -- 27,812
Stock options and warrants
exercised ........................... 794 -- -- 794
Payments of dividends on the
Company's Preferred Stock ......... 32 (2,890) -- (2,855)
Net change in unrealized loss on
investments available for sale . -- -- 1,168 1,168
Net income for the year ended
September 30, 1997 .................. -- 7,599 -- 7,599
--------- ------- ------- --------
Balance at September 30, 1997 ......... $86,679 $11,988 $ 861 $ 99,645
========= ======= ======= ========
</TABLE>
(CONTINUED ON NEXT PAGE)
A-59
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
The beginning balance at September 30, 1994 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
Series 9% ......... 1,150,000 11
--------- ---
Total ......... 2,679,107 $27
========= ===
</TABLE>
The ending balance at September 30, 1997 of Preferred Stock were as
follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- -------
<S> <C> <C>
Series B ......... 183,818 $ 2
Series 1993 ...... 744,870 7
Series 9% ......... 701,417 8
Series 1996 ...... 545,191 5
------- ---
Total ......... 2,175,296 $22
========= ===
</TABLE>
Effective September 30, 1995, the Series A Preferred Stock was exchanged
for Series B Preferred Stock.
See accompanying notes to consolidated financial statements.
A-60
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------------
1997 1996 1995
------------ --------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ......................................................... $ 7,599 $ 2,586 $ 6,240
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision (credit) for loan losses ................................. 1,295 (120) 1,221
Provision for losses on tax certificates ........................... 84 76 484
Depreciation and amortization ....................................... 1,320 674 526
Amortization of discounts and premiums on investments ............... 38 20 3
Amortization of discounts and premiums on
mortgage-backed securities ....................................... 101 144 84
Amortization of goodwill .......................................... 683 -- --
Amortization of discounts and premiums on loans ..................... (570) (2,332) (784)
Amortization of loan servicing assets .............................. 931 -- --
Loans originated for sale .......................................... (28,467) (4,141) (2,376)
Increase in accrued interest receivable ........................... (6,285) (1,239) (320)
Increase in interest payable on deposits and FHLB advances ......... 1,142 31 685
Increase (decrease) in accrued expenses ........................... 3,312 213 (68)
Increase (decrease) in accrued taxes .............................. 792 (2,960) 3,065
Increase (decrease) in deferred taxes .............................. (1,854) (469) 33
Increase (decrease) in other liabilities ........................... (22,130) 2,841 1,763
(Increase) decrease in prepaid expenses and other assets ............ (1,635) (224) 566
Gain on sales of mortgage-backed securities ........................ (185) -- (231)
Proceeds from sale of loans ....................................... 39,890 4,362 2,456
Proceeds from sale of loan servicing assets ........................ 4,215 -- 265
Recovery on loans ................................................... 69 1,119 1
(Gain) loss on sales of loans ....................................... 44 (5) (8)
(Gain) loss on real estate owned operations ........................ 236 (185) 94
(Gain) on sales of tax certificates ................................. -- -- (3)
(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 ............... 625 398 4,127
--------- ----------- ----------
Cash flows from investing activities:
Net increase in loans ............................................. (792,501) (185,457) (44,744)
Proceeds from sale of real estate owned ........................... 2,257 2,661 4,607
Purchase of investment securities ................................. (22,144) (3,510) (4,675)
Purchase of mortgage-backed securities .............................. (56,499) (19,228) (11,931)
Purchases of other earning assets ................................. (32,300) (650) (9,580)
Proceeds from repayments of investment securities .................. 4,051 5,675 2,000
Proceeds from repayments of mortgage-backed securities ............ 19,345 10,523 6,326
Proceeds from repayments of other earning assets .................. 14,176 750 5,125
Proceeds from sales of investment securities ........................ 126 2,097 --
Proceeds from sale of mortgage-backed securities .................. 7,653 -- 9,947
Purchases of office properties and equipment ........................ (1,980) (1,170) (742)
Sales of premises and equipment .................................... 1,364 -- --
Net decrease (increase) in tax certificates ........................ (9,278) (620) 2,587
Purchase of Bank of Florida, net of acquired cash equivalents ...... -- 1,521 --
Cash and cash equivalents of Suncoast at date of acquisition ...... 32,803 -- --
--------- ----------- ----------
Net cash used in investing activities .............................. (832,927) (187,408) (41,080)
--------- ----------- ----------
</TABLE>
(CONTINUED ON NEXT PAGE)
A-61
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------------------------------------
1997 1996 1995
------------ ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits .......................................... $366,049 $168,744 $ 92,555
Net (decrease) in deposits from sale of branches .................. -- -- (130,276)
Net (decrease) increase in Federal Home Loan Bank advances ...... 382,984 (4,000) 105,000
Net (decrease) increase in other borrowings ..................... 30,000 -- (21,400)
Decrease in subordinated notes .................................... (775) -- --
Premium on sale of branches ....................................... -- -- 9,304
Net proceeds from issuance of trust preferred securities ......... 111,456 -- --
Net proceeds from issuance of common stock ........................ 1,329 23,198 222
Preferred Stock, Series 9% tender offer ........................... (4,486) -- --
Dividends paid on the Company's preferred stock .................. (2,890) (2,086) (2,010)
Increase in advances from borrowers for taxes and insurance ...... 4,483 560 1,526
-------- -------- ----------
Net cash provided by financing activities ........................ 888,150 186,416 54,921
-------- -------- ----------
Increase (decrease) in cash and cash equivalents .................. 55,848 (594) 17,968
Cash and cash equivalents at beginning of year .................. 34,136 34,730 16,762
-------- -------- ----------
Cash and cash equivalents at end of year ........................ $ 89,984 $ 34,136 $ 34,730
======== ======== ==========
Supplemental Disclosures:
Interest paid on deposits and borrowings ........................ $ 73,385 $ 34,547 $ 25,617
======== ======== ==========
Income taxes paid ................................................ $ 3,390 $ 4,626 $ 676
======== ======== ==========
Transfers from loans to real estate owned ........................ $ 2,296 $ 1,154 $ 1,182
======== ======== ==========
Transfer of mortgage-backed securities from held to maturity to
available for sale ............................................. $ -- $ 31,780 $ --
======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
A-62
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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, including BankUnited, FSB (the "Bank"). 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. 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 allowance for loan losses
and the allowance for losses on tax certificates, the valuation of mortgage
servicing rights, 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 properties.
(B) MORTGAGE-BACKED SECURITIES AND INVESTMENTS
Mortgage-backed securities and other investments available for sale are
carried at fair value (market value), inclusive of unrealized gains and 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.
Mortgage-backed securities and investments held to maturity are carried at
amortized cost. 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.
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 of the tax certificates, 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
A-63
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 6 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 and costs are adjusted to the principal balances of the
related loans.
(E) LOAN-ORIGINATION FEES, COMMITMENT FEES AND RELATED COSTS
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
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 includes 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,
A-64
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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) 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.
(J) GOODWILL
Goodwill is amortized on a straight-line basis over its estimated
beneficial life of 10 to 25 years.
(K) 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. The Company accounts for
income 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.
(L) 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 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, 1997, 1996 and 1995 were 8,680,000, 4,559,000, and 2,296,000,
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
A-65
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
diluted common shares outstanding during the years ended September 30, 1997,
1996 and 1995 were 9,031,000, 4,559,000 and 4,159,000, respectively. Stock
dividends have been included in the calculation of earnings per share for all
years presented.
(M) 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. (See Note 14.)
(N) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued Statement of Financial Accounting Standards
No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" and in December 1996, the FASB issued a related
Statement of Financial Accounting Standards No. 127, "Deferral of the Effective
Date of Certain Provisions of FASB No. 125" (collectively "Statement No. 125").
Statement No. 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. Portions of Statement
No. 125 were effective for transactions entered into after December 31, 1996
with the remaining portions effective for transactions entered into after
December 31, 1997. The impact of adopting Statement No. 125 has not been nor is
it currently expected to be material to the Company's financial position or the
results of operations.
In February 1997, FASB issued Statement of Financial Accounting Standards
No. 128 "Earnings per Share" ("Statement No. 128"). Statement No. 128 specifies
the computation, presentation and disclosure requirements for earnings per
share. It replaces primary earnings per share and fully diluted earnings per
share with basic earnings per share and diluted earnings per share and is
effective for reporting periods ending after December 15, 1997. For the
Company, the computation for basic earnings per share is similar to primary
earnings per share except stock options are not considered when computing basic
earnings per share. Also, for the Company, diluted earnings per share and fully
diluted earnings per share are similar.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure"
("Statement No. 129"). Statement No. 129 continues previous requirements to
disclose certain information about an entity's capital structure. The Company
currently complies with the disclosure requirements of Statement No. 129.
(O) FINANCIAL STATEMENT RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
September 30, 1997 consolidated financial statements.
(2) ACQUISITIONS
On March 31, 1996, the Company 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. The acquisition was accounted for as a purchase and $2.5 million
of goodwill was recorded.
A-66
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(2) ACQUISITIONS--(CONTINUED)
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% Noncumulative Convertible
Preferred Stock, Series 1996 for each share of Suncoast preferred stock of
which 920,000 shares were outstanding. The 8% Noncumulative Convertible
Preferred Stock, Series 1996 has substantially the same terms and conditions as
the Suncoast preferred stock. The cost of the acquisition, which was 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. The balance
sheet and results of operations of Suncoast have been included with those of
BankUnited as of and for periods subsequent to November 15, 1996.
At the date of acquisition, the fair value of the assets and liabilities
acquired from Suncoast are as follows (in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents ...... $ 32,804
Loans receivable, net ............ 341,394
Mortgage-backed securities ...... 18,672
Goodwill ........................ 11,643
Other assets ..................... 34,930
Deposits ........................ (323,737)
FHLB advances .................. (51,500)
Other liabilities ............... (36,394)
----------
Net purchase price ............ $ 27,812
==========
</TABLE>
The unaudited proforma combined condensed statements of operations for the
years ended September 30, 1997 and 1996, after giving effect to certain
proforma adjustments are as follows (in thousands except per share data):
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Interest income .................................... $112,642 $81,752
Interest expense ................................. 78,268 52,423
Provision for loan losses ........................ 1,401 45
Non-interest income .............................. 4,714 9,193
Non-interest expense .............................. 24,770 31,885
Income tax expense ................................. 5,166 2,654
-------- -------
Net income before preferred stock dividends ...... 7,751 3,938
Preferred stock dividends ........................ 3,028 3,249
-------- -------
Net income after preferred stock dividends ...... $ 4,723 $ 689
======== =======
Earnings per share
Primary .......................................... $ .53 $ .10
Fully-diluted .................................... $ .52 $ .10
</TABLE>
The proforma combined condensed statement of operations assumes the
acquisition occurred as of October 1, 1995.
A-67
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(2) ACQUISITIONS--(CONTINUED)
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%
Noncumulative 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% Noncumulative Convertible Preferred Stock, Series 1996
or each warrant could be exercised to purchase 1.68595 shares, subject to
adjustment, of Class A Common Stock at a per share price of $10.68, also
subject to adjustment under certain conditions. The warrants expire on July 8,
1998 and, as of September 30, 1997, 63,541 warrants were outstanding.
In September 1997, the Company entered into a definitive agreement to
acquire Consumers Bancorp, Inc. for approximately $11 million in a combination
of cash and stock. Consumers Bancorp, Inc. is a thrift holding company for
Consumers Savings Bank which had assets of $108.0 million and deposits of $87.8
million at September 30, 1997. The acquisition will be accounted for as a
purchase and is expected to result in goodwill of approximately $3.5 million.
(3) 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 $49.3 million and $40.0
million at September 30, 1997 and 1996, respectively. Included in these amounts
at September 30, 1997 and 1996 were $1.3 million and $1.9 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 $697,000 and $614,000 at September 30, 1997 and 1996, 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.
(4) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Interest income from securities purchased under agreements to resell
aggregated approximately $1.2 million for the year ended September 30, 1995.
A-68
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(4) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL--(CONTINUED)
The following sets forth information concerning the Company's agreements
to resell for the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR
THE YEAR ENDED SEPTEMBER 30,
------------------------------
1997 1996 1995
------ ------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at any month end
during the period .................................... $-- $-- $ 700
Average amount outstanding during the period ............ $-- $-- $ 20,262
Weighted average interest rate for the period ......... -- -- 6.10%
Maturity ................................................ -- -- --
</TABLE>
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES
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.
INVESTMENTS
Presented below is an analysis of the carrying values and approximate
market values of investments held to maturity.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government agency securities ...... $14,483 $119 $-- $14,602
State of Israel Bonds .................. 11 -- -- 11
-------- ---- -------- -------
Total ................................. $14,494 $119 $-- $14,613
======== ==== ======== =======
</TABLE>
<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>
A-69
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
All investments held to maturity at September 30, 1997 and 1996 had
maturities between one and five years. Presented below is analysis of the
investments designated as available for sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government agency securities ...... $ 8,799 $ 2 $-- $ 8,801
Other ................................. 1,353 12 -- 1,365
-------- --- -------- -------
Total ................................. $10,152 $14 $-- $10,166
======== === ======== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE 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>
MORTGAGE-BACKED SECURITIES
The carrying value and historical cost of mortgage-backed securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------ ------------ ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities ...... $ 48,881 $ 994 $ (41) $ 49,834
FNMA mortgage-backed securities ...... 4,198 108 (6) 4,300
FHLMC mortgage-backed securities ...... 31,839 119 (19) 31,939
Other ................................. 22,625 282 (61) 22,846
-------- ------ ------- --------
Total ................................. $107,543 $1,503 $(127) $108,919
======== ====== ======= ========
</TABLE>
A-70
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
<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>
The market value and historical cost of mortgage-backed securities held to
maturity are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities ......... $ 74 $ 6 $ -- $ 80
FHLMC mortgage-backed securities ......... 3,434 -- (44) 3,390
Mortgage pass-through certificates ...... 7,844 -- (22) 7,822
-------- --- ----- -------
Total ................................. $11,352 $ 6 $ (66) $11,292
======== === ===== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities ......... $ 83 $ 5 $ -- $ 88
FHLMC mortgage-backed securities ......... 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>
The mortgage-backed securities have contractual maturities which range
from the years 1997 to 2027, however, expected maturities will differ from
contractual maturities as borrowers have the right to prepay obligations with
or without prepayment penalties.
Gross proceeds on sales of mortgage-backed securities and collateralized
mortgage obligations were $7.7 million for the year ended September 30, 1997
and $10.0 million for the year ended September 30, 1995. There were no sales of
mortgage-backed securities and collateralized mortgage obligations in 1996.
Gross realized gains were $250,000 and $231,000 on sales of mortgage-backed
securities and collateralized mortgage obligations during the years ended
September 30, 1997 and 1995, respectively. There were no realized losses during
the years ended September 30, 1997 and 1995.
A-71
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
At September 30, 1997 , GNMA mortgage-backed securities with carrying
values of approximately $10.9 million were pledged as collateral for public
funds on deposit.
At September 30, 1997, FHLMC and GNMA mortgage-backed securities with a
carrying value of approximately $34.0 million and a market value of
approximately $34.5 million were pledged as collateral for a $30.0 million
reverse repurchase agreement. The securities underlying the agreement were held
in safekeeping by a trustee.
(6) LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------------
1997 1996
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage loans-conventional ........................ $ 387,096 $263,757
Mortgage loans-conventional serviced by others ...... 1,110,686 317,103
Mortgage loans-other ................................. 140,393 53,817
Commercial loans:
Secured ............................................. 9,475 5,618
Unsecured .......................................... 1,168 787
Line of credit loans ................................. 1,456 1,254
Share loans .......................................... 835 648
Installment loans .................................... 836 1,001
---------- --------
Total ............................................. 1,651,945 643,985
Less allowance for loan losses ..................... (3,693) (2,158)
Deferred loan fees, discounts and premiums ......... 13,129 4,558
---------- --------
Loans receivable, net .............................. $1,661,381 $646,385
========== ========
</TABLE>
Of the total gross loans receivable of $1.7 billion at September 30, 1997,
approximately $506.1 million, or 30.6%, represents residential loans secured by
properties in Florida, $243.7 million, or 15.0% represents loans in California
and $950.2 million, or 54.4% represents loans secured by properties in other
states.
A-72
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(6) LOANS RECEIVABLE--(CONTINUED)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of the period ...... $2,158 $1,469 $ 841
Provision (credit) ..................... 1,295 (120) 1,221
Allowance from Bank of Florida ......... -- 183 --
Allowance from Suncoast .................. 775 -- --
Loans charged-off ........................ (604) (493) (594)
Recoveries .............................. 69 1,119 1
------ ------ ------
Balance at end of the period ............ $3,693 $2,158 $1,469
====== ====== ======
</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" ("Statement No. 114"). There was
no significant 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.
As of September 30, 1997 and 1996, the Company had impaired or non-accrual
loans of $10.9 million and $4.9 million, respectively and had recorded specific
reserves on these loans of $704,000 and $801,000, respectively. For the years
ended September 30, 1997, 1996 and 1995 the average amounts of impaired loans
were $8.0 million, $4.8 million and $2.3 million, respectively. No income is
recognized on loans during the period for which the loan is deemed impaired.
(7) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Office buildings ........................... $ 2,600 $ --
Leasehold improvements ..................... 2,700 1,640
Furniture, fixtures and equipment ......... 3,504 1,881
Computer equipment and software ............ 3,548 1,124
-------- --------
Total .................................... 12,352 4,645
Less: accumulated depreciation ............ (4,981) (2,037)
-------- --------
Office properties and equipment, net ...... $ 7,371 $ 2,608
======== ========
</TABLE>
Depreciation expense was $1.2 million, $674,000 and $526,000, for the
years ended September 30, 1997, 1996, and 1995, respectively.
A-73
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(7) OFFICE PROPERTIES AND EQUIPMENT--(CONTINUED)
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>
1998 .................. $ 2,961
1999 .................. 2,889
2000 .................. 2,051
2001 .................. 1,464
2002 .................. 956
Thereafter ............ 997
-------
Total .................. $11,318
=======
</TABLE>
Rent expense for the years ended September 30, 1997, 1996, and 1995 was
$1.6 million, $905,000, and $959,000, respectively.
(8) DEPOSITS
The weighted average nominal interest rate payable on all deposit accounts
at September 30, 1997 and 1996 was 5.20% and 5.11%, respectively.
Types of deposits and related range of interest rates were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------------------------------
1997 1996
------------------------------------ -----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing deposits ......... --% - --% $ 21,436 --% - --% $ 7,301
Passbook and statement savings deposits 2.00% - 5.16% 160,557 2.00% - 4.97% 73,780
Super NOW deposits .................. 0.00% - 3.93% 57,471 0.00% - 3.00% 17,265
Money market deposits ............... 0.00% - 3.10% 20,325 0.00% - 4.65% 16,556
Certificates of deposit ............... 3.92% - 6.06% 936,103 3.92% - 6.16% 391,204
---------- --------
Total .............................. $1,195,892 $506,106
========== ========
</TABLE>
Deposit accounts with balances of $100,000 or more totaled approximately
$174.0 millioin and $69.4 million at September 30, 1997 and 1996, respectively.
Interest expense on deposits for the years ended September 30, 1997, 1996
and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Super NOW and money market deposits ......... $ 2,236 $ 775 $ 875
Passbook and statement savings deposits ...... 6,342 2,627 2,420
Certificates of deposit ..................... 41,558 17,389 14,554
------- ------- -------
Total ....................................... $50,136 $20,791 $17,849
======= ======= =======
</TABLE>
Early withdrawal penalties on deposits are recognized as a reduction of
interest on deposits. For the years ended September 30, 1997, 1996 and 1995,
early withdrawal penalties totaled $101,000, $42,000, and $110,000,
respectively.
A-74
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(8) DEPOSITS--(CONTINUED)
The amounts and scheduled maturities of certificate accounts at September
30, 1997 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- ---------------------------- -----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1998 .................. $809,444
1999 .................. 81,912
2000 .................. 11,152
2001 .................. 4,951
2002 .................. 28,414
Thereafter ............ 230
--------
Total .................. $936,103
========
</TABLE>
(9) 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 1997 1996
- -------------------------------------------- --------------------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997 .................................... 4.56% - 6.07% $ -- 192,000
1998 .................................... 5.63% - 6.55% 480,000 5,000
1999(1) ................................. 5.60% 25,000 --
2001(2) ................................. 5.33% - 5.61% 15,000 40,000
2002(3) ................................. 5.43% - 6.24% 150,000 --
2005 .................................... 6.65% 1,484 --
-------- -------
$671,484 $237,000
======== ========
</TABLE>
- ----------------
(1) Advances for $25 million are callable by the FHLB in 1998.
(2) Advances for $15 million are callable by the FHLB in 1997.
(3) Advances for $25 million are callable by the FHLB in 1998 and $125 million
in 1999.
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 75% of the unpaid
pricipal balance. The FHLB of Atlanta stock, which is recorded at cost, is also
pledged as collateral for these advances.
(10) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE
Interest expense on securities sold under an agreement to repurchase
aggregated $506,000 and $367,000 for the years ended September 30, 1997 and
1995, respectively.
A-75
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(10) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE--(CONTINUED)
The following sets forth information concerning repurchase agreements for
the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------
1997 1996 1995
---------------- ------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at any month
end during the period .............................. $30,000 $-- $ 33,600
Average amount outstanding during the period ...... $8,828 $-- $ 6,572
Weighted average interest rate for the period ...... 5.73% -- 5.59%
Maturity .......................................... Nov. 28, 1997 -- --
</TABLE>
At September 30, 1997, the Company had $34.0 million of mortgage-backed
securities pledged under repurchase agreements. At September 30, 1996 and 1995,
the Company had no pledged securities under repurchase agreements.
(11) COMPANY OBLIGATED MANDATORILY REEDEMABLE TRUST 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 and $2 million of common securities. The common
securities 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 10-1/4% Trust
Preferred Securities, Series A which are the sole assets of BankUnited Capital.
On March 24, 1997, BankUnited Capital issued an additional $20 million of
10-1/4% Trust Preferred Securities, Series A and $800,000 of common securites,
which common securities are also wholly owned by the Company. BankUnited
Capital simultaneously purchased an additional $20.8 million of 10-1/4% Junior
Subordinated Deferrable Interest Debentures, Series A issued by BankUnited
Financial Corporation. 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 10-1/4% Trust Preferred Securities, Series A subject to
certain limitations.
On June 5, 1997, BankUnited Capital II, a newly formed trust subsidiary
created under the laws of Delaware, issued $46 million of 9.60% Cumulative
Trust Preferred Securities and $1.84 million of common securities. The common
securities are wholly owned by the Company. In connection with this
transaction, BankUnited Capital II simultaneously purchased $47.8 million of
9.60% Junior Subordinated Deferrable Interest Debentures issued by BankUnited
Financial Corporation with terms similar to the 9.60% Cumulative Trust
Preferred Securities which are the sole assets of BankUnited Capital II.
These securities mature June 30, 2027 and pay a preferential cumulative
cash distribution at an annual ratae of 9.60%. The Company and BankUnited
Capital II have the right to defer payment of
A-76
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(11) COMPANY OBLIGATED MANDATORILY REEDEMABLE TRUST PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES OF THE COMPANY.--(CONTINUED)
interest for up to five years. BankUnited Financial Corporation has guaranteed
all the obligations of the 9.60% Cumulative Trust Preferred Securities, subject
to certain limitations. The 9.60% Junior Subordinated Deferrable Interest
Debentures rank pari pasu with the 10-1/4% Junior Subordinated Deferrable
Interest Debentures.
Considered together the back-up undertakings constitute a full and
unconditional guarantee by the Company of the obligations of the Trust
Preferred Securities.
(12) 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
--------------------------- ---------------------------- ----------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ------------- ------------ ------------- ------------
(DOLLAR IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital ......... $ 31,542 $ 12,196 $ 169,708 $ 56,967 $ 138,166 $ 44,771
1.5% 1.5% 8.1% 7.0% 6.6% 5.5%
Core Capital ............ $ 63,084 $ 24,392 $ 169,708 $ 56,967 $ 106,624 $ 32,575
3.0% 3.0% 8.1% 7.0% 5.1% 4.0%
Risk-based capital ...... $123,365 $ 33,927 $ 173,725 $ 60,164 $ 50,360 $ 26,237
8.0% 8.0% 11.3% 14.2% 3.3% 6.2%
</TABLE>
Under the Office of Thrift Supervision (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, 1997, 1996 and 1995 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
A-77
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(12) REGULATORY CAPITAL--(CONTINUED)
OTS appeals process. If the IRR component had been required as of September 30,
1997, 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.
(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, 1997, 5,666,310
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 Noncumulative 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 Noncumulative 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 will 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
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.6750 per share beginning October 1, 1997 and $0.7375 per
share prior to that date.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $7.375 per share.
Redemption Prior to October 1, 1997--except for the shares converted from
Series A discussed above, at the option of the Company at $7.67 per share at
September 30, 1995, declining thereafter at $.07375 per share during each year
through January 31, 1998, and thereafter the redemption price remains at $7.375
per share.
Effective October 1, 1997, the Company, in exchange for a reduction in the
dividend rate described above, has agreed not to redeem the Series B, Preferred
Stock until October 1, 2007 or later unless earlier redemption is approved by
the holders of at least 50 percent of the Series B Preferred shares.
A-78
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
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 1.4959 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, issued and outstanding shares--none as of September 30, 1997
and 363,636 shares as of September 30, 1996.
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 1.45475 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, issued and outstanding shares--none as of September 30, 1997
and 222,223 shares as of September 30, 1996.
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 1.3225 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.
A-79
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993:
Authorized shares--1,610,000 shares.
Issued and outstanding--744,870 shares as of September 30, 1997 and
September 30, 1996.
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.
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;
beginning July 1, 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--1,851,417 shares as of September 30, 1997 and 2,300,000
shares as of September 30, 1996.
Issued and outstanding--701,417 as of September 30, 1997 and 1,150,000 as
of September 30, 1996.
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.
A-80
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1996:
Authorized shares--608,732 shares as of September 30, 1997 and none as of
September 30, 1996.
Issued and outstanding shares--545,191 shares as of September 30, 1997 and
none as of September 30, 1996.
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--called for redemption effective October 10, 1997 for $15.00
per share. As a result 927,204 shares were converted to Class A Common Stock
and 5,696 shares were or will be redeemed.
Voting rights--nonvoting except under certain circumstances.
Convertibility--convertible into 1.67 shares of Class A Common Stock for
each share of 8% Noncumulative Convertible Preferred Stock, Series 1996,
surrendered for conversion.
CLASS A COMMON STOCK:
Issuable in series with rights and preferences to be designated by the
Board of Directors:
As of September 30, 1997, 10,000,000 shares of Class A Common Stock were
authorized but not designated to a series. As of September 30, 1996, 5,000,000
shares were authorized but not designated.
SERIES I CLASS A COMMON STOCK:
Authorized shares--20,000,000 at September 30, 1997 and 10,000,000 at
September 30, 1996.
Issued and outstanding--9,257,098 shares as of September 30, 1997 and
5,454,201 shares as of September 30, 1996.
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.
In October 1997, the Company issued 3,680,000 shares of Series I Class A
Common Stock pursuant to a public stock offering. Net proceeds from the
offering were approximately $43.9 million.
A-81
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
CLASS B COMMON STOCK:
Authorized shares--3,000,000.
Issued and outstanding--275,685 shares as of September 30, 1997 and
251,515 shares as of September 30, 1996.
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
The Company maintains the 1992 Stock Bonus Plan whereby it is authorized
to issue up 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, 1997, 64,857 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, 1997, there were 5,364 shares
available for grant under the 1992 Stock Bonus Plan.
The Company also maintains a non-statutory stock option plan under which
options for up to 825,000 shares of Class A and Class B Common Stock may be
granted. 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, 1997,
825,000 options have been granted under this plan and 75,207 options have been
exercised.
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, 1997, 250,000 options have been granted under this
plan.
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, 1997, the Agreements are exercisable for
a total of 155,367 shares at the exercise price of $4.64 per share; none have
been exercised.
Pursuant to stockholder approval in February 1997, the Company maintains
the 1996 Incentive and Stock Award Plan. Under this plan, the Compensation
Committee of the Board of Directors may grant options to purchase, or may issue
in connection with Stock Awards, Stock Bonuses and Restricted Stock, up to
550,000 shares of Class A or Class B Common Stock. Additionally, the number of
shares of Noncumulative Convertible Preferred Stock, Series B for which Options
may be granted or which may be issued in connection with Stock Bonuses, Stock
Awards and Restricted Stock in lieu of cash or other
A-82
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
stock awards is 100,000. As of September 30, 1997, options to purchase 149,365
shares of Class A Common Stock and 237,000 shares of Class B Common Stock had
been granted and 9,452 shares of Class A Common Stock had been issued.
The following table presents additional data concerning the Company's
outstanding stock options:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE AGGREGATE
OF SHARES PER SHARE OPTION PRICE
----------- ---------------- -------------
<S> <C> <C> <C>
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 .................................... 122,585 7.24 - 8.26 933,064
------- ---------------- ----------
Options outstanding, September 30, 1996 ............ 941,148 3.11 - 10.98 5,410,580
Options granted (including Suncoast options) ...... 729,381 3.00 - 10.74 5,839,961
Options exercised ................................. (83,004) 3.00 - 8.80 (490,932)
------- ---------------- ----------
Options outstanding, September 30, 1997 ............ 1,587,525 $3.00 - $10.98 $10,759,609
========= ================ ===========
</TABLE>
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" and as permitted by SFAS No. 123, the Company continues to follow
the measurement provisions of Accounting Principles Board Option No. 25,
"Accounting for Stock Issued to Employees, " and does not recognize
compensation expense for its stock-based incentive plans. Had compensation cost
for the Company's stock based incentive compensation plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the methodology prescribed by SFAS No. 123, the Company's net
income and earnings per share for fiscal 1997 and 1996 would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
As Reported ........................... $7,599 $2,586
Pro forma .............................. 6,218 2,349
Primary earnings per common share:
As reported ........................... $ .54 $ .10
Pro forma .............................. $ .39 $ .04
Fully diluted earnings per common share:
As reported ........................... $ .54 $ .10
Pro forma .............................. $ .38 $ .04
</TABLE>
The fair value of each option is estimated on the date of the grant using
the Black Scholes option pricing model, with the following historical weighted
average assumptions applied to grants in fiscal 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Dividend yields ............... -- --
Expected volatility ............ 30.1 % 30.1 %
Risk-free interest rates ...... 6.30% 6.52%
Expected life (in years) ...... 9.52 7.88
</TABLE>
A-83
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
Based upon the above assumptions, the weighted average fair value of
options granted during 1997 and 1996 was $2,484,000 and $334,000, respectively.
The Company has a 401(k) savings plan pursaunt 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, 1997, 1996, and
1995 totaled approximately $34,600, $7,000, and $30,000 respectively. Employees
are eligible to participate in the plan after one year of service and begin
vesting in the company's contribution after two years of 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 the eligible 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 $170,000, $100,000 and $75,000 in 1997,
1996 and 1995, respectively.
In connection with the Suncoast acquisition 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. As of
September 30, 1997, 73,000 of these options had been exercised.
(15) INCOME TAXES
The Company's effective tax rate differs from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ----------------------
AMOUNT % AMOUNT % AMOUNT %
-------- ---------- -------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax at federal income tax rate ...... $4,295 34.0% $1,443 34.0% $3,394 34.0%
Increase (decrease) resulting from:
State tax ........................... 314 2.5% 154 3.6 362 3.6
Other, net ........................ 424 3.3% 60 1.5 (15) (0.1)
------ ---- ------ ---- ------ ----
Total .............................. $5,033 39.8% $1,657 39.1% $3,741 37.5%
====== ==== ====== ==== ====== ====
</TABLE>
A-84
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(15) INCOME TAXES--(CONTINUED)
The components of the provision for income taxes for the year ended
September 30, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------------
1997 1996 1995
-------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current-federal ...... $1,150 $1,324 $3,590
Current-state ......... 125 227 620
Deferred-federal ...... 3,391 90 (400)
Deferred-state ......... 367 16 (69)
------ ------ ------
Total ............... $5,033 $1,657 $3,741
====== ====== ======
</TABLE>
The tax effects of significant temporary differences included in the
deferred tax asset as of September 30, 1997 and 1996 were:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1996
-------- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Non-accrual interest ............... $ 200 $185
Loan loss and other reserves ...... 875 431
Fixed assets ........................ 77 5
Deferrals and amortization ......... 250 19
Purchase accounting ............... 1,605 --
Other .............................. 236 --
------ ----
Gross deferred tax asset ......... 3,243 640
------ ----
Deferred tax liability:
FHLB Atlanta stock dividends ...... 159 167
Deferrals and amortizations ......... 912 --
Other .............................. 91 13
------ ----
Gross deferred tax liability ...... 1,162 180
------ ----
Net deferred tax asset ............ $2,081 $460
====== ====
</TABLE>
At September 30, 1997, the Company had $409,000 in Tax Bad Debt Reserves
originating before December 31, 1987 for which deferred taxes have not been
provided. The amount becomes taxable under the Internal Revenue Code upon the
occurrence of certain events, including certain non-dividend distributions. The
Company does not anticipate any actions which would ultimately result in the
recapture of this amount for income tax purposes.
A-85
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(15) INCOME TAXES--(CONTINUED)
The components of deferred income tax provision (benefit) relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------
1997 1996 1995
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Differences in book/tax depreciation ...... $ -- $(10) $ (21)
Delinquent interest ........................ (18) (7) (80)
FHLB Stock dividends ..................... -- -- (144)
Loan fees ................................. 15 -- --
Loan loss and other reserves ............... (294) 156 (164)
Deferrals and amortization ............... (145) (33) (60)
SAIF special assessment .................. 758 -- --
Purchase accounting ........................ 2,635 -- --
Other .................................... 807 -- --
------ ------ ------
Total deferred taxes ..................... $3,758 $106 $ (469)
====== ====== ======
</TABLE>
In connection with the acquisition of Suncoast, the Company recorded
deferred tax assets and liabilities for the differences between values assigned
in purchase accounting and the tax bases of acquired assets and liabilities.
The resultant net deferred tax asset is not included in the summary of
significant temporary differences at September 30, 1996 above. Approximately
$2,635,000 of this deferred tax asset has been recognized as deferred tax
expense during the year ended September 30, 1997 and $1,605,000 represents the
tax effect at September 30, 1997 of amounts deductible for tax purposes in
future periods.
The Company also acquired net deferred tax assets of approximately
$1,140,000 in conjunction with its acquisition of Suncoast. These net deferred
tax assets are not included in the summary of significant temporary differences
at September 30, 1996 above.
(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
A-86
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(16) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
other termination clauses and may require payment of a fee. Total commitments
to extend credit at September 30, 1997 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------
FIXED VARIABLE
RATE RATE TOTAL
--------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commitments to fund loans ......... $ 9,980 $ 15,826 $ 25,806
Loans in process .................. 4,297 8,664 12,961
Letters of credit .................. 127 -- 127
Commitments to purchase loans ...... -- 873,553 873,553
------- -------- --------
Total .............................. $14,404 $898,043 $912,447
======= ======== ========
</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 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 agency, of which a member of the Board of Directors is a vice
president. For the years ended September 30, 1997, 1996 and 1995, total fees (a
portion of which were capitalized) paid to this law firm totaled approximately
$2.2 million, $986,000, and $1.1 million, respectively, and amounts paid to
this insurance agency totaled approximately $373,000, $147,000, and $129,000,
respectively.
In fiscal 1997, the Company leased property for a new branch, which is 25%
owned by the Company's Chairman of the Board. The lease is for a term of 3
years with four three year options to renew. The annual rent for the property
is approximately $126,000, and in fiscal 1997, the Company paid a total of
$82,000 in rent.
A-87
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(18) 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,
------------------------
1997 1996
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
Cash ......................................................... $ 623 $ 88
FHLB overnight deposits ....................................... 2,822 7,889
Tax certificates ............................................. 40 312
Investments, net (market value of approximately $10 and $10 at
September 30, 1997 and 1996, respectively) .................. 10 10
Investments available for sale .............................. -- 155
Mortgage-backed securities, available for sale ............... 18,644 1,309
Accrued interest receivable ................................. 173 132
Investment in the Bank ....................................... 183,807 59,443
Investment in subsidiaries .................................... 4,640 --
Other assets ................................................ 9,622 248
-------- -------
Total ...................................................... $220,381 $69,586
======== =======
Liabilities ................................................... $ 96 $ 475
Junior subordinated deferrable interest debentures ............ 120,640 --
Stockholders' equity:
Preferred stock ............................................. 22 27
Common stock ................................................ 95 57
Paid-in capital ............................................. 86,679 62,055
Retained earnings ............................................. 11,988 7,279
Net unrealized gains (losses) on securities available for sale,
net of taxes ................................................ 861 (307)
-------- -------
Total stockholders' equity ................................. 99,645 69,111
-------- -------
Total liabilities and stockholders' equity .................. $220,381 $69,586
======== =======
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
----------------------------------
1997 1996 1995
----------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income .................. $ 2,626 $ 803 $ 307
Interest expense .................. 6,726 17 36
Equity income of the Bank ......... 10,927 2,406 6,587
Operating expenses ............... 1,166 491 818
-------- ------ ------
Income before income taxes ......... 5,661 2,701 6,040
Income tax expense (benefit) ...... (1,938) 115 (200)
-------- ------ ------
Net income ........................ $ 7,599 $2,586 $6,240
======== ====== ======
</TABLE>
A-88
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(18) BANKUNITED FINANCIAL CORPORATION--(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
1997 1996 1995
------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income ................................................... $ 7,599 $ 2,586 $ 6,240
Less: Undistributed income of the Bank ..................... (11,551) (406) (6,587)
Other ...................................................... (2,757) 242 156
--------- --------- --------
Net cash provided by (used in) operating activities ......... (6,709) 2,422 (191)
--------- --------- --------
Cash from investing activities:
Equity contributions to the Bank ........................... (85,000) (16,000) --
Equity contributions to subsidiaries ........................ (4,640) -- --
Purchase of investment securities ........................... -- (155) --
Proceeds from sale of investments ........................... 155 -- --
Purchase of mortgage-backed securities ..................... (27,411) -- --
Proceeds from repayments of mortgage- backed securities . 5,054 368 181
Proceeds from sales of mortgage-backed securities ............ 5,021 -- --
Net decrease in tax certificates ........................... 269 145 732
--------- --------- --------
Net cash provided by (used in) investing activities ......... (106,552) (15,642) 913
--------- --------- --------
Cash flow from financing activities:
Net proceeds from issuance of Junior subordinated
deferrable interest debentures ........................... 114,776 -- --
Net proceeds from issuance of common stock .................. 1,329 23,198 222
Dividends paid on preferred stock ........................... (2,890) (2,086) (2,010)
Preferred Stock, Series 9% tender offer ..................... (4,486) -- --
--------- --------- --------
Net cash provided by (used in) financing activities ......... 108,729 21,112 (1,788)
(Decrease) increase in cash and cash equivalents ............ (4,532) 7,892 (1,066)
Cash and cash equivalents at beginning of year ............... 7,977 85 1,151
--------- --------- --------
Cash and cash equivalents at end of year ..................... $ 3,445 $ 7,977 $ 85
========= ========= ========
</TABLE>
(19) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated fair
value of the Company's financial instruments. 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
A-89
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(19) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
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.
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 the Trust Preferred Securities is estimated based on bid
prices available from securities dealers.
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.
A-90
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(19) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
The following table presents information for the Company's financial
instruments at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------
CARRYING VALUE FAIR VALUE
---------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ............... $ 89,984 $ 89,984
Tax certificates and other investments ...... 73,943 74,062
Mortgage-backed securities .................. 120,271 120,211
Loans receivable ........................... 1,765,723 1,814,459
Mortgage servicing assets .................. 4,783 4,890
Other interest-earning assets ............... 33,599 33,599
Financial liabilities:
Deposits .................................... $1,195,892 $1,197,871
Borrowings ................................. 701,484 704,705
Trust Preferred Securities .................. 116,000 119,010
</TABLE>
<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 .................. 70,163 69,741
Loans receivable ........................... 646,385 646,547
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>
A-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"
appearing in the Company's definitive proxy statement relating to the Company's
1998 Annual Meeting of Stockholders, which definitive proxy statement was
filed with the Securities and Exchange Commission within 120 days after
the end of the Company's fiscal year covered by this report on Form 10-K/A
(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/A.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the caption "Executive Compensation"
appearing 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" appearing 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" appearing 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 filed with this
report:
Report of Independent Certified Public Accountants (Price
Waterhouse LLP).
Consolidated Statements of Financial Condition as of September 30,
1997 and 1996.
Consolidated Statements of Operations for the years September 30,
1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1997, 1996 and 1995.
A-92
<PAGE>
Consolidated Statements of Cash Flows for the years ended September
30, 1997, 1996 and 1995.
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.*
2.1 Agreement and Plan of Merger, dated July 15, 1996, between
BankUnited and Suncoast Savings and Loan Association, FSA. (Exhibit 2.1
to BankUnited's Form S-4 Registration Statement, File No. 333-13211, as
filed with the Securities and Exchange Commission on October 1, 1996).
2.2 Agreement and Plan of Merger between BankUnited and Consumers
Bancorp, Inc. dated September 19, 1997 (Exhibit 2.2 to BankUnited's
Form S-4 Registration Statement, File No. 333-39921, as filed with the
Securities and Exchange Commission on November 10, 1997).
3.1 Articles of Incorporation of BankUnited (Exhibit 3.1 to
BankUnited's Form 10-K report for the year ended September 30, 1997).
3.2 Statement of Designation of Series I Class A Common Stock and
Class B Common Stock of BankUnited (included as an appendix to Exhibit
3.1).
3.3 Statement of Designation of Noncumulative Convertible Preferred
Stock, Series A, of BankUnited (included as an appendix to Exhibit
3.1).
3.4 Statement of Designation of Noncumulative Convertible Preferred
Stock, Series B of BankUnited (included as appendix to Exhibit 3.1).
3.5 Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1993 of BankUnited (included as an appendix to
Exhibit 3.1).
3.6 Statement of Designation of 9% Noncumulative Perpetual Preferred
Stock of BankUnited (included as an appendix to Exhibit 3.1).
3.7 Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1996 of BankUnited (included as appendix to
Exhibit 3.1).
3.8 Form of Letter Agreement between BankUnited and the holders of
shares of BankUnited's Noncumulative Convertible Preferred Stock,
Series B (Exhibit 3.8 to BankUnited's Form 10-K report for the year
ended September 30, 1997).
3.9 Bylaws of BankUnited (Exhibit 4.5 to BankUnited'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 BankUnited, FSB
(the "Bank") and the Federal Home Loan Bank 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 BankUnited's
Form 8-K dated March 25, 1993).
A-93
<PAGE>
4.2 Forms of Series 15A-F, Series 18E and Series 20A-F of
Subordinated Notes of the Bank (Exhibit 4.3 to BankUnited'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
BankUnited'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 BankUnited'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 The Bank's Profit Sharing Plan. (Exhibit 10.4 to BankUnited's
Form S-2 Registration Statement, File No. 33-80791, as filed with the
Securities and Exchange Commission on December 22, 1995).**
10.5 1996 Incentive Compensation and Stock Award Plan (Exhibit 10.5
to BankUnited'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 BankUnited, the Bank, SouthTrust Corporation, SouthTrust of
Florida, Inc. and SouthTrust Bank of the Suncoast (Exhibit 10.1 to
BankUnited's Form 10-Q Report for the quarter ended March 31, 1995 [the
"March 31, 1995 10-Q"]).
10.7 Purchase and Assumption Agreement dated March 20, 1995 by and
among BankUnited, 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 BankUnited, the Bank, SouthTrust Corporation,
SouthTrust of Florida, Inc., and SouthTrust Bank of the Suncoast
(Exhibit 10.1 to BankUnited'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 BankUnited, 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 BankUnited and Alfred R.
Camner (Exhibit 10.10 to BankUnited's 10-K Report for the year ended
September 30, 1996).
10.11 Form of Employment Agreement between BankUnited and Earline G.
Ford (Exhibit 10.11 to BankUnited's 10-K Report for the year ended
September 30, 1996).
10.12 Form of Employment Agreement between BankUnited and certain of
its senior officers (Exhibit 10.12 to BankUnited's 10-K Report for the
year ended September 30, 1996).
10.13 Junior Subordinated Indenture with respect to BankUnited's
101/4% Junior Subordinated Debentures. (Exhibit 4.1A to the Company's
Registration Statement on Form S-4, File No. 333-24025, as filed with
the Securities and Exchange Commission on March 27, 1997).
10.14 Supplemental Indenture (Exhibit 4.1B to the Company's
Registration Statement on Form S-4, File No. 333-24025, as filed with
the Securities and Exchange Commission on March 27, 1997).
A-94
<PAGE>
10.15 Form of Amended and Restated Trust Agreement of BankUnited
Capital. (Exhibit 4.3 to the Company's Registration Statement on Form
S-4, No. 333-24025, as filed with the Securities and Exchange
Commission on March 27, 1997).
10.16 Form of Amended and Restated Guarantee Agreement for
BankUnited Capital. (Exhibit 4.5 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the Securities and
Exchange Commission on March 27, 1997).
10.17 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 99.6 to the Company's Registration Statement on
Form S-4, No. 333-24025, as filed with the Securities and Exchange
Commission on March 27, 1997).
10.18 Registration Rights Agreement (Exhibit 4.6 to the Company's
Registration Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
10.19 Registration Rights Agreement (Exhibit 4.7 to the Company's
Registration Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
10.20 Purchase Agreement (Exhibit 99.4 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the Securities and
Exchange Commission on March 27, 1997).
10.21 Purchase Agreement (Exhibit 99.5 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the Securities and
Exchange Commission on March 27, 1997).
10.22 Form of Indenture with respect to BankUnited's 9.60% Junior
Subordinated Debentures. (Exhibit 4.3 to the Company's Registration
Statement on Form S-2, File No. 333-27597, as filed with the Securities
and Exchange Commission on May 22, 1997).
10.23 Trust Agreement of BankUnited Capital II. (Exhibit 4.6 to the
Company's Registration Statement on Form S-2, File No. 333-27597, as
filed with the Securities and Exchange Commission on May 22, 1997).
10.24 Form of Amended and Restated Trust Agreement of BankUnited
Trust II. (Exhibit 4.7 to the Company's Registration Statement on Form
S-2, No. 333-27597, as filed with the Securities and Exchange
Commission on May 22, 1997).
10.25 Form of Guarantee Agreement for BankUnited Capital II.
(Exhibit 4.9 to the Company's Registration Statement on Form S-2, No.
333-27597, as filed with the Securities and Exchange Commission on May
22, 1997).
10.26 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 4.7) (Exhibit 4.10 to the Company's Registration
Statement on Form S-2, No. 333-27597, as filed with the Securities and
Exchange Commission on May 22, 1997).
11.1 Statement regarding calculation of earnings per common share
(Exhibit 11.1 to BankUnited's Form 10-K report for the year ended
September 30, 1997).
12.1 Statement regarding calculation of earnings to combined fixed
charges and preferred stock dividends (Exhibit 12.1 to BankUnited's Form
10-K report for the year ended September 30, 1997).
21.1 Subsidiaries of the Registrant (Exhibit 21.1 to BankUnited's
Form S-4 Registration Statement, File No. 333-39921, as filed with the
Securities and Exchange Commission on November 10, 1997).
A-95
<PAGE>
23.1 Consent of Price Waterhouse LLP.
24.1 Power of attorney (set forth on the signature page in Part IV
of BankUnited's Report on Form 10-K for the year ended September 30,
1997).
27.1 Financial Data Schedule (Exhibit 27.1 to BankUnited's Form 10-K
report for the year ended September 30, 1997).
- ----------------
* Exhibits followed by a parenthetical reference are incorporated herein by
reference from the documents described therein.
** Exhibits 10.1--10.5 are compensatory plans or arrangements.
(B) REPORTS ON FORM 8-K.
During the quarter ended September 30, 1997, the Company filed with the
Securities and Exchange Commission, (i) a Current Report on Form 8-K dated
September 12, 1997, which reported that the Company had called its 8%
Noncumulative Convertible Preferred Stock, Series 1996, for redemption, and
(ii) a Current Report on Form 8-K dated September 23, 1997 announcing that the
Company had agreed to acquire Consumers Bancorp, Inc., the parent company of
Consumers Savings Bank.
SUPPLEMENTAL INFORMATION
Copies of the Company's annual report to security holders and proxy
materials have previously been provided to the Commission.
A-96
<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/A
to be signed on its behalf by the undersigned, thereunto duly authorized on
February 27, 1998.
BANKUNITED FINANCIAL CORPORATION
By: /s/ Alfred R. Camner
-----------------------------------
Alfred R. Camner
Chairman of the Board, President
and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on February 27, 1998 on behalf of the Registrant by the
following persons and in the capacities indicated.
<TABLE>
<S> <C>
* Chairman of the Board, Chief Executive
- ---------------------------- Officer, President and Director
Alfred R. Camner (Principal Executive Officer)
* Executive Vice President, Treasurer and
- ---------------------------- Director
Earline G. Ford
* Executive Vice President and Director
- ----------------------------
James A. Dougherty
* Executive Vice President and Chief Financial
- ---------------------------- Officer (Principal Financial Officer and
Samuel A. Milne Principal Accounting Officer)
* Director
- ----------------------------
Marc D. Jacobson
* Director
- ----------------------------
Allen M. Bernkrant
* Director
- ----------------------------
Lawrence H. Blum
* Director
- ----------------------------
Patricia L. Frost
</TABLE>
A-97
<PAGE>
<TABLE>
<S> <C>
- --------------------------- Director
Anne W. Solloway
* Director
- ---------------------------
Neil Messinger
* Director
- ---------------------------
Bruce Friesner
* Director and Corporate Secretary
- ---------------------------
Marc Lipsitz
*By: /s/ Alfred R. Camner
----------------------
as Attorney-in-Fact
</TABLE>
A-98
<PAGE>
APPENDIX B
BANKUNITED FINANCIAL CORPORATION
OPERATING RESULTS AND FINANCIAL INFORMATION
FOR THE QUARTER ENDED DECEMBER 31, 1997
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, SEPTMEBER 30,
1997 1997
(Unaudited) 1997
-------------- -------------
(Dollars in thousands, except per share amounts)
<S> <C> <C>
ASSETS
Cash $ 13,136 $ 10,571
Federal Home Loan Bank overnight deposits 20,261 79,413
Securities purchased under agreements to resell 30,032 --
Tax certificates (net of reserves of $714 at December 31, 1997 and
$697 at September 30, 1997) 40,035 49,283
Investments held to maturity (market value of approximately
$14,612 at December 31, 1997 and $14,613 at September 30, 1997) 14,497 14,494
Investments available for sale, at market 8,168 10,166
Mortgage-backed securities, held to maturity (market
value of approximately $10,946 at December 31, 1997
and $11,292 at September 30, 1997) 10,882 11,352
Mortgage-backed securities available for sale, at market 84,403 108,919
Loans receivable, net 2,579,433 1,661,381
Mortgage loans held for sale (market value of approximately $93,443
at December 31, 1997 and $105,980 at September 30, 1997) 92,224 104,342
Other interest earning assets 63,098 33,599
Office properties and equipment, net 8,682 7,371
Real estate owned, net 780 611
Accrued interest receivable 22,743 16,261
Mortgage servicing rights 5,030 4,783
Goodwill 14,559 14,278
Prepaid expenses and other assets 20,813 18,582
---------- ----------
Total assets $3,028,776 $2,145,406
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $1,444,102 $1,195,892
Securities sold under agreements to repurchase 30,000 30,000
Advances from Federal Home Loan Bank 1,261,466 671,484
Company obligated mandatorily redeemable trust preferred securities of
subsidiary trust holding solely junior subordinated deferrable interest
debentures of the Company 116,000 116,000
Interest payable (primarily on deposits and advances from Federal Home
Loan Bank) 5,770 3,844
Advance payments by borrowers for taxes and insurance 6,434 10,688
Accrued expenses and other liabilities 19,373 17,853
---------- ----------
Total liabilities 2,883,145 2,045,761
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, Series B, 1993, 1996 and 9%, $0.01 par value. Authorized
shares - 10,000,000; issued and outstanding shares - 1,644,805 at
December 31,1997 and 2,175,296 at September 30, 1997 16 22
Class A Common Stock, $.01 par value. Authorized shares - 30,000,000;
issued and outstanding shares - 13,923,022 at December 31, 1997 and
9,257,098 at September 30, 1997 139 92
Class B Common Stock, $.01 par value. Authorized shares - 3,000,000;
issued and outstanding shares - 285,958 at December 31, 1997 and 275,685
at September 30, 1997 3 3
Additional paid-in capital 131,149 86,679
Retained earnings 13,632 11,988
Net unrealized gains on securities available for sale, net of tax 692 861
---------- ----------
Total stockholders' equity 145,631 99,645
---------- ----------
Total liabilities and stockholders' equity $3,028,776 $2,145,406
========== ==========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B-1
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(Unaudited)
1997 1996
-------- --------
(In thousands, except earnings per share)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 36,893 $ 16,616
Interest on mortgage-backed securities 2,192 1,309
Interest on short-term investments 420 467
Interest and dividends on long-term investments
and other earning assets 1,945 1,099
-------- --------
Total interest income 41,450 19,491
-------- --------
Interest expense:
Interest on deposits 17,584 8,882
Interest on borrowings 11,591 3,505
Preferred dividends of Trust Subsidiary 2,908 28
-------- --------
Total interest expense 32,083 12,415
-------- --------
Net interest income before provision for loan losses 9,367 7,076
Provision for loan losses 650 250
-------- --------
Net interest income after provision for loan losses 8,717 6,826
-------- --------
Non-interest income:
Service fees, net 452 575
Gain (loss) on sale of loans and mortgage-backed securities 1,115 (11)
Other 77 36
-------- --------
Total non-interest income 1,644 600
-------- --------
Non-interest expenses:
Employee compensation and benefits 2,480 1,915
Occupancy and equipment 886 886
Insurance 255 361
Professional fees - legal and accounting 622 222
Other operating expenses 2,782 1,421
-------- --------
Total non-interest expenses 7,025 4,805
-------- --------
Income before income taxes and preferred stock dividends 3,336 2,621
Income taxes 1,361 1,022
-------- --------
Net income before preferred stock dividends 1,975 1,599
Preferred stock dividends 332 672
-------- --------
Net income after preferred stock dividends $ 1,643 $ 927
======== ========
Earnings Per Share
Basic $ 0.13 $ 0.14
======== ========
Diluted $ 0.12 $ 0.13
======== ========
Weighted average number of common shares
assumed outstanding during the period:
Basic 13,012 6,807
======== ========
Diluted 14,042 7,958
======== ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B-2
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(Unaudited)
1997 1996
--------- ---------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,975 $ 1,599
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan losses 650 250
Provision for losses on tax certificates 16 18
Depreciation and amortization 328 313
Amortization of discounts and premiums on investments (2) 8
Amortization of discounts and premiums on mortgage-backed securities (633) 30
Amortization of discounts and premiums on loans (1,162) (23)
Amortization of loan servicing assets 285 163
Amortization of goodwill 208 113
Loans originated for sale (12,037) (5,193)
Increase in accrued interest receivable (6,481) (1,097)
Increase (decrease) in interest payable on deposits and FHLB advances 1,926 (845)
Increase (decrease) in accrued expenses (60) 2,347
Increase (decrease) in accrued taxes 2,687 (937)
Increase (decrease) in deferred taxes (249) 17
Decrease in other liabilities (1,005) (27,320)
(Increase) decrease in prepaid expenses and other assets (3,004) 1,763
Proceeds from sale of loans 28,574 3,657
Recovery on loans 5 11
(Gain) loss on sales of loans (692) 11
Gain on sale of mortgage-backed securities (423) --
(Gain) loss on sales of real estate owned (54) 23
--------- ---------
Net cash provided by (used in) operating activities 10,852 (25,092)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (921,700) (58,864)
Proceeds from sale of real estate owned 313 488
Purchase of other earning assets (34,250) (2,650)
Proceeds from repayments of mortgage-backed securities 8,747 3,136
Proceeds from repayments of other earning assets 4,751 3,000
Proceeds from repayments of investment securities 2,000 --
Proceeds from sale of mortgage securities 17,021 --
Purchases of premises and equipment (1,639) (338)
Net decrease in tax certificates 9,231 6,281
Purchase of Suncoast's cash equivalents -- 32,803
--------- ---------
Net cash (used in) investing activities (915,526) (16,144)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 248,210 48,323
Net increase (decrease) in other borrowings 589,982 (16)
Net proceeds from issuance of preferred stock -- 9
Net proceeds from issuance of common stock 44,641 14
Net proceeds from issuance of trust preferred securities -- 48,350
Preferred Stock purchase (43) --
Preferred Stock, Series 1996 called (85) --
Dividends paid on the Company's preferred stock (332) (672)
Decrease in advances from borrowers for taxes and insurance (4,254) (4,490)
--------- ---------
Net cash provided by financing activities 878,119 91,518
--------- ---------
Increase (decrease) in cash and cash equivalents (26,555) 50,282
Cash and cash equivalents at beginning of period 89,984 34,136
--------- ---------
Cash and cash equivalents at end of period $ 63,429 $ 84,418
========= =========
SUPPLEMENTAL DISCLOSURES:
Transfer from loans to real estate owned $ 428 $ 1,160
========= =========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B-3
<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, 1997 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 the fiscal year ended September
30, 1997.
2. CAPITAL
In January 1998, the Company called its 743,870 shares of its 8% Noncumulative
Convertible Preferred Stock, Series 1993 effective February 20, 1998 at $10.00
per share. Management expects substantially all shares of the preferred stock to
be converted into common stock at a ratio of one for one.
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, 1997 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 $ 44,850 1.5% $ 212,474 7.1% $ 167,624 5.6%
Core Capital $ 89,699 3.0% $ 212,474 7.1% $ 122,775 4.1%
Risk-Based Capital $134,722 8.0% $ 217,097 12.9% $ 82,375 4.9%
</TABLE>
3. ACQUISITIONS
On January 23, 1998, the Company acquired Consumers Bancorp, Inc., for
approximately $11 million in a combination of cash and stock, and merged its
wholly-owned subsidiary, Consumers Savings Bank, which had assets of $101.2
million and deposits of $84.2 million as of December 31, 1997, into the Bank.
On December 30, 1997, the Company entered into a definitive agreement to acquire
Central Bank for 1,516,500 shares of the Company's Class A common stock, subject
to adjustment under certain conditions. Central Bank is a state chartered
commercial bank which had assets of $96.9 million and deposits of $72.8 million
as of December 31, 1997. Central Bank operates 4 branch offices in Miami-Dade
County, Florida.
B-4
<PAGE>
On November 15, 1996, the Company acquired Suncoast Savings and Loan
Association, FSA. The balance sheet and results of operations of Suncoast have
been included with those of the Company as of and for periods subsequent to
November 15, 1996.
4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" and in December 1996, the FASB issued a related
Statement of Financial Accounting Standards No. 127, "Deferral of the Effective
Date of Certain Provisions of FASB No. 125" (collectively "Statement No. 125").
Statement No. 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. Portions of Statement No.
125 were effective for transactions entered into after December 31, 1996 with
the remaining portions effective for transactions entered into after December
31, 1997. The impact of adopting Statement No. 125 has not been nor is it
currently expected to be material to the Company's financial position or the
results of operations.
The Company has adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" and as required, restated all earnings per share to report
"Basic" and "Diluted" earnings per share.
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.
B-5
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such information and representations must
not be relied upon as having been authorized by the Company, the Trust Issuer or
the Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the registered
securities to which it relates or an offer to sell or a solicitation of an offer
to buy such securities in any circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
Table of Contents
PAGE
Summary ...........................................................
Summary Consolidated Financial Information and Other Data..........
Risk Factors.......................................................
BankUnited Financial Corporation...................................
The Trust Issuer...................................................
Use of Proceeds....................................................
Market for the Preferred Securities................................
Accounting Treatment...............................................
Capitalization.....................................................
Summary Consolidated Financial Information and Other Data..........
Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................
Description of the Preferred Securities............................
Description of the Junior Subordinated Debentures..................
Description of the Guarantee.......................................
Relationship Among the Preferred Securities, the Junior
Subordinated Debentures, the Expense Agreement and the Guarantee.
Certain Federal Income Tax Consequences............................
Underwriting.......................................................
Validity of Securities.............................................
Experts ....................................................
Available Information..............................................
Incorporation of Certain Documents by Reference....................
Appendix A - 1997 Annual Report on Form 10-K/A
of BankUnited Financial Corporation..............................
Business of BankUnited Corporation..................
Regulation..........................................
Taxation............................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...............
Consolidated Financial Statements...................
Appendix B - Operating Results and Financial Information of
BankUnited Financial Corporation for the quarter ended
December 31, 1997...............................................
[LOGO]
3,600,000
TRUST PREFERRED SECURITIES
BANKUNITED CAPITAL III
__% CUMULATIVE TRUST
PREFERRED SECURITIES
GUARANTEED, TO THE EXTENT SET FORTH HEREIN, BY
BANKUNITED FINANCIAL
CORPORATION
---------------------------
PROSPECTUS
---------------------------
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
__________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the offering of the securities to which
this Registration Statement relates which will be borne by BankUnited, are as
set forth below. With the exception of the Securities and Exchange Commission
("SEC") and National Association of Securities Dealers, Inc. filing fees, all
amounts shown are estimates.
AMOUNT
------
SEC registration fee................................... $ 34,848.49
NASD filing fee........................................ $ 12,000.00
New York Stock Exchange listing fee.................... $ 44,300.00
Rating Agency fee...................................... $ 40,000.00
Trustee fees and expenses.............................. $ 5,000.00
Legal fees and expenses................................ $225,000.00
Accounting fees and expenses........................... $ 75,000.00
Printing and mailing expenses.......................... $ 60,000.00
Blue Sky fees and expenses............................. $ 7,500.00
Miscellaneous.......................................... $ 5,000.00
-----------
TOTAL................................................ $508,648.49
===========
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IX of the Articles of Incorporation of BankUnited provides that
BankUnited shall indemnify its officers and directors to the fullest extent
permitted by law.
The Bylaws of BankUnited provide that BankUnited will indemnify any
person against whom an action is brought or threatened because that person is or
was a director, officer or employee of BankUnited for any amount for which that
person becomes liable under a judgment in such action and reasonable costs and
expenses, including attorneys' 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
II-1
<PAGE>
of the Board of Directors of BankUnited 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 BankUnited.
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 to the liability of the directors
for improper distributions) are applicable; (d) willful misconduct or a
conscious disregard for the best interest 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, BankUnited to indemnify any person who was or is a party to
any proceeding (other than an action by or in the right of BankUnited) by reason
of the fact that he is or was a director, officer, employee or agent of
BankUnited (or is or was serving at the request of BankUnited 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 BankUnited 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, 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
II-2
<PAGE>
Florida Business Corporation Act (relating to the liability of directors for
improper distributions) are applicable.
BankUnited 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 of the Trust Issuer, BankUnited will agree to
indemnify each of the Trustees of the Trust Issuer or any predecessor trustee
for the Trust Issuer, and to hold harmless against, any loss, damage, claim,
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 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 under the Trust Agreement.
Item 16. EXHIBITS.1
The following is a list of Exhibits to this Registration Statement:
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger, dated July 15, 1996, between the
Company and Suncoast Savings and Loan Association, FSA.
(Exhibit 2.1 to BankUnited's Form S-4 Registration Statement,
File No. 333-13211, as filed with the Securities and Exchange
Commission on October 1, 1996).
2.2 Agreement and Plan of Merger between the Company and Consumers
Bancorp, Inc. dated September 19, 1997 ( Exhibit 2.2 to
BankUnited's Form S-4 Registration Statement, File No.
333-39921, as filed with the Securities and Exchange
Commission on November 10, 1997).
2.3 Agreement and Plan of Merger between the Company and Central
Bank dated December 30, 1997. (Exhibit 2.1 to the Company's
Current Report on Form 8-K dated December 30, 1997, as filed
with the Securities and Exchange Commission on January 2,
1998).
3.1 Articles of Incorporation of the Company (Exhibit 3.1 to the
Company's Form 10-K/A Report for the year ended September 30,
1997 [the "1997 10-K"]).
4.2 Bylaws of BankUnited (Exhibit 4.5 to BankUnited's Form S-8
Registration Statement, File No. 333-43211, as filed with the
Securities and Exchange Commission on November 14, 1996).
4.3 Form of Indenture with respect to BankUnited's _____% Junior
Subordinated Debentures.
II-3
<PAGE>
4.4 Form of Specimen __% Junior Subordinated Deferrable Interest
Debenture (included as an exhibit to the Form of Indenture
filed as Exhibit 4.3).
4.5 Certificate of Trust of BankUnited Capital III.4
4.6 Trust Agreement of BankUnited Capital III.4
4.7 Form of Amended and Restated Trust Agreement of BankUnited
Trust III.
4.8 Form of Certificate for ___% Trust Preferred Security of
BankUnited Capital III.
4.9 Form of Guarantee Agreement for BankUnited Capital III.
4.10 Form of Agreement as to Expenses and Liabilities.4
4.11 Agreement for Advances and Security Agreement with Blanket
Floating Lien dated as of September 25, 1992, between the
Company, FSB (the "Bank") and the Federal Home Loan Bank 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 BankUnited's Form 8-K
dated March 25, 1993).
4.12 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).
4.13 Junior Subordinated Indenture with respect to the Company's 10
1/4% Junior Subordinated Debentures. (Exhibit 4.1A to the
Company's Registration Statement on Form S-4, File No.
333-24025, as filed with the Securities and Exchange
Commission on March 27, 1997).
4.14 Supplemental Indenture (Exhibit 4.1B to the Company's
Registration Statement on Form S-4, File No. 333-24025, as
filed with the Securities and Exchange Commission on March 27,
1997).
4.15 Form of Amended and Restated Trust Agreement of the Company
Capital. (Exhibit 4.3 to the Company's Registration Statement
on Form S-4, No. 333-24025, as filed with the Securities and
Exchange Commission on March 27, 1997).
4.16 Form of Amended and Restated Guarantee Agreement for the
Company Capital. (Exhibit 4.5 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
II-4
<PAGE>
4.17 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 99.6 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
4.18 Registration Rights Agreement (Exhibit 4.6 to the Company's
Registration Statement on Form S-4, No. 333-24025, as filed
with the Securities and Exchange Commission on March 27,
1997).
4.19 Registration Rights Agreement (Exhibit 4.7 to the Company's
Registration Statement on Form S-4, No. 333-24025, as filed
with the Securities and Exchange Commission on March 27,
1997).
4.20 Purchase Agreement (Exhibit 99.4 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
4.21 Purchase Agreement (Exhibit 99.5 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
4.22 Form of Indenture with respect to the Company's 9.60% Junior
Subordinated Debentures. (Exhibit 4.3 to the Company's
Registration Statement on Form S-2, File No. 333-27597, as
filed with the Securities and Exchange Commission on May 22,
1997).
4.23 Trust Agreement of the Company Capital II. (Exhibit 4.6 to the
Company's Registration Statement on Form S-2, File No.
333-27597, as filed with the Securities and Exchange
Commission on May 22, 1997).
4.24 Form of Amended and Restated Trust Agreement of the Company
Trust II. (Exhibit 4.7 to the Company's Registration Statement
on Form S-2, No. 333-27597, as filed with the Securities and
Exchange Commission on May 22, 1997).
4.25 Form of Guarantee Agreement for the Company Capital II.
(Exhibit 4.9 to the Company's Registration Statement on Form
S-2, No. 333-27597, as filed with the Securities and Exchange
Commission on May 22, 1997).
4.26 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 4.7) (Exhibit 4.10 to the Company's
Registration Statement on Form S-2, No. 333-27597, as filed
with the Securities and Exchange Commission on May 22, 1997).]
5.1 Opinion of Stuzin and Camner, P.A. as to the validity of the
issuance of the __% Junior Subordinated Deferrable Interest
Debentures to be issued by BankUnited.
II-5
<PAGE>
5.2 Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the issuance of the ___%
Cumulative Trust Preferred Securities to be issued by
BankUnited Capital III.
8.1 Tax Opinion of Kronish, Lieb, Weiner & Hellman LLP.
10.1 Non-Statutory Stock Option Plan, as amended (Exhibit 4.9 to
BankUnited's Form S-8 Registration Statement [File No.
33-76882], as filed with the Securities and Exchange
Commission on March 24, 1994).2
10.2 1992 Stock Bonus Plan, as amended. (Exhibit 10.2 to
BankUnited's Form 10-K Report for the year ended September 30,
1994 [the "1994 10-K"]).2
10.3 1994 Incentive Stock Option Plan. (Exhibit 10.3 to the 1994
10-K).2
10.4 Profit Sharing Plan of the Bank (Exhibit 10.4 to BankUnited'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 BankUnited's Form 10-K Report for the year ended September
30, 1996 [the "1996 10-K").2
10.6 Purchase and Assumption Agreement dated March 20, 1995 by and
among BankUnited, the Bank, SouthTrust Corporation, SouthTrust
of Florida, Inc., and SouthTrust Bank of the Suncoast (Exhibit
10.1 to BankUnited's Form 10-Q Report for the quarter ended
March 31, 1995 [the "March 31, 1995 10-Q"]).
10.7 Purchase and Assumption Agreement dated March 20, 1995 by and
among BankUnited, 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 BankUnited, the Bank, SouthTrust
Corporation, SouthTrust of Florida, Inc. and SouthTrust Bank
of the Suncoast (Exhibit 10.1 to BankUnited'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 BankUnited, 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 BankUnited and Alfred R.
Camner (Exhibit 10.10 to the 1996 10-K).
10.11 Form of Employment Agreement between BankUnited and Earline G.
Ford (Exhibit 10.11 to the 1996 10-K).
II-6
<PAGE>
10.12 Form of Employment Agreement between BankUnited and certain of
its senior officers (Exhibit 10.12 to the 1996 10-K).
12.1 Statement regarding calculation of ratios.5
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Stuzin and Camner, P.A. (set forth in Exhibit 5.1
to this Registration Statement).
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2
to this Registration Statement).
24.1 Power of attorney (set forth on the signature page in Part II
of this Registration Statement).4
25.1 Form T-1: Statement of Eligibility of The Bank of New York to
act as trustee under the Indenture.5
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.5
25.3 Form T-1: Statement of Eligibility of The Bank of New York to
act as trustee under the Guarantee Agreement for BankUnited
Capital III.5
- -----------------------
1 Exhibits containing a parenthetical reference in their description are
incorporated herein by reference from the documents described in the
parenthetical reference.
2 Exhibits 10.1--10.5 are compensatory plans or arrangements.
3 To be filed by amendment.
4 Filed with the original filing of the Registration Statement.
5 Filed with Amendment No. 1 to the Registration Statement.
II-7
<PAGE>
Item 17. UNDERTAKINGS.
Each of the undersigned Registrants hereby undertakes:
(a) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of BankUnited's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to Item 15 of this Registration Statement,
or otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c)(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424 (b) (1) or (4) or 497
(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, BankUnited
Financial Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 3 to Form S-3 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Coral Gables, State of Florida on
March 6, 1998.
BANKUNITED FINANCIAL CORPORATION
By: /S/ ALFRED R. CAMNER
--------------------
Alfred R. Camner
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
BankUnited Capital III certifies that it has reasonable grounds to believe it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 3 to Form S-3 to be filed on its behalf by the undersigned,
thereunto duly authorized, in the City of Coral Gables, State of Florida on
March 6, 1998.
BANKUNITED CAPITAL III
By: BANKUNITED FINANCIAL CORPORATION,
as Depositor
By:/S/ ALFRED R. CAMNER
--------------------
Alfred R. Camner
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to Form S-3 has been signed on March 6, 1998 by the following
persons in the capacities indicated.
* Chairman of the Board, Chief Executive
- -------------------------------- Officer, President and Director
Alfred R. Camner (Principal Executive Officer)
* Vice Chairman of the Board and Director
- --------------------------------
Lawrence H. Blum
* Executive Vice President, Treasurer and
- -------------------------------- Director
Earline G. Ford
II-9
<PAGE>
* Executive Vice President and Chief Financial
- -------------------------------- Officer (Principal Financial Officer and
Samuel A. Milne Principal Accounting Officer)
* Director
- --------------------------------
Marc D. Jacobson
* Director
- --------------------------------
Allen M. Bernkrant
Director
- --------------------------------
Patricia L. Frost
* Director
- --------------------------------
Neil Messinger
* Corporate Secretary and Director
- --------------------------------
Marc Lipsitz
* Director
- --------------------------------
Anne W. Solloway
* Executive Vice President, Chief Operating
- -------------------------------- Officer and Director
James A. Dougherty
* By:/S/ ALFRED R. CAMNER
-------------------------
Alfred R. Camner
as Attorney-in-Fact
II-10
<PAGE>
BANKUNITED FINANCIAL CORPORATION
Index to Exhibits 1
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ------------
1.1 Form of Underwriting Agreement.
4.3 Form of Indenture with respect to BankUnited's % Junior
Subordinated Debentures.
4.4 Form of Specimen __% Junior Subordinated Deferrable Interest
Debenture (included as an exhibit to the Form of Indenture
filed as Exhibit 4.3).
4.5 Certificate of Trust of BankUnited Capital III.3
4.6 Trust Agreement of BankUnited Capital III.3
4.7 Form of Amended and Restated Trust Agreement of BankUnited
Capital III.
4.8 Form of Certificate for ___% Trust Preferred Security of
BankUnited Capital III.
4.9 Form of Guarantee Agreement for BankUnited Capital III.
4.10 Form of Agreement as to Expenses and Liabilities.4
5.1 Opinion of Stuzin and Camner, P.A. as to the validity of the
issuance of the __% Junior Subordinated Deferrable Interest
Debentures to be issued by BankUnited.
5.2 Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the issuance of the ___%
Cumulative Trust Preferred Securities to be issued by
BankUnited Capital III.
8.1 Tax Opinion of Kronish, Lieb, Weiner & Hellman LLP.
12.1 Statement regarding calculation of ratios.4
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Stuzin and Camner, P.A. (set forth in Exhibit 5.1
to this Registration Statement).
23.3 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2 to this Registration Statement).
<PAGE>
24.1 Power of attorney (set forth on the signature page in Part II
of this Registration Statement).3
25.1 Form T-1: Statement of Eligibility of The Bank of New York to
act as trustee under the Indenture.4
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.4
25.3 Form T-1: Statement of Eligibility of The Bank of New York to
act as trustee under the Guarantee Agreement for BankUnited
Capital III.4
- ----------------------------------------------------------------
1 Exhibits containing a parenthetical reference in their description are
incorporated herein by reference from the documents described in the
parenthetical reference.
2 To be filed by amendment.
3 Filed with original filing of this Registration Statement.
4 Filed with Amendment No. 1 to the Registration Statement.
EXHIBIT 1.1
BANKUNITED CAPITAL III
3,600,000 Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security)
Guaranteed by
BANKUNITED FINANCIAL CORPORATION
PURCHASE AGREEMENT
[_____________ ___, 1998]
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
BankUnited Capital III (the "Trust"), a business trust organized under
the Delaware Business Trust Act (the "Delaware Act") of the State of Delaware
(Chapter 38, Title 12, of the Delaware Code, 12 Del. C. ss. 3801 et seq.) and
BankUnited Financial Corporation, a Florida corporation (the "Company") hereby
confirm their agreement with PaineWebber Incorporated, acting as representative
(the "Representative") on behalf of itself, Prudential Securities Incorporated
and Friedman, Billings, Ramsey & Co., Inc., each an underwriter, (together, the
"Underwriters"). The Trust hereby proposes to issue and sell to the Underwriters
an aggregate of 3,600,000 shares of the Trust's [ ]% preferred trust securities
(the "Firm Securities"). The Trust has also agreed to grant to the Underwriters
an option (the "Option") to purchase up to an additional 540,000 shares of the
Trust's [ ]% preferred trust securities (the "Option Securities") on the terms
and for the purposes set forth herein in Section 1(b). The Firm Securities and
the Option Securities are hereinafter collectively referred to as the "Preferred
Securities." The Preferred Securities will be sold to the Underwriters and will
be guaranteed, to the extent set forth in the Prospectus (as defined in Section
3(a) hereof), by the Company. Capitalized terms used but not separately defined
herein are defined in the Prospectus and used herein as so defined.
<PAGE>
It is understood that substantially contemporaneously with the offering
and sale of the Firm Securities to the Underwriters contemplated hereby, (i) the
Trust, its trustees (the "Trustees") and the Company shall take all necessary
action to adopt an Amended and Restated Declaration of Trust in substantially
the form of the Form of Amended and Restated Declaration of Trust filed as
Exhibit 4.7 to the Registration Statement (as defined in Section 3(a) hereof)
(as so supplemented, amended and restated, the "Declaration"), pursuant to which
the Trust shall (x) issue and sell the Preferred Securities to the Underwriters
pursuant hereto and (y) issue 150,000 shares of its [ ]% common trust securities
(and up to an additional 22,500 shares of such securities in connection with the
issuance and sale of the Option Securities) (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities") to the Company,
in each case with such rights and obligations as shall be set forth in the
Declaration, (ii) the Company and The Bank of New York, as trustee (the
"Debenture Trustee"), shall enter into an Indenture in substantially the form of
the Form of the Junior Subordinated Debt Indenture filed as Exhibit 4.3 to the
Registration Statement (the "Indenture") providing for the issuance of up to
$107,812,500 in aggregate principal amount of the Company's [ ]% Junior
Subordinated Debentures due March 31, 2028 (the "Debentures"), (iii) the Company
shall sell such Debentures to the Trust in conjunction with the consummation of
the sale of the Preferred Securities to the Underwriters contemplated hereby and
(iv) the Company and The Bank of New York, as Guarantee Trustee (the "Guarantee
Trustee"), shall enter into a Guarantee Agreement in substantially the form of
the Form of Guarantee Agreement with respect to the Preferred Securities filed
as Exhibit 4.9 to the Registration Statement (the "Guarantee") for the benefit
of holders from time to time of the Preferred Securities. The Preferred
Securities together with the Guarantee are collectively hereinafter called the
"Offered Securities".
The Company confirms its agreements with the Underwriters as follows.
1. AGREEMENT TO SELL AND PURCHASE.
(a) On the basis of the representations, warranties and
agreements of the Trust and the Company herein contained and subject to all the
terms and conditions of this Agreement, the Trust agrees to sell to each
Underwriter, and each Underwriter, severally and not jointly, agrees to purchase
from the Trust, at a purchase price of $25.00 per Preferred Security plus
accrued and unpaid distributions, if any, on the Firm Securities as of the
Closing Date (as defined below), the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule I, plus such additional number
of Firm Securities which such Underwriter may become obligated to purchase
pursuant to Section 9 hereof.
(b) Subject to all the terms and conditions of this Agreement,
the Trust grants the Option to the several Underwriters to purchase, severally
and not jointly, up to 450,000 Option Securities from the Trust at the same
purchase price per Preferred Security as the Underwriters shall pay for the Firm
Securities plus any accrued and unpaid distributions on the Option Securities as
of the Option Closing Date (as defined below). The Option may be exercised only
to cover over-allotments in the sale of the Firm Securities by
2
<PAGE>
the Underwriters and may be exercised in whole or in part at any time (but not
more than once) on or before the 30th day after the date hereof, upon written or
telegraphic notice (the "Option Securities Notice") by the Representative to the
Trust and the Company no later than 12:00 noon, New York City time, at least two
and no more than five business days before the date specified for closing in the
Option Securities Notice (the "Option Closing Date") setting forth the aggregate
number of Option Securities to be purchased and the time and date for such
purchase. On the Option Closing Date, the Trust will issue and sell to the
Underwriters the number of Option Securities set forth in the Option Securities
Notice, and each Underwriter will purchase such percentage of the Option
Securities as is equal to the percentage of Firm Securities that such
Underwriter is purchasing, as adjusted by the Representative in such manner as
they deem advisable to avoid fractional Preferred Securities.
(c) As compensation to the Underwriters for their commitment
hereunder, and in view of the fact that the proceeds of the sale of the
Preferred Securities will be used by the Trust to purchase the Debentures of the
Company, the Company hereby agrees to pay at the Closing Date and the Option
Closing Date, if applicable, for the account of the several Underwriters, an
amount equal to $[ ] per Preferred Security.
2. DELIVERY AND PAYMENT. Delivery of one or more certificates in
definitive form for the Firm Securities that the Underwriters have agreed to
purchase hereunder, and in such denomination or denominations and registered in
such name or names as the Representative requests upon notice to the Trust and
the Company at least 48 hours prior to the Closing Date shall be made to the
Representative for the accounts of the Underwriters at the offices of
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019
or at such other place as shall be agreed among the Trust, the Company and the
Representative, against payment of the purchase price by wire transfer of
immediately available funds to the account of the Trust with The Depository
Trust Company such account as the Trust shall specify at least 48 hours prior to
the Closing Date. Such payment shall be made at 10:00 a.m., New York City time,
on [___________ __, 1998] or at such time on such other date, not later than ten
business days after such date, as may be agreed upon by the Trust, the Company
and the Representative (such date is hereinafter referred to as the "Closing
Date"). The certificates (including one or more global certificates), if any,
for the Firm Notes to be so delivered will be made available to the Underwriters
at such office or at such other location in New York City as the Representative
may reasonably request for checking at least one full business day prior to the
Closing Date. To the extent that the Representative so elects, delivery of the
Firm Securities held in global certificates may be made by credit through full
fast transfer to the accounts at The Depository Trust Company ("DTC") designated
by the Representative.
To the extent the Option is exercised, delivery of the Option
Securities against payment by the Underwriters (in the manner specified above)
will take place at the time and date (which may be the Closing Date) specified
in the Option Securities Notice.
3
<PAGE>
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Securities and Option Securities by the Trust
to the respective Underwriters shall be borne by the Trust and the Company. The
Trust and the Company will, jointly and severally, pay and save each Underwriter
and any subsequent holder of the Preferred Securities harmless from any and all
liabilities with respect to or resulting from any failure or delay in paying
Federal and state stamp and other transfer taxes, if any, which may be payable
or determined to be payable in connection with the original issuance or sale to
such Underwriter or such other holder of the Firm Securities and Option
Securities.
At the Closing Date and the Option Closing Date, if any, the Company
will pay, or cause to be paid, the commission payable at such time to the
Underwriters under Section 1(c) hereof in immediately available funds to a bank
account or bank accounts designated by the Representative.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE TRUST. The
Company and the Trust, jointly and severally, represent, warrant and covenant to
each Underwriter that:
(a) The Trust and the Company meet the requirements for use of
Form S-3 and a registration statement on Form S-2 as amended by the filing of
Amendment No. 1 on Form S-3 (Registration No. 333-28677) relating to the Offered
Securities, including a preliminary prospectus relating to the Offered
Securities and such amendments to such registration statement as may have been
required to the date of this Agreement, has been prepared by the Company and the
Trust under the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (collectively referred to as the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission. On the date of the filing of
Amendment No. 1 on Form S-3, previous to the filing of the Form S-2, the Trust
and the Company met the requirements for use of the Form S-2. Copies of all
above-referenced registration statements and amendments and of each related
preliminary prospectus have been delivered to the Representative. The Company
will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, an amendment to such registration
statement, including the form of final prospectus relating to the Offered
Securities, (ii) a final prospectus relating to the Offered Securities in
accordance with Rule 430A ("Rule 430A") and Rule 424(b)(1) or (4) of the Rules
and Regulations, or (iii) a final prospectus relating to the Offered Securities
in accordance with Rule 415 ("Rule 415") and Rule 424(b)(2) or (5) of the Rules
and Regulations. In the case of clause (ii), the Company has included in such
registration statement, as amended at the Effective Date (as defined below), all
information required by the Act and the Rules and Regulations to be included in
the Prospectus (as defined below) with respect to the Offered Securities and the
offering thereof other than the information permitted to be omitted therefrom at
the Effective Date by Rule 430A ("Rule 430A Information"). As filed, such
amendment and form of final prospectus, or such final prospectus, shall contain
all Rule 430A Information, together with all other such required information,
with respect to the Offered Securities and the offering
4
<PAGE>
thereof and, except to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to you
prior to the time (the "Execution Time") this Agreement is entered into or, to
the extent not completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the latest
preliminary prospectus) as the Company has advised you, prior to the Execution
Time, will be included or made therein. If the Registration Statement (as
defined below) contains the undertaking specified by Regulation S-K Item 512(a),
the Registration Statement, at the Execution Time, meets the requirements set
forth in Rule 415(a)(1)(x). The term "preliminary prospectus" as used herein
means any preliminary prospectus (including any supplement thereto) relating to
the Offered Securities referred to above and any preliminary prospectus
(including any supplement thereto) relating to the Offered Securities included
in the Registration Statement at the Effective Date that omits Rule 430A
Information. The term "Registration Statement" means the registration statement
referred to above as amended at the time it became effective (the "Effective
Date") and, in the event any post-effective amendment thereto becomes effective
prior to the Closing Date shall also mean such registration statement as so
amended, including financial statements and all exhibits and any information
deemed to be included by Rule 430A of the Rules and Regulations after the
Execution Time. The term "Prospectus" means the prospectus (including any
supplement thereto) relating to the Offered Securities that is first filed with
the Commission pursuant to Rule 424(b) ("Rule 424(b)") of the Rules and
Regulations after the Execution Time or, if no such filing is required, the form
of final prospectus (including any supplement thereto) relating to the Offered
Securities included in the Registration Statement at the Effective Date. Any
reference herein to the Registration Statement, any preliminary prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on or before the Effective Date or the date of such preliminary
prospectus or the Prospectus, as the case may be. Any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to refer
to and include the filing of any document under the Exchange Act after the
Effective Date, or the date of any preliminary prospectus or the Prospectus, as
the case may be, and deemed to be incorporated therein by reference.
(b) On the Effective Date, at all times subsequent to and
including the Closing Date and, if later, the Option Closing Date and when any
post-effective amendment to the Registration Statement becomes effective or any
amendment or supplement to the Prospectus is filed with the Commission, the
Registration Statement and the Prospectus (as amended or supplemented if the
Company and the Trust shall have filed with the Commission any amendment or
supplement thereto), including the financial statements included or incorporated
by reference in the Prospectus, did or will comply with all applicable
provisions of the Act, the Exchange Act, the rules and regulations thereunder
(the "Exchange Act Rules and Regulations"), the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), the rules and regulations thereunder (the
"Trust Indenture Act Rules and Regulations") and the Rules and Regulations and
will contain all statements required to
5
<PAGE>
be stated therein in accordance with the Act, the Exchange Act, the Exchange Act
Rules and Regulations and the Rules and Regulations. On the date the Prospectus
is first filed with the Commission pursuant to Rule 424(b) (if required), at all
times subsequent to and including the Closing Date and, if later, the Option
Closing Date and when any amendment or supplement to the Prospectus is filed
with the Commission, the Prospectus (as amended or supplemented if the Company
and the Trust shall have filed with the Commission any amendment or supplement
thereto), including the financial statements included or incorporated by
reference in the Prospectus, will comply with the applicable provisions of the
Act, the Exchange Act, the Trust Indenture Act, the Exchange Act Rules and
Regulations, the Trust Indenture Rules and Regulations and the Rules and
Regulations and will contain all statements required to be stated therein in
accordance with the Act, the Exchange Act, the Exchange Act Rules and
Regulations and the Rules and Regulations. On the Effective Date and when any
post-effective amendment to the Registration Statement becomes effective, no
part of the Registration Statement or any such amendment did or will contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading. At the Effective Date, the Prospectus, if not filed pursuant to Rule
424(b), did not, and on the date the Prospectus or any amendment or supplement
to the Prospectus is filed (if required) with the Commission pursuant to Rule
424(b) and on the Closing Date, and, if later, the Option Closing Date, the
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The foregoing
representations and warranties in this Section 3(b) do not apply to any
statements or omissions made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representative specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto. The Company has not
distributed any offering material in connection with the offering or sale of the
Offered Securities other than the Registration Statement, the preliminary
prospectus, the Prospectus or any other materials, if any, permitted by the Act.
On the Effective Date, the date the Prospectus is first filed with the
Commission pursuant to Rule 424(b) (if required), and at all subsequent times to
and including the Closing Date or, if later, the Option Closing Date, the
Indenture will comply with all applicable provisions of the Trust Indenture Act
and the Trust Indenture Act Rules and Regulations.
(c) The documents which are incorporated by reference in the
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, at the time they become effective or were filed with
the Commission, as the case may be, complied in all material respects with the
requirements of the Act and the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations and any documents so filed
and incorporated by reference subsequent to the Effective Date shall, when they
are filed with the Commission, conform in all material respects with the
requirements of the Act and the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations.
6
<PAGE>
(d) The Company and each of the Company's subsidiaries
(collectively, the "Subsidiaries") is, and at the Closing Date will be, a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. The Company and each of its Subsidiaries
has, and at the Closing Date will have, full power and authority to conduct all
the activities conducted by it, to own or lease all the assets owned or leased
by it and to conduct its business as described in the Registration Statement and
the Prospectus; except where the failure to have such power and authority would
not have a Material Adverse Effect (as defined below). The Company and each of
its Subsidiaries is, and at the Closing Date will be, duly licensed or qualified
to do business and in good standing as a foreign corporation in all
jurisdictions in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such licensing or
qualification necessary except for such failures to be licensed or qualified as
would not materially and adversely affect the business, properties, business
prospects, condition (financial or otherwise) or results of operation of the
Trust or of the Company and its Subsidiaries considered as one enterprise (a
"Material Adverse Effect"). All of the outstanding shares of capital stock of
the Subsidiaries have been duly authorized and validly issued and are fully paid
and nonassessable and are owned by the Company free and clear of all liens,
encumbrances and claims (collectively, "Liens") whatsoever except for such Liens
as would not have a Material Adverse Effect. Complete and correct copies of the
certificates of incorporation and of the by-laws of the Company and the
Subsidiaries and all amendments thereto have been delivered to the counsel to
the Representative, and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date or, if later, the Option Closing Date.
(e) The descriptions of the Preferred Securities, the Common
Securities, the Guarantee and the Debentures in the Registration Statement at
the Effective Date are, and the descriptions in the Prospectus at the date it is
first filed under Rule 424(b) and in the Registration Statement and the
Prospectus is and at the Closing Date will be, complete and accurate in all
material respects. Each of the Declaration and the Indenture conforms to the
description thereof contained in the Registration Statement and the Prospectus
in all material respects. Except as set forth in the Prospectus, the Company
does not have outstanding, and at the Closing Date will not have outstanding,
any options to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, any shares of the Common Stock, any shares of capital stock of
any Subsidiary or any such warrants, convertible securities or obligations.
(f) The financial statements and schedules included or
incorporated by reference in the Registration Statement or the Prospectus, and
any amendment or supplement thereto, present fairly the consolidated financial
condition of the Company as of the respective dates thereof and the consolidated
results of operations and cash flows of the Company for the respective periods
covered thereby, all in conformity with generally accepted accounting principles
applied on a consistent basis throughout the entire period involved, except as
otherwise disclosed in the Prospectus. No other financial statements or
schedules of the Company are required by the Act, the Exchange Act or the Rules
and
7
<PAGE>
Regulations to be included in the Registration Statement or the Prospectus.
Price Waterhouse LLP (the "Accountants"), who have reported on such financial
statements and schedules, are independent accountants with respect to the
Company as required by the Act and the Rules and Regulations. The statements
included in the Registration Statement with respect to the Accountants pursuant
to Rule 509 of Regulation S-K of the Rules and Regulations are true and correct
in all material respects.
(g) Each of the Trust and the Company maintains a system of
internal accountings control sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and prior to the
Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) there has not been and will not have been any
change in the capitalization of the Company or the Trust or material adverse
change in the capitalization of the Company or the Trust, or any material
adverse change in the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Trust or the Company
and its Subsidiaries considered as one enterprise, arising for any reason
whatsoever, (ii) neither the Trust nor the Company nor any of its Subsidiaries
has incurred nor will incur any material liabilities or obligations, direct or
contingent, nor have they entered into nor will they enter into any material
transactions other than pursuant to this Agreement and the transactions referred
to herein or, in the case of the Company and its Subsidiaries, in the ordinary
course of business, and (iii) the Trust has not and will not have paid or
declared any distributions of any kind on any class of its securities.
(i) Neither the Trust nor the Company is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
(j) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or threatened
against or affecting the Trust or the Company or any of the Subsidiaries or any
of their respective officers in their capacity as such, before or by any Federal
or state court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would reasonably be expected to have a Material Adverse Effect.
(k) Each of the Trust and the Company and each of the
Subsidiaries has, and at the Closing Date will have, (i) all governmental
licenses, permits, consents, orders,
8
<PAGE>
approvals and other authorizations necessary to carry on its business as
contemplated in the Prospectus, (ii) complied in all respects with all laws,
regulations and orders applicable to it or its business and (iii) performed all
obligations required to be performed by it, and is not, and at the Closing Date
will not be, in default, under any indenture, mortgage, deed of trust, voting
trust agreement, loan agreement, bond, debenture, note agreement, lease,
contract or other agreement or instrument (collectively, a "contract or other
agreement") to which it is a party or by which its property is bound or
affected, except in the case of (i), (ii) or (iii) above, for such failures to
possess, comply or perform as would not have a Material Adverse Effect. To the
best knowledge of each of the Trust and the Company and each of its
Subsidiaries, no other party under any contract or other agreement to which it
is a party is in material default thereunder. None of the Trust, the Company nor
any of the Subsidiaries is, nor at the Closing Date will any of them be, in
violation of its respective Declaration, charter or by-laws.
(l) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is required
in connection with the authorization, issuance, transfer, sale or delivery of
the Trust Securities by the Trust or the Guarantee and the Debentures by the
Company, in connection with the execution, delivery and performance of this
Agreement by the Trust and the Company or in connection with the taking by the
Trust or the Company of any action contemplated hereby and in the Indenture, the
Expense Agreement, the Guarantee, the Preferred Securities and the Common
Securities, except such as have been obtained under the Act, the Exchange Act,
the Trust Indenture Act and the Exchange Act Rules and Regulations, the Trust
Indenture Act Rules and Regulations and the Rules and Regulations and such as
may be required under state securities or Blue Sky laws or the by-laws and rules
of the National Association of Securities Dealers, Inc. (the "NASD") in
connection with the purchase and distribution by the Underwriters of the
Preferred Securities.
(m) The Trust and the Company each have all trust and
corporate power, as the case may be, to enter into this Agreement. This
Agreement has been and, as of the Closing Date will have been, duly authorized,
executed and delivered by each of the Trust and the Company and upon such
execution by each of the Trust and the Company (assuming the due authorization,
execution and delivery of the Agreement by the other hereto) this Agreement will
constitute the valid and binding obligations of each of the Trust and the
Company enforceable against each of the Trust and the Company in accordance with
the terms hereof or thereof, subject to the applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors rights generally from time to time in effect and to general principles
of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether considered in
a proceeding in equity or at law and except as the enforcement of
indemnification and contribution provisions hereof and thereof may be limited by
applicable law.
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(n) The execution, delivery and performance by the Company of
this Agreement, the Indenture, the Expense Agreement, the Debentures, the
Declaration and the Guarantee and the execution, delivery and performance by the
Trust of this Agreement and the Trust Securities, the performance by the Trust
of the Declaration and the consummation of the transactions contemplated hereby
and thereby and compliance by the Company and the Trust, as the case may be,
with the terms hereof and thereof and the application of the net proceeds from
the offering and sale of the Trust Securities to be sold by the Trust and the
Debentures to be sold by the Company in the manner set forth in the Prospectus
under "Use of Proceeds" will not result in the creation or imposition of any
lien, charge or encumbrance upon any of the assets of the Trust (other than the
creation of a lien on the Debentures in favor of the holders of the Trust
Securities as provided in the Declaration) or the Company or any of the
Subsidiaries pursuant to the terms or provisions of, or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or give any other party a right to terminate any of its obligations under, or
result in the acceleration of any obligation under, the Declaration, the
certificate of incorporation or by-laws of the Company or any of the
Subsidiaries, any contract or other agreement to which the Trust or the Company
or any of the Subsidiaries is a party or by which the Trust or the Company or
any of the Subsidiaries or any of their respective properties is bound or
affected, except for any of the foregoing which would not have a Material
Adverse Effect, or violate or conflict with any judgment, ruling, decree, order,
statute, rule or regulation of any court or governmental agency or body
applicable to the business or properties of the Trust or the Company or any of
the Subsidiaries.
(o) The Company and each of the Subsidiaries has valid,
subsisting and enforceable leases for the properties described in the
Registration Statement and the Prospectus as leased by it, with such exceptions
as are not material and do not materially interfere with the use made and
proposed to be made of such properties by the Company and such Subsidiaries.
(p) There is no document or contract of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement which is not described or filed as
required. All such contracts to which the Trust or the Company or any Subsidiary
is a party have been duly authorized, executed and delivered by the Trust or the
Company or such Subsidiary, constitute valid and binding agreements of the Trust
or the Company or such Subsidiary and are enforceable against the Trust or the
Company or such Subsidiary in accordance with the terms thereof (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law).
(q) No statement, representation, warranty or covenant made by
the Trust or the Company in this Agreement, the Indenture or the Declaration or
made in any
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certificate or document required by this Agreement to be delivered to the
Representative was or will be, when made, inaccurate, untrue or incorrect in any
material respect.
(r) Neither the Company nor the Trust nor any of their
respective directors, officers, trustees or controlling persons has taken,
directly or indirectly, any action intended, or which might reasonably be
expected, to cause or result, under the Act or otherwise, in, or which has
constituted, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Preferred Securities.
(s) No holder of securities of the Company or the Trust has
rights or will have rights to the registration of any securities of the Company
or the Trust because of the filing of the Registration Statement.
(t) Prior to the Closing Date, the Preferred Securities will
be duly authorized for their listing on the New York Stock Exchange (the "NYSE")
upon official notice of issuance.
(u) The Company and its Subsidiaries are in compliance with
all federal, state and local employment and labor laws, including, but not
limited to, laws relating to non-discrimination in hiring, promotion and pay of
employees, no labor dispute with the employees of the Company or any Subsidiary
exists, or to the knowledge of the Company is imminent or threatened which could
reasonably be expected to have a Material Adverse Effect.
(v) The Company and the Subsidiaries own, or are licensed or
otherwise have the full right to use, all material trademarks and trade names
which are used in or necessary for the conduct of their respective businesses as
described in the Prospectus. No claims have been asserted by any person to the
use of any such trademarks or trade names or challenging or questioning the
validity or effectiveness of any such trademark or trade name except such claims
as would not reasonably be expected to have a Material Adverse Effect. The use,
in connection with the business and operations of the Company and the
Subsidiaries of such trademarks and trade names does not, to the Company's
knowledge, infringe on the rights of any person except such infringements as
would not reasonably be expected to have a Material Adverse Effect.
(w) None of the Trust, the Company or any of the Subsidiaries
or, to the Trust's or the Company's knowledge, any employee or agent of the
Trust, the Company or any Subsidiary has made any payment of funds of the Trust,
the Company or any Subsidiary or received or retained any funds in violation of
any law, rule or regulation or of a character required to be disclosed in the
Prospectus.
(x) Except as disclosed in the Prospectus, there is no claim
pending or to the knowledge of the Company threatened under any Environmental
Law (as defined below) against the Company or the Subsidiaries which could
reasonably be expected, singly or in the
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<PAGE>
aggregate, to result in a Material Adverse Effect; to the knowledge of the
Company there are no past or present actions, conditions, events, circumstances
or practices, including, without limitation, the release of any Hazardous
Material (as defined below) that could reasonably be expected to form the basis
of any such claim under any Environmental Law against the Company or the
Subsidiaries which would, singly or in the aggregate, result in a Material
Adverse Effect. The term "Environmental Law" means the common law and any
federal, state, local or foreign law, rule or regulation, code, order, decree,
judgment or injunction, issued, promulgated, approved or entered thereunder
relating to pollution or protection of public or employee health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substance Control Act, as
amended, the Clean Air Act, as amended, and the Federal Water Pollution Act, as
amended, and their foreign, state and local counterparts or equivalents and any
other laws relating to (i) releases of any Hazardous Material into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, presence or handling
of any Hazardous Material, or (iii) underground storage tanks and related
piping, and releases therefrom. The term "Hazardous Material" means any
pollutant, contaminant, chemical, hazardous material, or industrial, toxic or
hazardous substance or waste (including, without limitation, petroleum,
including crude oil or any fraction thereof or any petroleum product) regulated
by or the subject of any Environmental Law.
(y) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its Subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). Except as set forth in the Registration
Statement and the Prospectus there are no costs and liabilities associated with
or arising in connection with Environmental Laws as currently in effect
(including, without limitation, costs of compliance therewith) which would,
singly or in the aggregate have a material adverse effect on the condition
(financial or otherwise) or on the earnings, business, properties, business
prospects or operations of the Company and its Subsidiaries, taken as a whole.
(z) The Company maintains insurance with respect to its
properties and business of the types and in amounts the Company reasonably deems
adequate for its business, all of which insurance is in full force and effect.
(aa) The Company has filed all material federal, state and
foreign income and franchise tax returns and has paid all taxes shown as due
thereon, other than taxes which are being contested in good faith and for which
adequate reserves have been established in accordance with generally accepted
accounting principles ("GAAP"); and the Company has
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<PAGE>
no knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company. There are no tax returns of the Company or any
of its Subsidiaries that are currently being audited by state, local or federal
taxing authorities or agencies (and with respect to which the Company or
Subsidiary of the Company has received notice), where the findings of such
audit, if adversely determined, would result in a Material Adverse Effect.
(bb) With respect to each employee benefit plan, program and
arrangement (including, without limitation, any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) maintained or contributed to by the Company, or with
respect to which the Company could incur any liability under ERISA
(collectively, the "Benefit Plans"), no event has occurred and, to the best
knowledge of the Company, there exists no condition or set of circumstances, in
connection with which the Company could be subject to any liability under the
terms of such Benefit Plan, applicable law (including, without limitation, ERISA
and the Internal Revenue Code of 1986, as amended) or any applicable agreement
that could have a Material Adverse Effect.
(cc) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Act; all filings
required under the laws of the State of Delaware with respect to the creation
and valid existence of the Trust as a business trust have been made; under the
Delaware Act and the Declaration, the Trust has the business trust power and
authority to (x) own property and conduct its business, all as described in the
Prospectus, (y) enter into and perform its obligations under this Agreement, and
(z) issue and perform its obligations under the Preferred Securities and the
Common Securities and is not required to be authorized to do business in any
jurisdiction other than Delaware; the Trust is not a party to or otherwise bound
by any agreement other than those described in the Prospectus; the Trust does
not have any consolidated or unconsolidated subsidiaries; and the Trust is and
will be treated as a consolidated subsidiary of the Company pursuant to
generally accepted accounting principles; and the Trust is not and, assuming
compliance by the Trust with the Declaration, will not be classified as an
association taxable as a corporation for United States federal income tax
purposes.
(dd) The Declaration has been duly and validly authorized by
the Company and, when executed and delivered by the Company and the Regular
Trustees (as defined in the Declaration) at the Closing Date, and assuming due
authorization, execution and delivery thereof by the Property Trustee and the
Delaware Trustee (as such terms are defined in the Declaration), will be the
valid and binding obligation of the Company and the Regular Trustees,
enforceable against the Company and the Regular Trustees in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law)
and conforms to the description thereof contained in the Prospectus; and,
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<PAGE>
at the Closing Date, the Declaration will have been duly qualified under the
Trust Indenture Act.
(ee) The Indenture has been duly and validly authorized and
will be executed and delivered by the Company at the Closing Date and, assuming
due authorization, execution and delivery by the Debenture Trustee, at such
Closing Date will constitute a valid and legally binding agreement of the
Company enforceable in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing, regardless
of whether considered in a proceeding in equity or at law); at the Closing Date,
the Indenture will have been duly qualified under the Trust Indenture Act; and
the Indenture conforms to the description thereof contained in the Prospectus.
(ff) The Preferred Securities have been duly authorized by the
Declaration and, when issued and delivered by the Trust in accordance with the
Declaration to the Underwriters and paid for in accordance with this Agreement,
will be validly issued, and fully paid and nonassessable undivided beneficial
interests in the assets of the Trust and will be entitled to the benefits of the
Declaration; provided, however, the holders of the Preferred Securities may be
obligated, pursuant to the Declaration, (i) to provide indemnity and/or security
in connection with and pay taxes or governmental charges arising from transfers
or exchanges of Preferred Securities and the issuance of replacement Preferred
Securities certificates, and (ii) to provide security or indemnity in connection
with requests of or directions to the Property Trustee (as defined in the
Declaration) to exercise its rights and powers under the Declaration. The
holders of the Preferred Securities, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability as that extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware; under the Delaware Act and the
Declaration, the issuance of the Preferred Securities will not be subject to
preemptive or other similar rights; and the Preferred Securities will conform to
the description thereof in the Prospectus.
(gg) At the Closing Date and the Option Closing Date, the
Property Trustee will be the record holder of the Debentures and no security
interest, mortgage, pledge, lien, encumbrance, claim or equity will be noted
thereon or on the Debenture register maintained by or on behalf of the Company.
(hh) The Guarantee has been duly and validly authorized by the
Company and, when executed and delivered by the Company at the Closing Date,
will constitute a valid and legally binding agreement of the Company enforceable
in accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether considered in
a proceeding
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<PAGE>
in equity or at law); at the Closing Date, the Guarantee will have been duly
qualified under the Trust Indenture Act; and the Guarantee will conform to the
description thereof contained in the Prospectus.
(ii) The Expense Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company at the
Closing Date, will constitute a valid and legally binding agreement of the
Company enforceable in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing, regardless
of whether considered in a proceeding in equity or at law); and at the Closing
Date the Expense Agreement will conform to the description thereof contained in
the Prospectus.
(jj) Neither the Commission nor the Blue Sky or securities
authority of any jurisdiction has issued an order (a "Stop Order") suspending
the effectiveness of the Registration Statement, preventing or suspending the
use of any preliminary prospectus, the Prospectus, the Registration Statement or
any amendment or supplement thereto, refusing to permit the effectiveness of the
Registration Statement, suspending the registration or qualification of the
Offered Securities, nor have any such authorities instituted or, to the
knowledge of the Trust or the Company, threatened to institute any proceedings
with respect to a Stop Order in any jurisdiction in which the Offered Securities
are to be sold or in which the Offered Securities may be issued, nor, with
respect to accuracy on the Closing Date, has there been any Stop Order
instituted or, to the knowledge of the Trust or the Company, threatened on or
after the effective date of the Registration Statement in any jurisdiction.
(kk) The Common Securities have been duly authorized by the
Declaration and, when issued and delivered by the Trust to the Company against
payment therefore in accordance with the Declaration, will be validly issued and
fully paid and undivided beneficial interests in the assets of the Trust; under
the Delaware Act and the Declaration, the issuance of the Common Securities will
not be subject to preemptive or other similar rights; and at the Closing Date
and the Option Closing Date, all of the issued and outstanding Common Securities
of the Trust will be directly or indirectly owned by the Company free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or equity.
(ll) Except for subsequent issuances, if any, pursuant to this
Agreement or upon issuance of stock or exercise of stock options or warrants
pursuant to employee benefit plans, the Company has the authorized, issued and
outstanding capitalization set forth in the Registration Statement and
Prospectus; all of the outstanding capital stock of the Company has been duly
authorized and validly issued, is fully paid and nonassessable; and the
authorized capital stock of the Company conforms in all material respects to the
statements relating thereto in the Registration Statement and Prospectus.
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(mm) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act in
connection with the sale and offering of the Debentures.
(nn) The execution, delivery and performance by the Company of
this Agreement, the Indenture, the Expense Agreement, the Debentures, the
Declaration and the Guarantee and the execution, delivery and performance by the
Trust of this Agreement and the Trust Securities, the performance by the Trust
of the Declaration and the consummation of the transactions contemplated hereby
and thereby and compliance by the Company and the Trust, as the case may be,
with the terms hereof and thereof and the application of the net proceeds from
the offering and sale of the Trust Securities to be sold by the Trust and the
Debentures to be sold by the Company in the manner set forth in the Prospectus
under "Use of Proceeds" will not result in the creation or imposition of any
lien, charge or encumbrance upon any of the assets of the Trust (other than the
creation of a lien on the Debentures in favor of the holders of the Trust
Securities as provided in the Declaration) or the Company or any of the
Subsidiaries pursuant to the terms or provisions of, or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or give any other party a right to terminate any of its obligations under, or
result in the acceleration of any obligation under, the Declaration, the
certificate of incorporation or by-laws of the Company or any of the
Subsidiaries, any contract or other agreement to which the Trust or the Company
or any of the Subsidiaries is a party or by which the Trust or the Company or
any of the Subsidiaries or any of their respective properties is bound or
affected, or violate or conflict with any judgment, ruling, decree, order,
statute, rule or regulation of any court or governmental agency or body
applicable to the business or properties of the Trust or the Company or any of
the Subsidiaries except for any of the foregoing which would not have a Material
Adverse Effect.
(oo) Any certificate signed by any officer or delivered to the
Representative or to counsel for the Representative pursuant to the terms of
this Agreement shall be deemed a representation and warranty by the Company to
the Underwriter as to the matters covered thereby.
(pp) The Company and the Trust have not done anything and will
not do anything in connection with the issuance and sale of the Offered
Securities that is violative of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
(qq) Each of the Company's banking Subsidiaries has been duly
incorporated and is validly existing as a bank or savings bank in good standing
under the laws of its jurisdiction of incorporation, is a member in good
standing of the Federal Deposit Insurance Corporation, and has full power and
authority under its articles of incorporation and by-laws and the laws of its
jurisdiction of incorporation to own, lease, and operate its properties and to
conduct its businesses as described in the Registration Statement and Prospectus
and as presently conducted;
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4. AGREEMENTS OF THE TRUST AND THE COMPANY. The Trust and the Company,
jointly and severally, agree with the several Underwriters as follows:
(a) The Company and the Trust will not, either prior to the
Effective Date or thereafter during such period as a prospectus is required by
law to be delivered in connection with sales of the Offered Securities by an
Underwriter or dealer, file or distribute any amendment or supplement to the
Registration Statement or the Prospectus, unless a copy thereof shall first have
been submitted to the Representative within a reasonable period of time prior to
the filing or distribution thereof and the Representative shall not have
objected thereto in good faith.
(b) The Trust and the Company will use their best efforts to
cause the Registration Statement to become effective (if not yet effective), and
will notify the Representative promptly, and will confirm such advice in
writing, (1) when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (2) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (3) of the issuance by the Commission
of any Stop Order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose or the threat thereof, (4) of
the happening of any event during the period mentioned in the second sentence of
Section 4(e) that in the judgment of the Trust or the Company makes any
statement made in the Registration Statement or the Prospectus untrue or that
requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (5) of receipt by
the Trust or the Company or any representative or attorney of the Trust or the
Company of any other communication from the Commission relating to the Trust or
the Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Trust and the Company will make
every reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. The Trust and the Company will use their best efforts to comply
with the provisions of and make all requisite filings with the Commission
pursuant to Rule 430A, if any, and to notify the Representative promptly of all
such filings.
(c) The Trust or the Company will promptly furnish to the
Representative, without charge, two conformed copies of the Registration
Statement and of any post-effective amendment thereto, including financial
statements and schedules, and all exhibits thereto (including any document filed
under the Exchange Act and deemed to be incorporated by reference into the
Prospectus) and will furnish to the Representative, without charge, for
transmittal to each of the other Underwriters, a copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules.
(d) The Trust and the Company will comply with all the
provisions of any undertakings contained in the Registration Statement.
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<PAGE>
(e) On the Effective Date, and thereafter from time to time,
the Company will deliver to each of the Underwriters, without charge, as many
copies of the preliminary prospectus and Prospectus and any amendment or
supplement thereto, as the Representative may reasonably request. The Company
and the Trust consent to the use of the preliminary prospectus or Prospectus and
any amendment or supplement thereto, as the case may be, by the several
Underwriters and by all dealers to whom the Offered Securities may be sold, both
in connection with the offering or sale of the Offered Securities and for any
period of time thereafter during which the Prospectus is required by law to be
delivered in connection therewith. If during such period of time any event shall
occur which in the judgment of the Trust or the Company or counsel to the
Underwriters should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was made,
not misleading in any material respect, or if it is necessary to supplement or
amend the Prospectus to comply with law, the Company will forthwith prepare and
duly file with the Commission an appropriate supplement or amendment thereto,
and will deliver to each of the Underwriters, without charge, such number of
copies thereof as the Representative may reasonably request. The Company shall
not file any document under the Exchange Act before the termination of the
offering of the Offered Securities by the Underwriters if such document would be
deemed to be incorporated by reference into the Prospectus which is not approved
by the Representative after reasonable notice thereof.
(f) Prior to any public offering of the Offered Securities by
the Underwriters, the Trust and the Company will cooperate with the
Representative and counsel to the Underwriters in connection with the
registration or qualification of the Offered Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Representative may
request; provided, that in no event shall the Trust or the Company be obligated
to qualify to do business in any jurisdiction where it is not now so qualified
or to take any action which would subject it to general service of process in
any jurisdiction where it is not now so subject.
(g) During the period of five years commencing on the
Effective Date, the Company will furnish to the Representative and each other
Underwriter who may so request each of the Underwriters copies of such financial
statements and other periodic and special reports as the Company may from time
to time distribute generally to the holders of any class of its capital stock,
and will furnish to the Representative and each other Underwriter who may so
request a copy of each annual or other report it shall be required to file with
the Commission.
(h) The Company will make generally available to holders of
the Preferred Securities and the Representative as soon as may be practicable
but in no event later than the last day of the fifteenth full calendar month
following the calendar quarter in which the Effective Date falls, an earnings
statement (which need not be audited but shall be in reasonable detail) for a
period of 12 months ended commencing after the Effective Date, and satisfying
the provisions of Section 11(a) of the Act (including Rule 158 of the Rules and
Regulations).
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(i) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay
or cause to be paid or reimburse if paid by the Representative all costs and
expenses incident to the performance of the obligations of the Trust and the
Company under this Agreement, including but not limited to costs and expenses of
or relating to (i) the preparation, printing and filing of the Registration
Statement and exhibits to it, each preliminary prospectus, the Prospectus, any
amendment or supplement to the Registration Statement or the Prospectus thereto
and the Indenture, (ii) the preparation and delivery of certificates
representing the Trust Securities, (iii) the printing of this Agreement, the
Agreement Among Underwriters, any Dealer Agreements and any Underwriters'
Questionnaire, (iv) furnishing (including cost of shipping, mailing and courier)
such copies of the Registration Statement, the Prospectus and any preliminary
prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Offered Securities by the
Underwriters or by dealers to whom Preferred Securities may be sold, (v) the
listing of the Preferred Securities on the NYSE, (vi) any filings required to be
made by the Underwriters with the NASD, and the fees, disbursements and other
charges of counsel for the Underwriters in connection therewith, (vii) the
registration or qualification of the Offered Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions designated pursuant to
Section 4(f), including the fees, disbursements and other charges of counsel to
the Underwriters in connection therewith, and the preparation and printing of
preliminary, supplemental and final Blue Sky memoranda, (viii) fees and
disbursements of counsel to the Company and the Trust, (ix) fees and
disbursements of the transfer agent and registrar for the Trust Securities, (x)
any fees charged by rating agencies with respect to the rating of the Debentures
by one or more rating agencies, (xi) the fees and expenses of the Debenture
Trustee under the Indenture, the Preferred Guarantee Trustee under the
Guarantee, the Property Trustee, the Delaware Trustee and the Regular Trustees
under the Declaration and any agents of such trustees and the fees,
disbursements and other charges of counsel for such trustees in connection with
the Indenture, the Guarantee, the Declaration and the Debentures and (xii) the
fees and disbursements of the Accountants.
(j) If this Agreement shall be terminated by the Company or
the Trust pursuant to any of the provisions of Section 5 or Section 8 hereof or
if for any reason the Company or the Trust shall be unable to perform its
obligations hereunder, the Company or the Trust will reimburse the several
Underwriters for all out-of-pocket expenses (including the fees, disbursements
and other charges of counsel to the Underwriters) reasonably incurred by them in
connection herewith.
(k) The Company and the Trust will not at any time, directly
or indirectly, take any action intended, or which might reasonably be expected,
to cause or result in, or which will constitute, stabilization of the price of
the Preferred Securities to facilitate the sale or resale of any of the
Preferred Securities.
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(l) The Trust will apply the net proceeds from the offering
and sale of the Preferred Securities in the manner set forth in the Prospectus
under the caption "Use of Proceeds."
(m) During a period of 90 days from the date hereof, neither
the Trust nor the Company will, without the Representative's prior written
consent, directly or indirectly, sell, offer to sell, offer, pledge, contract to
sell, offer or pledge, or to grant any option to sell, offer or pledge, or
otherwise dispose of, any (i) Preferred Securities, any security convertible
into or exchangeable into or exercisable for, Preferred Securities, (ii)
Debentures or any debt securities substantially similar to the Debentures or
(iii) any equity securities substantially similar to the Preferred Securities,
except for the Debentures and Preferred Securities offered hereby, (iv) any
preferred stock or any other security of the Company that is substantially
similar to the Preferred Securities or (v) any other securities which are
convertible into, or exercisable or exchangeable for, any of such securities; or
enter into any swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of any equity securities of the
Company, the Trust or any similar trust each, a "Company Security", whether any
such transaction is to be settled by delivery of equity securities of the
Company, the Trust or any similar trust, cash or otherwise. For the avoidance of
doubt, it is acknowledged that debt securities substantially similar to the
Debentures would be debt securities that have substantially the same maturity
and other provisions as the Debentures.
(n) The Trust and the Company will use every reasonable effort
to effect and maintain the listing of the Preferred Securities on the New York
Stock Exchange (the "NYSE") and to file with the NYSE all documents and notices
required by the NYSE of issuers that have securities quoted on such exchange.
(o) The Company will not claim the benefit of any usury law
against any holders of Debentures or Preferred Securities.
5. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The obligations of
each Underwriter to purchase and pay for the Preferred Securities shall be
subject to the satisfaction or waiver of the following conditions on or prior to
the Closing Date:
(a) Notification that the Registration Statement has become
effective shall be or have been received by the Representative not later than
5:00 P.M., New York City time, on the date of this Agreement or at such later
date and time as shall be consented to in writing by the Representative and all
filings required by Rule 424 of the Rules and Regulations and Rule 430A shall
have been made.
(b) (i) No Stop Order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall be pending or threatened by the Commission; (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Offered Securities under the securities or
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Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such
purpose shall be pending before or threatened or contemplated by the Commission
or the authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities and (iv) after the date hereof no amendment or supplement to
the Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Representative and the Representative did not
object thereto in good faith, and the Representative shall have received a
certificate dated the Closing Date and signed by the Chief Executive Officer or
the Chairman of the Board of Directors of the Company and the Chief Financial
Officer of the Company (who may, as to proceedings threatened, rely upon the
best of their information and belief), to the effect of clauses (i), (ii) and
(iii).
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (i) there shall not have
been, and no development shall have occurred which could reasonably be expected
to result in, a material adverse change in the general affairs, business,
business affairs, business prospects, properties, management, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, considered as one enterprise, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in or contemplated by the Registration Statement and the Prospectus, and
(ii) neither the Company nor any of its Subsidiaries shall have sustained any
material loss or interference with its business or properties from fire,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or any court or legislative or other governmental action,
order or decree, which is not set forth in the Registration Statement and the
Prospectus, if in the judgment of the Representative any such development makes
it impracticable or inadvisable to consummate the sale and delivery of the
Offered Securities by the Underwriters in accordance with the terms and in the
manner hereof and thereof.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Trust, the Company or any
of its Subsidiaries or any of their respective officers or directors in their
capacities as such, before or by any federal, state or local court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding could reasonably be expected to materially and adversely affect the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries considered as one
enterprise.
(e) Each of the representations and warranties of the Company
and the Trust contained herein shall be true and correct in all material
respects on the Closing Date and, with respect to the Option Securities, on the
Option Closing Date, if applicable, as if made on the Closing Date, or on the
Option Closing Date, if applicable, and all covenants and agreements herein
contained to be performed on the part of the Trust and the Company
21
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and all conditions herein contained to be fulfilled or complied with by the
Company or the Trust on or prior to the Closing Date and, with respect to the
Option Securities, on or prior to the Option Closing Date, if applicable, shall
have been duly performed, fulfilled or complied with.
(f) The Representative shall have received an opinion of
Stuzin and Cramner, P.A., special counsel for the Trust and the Company, dated
the Closing Date and, with respect to the Option Securities, the Option Closing
Date, addressed to the Underwriters, in form and substance satisfactory to
counsel for the Underwriters and substantially in the form of Exhibit A.
(g) Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to the Representative a letter,
dated the date of its delivery, addressed to the Representative and in form and
substance satisfactory to the Representative, confirming that they are
independent accountants with respect to the Trust and the Company as required by
the Act and the Rules and Regulations and with respect to the financial and
other statistical and numerical information contained in the Registration
Statement or incorporated by reference therein. On the Closing Date and, as to
the Option Securities, the Option Closing Date, if applicable, the Accountants
shall have furnished to the Representative a letter, dated the date of its
delivery, which shall confirm, on the basis of a review in accordance with the
procedures set forth in the letter from the Accountants, that nothing has come
to their attention during the period from the date of the letter referred to in
the prior sentence to a date (specified in the letter) not more than three days
prior to the Closing Date and the Option Closing Date, if applicable, which
would require any change in their letter dated the date hereof if it were
required to be dated and delivered on the Closing Date and the Option Closing
Date, if applicable.
(h) The Issuance and sale of the Preferred Securities pursuant
to this Agreement and of the Common Securities and the Debentures shall not be
enjoined (temporarily or permanently) and no restraining order or other
injunctive order shall have been issued on any action, suit or proceeding shall
have been commenced with respect to this Agreement before any court or
governmental authority.
(i) On the Closing Date and any Option Closing Date, the
Representative shall have received a certificate of the Company, in its capacity
as Sponsor of the Trust and on its own behalf, signed by the Chairman, Chief
Executive Officer or President of the Company and by the Chief Financial Officer
of the Company, dated as of the Closing Date, to the effect that the conditions
set forth in this Section 5 have been satisfied, that as of the date hereof and
on the Closing Date to the effect that:
(i) Each of the representations and warranties of the
Trust and the Company contained in this Agreement were, when originally
made, and are, at the time such certificate is delivered, true and
correct in all material respects;
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(ii) Each of the covenants required herein to be
performed by the Trust and the Company on or prior to the delivery of
such certificate has been duly, timely and fully performed and each
condition herein required to be complied with by the Trust and the
Company on or prior to the date of such certificate has been duly,
timely and fully complied with; and
(iii) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, (A)
there has not been, and no development has occurred which could
reasonably be expected to result in a material adverse change in the
business, business affairs, business prospects, properties, condition
(financial or otherwise) or results of operations of the Company and
the Subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Prospectus and (B) neither
the Company nor any of the Subsidiaries has sustained any material loss
or interference with its business or properties from fire, explosion,
flood or other casualty, whether or not covered by insurance, or from
any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Prospectus.
(j) The Offered Securities shall be qualified for sale in such
states as the Representative may reasonably request, each such qualification
shall be in effect and not subject to any Stop Order or other proceeding on the
Closing Date or the Option Closing Date, if applicable.
(k) Prior to the Closing Date, the Preferred Securities shall
have been duly authorized for listing by the NYSE upon official notice of
issuance.
(l) The National Association of Securities Dealers, Inc. shall
have approved the underwriting terms and arrangements and such approval shall
not have been withdrawn or limited.
(m) The Trust and the Company shall have furnished to the
Representative such certificates, in addition to those specifically mentioned
herein, as the Representative may have reasonably requested as to the accuracy
and completeness on the Closing Date and the Option Closing Date, if applicable,
of any statement in the Registration Statement or the Prospectus or any
documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus, as to the accuracy on the Closing Date and the
Option Closing Date, if applicable, of the representations and warranties of the
Trust and the Company herein, as to the performance by the Trust and the Company
of their respective obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Representative, each in form and substance satisfactory to the Representative.
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(n) The Representative shall have received an opinion of
Richards, Layton & Finger, P.A., special Delaware counsel to the Trust and the
Company, dated the Closing Date and, with respect to the Option Securities, the
Option Closing Date, addressed to the Underwriters, in form and substance
satisfactory to counsel for the Underwriters and substantially in the form of
Exhibit B.
(o) The Representative shall have received an opinion of Brown
& Wood LLP, counsel to the Representative, dated the Closing Date and, with
respect to the Option Securities, the Option Closing Date, addressed to the
Representative with respect to certain legal matters relating to this Agreement,
the Registration Statement and the Prospectus, and such other related matters as
the Representative may reasonably require, which opinion shall be satisfactory
in all respects to the Representative. In rendering such opinion, Brown & Wood
LLP shall have received and may rely upon such certificates and other documents
and information as they may reasonably request to pass upon such matter.
(p) On the Closing Date, the Trust shall have received
opinions of Richards, Layton & Finger, P.A., dated as of the Closing Date and,
with respect to the Delaware Trustee, in form and substance satisfactory to
counsel for the Underwriters and substantially in the forms set forth in Exhibit
C.
(q) On the Closing Date, the Company shall have received the
favorable opinion of Kronish, Lieb, Weiner & Hellman, LLP, special tax counsel
to the Company and the Trust, dated as of the Closing Date, substantially in the
form of Exhibit D.
(r) The Company shall have obtained and delivered to the
Representative an agreement from each executive officer and director of the
Company in writing on or prior to the date hereof, in form and substance
satisfactory to counsel for the Underwriters and substantially in the form of
Exhibit E hereto.
(s) Each of the Company's banking Subsidiaries shall be
validly existing as a banking corporation in good standing under the laws of its
jurisdiction of incorporation, is a member in good standing of the Federal
Deposit Insurance Corporation, and has full power and authority under its
articles of incorporation and by-laws and the laws of its jurisdiction of
incorporation to own, lease, and operate its respective properties and to
conduct its businesses as described in the Registration Statement and
Prospectus.
6. INDEMNIFICATION.
(a) The Trust and the Company, jointly and severally, will
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person, if any, who controls each
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, liabilities, expenses
and damages (including, but not limited to, any and all investigative, legal and
other expenses reasonably incurred in connection with, and any and
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all amounts paid in settlement of, any action, suit or proceeding between any of
the indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted) as and when
incurred, to which any Underwriter, or any such person, may become subject under
the Act, the Exchange Act or other Federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims, liabilities,
expenses or damages arise out of or are based on (i) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment or
supplement to the Registration Statement or the Prospectus or in any documents
filed under the Exchange Act and deemed to be incorporated by reference into the
Prospectus, or in any application or other document executed by or on behalf of
the Company or based on written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Offered Securities
under the securities laws thereof or filed with the Commission, or (ii) the
omission or alleged omission to state in such document a material fact required
to be stated in it or necessary to make the statements in it not misleading, or
(iii) any act or failure to act or any alleged act or failure to act by any
Underwriter, its directors, officers, employees and agents and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, in connection with, or relating in any manner
to, the Preferred Securities, the Guarantee, or the Debentures or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, liability, expense or damage arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Trust or the Company
shall not be liable under this clause (iii) to the extent it is finally
judicially determined by a court of competent jurisdiction that such loss,
claim, liability, expense or damage resulted directly from any such acts or
failures to act undertaken or omitted to be taken by an Underwriter through its
gross negligence or willful misconduct); provided that neither the Company nor
the Trust will be liable to the extent that such loss, claim, liability, expense
or damage arises from the sale of the Offered Securities in the public offering
to any person by an Underwriter and is based on an untrue statement or omission
or alleged untrue statement or omission made in reliance on and in conformity
with information relating to any Underwriter furnished in writing to the Company
or the Trust by the Representative on behalf of any Underwriter expressly for
inclusion in the Registration Statement, any preliminary prospectus or the
Prospectus.
Each indemnity agreement will be in addition to any liability
which the Trust and the Company might otherwise have including under this
Agreement.
(b) The Underwriter will indemnify and hold harmless (i) the
Trust, the Trustees, its officers who sign the Registration Statement and any
person controlling the Trust within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and (ii) the Company, its directors, its officers
who sign the Registration Statement and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, in each case to the same extent as the foregoing indemnity from
the Trust and the Company to each Underwriter, but only insofar as losses,
liabilities, claims, expenses or damages arise out of or are based upon any
untrue statement or omission
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<PAGE>
or alleged untrue statement or omission, made in reliance on and in conformity
with written information relating to an Underwriter furnished to the Trust or
the Company by the Representative expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus. This indemnity will be
in addition to any liability that each Underwriter may otherwise have; provided,
however, that in no case shall an Underwriter be liable or responsible for any
amount in excess of the total commissions received by such Underwriter in
connection with the offering of the Preferred Securities.
(c) Any party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after
receiving notice of the commencement of the action from the indemnified party,
jointly with any other indemnifying party similarly notified, to assume the
defense of the action, with counsel satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party), or (4) the indemnifying party has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other charges
will be reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable
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<PAGE>
for any settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld). No indemnifying party shall,
without the prior written consent of each indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated by this Section
6 (whether or not any indemnified party is a party thereto), unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding. Notwithstanding any other provision of this Section
6(c), if at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Trust and the Company or the
Underwriters, the Trust, the Company and the Underwriters shall contribute to
the aggregate losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Trust or the Company, any contribution
received by the Trust or the Company from persons other than the Underwriters,
such as persons who control the Trust or the Company within the meaning of the
Act and directors and officers of the Company) to which the Trust, the Company
and any one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Trust and the
Company on the one hand and the Underwriters on the other. The relative benefits
received by the Trust and the Company on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses other than underwriting discounts
and commissions) received by the Trust and the Company bear to the total
underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus. If, but only if, the allocation provided by the foregoing sentence
is not permitted by applicable law, the allocation of contribution shall be made
in such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the Trust
and the Company on the one hand and the Underwriters on the other with respect
to the statements or omissions which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. The relative fault of
the Trust and the Company on the one hand and of the Underwriters on the other
shall be determined by reference to, among other
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<PAGE>
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Trust or the Company or the Underwriters, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Trust, the Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 6(d) were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 6(d) shall be deemed to
include, for purpose of this Section 6(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), an Underwriter shall not be required to contribute any amount in
excess of the total commissions received by such Underwriter with respect to the
offering of the Preferred Securities received by it, and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 6(d) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 6(d), any
person who controls a party to this Agreement within the meaning of the Act will
have the same rights to contribution as that party, and each officer of the
Trust and the Company who signs the Registration Statement will have the same
rights to contribution as the Trust and the Company, respectively, subject in
each case to the provisions hereof. Any party entitled to contribution, promptly
after receipt of notice of commencement of any action against such party in
respect of which a claim for contribution may be made under this Section 6(d),
will notify any such party or parties from whom contribution may be sought, but
the omission so to notify will not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have under
this Section 6(d). Except for a settlement entered into pursuant to the last
sentence of Section 6(c) hereof, no party will be liable for contribution with
respect to any action or claim settled without its written consent (which
consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in
this Section 6 and the representations and warranties of the Trust and the
Company and the Underwriter contained in this Agreement shall remain operative
and in full force and effect regardless of (i) any investigation made by or on
behalf of the Underwriters, (ii) acceptance of any of the Offered Securities and
payment therefore, or (iii) any termination of this Agreement.
7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, covenants and agreements of the Trust and the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 6
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of an Underwriter or any
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person controlling such Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Trust and the Company or any of their
respective officers, trustees, directors or controlling persons within the
meaning of the Act or the Exchange Act, and shall survive the delivery of the
Offered Securities to the Underwriter hereunder or termination of this
Agreement.
8. TERMINATION.
(a) The obligations of the several Underwriters under this
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Securities, on or prior to the Option Closing Date),
by notice to the Trust and the Company from the Representative, without
liability on the part of any Underwriter to the Trust or the Company, if, prior
to delivery and payment for the Firm Securities (or the Option Securities, as
the case may be), in the sole judgment of the Representative, (i) there has
been, since the respective dates as of which information is given in the
Resignation Statement, any material adverse change in the Company's business,
properties, condition (financial or otherwise) or results of operations, (ii)
trading in any of the equity securities of the Company shall have been suspended
by the Commission, by an exchange that lists the securities or by the Nasdaq
Stock Market, (iii) trading in securities generally on the NYSE or the Nasdaq
shall have been suspended or limited or minimum or maximum prices shall have
been generally established on such exchange, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by such exchange or by order of the
Commission or any court or other governmental authority, (iv) a general banking
moratorium shall have been declared by either Federal or New York State
authorities, or (v) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or any outbreak or material escalation of hostilities or
declaration by the United States of a national emergency or war or other
calamity or crisis shall have occurred, the effect of any of which is such as to
make it, in the sole judgment of the Representative, impracticable or
inadvisable to market the Offered Securities on the terms and in the manner
contemplated by the Prospectus.
9. SUBSTITUTION OF UNDERWRITERS.
(a) If any one or more of the Underwriters shall fail or
refuse to purchase any of the Firm Securities which it or they have agreed to
purchase hereunder, and the aggregate principal amount of Firm Securities which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase is not more than one tenth of the aggregate principal amount of Firm
Securities, the other Underwriters shall be obligated, severally, to purchase
the Firm Securities which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase, in the proportions which the principal amount of
Firm Securities which they have respectively agreed to purchase pursuant to
Section 1 herein bears to the aggregate principal amount of Firm Securities
which all such non-defaulting Underwriters have so agreed to purchase, or in
such other proportions as the Representative
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<PAGE>
may specify; provided that in no event shall the maximum principal amount of
Firm Securities which any Underwriter has obligated to purchase pursuant to
Section 1 be increased pursuant to this Section 9 by more than one ninth of the
principal amount of Firm Securities agreed to be purchased by such Underwriter
without the prior written consent of such Underwriter. If any Underwriter or
Underwriters shall fail or refuse to purchase any Firm Securities and the
aggregate principal amount of Firm Securities which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase exceeds one tenth of
the aggregate principal amount of the Firm Securities and arrangements
satisfactory to the Representative and the Trust and the Company for the
purchase of such Firm Securities are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Trust and the Company for the purchase or sale
of any Preferred Securities under this Agreement. In any such case either the
Representative or the Trust and the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. Any action taken
pursuant to this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
(b) Termination of this Agreement pursuant to this Section 9
or Section 6 hereof shall be without liability of any party to any other party
except as provided in Sections 4 and 6 hereof.
10. MISCELLANEOUS. All notice given pursuant to any of the provisions
of this Agreement shall be in writing and, unless otherwise specified herein,
shall be mailed or delivered (a) if to the Trust, at 255 Alhambra Circle, Coral
Gables, Florida 33134, Attention: [ ], or (b) if to the Company, at the office
of the Company, Attention: [ ], or (c) if to the Representative, to the offices
of PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York
10019, Attention: Corporate Finance Department. Any such notice shall be
effective only upon receipt. Any notice under Section 8 or 9 may be made by
facsimile, telex or telephone, but if so made shall be subsequently confirmed in
writing.
This Agreement has been and is made solely for the benefit of the
Underwriters and the Trust and the Company and of the controlling persons,
Trustees, directors and officers referred to in Section 6, and their respective
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" as used
in this Agreement shall not include a purchaser, as such purchaser, of Offered
Securities from any of the several Underwriters.
All representations, warranties and agreements of the Trust and the
Company contained herein or in certificates or other instruments delivered
pursuant hereto, shall remain operative and in full force and effect regardless
of any investigation made by or on
30
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behalf of any Underwriter or any of their controlling persons and shall survive
delivery of and payment for the Preferred Securities hereunder.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement 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.
The Trust, the Company and the Underwriters each hereby irrevocably
waive any right they may have to trial by jury in respect of any claim based
upon or arising out of this Agreement or the transactions contemplated hereby.
This Agreement may not be amended or otherwise modified or any
provision hereof waived except by an instrument in writing signed by the
Representative, the Trust and the Company.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Trust, the Company and the several Underwriters.
Very truly yours,
BANKUNITED CAPITAL III,
a Delaware business trust
By: ____________________________
Name:
Title:
BANKUNITED FINANCIAL CORPORATION
By: ____________________________
Name:
Title:
Confirmed as of the date first above mentioned:
PAINEWEBBER INCORPORATED
Acting on behalf of themselves
and as the
Representative of
all Underwriters named in
Schedule I hereof.
By: ___________________________
Name:
Title:
32
<PAGE>
SCHEDULE I
UNDERWRITERS
NUMBER
OF FIRM
SECURITIES
NAME OF TO BE
UNDERWRITERS PURCHASED
------------ ---------
[ ]
PaineWebber Incorporated..............................
Prudential Securities Incorporated.................... [ ]
Friedman, Billings, Ramsey & Co., Inc................. [ ]
-------------------
TOTAL........................................ 3,000,000
===================
S-1
<PAGE>
Exhibit A
[FORM OF OPINION OF STUZIN AND CRAMNER, P.A.
PURSUANT TO SECTION 5(f)]
1. The Company and each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to a)
enter into the Purchase Agreement, the Guarantee Agreement, the Expense
Agreement, the Indenture and the Declaration and to perform its obligations
thereunder and b) own or lease its assets and conduct its business as described
in the Registration Statement and Prospectus, except in the case of b), where
the failure to have such power and authority would not have a Material Adverse
Effect; the Company is the sole record owner and, to our knowledge, the sole
beneficial owner of all of the capital stock of each of its Subsidiaries.
2. The Company and each of the Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing under the laws of all
other jurisdictions in the United States where the ownership or leasing of its
respective assets or the conduct of its business as described in the
Registration Statement and Prospectus requires such qualification, except where
the failure to be so qualified would not have a Material Adverse Effect.
3. The Preferred Securities conform in all material respects to the
description thereof contained in the Prospectus. The Declaration has been duly
authorized, executed and delivered by the Company, has been duly qualified under
the Trust Indenture Act of 1939 (the "Trust Indenture Act") and constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, regardless of whether
considered in a proceeding in equity or in law).
4. The Guarantee conforms in all material respects to the description
thereof contained in the Prospectus. The Guarantee Agreement has been duly
authorized, executed and delivered by the Company, has been duly qualified under
the Trust Indenture Act and constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and general principles of equity, including,
A-1
<PAGE>
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or in law).
5. The Expense Agreement conforms in all material respects to the
description thereof contained in the Prospectus. The Expense Agreement has been
duly authorized, executed and delivered by the Company, has been duly qualified
under the Trust Indenture Act and constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or in law).
6. The Debentures conform in all material respects to the description
thereof contained in the Prospectus. The Indenture has been duly authorized,
executed and delivered by the Company, has been duly qualified under the Trust
Indenture Act and constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law).
The Debentures have been duly authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for by
the Trust as contemplated by the Declaration, 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
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law).
7. The holders of outstanding shares of capital stock of the Company
are not entitled to any preemptive rights or similar right under (i) the
statutes, judicial and administrative decisions, and the rules and regulations
of the governmental agencies of the State of Florida, (ii) the Company's
Certificate of Incorporation or By-Laws, (iii) any instrument, document,
contract or other agreement referred to in the Registration Statement or any
instrument, document, contract or agreement filed as an exhibit to, or
incorporated as an exhibit by reference in, the Registration Statement, or (iv)
the law of Delaware to subscribe for the Preferred Securities or the Debentures;
except as described in the Registration Statement or the Prospectus, to the best
of our knowledge, there is no commitment or arrangement to issue, and there are
no outstanding options, warrants or other rights calling for the issuance of,
any share of capital stock of the Company or any Subsidiary to any person or any
security or other instrument that by its terms is convertible into, exercisable
for or exchangeable for capital stock of the Company.
A-2
<PAGE>
8. The statements set forth under the headings "Description of the
Preferred Securities", "Description of the Junior Subordinated Debentures",
"Description of the Guarantee", "Relationship Among the Preferred Securities,
the Junior Subordinated Debentures, the Expense Agreement and the Guarantee", in
the Registration Statement and Prospectus, insofar as such statements purport to
summarize certain provisions of the Trust Securities, the Debentures, the
Guarantee, the Indenture, the Declaration and the Certificate of Incorporation
of the Company, provide a fair summary of such provisions.
9. The execution and delivery of the Purchase Agreement have been duly
authorized by all necessary corporate action of the Company, and the Purchase
Agreement has been duly executed and delivered by the Company on behalf of the
Trust.
10. The issuance and sale of the Preferred Securities by the Trust to
the Initial Purchasers pursuant to the Purchase Agreement, the performance by
the Trust and the Company of their respective obligations in the Purchase
Agreement, the Indenture, the Debentures, the Guarantee, Expense Agreement, the
Declaration and the Trust Securities and the application of the net proceeds of
the Debentures by the Company in the manner described in the Registration
Statement and Prospectus do not require any consent, approval, authorization,
registration or qualification of or with any governmental authority of the
United States or the State of Florida, (but we express no opinion as to any
consent, approval, authorization, registration or qualification that may be
required under state securities or Blue Sky laws).
11. All the outstanding shares of capital stock of each Subsidiary have
been duly and validly authorized and issued and are fully paid and
nonassessable, and are owned by the Company either directly or through wholly
owned subsidiaries free and clear of any perfected security interest and, to my
knowledge, after due inquiry of appropriate officers of the Company, any
encumbrances equities or claims, except for restrictions on sales of capital
stock contained in debt instruments.
12. To the best of our knowledge, any instrument, document, lease,
license, contract or other agreement (collectively, "Documents" each a
"Document") required to be described or referred to in the Registration
Statement or the Prospectus has been properly described or referred to therein
and any Document required to be filed as an exhibit to the Registration
Statement has been filed as an exhibit thereto or has been incorporated as an
exhibit by reference in the Registration Statement; and no default exists in the
due performance or observance of any material obligation, agreement, covenant or
condition contained in any Document filed or required to be filed as an exhibit
to the Registration Statement.
13. There is no pending or threatened action, suit, investigation or
proceeding before any court or governmental agency, authority or body or any
arbitrator involving the Company, any of the Subsidiaries or the Trust, or any
of their respective officers or directors in their capacity as such, which (i)
seek to challenge the legality or enforceability of the
A-3
<PAGE>
Agreement, (ii) seek to challenge the legality or enforceability of any of the
Documents filed, or required to be filed, as exhibits to the Registration
Statement, (iii) seek damages or other remedies with respect to any of the
Documents filed, or required to be filed, as exhibits to the Registration
Statement, (iv) except as set forth in or contemplated by the Registration
Statement and the Prospectus, seek money damages in excess of $100,000 or seek
to impose criminal penalties upon the Company, any of its Subsidiaries or any of
their respective officers or directors in their capacities as such and of which
we have knowledge, (v) seek to enjoin any of the business activities of the
Company or any of its Subsidiaries or the transactions described in the
Prospectus and of which we have knowledge or (vi) is required to be disclosed in
the Registration Statement which is not adequately disclosed in the Prospectus;
there is no franchise, contract or other document of a character required to be
described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement or the Prospectus, which is not described
or filed as required; the statements included or incorporated in the Prospectus
describing any legal proceedings or material contracts or agreements relating to
the Company fairly summarize such matters.
14. None of the Company or any of the Subsidiaries is, except as
disclosed in the Registration Statement and Prospectus, in default (or, with
notice or lapse of time or both, would be in default) in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan agreement,
note, lease or other instrument to which it is a party or by which it is bound,
or to which any of its respective assets is subject, or in violation of any law,
statute, judgment, decree, order, rule or regulation of any domestic or foreign
court with jurisdiction over the Company or any of the Subsidiaries or any of
their respective assets, or other governmental or regulatory authority, agency
or other body, other than such defaults or violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
15. Neither the issuance, sale or delivery by the Company and the Trust
of the Trust Securities, the issuance by the Company of the Guarantee, the
issuance and sale by the Company of the Debentures, the execution, delivery and
performance of the Purchase Agreement by the Trust or the Company, the Guarantee
Agreement by the Company or the Indenture by the Company, nor the consummation
by the Trust or the Company of any other of the transactions contemplated in the
Purchase Agreement, nor the fulfillment of the terms of the Purchase Agreement
nor the filing of the Declaration with the Secretary of State for the State of
Delaware will (a) conflict with, result in or constitute a breach of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any assets of the Company or any of the Subsidiaries
pursuant to, (i) any material contract, indenture, mortgage, loan agreement,
note, lease other instrument to which the Company or any of the Subsidiaries is
a party or by which any of them is bound, or to which any of the assets of the
Company or any of the Subsidiaries is subject, (ii) any voting trust arrangement
or any contract or other agreement to which the Company is a party that
restricts the ability of the Company to issue securities and of which we have
knowledge or (iii) any Document filed as an exhibit to, or incorporated as an
exhibit by reference in, the Registration Statement, (iv) any existing
obligation of the Company under any court or
A-4
<PAGE>
administrative order, judgment or decree of which we have knowledge or (b)
violate applicable provisions of any statute or regulation in the State of
Florida or of the United States nor (c) will such action result in any violation
of the provisions of the Certificate of Incorporation or By-Laws of the Company
or any of the Subsidiaries or any applicable law, administrative regulation or
administrative or court decree.
16. Each of the Company's banking Subsidiaries is validly existing as a
banking corporation in good standing under the laws of its jurisdiction of
incorporation, is a member in good standing of the Federal Deposit Insurance
Corporation, and has full power and authority under its articles of
incorporation and by-laws and the laws of its jurisdiction of incorporation to
own, lease, and operate its respective properties and to conduct its businesses
as described in the Registration Statement and Prospectus.
17. No authorization, approval or other action by, and no notice to,
consent of, order of, or filing with, any United States Federal, Florida or, to
the extent required under the General Corporation Law of the State of Delaware,
Delaware governmental authority or regulatory body is required for the
consummation of the transactions contemplated by the Underwriting Agreement,
except such as have been obtained under the Securities Act, the Securities
Exchange Act of 1934 or the Trust Indenture Act and such as may be required
under the Blue Sky laws of any jurisdiction in connection with the purchase and
distribution of the Preferred Securities by the Underwriters, the purchase of
the Common Securities by the Company, the purchase of the Debentures by the
Trust and the issuance of the Guarantee.
18. Neither the Company nor the Trust is an "investment company" and
the Company is not a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
19. The Registration Statement became effective under the Securities
Act on ________ __, 1998, and thereupon the offering of the Preferred Securities
(including the related guarantees) as contemplated by the Prospectus became
registered under the Securities Act.
20. The required filings of the Prospectus pursuant to Rule 424(b)
under the Securities Act have been made in the manner and in the time required
by such Rule; no Stop Order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act.
21. The authorized, issued and outstanding capital stock of the Company
is as set forth in the Registration Statement and the Prospectus under the
caption "Capitalization."
22. The Registration Statement and the Prospectus (including any
documents incorporated by reference into the Prospectus, at the time they were
filed) comply in all material respects as to form with the requirements of the
Act, the Exchange Act, the
A-5
<PAGE>
Exchange Act Rules and Regulations and the Rules and Regulations (except that we
express no opinion as to financial statements, schedules and other financial
data contained in the Registration Statement or the Prospectus or incorporated
by reference therein).
23. All descriptions in the Prospectus of statutes, regulations or
legal or governmental proceedings are accurate and fairly present the
information required to be shown.
24. Delivery of certificates for the Preferred Shares will transfer
valid and marketable title thereto to each of the Underwriters that has
purchased such Preferred Shares in good faith and without notice of any adverse
claim with respect thereto.
25. The Preferred Securities have been duly authorized for listing by
the NYSE upon official notice of issuance.
Insofar as the foregoing opinions relate to the valid existence and
good standing of the Company, they are based solely on a certificate of good
standing received from the Secretary of State of the State of Florida. So far as
the foregoing opinions relate to the legal, valid, binding effect or
enforceability of any agreement or obligation of the Company or the Trust, (a)
we have assumed that each other party to such agreement or obligation has
satisfied those legal requirements that are applicable to it to the extent
necessary to make such agreement or obligation enforceable against it, and (b)
such opinions are subject to (i) bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally, (ii) general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law) and (iii) with respect to rights to indemnity or
contribution, may be limited to applicable law or by the policies underlying
such laws.
We have participated in conferences and telephone conversations with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, your representatives and
representatives of your counsel, during which conferences and conversations the
contents of the Registration Statement and the Prospectus and related matters
were discussed, and we reviewed certain corporate records and documents of the
Company.
Based on our participation in such conferences and conversations and
our review of such documents, we do not believe that (i) the Registration
Statement, at the time the Registration Statement became effective, or the
Prospectus or any amendment or supplement thereto including any documents
incorporated by reference into the Prospectus, as of the date hereof (except for
the financial statements and other information of an accounting or financial
nature included therein, and the Statement of Eligibility (Form T-1) included as
an exhibit to the Registration Statement, as to which we do not express any
view) was not appropriately responsive in all material respects to the
requirements of the Securities Act and the Trust Indenture Act of 1939 and the
applicable rules and regulations of the Commission thereunder, or (ii) the
Registration Statement or any amendment thereto, at the time the
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<PAGE>
Registration Statement and such amendments became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus or any amendment thereto including documents incorporated by
reference into the Prospectus, at the date hereof, includes an untrue statement
of a material fact or omits 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 (in each case except for financial statements and other
information of an accounting or financial nature included therein, and the
several Statements of Eligibility (Form T-1) included as exhibits to the
Registration Statement, as to which we do not express any view).
We are admitted to practice in the State of Florida, and we express no
opinion as to any matters governed by any law other than the law of the State of
Florida, the General Corporation Law of the State of Delaware and the Federal
law of the United States of America.
In rendering this opinion to you, we have, with your approval, relied
on the opinions dated the date hereof of Richards, Layton & Finger, copies of
which have been delivered to you pursuant to Sections 5(n) and 5(p) of the
Purchase Agreement, as to all matters of law covered therein relating to the
laws of the State of Delaware governing business trusts, and we do not express
any opinion with respect to such law.
We are furnishing this opinion letter to you, as the Representative for
the Underwriters, solely for your benefit in connection with the offering of the
Preferred Securities. This opinion letter is not to be used, circulated, quoted
or otherwise referred to for any other purpose.
A-7
<PAGE>
Exhibit B
[FORM OF OPINION OF RICHARDS, LAYTON & FINGER, P.A.,
SPECIAL DELAWARE COUNSEL TO THE TRUST AND THE COMPANY
PURSUANT TO SECTION 5(n)]
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, and all
filings required under the laws of the State of Delaware with respect to the
creation and valid existence of the Trust as a business trust have been made.
2. The Declaration constitutes a valid and binding obligation of the
Company and each of the Trustees, and is enforceable against the Company and
each of the Trustees, in accordance with its terms, except as such
enforceability may be limited by (A) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws of general application relating
to or affecting the enforcement of creditors' rights and remedies, (B)
application of equitable principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law) and (C) considerations of
public policy or the effects of applicable law relating to fiduciary duties.
3. Under the Delaware Business Trust Act and the Declaration, the Trust
has the trust power and authority to own its property and conduct its business,
all as described in the Prospectus.
4. Under the Delaware Business Trust Act and the Declaration, the Trust
has the trust power and authority (A) to execute and deliver, and to perform its
obligations under, the Purchase Agreement, (B) perform its obligations under the
Declaration, (C) issue and perform its obligations under the Securities and (D)
purchase and hold the Debentures.
5. The execution and delivery of the Purchase Agreement by the Trust
and the performance of its obligations thereunder have been duly authorized by
all necessary trust action on the part of the Trust.
6. The Preferred Securities have been duly authorized by the
Declaration 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 Trust and are entitled to the benefits of the Declaration. The
holders, 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. We note that the holders may be obligated, pursuant to the
Declaration, (i) to provide indemnity and/or security in connection with and pay
taxes or governmental charges arising from transfers or exchanges of Preferred
Securities Certificates and the issuance of replacement
B-1
<PAGE>
Preferred Securities Certificates, 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 Declaration.
7. Under the Delaware Business Trust Act, the certificate attached as
an exhibit to the Declaration is an appropriate form of certificate to evidence
ownership of the Preferred Securities.
8. Under the Delaware Business Trust Act and the Declaration, the
issuance of the Preferred Securities is not subject to preemptive rights.
9. The issuance and sale by the Trust of the Preferred Securities, the
execution, delivery and performance by the Trust of the Underwriting Agreement,
the consummation by the Trust of the transactions contemplated thereby and
compliance by the Trust with its obligations thereunder do not require the
approval of any Delaware governmental agency and do not violate (i) any of the
provisions of the Certificate or the Declaration, or (ii) any applicable
Delaware law (statutory or decisional) or any rule or regulation of any Delaware
governmental agency.
10. No authorization, approval, consent or order of any Delaware court
or other Delaware governmental authority or agency is required to be obtained by
the Trust solely in connection with the issuance and sale of the Preferred
Securities.
11. The holders of the Preferred Securities (other than those Holders
who reside or are domiciled in the State of Delaware) will have no liability for
income taxes imposed by the State of Delaware solely as a result of their
participation in the Trust, and the Trust will not be liable for any income tax
imposed by the State of Delaware.
We consent to your relying as to matters of Delaware law upon
this opinion in connection with the Purchase Agreement. We also consent to the
reliance of Brown & Wood, LLP, Kronish, Lieb, Weiner & Hellman, LLP and Stuzin
and Cramner, P.A. as to matters of Delaware law upon this opinion in connection
with opinions to be rendered by them to the Underwriters pursuant to the
Purchase Agreement. Except as stated above, without our prior written consent,
this opinion may not be furnished or quoted to, or relied upon by, any other
person for any purpose.
B-2
<PAGE>
Exhibit C
[FORM OF OPINION OF RICHARDS, LAYTON & FINGER, P.A.,
WITH RESPECT TO THE DELAWARE TRUSTEE
PURSUANT TO SECTION 5(p)]
1. The Bank of New York, Delaware is duly incorporated and is validly
existing in good standing as a banking corporation with trust powers under the
laws of the State of Delaware.
2. The Bank of New York, Delaware has the corporate and trust power and
authority to execute, deliver and perform its obligations under the Declaration.
3. The Declaration constitutes a legal, valid and binding obligation of
The Bank of New York, Delaware, enforceable against The Bank of New York,
Delaware, in accordance with its terms, except as such enforceability may be
limited by (A) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws of general application relating to or affecting the
enforcement of creditors' rights and remedies, (B) application of equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (C) considerations of public policy or the
effects of applicable law relating to fiduciary duties.
4. The execution, delivery and performance by The Bank of New York,
Delaware of the Declaration does not violate the charter or by-laws of The Bank
of New York, Delaware.
5. No consent, approval or authorization of, or registration with or
notice to, any governmental authority or agency of the State of Delaware is
required to be obtained by The Bank of New York, Delaware solely in connection
with the execution, delivery or performance by The Bank of New York, Delaware of
the Declaration.
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<PAGE>
Exhibit D
[FORM OF OPINION OF KRONISH, LIEB, WEINER & HELLMAN, LLP,
SPECIAL TAX COUNSEL TO THE COMPANY AND THE TRUST
PURSUANT TO SECTION 5(q)]
1. The Trust will be characterized as a grantor trust for U.S. federal
income tax purposes and not as a partnership or as an association subject to tax
as a corporation;
2. The Debentures will constitute indebtedness of the Company; and
3. The discussion set forth in the Registration Statement and
Prospectus under the caption "Certain Federal Income Tax Consequences," to the
extent it constitutes summaries of legal matters or legal conclusions, is
accurate in all material respects.
D-1
<PAGE>
Exhibit E
[FORM OF LOCK-UP LETTER
PURSUANT TO SECTION 5(r)]
[________ __, 1998]
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
In consideration of the agreement of PaineWebber Incorporated,
Prudential Securities Incorporated and Friedman, Billings, Ramsey & Co., Inc.
(the "Underwriters") to enter into a purchase agreement (the "Purchase
Agreement) with BankUnited Capital III, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), and BankUnited Financial
Corporation, a corporation incorporated under the laws of the State of Delaware
(the "Company"), providing for the offering of the [ ] Trust Preferred
Securities (the "Preferred Securities") of the Trust, guaranteed by common
stock, par value $25.00 share of the Company, as contemplated by the
Registration Statement dated [_________ __, 1998] (the "Registration
Statement"), the undersigned hereby agrees that the undersigned will not, for a
period of 90 days after the date of the Purchase Agreement, without the prior
written consent of PaineWebber Incorporated, (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option to purchase or otherwise transfer or dispose
of any Preferred Securities, any equity securities of the Company, the Trust or
any similar trust or any securities convertible into or exchangeable or
exercisable for any equity securities of the Company, the Trust or any similar
trust or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences of ownership of any equity securities
of the Company, the Trust or any similar trust, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of equity
securities of the Company, the Trust or any similar trust, other securities,
cash or otherwise, of which the undersigned is now, or may in the future become,
the beneficial owner within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934.
Very truly yours,
By: _____________________________________
Print Name: _____________________________
E-1
EXHIBIT 4.3
BANKUNITED FINANCIAL CORPORATION
AND
THE BANK OF NEW YORK,
AS TRUSTEE
INDENTURE
____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE MARCH 31, 2028
DATED AS OF _________, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS OF TERMS.................................... 2
ARTICLE II
ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION AND EXCHANGE
OF THE DEBENTURES
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT........................ 11
SECTION 2.2 MATURITY................................................ 11
SECTION 2.3 FORM AND PAYMENT........................................ 12
SECTION 2.4 INTEREST................................................ 12
SECTION 2.5 EXECUTION AND AUTHENTICATIONS........................... 13
SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE................... 14
SECTION 2.7 TEMPORARY DEBENTURES.................................... 16
SECTION 2.7A GLOBAL SECURITIES....................................... 16
SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN
DEBENTURES.............................................. 17
SECTION 2.9 CANCELLATION............................................ 18
SECTION 2.10 BENEFIT OF INDENTURE.................................... 19
SECTION 2.11 AUTHENTICATION AGENT.................................... 19
SECTION 2.12 RIGHT OF SET-OFF........................................ 20
SECTION 2.13 CUSIP NUMBERS........................................... 20
ARTICLE III
REDEMPTION OF DEBENTURES
SECTION 3.1 REDEMPTION.............................................. 20
SECTION 3.2 SPECIAL EVENT REDEMPTION................................ 20
SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY.......................... 21
SECTION 3.4 NOTICE OF REDEMPTION.................................... 21
SECTION 3.5 PAYMENT UPON REDEMPTION................................. 22
SECTION 3.6 NO SINKING FUND......................................... 23
<PAGE>
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD.................... 23
SECTION 4.2 NOTICE OF EXTENSION..................................... 24
SECTION 4.3 LIMITATION ON TRANSACTIONS.............................. 24
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST....................... 25
SECTION 5.2 MAINTENANCE OF AGENCY................................... 25
SECTION 5.3 PAYING AGENTS........................................... 25
SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF
TRUSTEE................................................. 27
SECTION 5.5 COMPLIANCE WITH CONSOLIDATION
PROVISIONS.............................................. 27
SECTION 5.6 LIMITATION ON TRANSACTIONS.............................. 27
SECTION 5.7 COVENANTS AS TO THE TRUST............................... 27
SECTION 5.8 COVENANTS AS TO PURCHASES............................... 28
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE
TRUSTEE
SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND
ADDRESSES OF DEBENTURE HOLDERS.......................... 28
SECTION 6.2 PRESERVATION OF INFORMATION
COMMUNICATIONS WITH DEBENTUREHOLDERS.................... 28
SECTION 6.3 REPORTS BY THE COMPANY.................................. 29
SECTION 6.4 REPORTS BY THE TRUSTEE.................................. 30
SECTION 6.5 STATEMENTS AS TO DEFAULT................................ 30
ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT....................................... 30
SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.................................. 32
SECTION 7.3 APPLICATION OF MONEYS COLLECTED......................... 34
SECTION 7.4 LIMITATION ON SUITS..................................... 34
2
<PAGE>
SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY
OR OMISSION NOT WAIVER.................................. 35
SECTION 7.6 CONTROL BY DEBENTUREHOLDERS............................. 36
SECTION 7.7 UNDERTAKING TO PAY COSTS................................ 37
SECTION 7.8 DIRECT ACTION BY HOLDERS OF PREFERRED
SECURITIES.............................................. 37
ARTICLE VIII
FORM OF DEBENTURE AND ORIGINAL ISSUE
SECTION 8.1 FORM OF DEBENTURE....................................... 37
SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES............................ 37
ARTICLE IX
CONCERNING THE TRUSTEE
SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES..................... 38
SECTION 9.2 NOTICE OF DEFAULTS...................................... 39
SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE............................... 39
SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC............... 41
SECTION 9.5 MAY HOLD DEBENTURES..................................... 41
SECTION 9.6 MONEYS HELD IN TRUST.................................... 41
SECTION 9.7 COMPENSATION AND REIMBURSEMENT.......................... 41
SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE....................... 42
SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS................. 42
SECTION 9.10 CORPORATE TRUSTEE REQUIRED ELIGIBILITY.................. 43
SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR............................................... 43
SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.................. 44
SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR
SUCCESSION TO BUSINESS.................................. 45
SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS
AGAINST THE COMPANY..................................... 46
ARTICLE X
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS........................... 46
SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS.................. 46
SECTION 10.3 WHO MAY BE DEEMED OWNERS................................ 47
SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY
DISREGARDED............................................. 47
SECTION 10.5 ACTIONS BINDING ON FUTURE
DEBENTUREHOLDERS........................................ 48
3
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ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE
CONSENT OF DEBENTUREHOLDERS............................. 48
SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF
DEBENTUREHOLDERS........................................ 49
SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES....................... 50
SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL
INDENTURES.............................................. 50
SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES.................... 50
ARTICLE XII
SUCCESSOR CORPORATION
SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED....................... 51
SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO
TRUSTEE................................................. 52
ARTICLE XIII
SATISFACTION AND DISCHARGE
SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE................. 52
SECTION 13.2 DISCHARGE OF OBLIGATIONS................................ 53
SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST.................... 53
SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS................. 53
SECTION 13.5 REPAYMENT TO COMPANY.................................... 54
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS
SECTION 14.1 NO RECOURSE............................................. 54
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS........................ 55
SECTION 15.2 ACTIONS BY SUCCESSOR.................................... 55
SECTION 15.3 SURRENDER OF COMPANY POWERS............................. 55
SECTION 15.4 NOTICES................................................. 55
SECTION 15.5 GOVERNING LAW........................................... 55
SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT......................... 56
SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS.................... 56
4
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SECTION 15.8 PAYMENTS ON BUSINESS DAYS............................... 56
SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT....................... 56
SECTION 15.10 COUNTERPARTS............................................ 57
SECTION 15.11 SEPARABILITY............................................ 57
SECTION 15.12 ASSIGNMENT.............................................. 57
SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS................................ 57
ARTICLE XVI
SUBORDINATION OF DEBENTURES
SECTION 16.1 AGREEMENT TO SUBORDINATE................................ 58
SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED
DEBT.................................................... 58
SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY.................... 58
SECTION 16.4 SUBROGATION............................................. 60
SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION..................... 61
SECTION 16.6 NOTICE BY THE COMPANY................................... 61
SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR
INDEBTEDNESS............................................ 62
SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED....................... 63
5
<PAGE>
CROSS-REFERENCE TABLE
SECTION OF TRUST
INDENTURE ACT OF SECTION OF
1939, AS AMENDED INDENTURE
- ------------------------------ --------------------------------
310(a) 9.10
310(b) 9.9
9.11
310(c) N/A
311(a) 9.14
311(b) 9.14
311(c) N/A
312(a) 6.1
6.2(a)
312(b) 6.2(c)
312(c) 6.2(c)
313(a) 6.4(a)
313(b) 6.4(b)
313(c) 6.4(a)
6.4(b)
313(d) 6.4(c)
314(a) 6.3(a)
314(b) N/A
314(c) 15.7
314(d) N/A
314(e) 15.7
314(f) N/A
315(a) 9.1(a)
9.3
315(b) 9.2
315(c) 9.1(a)
315(d) 9.1(b)
315(e) 7.7
316(a) 1.1
7.6
316(b) 7.4(b)
316(c) 10.1(b)
317(a) 7.2
317(b) 5.3
318(a) 15.9
Note: This Cross-Reference Table does not constitute part of this Indenture and
shall not affect the interpretation of any of its terms or provisions.
6
<PAGE>
INDENTURE
INDENTURE, dated as of _________, 1998, between BANKUNITED FINANCIAL
CORPORATION, a Florida corporation (the "Company") and THE BANK OF NEW YORK, a
New York banking corporation (the "Trustee").
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the
execution and delivery of this Indenture to provide for the issuance of
unsecured securities to be known as its ____% Junior Subordinated Deferrable
Interest Debentures due 2028 (hereinafter referred to as the "Debentures"), the
form and substance of such Debentures and the terms, provisions and conditions
thereof to be set forth as provided in this Indenture; and
WHEREAS, BankUnited Capital III, a Delaware statutory business trust (the
"Trust"), has offered to the public 3,600,000 (or up to 4,140,000 if the
over-allotment option granted to the underwriters is exercised in full) of its
Preferred Securities (as defined herein), with a liquidation amount of $25 per
Preferred Security and having an aggregate liquidation amount with respect to
the assets of the Trust of $90,000,000 (or up to $103,500,000 in aggregate
liquidation amount if the over-allotment option is exercised in full); and
WHEREAS, the trustees of the Trust, on behalf of the Trust, will execute and
deliver to the Company common securities evidencing an ownership interest in the
Trust (the "Common Securities"), registered in the name of the Company, in an
aggregate amount equal to approximately three percent (4%) of the capitalization
of the Trust, equivalent to 150,000 Common Securities (or up to 172,500 if the
over-allotment option is exercised in full), with a liquidation amount of $25
per Common Security and having an aggregate liquidation amount with respect to
the assets of the Trust of $3,750,000 (or up to $4,312,500 if the over-allotment
option is exercised in full);
WHEREAS, the Trust will use the proceeds from the sale of the Preferred
Securities and the Common Securities to purchase, from the Company, Debentures
in an aggregate principal amount of $93,750,000 (or up to $107,812,500 if the
over-allotment option is execised in full);
WHEREAS, the Company has requested that the Trustee execute and deliver this
Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid instrument in
accordance with its terms, and to make the Debentures, when executed by the
Company and authenticated and delivered by the Trustee, the valid obligations of
the Company, have been performed, and the execution and delivery of this
Indenture have been duly authorized in all respects, and
WHEREAS, to provide the terms and conditions upon which the Debentures are to be
authenticated, issued and delivered, the Company has duly authorized the
execution of this Indenture; and
<PAGE>
WHEREAS, all things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of the
Debentures by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of the Debentures and
intending to be legally bound hereby:
2
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS OF TERMS.
The terms defined in this Section 1.1 (except as in this Indenture otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.1 and shall include the plural
as well as the singular. All other terms used in this Indenture that are defined
in the Trust Indenture Act, or that are by reference in the Trust Indenture Act
defined in the Securities Act (except as herein otherwise expressly provided or
unless the context otherwise requires), shall have the meanings assigned to such
terms in the Trust Indenture Act and in the Securities Act as in force at the
date of the execution of this instrument. All accounting terms used herein and
not expressly defined shall have the meanings assigned to such terms in
accordance with Generally Accepted Accounting Principles as in effect at the
time of computation.
"Accelerated Maturity Date" means if the Company elects to accelerate the
Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is prior to the Scheduled Maturity Date, but is after March 31,
2028.
"Additional Interest" shall have the meaning set forth in Section 2.4.
"Administrative Trustees" shall have the meaning set forth in the Trust
Agreement.
"Adjusted Treasury Rate" means, with respect to any prepayment date, 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 percentage of its principal amount) equal to the Comparable
Treasury Price for such prepayment date, calculated on the third Business Day
preceding the prepayment date, plus in each case (a) 1.25% if such prepayment
date occurs on or prior to the first anniversary of the issuance of the
Preferred Securities offered hereby and (b) 0.50% in all other cases.
"Affiliate" means, with respect to a specified Person, (a) any Person directly
or indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities or other ownership interests of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities or
other ownership interests are directly or indirectly owned, controlled or held
with power to vote by the specified Person; (c) any Person directly or
indirectly controlling, controlled by, or under common control with the
specified Person; (d) a partnership in which the specified Person is a general
partner; (e) any officer or director of the specified Person; and (f) if the
specified Person is an individual, any entity of which the specified Person is
an officer, director or general partner.
3
<PAGE>
"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 Global Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means an authenticating agent with respect to the
Debentures appointed by the Trustee pursuant to Section 2.11.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law
for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any duly
authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification.
"Business Day" means, with respect to the Debentures, any day other than a
Saturday or a Sunday or a day on which federal or state banking institutions in
the Borough of Manhattan, The City of New York, or the State of Florida are
authorized or required by law, executive order or regulation to close, or a day
on which the Corporate Trust Office of the Trustee or the Property Trustee is
closed for business.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of any amendment to, or change (including any proposed change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change pronouncement, action or decision is announced on or after
the date of original issuance of the Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk that the Company will not be
entitled to treat an amount equal to the Liquidation Amount of such Preferred
Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the Federal Reserve (or any successor
regulatory authority with jurisdiction over bank holding companies), or any
capital adequacy guidelines as then in effect and applicable to the Company.
"Certificate" means a certificate signed by the principal executive officer, the
principal financial officer, the principal accounting officer, the treasurer or
any vice president of the Company. The Certificate need not comply with the
provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the definition of
"Investment Company Event."
4
<PAGE>
"Commission" means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Securities" means undivided beneficial interests in the assets of the
Trust which rank pari passu with the Preferred Securities; provided, however,
that upon the occurrence of an Event of Default, the rights of holders of Common
Securities to payment in respect of (i) distributions and (ii) payments upon
liquidation, redemption and otherwise are subordinated to the rights of holders
of Preferred Securities.
"Company" means BankUnited Financial Corporation, a corporation duly organized
and existing under the laws of the State of Florida, and, subject to the
provisions of Article XII, shall also include its successors and assigns.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the remaining term to
the Stated Maturity Date of the Junior Subordinated Debentures 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 term of the Junior Subordinated Debentures.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
average of the bid and asked prices for the Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount on the third Business Day
preceding such prepayment date, as set forth in the daily statistical release
(or any successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 P.M. Quotations for U.S. Government Securities" or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such Business Day, (A) the average of the Reference
Treasury Dealer Quotations for such prepayment date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Debenture
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at any
particular time, its corporate trust business shall be principally administered,
which office at the date hereof is located at 101 Barclay Street, Floor 21 West,
New York, New York 10286, Attention: Corporate Trust Trustee Administration.
"Coupon Rate" shall have the meaning set forth in Section 2.4.
"Custodian" means any receiver, trustee, assignee, liquidator, or similar
official under any Bankruptcy Law.
5
<PAGE>
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder," or other similar
term, means the Person or Persons in whose name or names a particular Debenture
shall be registered on the books of the Company or the Trustee kept for that
purpose in accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in Section 2.6(b).
"Debt" means with respect to any Person, whether recourse is to all or a portion
of the assets of such Person and whether or not contingent, (i) every obligation
of such Person for money borrowed; (ii) every obligation of such Person
evidenced by bonds, debentures, notes or other similar instruments, including
obligations incurred in connection with the acquisition of property, assets or
businesses; (iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person; (iv) every obligation of such Person issued or assumed
as the deferred purchase price of property or services (but excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (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, swaps and similar arrangements; (vii) every obligation of the type
referred to in clauses (i) through (v) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable, directly or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse of time,
or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Depositary" means, with respect to the Debentures issuable or issued in whole
or in part in the form of one or more Global Securities, the Person designated
as Depositary by the Company pursuant to Section 2.3. The initial Depositary
shall be The DTC.
"Dissolution Event" means that as a result of the occurrence and continuation of
a Special Event, the Trust is to be dissolved in accordance with the Trust
Agreement and the Debentures held by the Property Trustee are to be distributed
to the holders of the Trust Securities issued by the Trust pro rata in
accordance with the Trust Agreement.
"DTC" shall mean The Depository Trust Company.
"Event of Default" means, with respect to the Debentures, any event specified in
Section 7.1 , which has continued for the period of time, if any, and after the
giving of the notice, if any, therein designated.
6
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
statute, in each case as amended from time to time.
"Extended Interest Payment Period" shall have the meaning set forth in Section
4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve System.
"First Preferred Securities" means the 10 1/4% Cumulative Trust Preferred
Securities of BankUnited Capital.
"Generally Accepted Accounting Principles" means such accounting principles as
are generally accepted at the time of any computation required hereunder.
"Global Security" means a Debenture evidencing all or part of the Debentures,
issued to the Depositary or its nominee, and registered in the name of such
Depositary or its nominee.
"Governmental Obligations" means securities that are (i) direct obligations of
the United States of America for the payment of which its full faith and credit
is pledged; or (ii) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depositary receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar import, refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision.
"Indenture" means this instrument as originally executed or as it may from time
to time be supplemented or amended by one or more indentures supplemental hereto
entered into in accordance with the terms hereof.
"Interest Payment Date" has the meaning assigned to such term in Section 2.4(a).
"Investment Company Act" means the Investment Company Act of 1940, and any
statute successor thereto, in each case as amended from time to time.
7
<PAGE>
"Investment Company Event" means the receipt by the Trust of an Opinion of
Counsel, rendered by a law firm experienced in such matters, to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
the Trust is or shall be considered an "investment company" that is required to
be registered under the Investment Company Act, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature and on which the
principal shall be due and payable together with all accrued and unpaid interest
thereon including Compounded Interest and Additional Interest, if any.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Controller or an
Assistant Controller or the Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee. Any Officers' Certificate delivered with respect
to compliance with a condition or covenant provided for in this Indenture 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 an opinion in writing of legal counsel, who may be an
employee of or counsel for the Company, that is delivered to the Trustee in
accordance with the terms hereof.
"Optional Redemption Price" means, with respect to any Junior Subordinated
Debenture, a price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest thereon to the date of redemption.
"Outstanding" when used with reference to the Debentures, means, subject to the
provisions of Section 10.4, as of any particular time, all Debentures
theretofore authenticated and delivered by
8
<PAGE>
the Trustee under this Indenture, except (a) Debentures theretofore canceled by
the Trustee or any paying agent, or delivered to the Trustee or any paying agent
for cancellation or that have previously been canceled; (b) Debentures or
portions thereof for the payment or redemption of which moneys or Governmental
Obligations in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as its
own paying agent); provided, however, that if such Debentures or portions of
such Debentures are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in Article III or provision
satisfactory to the Trustee shall have been made for giving such notice; (c)
Debentures in lieu of or in substitution for which other Debentures shall have
been authenticated and delivered pursuant to the terms of Section 2.6 and (d)
Debentures paid pursuant to Section 2.8.
"Person" means any individual, corporation, partnership, joint-venture, trust,
joint-stock company, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment" means the place or places where the principal of and interest
on the Debentures are payable in accordance with the terms of this Indenture.
"Predecessor Debenture" means every previous Debenture evidencing all or a
portion of the same debt as that evidenced by such particular Debenture; and,
for the purposes of this definition, any Debenture authenticated and delivered
under Section 2.8 in lieu of a lost, destroyed or stolen Debenture shall be
deemed to evidence the same debt as the lost, destroyed or stolen Debenture.
"Preferred Securities" means undivided beneficial interests in the assets of the
Trust which rank pari passu with Common Securities issued by the Trust;
provided, however, that upon the occurrence of an Event of Default, the rights
of holders of Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means the Preferred Securities Guarantee, as
amended from time to time, by and between the Company, as guarantor, and the
Trustee, executed and delivered for the benefit of the Holders of the Preferred
Securities.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Quotation Agent" means the Reference Treasury Dealer appointed by the Company.
"Reference Treasury Dealer" means (i) [Paine Webber] and respective successors;
PROVIDED, HOWEVER that if the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer; and (ii) any
other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Company.
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"Redemption Price" means, either the Optional Redemption Price or the Special
Event Redemption Price, as applicable.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any prepayment date, the average, as determined by the
Debenture Trustee, of the bid and asked price for the Comparable Treasury Issue
(expressed in each case as 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 prepayment date.
"Responsible Officer" when used with respect to the Trustee means any vice
president, any assistant vice president, any assistant secretary, any assistant
treasurer, any trust officer, any corporate trust officer or any other officer
or assistant officer of the Trustee customarily performing functions similar to
those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of his
or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means March 31, 2028.
"Securities Act" means the Securities Act of 1933, or any successor statute, in
each case as amended from time to time.
"Senior Debt" means the principal of (and premium, if any) and interest, if any
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under Section 1111 (b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Company; (ii) any Debt of the Company to any of its subsidiaries; and (iii) any
Debt to any employee of the Company.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
"Special Event" means a Tax Event, an Investment Company Event or a Capital
Treatment Event.
"Special Event Redemption Price" means, with respect to any Junior Subordinated
Debenture, a price equal to the greater of (A) 100% of the principal amount
thereof or (B) the sum, as determined by a Quotation Agent, of the present
values of 100% of the principal amount of Junior Subordinated Debentures,
together with scheduled payments of interest on the Junior Subordinated
Debentures from the prepayment date to and including March 31, 2003, discounted
to the prepayment date on a quarterly basis (assuming a 360-day year consisting
of twelve 30-day
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months) at the Adjusted Treasury Rate (as defined herein) plus accrued interest
thereon to the date of prepayment.
"Subordinated Debt" means the principal of (and premium, if any) and interest,
if any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of this Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Debentures), except that
Subordinated Debt shall not include debentures sold by the Company to BankUnited
Capital or to the holders of First Preferred Securities of BankUnited Capital
which shall be pari passu with the Debentures.
"Subsidiary" means, with respect to any Person, (i) any corporation at least a
majority of whose outstanding Voting Stock shall at the time be owned, directly
or indirectly, by such Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries; (ii) any general partnership, joint
venture, trust or similar entity, at least a majority of whose outstanding
partnership or similar interests shall at the time be owned by such Person, or
by one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; and (iii) any limited partnership of which such Person or any of
its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel, rendered by
a law firm experienced in such matters, to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or shall be within 90 days after the
date of such Opinion of Counsel, subject to United States federal income tax
with respect to income received or accrued on the Debentures; (ii) interest
payable by the Company on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, shall not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes; or (iii) the
Trust is, or shall be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges. The Trust or the Company shall request and receive
such Opinion of Counsel with regard to such matters within a reasonable period
of time after the Trust or the Company shall have become aware of the possible
occurrence of any of the events described in clauses (i) through (iii) above.
"Trust" means BankUnited Capital III, a Delaware statutory business trust
created by the Trust Agreement.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
_________, 1998, of the Trust, as amended, modified or supplemented in
accordance with the applicable provisions
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thereof, among the trustees of the trust named therein, the Company, as
depositor, and the holders from time to time of undivided beneficial ownership
interests in the assets of the Trust, including all exhibits thereto, including,
for all purposes of the 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 the Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trustee" means The Bank of New York and, subject to the provisions of Article
IX, shall also include its successors and assigns, and, if at any time there is
more than one Person acting in such capacity hereunder, "Trustee" shall mean
each such Person.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, subject
to the provisions of Sections 11.1, 11.2, and 12.1 and any statute successor
thereto, in each case as amended from time to time.
"Trust Securities" means the Common Securities and Preferred Securities,
collectively.
"Voting Stock" as applied to stock of any Person, means shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person having ordinary voting power for the election of a majority of
the directors (or the equivalent) of such Person, other than shares, interests,
participations or other equivalents having such power only by reason of the
occurrence of a contingency.
ARTICLE II
ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION AND EXCHANGE
OF THE DEBENTURES
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT.
There is hereby authorized Debentures designated the "____% Junior Subordinated
Deferrable Interest Debentures due March 31, 2028," limited in aggregate
principal amount to $86,250,000 which amount shall be as set forth in any
written order of the Company for the authentication and delivery of Debentures
pursuant to Section 2.5.
SECTION 2.2 MATURITY.
(a) The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
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(ii) if the Company elects to accelerate the Maturity Date
to be a date prior to the Scheduled Maturity Date in
accordance with Section 2.2(b), the Accelerated
Maturity Date.
(b) If a Tax Event occurs, the Company will have the right prior
to the termination of the Trust, subject to the Company having
received prior regulatory approval if then required under
applicable capital guidelines or regulatory policies, to
accelerate the Maturity Date of the Junior Subordinated
Debentures to the minimum extent required in order to allow or
the payments of interest in respect of the Junior Subordinated
Debentures to continue to be tax deductible, but in no event
shall the resulting maturity of the Junior Subordinated
Debentures be less than 15 years from the date of original
issuance thereof. The Maturity Date shall be accelerated only,
if in the opinion of counsel to the Company experienced in
such matters, (a) after accelerating the Maturity Date,
interest paid on the Junior subordinated Debentures will be
deductible for United States federal income tax purposes and
(b) accelerating the Maturity Date will not result in a
taxable event to the holders of the Debentures.
(c) If the Company elects to accelerate the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice
to the registered holders of the Debentures, the Property
Trustee and the Trust of the acceleration of the Maturity Date
and the Accelerated Maturity Date at least 90 days and no more
than 180 days before the Accelerated Maturity Date.
SECTION 2.3 FORM AND PAYMENT.
The Debentures shall be issued in fully registered certificated form without
interest coupons. Principal and interest on the Debentures issued in
certificated form shall be payable, the transfer of such Debentures shall be
registrable and such Debentures shall be exchangeable for Debentures bearing
identical terms and provisions at the office or agency of the Trustee; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the holder at such address as shall appear in the Debenture
Register or by wire transfer to an account maintained by the holder as specified
in the Debenture Register, provided that the holder provides proper wire
transfer instructions by the regular record date. Notwithstanding the foregoing,
so long as the holder of any Debentures is the Property Trustee, the payment of
the principal of and interest (including Compounded Interest and Additional
Interest, if any) on such Debentures held by the Property Trustee shall be made
at such place and to such account as may be designated by the Property Trustee.
Debentures shall be issuable in whole or in part in the form of one or more
Global Securities and, in such case, the Depositary for such Global Securities
shall be DTC.
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SECTION 2.4 INTEREST.
(a) Each Debenture shall bear interest at the rate of ____% per
annum (the "Coupon Rate") from the original date of issuance
until the principal thereof becomes due and payable, and on
any overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) on any overdue
installment of interest at the Coupon Rate, compounded
quarterly, payable (subject to the provisions of Article IV)
quarterly in arrears on March 31, June 30, September 30, and
December 31 of each year (each, an "Interest Payment Date")
commencing on June 30, 1998 to the Person in whose name such
Debenture or any Predecessor Debenture is registered, at the
close of business on the regular record date for such interest
installment, which shall be the fifteenth day of the last
month of the calendar quarter.
(b) The amount of interest payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day
months. Except as provided in the following sentence, the
amount of interest payable for any period shorter or longer
than a full quarterly period for which interest is computed,
shall be computed on the basis of the actual number of days
elapsed in such period. In the event that any date on which
interest is payable on the Debentures is not a Business Day,
then payment of interest payable on such date shall be made on
the next succeeding day which is a Business Day (and without
any interest or other payment in respect of any such delay),
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.
(c) If, at any time while the Property Trustee is the holder of
any Debentures, the Trust or the Property Trustee is required
to pay any taxes, duties, assessments or governmental charges
of whatever nature (other than withholding taxes) imposed by
the United States, or any other taxing authority, then, in any
case, the Company shall pay as additional interest
("Additional Interest") on the Debentures held by the Property
Trustee, such additional amounts as shall be required so that
the net amounts received and retained by the Trust and the
Property Trustee after paying such taxes, duties, assessments
or other governmental charges shall be equal to the amounts
the Trust and the Property Trustee would have received had no
such taxes, duties, assessments or other governmental charges
been imposed.
SECTION 2.5 EXECUTION AND AUTHENTICATIONS.
(a) The Debentures shall be signed on behalf of the Company by its
Chief Executive Officer, President or one of its Vice
Presidents, under its corporate seal attested by its Secretary
or one of its Assistant Secretaries. Signatures may be in the
form of a manual or facsimile signature. The Company may use
the facsimile signature
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of any Person who shall have been a Chief Executive Officer,
President or Vice President thereof, or of any Person who
shall have been a Secretary or Assistant Secretary thereof,
notwithstanding the fact that at the time the Debentures shall
be authenticated and delivered or disposed of such Person
shall have ceased to be the Chief Executive Officer, President
or a Vice President, or the Secretary or an Assistant
Secretary, of the Company. The seal of the Company may be in
the form of a facsimile of such seal and may be impressed,
affixed, imprinted or otherwise reproduced on the Debentures.
The Debentures may contain such notations, legends or
endorsements required by law, stock exchange rule or usage.
Each Debenture shall be dated the date of its authentication
by the Trustee.
(b) A Debenture shall not be valid until authenticated manually by
an authorized signatory of the Trustee, or by an
Authenticating Agent. Such signature shall be conclusive
evidence that the Debenture so authenticated has been duly
authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture.
(c) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Debentures
executed by the Company to the Trustee for authentication,
together with a written order of the Company for the
authentication and delivery of such Debentures signed by its
Chief Executive Officer, President or any Vice President and
its Secretary or any Assistant Secretary, and the Trustee in
accordance with such written order shall authenticate and make
available for delivery such Debentures.
(d) In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such
Debentures, the Trustee shall be entitled to receive, and
(subject to Section 9.1) shall be fully protected in relying
upon, an Opinion of Counsel stating that the form and terms
thereof have been established in conformity with the
provisions of this Indenture.
(e) The Trustee shall not be required to authenticate such
Debentures if the issue of such Debentures pursuant to this
Indenture shall affect the Trustee's own rights, duties or
immunities under the Debentures and this Indenture or
otherwise in a manner that is not reasonably acceptable to the
Trustee.
SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE.
(a) Debentures may be exchanged upon presentation thereof at the
office or agency of the Company designated for such purpose,
for other Debentures and for a like aggregate principal
amount, upon payment of a sum sufficient to cover any tax or
other governmental charge in relation thereto, all as provided
in this Section 2.6. In respect of any Debentures so
surrendered for exchange, the Company shall execute, the
Trustee shall authenticate and such office or agency shall
deliver in
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exchange therefor the Debenture or Debentures that the
Debenture holder making the exchange shall be entitled to
receive, bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose or such other location
designated by the Company a register or registers (herein
referred to as the "Debenture Register") in which, subject to
such reasonable regulations as it may prescribe, the Company
shall register the Debentures and the transfers of Debentures
as in this Article II provided and which at all reasonable
times shall be open for inspection by the Trustee. The
registrar for the purpose of registering Debentures and
transfer of Debentures as herein provided shall be appointed
as authorized by Board Resolution (the "Debenture Registrar").
Upon surrender for transfer of any Debenture at the office or
agency of the Company designated for such purpose, the Company
shall execute, the Trustee shall authenticate and such office
or agency shall make available for delivery in the name of the
transferee or transferees a new Debenture or Debentures for a
like aggregate principal amount. All Debentures presented or
surrendered for exchange or registration of transfer, as
provided in this Section 2.6, shall be accompanied (if so
required by the Company or the Debenture Registrar) by a
written instrument or instruments of transfer, in form
satisfactory to the Company or the Debenture Registrar, duly
executed by the registered holder or by such holder's duly
authorized attorney in writing.
(c) No service charge shall be made for any exchange or
registration of transfer of Debentures, or issue of new
Debentures in case of partial redemption, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge in relation thereto, other than exchanges
pursuant to Section 2.7, Section 3.5(b) and Section 11.4 not
involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period
beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of less than all the
Outstanding Debentures and ending at the close of business on
the day of such mailing; nor (ii) to register the transfer of
or exchange any Debentures or portions thereof called for
redemption.
(e) Notwithstanding any other provision of this Indenture,
transfers and exchanges of Debentures and beneficial interests
in a Global Security shall be made only in accordance with
this Section 2.6(e).
(i) A Debenture that is not a Global Security may be
transferred, in whole or in part, to a Person who
takes delivery in the form of another Debenture that
is not a Global Security as provided in this Section
2.6.
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(ii) A beneficial interest in a Global Security may be
exchange for a Debenture that is not a Global
Security as provided in Section 2.7A.
SECTION 2.7 TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Company may execute, and
the Trustee shall authenticate and deliver, temporary Debentures (printed,
lithographed, or typewritten). Such temporary Debentures shall be substantially
in the form of the definitive Debentures in lieu of which they are issued, but
with such omissions, insertions and variations as may be appropriate for
temporary Debentures, all as may be determined by the Company. Every temporary
Debenture shall be executed by the Company and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with like
effect, as the definitive Debentures. Without unnecessary delay the Company
shall execute and shall furnish definitive Debentures and thereupon any or all
temporary Debentures may be surrendered in exchange therefor (without charge to
the holders), at the office or agency of the Company designated for such
purpose, and the Trustee shall authenticate and such office or agency shall
deliver in exchange for such temporary Debentures an equal aggregate principal
amount of definitive Debentures, unless the Company advises the Trustee to the
effect that definitive Debentures need not be executed and furnished until
further notice from the Company. Until so exchanged, the temporary Debentures
shall be entitled to the same benefits under this Indenture as definitive
Debentures authenticated and delivered hereunder.
SECTION 2.7A GLOBAL SECURITIES.
(a) Each Global Security issued under this Indenture shall be
registered in the name of the Depositary designated by the
Company 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.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for
Debentures 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 (i) such Depositary advises the Trustee
in writing that such Depositary is no longer willing or able
to properly discharge its responsibilities as Depositary with
respect to such Global Security, and the Company is unable to
locate a qualified successor, (ii) the Company executes and
delivers to the Trustee a Company Order stating that the
Company elects to terminate the book-entry system through the
Depositary, or (iii) there shall have occurred and be
continuing an Event of Default.
(c) If any Global Security is to be exchanged for other Debentures
or cancelled in whole, it shall be surrendered by or on behalf
of the Depositary or its nominee to
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the Securities Registrar for exchange or cancellation as
provided in this Article II. If any Global Security is to be
exchanged for other Debentures or cancelled in part, or if
another Security is to be exchanged in whole or in part for a
beneficial interest in any Global Security, then either (i)
such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article II or (ii) the
principal amount thereof shall be reduced or increased by an
amount equal to the portion thereof to be so exchanged or
cancelled, or equal to the principal amount of such Debenture
to be so exchanged for a beneficial interest therein, as the
case may be, by means of an appropriate adjustment made on the
records of the Securities Registrar, whereupon the Trustee, in
accordance with Applicable Procedures, shall instruct the
Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Security by the
Depositary, accompanied by registration instructions, the
Trustee shall, subject to Section 2.6 and as otherwise
provided in this Article II, authenticate and make available
for delivery any Debentures issuable in exchange for such
Global Security (or any portion thereof) in accordance with
the instructions of the Depositary. The Trustee shall not be
liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying
on, such instructions.
(d) Every Debenture 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
Article II, Section 3.5 or Article IX or otherwise, shall be
authenticated and delivered in the form of, and shall be, a
Global Security, unless such Debenture is registered in the
name of a Person other than the Depositary for such Global
Security or a nominee thereof.
(e) The Depositary or its nominee, as the registered owner of a
Global Security, shall be the Holder of such Global Security
for all purposes under this Indenture and the Debenture, and
owners of beneficial interests in a Global Security shall hold
such interests pursuant to Applicable Procedures. Accordingly,
any such owner's beneficial interest in a Global Security
shall be shown only on, and the transfer of such interest
shall be effected only through, records maintained by the
Depositary or its nominee or agent. Neither the Trustee nor
the Securities Registrar shall have any liability in respect
of any transfers effected by the Depositary.
(f) The rights of owners of beneficial interests in a Global
Security shall be exercised only through the Depositary and
shall be limited to those established by law and agreements
between such owners and the Depositary and/or its Agent
Members.
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SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES..
(a) In case any temporary or definitive Debenture shall become
mutilated or be destroyed, lost or stolen, the Company
(subject to the next succeeding sentence) shall execute, and
upon the Company's request the Trustee (subject as aforesaid)
shall authenticate and make available for delivery, a new
Debenture bearing a number not contemporaneously outstanding,
in exchange and substitution for the mutilated Debenture, or
in lieu of and in substitution for the Debenture so destroyed,
lost or stolen. In every case the applicant for a substituted
Debenture shall furnish to the Company and the Trustee such
security or indemnity as may be required by them to save each
of them harmless, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company and the
Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Debenture and of the
ownership thereof. The Trustee may authenticate any such
substituted Debenture and make available for delivery the same
upon the written request or authorization of any officer of
the Company. Upon the issuance of any substituted Debenture,
the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees
and expenses of the Trustee) connected therewith. In case any
Debenture that has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Debenture, pay or authorize
the payment of the same (without surrender thereof except in
the case of a mutilated Debenture) if the applicant for such
payment shall furnish to the Company and the Trustee such
security or indemnity as they may require to save them
harmless, and, in case of destruction, loss or theft, evidence
to the satisfaction of the Company and the Trustee of the
destruction, loss or theft of such Debenture and of the
ownership thereof.
(b) Every replacement Debenture issued pursuant to the provisions
of this Section 2.8 shall constitute an additional contractual
obligation of the Company whether or not the mutilated,
destroyed, lost or stolen Debenture shall be found at any
time, or be enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately
with any and all other Debentures duly issued hereunder. All
Debentures shall be held and owned upon the express condition
that the foregoing provisions are exclusive with respect to
the replacement or payment of mutilated, destroyed, lost or
stolen Debentures, and shall preclude (to the extent lawful)
any and all other rights or remedies, notwithstanding any law
or statute existing or hereafter enacted to the contrary with
respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
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SECTION 2.9 CANCELLATION.
All Debentures surrendered for the purpose of payment, redemption, exchange or
registration of transfer shall, if surrendered to the Company or any paying
agent, be delivered to the Trustee for cancellation, or, if surrendered to the
Trustee, shall be canceled by it, and no Debentures shall be issued in lieu
thereof except as expressly required or permitted by any of the provisions of
this Indenture. On request of the Company at the time of such surrender, the
Trustee shall deliver to the Company canceled Debentures held by the Trustee. In
the absence of such request the Trustee may dispose of canceled Debentures in
accordance with its standard procedures. If the Company shall otherwise acquire
any of the Debentures, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.10 BENEFIT OF INDENTURE.
Nothing in this Indenture or in the Debentures, express or implied, shall give
or be construed to give to any Person, other than the parties hereto and the
holders of the Debentures (and, with respect to the provisions of Article XVI,
the holders of Senior Indebtedness) any legal or equitable right, remedy or
claim under or in respect of this Indenture, or under any covenant, condition or
provision herein contained; all such covenants, conditions, and provisions being
for the sole benefit of the parties hereto and of the holders of the Debentures
(and, with respect to the provisions of Article XVI, the holders of Senior
Indebtedness).
SECTION 2.11 AUTHENTICATION AGENT.
(a) So long as any of the Debentures remain Outstanding there may
be an Authenticating Agent for any or all such Debentures,
which the Trustee shall have the right to appoint. Said
Authenticating Agent shall be authorized to act on behalf of
the Trustee to authenticate Debentures issued upon exchange,
transfer or partial redemption thereof, and Debentures so
authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder. All references
in this Indenture to the authentication of Debentures by the
Trustee shall be deemed to include authentication by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall be a corporation that has
a combined capital and surplus, as most recently reported or
determined by it, sufficient under the laws of any
jurisdiction under which it is organized or in which it is
doing business to conduct a trust business, and that is
otherwise authorized under such laws to conduct such business
and is subject to supervision or examination by federal or
state authorities. If at any time any Authenticating Agent
shall cease to be eligible in accordance with these
provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the
Company. The Trustee may at any time (and
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upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination
to such Authenticating Agent and to the Company. Upon
resignation, termination or cessation of eligibility of any
Authenticating Agent, the Trustee may appoint an eligible
successor Authenticating Agent acceptable to the Company. Any
successor Authenticating Agent, upon acceptance of its
appointment hereunder, shall become vested with all the
rights, powers and duties of its predecessor hereunder as if
originally named as an Authenticating Agent pursuant hereto.
SECTION 2.12 RIGHT OF SET-OFF.
With respect to the Debentures initially issued to the Trust,
notwithstanding anything to the contrary herein, the Company shall have the
right to set-off any payment it is otherwise required to make in respect of any
such Debenture to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Preferred
Securities Guarantee relating to such Debenture or to a holder of Preferred
Securities pursuant to an action undertaken under Section 7.8 of this Indenture.
SECTION 2.13 CUSIP NUMBERS.
The Company in issuing the Debentures may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Debentureholders; PROVIDED that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission or such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION OF DEBENTURES
SECTION 3.1 REDEMPTION.
Subject to the Company having received prior regulatory approval, if then
required under applicable capital guidelines or regulatory policies, the Company
may redeem the Debentures issued hereunder on and after the dates set forth in
and in accordance with the terms of this Article III.
SECTION 3.2 SPECIAL EVENT REDEMPTION.
Subject to the Company having received prior regulatory approval, if then
required under applicable capital guidelines or regulatory policies, if prior to
March 31, 2003 a Special Event has occurred and is continuing, then,
notwithstanding Section 3.3, the Company shall have the
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right upon not less than 30 days nor more than 60 days notice to the holders of
the Debentures to redeem the Debentures, in whole but not in part, for cash
within 180 days following the occurrence of such Special Event (the "180-Day
Period") at a redemption price equal to the Special Event Redemption Price,
provided that if at the time there is available to the Company the opportunity
to eliminate, within the 180-Day Period, a Tax Event by taking some ministerial
action (a "Ministerial Action"), such as filing a form or making an election, or
pursuing some other similar reasonable measure which has no adverse effect on
the Company, the Trust or the holders of the Trust Securities issued by the
Trust, the Company shall pursue such Ministerial Action in lieu of redemption,
and, provided further, that the Company shall have no right to redeem the
Debentures while the Trust is pursuing any Ministerial Action pursuant to its
obligations under the Trust Agreement. The Special Event Redemption Price shall
be paid prior to 12:00 noon, New York time, on the date of such redemption or
such earlier time as the Company determines, provided that the Company shall
deposit with the Trustee an amount sufficient to pay the Special Event
Redemption Price by 10:00 a.m., New York time, on the date such Special Event
Redemption Price is to be paid.
SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY.
Except as otherwise may be specified in this Indenture, the Company shall have
the right to redeem the Debentures, in whole or in part, from time to time, on
or after March 31, 2003, at the Optional Redemption Price. Any redemption
pursuant to this Section 3.3 shall be made upon not less than 30 days nor more
than 60 days notice to the holder of the Debentures, at the Optional Redemption
Price. If the Debentures are only partially redeemed pursuant to this Section
3.3, the Debentures shall be redeemed pro rata or by lot or in such other manner
as the Trustee shall deem appropriate and fair in its discretion. The Optional
Redemption Price shall be paid prior to 12:00 noon, New York time, on the date
of such redemption or at such earlier time as the Company determines provided
that the Company shall deposit with the Trustee an amount sufficient to pay the
Optional Redemption Price by 10:00 a.m., New York time, on the date such
Optional Redemption Price is to be paid.
SECTION 3.4 NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to
redeem all or a portion of the Debentures in accordance with
the right reserved so to do, the Company shall, or shall cause
the Trustee to, upon receipt of 45 days written notice from
the Company, give notice of such redemption to holders of the
Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and
not more than 60 days before the date fixed for redemption to
such holders at their last addresses as they shall appear upon
the Debenture Register unless a shorter period is specified in
the Debentures to be redeemed. Any notice that is mailed in
the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the registered holder
receives the notice. In any case, failure duly to give such
notice to the holder of any Debenture designated for
redemption in whole or in part, or any defect in the
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notice, shall not affect the validity of the proceedings for
the redemption of any other Debentures. In the case of any
redemption of Debentures prior to the expiration of any
restriction on such redemption provided in the terms of such
Debentures or elsewhere in this Indenture, the Company shall
furnish the Trustee with an Officers' Certificate evidencing
compliance with any such restriction. Each such notice of
redemption shall identify the Debenture to be redeemed
(including CUSIP numbers, if any) and shall specify the date
fixed for redemption and the Redemption Price and shall state
that payment of the Redemption Price shall be made at the
office or agency of the Company or at the Corporate Trust
Office, upon presentation and surrender of such Debentures,
that interest accrued to the date fixed for redemption shall
be paid as specified in said notice and that from and after
said date interest shall cease to accrue. If less than all the
Debentures are to be redeemed, the notice to the holders of
the Debentures shall specify the particular Debentures to be
redeemed. If the Debentures are to be redeemed in part only,
the notice shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the
redemption date, upon surrender of such Debenture, a new
Debenture or Debentures in principal amount equal to the
unredeemed portion thereof shall be issued.
(b) If less than all the Debentures are to be redeemed, the
Company shall give the Trustee at least 45 days notice in
advance of the date fixed for redemption as to the aggregate
principal amount of Debentures to be redeemed, and thereupon
the Trustee shall select, by lot or in such other manner as it
shall deem appropriate and fair in its discretion, the portion
or portions (equal to $25 or any integral multiple thereof) of
the Debentures to be redeemed and shall thereafter promptly
notify the Company in writing of the numbers of the Debentures
to be redeemed, in whole or in part. The Company may, if and
whenever it shall so elect pursuant to the terms hereof, by
delivery of instructions signed on its behalf by its President
or any Vice President, instruct the Trustee or any paying
agent to call all or any part of the Debentures for redemption
and to give notice of redemption in the manner set forth in
this Section 3.4, such notice to be in the name of the Company
or its own name as the Trustee or such paying agent may deem
advisable. In any case in which notice of redemption is to be
given by the Trustee or any such paying agent, the Company
shall deliver or cause to be delivered to, or permit to remain
with, the Trustee or such paying agent, as the case may be,
such Debenture Register, transfer books or other records, or
suitable copies or extracts therefrom, sufficient to enable
the Trustee or such paying agent to give any notice by mail
that may be required under the provisions of this Section 3.4.
SECTION 3.5 PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been
completed as above provided, the Debentures or portions of
Debentures to be redeemed specified in such notice shall
become due and payable on the date and at the place stated in
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such notice at the applicable Redemption Price, and interest
on such Debentures or portions of Debentures shall cease to
accrue on and after the date fixed for redemption, unless the
Company shall default in the payment of such Redemption Price
with respect to any such Debenture or portion thereof. On
presentation and surrender of such Debentures on or after the
date fixed for redemption at the place of payment specified in
the notice, said Debentures shall be paid and redeemed at the
Redemption Price (but if the date fixed for redemption is an
interest payment date, the interest installment payable on
such date shall be payable to the registered holder at the
close of business on the applicable record date pursuant to
Section 2.4).
(b) Upon presentation of any Debenture that is to be redeemed in
part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debenture is
presented shall make available for delivery to the holder
thereof, at the expense of the Company, a new Debenture of
authorized denomination in principal amount equal to the
unredeemed portion of the Debenture so presented.
SECTION 3.6 NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD.
So long as no Event of Default has occurred and is continuing, the Company shall
have the right, at any time and from time to time during the term of the
Debentures, to defer payments of interest by extending the interest payment
period of such Debentures for a period not exceeding 20 consecutive quarters
(the "Extended Interest Payment Period"), during which Extended Interest Payment
Period no interest shall be due and payable; provided that no Extended Interest
Payment Period may extend beyond the Maturity Date. Interest, the payment of
which has been deferred because of the extension of the interest payment period
pursuant to this Section 4.1, shall bear interest thereon at the rate of ____%
per annum, compounded quarterly during the Extended Interest Payment Period (the
"Compounded Interest"). At the end of the Extended Interest Payment Period, the
Company shall calculate (and deliver such calculation to the Trustee) and pay
all interest accrued and unpaid on the Debentures, including any Additional
Interest and Compounded Interest (together, "Deferred Interest") that shall be
payable to the holders of the Debentures in whose names the Debentures are
registered in the Debenture Register on the first record date after the end of
the Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive
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quarters, or extend beyond the Maturity Date of the Debentures. Upon the
termination of any Extended Interest Payment Period and upon the payment of all
Deferred Interest then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing requirements. No interest shall be due
and payable during an Extended Interest Payment Period, except at the end
thereof, but the Company may prepay at any time all or any portion of the
interest accrued during an Extended Interest Payment Period.
SECTION 4.2 NOTICE OF EXTENSION.
(a) If the Property Trustee is the only registered holder of the
Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give written notice
to the Administrative Trustees, the Property Trustee and the
Trustee of its selection of such Extended Interest Payment
Period one Business Day before the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities
issued by the Trust are payable; or (ii) the date the Trust is
required to give notice of the record date or the date such
Distributions are payable, to The Nasdaq Stock Market's
National Market or other applicable self-regulatory
organization or to holders of the Preferred Securities issued
by the Trust, but in any event at least one Business Day
before such record date.
(b) If the Property Trustee is not the only holder of the
Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give the holders of
the Debentures and the Trustee written notice of its selection
of such Extended Interest Payment Period at least one Business
Day before the earlier of (i) the next succeeding Interest
Payment Date; or (ii) the date the Company is required to give
notice of the record or payment date of such interest payment
to The Nasdaq Stock Market's National Market or other
applicable self-regulatory organization or to holders of the
Debentures.
(c) The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as
one of the 20 quarters permitted in the Minimum Extended
Interest Payment Period permitted under Section 4.1.
SECTION 4.3 LIMITATION ON TRANSACTIONS.
If (i) the Company shall exercise its right to defer payment of interest as
provided in Section 4.1; (ii) there shall have occurred any Event of Default; or
(iii) the Company is in default with respect to its obligations under the
Preferred Securities Guarantee, then (a) the Company will not, and will not
permit any Subsidiary to, 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 (other than (1) the reclassification of any class of
the Company's capital stock into another class of its capital stock; (2)
dividends or distributions payable in any class of the Company's common stock,
(3) any declaration of a dividend in connection with the implementation of a
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shareholder 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, (4)
payments under the Preferred Securities Guarantee and (5) purchases of the
Company's common stock related to the rights under any of the Company's benefit
plans for its or its subsidiaries' directors, officers or employees); (b) the
Company will not, and will not permit any Subsidiary to, make any payment of
interest, principal or premium, if any, or repay, repurchase or redeem any debt
securities issued by the Company which rank pari passu with or junior to the
Debentures 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 to the Debentures; provided, however,
that notwithstanding the foregoing the Company may make payments pursuant to its
obligations under the Preferred Securities Guarantee; and (c) the Company shall
not redeem, purchase or acquire less than all of the outstanding Debentures or
any of the Preferred Securities.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall duly and punctually pay or cause to be paid the principal of
and interest on the Debentures at the time and place and in the manner provided
herein.
SECTION 5.2 MAINTENANCE OF AGENCY.
So long as any of the Debentures remain Outstanding, the Company shall maintain
an office or agency in the Place of Payment where (i) Debentures may be
presented for payment; (ii) Debentures may be presented as hereinabove
authorized for registration of transfer and exchange; and (iii) notice and
demands to or upon the Company in respect of the Debentures and this Indenture
may be given or served, such designation to continue with respect to such office
or agency until the Company shall, by written notice signed by its President or
a Vice President and delivered to the Trustee, designate some other office or
agency for such purposes or any of them. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
notices and demands. In addition to any such office or agency, the Company may
from time to time designate one or more offices or agencies where the Debentures
may be presented for registration or transfer and for exchange in the manner
provided herein, and the Company may from time to time rescind such designation
as the Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain any such office or agency in the Place of Payment for
such purposes. The Company shall give the Trustee prompt written notice of any
such designation or rescission thereof.
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SECTION 5.3 PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents for the
Debentures, other than the Trustee, the Company shall cause
each such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent
for the payment of the principal of or interest on
the Debentures (whether such sums have been paid to
it by the Company or by any other obligor of such
Debentures) in trust for the benefit of the Persons
entitled thereto;
(ii) that it shall give the Trustee prompt written notice
of any failure by the Company (or by any other
obligor of such Debentures) to make any payment of
the principal of or interest on the Debentures when
the same shall be due and payable;
(iii) that it shall, at any time during the continuance of
any failure referred to in the preceding paragraph
(a)(ii) above, upon the written request of the
Trustee, forthwith pay to the Trustee all sums so
held in trust by such paying agent; and
(iii) that it shall perform all other duties of paying
agent as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect
to the Debentures, it shall on or before each due date of the
principal of or interest on such Debentures, set aside,
segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay such principal or
interest so becoming due on Debentures until such sums shall
be paid to such Persons or otherwise disposed of as herein
provided and shall promptly notify the Trustee of such action,
or any failure (by it or any other obligor on such Debentures)
to take such action. Whenever the Company shall have one or
more paying agents for the Debentures, it shall, prior to each
due date of the principal of or interest on any Debentures,
deposit with the paying agent a sum sufficient to pay the
principal or interest so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such
principal or interest, and (unless such paying agent is the
Trustee) the Company shall promptly notify the Trustee of this
action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the contrary,
(i) the agreement to hold sums in trust as provided in this
Section 5.3 is subject to the provisions of Section 13.3 and
13.4; and (ii) the Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or
for any other purpose, pay, or direct any paying agent to pay,
to the Trustee all sums held in trust by the
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Company or such paying agent, such sums to be held by the
Trustee upon the same terms and conditions as those upon which
such sums were held by the Company or such paying agent; and,
upon such payment by any paying agent to the Trustee, such
paying agent shall be released from all further liability with
respect to such money.
SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, shall appoint, in the manner provided in Section 9.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS.
The Company shall not, while any of the Debentures remain outstanding,
consolidate with, or merge into, or merge into itself, or convey, transfer or
lease all or substantially all of its property and assets to any other entity
and no entity shall consolidate with or merger into the Company or convey,
transfer or lease substantially all of its properties and assets to the Company,
unless the provisions of Article XII hereof are complied with.
SECTION 5.6 LIMITATION ON TRANSACTIONS.
If Debentures are issued to the Trust or a trustee of the Trust in connection
with the issuance of Trust Securities by the Trust and (i) there shall have
occurred any event that would constitute an Event of Default; (ii) the Company
shall be in default with respect to its payment of any obligations under the
Preferred Securities Guarantee relating to the Trust; or (iii) the Company shall
have given notice of its election to defer payments of interest on such
Debentures by extending the interest payment period as provided in this
Indenture and such period, or any extension thereof, shall be continuing, then
(a) the Company may not, and may not permit any Subsidiary to, declare or pay
any dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
(other than (1) the reclassification of any class of the Company's capital stock
into another class of capital stock, (2) dividends or distributions payable in
any class of the Company's common stock, (3) any declaration of a dividend in
connection with the implementation of a shareholder 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, (4) payments under the Preferred Securities
Guarantee and (5) purchases of the Company's common stock related to the rights
under any of the Company's benefit plans for its or its subsidiaries' directors,
officers or employees); (b) the Company shall not make any payment of interest,
principal or premium, if any, or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior to the Debentures;
provided, however, that the Company may make payments pursuant to its
obligations under the Preferred Securities Guarantee; and (c) the Company shall
not redeem, purchase or acquire less than all of the outstanding Debentures or
any of the Preferred Securities.
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SECTION 5.7 COVENANTS AS TO THE TRUST.
For so long as such Trust Securities of the Trust remain outstanding, the
Company shall (i) maintain 100% direct or indirect ownership of the Common
Securities of the Trust; provided, however, that any permitted successor of the
Company under this Indenture may succeed to the Company's ownership of the
Common Securities; (ii) not voluntarily terminate, wind up or liquidate the
Trust, except upon prior regulatory approval if then so required under
applicable capital guidelines or regulatory policies and use its reasonable
efforts to cause the Trust (a) to remain a business trust, except in connection
with a distribution of Debentures, the redemption of all of the Trust Securities
of the Trust or certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement; and (b) to otherwise continue not to be
treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; and (iii) use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an individual
beneficial interest in the Debentures. In connection with the distribution of
the Debentures to the holders of the Preferred Securities issued by the Trust
upon a Dissolution Event, the Company shall use its best efforts to list such
Debentures on The Nasdaq Stock Market's National Market or on such other
exchange as the Preferred Securities are then listed.
SECTION 5.8 COVENANTS AS TO PURCHASES.
Prior to March 31, 2003, the Company shall not purchase any Debentures, in whole
or in part, from the Trust.
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE
TRUSTEE
SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF DEBENTURE HOLDERS
The Company shall furnish or cause to be furnished to the Trustee (a) within one
Business Day after January and June 30th of each year a list, in such form as
the Trustee may reasonably require, of the names and addresses of the holders of
the Debentures as of such regular record date, provided that the Company shall
not be obligated to furnish or cause to furnish such list at any time that the
list shall not differ in any respect from the most recent list furnished to the
Trustee by the Company; and (b) at such other times as the Trustee may request
in writing within 30 days after the receipt by the Company of any such request,
a list of similar form and content as of a date not more than 15 days prior to
the time such list is furnished; provided, however, that, in either case, no
such list need be furnished if the Trustee shall be the Debenture Registrar.
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SECTION 6.2 PRESERVATION OF INFORMATION COMMUNICATIONS WITH DEBENTUREHOLDERS
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and
addresses of the holders of Debentures contained in the most
recent list furnished to it as provided in Section 6.1 and as
to the names and addresses of holders of Debentures received
by the Trustee in its capacity as registrar for the Debentures
(if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided
in Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Debentureholders with
respect to their rights under this Indenture or under the
Debentures.
SECTION 6.3 REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the Company is required to file the same
with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) that the
Company may be required to file with the Commission pursuant
to Section 13 or Section 15(d) of the Exchange Act; or, if the
Company is not required to file information, documents or
reports pursuant to either of such sections, then to file with
the Trustee and the Commission, in accordance with the rules
and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic
information, documents and reports that may be required
pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules
and regulations.
(b) The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations
prescribed from to time by the Commission, such additional
information, documents and reports with respect to compliance
by the Company with the conditions and covenants provided for
in this Indenture as may be required from time to time by such
rules and regulations.
(c) The Company covenants and agrees to transmit by mail, first
class postage prepaid, or reputable over-night delivery
service that provides for evidence of receipt, to the
Debentureholders, as their names and addresses appear upon the
Debenture Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents
and reports required to be filed by the
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Company pursuant to subsections (a) and (b) of this Section
6.3 as may be required by rules and regulations prescribed
from time to time by the Commission.
(d) 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 Company's
compliance with any of its covenants hereunder (as to which
the Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 6.4 REPORTS BY THE TRUSTEE.
(a) The Trustee shall transmit to Debentureholders 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. If required
by Section 313(a) of the Trust Indenture Act, the Trustee
shall, within sixty days after each May 15 following the date
of this Indenture deliver to Debentureholders a brief report,
dated as of such May 15, which complies with the provisions of
such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Debentureholders, be filed by the Trustee with
each stock exchange, if any, upon which the Debentures are
listed with the Commission and with the Company will promptly
notify the Trustee when any Debentures become listed on any
stock exchange.
SECTION 6.5 STATEMENTS AS TO DEFAULT
(a) The Company will deliver to the Trustee annually, within 120
days after the end of each of its fiscal years, a certificate,
from its principal executive officer, principal financial
officer or principal accounting officer, stating whether or
not to the best knowledge of the signer thereof the Company is
in compliance (without regard to periods of grace or notice
requirements) with all conditions and covenants under this
Indenture, and if the Company shall not be in compliance,
specifying such non-compliance and the nature and status
thereof of which such signer may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible
and in any event within five days after the Company becomes
aware of the occurrence of any Event of Default or an event
which, with notice or the lapse of time or both, would
constitute an Event of Default, an Officers' Certificate
setting forth the details of such Event of Default or Default
and the action which the Company proposes to take with respect
thereto.
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ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
(a) Whenever used herein with respect to the Debentures, "Event of
Default" means any one or more of the following events that
has occurred and is continuing:
(i) the Company defaults in the payment of any
installment of interest upon any of the Debentures,
as and when the same shall become due and payable,
and continuance of such default for a period of 30
days; provided, however, that a valid extension of an
interest payment period by the Company in accordance
with the terms of this Indenture shall not constitute
a default in the payment of interest for this
purpose;
(ii) the Company defaults in the payment of the principal
on the Debentures as and when the same shall become
due and payable whether at maturity, upon redemption,
by declaration or otherwise;
(iii) the Company fails to observe or perform any other of
its covenants or agreements with respect to the
Debentures for a period of 90 days after the date on
which written notice of such failure, requiring the
same to be remedied and stating that such notice is a
"Notice of Default" hereunder, shall have been given
to the Company by the Trustee, by registered or
certified mail, or to the Company and the Trustee by
the holders of at least 25% in principal amount of
the Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (i) commences a voluntary case; (ii)
consents to the entry of an order for relief against
it in an involuntary case; (iii) consents to the
appointment of a Custodian of it or for all or
substantially all of its property; or (iv) makes a
general assignment for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order
under any Bankruptcy Law that (i) is for relief
against the Company in an involuntary case; (ii)
appoints a Custodian of the Company for all or
substantially all of its property; or (iii) orders
the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise
terminated its existence except in connection with
(i) the distribution of Debentures to holders of
Trust Securities in liquidation of their interests in
the Trust; (ii) the redemption of all of the
outstanding
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Trust Securities of the Trust; or (iii) certain
mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the
Debentures shall have already become due and payable, either
the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then Outstanding hereunder,
by notice in writing to the Company (and to the Trustee if
given by such Debentureholders) shall declare the principal of
all the Debentures to be due and payable immediately, and upon
any such declaration the same shall become and shall be
immediately due and payable, notwithstanding anything
contained in this Indenture or in the Debentures.
(c) At any time after the principal of the Debentures shall have
been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the holders of a
majority in aggregate principal amount of the Debentures then
Outstanding hereunder, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its
consequences if: (i) the Company has paid or deposited with
the Trustee a sum sufficient to pay all matured installments
of interest upon all the Debentures and the principal of any
and all Debentures that shall have become due otherwise than
by acceleration (with interest upon such principal, and upon
overdue installments of interest, at the rate per annum
expressed in the Debentures to the date of such payment or
deposit) and the amount payable to the Trustee under Section
9.6; and (ii) any and all Events of Default under this
Indenture, other than the nonpayment of principal on
Debentures that shall not have become due by their terms,
shall have been remedied or waived as provided in Section 7.6.
No such rescission and annulment shall extend to or shall
affect any subsequent default or impair any right consequent
thereon.
(d) In case the Trustee shall have proceeded to enforce any right
with respect to Debentures under this Indenture and such
proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and
in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company
and the Trustee shall continue as though no such proceedings
had been taken.
SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
(a) The Company covenants that (1) in case it shall default in the
payment of any installment of interest on any of the
Debentures, and such default shall have
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continued for a period of 90 Business Days; or (2) in case it
shall default in the payment of the principal of any of the
Debentures when the same shall have become due and payable,
whether upon maturity of the Debentures or upon redemption or
upon declaration or otherwise, then, upon demand of the
Trustee, the Company shall pay to the Trustee, for the benefit
of the holders of the Debentures, the whole amount that then
shall have been become due and payable on all such Debentures
for principal or interest, or both, as the case may be, with
interest upon the overdue principal and (if the Debentures are
held by the Trust or a trustee of the Trust, without
duplication of any other amounts paid by the Trust or trustee
in respect thereof) upon overdue installments of interest at
the rate per annum expressed in the Debentures; and, in
addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, and the amount
payable to the Trustee under Section 9.7.
(b) If the Company shall fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute
any action or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the
Company or other obligor upon the Debentures and collect the
moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or other
obligor upon the Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement,
composition or judicial proceedings affecting the Company or
the creditors or property of either, the Trustee shall have
power to intervene in such proceedings and take any action
therein that may be permitted by the court and shall (except
as may be otherwise provided by law) be entitled to file such
proofs of claim and other papers and documents as may be
necessary or advisable in order to have the claims of the
Trustee and of the holders of the Debentures allowed for the
entire amount due and payable by the Company under this
Indenture at the date of institution of such proceedings and
for any additional amount that may become due and payable by
the Company after such date, and to collect and receive any
moneys or other property payable or deliverable on any such
claim, and to distribute the same after the deduction of the
amount payable to the Trustee under Section 9.7; and any
receiver, assignee or trustee in bankruptcy or reorganization
is hereby authorized by each of the holders of the Debentures
to make such payments to the Trustee, and, in the event that
the Trustee shall consent to the making of such payments
directly to such Debentureholders, to pay to the Trustee any
amount due it under Section 9.7.
(d) All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect
to Debentures, may be enforced by the Trustee
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without the possession of any of such Debentures, or the
production thereof at any trial or other proceeding relating
thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after
provision for payment to the Trustee of any amounts due under
Section 9.7, be for the ratable benefit of the holders of the
Debentures. In case of an Event of Default hereunder, the
Trustee may in its discretion proceed to protect and enforce
the rights vested in it by this Indenture by such appropriate
judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in
this Indenture, or to enforce any other legal or equitable
right vested in the Trustee by this Indenture or by law.
Nothing contained herein shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on
behalf of any Debentureholder any plan of reorganization,
arrangement, adjustment or composition affecting the
Debentures or the rights of any holder thereof or to authorize
the Trustee to vote in respect of the claim of any
Debentureholder in any such proceeding.
SECTION 7.3 APPLICATION OF MONEYS COLLECTED.
Any moneys collected by the Trustee pursuant to this Article VII with respect to
the Debentures shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such moneys on account
of principal or interest, upon presentation of the Debentures, and notation
thereon the payment, if only partially paid, and upon surrender thereof if fully
paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the Company if and
to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon the
Debentures for principal and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Debentures for principal and interest, respectively.
SECTION 7.4 LIMITATION ON SUITS.
(a) No holder of any Debenture shall have any right by virtue or
by availing of any provision of this Indenture to institute
any suit, action or proceeding in equity or at law upon or
under or with respect to this Indenture or for the appointment
of a receiver or trustee, or for any other remedy hereunder,
unless (i) such holder
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previously shall have given to the Trustee written notice of
an Event of Default and of the continuance thereof with
respect to the Debentures specifying such Event of Default, as
hereinbefore provided; (ii) the holders of not less than 25%
in aggregate principal amount of the Debentures then
Outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name
as trustee hereunder; (iii) such holder or holders shall have
offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be
incurred therein or thereby; and (iv) the Trustee for 60 days
after its receipt of such notice, request and offer of
indemnity, shall have failed to institute any such action,
suit or proceeding; and (v) during such 60 day period, the
holders of a majority in principal amount of the Debentures do
not give the Trustee a direction inconsistent with the
request.
(b) Notwithstanding anything contained herein to the contrary or
any other provisions of this Indenture, the right of any
holder of the Debentures to receive payment of the principal
of and interest on the Debentures, as therein provided, on or
after the respective due dates expressed in such Debenture (or
in the case of redemption, on the redemption date), or to
institute suit for the enforcement of any such payment on or
after such respective dates or redemption date, shall not be
impaired or affected without the consent of such holder and by
accepting a Debenture hereunder it is expressly understood,
intended and covenanted by the taker and holder of every
Debenture with every other such taker and holder and the
Trustee, that no one or more holders of Debentures shall have
any right in any manner whatsoever by virtue or by availing of
any provision of this Indenture to affect, disturb or
prejudice the rights of the holders of any other of such
Debentures, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right
under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all holders of
Debentures. For the protection and enforcement of the
provisions of this Section 7.4, each and every Debentureholder
and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 2.8, all powers and
remedies given by this Article VII to the Trustee or to the
Debentureholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers and
remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements
contained in this Indenture or otherwise established with
respect to such Debentures.
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(b) No delay or omission of the Trustee or of any holder of any of
the Debentures to exercise any right or power accruing upon
any Event of Default occurring and continuing as aforesaid
shall impair any such right or power, or shall be construed to
be a waiver of any such default or an acquiescence therein;
and, subject to the provisions of Section 7.4, every power and
remedy given by this Article VII or by law to the Trustee or
the Debentureholders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by
the Debentureholders.
SECTION 7.6 CONTROL BY DEBENTUREHOLDERS.
The holders of a majority in aggregate principal amount of the Debentures at the
time Outstanding, determined in accordance with Section 10.4, shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee; provided, however, that such direction shall not be in conflict
with any rule of law or with this Indenture. Subject to the provisions of
Section 9.1, the Trustee shall have the right to decline to follow any such
direction if the Trustee in good faith shall, by a Responsible Officer or
Officers of the Trustee, determine that the proceeding so directed would involve
the Trustee in personal liability. The holders of a majority in aggregate
principal amount of the Debentures at the time Outstanding affected thereby,
determined in accordance with Section 10.4, may on behalf of the holders of all
of the Debentures waive any past default in the performance of any of the
covenants contained herein and its consequences, except (i) a default in the
payment of the principal of or interest on, any of the Debentures as and when
the same shall become due by the terms of such Debentures otherwise than by
acceleration (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal has been deposited with the
Trustee (in accordance with Section 7.1(c)); (ii) a default in the covenants
contained in Section 5.6; or (iii) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the holder of each
Outstanding Debenture affected; provided, however, that if the Debentures are
held by the Trust or a trustee of the Trust, such waiver or modification to such
waiver shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the Trust shall have consented to such waiver
or modification to such waiver; provided further, that if the consent of the
holder of each Outstanding Debenture is required, such waiver shall not be
effective until each holder of the Trust Securities of the Trust shall have
consented to such waiver. Upon any such waiver, the default covered thereby
shall be deemed to be cured for all purposes of this Indenture and the Company,
the Trustee and the holders of the Debentures shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
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SECTION 7.7 UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any Debentures by such
holder's acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party litigant in such suit
of an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees 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 7.7 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders holding more than 10% in aggregate principal amount of the
Outstanding Debentures, or to any suit instituted by any Debentureholder for the
enforcement of the payment of the principal of or interest on the Debentures, on
or after the respective due dates expressed in such Debenture or established
pursuant to this Indenture.
SECTION 7.8 DIRECT ACTION BY HOLDERS OF PREFERRED SECURITIES.
Any registered holder of the Preferred Securities issued by the Trust shall have
the right, upon the occurrence of an Event of Default described in Section
7.1(a)(i) or 7.1(a)(ii), to institute a suit directly against the Company for
enforcement of payment to such holder of principal of and (subject to Sections
2.4 and 4.1) interest (including any Additional Interest) on the Debentures
having a principal amount equal to the aggregate Liquidation Amount (as defined
in the Trust Agreement) of such Preferred Securities held by such holder. The
Company may not amend this Indenture to remove this right to institute a suit
directly against the Company without the prior consent of the holders of all the
Preferred Securities.
ARTICLE VIII
FORM OF DEBENTURE AND ORIGINAL ISSUE
SECTION 8.1 FORM OF DEBENTURE.
The Debenture and the Trustee's Certificate of Authentication to be endorsed
thereon are to be substantially in the forms contained as Exhibit A attached
hereto and incorporated herein by reference.
SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES.
Debentures in the aggregate principal amount of up to $86,250,000 may, upon
execution of this Indenture, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
make available for delivery said Debentures to or upon the written order of the
Company, signed by its Chairman, its Vice Chairman, its President, or any Vice
President and its Treasurer or an Assistant Treasurer, without any further
action by the Company.
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ARTICLE IX
CONCERNING THE TRUSTEE
SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default that may have
occurred, shall undertake to perform with respect to the
Debentures such duties and only such duties as are
specifically set forth in this Indenture, and no implied
covenants shall be read into this Indenture against the
Trustee. In case an Event of Default has occurred that has not
been cured or waived, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the
same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct,
except that:
(1) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default that may have
occurred:
(i) the duties and obligations of the Trustee shall, with
respect to the Debentures, be determined solely by
the express provisions of this Indenture, and the
Trustee shall not be liable with respect to the
Debentures except for the performance of such duties
and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations
shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may with respect to the
Debentures conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of
any such certificates or opinions that by any
provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or
not they conform to the requirements of this
Indenture;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Responsible Officers
of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
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(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority
in principal amount of the Debentures at the time outstanding
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee under
this Indenture with respect to the Debentures; and
(4) none of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for
believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Indenture or
adequate indemnity against such risk is not reasonably assured
to it.
SECTION 9.2 NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the Trustee of
the occurrence of any default hereunder with respect to the Debentures, the
Trustee shall transmit by mail to all holders of the Debentures, as their names
and addresses appear in the Debenture Register, notice of such default, unless
such default shall have been cured or waived; provided, however, that, except in
the case of any default in the payment of the principal or interest (including
any Additional Interest) on any Debenture, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of the directors and/or Responsible Officers of
the Trustee determines in good faith that the withholding of such notice is in
the interests of the holders of such Debentures; and provided, further, that in
the case of any default of the character specified in section 7.1(a)(iii), no
such notice to holders of Debentures need be sent until at least 30 days after
the occurrence thereof. For the purposes of this Section 9.2, the term "default"
means any event which is, or after notice or lapse of time or both, would
become, an Event of Default with respect to the Debentures.
SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 9.1:
(a) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, security or other
paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board
Resolution or an instrument signed in the name of the Company
by the President or any Vice President and by the Secretary
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or an Assistant Secretary or the Treasurer or an Assistant
Treasurer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a default
or an Event of Default, other than an Event of Default
specified in Section 7.1(a)(i) or (ii), unless and until it
receives notification of such Event of Default from the
Company or by holders of at least 25% of the aggregate
principal amount of the Debentures at the time Outstanding;
(d) The Trustee may consult with counsel 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 or suffered or omitted hereunder in good faith
and in reliance thereon;
(e) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Debentureholders,
pursuant to the provisions of this Indenture, unless such
Debentureholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default (that
has not been cured or waived) to exercise with respect to the
Debentures such of the rights and powers vested in it by this
Indenture, and to use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs;
(f) The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and believed by it to
be authorized or within the discretion or rights or powers
conferred upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, security, or other papers or
documents, 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 Company, personally or by
agent or attorney; and
(h) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
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SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC.
(a) The Recitals contained herein and in the Debentures, except
the certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or
application by the Company of any of the Debentures or of the
proceeds of such Debentures, or for the use or application of
any moneys paid over by the Trustee in accordance with any
provision of this Indenture, or for the use or application of
any moneys received by any paying agent other than the
Trustee.
SECTION 9.5 MAY HOLD DEBENTURES.
The Trustee or any paying agent or registrar for the Debentures, in its
individual or any other capacity, may become the owner or pledgee of Debentures
and, subject to Sections 9.9 and 9.14, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, paying agent or Debenture
Registrar.
SECTION 9.6 MONEYS HELD IN TRUST.
Subject to the provisions of Section 13.5, all moneys received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree in writing with the Company to pay thereon.
SECTION 9.7 COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time such compensation as
the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, 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
compensation and the expenses and disbursements of its agents
and counsel),
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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
and their agents for, and to hold them harmless against, any
and all loss, damage, claims, liability or expense, including
taxes (other than taxes based upon, measured by or determined
by the income of the Trustee), arising out of or in connection
with the acceptance or administration of the trust or trusts
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, except tot he extent that such loss, damage, claim,
liability or expense is due to its own negligence or bad
faith.
The Trustee shall have a lien prior to the Debentures as to all property and
funds held by it hereunder for any amount owing it or any predecessor Trustee
pursuant to this Section 9.7, except with respect to funds held in trust for the
benefit of the holders of particular Debentures.
When the Trustee incurs expenses or renders services in connection with an Event
of Default specified in Section 7.1(a)(iv), Section 7.1(a)(v) or 7.1(a)(vi), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Bankruptcy Law.
The provisions of this Section shall survive the termination of this Indenture.
SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE.
Except as otherwise provided in Section 9.1, whenever in the administration of
the provisions of this Indenture the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or suffering or
omitting to take any action hereunder, such matter (unless other evidence in
respect thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Trustee and
such certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted to be taken by it under the provisions of this Indenture upon the faith
thereof.
SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS.
If the Trustee has or shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
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SECTION 9.10 CORPORATE TRUSTEE REQUIRED ELIGIBILITY.
There shall at all times be a Trustee with respect to the Debentures issued
hereunder which shall at all times be a corporation organized and doing business
under the laws of the United States of America or any State or Territory thereof
or of the District of Columbia or a corporation or other Person permitted to act
as trustee by the Commission, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $50,000,000, and
subject to supervision or examination by federal, state, territorial, or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 9.10, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. The Company may not, nor may any Person
directly or indirectly controlling, controlled by, or under common control with
the Company, serve as Trustee. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.10, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.11.
SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at any
time resign by giving written notice thereof to the Company
and by transmitting notice of resignation by mail, first class
postage prepaid, to the Debentureholders, as their names and
addresses appear upon the Debenture Register. Upon receiving
such notice of resignation, the Company shall promptly appoint
a successor trustee with respect to Debentures by written
instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee.
If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the mailing of such
notice of resignation, the resigning Trustee may petition at
the expense of the Company any court of competent jurisdiction
for the appointment of a successor trustee with respect to
Debentures, or any Debentureholder who has been a bona fide
holder of a Debenture or Debentures for at least six months
may, subject to the provisions of Section 9.9, on behalf of
himself and all others similarly situated, petition any such
court for the appointment of a successor trustee. Such court
may thereupon after such notice, if any, as it may deem
proper, appoint a successor trustee.
(b) In case at any time any one of the following shall occur
(i) the Trustee shall fail to comply with the provisions
of Section 9.9 after written request therefor by the
Company or by any Debentureholder who has been a bona
fide holder of a Debenture or Debentures for at least
six months; or
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(ii) the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.10 and shall fail to
resign after written request therefor by the Company
or by any such Debentureholder; or
(iii) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or
commence a voluntary bankruptcy proceeding, or a
receiver of the Trustee or of its property shall be
appointed or consented to, or any public officer
shall take charge or control of the Trustee or of its
property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in
any such case, the Company may remove the Trustee
with respect to all Debentures and appoint a
successor trustee by written instrument, in
duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to
the successor trustee, or, subject to the provisions
of Section 9.9, unless the Trustee's duty to resign
is stayed as provided herein, any Debentureholder who
has been a bona fide holder of a Debenture or
Debentures for at least six months may, on behalf of
that holder and all others similarly situated,
petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after
such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding may at any time remove the
Trustee by so notifying the Trustee and the Company and may
appoint a successor Trustee with the consent of the Company.
If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after such notification,
the Trustee may petition at the expense of the Company any
court of competent jurisdiction for the appointment of a
successor trustee with respect to Debentures, or any
Debentureholder who has been a bona fide holder of a Debenture
or Debentures for at least six months may, subject to the
provisions of Section 9.9, on behalf of himself and all others
similarly situated, petition any such court for the
appointment of a successor trustee. Such court may appoint a
successor trustee.
(d) No resignation or removal of the Trustee and no appointment of
a successor trustee with respect to the Debentures pursuant to
any of the provisions of this Section 9.11 shall become
effective until acceptance of appointment by the successor
trustee as provided in Section 9.12.
SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor trustee
with respect to the Debentures, every successor trustee so
appointed shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting
such
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appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Company or
the successor trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument
transferring to such successor trustee all the rights, powers,
and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor trustee all property
and money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor trustee all such
rights, powers and trusts referred to in paragraph (a) of this
Section 9.12.
(c) No successor trustee shall accept its appointment unless at
the time of such acceptance such successor trustee shall be
qualified and eligible under this Article IX.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section 9.12, the Company shall transmit
notice of the succession of such trustee hereunder by mail,
first class postage prepaid, to the Debentureholders, as their
names and addresses appear upon the Debenture Register. If the
Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be transmitted at
the expense of the Company.
SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation shall be qualified under the provisions of Section 9.9 and eligible
under the provisions of Section 9.10, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. In case any Debentures shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Debentures so authenticated with the same
effect as if such successor Trustee had itself authenticated such Debentures.
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SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship described in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent included therein.
ARTICLE X
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS.
(a) Whenever in this Indenture it is provided that the holders of
a majority or specified percentage in aggregate principal
amount of the Debentures may take any action (including the
making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact
that at the time of taking any such action the holders of such
majority or specified percentage have joined therein may be
evidenced by any instrument or any number of instruments of
similar tenor executed by such holders of Debentures in Person
or by agent or proxy appointed in writing.
(b) If the Company shall solicit from the Debentureholders any
request, demand, authorization, direction, notice, consent,
waiver or other action, the Company may, at its option, as
evidenced by an Officers' Certificate, fix in advance a record
date for the determination of Debentureholders entitled to
give such request, demand, authorization, direction, notice,
consent, waiver or other action, but the Company shall have no
obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent,
waiver or other action maybe given before or after the record
date, but only the Debentureholders of record at the close of
business on the record date shall be computed to be
Debentureholders for the purposes of determining whether
Debentureholders of the requisite proportion of Outstanding
Debentures have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding
Debentures shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by
such Debentureholders on the record date shall be deemed
effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after
the record date.
SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS.
Subject to the provisions of Section 9.1, proof of the execution of any
instrument by a Debentureholder (such proof shall not require notarization) or
his agent or proxy and proof of
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the holding by any Person of any of the Debentures shall be sufficient if made
in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable
to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the
Debenture Registrar thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section 10.2 as it shall deem necessary.
SECTION 10.3 WHO MAY BE DEEMED OWNERS.
Prior to the due presentment for registration of transfer of any Debenture, the
Company, the Trustee, any paying agent, any Authenticating Agent and any
Debenture Registrar may deem and treat the Person in whose name such Debenture
shall be registered upon the books of the Company as the absolute owner of such
Debenture (whether or not such Debenture shall be overdue and notwithstanding
any notice of ownership or writing thereon made by anyone other than the
Debenture Registrar) for the purpose of receiving payment of or on account of
the principal of and interest on such Debenture (subject to Section 2.3) and for
all other purposes; and neither the Company nor the Trustee nor any paying agent
nor any Authenticating Agent nor any Debenture Registrar shall be affected by
any notice to the contrary.
SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED.
In determining whether the holders of the requisite aggregate principal amount
of Debentures have concurred in any direction, consent or waiver under this
Indenture, the Debentures that are owned by the Company or any other obligor on
the Debentures or by any Person directly or indirectly controlling or controlled
by, or under common control with the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that for the purpose of determining whether
the Trustee shall be protected in relying on any such direction, consent or
waiver, only Debentures that a Responsible Officer of the Trustee actually knows
are so owned shall be so disregarded. The Debentures so owned that have been
pledged in good faith may be regarded as Outstanding for the purposes of this
Section 10.4, if the pledgee shall establish to the satisfaction of the Trustee
the pledgee's right so to act with respect to such Debentures and that the
pledgee is not a Person directly or indirectly, controlling or controlled by, or
under direct or indirect common control with the Company or any such other
obligor. In case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.
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SECTION 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS.
At any time prior to (but not after) the evidencing to the Trustee, as provided
in Section 10.1, of the taking of any action by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action, any holder of a Debenture that is
shown by the evidence to be included in the Debentures the holders of which have
consented to such action may, by filing written notice with the Trustee, and
upon proof of holding as provided in Section 10.2, revoke such action so far as
concerns such Debenture. Except as aforesaid any such action taken by the holder
of any Debenture shall be conclusive and binding upon such holder and upon all
future holders and owners of such Debenture, and of any Debenture issued in
exchange therefor, on registration of transfer thereof or in place thereof,
irrespective of whether or not any notation in regard thereto is made upon such
Debenture. Any action taken by the holders of the majority or percentage in
aggregate principal amount of the Debentures specified in this Indenture in
connection with such action shall be conclusively binding upon the Company, the
Trustee and the holders of all the Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS.
In addition to any supplemental indenture otherwise authorized by this
Indenture, the Company and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as then in effect), without the
consent of the Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, in the
Debentures;
(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition to or in
place of certificated Debentures;
(d) to add to the covenants of the Company for the benefit of the
holders of all or any of the Debentures or to surrender any
right or power herein conferred upon the Company;
(e) to evidence the succession of another corporation to the
Company, and the assumption by any such successor of the
covenants of the Company herein and in the Debentures
contained;
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(f) to convey, transfer, assign, mortgage or pledge to or with the
Trustee any property or assets which the Company may desire to
convey, transfer, assign, mortgage or pledge;
(g) to add to, delete from, or revise the conditions, limitations,
and restrictions on the authorized amount, terms, or purposes
of issue, authentication, and delivery of Debentures, as
herein set forth;
(h) to make any change that does not adversely affect the rights
of any Debentureholder in any material respect;
(i) to provide for the issuance of and establish the form and
terms and conditions of the Debentures, to establish the form
of any certifications required to be furnished pursuant to the
terms of this Indenture or of the Debentures, or to add to the
rights of the holders of the Debentures; or
(j) to qualify or maintain the qualification of this Indenture
under the Trust Indenture Act.
The Trustee is hereby authorized to join with the Company in the execution of
any such supplemental indenture, and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section 11.1 may
be executed by the Company and the Trustee without the consent of the holders of
any of the Debentures at the time Outstanding, notwithstanding any of the
provisions of Section 11.2.
SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS.
With the consent (evidenced as provided in Section 10.1) of the holders of not
less than a majority in aggregate principal amount of the Debentures at the time
Outstanding, the Company, when authorized by Board Resolutions, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as then in effect) for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of any supplemental indenture or of modifying in any manner not covered by
Section 11.1 the rights of the holders of the Debentures under this Indenture;
provided, however, that no such supplemental indenture shall without the consent
of the holders of each Debenture then Outstanding and affected thereby, (i)
extend the fixed maturity of any Debentures, reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
(other than the Company's right to defer interest pursuant to this Indenture),
without the consent of the holder of each Debenture so affected; or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture; provided further, that if the
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Debentures are held by the Trust or a trustee of the Trust, such supplemental
indenture shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the Trust shall have consented to such
supplemental indenture; provided further, that if the consent of the holder of
each Outstanding Debenture is required, such supplemental indenture shall not be
effective until each holder of the Trust Securities of the Trust shall have
consented to such supplemental indenture. It shall not be necessary for the
consent of the Debentureholders affected thereby under this Section 11.2 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof.
SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture pursuant to the provisions of
this Article XI, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitations of
rights, obligations, duties and immunities under this Indenture of the Trustee,
the Company and the holders of Debentures shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES.
Debentures affected by a supplemental indenture, authenticated and delivered
after the execution of such supplemental indenture pursuant to the provisions of
this Article XI, may bear a notation in form approved by the Company, provided
such form meets the requirements of any exchange upon which the Debentures may
be listed, as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Debentures so modified as to conform, in the
opinion of the Board of Directors of the Company, to any modification of this
Indenture contained in any such supplemental indenture may be prepared by the
Company, authenticated by the Trustee and delivered in exchange for the
Debentures then Outstanding.
SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES.
(a) Upon the request of the Company, accompanied by their Board
Resolutions authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of
the consent of Debentureholders required to consent thereto as
aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion but shall not be
obligated to enter into such supplemental indenture. The
Trustee, subject to the provisions of Section 9.1, may receive
an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article XI is
authorized or permitted by, and conforms to, the terms of this
Article XI and that
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it is proper for the Trustee under the provisions of this
Article XI to join in the execution thereof.
(b) Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this
Section 11.5, the Trustee shall transmit by mail, first class
postage prepaid, a notice, setting forth in general terms the
substance of such supplemental indenture, to the
Debentureholders as their names and addresses appear upon the
Debenture Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental
indenture.
ARTICLE XII
SUCCESSOR CORPORATION
SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC.
Nothing contained in this Indenture or in any of the Debentures shall prevent
any consolidation or merger of the Company with or into any other corporation or
corporations (whether or not affiliated with the Company, as the case may be),
or successive consolidations or mergers in which the Company, as the case may
be, or its successor or successors shall be a party or parties, or shall prevent
any sale, conveyance, transfer or other disposition of the property of the
Company, as the case may be, or its successor or successors as an entirety, or
substantially as an entirety, to any other corporation (whether or not
affiliated with the Company, as the case may be, or its successor or successors)
authorized to acquire and operate the same; provided, however, the Company
hereby covenants and agrees that, (i) upon any such consolidation, merger, sale,
conveyance, transfer or other disposition, the due and punctual payment, in the
case of the Company, of the principal of and interest on all of the Debentures,
according to their tenor and the due and punctual performance and observance of
all the covenants and conditions of this Indenture to be kept or performed by
the Company as the case may be, shall be expressly assumed, by supplemental
indenture (which shall conform to the provisions of the Trust Indenture Act, as
then in effect) satisfactory in form to the Trustee executed and delivered to
the Trustee by the entity formed by such consolidation, or into which the
Company, as the case may be, shall have been merged, or by the entity which
shall have acquired such property; (ii) in case the Company consolidates with or
merges into another Person or conveys or transfers its properties and assets
substantially then as an entirety to any Person, the successor Person is
organized under the laws of the United States or any state or the District of
Columbia; and (iii) immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing.
SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the
successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the
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Trustee, of, in the case of the Company, the due and punctual
payment of the principal of and interest on all of the
Debentures Outstanding and the due and punctual performance of
all of the covenants and conditions of this Indenture to be
performed by the Company, as the case may be, such successor
corporation shall succeed to and be substituted for the
Company, with the same effect as if it had been named as the
Company herein, and thereupon the predecessor corporation
shall be relieved of all obligations and covenants under this
Indenture and the Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and
form (but not in substance) may be made in the Debentures
thereafter to be issued as may be appropriate.
(c) Nothing contained in this Indenture or in any of the
Debentures shall prevent the Company from merging into itself
or acquiring by purchase or otherwise all or any part of the
property of any other Person (whether or not affiliated with
the Company).
SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.
The Trustee, subject to the provisions of Section 9.1, may receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
conveyance, transfer or other disposition, and any such assumption, comply with
the provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE
SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE.
If at any time: (a) the Company shall have delivered to the Trustee for
cancellation all Debentures theretofore authenticated (other than any Debentures
that shall have been destroyed, lost or stolen and that shall have been replaced
or paid as provided in Section 2.8) and Debentures for whose payment money or
Governmental Obligations have theretofore been deposited in trust or segregated
and held in trust by the Company (and thereupon repaid to the Company or
discharged from such trust, as provided in Section 13.5); or (b) all such
Debentures not theretofore delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit or cause to be deposited with the Trustee as trust funds
the entire amount in moneys or Governmental Obligations sufficient or a
combination thereof, sufficient in the opinion of a nationally recognized firm
of independent public accountants expressed in written certification thereof
delivered to the Trustee, to pay at maturity or upon redemption all Debentures
not theretofore delivered to the Trustee for cancellation, including principal
and interest due or to become due to such date of maturity or date fixed for
redemption, as the case may be, and if the
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Company shall also pay or cause to be paid all other sums payable hereunder by
the Company; then this Indenture shall thereupon cease to be of further effect
except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3 and 9.10,
that shall survive until the date of maturity or redemption date, as the case
may be, and Sections 9.7 and 13.5, that shall survive to such date and
thereafter, and the Trustee, on demand of the Company and at the cost and
expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture.
SECTION 13.2 DISCHARGE OF OBLIGATIONS.
If at any time all Debentures not heretofore delivered to the Trustee for
cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Company by depositing irrevocably with the
Trustee as trust funds moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all Debentures not theretofore
delivered to the Trustee for cancellation, including principal and interest due
or to become due to such date of maturity or date fixed for redemption, as the
case may be, and if the Company shall also pay or cause to be paid all other
sums payable hereunder by the Company, then after the date such moneys or
Governmental Obligations, as the case may be, are deposited with the Trustee,
the obligations of the Company under this Indenture shall cease to be of further
effect except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3, 9.7,
9.10 and 13.5 hereof that shall survive until such Debentures shall mature and
be paid. Thereafter, Sections 9.7 and 13.5 shall survive.
SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST.
All monies or Governmental Obligations deposited with the Trustee pursuant to
Sections 13.1 or 13.2 shall be held in trust and shall be available for payment
as due, either directly or through any paying agent (including the Company
acting as its own paying agent), to the holders of the Debentures for the
payment or redemption of which such moneys or Governmental Obligations have been
deposited with the Trustee.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the Government Obligations deposited
pursuant to Section 13.1 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the holders of Outstanding Debentures.
SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS.
In connection with the satisfaction and discharge of this Indenture, all moneys
or Governmental Obligations then held by any paying agent under the provisions
of this Indenture shall, upon demand of the Company, be paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys or Governmental Obligations.
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SECTION 13.5 REPAYMENT TO COMPANY.
Any monies or Governmental Obligations deposited with any paying agent or the
Trustee, or then held by the Company in trust, for payment of principal of or
interest on the Debentures that are not applied but remain unclaimed by the
holders of such Debentures for at least two years after the date upon which the
principal of or interest on such Debentures shall have respectively become due
and payable, shall be repaid to the Company, as the case may be, on May 31 of
each year or (if then held by the Company) shall be discharged from such trust;
and thereupon the paying agent and the Trustee shall be released from all
further liability, with respect to such money's or Governmental Obligations, and
the holder of any of the Debentures entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Company for the
payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS
SECTION 14.1 NO RECOURSE.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of the Debentures, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, past, present or future as such, of the Company or of any predecessor
or successor corporation,either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or of
any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom, are hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this Indenture and
the issuance of such Debentures.
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ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS.
All the covenants, stipulations, promises and agreements in this Indenture
contained by or on behalf of the Company shall bind their respective successors
and assigns, whether so expressed or not.
SECTION 15.2 ACTIONS BY SUCCESSOR.
Any act or proceeding by any provision of this Indenture authorized or required
to be done or performed by any board, committee or officer of the Company shall
and may be done and performed with like force and effect by the corresponding
board, committee or officer of any corporation that shall at the time be the
lawful sole successor of the Company.
SECTION 15.3 SURRENDER OF COMPANY POWERS.
The Company by instrument in writing executed by appropriate authority of its
Board of Directors and delivered to the Trustee may surrender any of the powers
reserved to the Company, and thereupon such power so surrendered shall terminate
both as to the Company, as the case may be, and as to any successor corporation.
SECTION 15.4 NOTICES.
Except as otherwise expressly provided herein any notice or demand that by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Debentures to or on the Company may be given or
served by being deposited first class postage prepaid in a post-office letter
box addressed(until another address is filed in writing by the Company with the
Trustee), as follows: BankUnited Financial Corporation, 255 Alhambra Circle,
Coral Gables, Florida 33134, Attention: Secretary. Any notice, election, request
or demand by the Company or any Debentureholder to or upon the Trustee shall be
deemed to have been sufficiently given or made, for all purposes, if given or
made in writing at the Corporate Trust Office of the Trustee.
SECTION 15.5 GOVERNING LAW.
This Indenture and each Debenture shall be deemed to be a contract made under
the internal laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without regard to conflicts
of law principles.
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SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT.
It is intended that the Debentures shall be treated as indebtedness and not as
equity for federal income tax purposes. The provisions of this Indenture shall
be interpreted to further this intention.
SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the proposed action
have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent
have been complied with, except that in the case of any such
application or demand as to which the furnishing of such
documents is specifically required by any provision of this
Indenture relating to such particular application or demand,
no additional certificate or opinion need be furnished.
(b) Each certificate or opinion of the Company provided for in
this Indenture and delivered to the Trustee with respect to
compliance with a condition or covenant in this Indenture
shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as, in the opinion of
such Person, is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not,
in the opinion of such Person, such condition or covenant has
been complied with.
SECTION 15.8 PAYMENTS ON BUSINESS DAYS.
In any case where the date of maturity of interest or principal of any Debenture
or the date of redemption of any Debenture shall not be a Business Day, then
payment of interest or principal may (subject to Section 2.4) be made on the
next succeeding Business Day with the same force and effect as if made on the
nominal date of maturity or redemption, and no interest shall accrue for the
period after such nominal date.
SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
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SECTION 15.10 COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of which
shall be an original, but such counterparts shall together constitute but one
and the same instrument.
SECTION 15.11 SEPARABILITY.
In case any one or more of the provisions contained in this Indenture or in the
Debentures shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Indenture or of the Debentures, but this Indenture
and the Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
SECTION 15.12 ASSIGNMENT.
The Company shall have the right at all times to assign any of its respective
rights or obligations under this Indenture to a direct or indirect wholly owned
Subsidiary of the Company, provided that, in the event of any such assignment,
the Company shall remain liable for all such obligations. Subject to the
foregoing, this Indenture is binding upon and inures to the benefit of the
parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties hereto.
SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS.
The Company acknowledges that, with respect to any Debentures held by the Trust
or a trustee of the Trust, if the Property Trustee fails to enforce its rights
under this Indenture as the holder of the Debentures held as the assets of the
Trust, any holder of Preferred Securities may institute legal proceedings
directly against the Company to enforce such Property Trustee's rights under
this Indenture without first instituting any legal proceedings against such
Property Trustee or any other person or entity. Notwithstanding the foregoing,
if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), the Company acknowledges that a
holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Debentures.
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ARTICLE XVI
SUBORDINATION OF DEBENTURES
SECTION 16.1 AGREEMENT TO SUBORDINATE.
The Company covenants and agrees, and each holder of Debentures issued hereunder
by such holder's acceptance thereof likewise covenants and agrees, that all
Debentures shall be issued subject to the provisions of this Article XVI; and
each holder of a Debenture, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions. The
payment by the Company of the principal of and interest on all Debentures issued
hereunder shall, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to the prior payment in full of all
Senior Debt and Subordinated Debt (collectively, "Senior Indebtedness") to the
extent provided herein, whether outstanding at the date of this Indenture or
thereafter incurred. No provision of this Article XVI shall prevent the
occurrence of any default or Event of Default hereunder.
SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED DEBT.
In the event and during the continuation of any default by the Company in the
payment of principal, premium, interest or any other payment due on any Senior
Indebtedness of the Company, or in the event that the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default, then, in
either case, no payment shall be made by the Company with respect to the
principal (including redemption payments) of or interest on the Debentures. In
the event that, notwithstanding the foregoing, any payment shall be received by
the Trustee when such payment is prohibited by the preceding sentence of this
Section 16.2, such payment shall be held in trust for the benefit of, and shall
be paid over or delivered to, the holders of Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that the holders of the
Senior Indebtedness (or their representative or representatives or a trustee)
notify the Company or the Trustee in writing within 90 days of such payment of
the amounts then due and owing on the Senior Indebtedness and only the amounts
specified in such notice to the Trustee shall be paid to the holders of Senior
Indebtedness.
SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash,
property or securities, to creditors upon any liquidation,
dissolution or 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, all amounts due upon all Senior Indebtedness of the
Company shall first be paid in full, or payment thereof
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provided for in money in accordance with its terms, before any
payment is made by the Company on account of the principal or
interest on the Debentures; and upon any such liquidation,
dissolution, winding-up, reorganization, assignment for the
benefit of creditors, marshaling of assets, any payment by the
Company, or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to
which the holders of the Debentures or the Trustee would be
entitled to receive from the Company, except for the
provisions of this Article XVI, shall be paid by the Company
or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or
distribution, or by the holders of the Debentures or by the
Trustee under this Indenture if received by them or it,
directly to the holders of Senior Indebtedness of the Company
(pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, as
calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after
giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness, before any
payment or distribution is made to the holders of Debentures
or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, prohibited
by the foregoing, shall be received by the Trustee before all
Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the
holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness of the
Company, as the case may be, remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit of
the holders of such Senior Indebtedness.
(c) For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article
XVI with respect to the Debentures to the payment of all
Senior Indebtedness of the Company, as the case may be, that
may at the time be outstanding, provided that (i) such Senior
Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or
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readjustment; and (ii) the rights of the holders of such
Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or
transfer of its property as an entirety, or substantially as
an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 16.3 if such other corporation shall,
as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article XII.
Nothing in Section 16.2 or in this Section 16.3 shall apply to
claims of, or payments to, the Trustee under or pursuant to
Section 9.7.
SECTION 16.4 SUBROGATION.
(a) Subject to the payment in full of all Senior Indebtedness of
the Company, the rights of the holders of the Debentures shall
be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash,
property or securities of the Company, as the case may be,
applicable to such Senior Indebtedness until the principal of
and interest on the Debentures shall be paid in full; and for
the purposes of such subrogation, no payments or distributions
to the holders of such Senior Indebtedness of any cash,
property or securities to which the holders of the Debentures
or the Trustee would be entitled except for the provisions of
this Article XVI, and no payment over pursuant to the
provisions of this Article XVI to or for the benefit of the
holders of such Senior Indebtedness by holders of the
Debentures or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness of the
Company, and the holders of the Debentures, be deemed to be a
payment by the Company to or on account of such Senior
Indebtedness. It is understood that the provisions of this
Article XVI are and are intended solely for the purposes of
defining the relative rights of the holders of the Debentures,
on the one hand, and the holders of such Senior Indebtedness
on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair,
as between the Company, its creditors (other than the holders
of Senior Indebtedness of the Company), and the holders of the
Debentures, the obligation of the Company, which is absolute
and unconditional, to pay to the holders of the Debentures the
principal of and interest on the Debentures as and when the
same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights
of the holders of the Debentures and creditors of the Company,
as the case may be, other than the holders of Senior
Indebtedness of the Company, nor shall anything herein or
therein prevent the Trustee or the holder of any Debenture
from exercising all remedies otherwise permitted by applicable
law upon default under
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this Indenture, subject to the rights, if any, under this
Article XVI of the holders of such Senior Indebtedness in
respect of cash, property or securities of the Company, as the
case may be, received upon the exercise of any such remedy.
(c) Upon any payment or distribution of assets of the Company
referred to in this Article XVI, the Trustee, subject to the
provisions of Article IX, and the holders of the Debentures
shall be entitled to conclusively rely upon any order or
decree made by any court of competent jurisdiction in which
such dissolution, winding-up, liquidation or reorganization
proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other
Person making such payment or distribution, delivered to the
Trustee or to the holders of the Debentures, for the purposes
of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, as the case may be, the amount
thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or
to this Article XVI.
SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each holder of Debentures by such holder's acceptance thereof authorizes and
directs the Trustee on such holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article XVI and appoints the Trustee such holder's attorney-in-fact for any and
all such purposes.
SECTION 16.6 NOTICE BY THE COMPANY.
(a) The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that
would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the
provisions of this Article XVI. Notwithstanding the provisions
of this Article XVI or any other provisions of this Indenture,
the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any
payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XVI,
unless and until a Responsible Officer of the Trustee shall
have received written notice thereof from the Company or a
holder or holders of Senior Indebtedness or from any trustee
therefor, and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 9.1, shall
not be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 16.6 at least
two Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal
of or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to
apply the same to the
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purposes for which they were received, and shall not be
affected by any notice to the contrary that may be received by
it within two Business Days prior to such date.
(b) The Trustee, subject to the provisions of Section 9.1, shall
be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder
of Senior Indebtedness of the Company (or a trustee on behalf
of such holder) to establish that such notice has been given
by a holder of such Senior Indebtedness or a trustee on behalf
of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required
with respect to the right of any Person as a holder of such
Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XVI, the Trustee may
request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of
such Person under this Article XVI, and, if such evidence is
not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
(a) The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article XVI in respect of any
Senior Indebtedness at any time held by it, to the same extent
as any other holder of Senior Indebtedness, and nothing in
this Indenture shall deprive the Trustee of any of its rights
as such holder. The Trustee's right to compensation and
reimbursement of expenses as set forth in Section 9.7 shall
not be subject to the subordination provisions of this Article
XVI.
(b) With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only
such of its covenants and obligations as are specifically set
forth in this Article XVI, and no implied covenants or
obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to have any fiduciary
duty to the holders of such Senior Indebtedness and, subject
to the provisions of Section 9.1, the Trustee shall not be
liable to any holder of such Senior Indebtedness if it shall
in good faith mistakenly pay over or deliver to holders of
Debentures, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled
by virtue of this Article XVI or otherwise.
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SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED.
(a) No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein
provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless
of any knowledge thereof that any such holder may have or
otherwise be charged with.
(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company
may, at any time and from time to time, without the consent of
or notice to the Trustee or the holders of the Debentures,
without incurring responsibility to the holders of the
Debentures and without impairing or releasing the
subordination provided in this Article XVI or the obligations
hereunder of the holders of the Debentures to the holders of
such Senior Indebtedness, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, such Senior
Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same
or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing
such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against
the Company and any other Person.
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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:
Name: _____________________________________
Title: ____________________________________
THE BANK OF NEW YORK, as trustee
By:
Name: _____________________________________
Title: ____________________________________
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EXHIBIT A
FACE OF DEBENTURE
No. _______________ $86,250,000
CUSIP No. _________
BANKUNITED FINANCIAL CORPORATION
____% SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE MARCH 31, 2028
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A 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 MAY NOT BE TRANSFERRED
EXCEPT 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, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
BankUnited Financial Corporation, a Florida corporation (the "Company," which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to The Bank of New York, as
Property Trustee for BankUnited Capital Trust III, or registered assigns, the
principal sum of Dollars ($86,250,000) on March 31, 2028 (the "Stated
Maturity"), and to pay interest on said principal sum from ________, 1998, or
from the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, quarterly (subject
to deferral as set forth herein) in arrears on March 31, June 30, September 30
and December 31 of each year commencing June 30, 1998, at the rate of ____% per
annum until the principal hereof shall have become due and payable, and on any
overdue principal and (without duplication) on any overdue installment of
interest at the rate of ____% per annum compounded quarterly. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on this Debenture is not a business day, then payment of
interest payable on such date shall be made on the next succeeding day that is a
business day (and without any interest or other payment in respect of any such
delay), except that, if such business day is in the next succeeding calendar
year, such payment shall be made on the preceding business day, in each case
with the same force and effect as if made on such
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date. The interest installment so payable, and punctually, paid or duly provided
for, on any Interest Payment Date shall, as provided in the Indenture, be paid
to the person in whose name this Debenture (or one or more Predecessor
Debentures, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be the
close of business on the business day next preceding such Interest Payment Date
unless otherwise provided in the Indenture. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
registered holders on such regular record date and may be paid to the Person in
whose name this Debenture (or one or more Predecessor Debentures) is registered
at the close of business on a special record date to be fixed by the Trustee for
the payment of such defaulted interest, notice whereof shall be given to the
registered holders of the Debentures not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. The principal of and the
interest on this Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the registered holder at such address
as shall appear in the Debenture Register. Notwithstanding the foregoing, so
long as the holder of this Debenture is the Property Trustee, the payment of the
principal of and interest on this Debenture shall be made at such place and to
such account as may be designated by the Trustee.
If a Tax Event occurs, the Company will have the right subject to the Company
having received prior regulatory approval if then required under applicable
capital guidelines or regulatory policies to advance the Stated Maturity to the
minimum extent required in order to allow for the payments of interest in
respect of the Junior Subordinated Debentures to continue to be tax deductible,
but in no event shall the resulting maturity of the Junior Subordinated
Debentures be less than 15 years from the date of original issuance hereof. The
Stated Maturity shall be advanced only if, in the opinion of counsel to the
Company experienced in such matters, (a) after advancing the Stated Maturity,
interest paid on the Junior Subordinated Debentures will be deductible for
United Stated federal income tax purposes and (b) advancing the Stated Maturity
will not result in a taxable event to holders of the Trust Securities.
The indebtedness evidenced by this Debenture is, to the extent provided in the
Indenture, subordinate and junior in right of payment to the prior payment in
full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this Debenture,
by accepting the same, (a) agrees to and shall be bound by such provisions; (b)
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to acknowledge or effectuate the subordination
so provided; and (c) appoints the Trustee his or her attorney-in-fact for any
and all such purposes. Each holder hereof, by his or her acceptance hereof,
hereby waives all notice of the acceptance of the subordination provisions
contained herein and in the Indenture by each holder of Senior Indebtedness,
whether now outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.
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This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
This Debenture shall be deemed to be a contract made under the laws of the State
of New York and for all purposes shall be construed in accordance with the laws
of New York without regard to conflicts of laws principles.
The provisions of this Debenture are continued on the reverse side hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
BANKUNITED FINANCIAL CORPORATION
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
Attest: ____________________________
By: ________________________________
Name: ______________________________
Title: _____________________________
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CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK as Trustee _______________________________________
or Authentication Agent
By _________________________________ By ____________________________________
Authorized Signatory
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REVERSE OF DEBENTURE
____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
(CONTINUED)
This Debenture is one of the subordinated debentures of the Company (herein
sometimes referred to as the "Debentures"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture dated as of
__________, 1998 (the "Indenture") duly executed and delivered between the
Company and The Bank of New York, as Trustee (the "Trustee"), to which Indenture
reference is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Debentures. The Debentures are limited in aggregate principal
amount as specified in the Indenture.
The Company has the right to redeem this Debenture at the option of the Company,
without premium or penalty (i) at any time on or after March 31, 2003 in whole
or in part at the Optional Redemption Price, or (ii) prior to March 31, 2003 in
certain circumstances in whole (but not in part) upon the occurrence of a
Special Event, in each case at the Special Event Redemption Price. The
applicable Redemption Price shall be paid prior to 12:00 noon, Eastern Standard
Time, on the date of such redemption or at such earlier time as the Company
determines. Any redemption pursuant to this paragraph shall be made upon not
less than 30 days nor more than 60 days notice, at the applicable Redemption
Price. If the Debentures are only partially redeemed by the Company, the
Debentures shall be redeemed pro rata or by lot or by any other method utilized
by the Trustee.
In the event of redemption of this Debenture in part only, a new Debenture or
Debentures for the unredeemed portion hereof shall be issued in the name of the
holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have occurred
and be continuing, the principal of all of the Debentures may be declared, and
upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with
the consent of the holders of not less than a majority in aggregate principal
amount of the Debentures at the time outstanding, as defined in the Indenture,
to execute supplemental indentures for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or of modifying in any manner the rights of the
holders of the Debentures; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of the Debentures except as
provided in the Indenture, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon (except for deferrals of
interest as described below), without the consent of the holder of each
Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures,
the holders of which are required to consent to any such supplemental indenture,
without the consent of the holders
A-6
<PAGE>
of each Debenture then outstanding and affected thereby. The Indenture also
contains provisions permitting the holders of a majority in aggregate principal
amount of the Debentures at the time outstanding, on behalf of all of the
holders of the Debentures, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of the Debentures. Any such consent or waiver by
the registered holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Debenture and of any Debenture issued in exchange
therefor or in place thereof (whether by registration of transfer or otherwise
or whether any notation of such consent or waiver is made upon this Debenture).
No reference herein to the Indenture and no provision of this Debenture or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal and interest on this Debenture
at the time and place and at the rate and in the money herein prescribed.
So long as no Event of Default has occurred and is continuing, the Company shall
have the right at any time during the term of the Debentures and from time to
time to extend the interest payment period of such Debentures for up to 20
consecutive quarters (each, an "Extended Interest Payment Period"), at the end
of which period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Debentures to the
extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Company
may further extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters. At the termination of any such
Extended Interest Payment Period and upon the payment of all accrued and unpaid
interest and any additional amounts then due, the Company may commence a new
Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount shall be
issued to the designated transferee or transferees. No service charge shall be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Debenture, the
Company, the Trustee, any paying agent and the Debenture Registrar may deem and
treat the registered holder hereof as the absolute owner hereof (whether or not
this Debenture shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Debenture Registrar)
A-7
<PAGE>
for the purpose of receiving payment of or on account of the principal hereof
and interest due hereon and for all other purposes, and neither the Company nor
the Trustee nor any paying agent nor any Debenture Registrar shall be affected
by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest on
this Debenture, or for any claim based hereon, or otherwise in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the
issuance hereof, expressly waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
A-8
EXHIBIT 4.7
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 _________, 1998
BANKUNITED CAPITAL III
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS............................................ 1
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME................................................... 10
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE
OF BUSINESS........................................... 10
SECTION 203. TRUST PROPERTY; ORGANIZATIONAL EXPENSES................ 10
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES................... 10
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION
AND PURCHASE OF DEBENTURES............................ 11
SECTION 206. DECLARATION OF TRUST................................... 11
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS....... 11
SECTION 208. ASSETS OF TRUST........................................ 15
SECTION 209. TITLE TO TRUST PROPERTY................................ 15
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT........................................ 15
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.......................................... 15
SECTION 402. REDEMPTION............................................. 16
SECTION 403. SUBORDINATION OF COMMON SECURITIES..................... 18
SECTION 404. PAYMENT PROCEDURES..................................... 19
SECTION 405. TAX RETURNS AND REPORTS................................ 19
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST............ 19
SECTION 407. PAYMENTS UNDER INDENTURE............................... 19
i
<PAGE>
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP...................................... 20
SECTION 502. THE TRUST SECURITIES CERTIFICATES...................... 20
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES
CERTIFICATES.......................................... 20
SECTION 504. A GLOBAL PREFERRED SECURITIES.......................... 21
SECTION 505. REGISTRATION OF TRANSFER AND EXCHANGE OF
PREFERRED SECURITIES CERTIFICATES..................... 23
SECTION 506. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
SECURITIES CERTIFICATES............................... 24
SECTION 507. PERSONS DEEMED SECURITYHOLDERS......................... 24
SECTION 508. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND
ADDRESSES............................................. 24
SECTION 509. MAINTENANCE OF OFFICE OR AGENCY........................ 25
SECTION 510. APPOINTMENT OF PAYING AGENT............................ 25
SECTION 511. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR............ 26
SECTION 512. NOTICES TO CLEARING AGENCY............................. 26
SECTION 513A. DEFINITIVE PREFERRED SECURITIES AND TEMPORARY
PREFERRED SECURITIES.................................. 26
SECTION 514. RIGHTS OF SECURITYHOLDERS.............................. 27
SECTION 515. CUSIP NUMBERS.......................................... 29
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS........................... 29
SECTION 602. NOTICE OF MEETINGS..................................... 30
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.................. 30
SECTION 604. VOTING RIGHTS.......................................... 31
SECTION 605. PROXIES, ETC........................................... 31
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT............... 31
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.............. 31
SECTION 608. ACTS OF SECURITYHOLDERS................................ 31
SECTION 609. INSPECTION OF RECORDS.................................. 32
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY
TRUSTEE AND THE DELAWARE TRUSTEE....................... 33
SECTION 702. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR............. 34
ii
<PAGE>
ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.................... 34
SECTION 802. CERTAIN NOTICES........................................ 36
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE..................... 36
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES............................................ 38
SECTION 805. MAY HOLD SECURITIES.................................... 38
SECTION 806. COMPENSATION; INDEMNITY; FEES.......................... 38
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY
OF TRUSTEES........................................... 39
SECTION 808. CONFLICTING INTERESTS.................................. 39
SECTION 809A. CO-TRUSTEES AND SEPARATE TRUSTEE....................... 40
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR............................................. 41
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR................. 42
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS........................................... 43
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
DEPOSITOR OR TRUST.................................... 43
SECTION 814. REPORTS BY PROPERTY TRUSTEE............................ 43
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE........................ 44
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS
PRECEDENT............................................. 44
SECTION 817. NUMBER OF TRUSTEES..................................... 44
SECTION 818. DELEGATION OF POWER.................................... 44
SECTION 819. VOTING................................................. 45
ARTICLE IX
TERMINATION, LIQUIDATION AND MERGER
SECTION 901. TERMINATION UPON EXPIRATION DATE....................... 45
SECTION 902. EARLY TERMINATION...................................... 45
SECTION 903. TERMINATION............................................ 45
SECTION 904. LIQUIDATION............................................ 46
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR
REPLACEMENTS OF THE TRUST............................. 47
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS............... 48
SECTION 1002. AMENDMENT............................................. 48
SECTION 1003. SEPARABILITY.......................................... 49
SECTION 1004. GOVERNING LAW......................................... 50
iii
<PAGE>
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY...................... 50
SECTION 1006. SUCCESSORS............................................ 50
SECTION 1007. HEADINGS.............................................. 50
SECTION 1008. REPORTS, NOTICES AND DEMANDS.......................... 50
SECTION 1009. AGREEMENT NOT TO PETITION............................. 51
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST
INDENTURE ACT........................................ 51
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT,
GUARANTEE AND INDENTURE.............................. 52
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
iv
<PAGE>
CROSS-REFERENCE TABLE
SECTION OF SECTION OF AMENDED
TRUST INDENTURE ACT AND RESTATED
OF 1939, AS AMENDED TRUST AGREEMENT
------------------- ---------------
310(a)(1) 807
310(a)(2) 807
310(a)(3) 807
310(a)(4) 207(a)(ii)
310(b) 808
311(a) 813
311(b) 813
312(a) 507
312(b) 507
312(c) 507
313(a) 814(a)
313(a)(4) 814(b)
313(b) 814(b)
313(c) 1008
313(d) 814(c)
314(a) 815
314(b) Not Applicable
314(c)(1) 816
314(c)(2) 816
314(c)(3) Not Applicable
314(d) Not Applicable
314(e) 101,816
315(a) 801(a), 803(a)
315(b) 802, 1008
315(c) 801(a)
315(d) 801, 803
316(a)(2) Not Applicable
316(b) Not Applicable
316(c) 607
317(a)(1) Not Applicable
317(a)(2) Not Applicable
317(b) 509
318(a) 1010
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect any interpretation of any of its terms or provisions.
v
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of ___________, 1998,
among (i) BankUnited Financial Corporation, a Florida corporation (including any
successors or assigns, the "Depositor"), (ii) The Bank of New York, a New York
banking corporation, 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 Delaware
banking corporation, 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).
RECITALS
WHEREAS, the Depositor, the Property Trustee and the Delaware Trustee
have heretofore duly declared and established a business trust, BankUnited
Capital III, pursuant to the Delaware Business Trust Act by the entering into of
that certain Trust Agreement, dated as of __________, 1998 (the "Original Trust
Agreement"), and by the execution and filing by the Delaware Trustee, the
Depositor and the Administrative Trustees with the Secretary of State of the
State of Delaware of the Certificate of Trust, filed on _________, 1998, the
form of which is attached as Exhibit A; and
WHEREAS, the Depositor and the Trustees desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities (as defined
herein) by the Trust (as defined herein) to the Depositor; (ii) the issuance and
sale of the Preferred Securities (as defined herein) by the Trust pursuant to
the Underwriting Agreement (as defined herein); (iii) the acquisition by the
Trust from the Depositor of all of the right, title and interest in the
Debentures (as defined herein); and (iv) the appointment of the Administrative
Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party for the benefit of the
other parties and for the benefit of the Securityholders (as defined herein)
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows.
<PAGE>
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to
them in this Article I and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein", "hereof and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1 of the
Indenture.
"Administrative Trustee" means each of 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" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Preferred Security or beneficial interest
therein, the rules and procedures of the Depositary for such Preferred Security,
in each case to the extent applicable to such transaction and as in effect from
time to time.
2
<PAGE>
"Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in respect
of such Person under the United States Bankruptcy Code of 1978, as amended, or
any other similar applicable federal or state law, and the continuance of any
such decree or order unvacated and unstayed for a period of 90 days; or the
commencement of an involuntary case under the United States Bankruptcy Code of
1978, as amended, in respect of such Person, which shall continue undismissed
for a period of 90 days or entry of an order for relief in such case; or the
entry of a decree or order of a court having jurisdiction in the premises for
the appointment on the ground of insolvency or bankruptcy of a receiver,
custodian, liquidator, trustee or assignee in bankruptcy or insolvency of such
Person or of its property, or for the winding up or liquidation of its affairs,
and such decree or order shall have remained in force unvacated and unstayed for
a period of 60 days; or
(b) the institution by such Person of proceedings to be adjudicated a
voluntary bankrupt, or the consent by such Person to the filing of a bankruptcy
proceeding against it, or the filing by such Person of a petition or answer or
consent seeking liquidation or reorganization under the United States Bankruptcy
Code of 1978, as amended, or other similar applicable Federal or State law, or
the consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or custodian
or liquidator or trustee or assignee in bankruptcy or insolvency of such Person
or of its property, or shall make a general assignment for the benefit of
creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the appropriate Trustee.
"Business Day" means a day other than a Saturday or Sunday, a day on
which banking institutions in the Borough of Manhattan, The City of New York, or
the State of Florida are authorized or required by law, executive order or
regulation to remain closed, or a day on which the Property Trustee's Corporate
Trust Office or the Corporate Trust Office of the Debenture Trustee is closed
for business.
"Capital Treatment Event" has the meaning specified in Section 1.1 of
the Indenture.
"Certificate Depositary Agreement" means the agreement among the Trust,
the Depositor and The Depository Trust Company ("DTC"), as the initial Clearing
Agency, dated as of the Closing Date, substantially in the form attached as
Exhibit B, as the same may be amended and supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
3
<PAGE>
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. DTC shall 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 Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, or any successor
statute, in each case as amended from time to time.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $25 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 rank pari
passu with the Preferred Securities; provided, however, that upon the occurrence
of an Event of Default, the right of holders of Common Securities to payment in
respect of (i) distributions, and (ii) payments upon liquidation, redemption and
otherwise are subordinated to the right of holders of Preferred Securities.
"Common Securities Certificate" means a certificate 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
Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as specified in Section 1.1
of 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.
4
<PAGE>
"Debentures" means the aggregate principal amount of the Depositor's
____% Junior Subordinated Deferrable Interest Debentures due 2028, issued
pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means the Preferred
Securities Certificates issued in certificated, fully registered form
(non-global) as provided in Section 503A.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from
time to time.
"Delaware Trustee" means the 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 401(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401(a).
"DTC" means The Depository Trust Company.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such default
for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Trust Agreement (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clause (b) or (c), above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Trustee or Trustees by the
Holders of at least 25% in aggregate liquidation preference 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.
5
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor statute, in each case as amended from time to time.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extended Interest Payment Period" has the meaning specified in Section
4.1 of the Indenture.
"Global Preferred Securities Certificate" means a Preferred Securities
Certificate evidencing ownership of Global Preferred Securities.
"Global Preferred Security" means a Preferred Security, the ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 503A.
"Guarantee" means the Preferred Securities Guarantee Agreement executed
and delivered by the Depositor, as guarantor, and The Bank of New York, as
Trustee, contemporaneously with the execution and delivery of this Trust
Agreement, for the benefit of the Holders of the Preferred Securities, as
amended from time to time.
"Indenture" means the Indenture, dated as of __________, 1998 between
the Depositor and the Debenture Trustee, as trustee, as amended or supplemented
from time to time.
"Investment Company Act," means the Investment Company Act of 1940, or
any successor statute, in each case as amended from time to time.
"Investment Company Event" has the meaning specified in Section 1.1 of
the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture and the proceeds of which shall be used to pay the Redemption Price of
such Trust Securities; and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a termination or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
Each Debenture distributed pursuant to clause (b) above shall carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Debentures.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
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"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 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Chief Executive Officer, President or a Vice President and by the
Chief Financial Officer, the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 816
shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be counsel for the Trust, the Property Trustee, or the Depositor, but not an
employee of any thereof, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the Recitals to
this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means,
as of the date of determination, all Preferred Securities theretofore executed
and delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Preferred Securities; provided that, if
such Preferred Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or in
lieu of which other Preferred Securities have been executed and delivered
pursuant to Sections 504, 505 and 511; provided, however, that in determining
whether the Holders of the requisite Liquidation Amount of the
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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 and/or any such Affiliate. Preferred Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Administrative Trustees the pledgee's
right so to act with respect to such Preferred Securities and that the pledgee
is not the Depositor or any Affiliate of the Depositor.
"Owners" 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 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures shall be held and from which the Property Trustee
shall make payments to the Securityholders in accordance with Sections 401 and
102.
"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 $25 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate", means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
E.
"Property Trustee" means the Person identified as the "Property
Trustee," in the Preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Trust heretofore formed and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
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"Redemption Price" means, with respect to any Trust Security, an amount
equal to the redemption price or the Debentures to be contemporaneously redeemed
in accordance with the Indenture.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
is a beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means BankUnited Capital III, a Delaware business trust created
and continued hereby.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939, as
amended, is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of the
Property Trustee under the Guarantee; (c) any cash on deposit in, or owing to,
the Payment Account; and (d) all proceeds and rights in respect of the foregoing
and any other property and assets for the time being held or deemed to be held
by the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
__________, 1998, among the Trust, the Depositor and the Underwriters named
therein.
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ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME.
The Trust created and continued hereby shall be known as "BankUnited
Capital III," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may engage in the
transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS.
The address of the Property Trustee in the State of Delaware is c/o The
Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
197111, 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 203. TRUST PROPERTY; ORGANIZATIONAL EXPENSES.
The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES.
On __________, 1998, the Depositor and an Administrative Trustee, on
behalf of the Trust and pursuant to the Original Trust Agreement, executed and
delivered the Underwriting Agreement. Contemporaneously with the execution and
delivery of this Trust Agreement, an Administrative Trustee, on behalf of the
Trust, shall execute in accordance with Section 502 and deliver in accordance
with the Underwriting Agreement, Preferred Securities Certificates, registered
in the name of the Persons entitled thereto, in an aggregate amount of 3,000,000
Preferred Securities having an aggregate Liquidation Amount of $75,000,000
against receipt of the aggregate purchase price of such Preferred Securities of
$75,000,000, which amount such Administrative Trustee shall promptly deliver to
the Property Trustee. If the underwriters exercise their Option and there is an
Option Closing Date (as such terms are defined in the Underwriting Agreement),
then an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver in accordance with the Underwriting
Agreement, Preferred Securities Certificates, registered in the name of the
Persons entitled thereto, in an aggregate amount of up to 450,000 Preferred
Securities having an aggregate Liquidation Amount of up to $11,250,000 against
receipt of the aggregate purchase price of such Preferred Securities of
$11,250,000, which amount such Administrative Trustee shall promptly deliver to
the Property Trustee.
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SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND
PURCHASE OF DEBENTURES.
(a) Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver to the Depositor, Common Securities
Certificates, registered in the name of the Depositor in an aggregate amount of
Common Securities having an aggregate Liquidation Amount of $3,125,000 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 corresponding amounts of Debentures, registered
in the name of the Property Trustee on behalf of the Trust and having an
aggregate principal amount equal to $78,125,000 (being the sum of the amounts
delivered to the Property Trustee pursuant to (i) the second sentence of Section
204; and (ii) the first sentence of Section 205(a)), 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 $78,125,000.
(b) If the underwriters exercise the Option and there is an Option
Closing Date, then an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver to the Depositor, Common
Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of Common Securities having an aggregate Liquidation Amount of
up to $468,750 against payment by the Depositor of such amount.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor corresponding amounts of
Debentures, registered in the name of the Trust and having an aggregate
principal amount of up to $11,718,750, and, in satisfaction of the purchase
price of such Debentures, the Property Trustee, on behalf of the Trust, shall
deliver to the Depositor the amount received from one of the Administrative
Trustees pursuant to the last sentence of Section 204 (being the sum of the
amounts delivered to the Property Trustee pursuant to (i) the third sentence of
Section 204; and (ii) the first sentence of this Section 205(b)).
SECTION 206. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to acquire the
Debentures; and (b) to engage in those activities necessary, convenient or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it shall hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Securityholders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall be one of the Trustees of the
Trust for the sole and limited purpose of fulfilling the requirements of Section
3807 of the Delaware Business Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section 207 and Article VIII, and in accordance with the
following provisions (i) and (ii), the Administrative Trustees shall have the
authority to enter into all transactions and agreements determined by the
Administrative
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Trustees to be appropriate in exercising the authority, express or implied,
otherwise granted to the Administrative Trustees under this Trust Agreement, and
to perform all acts in furtherance thereof, including without limitation, the
following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect
to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense Agreement and such other
agreements or documents as may be necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as amended, and under state
securities or blue sky laws, and the qualification of this Trust Agreement as a
trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon The Nasdaq Stock Market's National Market or such securities
exchange or exchanges as shall be determined by the Depositor and the
registration of the Preferred Securities under the Exchange Act, and the
preparation and filing of all periodic and other reports and other documents
pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities and the Debentures
to the Securityholders in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with this Trust Agreement;
(G) to the extent provided in this Trust Agreement,
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 State of the State of Delaware;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business trust under
the laws of the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of the
Preferred Securities or to enable the Trust to effect the purposes for which the
Trust was created;
(I) 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; and
(J) the taking of any action incidental to the
foregoing as the Administrative Trustees may from time to time determine is
necessary or advisable to give effect to
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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 and any
other payments made in respect of the Debentures in the Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in accordance with the terms
of this Trust Agreement;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the 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, the taking of any
action incidental to the foregoing as the Property Trustee may from time to time
determine is necessary or advisable to give effect to the terms of this Trust
Agreement and protect and conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any such action on any
particular Securityholder);
(J) registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of the duties, liabilities,
powers or the authority of the Administrative Trustees set forth in Section
207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement; (ii) sell,
assign, transfer, exchange, mortgage, pledge, setoff or otherwise dispose of any
of the Trust Property or interests therein, including to Securityholders, except
as expressly provided herein; (iii) take any action
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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 issuance and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Preferred
Securities and the Debentures, including any amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or, register for sale all or part of the
Preferred Securities and to do any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and advise
the Trustees of actions they must take on behalf of the Trust, and
prepare for execution and filing any documents to be executed and filed
by the Trust or on behalf of the Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of
any such States;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to The Nasdaq Stock Market's
National Market or a national stock exchange or other organizations for
listing upon notice of issuance of any Preferred Securities and to file
or cause an Administrative Trustee to file thereafter with such
exchange or organization such notifications and documents as may be
necessary from time to time;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) or 12(g) of the Exchange Act, including
any amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust shall not be deemed to be an "investment
company" required to be registered under the Investment Company Act, shall be
classified as a "grantor trust" and not as an association taxable as a
corporation for United States federal income tax purposes and so that the
Debentures shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section 1002, the
Depositor and the Administrative Trustees are authorized to take any
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action, not inconsistent with applicable law or this Trust Agreement, that each
of the Depositor and the Administrative Trustees determines in their discretion
to be necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Securityholders in accordance with
this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
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:
(a) Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall
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accumulate from June 30, 1998, and, except during any Extended Interest Payment
Period with respect to the Debentures, shall be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year, commencing on June
30, 1998. 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 401(a), a "Distribution Date.).
(b) 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 ____% per annum of the
Liquidation Amount of the Trust Securities. The amount of Distributions payable
for any full period shall be computed on the basis of a 360 day year of twelve
30-day months. The amount of Distributions for any partial period shall be
computed on the basis of the number of days elapsed in a 360 day year of twelve
30 day months. During any Extended Interest Payment Period with respect to the
Debentures, Distributions on the Preferred Securities shall be deferred for a
period equal to the Extended Interest Payment Period. The amount of
Distributions payable for any period shall include the Additional Amounts, if
any.
(c) Distributions on the Trust Securities shall be made by the Property
Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available in the Payment Account for the payment of such
Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be 15th day of the month in which the Distribution is payable.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures the Trust shall be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Securities Register. The Property
Trustee shall have no responsibility for the accuracy of any CUSIP number
contained in such notice. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
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(iv) if less than all the Outstanding Trust Securities are
to be redeemed, the identification and the aggregate Liquidation Amount
of the particular Trust Securities to be redeemed;
(v) that, on the Redemption Date, the Redemption Price
shall become due and payable upon each such Trust Security to be
redeemed and that Distributions thereon shall cease to accumulate on
and after said date with respect to each such Trust Security; and
(vi) the place or places where the Trust Securities are to
be surrendered for the payment of the Redemption Price.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has immediately available funds then on hand and available in the
Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 10:00 a.m., New York City time, on the
Redemption Date, subject to Section 402(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 402(c), will irrevocably deposit with 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 Securities so called for redemption shall cease, accept 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 shall cease to be Outstanding. In the event that any date on which
any Redemption Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date shall be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next 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 such date. In the event
that payment of the Redemption Price in respect of any Trust Securities called
for redemption is improperly withheld or refused and not paid either by the
Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust
Securities shall continue to accumulate, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities to
the date such Redemption Price is actually paid, in which case the actual
payment date shall be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the record holders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date; provided, however, in
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the event that the Preferred Securities do not remain in book-entry form, the
relevant record date shall be the date 15 days prior to the relevant Redemption
Date.
(f) Subject to Section 403(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Preferred Securities not previously called
for redemption, 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 $25 or an integral multiple of
$25 in excess thereof), of the Liquidation Amount of Preferred Securities of a
denomination larger than $25. The Property Trustee shall promptly notify the
Securities Registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of Preferred Securities shall relate, in the case of
any Preferred Securities redeemed or to be redeemed only in part, to the portion
of the Liquidation Amount of Preferred Securities which has been or is to be
redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities, provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of, Preferred
Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Holder of Common Securities shall be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Preferred Securities shall have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities shall have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
Holders of the Preferred Securities and not the Holder of the Common Securities,
and only the Holders of the Preferred Securities shall have the right to direct
the Property Trustee to act on their behalf.
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SECTION 404. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Preferred Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register 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 will credit the relevant accounts 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.
SECTION 405. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
furnished to such Securityholder or the information required to be provided on
such form. The Administrative Trustees shall provide the Depositor with a copy
of all such returns and reports promptly after such filing or furnishing. The
Property Trustee shall comply with United States federal withholding and backup
withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Interest, the Property
Trustee, at the direction of an Administrative Trustee or the Depositor, shall
promptly pay any taxes, duties or governmental charges of whatsoever nature
(other than withholding taxes) imposed on the Trust by the United States or any
other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE.
Any amount payable hereunder to any Holder or Preferred Securities
shall be reduced by the amount of any corresponding payment such Holder has
directly received under the Indenture pursuant to Section 512(b) or (c) hereof.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 203 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
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SECTION 502. THE TRUST SECURITIES CERTIFICATES.
(a) The Preferred Securities Certificates shall be issued in minimum
denominations of $25 Liquidation Amount and integral multiples of $25 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $25 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual, facsimile or
imprinted signature of at least one Administrative Trustee, except as provided
in Section 503. Trust Securities Certificates bearing the signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be validly issued and entitled
to the benefits of this Trust Agreement, notwithstanding that such individuals
or any of them shall have ceased to be so authorized prior to the delivery of
such Trust Securities Certificates or did not hold such offices at the date of
delivery of such Trust Securities Certificates. A transferee of a Trust
Securities Certificate shall become a Securityholder, and shall be entitled to
the rights and subject to the obligations of a Securityholder hereunder, upon
due registration of such Trust Securities Certificate in such transferee's name
pursuant to Sections 504 and 511.
(b) Upon their original issuance, Preferred Securities Certificates
shall be issued in the form of one or more fully registered Global Preferred
Securities Certificates which will be deposited with or on behalf of the
Depositary and registered in the name of the Depositary"s nominee. Unless and
until it is exchangeable in whole or in part for the Preferred Securities in
definitive form, a global security may not be transferred except 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 or by the Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor.
(c) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date and on the date on which the Underwriters exercise
the option to purchase additional Preferred Securities, as applicable (the
"Option Closing Date"), the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 204 and
205, to be executed on behalf of the Trust by at least one of the Administrative
Trustees and delivered to the Property Trustee and upon such delivery, the
Property Trustee shall countersign and register the Preferred Securities
Certificates and make available for delivery such Preferred Securities
Certificates upon the written order of the Depositor, executed by its Chairman
of the Board, Chief Executive Officer or President or any Vice President and the
Chief Financial Officer, Treasurer or an Assistant Treasurer or Secretary or
Assistant Secretary without further corporate action by the Depositor, in
authorized denominations.
SECTION 504.A 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.
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(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 (a) 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 Administrative Trustees are
unable to locate a qualified successor, (b) the Trust at its option advises the
Clearing Agency in writing that it elects to eliminate the global system through
the Clearing Agency, (c) after the occurrence of a Debenture Event of Default or
(d) pursuant to the 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 (a), (b) or (c) 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
reasonable acceptable to the Administrative Trustees, as evidenced by the
execution thereof by the Administrative Trustees or an 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 V 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 in Aggregate Liquidation Amount of Preferred
Securities. None of the Securities Registrar, the Trustees or the
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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 V or
Article IV 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 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 503B, 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 505. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES.
(a) The Property Trustee shall keep or cause to be kept, at the office
or agency maintained pursuant to Section 508, a register or registers for the
purpose of registering Trust Securities Certificates and transfers and exchanges
of Preferred Securities Certificates (herein referred to as the "Securities
Register") in which the registrar and transfer agent (the "Securities
Registrar"), subject to such reasonable regulations as it may prescribe, shall
provide for the registration of Preferred Securities Certificates and Common
Securities Certificates (subject to Section 510 in the case of the Common
Securities Certificates) and registration of transfers and exchanges of
Preferred Securities Certificates as herein provided. The Property Trustee shall
be the initial Securities Registrar.
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Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 508, the
Administrative Trustees or any one of them shall execute and the Property
Trustee shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Preferred Securities
Certificates in authorized denominations of a like aggregate Liquidation Amount
dated the date of execution by such Administrative Trustee or Trustees. The
Securities Registrar shall not be required to register the transfer of any
Preferred Securities that have been called for redemption. At the option of a
Holder, Preferred Securities Certificates may be exchanged for other Preferred
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Preferred Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 508.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Property Trustee in accordance with its customary practice. The Trust shall not
be required to (i) issue, register the transfer of, or exchange any Preferred
Securities during a period beginning at the opening of business 15 calendar days
before the date of mailing of a notice of redemption of any Preferred Securities
called for redemption and ending at the close of business on the day of such
mailing; or (ii) register the transfer of or exchange of any Preferred
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
(b) Trust Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Trust Agreement. Any
transfer or purported transfer of any Trust Security not made in accordance with
this Trust Agreement shall be null and void.
(i) A Trust Security that is not a Global Preferred Security
may be transferred, in whole or in part, to a Person who takes delivery
in the form of another Trust Security that is not a Global Security as
provided in Section 504(a).
(ii) Subject to this Section 504, Preferred Securities shall
be freely transferable.
(iii) A beneficial interest in Global Preferred Security may
be exchanged for a Preferred Security that is not a Global Preferred
Security as provided in Section 503A.
SECTION 506. 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
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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 the Property Trustee in the case of a Preferred Securities
Certificate shall authenticate 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 505, the Administrative Trustees or the
Securities Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Securities Certificate issued pursuant to this Section 505
shall constitute conclusive evidence of an undivided beneficial interest in the
assets of the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Trust Securities Certificate shall be found at any time.
SECTION 507. PERSONS DEEMED SECURITYHOLDERS.
The Trustees, the Paying Agent, the Securities Registrar and Depositor
shall treat any Persons in whose name any Trust Securities are issued as the
owner of such Trust Securities for the purpose of receiving Distributions and
for all other purposes whatsoever, and neither the Trustees, the Administrative
Trustees, the Securities Registrar nor the Depositor shall be bound by any
notice to the contrary.
SECTION 508. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the
Securities Registrar, the Administrative Trustees or the Depositor shall furnish
or cause to be furnished to the Property Trustee a list, in such form as the
Property Trustee may reasonably require, of the names and addresses of the
Securityholders as of the most recent record date (a) within one Business Day
after January 1 and June 30 of each year; and (b) promptly after receipt by any
Administrative Trustee or the Depositor of a request therefor from the Property
Trustee in order to enable the Property Trustee to discharge its obligations
under this Trust Agreement, in each case to the extent such information is in
the possession or control of the Administrative Trustees or the Depositor and is
not identical to a previously supplied list or has not otherwise been received
by the Property Trustee in its capacity as Securities Registrar. The rights of
Securityholders to communicate with other Securityholders with respect to their
rights under this Trust Agreement or under the Trust Securities, and the
corresponding rights of the Trustee shall be as provided in the Trust Indenture
Act. Each Holder 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 509. MAINTENANCE OF OFFICE OR AGENCY.
The Property Trustee shall designate, with the consent of the
Administrative Trustees, which consent shall not be unreasonably withheld, 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 Property Trustee initially designates its
corporate trust office at 101 Barclay Street, New York, New York Attn: Corporate
Trust Trustee Administration, as the principal corporate trust office for
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such purposes. The Property Trustee shall give prompt written notice to the
Depositor, the Administrative Trustees and to the Securityholders of any change
in the location of the Securities Register or any such office or agency.
SECTION 510. 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 Property Trustee may revoke
such power and remove the Paying Agent if such Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligation
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 Trustee and the
Property Trustee. 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 Property Trustee shall appoint a successor that is reasonably
acceptable to the Administrative Trustees to act as Paying Agent to execute and
deliver to the Trustees an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Trustees that as Paying Agent, such
successor Paying Agent or additional Paying Agent shall hold all sums, if any,
held by it for payment to the Securityholders in trust for the benefit of the
Securityholders entitled thereto until such sums shall be paid to such
Securityholders. The Paying Agent shall return all unclaimed funds to the
Property Trustee and, upon removal of a Paying Agent, such Paying Agent shall
also return all funds in its possession to the Property Trustee. The provisions
of Sections 801, 803 and 806 shall apply to the Property Trustee also in its
role as Paying Agent, for so long as the Property Trustee shall act as Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
SECTION 511. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, any attempted transfer of the Common Securities (other than a transfer
in connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT TO A SUCCESSOR IN INTEREST TO THE DEPOSITOR OR AN AFFILIATE OF THE
DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 510 OF THIS TRUST
AGREEMENT."
SECTION 512. NOTICES TO CLEARING AGENCY.
To the extent that a notice or other communication to the Holders is
required under this Trust Agreement, for so long as Preferred Securities are
represented by a Global Preferred Securities Certificate, the Trustees shall
give all such notices and communications specified herein to be given to the
Clearing Agency, and shall have no obligations to the Owners.
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SECTION 513.A DEFINITIVE PREFERRED SECURITIES AND TEMPORARY PREFERRED
SECURITIES.
(a) If (a) the Depositor advises the Trustee 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, Holders of a beneficial interest in 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 though the Clearing Agency is no longer in the best interest
of the Holders of Preferred Securities, then the Administrative Trustees shall
notify the Clearing Agency and the Clearing Agency shall notify the Holders of
Preferred Securities and the other Trustees of the occurrence of such event and
of the availability of a Definitive Preferred Security to Holders of such class
requesting the same.
(b) Pending the preparation of permanent Definitive 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 Definitive Preferred Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations of the officers 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 the Definitive Preferred Securities, the
Temporary Preferred Securities shall be exchangeable for Definitive Preferred
Securities upon surrender of the Temporary Preferred Securities at any office or
agency of the Depositor designated herein, 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 execute and the
Property Trustee shall authenticate and make available for delivery in exchange
therefor a like principal amount of Definitive Preferred Securities of
authorized denominations. Until so exchange the Temporary Preferred Securities
shall in all respects be entitled to the same benefits as Definitive Preferred
Securities.
SECTION 514. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 209, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights. When issued and delivered to Holders
of the Preferred Securities against payment of the purchase price therefor, the
Preferred Securities shall be fully paid and nonassessable interests in the
Trust. The Holders of the Preferred Securities, in their capacities as such,
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
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(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 to make such declaration by a
notice in writing to the Depositor, the Property Trustee 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 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 provided in the
Indenture, 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:
(i) the Depositor has paid or deposited with the
Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of
the Debentures,
(B) any accrued Additional Interest on all of the
Debentures,
(C) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such declaration of
acceleration and interest and Additional Interest thereon at the rate borne by
the Debentures, and
(D) 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 non-payment of the principal of the Debentures which has
become due solely by such acceleration, have been cured or waived as
provided in the Indenture.
If the Property Trustee fails to annul any such declaration and waive
such default, the Holders of at least a majority in Liquidation Amount of the
Preferred Securities shall also have the right to rescind and annul such
declaration and its consequences by written notice to the Depositor, the
Property Trustee and the Debenture Trustee, subject to the satisfaction of the
conditions set forth in clause (i) and (ii) of this Section 512.
The Holders of at least a majority in Liquidation 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 and 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
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outstanding Debentures. 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 is represented by Global Preferred
Securities, 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 designated 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 or annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day which is 90 days after the 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
cancelled 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 cancelled 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 512.
(c) For so long as any Preferred Securities remain outstanding, if,
upon a Debenture Event of Default arising from the failure to pay interest or
principal on the Debentures, any Holders of Preferred Securities then
Outstanding shall, to the fullest extent permitted by law and subject to the
terms of this Trust Agreement and the Indenture, have the right to institute a
proceeding directly against the Depositor for enforcement of payment to such
Holder of principal of or interest on the Debentures having a principal amount
equal to the Liquidation Amount of the Preferred Securities of such Holder.
SECTION 515. CUSIP NUMBERS.
The Depositor in issuing the Debentures may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Depositor will promptly notify
the Property Trustee of any change in the CUSIP numbers.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 601, in Sections 514, 810 and
1002 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or
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the obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures; (ii) waive any past default which is waivable under Article VII of
the Indenture; (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each Holder of Outstanding Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior written consent of each holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote of the
Holders of the Outstanding Preferred Securities, except by a subsequent vote of
the Holders of the Outstanding Preferred Securities. The Property Trustee shall
notify each Holder of Outstanding Preferred Securities of any notice of default
received from the Debenture Trustee with respect to the Debentures. In addition
to obtaining the foregoing approvals of the Holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Trustees shall, at the expense
of the Depositor, obtain an Opinion of Counsel experienced in such matters to
the effect that the Trust shall continue to be classified as a grantor trust and
not as an association taxable as a corporation for United States federal income
tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise; or (ii) the dissolution, 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 shall be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Preferred Securities. No amendment to this Trust
Agreement may be made if, as a result of such amendment, the Trust would cease
to be classified as a grantor trust or would be classified as an association
taxable as a corporation for United States federal income tax purposes.
SECTION 602. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 1008 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
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SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.
(a) No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Securityholders to
vote on any matter in respect of which Preferred Securityholders are entitled to
vote upon the written request of the Preferred Securityholders of 25% of the
Outstanding Preferred Securities (based upon their aggregate Liquidation Amount)
and the Administrative Trustees or the Property Trustee may, at any time in
their discretion, call a meeting of Preferred Securityholders to vote on any
matters as to which the Preferred Securityholders are entitled to vote.
(b) Preferred Securityholders of record of 50% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation Amount), present in
person or by proposal shall constitute a quorum at any meeting of
Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their aggregate
Liquidation Amount) held by the Preferred Securityholders of record present,
either in person or by proxy, at such meeting shall constitute the action of the
Securityholders unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 604. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each $25 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
SECTION 605. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
When Trust Securities are held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Trust Securities,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such Trust Securities.
A proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and, the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their aggregate Liquidation Amount)
entitled to vote in respect of such action (or such larger proportion thereof as
shall be required by any express provision of this Trust Agreement) shall
consent to the action in writing (based upon their aggregate Liquidation
Amount).
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SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of any Distribution or other action as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
SECTION 608. ACTS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to be
given, made or taken by Securityholders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Securityholders in person or by an agent duly appointed in writing, and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 801) conclusive in favor
of the Trustees, if made in the manner provided in this Section 608.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the
Securities Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of every
Trust Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled hereunder
to take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of such Liquidation
Amount.
(f) A Securityholder may institute a legal proceeding directly against
the Depositor under the Guarantee to enforce its rights under the Guarantee
without first instituting a legal proceeding
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against the Guarantee Trustee (as defined in the Guarantee), the Trust, any
Administrative Trustee or any Person.
SECTION 609. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection and copying by
Securityholders and their authorized representatives during normal business
hours for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND
THE DELAWARE TRUSTEE.
The Property Trustee and the Delaware Trustee, each severally on behalf
of and as to itself, as of the date hereof, hereby represents and warrants for
the benefit of the Depositor and the Securityholders that:
(a) the Property Trustee is a New York banking corporation, 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 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 by the Property Trustee and
the Delaware Trustee of this Trust Agreement has been duly authorized by all
necessary corporate or other action on the part of the Property Trustee and
Delaware Trustee and does not require any approval of stockholders of the
Property Trustee or the Delaware Trustee and such execution delivery and
performance shall 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
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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 State of New
York or the State of Delaware, as the case may be, governing the banking or
trust powers of the Property 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
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 New York or
Delaware law governing the banking or trust powers of the Property Trustee or
the Delaware Trustee, as the case may be; 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 702. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date or the
Option Closing Date, if applicable, on behalf of the Trust have been duly
authorized and, shall have been, duly and validly executed, issued and delivered
by the Administrative Trustees pursuant to the terms and provisions of, and in
accordance with the requirements of, this Trust Agreement and the
Securityholders shall be, as of such date, entitled to the benefits of this
Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the State
of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank or the Property Trustee, as the
case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own
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funds or otherwise incur any financial liability in the performance of any of
their duties hereunder, or in the exercise of any of their rights or powers, if
they shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. No Administrative Trustee shall be liable for its act or omissions hereunder
except as a result of its own gross negligence or willful misconduct. The
Property Trustee's liability shall be determined under the Trust Indenture Act.
Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Section
801. To the extent that, at law or in equity, 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. With respect
to the relationship of each Securityholder and the Trustee, each Securityholder,
by its acceptance of a Trust Security, agrees that it shall look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees are not personally
liable to it for any amount distributable in respect of any Trust Security or
for any other liability in respect of any Trust Security. This Section 801(b)
does not limit the liability of the Trustees expressly set forth elsewhere in
this Trust Agreement or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error
of judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such Property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
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(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 301 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the negligence, default or
misconduct of the Administrative Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within 90 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 1008, notice of such Event of
Default to the Securityholders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived.
(b) The Administrative Trustees shall transmit, to the Securityholders
and the Property Trustee in the manner and to the extent provided in Section
1008, notice of the Depositor's election to begin or further extend an Extended
Interest Payment Period on the Debentures (unless such election shall have been
revoked) within the time specified for transmitting such notice to the holders
of the Debentures pursuant to the Indenture as originally executed.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 801:
(a) the Property Trustee may conclusively rely and shall be protected
in acting or refraining from acting in good faith upon any resolution, Opinion
of Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action; or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with other provisions contained
herein; or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor, provided, however, that if the
Property Trustee does not receive such instructions of the Depositor within 10
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not be less than 2 Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Trust Agreement as
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it shall deem advisable and in the best interests of the Securityholders, in
which event the Property Trustee shall have no liability except for its own bad
faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an 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
re-recording, refilling, or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice (which
counsel may be counsel to the Depositor or any of its Affiliates) and the advice
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon and in accordance with such advice, the Property Trustee
shall have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request written instructions from the Holders of the Trust
Securities which written instructions may only be given by the Holders of the
same proportion in Liquidation Amount of the Trust Securities as would be
entitled to direct the Property Trustee under the terms of the Trust Securities
in respect of such remedy, right or action; (ii) may
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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 written instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement. No provision of this
Trust Agreement shall be deemed to impose any duty or obligation on the Property
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it, in any jurisdiction in which it shall be
illegal, or in which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts, or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Property Trustee shall be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The Recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 805. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 808 and 813 and except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
SECTION 806. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time such compensation as the
Trustees and the Depositor may agree in writing for all services rendered by
them hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees, any such
expense, disbursement or advance as may be attributable to its, his or her gross
negligence, bad faith or willful misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee for,
and to hold the Trustees harmless against, any and all loss, damage, claim,
liability, penalty or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Trust Agreement, including the costs and expenses of defending itself against
any claim or liability in connection with the acceptance, exercise or
performance of any of its powers or duties hereunder,
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except any such expense, disbursement or advance as may be attributable to such
Trustee's negligence, bad faith or willful misconduct (or, in the case of the
Administrative Trustees, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct).
(d) provisions of this Section 806 shall survive the termination of
this Trust Agreement or the earlier resignations or removal of any Trustee.
No Trustee may claim any Lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 806.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 7.1(a)(iv), Section 7.1(a)(v) or
7.1(a)(vi) of the Indenture, the expenses (including reasonable charges and
expenses of its counsel) and the compensation for the services are intended to
constitute expenses of administration under any applicable Bankruptcy Law.
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF
TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
807, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware; or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
SECTION 808. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trust shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
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SECTION 809.A CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) Unless an Event of Default shall have occurred and be continuing,
at any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Depositor shall have power to appoint,
and upon the written request of the Property Trustee, the Depositor shall for
such purpose join with the Property Trustee in the execution, delivery and
performance of any 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 with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 809. If the Depositor does not
join in such appointment within 15 days after the receipt by it of a request so
to do, or in case a Debenture Event of Default has occurred and is continuing,
the Property Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section 809 shall
either be (i) a natural person who is at least 21 years of age and a resident of
the United States; or (ii) a legal entity with its principal place of business
in the United States that shall act through one or more persons authorized to
bind such entity.
(b) Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and delivered
by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms,
namely:
(i) The Trust Securities shall be executed and delivered and
all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustees specified
hereunder, shall be exercised, solely by such Trustees and not by such
co-trustee or separate trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Property Trustee or by the Property
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall
be incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations shall be exercised and performed
by such co-trustee or separate trustee.
(iii) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor,
may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section 809, and, in case a Debenture
Event of Default has occurred and is continuing, the Property Trustee
shall have the power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence
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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 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 809.
(iv) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property
Trustee or any other trustee hereunder.
(v) The Property Trustee shall not be liable by reason of
any act of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of any Trustee (the "Relevant Trustee")
and no appointment of a successor Trustee pursuant to this Article VIII shall
become effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant
Trustee may resign at any time with respect to the Trust Securities by giving
written notice thereof to the Securityholders. If the instrument of acceptance
by the successor Trustee required by Section 811 shall not have been delivered
to the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Depositor,
any court of competent jurisdiction for the appointment of a successor Relevant
Trustee with respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time. In no event will the
holders of the Preferred Securities have the right to vote to appoint, remove or
replace the Administrative Trustees, which voting rights are vested exclusively
in the Common Securityholder. If an instrument of acceptance by a Successor
Trustee required by Section 8.11 shall have not been delivered to the Relevant
Trustee within 30 days after the giving of such notice of removal, the Relevant
Trustee may petition, at the expense of the Depositor, any court of competent
jurisdiction for the appointment of a Successor Relevant Trustee with respect to
the Trust Securities.
(d) If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and the successor
Trustee shall comply with the applicable requirements of Section 811. If the
Property Trustee shall resign, be removed or become incapable of continuing to
act as the Property Trustee at a time when a Debenture Event of Default
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shall have occurred and is continuing, the Preferred Securityholders, by Act of
the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees with respect to the
Trust Securities and the Trust, and such successor Trustee shall comply with the
applicable requirements of Section 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 an
Administrative Trustee, shall promptly appoint a successor Administrative
Trustee or Administrative Trustees with respect to the Trust Securities and the
Trust, and such successor Administrative Trustee or Administrative Trustees
shall comply with the applicable requirements of Section 811. If no successor
Relevant Trustee with respect to the Trust Securities shall have been so
appointed by the Common Securityholder or the Preferred Securityholders and
accepted appointment in the manner required by Section 811, any Securityholder
who has been a Security holder of Trust Securities on behalf of himself and all
others similarly situated may petition a court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Trust Securities.
(e) The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
(f) Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee 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 as forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Relevant
Trustee with respect to the Trust Securities and the Trust, the retiring
Relevant Trustee and each successor Relevant Trustee with respect to the Trust
Securities shall execute and deliver an instrument hereto wherein each successor
Relevant Trustee shall accept such appointment and which shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the Trust and, upon the execution and delivery of such instrument, the
resignation or removal of the retiring Relevant Trustee shall become effective
to the extent provided therein and each such successor Relevant Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust, but, on request of the Trust or any successor
Relevant Trustee such retiring Relevant Trustee shall upon payment of its
charges hereunder, 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.
(b) Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant
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Trustee all such rights, powers and trusts referred to in the immediately
preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment unless
at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article VIII.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any Person into which the Property Trustee or the Debenture Trustee may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such Person shall be
otherwise qualified and eligible under this Article VIII, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST.
If and when the Property Trustee shall be or become a creditor of the
Depositor or the Trust (or any other obligor upon the Debentures or the Trust
Securities), the Property Trustee shall be subject to and shall take all actions
necessary in order to comply with the provisions of the Trust Indenture Act
regarding the collection of claims against the Depositor or Trust (or any such
other obligor).
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) The Property Trustee shall transmit to Securityholders such reports
concerning the Property Trustee 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. If required by Section 313(a) of the Trust
Indenture Act, the Property Trustee shall, within sixty days after each May 15
following the date of the Trust Agreement, deliver to Securityholders a brief
report, dated as of such May 15, which complies with the provisions of such
Section 313(a).
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with The Nasdaq Stock Market's
National Market, and each national securities exchange or other organization
upon which the Trust Securities are listed, and also with the Commission and the
Depositor.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form in
the manner and at the times required by Section 314 of the Trust Indenture Act.
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Delivery of such reports, information and documents to the Property
Trustee is for information 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
Depositor"s compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers" Certificates).
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be 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 817(a), or if the
number of Trustees is increased pursuant to Section 817(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 810, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
207(a); and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of the Trust, as set forth herein.
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SECTION 819. VOTING.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
TERMINATION, LIQUIDATION AND MERGER
SECTION 901. TERMINATION UPON EXPIRATION DATE.
Unless earlier dissolved, the Trust shall automatically dissolve on
June 30, 2028 (the "Expiration Date") subject to distribution of the Trust
Property in accordance with Section 904.
SECTION 902. 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) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Debentures
to Securityholders in exchange for the Preferred Securities in accordance with
Section 904;
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all of the Debentures; and
(d) an order for dissolution of the Trust shall have been entered by a
court of competent jurisdiction.
SECTION 903. TERMINATION.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 904, or upon the
redemption of all of the Trust Securities pursuant to Section 402, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge
of all administrative duties of the Administrative Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
Securityholders; and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Business Trust Act.
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SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b), or (d)
of Section 902 occurs or upon the Expiration Date, the Trust shall be liquidated
by the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 904(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the
Trust Securities shall no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange shall be
deemed to represent a Like Amount of Debentures;
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 904(d) applies, receive a Liquidation
Distribution, as the Administrative Trustees shall deem appropriate;
(iv) state the CUSIP number; and
(v) state the office or agency of the Trust where Securities
should be surrendered.
(b) Except where Section 902(c) or 904(d) applies, in order to effect
the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to be
outstanding; (ii) certificates representing a Like Amount of Debentures shall be
issued to holders of Trust Securities Certificates upon surrender of such
certificates to the Administrative Trustees or their agent for exchange; (iii)
the Depositor shall use its reasonable efforts to have the Debentures listed on
The Nasdaq Stock Market's National Market or SmallCap Market or on such other
securities exchange or other organization as the Preferred Securities are then
listed or traded; (iv) any Trust Securities Certificates not so surrendered for
exchange shall be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last Distribution
Date on which a Distribution was made on such Trust Securities Certificates
until such certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal shall be made to holders of
Trust Securities Certificates with respect to such Debentures): and (v) all
rights of Securityholders holding Trust Securities shall cease, except the right
of such Securityholders to receive Debentures upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 904, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise,
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distribution of the Debentures in the manner provided herein is determined by
the Administrative Trustees 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 shall be entitled to receive out of the assets of the
Trust available for distribution to Securityholders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, 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 shall be entitled
to receive Liquidation Distributions upon any such dissolution, winding-up or
termination pro rata (determined as aforesaid) with Holders of Preferred
Securities, except that, if a Debenture Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF
THE TRUST.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Section 905. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety a trust organized
as such under the laws of any state; provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect to
the Preferred Securities; or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise; (ii) the Depositor expressly
appoints a trustee of such successor entity possessing substantially the same
powers and duties as the Property Trustee as the holder of the Debentures; (iii)
the Successor Securities are registered or listed, or any Successor Securities
shall be registered or listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then registered or listed (including, if applicable, the Nasdaq Stock Market"s
National Market), if any; (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not 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
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successor entity shall be required to register as an "investment company" under
the Investment Company Act, and (viii) the Depositor or any permitted successor
or assignee 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 Person or permit any other
Person to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the Trust or the
successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death or incapacity of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such person or any
Securityholder for such Person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding-up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a successor
Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein
or therein which may be inconsistent with any other provision herein or therein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement; or (iii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust shall be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust shall not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (ii), such action shall not adversely affect in any
material respect the interests of any Securityholder, and any amendments of this
Trust Agreement shall become effective when notice thereof is given to the
Securityholders.
(b) Except as provided in Section 601(c) or Section 1002(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and the
Depositor (i) with the consent of Trust Securityholders representing not less
than a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment shall not affect the Trust's status
as a grantor trust for United Status federal income tax purposes or the Trust's
exemption from status of an "investment company" under the Investment Company
Act.
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(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 603 or 606 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date; or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 603 or 606 hereof), this
paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e) 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.
(f) Neither the Property Trustee nor the Debenture Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
SECTION 1003. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1004. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day which is a Business Day (except as
otherwise provided in Sections 401(a) and 402(d)), with the same force and
effect as though made on the date fixed for such payment, and no distribution
shall accumulate thereon for the period after such date.
48
<PAGE>
SECTION 1006. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee(s),
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article XII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
SECTION 1007. HEADINGS.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Securityholder or the Depositor may be given or served in writing
by deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to BankUnited
Financial Corporation, 255 Alhambra Circle, Coral Gables, Florida 33134,
Attention: Chief Financial Officer, facsimile no.: (305) 569-2057. Any notice to
Preferred Securityholders shall also be given to such owners as have, within two
years preceding the giving of such notice, filed their names and addresses with
the Property Trustee for that purpose. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(a) with respect to the Property Trustee to 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), c/o The Bank of New York, 101 Barclay Street, Floor 21 West,
New York, New York 10286; 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 III." Such notice, demand or other
communication to or upon the Trust or the Property Trustee shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by
the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and 1 day after the Trust has been
terminated in accordance with Article IX, they shall not file, or join in the
filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws" or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in
49
<PAGE>
violation of this Section 1009, the Property Trustee agrees, for the benefit of
Securityholders, that at the expense of the Depositor (which expense shall be
paid prior to the filing), it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Depositor against
the Trust or the commencement of such action and raise the defense that the
Depositor has agreed in writing not to take such action and should be stopped
and precluded therefrom. The provisions of this Section 1009 shall survive the
termination of this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Trust Agreement as so modified
or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS
50
<PAGE>
TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST
AND SUCH SECURITYHOLDER AND SUCH OTHERS.
BANKUNITED FINANCIAL CORPORATION, as Depositor
By: _________________________________
Name: Alfred Camner
Title: Chairman of the Board
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
51
EXHIBIT 4.8
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
PREFERRED SECURITY
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P-1 _________
CUSIP NO. 066918 20 2
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
BANKUNITED CAPITAL III
____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
BankUnited Capital III a statutory business Trust created 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 III ____% Cumulative Trust Preferred
Securities (liquidation amount $25 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in Section
504 of the Trust Agreement (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 dated as
of _______, 1998, 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 entered into by BankUnited Financial Corporation, a Florida
corporation, as guarantor and The Bank of New York, as guarantee trustee, dated
as of _______, 1998, as amended from time to time (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.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of _____, 1998.
BANKUNITED CAPITAL III
By: ____________________________
Name: __________________________
Title: ADMINISTRATIVE TRUSTEE
<PAGE>
This is one of the Preferred Securities referred to in the within
mentioned Trust Agreement.
Dated: THE BANK OF NEW YORK
as Trustee
By: __________________________________
Authorized Signatory
<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.
EXHIBIT 4.9
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
BANKUNITED FINANCIAL CORPORATION
AND
THE BANK OF NEW YORK
____________, 1998
<PAGE>
TABLE OF CONTENTS
PAGE NO.
--------
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions and Interpretation........................... 1
ARTICLE II
TRUST INDENTURE ACT
Section 2.1 Trust Indenture Act; Application......................... 4
Section 2.2 Lists of Holders of Securities........................... 4
Section 2.3 Reports by the Preferred Guarantee Trustee............... 5
Section 2.4 Periodic Reports to Preferred Guarantee Trustee.......... 5
Section 2.5 Evidence of Compliance with Conditions Precedent......... 5
Section 2.6 Events of Default; Waiver................................ 5
Section 2.7 Event of Default; Notice................................. 5
Section 2.8 Conflicting Interests.................................... 5
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
Section 3.1 Powers and Duties of the Preferred Guarantee Trustee..... 6
Section 3.2 Certain Rights of Preferred Guarantee Trustee............ 7
Section 3.3 Not Responsible for Recitals or Issuance of Guarantee.... 8
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
Section 4.1 Preferred Guarantee Trustee; Eligibility................. 9
Section 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustees....................................... 9
ARTICLE V
GUARANTEE
Section 5.1 Guarantee................................................ 10
Section 5.2 Waiver of Notice and Demand.............................. 10
Section 5.3 Obligations not Affected................................. 10
Section 5.4 Rights of Holders........................................ 11
Section 5.5 Guarantee of Payment..................................... 11
Section 5.6 Subrogation.............................................. 11
Section 5.7 Independent Obligations.................................. 11
Section 5.8 Possibility of Advancement
of Maturity Date of Debentures........................... 12
<PAGE>
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.1 Limitation of Transactions............................... 12
Section 6.2 Ranking.................................................. 12
ARTICLE VII
TERMINATION
Section 7.1 Termination.............................................. 12
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Exculpation.............................................. 13
Section 8.2 Indemnification.......................................... 13
ARTICLE IX
MISCELLANEOUS
Section 9.1 Successors and Assigns................................... 13
Section 9.2 Amendments............................................... 13
Section 9.3 Notices.................................................. 14
Section 9.4 Benefit.................................................. 14
Section 9.5 Governing Law............................................ 14
<PAGE>
CROSS REFERENCE TABLE
SECTION OF TRUST SECTION OF
INDENTURE ACT OF GUARANTEE
1939, AS AMENDED AGREEMENT
310(a) 4.1 (a)
310(b) 4.1 (a), 2.8
310(c) Not Applicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Not Applicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Not Applicable
314(c) 2.5
314(d) Not Applicable
314(e) 1.1,2.5,3.2
314(f) 2.1,3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1,2.6, 5.4
316(b) 5 3
317(a) 3.1
317(b) Not Applicable
318(a) 2.1(a)
318(b) 2.1
318(c) 2.1(b)
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions.
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of ________, 1998, is executed and delivered by
BANKUNITED FINANCIAL CORPORATION, a Florida corporation (the "Guarantor"), and
THE BANK OF NEW YORK, a New York corporation, as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of BankUnited
Capital III, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of - ______________, 1998, among the trustees of
the Trust named therein, the Guarantor, as depositor, and the holders from time
to time of undivided beneficial interests in the assets of the Trust, the Trust
is issuing on the date hereof preferred securities, having an aggregate
liquidation amount of $25, designated the ____% Cumulative Trust Preferred
Securities (the "Preferred Securities") representing undivided beneficial
ownership interests in the assets of the Trust and having the terms set forth in
the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities, will be used to purchase the Junior Subordinated Debentures
due 2028 (the "Junior Subordinated Debentures") of the Guarantor which will be
deposited with The Bank of New York, as Property Trustee under the Trust
Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
(b) terms defined in the Trust Agreement in effect on the date of
execution of this Preferred Securities Guarantee have the same meaning when used
in this Preferred Securities Guarantee unless otherwise defined herein;
(c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
<PAGE>
(e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which federal or state
banking institutions in the Borough of Manhattan, The City of New York, or the
State of Florida are authorized or required by law, executive order or
regulation to close or a day on which the Corporate Trust Office of the
Preferred Guarantee Trustee is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at The Bank of New York, 101
Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate
Trust Trustee Administration.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the ____% Junior Subordinated Debentures due 2028,
of the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"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
Persons 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 payments 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 Preferred Securities Guarantee.
"Guarantor" means BankUnited Financial Corporation, a Florida
corporation.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued and unpaid Distributions (as defined
in the Trust Agreement) that are required to be paid on such Preferred
Securities, to the extent the Trust shall have funds available therefor, (ii)
the redemption price, including all accrued and unpaid Distributions to the date
of redemption (the "Redemption Price"), to the extent the Trust has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Trust, and (iii) upon a voluntary or involuntary dissolution,
2
<PAGE>
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Debentures to the Holders in exchange for
Preferred Securities as provided in the Trust Agreement or a redemption of all
of the Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of payment, to the extent the Trust shall have funds available therefor
(the "Liquidation Distribution"), and (b) the amount of assets of the Trust
remaining available for distribution to Holders in liquidation of the Trust.
"Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of __________, 1998, among the
Debenture Issuer and The Bank of New York, as trustee, and any indenture
supplemental thereto pursuant to which certain subordinated debt securities of
the Debenture Issuer are to be issued to the Property Trustee of the Trust.
"Junior Subordinated Debentures" shall have the meaning set forth in
the Recitals hereto.
"Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments.
"Majority in liquidation amount of the Preferred Securities" means the
holders of more than 50% of the liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the 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.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
3
<PAGE>
"Redemption Price" has the meaning provided therefor in the definition
of Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer of the Preferred Guarantee Trustee, including any
vice-president, any assistant vice-president, any assistant secretary, the
treasurer, any assistant treasurer or other officer customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing or 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 Junior Subordinated Debentures or to other
Debt which is PARI PASSU with, or subordinated to, the Junior 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 Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
Section 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
Section 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within one Business Day after January 1 and June
30 of each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
15 days before such List of Holders is given to the Preferred Guarantee Trustee;
provided, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The
Preferred Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
4
<PAGE>
Section 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
The Preferred Guarantee Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with
the requirements of Section 313 (d) of the Trust Indenture Act.
Section 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act. Delivery of such reports, information and documents to the
Preferred Guarantee Trustee is for informational purposes only and the Preferred
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 Preferred Guarantee Trustee is entitled to rely exclusively on
Officer's Certificates).
Section 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c) may be given in
the form of an Officers' Certificate.
Section 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
Section 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided, that the Preferred Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Preferred Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Trust Agreement shall
have obtained actual knowledge.
Section 2.8 CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in
this Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
Section 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of Preferred Securities exercising his
or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee. The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the
Preferred Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into this
Preferred Securities Guarantee against the Preferred Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Preferred Guarantee
Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates
or opinions that by any provision hereof are specifically
required to be furnished to the Preferred Guarantee Trustee,
the Preferred Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Preferred Guarantee Trustee, unless it shall be proved that the
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Preferred Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Preferred Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Preferred Guarantee Trustee, or exercising any trust
or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own funds
or otherwise incur personal financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers, if
the Preferred Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Preferred Securities
Guarantee or indemnity, reasonably satisfactory to the Preferred
Guarantee Trustee, against such risk or liability is not reasonably
assured to it.
Section 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently evidenced by
an Officers' Certificate;
(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or reregistration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in accordance with such advice or opinion. Such counsel
may be counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Preferred Guarantee Trustee shall
have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court of
competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the
Preferred Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such request
or direction, including such reasonable
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advances as may be requested by the Preferred Guarantee Trustee;
provided that, nothing contained in this Section 3.2(a)(vi) shall be
taken to relieve the Preferred Guarantee Trustee, upon the occurrence
of an Event of Default, of its obligation to exercise the rights and
powers vested in it by this Preferred Securities Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(ix) any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee Trustee or its
agents alone shall be sufficient and effective to perform any such
action. No third party shall be required to inquire as to the authority
of the Preferred Guarantee Trustee to so act or as to its compliance
with any of the terms and provisions of this Preferred Securities
Guarantee, both of which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed
to impose any duty or obligation on the Preferred Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.
Section 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not assume
any responsibility for their correctness. The Preferred Guarantee Trustee makes
no representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
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ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
Section 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section 4.1(a)(ii),
the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition as published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
Section 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(c), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee may be removed for cause at any
time by Act (within the meaning of Section 608 of the Trust Agreement) of the
Holders of at least a Majority in liquidation amount of the Preferred
Securities, delivered to the Preferred Guarantee Trustee.
(c) The Preferred Guarantee Trustee shall not be removed in accordance
with Sections 4.2(a) and 4.2(b) until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(d) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(e) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery of an instrument of resignation, the resigning Preferred
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Preferred
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Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee.
(f) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(g) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2,
the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued
to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
Section 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Trust), as and when due, regardless of any defense, right of set-off
or counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
Section 5.2 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
Section 5.3 OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Junior Subordinated Debentures);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary 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;
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(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the common
equity securities issued by the Trust), including the failure to receive any
regulatory approval required in connection with the redemption of the Preferred
Securities.
(g) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(h) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
Section 5.4 RIGHTS OF HOLDERS.
(a) The Guarantor expressly acknowledges that: (i) this Guarantee will
be deposited with the Preferred Guarantee Trustee to be held for the benefit of
the Holder; (ii) the Preferred Guarantee Trustee has the right to enforce this
Preferred Securities Guarantee; and (iii) 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 Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other Person.
Section 5.5 GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and
not of collection. This Preferred Securities Guarantee will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amount theretofore paid by the Trust.
Section 5.6 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders
of Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
Section 5.7 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.
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Section 5.8 POSSIBILITY OF ADVANCEMENT OF MATURITY DATE OF DEBENTURES
The parties hereto acknowledge that the Maturity Date (as defined in
the Indenture) of the Debentures may be advanced pursuant to the provisions of
Section 3.1 of the Indenture.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.1 LIMITATION OF TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if there shall
have occurred an Event of Default under this Preferred Securities Guarantee, an
Event of Default under the Trust Agreement or during an Extended Interest
Payment Period (as defined in the Indenture), then (a) the Guarantor shall not,
and shall not permit any Subsidiary to, declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
the reclassification of any class of the Company's capital stock into another
class of capital stock, (ii) dividends or distributions payable in any class of
the Company's common stock, (iii) any declaration of a dividend in connection
with the implementation of a shareholder 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 and (iv) purchases of the Company's common stock related
to the rights under any of the Company's benefit plane for its or its
subsidiaries' directors, officers or employees), and (b) the Guarantor shall
not, and shall not permit any Subsidiary to, make any payment of interest or
principal on or repay, repurchase or redeem any debt securities issued by the
Guarantor which rank PARI PASSU with or junior to the Junior Subordinated
Debentures; and (c) the Guarantor shall not redeem, purchase or acquire less
than all of the outstanding Debentures or any of the Preferred Securities.
Section 6.2 RANKING.
This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other Senior Debt of the Guarantor, (ii) pari passu with the most
senior preferred securities or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
in respect to any preferred securities or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION.
This Preferred Securities Guarantee shall terminate upon (i) full
payment of the Redemption Price of all Preferred Securities, (ii) upon full
payment of the amounts payable in accordance with the Trust Agreement upon
liquidation of the Trust, or (iii) upon distribution of the Junior Subordinated
Debentures to the Holders of the Preferred Securities. Notwithstanding the
foregoing, this Preferred Securities Guarantee shall continue to be effective or
shall be reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
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ARTICLE VIII
INDEMNIFICATION
Section 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, reasonable or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Preferred Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Preferred Securities Guarantee or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
Section 8.2 INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability or
expense, including taxes (other than taxes based on the income of the Guarantee
Trustee) incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee. The provisions
of this Section shall survive the termination of the Guarantee Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article XII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Guarantor's obligations hereunder, and any purported
assignment that is not in accordance with these provisions shall be void.
Section 9.2 AMENDMENTS.
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in liquidation amount of
the Preferred Securities. The provisions of
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Article VI of the Trust Agreement with respect to meetings of Holders of the
Preferred Securities apply to the giving of such approval.
Section 9.3 NOTICES.
All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33124
Attention: Treasurer
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
Section 9.4 BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1 (a), is not
separately transferable from the Preferred Securities.
Section 9.5 GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
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This Preferred Securities Guarantee is executed as of the day and year
first above written.
BANKUNITED FINANCIAL CORPORATION, as Guarantor
By: _____________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Preferred Guarantee Trustee
By: _____________________________________
Name:
Title:
15
EXHIBIT 5.1
The Board of Directors
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Re: BankUnited Financial Corporation
Registration Statement on Form S-3
File No. 333-28677
Ladies and Gentlemen:
We have acted as counsel to BankUnited Financial Corporation, a
Florida corporation (the "Company") and Depositor of BankUnited Capital III, a
Delaware statutory business trust (the "Trust"), in connection with the
preparation of a Registration Statement on Form S-3, Registration File No.
333-28677, including all amendments thereto, (the "Registration Statement")
filed by the Company and the Trust with the Securities and Exchange Commission
relating to (i) the proposed issuance by the Trust of $90,000,000 ($103,500,000
if the underwriters' over-allotment option is exercised) aggregate Liquidation
Amount of the Trust's ___% Cumulative Trust Preferred Securities due March 31,
2028 (the "Preferred Securities") registered under the Securities Act of 1933,
as amended (the "Securities Act"); (ii) the proposed issuance by the Company to
the Trust of $93,600,000 ($107,640,000 if the underwriters' over-allotment
option is exercised) aggregate principal amount of the Company's ___% Junior
Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") registered under the Securities Act; and (iii) the Company's
guarantee (the "Guarantee"), which guarantees the payment of Distributions and
payments on liquidation or redemption of the Preferred Securities, registered
under the Securities Act. The Preferred Securities are issuable under an Amended
and Restated Trust Agreement to be dated as of March __, 1998 (the "Trust
Agreement") between the Company, as Depositor, The Bank of New York (Delaware),
as Delaware Trustee, the Bank of New York, as Property Trustee, and the
Administrative Agents named therein; the Junior Subordinated Debentures are
issuable under an Indenture to be dated as of March __, 1998, (the "Indenture")
between the Company and The Bank of New York as Trustee; and the Guarantee is
issuable under the Guarantee Agreement to be dated as of March __, 1998 (the
"Guarantee Agreement") between the Company and The Bank of New York, as
Guarantee Trustee.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
certificate of trust filed by the Trust with the Secretary of State of the State
of the State of Delaware on June 6, 1997; (ii) the form of the Trust Agreement;
(iii) the form of the Preferred Securities; (iv) the form of the Guarantee
Agreement; (v) the form of the Junior Subordinated Debentures; (vi) the form of
the Indenture, in each case in the form filed as an exhibit to the Registration
Statement; and (vii) the Registration Statement. We have also examined originals
or copies, certified or otherwise identified to our satisfaction, of such other
documents, certificates and
<PAGE>
The Board of Directors
BankUnited Financial Corporation
Coral Gables, Florida 33134
March 6, 1998
Page 2
records and have reviewed such questions of law as we have considered necessary
and appropriate for the purposes of our opinions set forth below.
In rendering our opinions, we have assumed the authenticity of
all documents submitted to us as originals, the genuineness of all signatures
and the conformity to authentic originals of all documents submitted to us as
copies. We have also assumed the legal capacity for all purposes relevant hereto
of all natural persons and, with respect to all parties to agreements or
instruments relevant hereto other than the Company and the Trust, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. In addition, we have assumed that the Trust Agreement, the
Preferred Securities, the Guarantee, the Junior Subordinated Debentures and the
Indenture, when executed, will be executed in substantially the form reviewed by
us. As to questions of fact material to our opinions, we have relied upon
certificates of officers of the Company and the Trust and of public officials.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to them in the Trust Agreement, the Indenture and the
Guarantee Agreement, as applicable.
Based on the foregoing, we are of the opinion that:
(1) The Junior Subordinated Debentures have been duly authorized
by all requisite corporate action and, when executed and authenticated as
specified in the Indenture and delivered and paid for in the manner described in
the Registration Statement, the Junior Subordinated Debentures will constitute
valid and binding obligations of the Company, enforceable in accordance with
their terms.
(2) The Guarantee has been duly authorized by all requisite
corporate action and, when duly executed as specified in the Guarantee Agreement
and delivered in the manner described in the Registration Statement, the
Guarantee will constitute the valid and binding obligation of the Company,
enforceable in accordance with its terms.
The opinions set forth above are subject to the following
qualification and exceptions:
The enforceability of the operative documents, or any provision
thereof may be limited by and/or subject to bankruptcy (including, without
limitation, executory contracts provisions), insolvency, reorganization,
receivership, moratorium, fraudulent transfer or conveyance, or other laws
affecting the rights and remedies of creditors generally, or similar federal or
state laws, by general equity principles, by rules of law governing specific
performance, appointment of receivers, injunctive relief and other
<PAGE>
The Board of Directors
BankUnited Financial Corporation
Coral Gables, Florida 33134
March 6, 1998
Page 3
equitable remedies, and by certain other limitations which may be imposed upon
the availability of certain remedies or the exercise of certain rights
including, without limitation, commercial reasonableness or conscionability,
reasonable notice of disposition, specific performance or enforcement,
limitation on sale or encumbrance provisions, waivers or eliminations of rights
such as statutory rights of redemption, or of jury trial, separation or
aggregation of property at foreclosure or enforced sale, application of sale or
judgment proceeds, and multiplicity and inconsistency of remedies.
This opinion is rendered only with respect to the laws of the
State of Florida, the State of New York and of the United States of America (the
"Applicable Laws"). With respect to matters of Delaware law, we are relying upon
the opinion of Richards, Layton & Finger, P.A. Wilmington, Delaware, special
counsel to the Company and the Trust.
The opinions expressed above concern only the effect of laws as
now in effect and are rendered as of the date hereof. We undertake no, and
hereby disclaim any, obligation to revise or supplement this opinion should such
law be changed by legislative action, judicial decision, or otherwise after the
date of this opinion, or if we become aware of any facts that might change the
opinions expressed above after the date of this letter.
We hereby consent to your filing of this opinion as an exhibit to
the Registration Statement, and to the reference to our firm under the caption
"Validity of Securities" contained in the Prospectus included therein.
Date: March 6, 1998
Very truly yours,
STUZIN AND CAMNER,
PROFESSIONAL ASSOCIATION
/s/ Stuzin and Camner, Professional Association
EXHIBIT 5.2
[Letterhead of Richards, Layton & Finger]
March 6, 1998
BankUnited Capital III
c/o BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Re: BANKUNITED CAPITAL III
Ladies and Gentlemen:
We have acted as special Delaware counsel for BankUnited Financial
Corporation, a Florida corporation (the "Company"), and BankUnited Capital III,
a Delaware business trust (the "Trust"), in connection with the matters set
forth herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated as of June 6, 1997
(the "Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on June 6, 1997;
(b) The Trust Agreement of the Trust, dated as of June 6, 1997, by and
among the Company and the trustees of the Trust named therein;
(c) A form of Amended and Restated Trust Agreement of theTrust
(including Exhibits A, C and E thereto) (the "Trust Agreement") to be entered
into among the Company, as depositor, the trustees of the Trust named therein
and the holders, from time to time, of undivided beneficial interests in the
assets of the Trust, as attached as an exhibit to the Registration Statement (as
defined below);
(d) Amendment No. 3 to the Registration Statement on Form S-3 (the
"Registration Statement"), including a preliminary prospectus (the
"Prospectus"), relating to the ___% Cumulative Trust Preferred Securities of the
Trust
<PAGE>
BankUnited Capital III
March 6, 1998
Page 2
representing undivided beneficial interest in the assets of the Trust (each, a
"Preferred Security" and collectively, the "Preferred Securities"), as proposed
to be filed by the Company and the Trust with the Securities and Exchange
Commission on or about March 6, 1998; and
(e) A Certificate of Good Standing for the Trust, dated March 6, 1998,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our own
but rather have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Trust Agreement and the
Certificate are in full force and effect and have not been amended, (ii) except
to the extent provided in paragraph 1 below, the due creation or due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, organization or formation, (iii) the legal
capacity of natural persons who are parties to the documents examined by us,
(iv) that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to whom
a Preferred Security is to be issued by the Trust (collectively, the "Preferred
Security Holders") of a Preferred Securities Certificate for such Preferred
Securities and the payment for the Preferred Security acquired by it, in
accordance with the
<PAGE>
BankUnited Capital III
March 6, 1998
Page 3
Trust Agreement and the Registration Statement, and (vii) that the Preferred
Securities are issued to the Preferred Security Holders in accordance with the
Trust Agreement and the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act.
2. The Preferred Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, 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. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. We also consent
to Stuzin and Camner, P.A.'s relying as to matters of Delaware law upon this
opinion in connection with opinions to be rendered by it on the date hereof as
described in the Prospectus. In addition, we hereby consent to the use of our
name under the heading "Validity of Securities" in the Prospectus. In giving the
foregoing consents, we do not thereby admit that we come within the category of
Persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission
<PAGE>
BankUnited Capital III
March 6, 1998
Page 4
thereunder. Except as stated above, without our prior written consent, this
opinion may not be furnished or quoted to, or relied upon by, any other Person
for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger
BJK/BJ/bjr
EXHIBIT 8.1
March 6, 1998
BankUnited Financial Corporation
BankUnited Capital III
255 Alhambra Circle
Coral Gables, FL 33134
Ladies and Gentlemen:
We are acting as special tax counsel to BankUnited Financial
Corporation (the "Company") and BankUnited Capital III (the "Issuer") in
connection with the Registration Statement on Form S-3 (the "Registration
Statement") filed by the Company and the Issuer with the Securities and Exchange
Commission (Registration No. 333-28677) for the purpose registering under the
Securities Act of 1933 (the "Act") the Issuer's Trust Preferred Securities, the
Company's Junior Subordinated Deferrable Interest Debentures, and the Company's
Guarantee with respect to the Trust Preferred Securities.
We are of the opinion that the statements under the caption "Certain
Federal Income Tax Consequences" in the Prospectus included in the Registration
Statement, insofar as such statements constitute summaries of federal income tax
law, fairly summarize the matters referred to therein. In addition,
<PAGE>
BankUnited Financial Corporation
BankUnited Capital III
March 6, 1998
Page 2
the statements therein regarding the opinion of this firm are accurate.
We hereby consent to the use of our name under the captions "Certain
Federal Income Tax Consequences" and "Validity of Securities" in the Prospectus
included in the Registration Statement and to the filing of this opinion as an
exhibit to the Registration Statement. In giving such consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Act, as amended.
Very truly yours,
/s/ Kronish, Lieb, Weiner & Hellman LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 3 to the Registration Statement on Form
S-3 of our report dated November 12, 1997 appearing on page 55 of BankUnited
Financial Corporation's Annual Report on Form 10-K/A for the year ended
September 30, 1997. 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 6, 1998
