SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File Number 5-43936
BANKUNITED FINANCIAL CORPORATION
--------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 65-037773
- ------------------------------- ----------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number)
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
- ------------------------------------------ ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 569-2000
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
8% Noncumulative Convertible Preferred Stock, Series 1996
8% Noncumulative Convertible Preferred Stock, Series 1993
9% Noncumulative Perpetual Preferred Stock
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
---
The aggregate market value of the Class A Common Stock and Class B
Common Stock held by non-affiliates of the Registrant, based upon the average
price on December 23, 1998, was $118,495,647.* The Class A Common Stock is the
only publicly traded voting security of the Registrant.
The shares of the Registrant's common stock outstanding as of December
23, 1998 were as follows:
CLASS NUMBER OF SHARES
----- ----------------
Class A Common Stock, $.01 par value 17,829,675
Class B Common Stock, $.01 par value 376,392
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive Proxy Statement for its 1999 Annual Meeting
of Stockholders will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this Form 10-K
pursuant to Rule G(3) of the General Instructions for Form 10-K. Information
from such Definitive Proxy Statement will be incorporated by reference into Part
III, Items 10, 11, 12 and 13 hereof.
- ----------------
* 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.
<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 twenty-five branch offices, twenty-four
in southeast and one in southwest Florida and anticipates opening additional
branch offices in 1999 in its market area. 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 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 fiscal 1999, the Company expects to place increased emphasis on
retail and commercial branches and retail and correspondent lending, with a view
towards increasing the Company's margins and generating increased non-interest
income. It is also anticipated that the rapid expansion experienced during the
1998 fiscal year will be moderated during the 1999 fiscal year.
In connection with its emphasis on retail and commercial banking, as of
December 1, 1998, the Company and the Bank appointed a new President and Chief
Operating Officer who was formerly responsible for the Miami-Dade and Monroe
County operations of the largest commercial bank operating in South Florida.
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.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-K or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the word or phrases "will likely
result", "expect", "will continue", "anticipate", "estimate", "project",
"believe" and similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
to advise readers that various factors, including general economic factors and
conditions, changes in levels of market interest rates, credit risks of lending
activities, competitive and regulatory factors, and expansion strategies could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ materially from those anticipated or
projected.
The Company does not undertake, and specifically disclaims any obligation,
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
MARKET AREA AND COMPETITION
The Company conducts operations in Dade, Broward, Palm Beach and Collier
counties ("South Florida") which geographic region, at June 30, 1998, had a
total of approximately $79.7 billion in deposits at commercial banks and savings
institutions (42.1% of the total of $189.3 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.
1
<PAGE>
The Company encounters strong competition in attracting deposits and in its
lending activities. Its most direct competition for deposits historically has
been from commercial banks, brokerage houses, other savings associations, and
credit unions located in the Company's market area, and the Company expects
continued strong competition from such financial institutions in the foreseeable
future. The Company also competes in its market area with the branch offices of
several super-regional commercial banks and savings associations that are
substantially larger and have more extensive operations than the Company. In
addition, many financial institutions formerly independent and operating in
South Florida have recently been acquired by larger institutions 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 which it charges, the types of loans which it
offers, and the efficiency and quality of service which 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
2
<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.
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 adjustable rate and higher
fixed-rate mortgages tend to accelerate. As a result of the historically high
levels of prepayments, the results of operations for the year ended September
30, 1998 reflect an acceleration in the amortization of purchase premiums on
loans and mortgage-backed securities from $1.1 million for the year ended
September 30, 1997 to $11.4 million for the year ended September 30, 1998. In
turn, this caused a corresponding reduction in net interest income. To reduce
the adverse impact of declining market interest rates on the Company's net
interest income, the Company began to emphasize originating and purchasing
fixed-rate loans in the latter half of the fiscal year.
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 4.58% of total assets as of September 30,
1998. 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.
The Company currently utilizes derivative instruments on a limited basis to
hedge the interest rate risks of certain financial instruments. Interest Rate
Cap contracts have been acquired by the Company to hedge the risk on an increase
in market interest rates for variable rate sources of funds which are partially
funding financial instruments which have interest rate terms which are fixed for
certain periods of time (see Note 17 "Commitments and Contingencies" of the
Notes to Consolidated Financial Statements for further discussion of the
Interest Rate Cap contracts). The Interest Rate Cap contracts will be treated as
cash flow hedges and it is anticipated that any change in their fair value will
be substantially offset by an opposite change in the fair value of the financial
instruments designated in the hedge transaction.
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.
3
<PAGE>
GAP TABLE. The following table sets forth the amount of interest-earning
assets and interest-bearing liabilities outstanding at September 30, 1998, which
are expected to reprice or mature in each of the future time periods shown.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
INTEREST SENSITIVITY PERIOD (1)
----------------------------------------------------------------------------
6 MONTHS 6 MONTHS - OVER 1- OVER 5 - OVER 10-
OR LESS 1 YEAR 5 YEARS 10 YEARS YEARS
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<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 .............. $ 92,080 $ 11,556 $ 24,733 $ 51,289 $ 15,133
Mortgage-backed securities ..................... 308,754 30,848 304 511 5,339
Loans:
Adjustable-rate mortgages ...................... 1,080,972 599,087 126,637 18 26
Fixed-rate mortgages ........................... 195,482 84,991 508,154 260,928 124,568
Commercial and consumer loans .................. 16,120 8,501 20,472 59 --
----------- ----------- ----------- ----------- -----------
Total loans .................................. 1,292,574 692,579 655,263 261,005 124,594
----------- ----------- ----------- ----------- -----------
Total interest-earning assets .............. 1,693,408 734,983 680,300 312,805 145,066
Nonaccrual loans .................................. -- -- -- -- --
Other non-interest-earning assets ................. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total assets ................................... $ 1,693,408 $ 734,983 $ 680,300 $ 312,805 $ 145,066
=========== =========== =========== =========== ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ................ $ 98,719 $ 20,900 $ 33,458 $ 33,458 $ --
Passbook accounts ............................ 178,162 31,278 24,359 24,359 --
Certificate accounts ......................... 1,093,897 457,921 81,382 183 --
----------- ----------- ----------- ----------- -----------
Total customer deposits .................... 1,370,778 510,099 139,199 58,000 --
Borrowings:
FHLB advances .................................. 255,000 -- 765,000 1,466 --
Trust Preferred .................................. -- -- -- -- 218,500
Other borrowings ............................... 121,148 -- -- -- --
----------- ----------- ----------- ----------- -----------
Total borrowings ............................. 376,148 -- 765,000 1,466 218,500
----------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities ......... 1,746,926 510,099 904,199 59,466 218,500
Non-interest-bearing customer deposits ............ -- -- -- -- --
Other non-interest-bearing liabilities ............ -- -- -- -- --
Shareholders' equity .............................. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total liabilities and shareholders' equity $ 1,746,926 $ 510,099 $ 904,199 $ 59,466 $ 218,500
=========== =========== =========== =========== ===========
Total interest-earning assets less
interest-bearing liabilities ("GAP") .......... $ (53,518) $ 224,884 $ (223,899) $ 253,339 $ (73,434)
=========== =========== =========== =========== ===========
Ratio of GAP to total assets ...................... (1.43)% 6.01% (5.99)% 6.78 % (1.96)%
=========== =========== =========== =========== ===========
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities ............................ $ (53,518) $ 171,366 $ (52,533) $ 200,806 $ 127,372
=========== =========== =========== =========== ===========
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities, as a percentage
of total assets ................................ (1.43)% (4.58)% (1.41)% 5.37% 3.41%
=========== =========== =========== =========== ===========
<CAPTION>
AT SEPTEMBER 30, 1998
INTEREST SENSITIVITY PERIOD (1)
-------------------------------
NON-
INTEREST
EARNING TOTAL
-------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Interest-earning assets:
Investments, tax certificates,
Federal funds sold, FHLB
overnight deposits and other
interest earning assets, at cost ............ $ -- $ 194,791
Mortgage-backed securities ................... -- 345,756
Loans:
Adjustable-rate mortgages .................... -- 1,806,740
Fixed-rate mortgages ......................... -- 1,174,123
Commercial and consumer loans ................ -- 45,152
----------- -----------
Total loans ................................ -- 3,026,015
----------- -----------
Total interest-earning assets ............ -- 3,566,562
Nonaccrual loans ................................ 15,999 15,999
Other non-interest-earning assets ............... 155,822 155,822
----------- -----------
Total assets ................................. $ 171,821 $ 3,738,383
=========== ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts .............. $ -- $ 186,535
Passbook accounts .......................... -- 258,158
Certificate accounts ....................... -- 1,633,383
----------- -----------
Total customer deposits .................. -- 2,078,076
Borrowings:
FHLB advances ................................ -- 1,021,466
Trust Preferred ................................ -- 218,500
Other borrowings ............................. -- 121,148
----------- -----------
Total borrowings ........................... -- 1,361,114
----------- -----------
Total interest-bearing liabilities ....... -- 3,439,190
Non-interest-bearing customer deposits .......... 46,748 46,748
Other non-interest-bearing liabilities .......... 53,153 53,153
Shareholders' equity ............................ 199,292 199,292
----------- -----------
Total liabilities and shareholders' equity $ 299,193 $ 3,738,383
=========== ===========
Total interest-earning assets less
interest-bearing liabilities ("GAP") ........ $ -- $ 127,372
=========== ===========
Ratio of GAP to total assets .................... -% 3.41%
=========== ===========
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities ..........................
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities, as a percentage
of total assets ..............................
</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 determined by management. The rates paid in these
accounts, however, are determined by management based on market
conditions and other factors and may reprice more slowly than assumed.
All other assets and liabilities have been repriced based on the
earlier of repricing or contractual maturity. The mortgage prepayment
rate tables, deposit decay rates and the historical assumptions used
regarding payments on tax certificates should not be regarded as
indicative of the actual repricing that may be experienced by the
Company
4
<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>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------
1998 1997 1996
AS OF ----------------------------- ---------------------------- --------------------------
9/30/98 AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
YIELD/RATE(1) BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------------- ------- -------- ---- ------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net......... 7.05% $2,529,219 $ 177,252 7.01% $1,217,181 $94,655 7.78% $540,313 $ 41,313 7.65%
Mortgage-backed securities.... 6.27 288,832 16,588 5.74 103,389 7,035 6.80 62,711 4,250 6.78
Short-term investments (2).... 5.75 86,642 5,013 5.79 27,612 1,613 5.84 41,240 2,359 5.72
Tax certificates.............. 6.10 38,978 2,952 7.57 41,162 3,171 7.70 34,831 3,018 8.66
Long-term investments and
FHLB stock, net ............ 7.27 81,600 5,762 7.06 33,161 2,300 6.94 17,352 1,192 6.87
---- ---------- --------- ---- ---------- ------- ----- -------- ------- ----
Total interest-earning
assets.................... 6.95 3,025,271 207,567 6.86 1,422,505 108,774 7.65 696,447 52,132 7.49
---- ---------- --------- ---- ---------- ------- ----- -------- ------- ----
Interest-bearing liabilities:
NOW/Money Market.............. 3.00 163,513 5,083 3.11 91,515 2,236 2.44 33,148 775 2.34
Savings....................... 4.72 193,564 8,983 4.64 137,912 6,342 4.60 59,965 2,627 4.38
Certificate of deposits....... 5.56 1,384,710 79,365 5.73 735,008 41,558 5.65 313,521 17,389 5.55
Trust preferred securities.... 9.53 173,288 16,952 9.78 63,008 6,473 10.27 - - -
FHLB advances and other
borrowings.................. 5.55 998,562 57,160 5.72 335,112 19,351 5.77 235,264 13,831 5.88
---- ---------- --------- ---- ---------- ------- ----- -------- ------- ----
Total interest-bearing
liabilities................5.58 2,913,637 167,543 5.75 1,362,555 75,960 5.58 641,898 34,622 5.39
---- ---------- --------- ---- ---------- ------- ----- -------- ------- ----
Excess of interest-earning
assets over interest-bearing
liabilities................... $ 111,634 $ 59,950 $ 54,549
========== ========== ========
Net interest income.............. $ 40,024 $32,814 $17,510
========= ======= =======
Interest rate spread............. 1.37% 1.11% 2.07% 2.10%
==== ==== ===== ====
Net interest margin.............. 1.76% 1.32% 2.31% 2.51%
==== ==== ===== ====
Ratio of interest-earning
assets to interest-bearing
liabilities................... 103.83% 104.40% 108.50%
========== ========== ========
</TABLE>
(1) The yields and rates along with the corresponding interest rate spread and
net interest margin represent the yields earned and rates paid on the
Company's interest-earning assets and interest-bearing liabilities,
respectively, as of the close of business on September 30, 1998 and do not
include any estimates of the effect accelerated amortization of purchased
premiums would have on the yields earned.
(2) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
5
<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, YEAR ENDED SEPTEMBER 30,
--------------------------------------------- ------------------------------------------
1998 V. 1997 1997 V. 1996
--------------------------------------------- ------------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO
--------------------------------------------- ------------------------------------------
CHANGES CHANGES
CHANGES CHANGES IN TOTAL CHANGES CHANGES IN TOTAL
IN IN RATE/ INCREASE IN IN RATE/ INCREASE
VOLUME RATE VOLUME (DECREASE) VOLUME RATE VOLUME (DECREASE)
--------- --------- --------- --------- --------- ------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income attributable to:
Loans ............................... $ 102,032 $ (9,353) $ (10,082) $ 82,597 $ 52,842 $ 53 $ 447 $ 53,342
Mortgage-backed securities and
collateralized mortgage obligations 12,619 (1,098) (1,968) 9,553 2,757 17 11 2,785
Short-term investments (1) .......... 3,447 (15) (32) 3,400 (780) 49 (15) (746)
Tax Certificates .................... (168) (53) 2 (219) 549 (335) (61) 153
Long-term investments and FHLB stock 3,360 42 60 3,462 1,078 28 2 1,108
--------- --------- --------- --------- --------- ------- ------- ---------
Total interest-earning assets ..... 121,290 (10,477) (12,020) 98,793 56,446 (188) 384 56,642
--------- --------- --------- --------- --------- ------- ------- ---------
Interest expense attributable to:
NOW/Money Market .................... 1,760 608 479 2,847 1,365 35 61 1,461
Savings ............................. 2,559 58 24 2,641 3,415 131 169 3,715
Certificates of Deposit ............. 36,735 569 503 37,807 23,377 338 454 24,169
Trust preferred securities .......... 11,330 (309) (542) 10,479 -- -- 6,473 6,473
FHLB advances and other borrowings .. 38,310 (168) (333) 37,809 5,855 (233) (102) 5,520
--------- --------- --------- --------- --------- ------- ------- ---------
Total interest-bearing liabilities 90,694 758 131 91,583 34,012 271 7,055 41,338
--------- --------- --------- --------- --------- ------- ------- ---------
Increase (decrease) in net
interest income .............. $ 30,596 $ (11,235) $ (12,151) $ 7,210 $ 22,434 $ (459) $(6,671) $ 15,304
========= ========= ========= ========= ========= ======= ======= =========
</TABLE>
- ----------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
6
<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.
LOAN PORTFOLIO. The Company's loan portfolio primarily consists of
adjustable-rate mortgage loans ("ARMs") and fixed-rate mortgage loans secured by
one-to-four family residential and commercial real estate. As of September 30,
1998, the Company's loan portfolio totaled $3.0 billion, of which $2.8 billion
or 91.5 % 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, 1998, the
remainder of the Company's loan portfolio consisted of $145.9 million of
commercial real estate loans (4.8 % of total loans); five-or-more units
residential real estate loans of $24.4 million (0.8 % of total loans, net); $4.3
million of second mortgage loans (0.1 % of total loans, net); $30.4 million of
consumer loans (1.0% of total loans, net); $15.6 million of commercial business
loans (0.5 % of total loans, net); and $13.2 million of other loans (0.4% of
total loans, net).
At September 30, 1998, the Company's loan portfolio included $199.4
million, or 6.6% of the Company's total loans receivable, net, 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,
---------------------------------------------------
1998 1997 1996
------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Total loans receivable, net, at beginning of period (1)....... $ 1,765,723 $ 646,385 $ 453,350
Loans originated:.............................................
Residential real estate.................................... 312,749 159,533 65,954
Commercial business and consumer........................... 73,692 18,804 16,705
----------- ----------- ------------
Total loans originated................................... 386,441 178,337 82,659
Loans acquired in acquisitions (2)............................ 111,786 341,394 8,116
Loans purchased (3)........................................... 2,747,061 913,653 242,099
Loans sold.................................................... (173,498) (39,934) (4,356)
Loans securitized............................................. (355,469) - -
Principal repayments and amortization of discounts
and premiums............................................... (1,435,075) (270,281) (133,640)
Increase in allowance for loan losses......................... (2,435) (1,535) (689)
Transfers to real estate owned, net........................... (2,520) (2,296) (1,154)
----------- ----------- ------------
Total loans receivable, net, at end of period(1)........... $ 3,042,014 $ 1,765,723 $ 646,385
=========== =========== ============
</TABLE>
- -------------------------
(1) Includes loans held for sale.
(2) Loans acquired in the Central and Consumers mergers included $69.6 million
of one-to-four family residential real estate loans, $15.3 million of
commercial real estate loans and $26.8 million of other types of loans. 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. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations-Acquisitions" for
additional information regarding the acquisitions.
(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.
7
<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,
----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------------ ------------------- ----------------- ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to four-family
residential loans $2,784,494 91.5% $1,559,823 88.3% $568,203 87.9% $432,472 95.4% $393,933 95.3%
Five or more units
residential loans 24,392 0.8 32,163 1.8 12,559 2.0 1,124 0.2 2,164 0.5
Commercial......... 145,819 4.8 130,197 7.4 49,318 7.6 10,223 2.3 4,469 1.1
Construction....... 7,827 0.3 7,477 0.4 - - 200 0.1 - -
Land............... 5,410 0.2 7,997 0.5 2,687 0.4 450 0.1 1,095 0.3
Second mortgages
loans............ 4,344 0.1 5,992 0.3 2,748 0.4 2,412 0.5 2,616 0.6
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Total first
and second
mortgage loans 2,972,286 97.7 1,743,649 98.7 635,515 98.3 446,881 98.6 404,277 97.8
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Consumer loans..... 30,401 1.0 1,748 0.1 2,648 0.4 920 0.2 2,336 0.6
Commercial business
loans............ 15,550 0.5 10,890 0.6 5,822 0.9 3,632 0.8 4,732 1.1
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Total loans
receivable... 3,018,237 99.2 1,756,287 99.4 643,985 99.6 451,433 99.6 411,345 99.5
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Deferred loan fees,
premiums and
(discounts)...... 29,905 1.0 13,129 0.8 4,558 0.7 3,386 0.7 2,783 0.7
Allowance for loan
losses........... (6,128) (0.2) (3,693) (0.2) (2,158) (0.3) (1,469) (0.3) (841) (0.2)
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Loans receivable,
net........... $3,042,014 100.0% $1,765,723 100.0% $646,385 100.0% $453,350 100.0% $413,287 100.0%
========== ===== ========== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The following table sets forth, as of September 30, 1998, the amount of
loans (including mortgage loans held for sale) by category and expected
principal repayments by year.
<TABLE>
<CAPTION>
OUTSTANDING AT 2003- 2005- 2009 AND
SEPTEMBER 30, 1998 1999 2000 2001 2002 2004 2008 THEREAFTER
------------------- ---------- --------- --------- --------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four-family residential $2,784,494 $860,283 $ 549,271 $ 365,307 $ 251,455 $ 179,781 $ 418,077 $ 160,320
Five-,or-more-unit residential 24,392 3,640 2,348 1,520 1,450 3,405 7,629 4,400
Commercial.................... 145,819 52,597 18,812 12,224 13,953 9,736 33,623 4,874
Construction.................. 7,827 4,123 457 3,247 - - - -
Land.......................... 5,410 3,840 147 135 124 767 249 148
Second mortgage loans............ 4,344 1,343 857 570 392 280 652 250
---------- ---------- --------- --------- --------- --------- --------- ---------
Total first and second mortgage loan 2,972,286 925,826 571,892 383,003 267,374 193,969 460,230 169,992
---------- ---------- --------- --------- --------- --------- --------- ---------
Consumer loans................... 30,401 13,449 8,584 6,849 1,519 - - -
Commercial business loans........ 15,550 11,857 965 667 1,335 666 60 -
---------- ---------- --------- --------- --------- --------- --------- ---------
Total loans................ $3,018,237 $ 951,132 $ 581,441 $ 390,519 $ 270,228 $ 194,635 $ 460,290 $ 169,992
========== ========== ========= ========= ========= ========= ========= =========
</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, 1998, 18.9% of the Company's gross
loans receivable (15.3% of total assets) were secured by properties located in
Florida and 16.5 % of gross loans receivable (13.3% 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.
8
<PAGE>
The following table sets forth, as of September 30, 1998, the distribution
of the amount of the Company's loans (including mortgage loans held for sale) by
state.
OUTSTANDING ON
STATE SEPTEMBER 30, 1998
----- ------------------
(IN THOUSANDS)
Florida(l)................................................$ 571,695
California................................................ 496,450
Illinois.................................................. 180,503
Massachusetts............................................. 163,724
Michigan.................................................. 156,496
Colorado.................................................. 155,256
Virginia.................................................. 115,805
Texas..................................................... 100,960
Maryland.................................................. 100,694
New York.................................................. 99,921
New Jersey................................................ 80,170
Washington................................................ 77,109
Arizona................................................... 69,705
Ohio...................................................... 66,722
Georgia................................................... 58,620
Connecticut............................................... 53,516
Pennsylvania.............................................. 46,720
North Carolina............................................ 44,048
Utah...................................................... 38,067
Oregon.................................................... 37,216
Tennessee................................................. 28,276
Missouri.................................................. 27,718
Minnesota................................................. 21,063
Indiana................................................... 19,402
South Carolina............................................ 18,168
Nevada.................................................... 15,485
District of Columbia...................................... 13,444
New Mexico................................................ 12,837
Kansas.................................................... 11,186
Wisconsin................................................. 10,306
Alabama................................................... 8,542
Oklahoma.................................................. 7,468
Idaho..................................................... 6,848
Kentucky.................................................. 6,829
Hawaii.................................................... 6,522
Louisiana................................................. 5,961
Delaware.................................................. 5,262
Arkansas.................................................. 4,894
Iowa...................................................... 4,583
Montana................................................... 4,099
Rhode Island.............................................. 3,936
New Hampshire............................................. 3,682
Nebraska.................................................. 3,307
Wyoming................................................... 2,738
Mississippi............................................... 1,915
Maine..................................................... 1,708
Alaska.................................................... 1,231
Vermont................................................... 1,067
Other(2).................................................. 461
Not secured by real estate................................ 45,902
------------
Total........................................... $ 3,018,237
===========
(1) Does not include $40.0 million of tax certificates representing liens
secured by properties in Florida.
(2) Less than $1 million in any one state.
9
<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's ARMs generally have interest rates that adjust semi-annually,
annually and, to a lesser extent, after a 3, 5 or 7 year fixed-rate term with
subsequent annual interest rate adjustments 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. 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 has purchased and originated loans with "teaser" rates that are
below market rates during an initial period after the loan is originated. The
teaser rate loans are generally tied to the constant maturity of one year
published by the Federal Reserve. For loans with teaser rates, the borrower's
ability to repay is determined by reference to the teaser rate plus 2%. As of
September 30, 1998 there were approximately $492.4 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").
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
commitment 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, based upon pre-determined
criteria and review of the loan file, may arrange for an updated review
appraisal before purchasing the loan. An appraisal will generally be ordered if
the property securing the loan is located in a designated area (such as a
geographic region known for fluctuating property values), if the loan size or
loan -to-value ratio meets certain thresholds, or if an underwriter or other
Bank officer, upon review of the loan file, determines that it is prudent to
order an appraisal. 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.
10
<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 to standards established by Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation (the "FHLMC"), except that the Company's underwriting standards
allow it to make loans (i) to non-resident aliens, as discussed below, (ii)
exceeding the FHMA or FHLMC limits, and (iii) in cases where specific
characteristics of the loan or borrower may compensate for the lack of
conformity with the FNMA or FHLMC criteria. 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 confirmed by
one of the underwriters. With respect to a substantial percentage of loans
purchased, the collateral value is confirmed 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, 1998, approximately $199.4 million, or 6.6%, of the
Company's gross loans receivable were first mortgage loans to non-resident
aliens secured by single-family residences located in Florida. These loans are
primarily 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, certain aspects of
such loans may involve a greater degree of risk than conforming 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
$312.7 million in fiscal 1998 and $159.5 million for the year ended September
30, 1997.
Beginning in the Company's fiscal 1997 fourth quarter, management began a
program to sell substantially all of the Company's internally generated
residential loans. These loans are classified as held for sale when originated
and if, after attempting to market the loans, management determines that certain
loans are unable to be packaged into saleable pools, the Company may transfer
such loans to its portfolio at the lower of cost or market. During the fiscal
year ended September 30, 1998 and the fiscal 1997 fourth quarter, residential
loans totaling $173.5 million and $30.1 million, respectively, were sold for a
gain of $4.0 million and $523,000, respectively. In addition, as part of
starting this program, the Company reclassified $93.5 million of its internally
generated portfolio of residential loans as held for sale in the fiscal 1997
fourth quarter. Loans held for sale as of September 30, 1998 were $172.4
million.
11
<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, 1998, the Company had $145.8 million of
commercial real estate loans, representing a total of 4.8% 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, 1998, the Company had $7.8 million of construction loans
representing a total of 0.2% of the Company's loan portfolio before net items.
COMMERCIAL BUSINESS LENDING. Commercial business loans totaled $15.6
million as of September 30, 1998 representing 0.5 % 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.
12
<PAGE>
As of September 30, 1998, the Company had $21.6 million in substandard
assets of which $20.9 million are included in non-performing assets. Substandard
assets consisted of the following:
AS OF SEPTEMBER 30, 1998
------------------------
(IN THOUSANDS)
One-to-four family residential loans................... $ 13,787
Commercial real estate................................. 4,734
Consumer and business loans............................ 1,128
REO.................................................... 1,974
-----------
Total Substandard Assets............................. $ 21,623
==========
In addition, $521,000 of nonresidential mortgage loans, for which reserves
have been established, were classified as loss as of September 30, 1998.
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,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, balance (at beginning
of period)............................................ $ 3,693 $ 2,158 $ 1,469 $ 841 $ 1,184
Provisions (credit) for loan losses...................... 1,700 1,295 (120) 1,221 1,187
Allowance from acquisitions.............................. 1,262 775 183 - -
Loans charged off:
One-to-four family residential loans................... (508) (604) (493) (535) (1,582)
Commercial and other................................... (91) - - (59) -
-------- -------- -------- -------- --------
Total................................................ (599) (604) (493) (594) (1,582)
-------- -------- -------- -------- --------
Recoveries:
One-to-four family residential loans................... 33 48 1,119 1 52
Commercial and other................................... 39 21 - - -
-------- -------- -------- -------- --------
Total................................................ 72 69 1,119 1 52
-------- -------- -------- -------- --------
Allowance for loan losses, balance (at end of period).... $ 6,128 $ 3,693 $ 2,158 $ 1,469 $ 841
======== ======== ======== ======== ========
</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.
13
<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,
-------------------------------------------------------------------------------
1998 1997 1996
------------------------ -------------------------- ------------------------
% 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....................... $ 1,917 92.4% $ 1,873 89.2% $ 1,381 88.6%
Commercial and other loans......... 3,332 7.6 1,787 10.8 739 11.4
Unallocated........................ 879 N/A 33 N/A 38 N/A
-------- ----- --------- ----- --------- -----
Total allowances for loan losses... $ 6,128 100.0% $ 3,693 100.0% $ 2,158 100.0%
======== ===== ========= ===== ========= =====
</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--Discussion of Financial Condition Changes for the Years Ended
September 30, 1998, 1997, and 1996--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, trust preferred securities 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.
Also included in the Company's investment portfolio are trust preferred
securities issued by FDIC-insured financial institutions or their holding
companies. Such securities are primarily acquired for their liquidity and yield
characteristics.
14
<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 6 of
the Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------------------------------------
1998 1997 1996
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal funds sold........................................ $ - $ - $ 400
Federal agency securities................................. 22,188 23,283 4,985
FHLB overnight deposits................................... 65,268 79,413 28,253
Tax certificates.......................................... 40,007 49,283 40,088
Mortgage-backed securities................................ 345,756 120,271 70,165
Other (1)................................................. 16,015 1,377 1,711
------------- ------------- -------------
Total investment securities............................ $ 489,234 $ 273,627 $ 145,602
============= ============= =============
Weighted average yield................................. 6.47% 6.91% 7.09%
============= ============= =============
</TABLE>
(1) Includes $15.3 million of trust preferred securities.
The following table sets forth information regarding the maturities of the
Company's investments as of September 30, 1998. Amounts shown are book values:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1998
---------------------------------------------------------
AS OF WITHIN 1 THROUGH 5 THROUGH OVER
SEPTEMBER 30, 1998 1 YEAR 5 YEARS 10 YEARS 10 YEARS
------------------ ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Federal agency securities...... $ 22,188 $ 4,586 $ 17,602 $ - $ -
FHLB overnight deposits........ 65,268 65,268 - - -
Tax certificates (1)........... 40,007 30,005 10,002 - -
Mortgage-backed
securities................. 345,756 3,601 19,071 1,327 321,757
Other.......................... 16,015 - 388 491 15,136
----------- ----------- ----------- ---------- ----------
Total....................... $ 489,234 $ 103,460 $ 47,063 $ 1,818 $ 336,893
=========== =========== =========== =========== ===========
Weighted average yield...... 6.47 % 6.09% 6.76% 6.29% 6.54%
=========== =========== =========== =========== ===========
</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. In addition, the Company retains the servicing on the
internally generated residential loans that are sold in connection with the loan
sales program initiated by management in the Company's 1997 fiscal fourth
quarter.
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 Company recovers substantially all of the advanced funds upon cure of
default by the borrower, or through
15
<PAGE>
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>
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------------------------- --------------------------------------
# OF BOOK # OF BOOK
LOANS PRINCIPAL VALUE LOANS PRINCIPAL VALUE
----- --------- ----- ----- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
FNMA....................... 1,042 $ 78,007 $ 1,331 1,297 $ 102,805 $ 1,514
FHLMC...................... 2,810 250,152 2,760 2,903 246,557 2,318
Private investors.......... 1,419 202,125 4,826 472 68,906 951
Private subservicing....... 280 11,676 - 320 14,275 -
----- ----------- --------- ----- ----------- ---------
5,551 $ 541,960 $ 8,917 4,992 $ 432,543 $ 4,783
===== =========== ========= ===== =========== =========
</TABLE>
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. In addition,
as of September 30, 1998, the Company had $75.0 million in brokered certificates
of 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.
16
<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,
----------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------------- ---- ------------- ---- ------------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts:
Regular....................................... $ 258,127 4.72% $ 160,522 4.66% $ 73,741 4.44%
Holiday club.................................. 31 2.00 35 2.00 39 2.00
------------- ------------- -------------
Total passbook accounts..................... 258,158 160,557 73,780
------------- ------------- -------------
Checking:
Insured money market.......................... 115,104 4.05 20,325 4.00 16,556 3.87
NOW and non-interest-bearing accounts......... 118,179 1.97 78,907 2.28 24,566 1.49
------------- ------------- -------------
Total transaction accounts.................. 233,283 99,232 41,122
------------- ------------- -------------
Total passbook and checking accounts........ 491,441 259,789 114,902
------------- ------------- -------------
Certificates:
30-89-day certificates of deposit............. 3,485 4.63 - - - -
3-5-month certificates of deposit............. 96,221 5.20 18,674 4.94 7,114 4.67
6-8-month certificates of deposit............. 516,674 5.47 439,091 5.67 159,850 5.40
9-11-month certificates of deposit............ 104,296 5.69 15,721 5.66 20,279 5.45
12-17-month certificates of deposit........... 618,385 5.62 285,305 5.73 124,637 5.49
18-23-month certificates of deposit........... 9,770 5.64 20,410 5.80 12,375 5.79
24-29-month certificates of deposit........... 35,497 5.76 58,279 5.84 42,875 5.94
30-35-month certificates of deposit........... 15,040 5.89 12,517 5.85 1,774 5.57
36-60-month certificates of deposit........... 72,856 6.07 64,106 6.07 22,300 5.93
Public funds.................................. 86,159 5.35 22,000 5.78 - -
Brokered certificates of deposit.............. 75,000 5.66 - - - -
------------- ------------- -------------
Total certificates.......................... 1,633,383 936,103 391,204
------------- ------------- -------------
Total..................................... $ 2,124,824 $ 1,195,892 $ 506,106
============= ============= =============
Weighted average rate................... 5.18% 5.32% 5.11%
</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, 1998 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1998
---------------------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1998 1 YEAR 2 YEARS 3 YEARS 3 YEARS
------------------ ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificate accounts:
4.00% to 4.99%................ $ 56,956 $ 55,548 $ 1,060 $ 348 $ -
5.00% to 5.99%................ 1,173,855 1,145,179 22,106 4,352 2,218
6.00% to 6.99%................ 63,502 22,106 4,218 1,957 35,221
7.00% to 7.99%................ 1,437 298 1,087 52 -
----------- ----------- ----------- ----------- -----------
Total certificate accounts
(under $100,000).......... $ 1,295,750 $ 1,223,131 $ 28,471 $ 6,709 $ 37,439
=========== =========== =========== =========== ===========
</TABLE>
17
<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, 1998 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1998
---------------------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1998 1 YEAR 2 YEARS 3 YEARS 3 YEARS
------------------ ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Jumbo certificate accounts:
4.00% to 4.99%................ $ 21,005 $ 20,577 $ 213 $ 215 $ -
5.00% to 5.99%................ 306,676 304,595 1,627 251 203
6.00% to 6.99%................ 9,722 3,963 687 349 4,723
7.00% to 7.99%................ 230 - 230 - -
----------- ----------- ----------- ----------- -----------
Total Jumbo certificate
amounts..................... $ 337,633 $ 329,135 $ 2,757 $ 815 $ 4,926
=========== =========== =========== =========== ===========
</TABLE>
Included in the table of jumbo certificates accounts above, are $86.2
million in certificates of deposit issued to the State of Florida, referred to
as public funds, where $76.6 million have interest rates ranging from 5.05% to
5.63% and $10.0 million have interest rates of 4.80%.
Of the Company's total deposits, excluding public funds, at September 30,
1998, 1997, and 1996, 12.3%, 11.5%, and 10.5%, respectively, were deposits of
$100,000 or more issued to the general 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 fiscal 1998, the Company opened six new branch offices and acquired four
branch offices from Central. The branches acquired from Consumers were closed
and the deposits were consolidated with an existing branch of the Company. In
fiscal 1999, the Company intends to open several new branch offices including
two that are scheduled to be opened in the first quarter of 1999.
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,
securities sold under agreements to repurchase and trust preferred securities 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.
During the 1997 and 1998 fiscal years, the Company issued an aggregate of
$227.2 million in Junior Subordinated Deferrable Interest Debentures, which were
purchased by its Delaware trust subsidiaries primarily with proceeds from the
sale of trust preferred securities. See Note 12 of the Notes to Consolidated
Financial Statements for a description of the Junior Subordinated Deferrable
Interest Debentures and the trust preferred securities.
During November 1998, the Bank established a program to issue up to $500
million aggregate principal amount of its Senior Notes backed by an irrevocable
standby letter of credit from the FHLB of Atlanta. The notes, none of which have
been issued, may have either a fixed or variable rate of interest determined at
the time of issuance and will mature no sooner than 9 months and no more than 10
years from the date of issuance. The Bank intends to use the net proceeds from
the sale of the notes for general corporate purposes that will ultimately
promote home financing or other housing activity and assist the Bank's
asset/liability management. The notes have been rated "Aaa" by Moody's Investors
Service, Inc. and "AAA" by Standard and Poor's Rating Services.
18
<PAGE>
The following tables set forth information as to the Company's borrowings
as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
---------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
----------- ---- ----------- ---- ----------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PERIOD END BALANCES:
FHLB advances(l)...................... $ 1,021,466 5.61% $ 671,484 5.87% $ 237,000 5.73%
Company Obligated Mandatorily
Redeemable Trust Preferred
Securities of Subsidiary Trusts
Holding Solely Junior
Subordinated Deferrable
Interest Debentures of
the Company(2)..................... 218,500 9.53 116,000 10.17 - -
Subordinated notes.................... - - - - 775 9.00
Securities sold under agreements
to repurchase(3)................... 121,148 5.43 30,000 5.64 - -
----------- ---- ----------- ---- ----------- ----
Total borrowings................... $ 1,361,114 6.22% $ 817,484 6.47% $ 237,775 5.74%
=========== ==== =========== ==== =========== ====
<CAPTION>
AT SEPTEMBER 30,
---------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
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)...................... $ 901,269 5.64% $ 325,580 5.77% $ 234,489 5.77%
Company Obligated Mandatorily
Redeemable Trust Preferred
Securities of Subsidiary Trusts
Holding Solely Junior Subordinated
Deferrable Interest Debentures of
the Company(2)..................... 173,288 9.81 63,008 10.27 - -
Subordinated notes.................... - - 704 10.53 775 9.00
Securities sold under agreements to
repurchase(3)...................... 97,292 5.69 8,828 5.73 - -
----------- ---- ----------- ---- ----------- ----
Total borrowings................... $ 1,171,849 6.26% $ 398,120 6.49% $ 235,264 5.78%
=========== ==== =========== ==== =========== ====
</TABLE>
- -------------------------
(1) The maximum amount of FHLB advances outstanding during the years ended
September 30, 1998, 1997 and 1996 was $1.3 billion, $671.5 million and
$244.0 million, respectively.
(2) The maximum amount of trust preferred securities outstanding during the
years ended September 30, 1998, 1997 and 1996 was $218.5 million, $116.0
million and $0.0 million, respectively.
(3) The maximum amount of securities sold under agreements to repurchase at
any month-end during the years ended September 30, 1998, 1997, and 1996
was $192.6 million, $30.0 million and $0.0 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.
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.
19
<PAGE>
BankUnited Mortgage Corporation, a Florida corporation ("BMC"), is a wholly
owned operating subsidiary of the Company which was established in 1996 for the
purpose of servicing loans secured by real property. BMC is currently inactive.
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.
BUFC Financial Services, Incorporated, a Florida corporation ("BUFC"), is a
wholly owned operating subsidiary of the Company organized in 1997 for the
purpose of selling annuities, insurance and securities products. During fiscal
1998, BUFC implemented a program for selling fixed annuities, and, more
recently, variable annuities and mutual finds, to customers of the Bank and
others. The program is conducted separate from the business of the Bank, under
the supervision of licenced insurance agents and a registered broker-dealer, and
is expected to continue and expand during the 1999 fiscal year. BUFC is also
reviewing the feasibility of selling traditional life, health or property and
casualty insurance 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.
CRE Properties, Inc., a Florida corporation, is a wholly owned operating
subsidiary of the Bank that holds title to, maintains, manages and supervises
the disposition of commercial real estate acquired through foreclosure. CRE
Properties, Inc. was established in 1998 for the purpose of insulating the Bank
from risk of liability concerning maintenance, management and disposition of
commercial real estate.
EMPLOYEES
At September 30, 1998, the Company had 383 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 profit sharing plan and incentive
compensation plans (including stock bonus and stock option plans) for officers,
directors and employees.
REGULATION
The following discussion is a summary of the significant provisions of the
banking laws and regulations which affect the Company and the Bank.
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 limits savings institutions' business activities, and
establishes their regulatory capital requirements. The FIRREA establishes the
OTS as the primary federal regulator for savings institutions. Deposits at the
Bank are insured through the Savings Association Insurance Fund ("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 and the FDIC also manages conservatorships and
receiverships of insolvent thrifts.
THE FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991. The
FDICIA authorizes regulators to take prompt corrective action to solve the
problems of critically undercapitalized institutions. As a result, the banking
regulators are required to take certain supervisory actions against
undercapitalized institutions, the severity of which increases as an
institution's level of capitalization decreases. Pursuant to the FDICIA, the
federal banking agencies have established the levels at which an insured
institution is considered to be "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." See "--Savings Institution Regulations--Prompt Corrective
Action" below for a discussion of the applicable capital levels.
The FDICIA also requires that the federal banking agencies include
components for interest rate risk, concentration of credit risk and the risk of
non-traditional activities in their risk-based capital requirements. See
"--Savings Institution Regulations--Regulatory Capital Requirements" below for a
description of the OTS rule that incorporates an interest rate risk component in
the risk-based capital requirement. Although implementation of this rule has
been postponed indefinitely.
In addition, the FDICIA requires each federal banking agency to have
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 also
establishes the qualified thrift lender ("QTL") investment percentage applicable
to SAIF-insured institutions, (see "--Savings
20
<PAGE>
Institution Regulations--Qualified Thrift Lender Test" below) and pursuant to
the FDICIA, a risk based assessment system for insured depository institutions
(see "--Savings Institution Regulations--Insurance of Accounts" below) has 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.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Branching Act") , which was enacted in September 1994, generally
does not directly affect savings associations, 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.
SAVINGS AND LOAN HOLDING COMPANY REGULATIONS
TRANSACTIONS WITH AFFILIATES. The Company is a unitary savings and loan
holding company and is subject to the OTS regulations, examination, supervision
and reporting requirements pursuant to certain provisions of the Home Owners'
Loan Act (the "HOLA") and the Federal Deposit Insurance Act. As an insured
institution and a subsidiary of a savings and loan holding company, the Bank is
subject to restrictions in its dealings with companies that are "affiliates" of
the Company under the HOLA, certain provisions of the Federal Reserve Act that
were made applicable to savings institutions by the FIRREA, and the OTS
regulations.
As a result of the FIRREA, savings institutions' transactions with 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.
SAVINGS INSTITUTION REGULATIONS
Federal savings institutions such as the Bank are chartered by the OTS, are
members of the FHLB system, and have their deposits insured by the SAIF. They
are subject to comprehensive OTS and FDIC regulations that are intended
primarily to protect depositors. SAIF-insured, federally chartered institutions
may not enter into certain transactions unless applicable regulatory tests are
met or they obtain necessary approvals. They are also required to file reports
with the OTS describing their activities and financial condition, and periodic
examinations by the OTS test compliance by institutions with various regulatory
requirements, some of which are described below.
INSURANCE OF ACCOUNTS. The Bank's deposits are insured by the SAIF up to
$100,000 for each insured account holder, the maximum amount currently permitted
by law. Under the FDIC regulations implementing risk-based insurance premiums,
institutions are divided into three groups-well capitalized, adequately
capitalized and undercapitalized-based on criteria consistent with those
established pursuant to the prompt corrective action provisions of the FDICIA.
See "--Prompt Corrective Action"
21
<PAGE>
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.
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.
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.
In September 1996, Congress enacted legislation to eliminate this
disparity, and any competitive disadvantage between BIF and SAIF member
institutions, from SAIF deposit insurance premiums, which were generally higher
that BIF deposit insurance premiums. 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 September 30,
1998 to 6.2 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.
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 adjusted total assets, (ii) a leverage
(or core capital) ratio of 3.0% of adjusted total 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 (including retained earnings), noncumulative perpetual
preferred stock and related earnings, certain qualifying nonwithdrawable
accounts and pledged deposits, and minority interests in fully consolidated
subsidiaries, less intangible assets (except certain servicing assets) and
specified portions 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
22
<PAGE>
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, 1998, the Bank's tangible, core and risk-based capital
ratios were 8.7%, 8.7% and 17.5% 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 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" (i,e. 2%) 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, 1998, the Company would not
have been required to deduct an IRR component from its total capital when
determining its compliance with the Bank's risk-based capital.
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 total 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 either core capital of 4% or more or
core capital 3% or more and a CAMEL composite rating of 1; "undercapitalized" if
it has total risk-based capital of less than 8%, Tier I risk-based capital of
less than 4%, or either core capital of less than 4% or core capital of less
than 3% and a CAMEL rating of 1; "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," or
worse, 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
23
<PAGE>
institution's initial classification as critically undercapitalized unless a
number of stringent conditions are met, including a determination by the
regulator and the FDIC that the institution has positive net worth and a
certification by such agencies that the institution is viable and not expected
to fail.
The final rules establishing the capital levels for purposes of the FDICIA
also indicate that the federal regulators intend to lower or eliminate the core
capital requirement from the definitions of well capitalized, adequately
capitalized and undercapitalized after the requirement to deduct an IRR
component from total capital becomes effective. This action has not yet been
taken. See "Regulatory Capital Requirements" above.
In addition to the foregoing prompt corrective action provisions, the
FDICIA also sets forth requirements that the federal banking agencies, including
the OTS, review their capital standards every two years to ensure that their
standards require sufficient capital to facilitate prompt corrective action and
to minimize loss to the SAIF and the BIF.
RESTRICTIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. The current OTS
regulation applicable to the payment of dividends or other capital distributions
by savings institutions imposes limits on capital distributions based on an
institution's regulatory capital levels and net income. An institution that
meets or exceeds all of its capital requirements (both before and after giving
effect to the distribution) and is not in need of more than normal supervision
would be a "Tier 1 association." A Tier 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 notice and opportunity for objection or 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 to conform to the rules of the other banking agencies.
The proposed rule would require a savings association to file an application
with the OTS prior to making any capital distribution, if the total amount of
the association's capital distributions, including the proposed distribution,
for the applicable calendar year exceeds the associations net income for that
year to date plus the association's net income for the preceding two years or if
the association is not eligible for expedited treatment. A notice would be
required if an application is not required, but the savings association would
not be at least adequately capitalized after the distribution, the proposed
distribution would reduce the amount of or retire any part of the associations
common or preferred stock or any part of debt instruments such as notes or
debentures included in capital (other than regular debt payments on approved
debt instruments), the proposed distribution would violate any applicable
statute, regulation or agreement between the association and the OTS, or the
association is a holding company subsidiary. In all other circumstances not
listed herein, no notice or application would be required. A savings association
would qualify for expedited treatment if it has a CAMEL rating of 1 or 2, has a
CRA rating of satisfactory or better, has a compliance rating of 1 or 2, is
meeting all of its capital requirements, and is not of supervisory concern. The
OTS may disapprove a notice or deny an application if the association would be
undercapitalized after the distribution, if the OTS determines that the
distribution raises safety or soundness concerns, or if the distribution
violates any applicable statute, regulation or agreement between the OTS and the
association.
QUALIFIED THRIFT LENDER TEST. Pursuant to amendments effected by the
FDICIA, a savings institution will be a QTL if its qualified thrift investments
equal or exceed 65% of its portfolio assets on a monthly average basis in nine
of every 12 months. Qualified thrift investments, under the revised QTL test,
include (i) certain housing-related loans and investments, (ii) certain
obligations of the FSLIC, the FDIC, the FSLIC Resolution Fund and the RTC, (iii)
loans to purchase or construct churches, schools, nursing homes and hospitals
(subject to certain limitations), (iv) consumer loans (subject to certain
limitations), (v) shares of stock issued by any FHLB, and (vi) shares of stock
issued by the FHLMC or the FNMA (subject to certain limitations). Portfolio
assets under the revised test consist of total assets minus (a) goodwill and
other intangible assets, (b) the value of properties used by the savings
institution to conduct its business, and (c) certain liquid assets in an amount
not exceeding 20% of total assets.
Any savings institution that fails to become or remain a QTL must either
convert to a national bank charter or be subject to restrictions specified in
the OTS regulations. Any such savings institution that does not become a bank
will be: (i) prohibited from making any new investment or engaging in activities
that would not be permissible for national banks; (ii) prohibited from
establishing any new branch office in a location that would not be permissible
for a national bank in the institution's home state; (iii) ineligible to obtain
new advances from any FHLB; and (iv) subject to limitations on the payment of
dividends comparable to the statutory and regulatory dividend restrictions
applicable to national banks. Also, beginning three years after the date on
which the savings association ceases to be a QTL, the savings association would
be prohibited from retaining any investment
24
<PAGE>
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, 1998, 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 $51.3 million investment in stock of
the FHLB of Atlanta as of September 30, 1998.
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, 1998,
advances from the FHLB of Atlanta totaled $1.0 billion. 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
4% 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). 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 1998, the Bank's liquidity ratio was 7.18%. The Bank is also required
to maintain cash reserve requirements at the Federal Home Loan Bank. At
September 30, 1998 this cash reserve requirement was $8.2 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, 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
25
<PAGE>
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, 1998, the Bank
was in compliance with the loans-to-one-borrower limitations.
PORTFOLIO POLICY GUIDELINES
The Federal Financial Institutions Examination Council issued a Supervisory
Policy Statement on Securities Activities (the "Policy"), which provides
guidance to an institution in developing its portfolio policy, specifies factors
that must be considered when evaluating an institution's investment portfolio,
and provides guidance on the suitability of acquiring and holding certain
products, such as mortgage derivative products, in its investment portfolio. The
Policy, among other things, defines "high-risk mortgage securities" and provides
that such securities are not suitable investment portfolio holdings for
depository institutions and that they may only be acquired to reduce interest
rate risk. The determination of a high-risk mortgage security will be based upon
a quantitative calculation of the average life of the security, and the change
in the average life and market price sensitivity of the security based on a
300-basis-point shift in the yield curve. Currently, the Bank does not hold any
high-risk mortgage securities. The Policy, however, is applicable to all
depository institutions and will affect the Bank's ability to invest in certain
mortgage securities, primarily collateralized mortgage obligations, in the
future.
GENERAL LENDING REGULATIONS
The Bank's lending activities are subject to federal and state regulation,
including the Equal Credit Opportunity Act, the Truth in Lending Act, the Real
Estate Settlement Procedures Act, the Community Reinvestment Act and the laws of
Florida, California and other jurisdictions governing discrimination, lender
disclosure to borrowers, foreclosure procedures and anti-deficiency judgments,
among other matters.
FEDERAL RESERVE SYSTEM
The Bank is subject to certain regulations promulgated by the Federal
Reserve Board. Pursuant to such regulations, savings institutions are required
to maintain reserves against their transaction accounts (primarily
interest-bearing checking accounts) and non-personal time deposits. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve Board
may be used to satisfy liquidity requirements imposed by the OTS. In addition,
Federal Reserve Board regulations limit the periods within which depository
institutions must provide availability for and pay interest on deposits to
transaction accounts. Depository institutions are required to disclose their
check-hold policies and any changes to those policies in writing to customers.
The Bank is in compliance with all such Federal Reserve Board regulations.
TAXATION
The Company reports its income and expenses under an accrual method of
accounting and 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").
26
<PAGE>
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 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 September 30, 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
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
27
<PAGE>
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 $2.5 million as of September
30, 1998.
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, 1998:
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS, LEASE EXPIRATION DATE
LOCATION PROPERTY AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ------------------------------------- -------------------------- --------------------- --------------
<S> <C> <C> <C>
Executive and administrative offices,
and savings branches
Aventura branch......................... $ 490,123 1999 5,000
2984 Aventura Boulevard (2 options to renew
Aventura, Florida 33180 for 5 years each)
Boca Hamptons branch.................... 243,017 2002 2,700
9070 Kimberly Boulevard (3 options to renew
Suite 68 for 5 years each)
Boca Raton, Florida 33434
Boca Raton branch....................... 122,803 1999 2,442
21222 St. Andrews Boulevard #11 (3 options to renew
Boca Raton, Florida 33434 for 3 years each)
Boynton Beach branch.................... 197,435 2001 2,933
117 North Congress Avenue (2 options to renew
Boynton Beach, Florida 33426 for 5 years)
Coconut Creek branch.................... 280,607 2002 2,400
4913 Coconut Creek Parkway (2 options to renew
Coconut Creek, Florida 33063 for 5 years each)
Coral Gables branch..................... 1,715,760 2001 14,097
255 Alhambra Circle (2 options to renew
Coral Gables, Florida 33134 for 5 years each)
Coral Gables North branch............... 49,563 1999 2,366
999 Ponce de Leon Boulevard
Coral Gables, Florida 33134
Coral Springs branch.................... 71,580 2001 2,805
1307 University Drive (2 options to renew
Coral Springs, Florida 33071 for 5 years each)
Deerfield Beach branch.................. 279,400 1998 4,000
and Commercial Real Estate office (2 options to renew
2201 West Hillsboro Boulevard for 5 years each)
Deerfield Beach, Florida 33442
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS, LEASE EXPIRATION DATE
LOCATION PROPERTY AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ------------------------------------- -------------------------- --------------------- --------------
<S> <C> <C> <C>
Deerfield Promenade branch.............. 59,819 2003 2,030
1333 South Military Trail
Deerfield Beach, Florida 33442
Delray Beach branch..................... 340,251 2001 4,000
7431-39 West Atlantic Avenue (3 options to renew
Delray Beach, Florida 33446 for 5 years each)
Doral branch............................ 134,445 1999 8,000
7970 N.W. 36 Street (4 options to renew
Miami, Florida 33166 for 5 years)
Hialeah branch.......................... 80,524 2000 5,063
1291 West 49 Street (5 options to renew
Hialeah, Florida 33012 for 3 years)
Hallandale branch....................... 645,915 (1) 4,500
501 Golden Isles Drive
Hallandale, Florida 33009
Hollywood branch........................ 49,543 2004 4,111
4350 Sheridan Street, Unit 101
Hollywood, Florida 33021
Lake Worth branch....................... 390,321 2002 3,200
7737 Lake Worth Road
Lake worth, Florida 33467
Lauderdale by the Sea branch............ 751,661 (1)(2) 5,000
227 Commercial Boulevard
Lauderdale by the Sea, Florida 33008
Miami Lakes branch...................... 54,105 1999 3,085
16800 N.W. 67 Avenue (1 option to renew
Miami, Florida 33015 for 5 years)
Naples branch........................... 244,605 2003 2,000
4649 Ninth Street North (2 options to renew
Naples, Florida 34103 for 5 years)
Pembroke Pines branch................... 61,286 2001 4,059
100 South Flamingo Road (1 option to renew
Pembroke Pines, Florida 33027 for 5 years)
Plantation branch....................... 46,054 2003 5,000
8167 West Sunrise Boulevard., Unit 50
Plantation, Florida 33322
Pompano Beach branch.................... 705,561 (1) 5,000
1313 North Ocean Boulevard
Pompano Beach, Florida 33062
South Miami branch...................... 116,294 2002 6,701
6075 Sunset Drive (1 option to renew
South Miami, Florida 33143 for 5 years)
Tamarac branch.......................... 107,003 2002 3,531
5779 North University Drive (1 option to renew
Tamarac, Florida 33321 for 5 years)
The Falls branch........................ 549,671 2010 3,000
8941 SW 136 St.
Miami, Florida 33015
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS, LEASE EXPIRATION DATE
LOCATION PROPERTY AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ------------------------------------- -------------------------- --------------------- --------------
<S> <C> <C> <C>
West Airport branch..................... 1,035,987 2003 7,200
2410 N.W. 72nd Avenue (4 options to renew
Miami, Florida 33122 for 3 years)
West Palm Beach branch.................. 169,958 2001 3,740
2911C North Military Trail (2 options to renew
West Palm Beach, Florida 33409 for 5 years)
Miami Lakes Operation Center............ 4,496,878 2002 40,000
7815 N.W. 148 Street (2 options to renew
Miami Lakes, Florida 33016 for 5 years each)
Hollywood............................... 149,164 1999 4,042
4350 Sheridan Street,
Units 200 & 201
Hollywood, Florida 33021
Other Offices:
Presidential Circle.................. - 2000(4) 32,850
4000 Hollywood Boulevard (2 options to renew
Hollywood, Florida 33021 for 5 years each)
1177 George Bush Boulevard, #200..... - 2002 4,059
Delray Beach, Florida 33483 (1 option to renew
for 5 years)
4340 Sheridan Street................. 558,676 (1)(3) 4,764
Hollywood, Florida 33021
</TABLE>
- -------------------------
(1) The Bank owns the facility.
(2) The Bank leases part of the facility to unrelated parties.
(3) The entire space is currently sub-leased to an unrelated party.
(4) The Bank subleases 20,000 square feet 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, 1998.
30
<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 54 Director, Chairman of the Board and Chief Executive Officer (1993 to
present) and President (1993 to 1998) of the Company; Director,
Chairman of the Board and Chief Executive Officer (1984 to present)
and President (1984 to 1993, 1994 to 1998) of the Bank; Senior
Managing Director (1996 to present) of Camner, Lipsitz and Poller,
Professional Association, attorneys-at-law, and its predecessor, Stuzin
and Camner, Professional Association, attorneys-at-law; 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).
Mehdi Ghomeshi 42 Director, President and Chief Operating Officer of the Company and
the Bank (December 1998 to present); Market President of
NationsBank, South Florida (January 1998 to December 1998);
President and Chief Operating Officer of Barnett Bank, South Florida
(1996 to 1998); Director of Special Assets and Risk Management,
Barnett Bank, Inc. (1995 to 1996); Executive Vice President,
Commercial Real Estate, Barnett Bank of South Florida (1993 to
1995).
Lawrence H. Blum 55 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.
Earline G. Ford 55 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 56 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 68 Director of the Company (1993 to present) and the Bank (1985 to
present); Private investor in Miami, Florida (1990 to present).
Bruce D. Friesner 56 Director of the Company and the Bank (1996 to present); Principal of
F&G Associates, a commercial real estate development company
(1972 to present); Director of Loan America Financial Corporation, a
national mortgage banking company (1990 to 1994).
Marc Lipsitz 57 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).
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
<S> <C> <C>
Neil H. Messinger, M.D. 60 Director of the Company and the Bank (1996 to present); Radiologist;
President (1986 to present), Radiological Associates, Professional
Association; Chairman (1986 to present) of Imaging Services of
Baptist Hospital.
Anne W. Solloway 83 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:
James A. Dougherty 48 Executive Vice President, Commercial and Middle Market Lending
(December 1998 to present) of the Company and the Bank; Director
(1995 to December 1998), Chief Operating Officer (1994 to
December 1998) and Executive Vice President (1994 to present) of
the Company; Director and Chief Operating Officer (1994 to
December 1998) and Executive Vice President (1994 to present) of
the Bank; Executive Vice President of Retail Banking of
Intercontinental Bank (1989 to 1994).
Donald Putnam 41 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.
David Malinoff 53 Executive Vice President, Senior Loan Officer of the Bank (July 1998
to present); President and Chief Executive Officer of Central Bank
(1991 to 1998).
Diane DeLella 47 Vice President and Chief Financial Officer (December 1998 to
present) and Controller (1995 to present) of the Company and the
Bank; Vice President and Controller of Coral Gables Federal Savings
and Loan (1986 to 1995).
</TABLE>
-------------------------
All executive officers serve at the discretion of the Board of Directors
and are elected annually by the Board.
32
<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 22, 1998, there were 535 and 18 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 1998 or
1997. See Note 13 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.
CLASS A COMMON STOCK
---------------------
PRICE
---------------------
HIGH LOW
------ -------
Fiscal Year Ended September 30, 1998:
1st Quarter................................... $15.63 $ 12.75
2nd Quarter................................... $15.63 $ 12.25
3rd Quarter................................... $18.50 $ 13.75
4th Quarter................................... $17.00 $ 8.25
Fiscal Year Ended September 30, 1997:
1st Quarter................................... $10.25 $ 7.875
2nd Quarter................................... $11.25 $ 9.25
3rd Quarter................................... $ 10.875 $ 8.50
4th Quarter................................... $ 13.375 $ 9.625
33
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income................................ $ 207,567 $ 108,774 $ 52,132 $ 39,419 $ 30,421
Interest expense............................... 167,543 75,960 34,622 26,305 16,295
------------ ------------ ------------ ------------ ------------
Net interest income............................ 40,024 32,814 17,510 13,114 14,126
Provision (credit) for loan losses............. 1,700 1,295 (120) 1,221 1,187
------------ ------------ ------------ ------------ ------------
Net interest income after provision (credit)
for loan losses........................... 38,324 31,519 17,630 11,893 12,939
------------ ------------ ------------ ------------ ------------
Non-interest income:
Service fees, net.............................. 1,139 2,993 597 423 358
Net gain on sales of loans and mortgage-backed
securities.................................. 4,429 819 5 239 150
Net gain (loss) on sales of other assets(1).... 6 1 (6) 9,569 -
Other.......................................... 651 247 53 6 46
------------ ------------ ------------ ------------ ------------
Total non-interest income................... 6,225 4,060 649 10,237 554
------------ ------------ ------------ ------------ ------------
Non-interest expense:
Employee compensation and benefits.......... 10,943 8,880 4,275 3,997 3,372
Occupancy and equipment..................... 4,854 3,568 1,801 1,727 1,258
Insurance(2)................................ 1,185 948 3,610 1,027 844
Professional fees........................... 1,891 1,605 929 1,269 833
Other....................................... 13,310 7,946 3,421 4,129 3,579
------------ ------------ ------------ ------------ ------------
Total non-interest expense................ 32,183 22,947 14,036 12,149 9,886
------------ ------------ ------------ ------------ ------------
Income before income taxes..................... 12,366 12,632 4,243 9,981 3,607
Provision for income taxes(3).................. 5,009 5,033 1,657 3,741 1,328
------------ ------------ ------------ ------------ ------------
Net income before Preferred Stock dividends.... 7,357 7,599 2,586 6,240 2,279
Preferred stock dividends:
Bank........................................ - - - - 198
Company..................................... 897 2,890 2,145 2,210 1,871
------------ ------------ ------------ ------------ ------------
Net income after Preferred Stock dividends..... $ 6,460 $ 4,709 $ 441 $ 4,030 $ 210
============ ============ ============ ============ ============
FINANCIAL CONDITION DATA:
Total assets................................... $ 3,738,383 $ 2,145,406 $ 824,360 $ 608,415 $ 551,075
Loans receivable, net, and
mortgage-backed securities(4)............... 3,215,360 1,781,652 716,550 506,132 470,154
Investments, overnight deposits, tax certificates,
reverse repurchase agreements, certificates of
deposits and other earning assets........... 194,791 186,955 87,662 88,768 64,783
Total liabilities.............................. 3,539,091 2,045,761 755,249 562,670 509,807
Deposits....................................... 2,124,824 1,195,892 506,106 310,074 347,795
Long-term debt................................. 766,466 191,484 45,000 62,000 6,000
Company obligated mandatorily redeemable
trust preferred securities of subsidiary trust
holding solely junior subordinated deferrable
interest debentures of the Company.......... 218,500 116,000 - - -
Borrowings..................................... 1,361,114 817,484 237,775 241,775 158,175
Total stockholders' equity..................... 199,292 99,645 69,111 45,745 41,268
Common stockholders' equity.................... 190,627 75,649 44,807 21,096 16,667
(Continued on next page)
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA:
Basic earnings per common share................ $ 0.41 $ 0.57 $ 0.10 $ 1.77 $ 0.10
============ ============ ============ ============ ============
Fully diluted.................................. $ 0.39 $ 0.54 $ 0.10 $ 1.26 $ 0.10
============ ============ ============ ============ ============
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Basic....................................... 15,692,566 8,210,890 4,306,042 2,296,021 2,175,210
Diluted..................................... 16,666,415 9,148,229 4,558,521 4,158,564 2,175,210
Book value per common share.................... $ 10.50 $ 7.94 $ 7.85 $ 10.20 $ 8.33
Fully converted tangible book value per
common share............................... $ 8.66 $ 6.88 $ 7.13 $ 8.15 $ 7.39
Cash dividends per common share
Class A..................................... $ - $ - $ - $ - $ 0.075
Class B..................................... $ - $ - $ - $ - $ 0.030
SELECTED FINANCIAL RATIOS
PERFORMANCE RATIOS:
Return on average assets(5).................... 0.24% 0.51% 0.36% 1.10% 0.46%
Return on average common equity................ 4.94 9.34 1.30 22.60 1.21
Return on average total equity................. 4.53 8.06 4.30 14.70 5.84
Interest rate spread........................... 1.11 2.07 2.10 2.12 2.78
Net interest margin............................ 1.32 2.31 2.51 2.39 3.01
Dividend payout ratio(6)....................... 12.19 38.03 82.95 35.42 96.79
Ratio of earnings to combined fixed charges
and preferred stock dividends(7):
Excluding interest on deposits............ 1.14 1.26 1.05 1.52 1.07
Including interest on deposits............ 1.06 1.10 1.02 1.21 1.03
Total loans, net, and mortgage-backed
securities to total deposits................ 151.32 148.98 141.58 163.13 134.40
Non-interest expenses to average assets........ 1.03 1.55 1.97 2.14 2.04
Efficiency ratio(8)............................ 64.86 57.56 76.45 14.58 66.06
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans... 0.64% 0.72% 0.99% 1.02% 1.07%
Ratio of non-performing assets to total loans,
real estate owned and tax certificates...... 0.73 0.79 1.14 1.35 1.41
Ratio of non-performing assets to total assets. 0.61 0.67 0.95 1.10 1.17
Ratio of net charge-offs to total average loans 0.02 0.04 (0.12) 0.14 0.42
Ratio of loan loss allowance to total loans.... 0.20 0.21 0.34 0.32 0.20
Ratio of loan loss allowance to non-performing
loans....................................... 31.51 28.96 33.74 31.54 18.89
CAPITAL RATIO:
Ratio of average common equity to average
total assets................................ 4.18% 3.40% 4.78% 3.14% 3.58%
Ratio of average total equity to average
total assets................................ 5.19 6.36 8.44 7.47 8.05
Core capital-to-assets ratio(9)................ 8.72 8.07 7.01 7.09 6.65
Risk-based capital-to-assets ratio(9).......... 17.54 11.27 14.19 15.79 14.13
</TABLE>
- -------------------------
(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.
(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.
35
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BankUnited Financial Corporation (the "Company" or "BankUnited") is a
Florida-incorporated savings and loan holding company that operates as a
financial intermediary by acquiring and investing funds primarily through its
principal subsidiary, BankUnited, FSB (the "Bank"). The Bank is subject to the
regulations of certain federal agencies and undergoes periodic examinations by
those regulatory authorities. References to the Company include the activities
of all of its subsidiaries, including the Bank and its subsidiaries, if the
context so requires.
The following discussion and analysis and the related financial data
present a review of the consolidated operating results and financial condition
of the Company for the fiscal years ended September 30, 1998, 1997 and 1996.
This discussion and analysis is presented to assist the reader in understanding
and evaluating the financial condition, results of operations and future
prospects of BankUnited, and is 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.
On June 19, 1998, the Company acquired Central Bank ("Central"), for
1,386,000 shares of the Company's Class A Common Stock, and merged Central,
which had assets of $93.9 million and deposits of $65.9 million as of June 19,
1998, into the Bank.
On January 23, 1998, the Company acquired Consumers Bancorp, Inc.
("Consumers"), for approximately $12.0 million in a combination of cash and
stock, and merged its wholly-owned subsidiary, Consumers Savings Bank, which had
assets of $104.4 million and deposits of $88.3 million as of January 23, 1998,
into the Bank.
On November 15, 1996, BankUnited completed its acquisition of Suncoast
Savings and Loan Association, FSA ("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 3 of the Notes to Consolidated Financial Statements for additional
information regarding these acquisitions.
DISCUSSION OF FINANCIAL CONDITION CHANGES FOR THE YEARS ENDED SEPTEMBER 30,
1998, 1997, AND 1996
Total assets increased $1.6 billion, or 76.2% to $3.7 billion at September
30, 1998 from $2.1 billion at September 30, 1997, as compared to $824 million at
September 30, 1996.
LOANS. The Company's net loans receivable increased by $1.2 billion, or
70.6% to $2.9 billion at September 30, 1998 from $1.7 billion at September 30,
1997. The increase was primarily the result of the $2.7 billion of residential
loans purchased, $386.0 million of loans originated, and $66.3 million and $44.2
million of loans acquired with Consumers and Central, respectively, partially
offset by repayments of $1.4 billion (net of accretion of discount and
amortization of premium) and the securitization of $355.5 million of mortgage
loans.
In fiscal 1997, the Company's net loans receivable increased by $1.1
billion, or 170.2% 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 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).
Of the new loans originated or purchased during fiscal 1998 totaling $3.1
billion, $2.0 billion or 64.5% represented adjustable-rate residential loans
("ARMs"). Of BankUnited's total net loans receivable of $2.9 billion at
September 30, 1998, $1.6 billion or 55.2% were ARMs. Of this amount BankUnited
had $98.1 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.
Loans available for sale as of September 30, 1998, were $172.4 million as
compared to $104.3 million at September 30, 1997 and no such loans were
available for sale as of September 30, 1996. Beginning in the Company's fiscal
1997 fourth quarter,
36
<PAGE>
management began a program to sell substantially all of the Company's internally
generated residential loans. These loans are classified as held for sale when
originated and if, after attempting to market the loans, management determines
that certain loans are unable to be packaged into saleable pools, the Company
may transfer such loans to its portfolio at the lower of cost or market. During
the fiscal year ended September 30, 1998 and the fiscal 1997 fourth quarter,
residential loans totaling $173.5 million and $30.1 million, respectively, were
sold for a gain of $4.0 million and $523,000, respectively. 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
fiscal 1997 fourth quarter. Currently, the Company classifies loans as available
for sale at time of origination.
CREDIT QUALITY. At September 30, 1998, non-performing assets totaled $22.6
million as compared to $14.3 million and $7.8 million at September 30, 1997 and
1996, respectively. Expressed as a percentage of total assets, non-performing
assets declined to 0.61% as of September 30, 1998 as compared to 0.67% as of
September 30, 1997 and 0.95% as of September 30, 1996. The increase in
non-performing assets in 1998 is due primarily to the increase in total loans.
The allowance for loan losses was $6.1 million, $3.7 million, and $2.2
million at September 30, 1998, 1997, and 1996, respectively. The allowance for
loan losses as a percentage of total loans decreased to 0.20% at fiscal year end
1998, as compared to 0.21% at fiscal year end 1997, and 0.34% at fiscal year end
1996. 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 0.02%, 0.04% and (0.12%) for 1998, 1997 and
1996, respectively. The increase in non-performing assets to $22.6 million as of
September 30, 1998 from $14.3 million as of September 30, 1997 was due to
increases in non-performing loans of $6.7 million which, as stated above,
relates to the increase in total loans. Real estate owned increased to $2.0
million as of September 30, 1998 from $611,000 as of September 30, 1997.
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" (collectively, "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.
37
<PAGE>
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans(1)............................. $ 15,999 $ 10,866 $ 4,939 $ 3,496 $ 3,918
Restructured loans(2)............................ 1,137 1,888 1,457 1,070 533
Loans past due 90 days and still accruing........ 2,313 -- -- 92 --
----------- ----------- ----------- ----------- -----------
Total non-performing loans(3)................. 19,449 12,754 6,396 4,658 4,451
Non-accrual tax certificates..................... 1,225 958 800 574 --
Real estate owned................................ 1,974 611 632 1,453 1,983
----------- ----------- ----------- ----------- -----------
Total non-performing assets...................... $ 22,648 $ 14,323 $ 7,828 $ 6,685 $ 6,434
=========== =========== =========== =========== ===========
Allowance for losses on tax certificates......... $ 469 $ 697 $ 614 $ 569 $ 85
Allowance for loan losses........................ 6,128 3,693 2,158 1,469 841
----------- ----------- ----------- ----------- -----------
Total allowance............................... $ 6,597 $ 4,390 $ 2,772 $ 2,038 $ 926
=========== =========== =========== =========== ===========
Non-performing assets as a percentage of
total assets................................ 0.61% 0.67% 0.95% 1.10% 1.17%
Non-performing loans as a percentage of
total loans(4).............................. 0.64% 0.72% 0.99% 1.02% 1.07%
Allowance for loan losses as a percentage
of total loans(4)........................... 0.20% 0.21% 0.34% 0.32% 0.20%
Allowance for loan losses as a percentage
of non-performing loans..................... 31.51% 28.96% 33.74% 31.54% 18.89%
Net chargeoffs as a percentage of average
total loans................................. 0.02% 0.04% (0.12%) 0.14% 0.42%
</TABLE>
(1) Gross interest income that would have been recorded on non-accrual loans
had they been current in accordance with original terms was $1,037,000,
$556,000, $217,000, $128,000, and $52,000, for the years ended September
30, 1998, 1997, 1996, 1995, and 1994, respectively. The amount of interest
income on such non-accrual loans included in net income for years ended
September 30, 1998, 1997, and 1996 was $372,000, $369,000, and $145,000,
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 $2,679,000 and $1,878,000
of accruing loans as of September 30, 1998 and 1997, 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
decreased to $65.3 million at September 30, 1998 from $79.4 million at September
30, 1997, but increased from $28.3 million at September 30, 1996. This change is
due to adjustments to BankUnited's liquidity position in response to the growth
in the balance sheet and projected cash requirements.
TAX CERTIFICATES. BankUnited's investment in tax certificates decreased
$9.3 million, or 18.9%, to $40.0 million at September 30, 1998 from $49.3
million at September 30, 1997 and $40.1 million at September 30, 1996. The
decrease was primarily the result of $27.7 million in certificate purchases
during fiscal 1998 which was offset by $37.0 million in certificate redemptions
and repayments.
INVESTMENTS. Investments held to maturity remained constant at $14.5
million as of September 30, 1998 as compared with $14.5 million as of September
30, 1997 and increased from $11,000 as of September 30, 1996. Investments
available for sale increased $13.5 million to $23.7 million as of September 30,
1998 as compared to $10.2 million as of September 30, 1997 and $6.7 million as
of September 30, 1996. The increase is primarily due to the investment in agency
securities to be used as collateral for future borrowings.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities held to maturity
were $146.1 million, $11.4 million and $14.7 million at September 30, 1998, 1997
and 1996, respectively. The increase in fiscal 1998 was primarily due to the
securitization of $356.0 million of mortgage loans less repayments and
amortization of approximately $221.3 million.
BankUnited's available for sale mortgage-backed securities portfolio
increased $90.7 million to $199.6 million as of September 30, 1998 from $108.9
million as of September 30, 1997, and $55.5 million as of September 30, 1996. In
fiscal 1998, the increase was due to $17.2 million and $13.2 million of
mortgage-backed securities acquired with Consumers and Central, respectively,
and purchases of $118.3 million, partially offset by sales of $15.0 million and
repayments and amortization of $44.8 million.
38
<PAGE>
OTHER INTEREST EARNING ASSETS. Other interest earning assets increased to
$51.3 million at September 30, 1998 from $33.6 million at September 30, 1997 and
$12.2 million as of September 30, 1996 . This category primarily represents
stock in the FHLB which the Company is required to purchase as FHLB advances
increase.
OTHER ASSETS. Office properties and equipment, net, mortgage servicing
rights, goodwill and prepaid and other assets increased by $6.8 million, $4.1
million, $17.8 million and $20.9 million, respectively, from September 30, 1997
to September 30, 1998. These increases all relate primarily to the acquisition
of Consumers and Central. Accrued interest receivable increased $16.6 million
from September 30, 1997 to September 30, 1998, due to the increase in the loan
portfolio.
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 $0.9 billion, or 75.0%, to $2.1 billion at
September 30, 1998 from $1.2 billion at September 30, 1997. Management believes
this increase is attributable to the Company's opening of additional branch
offices, the offering of competitive interest rates and personalized service in
a market area dominated by super-regional banks and continued industry
consolidation. The acquisition of Consumers and Central also contributed to this
increase with deposits of $88.3 million and $65.9 million, respectively.
BankUnited intends to open as many as 5 branches in the 1999 fiscal year.
FHLB ADVANCES. FHLB advances were $1.0 billion at September 30, 1998, up
$0.3 billion from $0.7 billion at September 30, 1997. This increase was used to
fund, together with deposits and other sources, the purchase of residential
loans.
TRUST PREFERRED SECURITIES. In March 1998, BankUnited's subsidiary,
BankUnited Capital III, issued $102.5 million of Trust Preferred Securities; in
June 1997, BankUnited's subsidiary, BankUnited Capital II, issued $46 million of
Trust Preferred Securities; in December 1996, BankUnited's subsidiary,
BankUnited Capital, issued $50 million of Trust Preferred Securities; and in
March 1997, BankUnited Capital issued an additional $20 million of Trust
Preferred Securities. The net proceeds from the sales of the Trust Preferred
Securities were $98.9 million and $111.5 million for the years ended September
30, 1998 and 1997, respectively. 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, 1998,
BankUnited contributed $110.0 million of additional capital to the Bank.
SUBORDINATED NOTES. On August 31, 1997, BankUnited called all outstanding
subordinated notes totaling $774,500.
STOCKHOLDERS' EQUITY. BankUnited's total stockholders' equity was $199.3
million at September 30, 1998, an increase of $99.7 million, or 100.1% from
$99.6 million at September 30, 1997. This was due primarily to the issuance of
3.7 million shares of Class A Common stock pursuant to a public stock offering
in October 1997 with net proceeds of approximately $43.9 million; the issuance
of 0.6 million shares of Class A Common Stock in connection with the acquisition
of Consumers in January 1998 with an approximate value of $7.7 million; the
issuance of 1.4 million shares of Class A Common Stock in connection with the
acquisition of Central in June 1998 with an approximate value of $22.8 million;
and the issuance of 1.08 million shares of Class A Common Stock, 30,000 shares
of Class B Common Stock and 25,000 shares of Series B Preferred Stock in a
publicly underwritten offering and a direct offering to certain directors and
principal stockholders during April 1998 with net proceeds of $15.3 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 converted to
1,548,410 shares of Class A Common Stock at a ratio of 1- 2/3 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 the outstanding 743,870 shares of its
Series 1993 Preferred Stock effective February 20, 1998 at $10.00 per share.
Holders of shares of the Series 1993 Preferred Stock had the right to convert
them into shares of the Company's Class A Common Stock at a ratio of
one-for-one. 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 June 1998, holders of 42,655 warrants issued by Suncoast exercised their
conversion right, which resulted in the issuance of 71,259 shares of Class A
Common Stock. The 5,545 warrants which remained unexercised after July 9, 1998
expired pursuant to the terms of the warrant agreements.
In December 1998, the Board of Directors of the Company authorized the
purchase from time to time in open market transactions of up to 1,000,000 shares
of the Company's Class A Common Stock at such prices as the Executive Committee
shall deem advantageous.
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.
Over the last couple of years, the Company has increased the total deposit
base primarily through branch expansion in the South Florida market by 25% for
transaction accounts and 75% for certificates of deposit with contractual
maturities. While there
39
<PAGE>
is no guarantee that the certificates of deposit will remain with the Company
upon maturity, the Company's branch network cultivates a strong customer base
which gives the Company reasonable assurance of available deposits at market
rates. Management expects the Company's market share to continue to grow.
Additional sources of funds are FHLB advances, which the Company generally uses
as a source of funds with longer maturities than deposits. FHLB advances are
limited to 30% of assets in accordance with the FHLB policy. As of September 30,
1998, the Company had 27% of FHLB advances to total assets. Other sources of
short-term funds are available through other collateral borrowings.
During November 1998, the Company finalized a medium-term note program
which permits the issuance, from time to time, of up to $500 million of senior
notes with maturities from 9 months to 10 years from the date of issue. As a
condition of issuance, principal and interest on all offered notes will be
supported by an irrevocable stand-by letter of credit of the FHLB of Atlanta and
provide an additional source of funding, potentially with longer maturities with
attractive rates.
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 4.0% of its net
withdrawable accounts plus short-term borrowings. As of September 30, 1998, the
Bank had liquid assets of 7.18% which was in compliance with this requirement,
and as of September 30, 1997, the Bank had liquid assets of 8.49%.
BankUnited's primary use of funds is to purchase or originate loans and to
purchase mortgage-backed and investment securities. In fiscal 1998, 1997, and
1996, loans increased $1.2 billion, $1.1 billion, and $193.0 million,
respectively, and BankUnited purchased $133.7 million, $78.6 million, and $22.7
million, respectively, of mortgage-backed and investment securities. Funding for
the above came primarily from increases in deposits of $928.9 million, $689.8
million and $196.1 million in 1998, 1997 and 1996, respectively, and increases
in FHLB advances and other borrowings of $543.6 million in 1998, $580.5 million
in 1997 and $52.7 million in 1996.
Federal savings banks such as the Bank are also required to maintain
capital at levels specified by applicable minimum capital ratios. At September
30, 1998, the Bank was in compliance with all capital requirements and met the
definition of a "well capitalized" institution under applicable federal
regulations.
YEAR 2000
The Company utilizes extensive electronic data processing hardware and
software in its banking operations, among other things, to process and record
customer transactions, determine and collect revenue to be earned and expenses
to be paid in connection with customer transactions, maintain and report
customer transaction information, record and manage the Company's short-term and
long-term investments, accounting and financial management, and risk management.
The Company also relies on certain vendors to provide critical services to the
Company's banking operations, including telecommunications, loan servicing and
correspondent banking. Failure of the electronic data processing hardware or
software of the Company, its third-party service bureaus, or certain vendors to
properly recognize the Year 2000 could result in a significant disruption of the
Company's banking operations.
The Company's customer transactions are processed through a network of
electronic data processing workstations in its branch offices and loan servicing
department and are recorded on electronic data processing hardware and software,
a substantial portion of which are maintained by two third-party service
bureaus. The Company is in the process of replacing any hardware or software in
its branch offices to ensure compliance with Year 2000 issues, while one of the
Company's third-party service bureaus is working with the Company to convert its
customer transaction hardware and software to a more advanced version which is
expected to be completed in February 1999 and which will also be Year 2000
compliant. The third-party service bureau which processes the Company's loan
servicing transactions is also expected to be Year 2000 compliant. The Company
is in the process of replacing any other hardware and software used in its
operations as necessary for Year 2000 compliance. The Company is also seeking
Year 2000 compliance certifications from its major telecommunications, loan
servicing and correspondent banking vendors. While a portion of the Company's
financial assets and liabilities are with commercial businesses and government
sponsored entities, the Company's loans and deposits are primarily with
individuals. As a result, the Company does not expect any significant
disruptions resulting from customers that may not be Year 2000 compliant.
While the Company does not anticipate any difficulties becoming Year 2000
compliant with its third-party service bureaus, the Company continues to monitor
the feasibility of using a substitute third-party service bureau in the event of
such difficulties. Following the February 1999 conversion, should any
operational problems arise regarding compliance with Year 2000, the Company will
immediately pursue an alternative plan. Management is unable at this time to
estimate the additional costs should such alternative plans become necessary.
The Company has designated a Year 2000 task force under the direction of a
senior officer of the Company which is identifying and coordinating the
Company's efforts to become Year 2000 compliant. Additionally, the Company and
its banking subsidiary are subject to regulation and supervision by the OTS
which regularly conducts reviews of the safety and soundness of the Company's
operations, including the Company's progress in becoming Year 2000 compliant.
Failure by the Company to adequately prepare for Year 2000 issues could
negatively impact the Company's banking operations resulting in restrictions on
its banking operations by the OTS. No such restrictions exist at this time, nor
does the Company expect any such restrictions resulting from failure to address
Year 2000 issues.
The Company has estimated the costs associated with becoming Year 2000
compliant to be approximately $679,000, of which, approximately $353,000 has
been expensed through September 30, 1998.
40
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1998
AND 1997
NET INCOME AFTER PREFERRED STOCK DIVIDENDS. BankUnited had net income after
preferred stock dividends of $6.5 million for the year ended September 30, 1998,
compared to net income after preferred stock dividends of $4.7 million for the
year ended September 30, 1997. All major categories of income and expense
increased significantly in the year ended September 30, 1998 as compared to the
year ended September 30, 1997 and reflect the significant growth BankUnited has
experienced in the last year. Significant factors in such growth were the
acquisitions of Consumers and Central, which were completed on January 23, 1998
and June 19, 1998, respectively. BankUnited's Consolidated Statement of
Operations for the year ended September 30, 1998 reflects Consumers' and
Central'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 $7.2 million, or 22.0%,
to $40.0 million for the year ended September 30, 1998 from $32.8 million for
the year ended September 30, 1997. This increase was attributable to an increase
in average interest-earning assets of $1.6 billion, or 114.3%, to $3.0 billion
for the year ended September 30, 1998 from $1.4 billion for the year ended
September 30,1997 partially offset by a decrease in the net interest margin to
1.32% for the year ended September 30, 1998 from 2.31% for the year ended
September 30, 1997. The increase in average interest-earning assets was
primarily due to the purchase of $2.7 billion of residential mortgage loans
during the 1998 fiscal year. The decrease in the net interest margin was due to
a decrease in the yield on interest-earning assets to 6.86% for the year ended
September 30, 1998 from 7.65% for the year ended September 30, 1997, primarily
attributable to the lower yields on the loans purchased, and a 17 basis point
increase in the cost of interest-bearing liabilities to 5.75% for the year ended
September 30, 1998 from 5.58% for the year ended September 30, 1997.
The increase in interest income of $98.8 million, or 90.8%, to $207.6
million for the year ended September 30, 1998 from $108.8 million for the year
ended September 30, 1997, primarily reflects increases in interest and fees on
loans of $82.6 million and a $9.6 million increase in interest on
mortgage-backed securities. This increase in interest and fees on loans is due
to an increase in average loans outstanding of $1.3 billion, or 108.3%, to $2.5
billion for the year ended September 30, 1998 from $1.2 billion for the year
ended September 30, 1997 which resulted primarily from purchases of residential
loans in the secondary mortgage market. The results of operations for the year
ended September 30, 1998 reflect an acceleration in the amortization of purchase
premiums on loans and mortgage-backed securities which increased from $1.1
million for the year ended September 30, 1997 to $11.4 million for the year
ended September 30, 1998. The increase in premium amortization was largely the
result of increased prepayments on purchased mortgage loans. Prepayments on
purchased mortgage loans also negatively affect interest income since such loans
are generally serviced by other entities who only remit funds received from
prepayments on a monthly basis, which results in a loss of interest income from
the delay in remittance and use of funds from such prepayments. As a result of
prepayments and because many of the loans purchased are adjustable-rate
mortgages in the "teaser" period, the yield on loans declined from 7.78% for the
year ended September 30, 1997 to 7.01% for the year ended September 30, 1998.
This 77 basis point drop in the yield earned on loans was a significant factor
in the decline of the yield on interest earning assets.
The increase in interest expense of $91.5 million, or 120.4%, to $167.5
million for the year ended September 30, 1998 from $76.0 million for the year
ended September 30, 1997 primarily reflects an increase in interest expense on
interest-bearing deposits of $43.3 million, or 86.4%, to $93.4 million for the
year ended September 30, 1998, from $50.1 million for the year ended September
30, 1997, an increase in interest expense on FHLB advances of $32.9 million to
$51.6 million for the year ended September 30, 1998, from $18.7 million for the
year ended September 30, 1997, an increase in preferred dividends of the trust
subsidiaries of $10.5 million to $17.0 million for the year ended September 30,
1998 from $6.5 million for the year ended September 30, 1997 and an increase in
interest expense on securities sold under agreements to repurchase of $5.0
million to $5.5 million for the year ended September 30, 1998 from $0.5 million
for the year ended September 30, 1997. This was due to an increase in average
interest-bearing deposits of $777.4 million, or 80.6%,to $1.7 billion for the
year ended September 30, 1998, from $964.4 million for the year ended September
30, 1997. Approximately $79.1 million of this increase represents deposits
acquired with Consumers and Central. The average rate paid on interest-bearing
deposits increased 16 basis points to 5.36% for the year ended September 30,
1998 from 5.20% for the year ended September 30, 1997.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the year ended
September 30, 1998 was $1.7 million as compared with a provision for loan losses
of $1.3 million for the year ended September 30, 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. For a detailed
discussion of BankUnited's asset quality and allowance for loan losses, see
"--Discussion of Financial Condition Changes for the Years Ended September 30,
1998, 1997 and 1996--Credit Quality."
NON-INTEREST INCOME. Non-interest income for the year ended September 30,
1998 was $6.2 million compared with $4.1 million for the year ended September
30, 1997, an increase of $2.1 million. Of this increase, $3.6 million represents
gains on the sale of loans and mortgage backed securities, partially offset by a
$2.3 million decrease in loan servicing fee income, net, primarily due to the
acceleration of amortization of mortgage servicing rights resulting from an
increase in prepayments. 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 $9.3 million, or 40.6%,
to $32.2 million for the year ended September 30, 1998 compared to $22.9 million
for the year ended September 30, 1997. The increase in expenses was attributable
to the growth BankUnited has experienced including the expenses of Consumers'
and Central's operations.
41
<PAGE>
INCOME TAXES. The income tax provision was $5.0 million for each of the
years ended September 30, 1998 and 1997.
PREFERRED STOCK DIVIDENDS. Preferred stock dividends for the year ended
September 30, 1998 were $0.9 million, a decrease of $2.0 million, as compared to
$2.9 million for the year ended September 30, 1997. This decrease is the result
of the retirement, in October 1997, of the 8% Noncumulative Convertible
Preferred Stock, Series 1996, issued in connection with the acquisition of
Suncoast and ,in January 1998, of the Series 1993 Preferred Stock, partially
offset by the issuance of the Series B Preferred Stock in April 1998.
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 experienced in
fiscal 1997. 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 $18.8 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 "--Discussion of Financial
Condition Changes for the Years Ended September 30, 1997, 1996 and 1995--Credit
Quality."
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.
42
<PAGE>
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.
43
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
Set forth below is selected quarterly data for the fiscal years ended
September 30, 1998 and 1997.
The quarterly financial data for the fourth quarter of 1998 and 1997 was
not reviewed by the Company's independent certified public accountants in
accordance with standards established for such reviews.
<TABLE>
<CAPTION>
1998
---------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net interest income.................................... $ 9,367 $ 11,360 $ 8,151 $ 11,146
Provision for loan losses.............................. 650 400 300 350
Non-interest income.................................... 1,644 1,015 2,503 1,063
Non-interest expense................................... 7,025 8,170 8,054 8,934
----------- ----------- ----------- -----------
Income before taxes and preferred stock dividends...... 3,336 3,805 2,300 2,925
Income taxes........................................... 1,361 1,513 949 1,186
----------- ----------- ----------- -----------
Net income before preferred stock dividends............ 1,975 2,292 1,351 1,739
Preferred stock dividends.............................. 332 182 185 198
----------- ----------- ----------- -----------
Net income applicable to common stock.................. $ 1,643 $ 2,110 $ 1,166 $ 1,541
=========== =========== =========== ===========
Basic earnings per share............................... $ 0.13 $ 0.14 $ 0.07 $ 0.09
=========== =========== =========== ===========
Diluted earnings per share............................. $ 0.12 $ 0.13 $ 0.07 $ 0.08
=========== =========== =========== ===========
</TABLE>
In the fourth quarter of 1998, as a result of increased prepayments, the
Company recorded amortization expense of approximately $6.8 million relating to
premiums on loans and mortgage-backed securities. In addition, during the fourth
quarter, the Company adjusted normal recurring accruals of certain non-interest
and operating expenses, deferred loan costs and estimates of required reserves
based upon management's determination of amounts so required, in an aggregate of
approximately $1.0 million resulting in an increase to net income before taxes.
<TABLE>
<CAPTION>
1997
---------------------------------------------------------
First Second Third Fourth
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ---------- -----------
(Dollars in thousands, except per share data)
<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
=========== =========== =========== ===========
Basic earnings per share............................... $ 0.14 $ 0.13 $ 0.14 $ 0.16
=========== =========== =========== ===========
Diluted earnings per share............................. $ 0.13 $ 0.12 $ 0.14 $ 0.15
=========== =========== =========== ===========
</TABLE>
44
<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 withdrawal penalties, while term FHLB
Advances have prepayment penalties, which discourage customer withdrawal of time
deposits and prepayment of FHLB Advances prior to maturity.
The Company's trust preferred securities may be redeemed at varying times,
and as to $70 million of such securities, until 2016, at a premium. (See Note 12
of the Notes to Consolidated Financial Statements for further discussion of the
trust preferred securities).
INTEREST RATE INDICES. The Company's ARM loans and mortgage-backed
securities are primarily indexed to the One Year Constant Maturity Treasury
Index (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
45
<PAGE>
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.
46
<PAGE>
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
present value of the interest rate caps is calculated by the model using
estimated cash flows based on the contractual rates and terms at a discount rate
representing the index to which the interest rate caps are tied. 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.
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,
1998, 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, 1998
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.............................. $ 198,567 $ 196,731 $ 194,948 $ 194,200 $ 191,549
Mortgage-backed securities............. 348,445 345,764 343,115 338,054 331,164
Loans:
Adjustable-rate mortgages.............. 1,899,162 1,883,720 1,869,052 1,851,441 1,826,847
Fixed-rate mortgages................... 1,394,086 1,368,699 1,340,019 1,288,675 1,222,284
Commercial and consumer loans.......... 52,104 51,495 50,902 50,323 49,757
-------------- ------------- ------------- -------------- -------------
Total loans.......................... 3,345,352 3,303,914 3,259,973 3,190,439 3,098,888
-------------- ------------- ------------- -------------- -------------
Total interest-earning assets.......... $ 3,892,364 $ 3,846,409 $ 3,798,036 $ 3,722,693 $ 3,621,601
============== ============= ============= ============== =============
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts........ $ 233,661 $ 233,661 $ 233,661 $ 233,661 $ 233,661
Passbook accounts.................... 257,780 257,780 257,780 257,780 257,780
Certificate accounts................. 1,660,614 1,651,162 1,641,745 1,632,549 1,623,507
-------------- ------------- ------------- -------------- -------------
Total customer deposits.............. 2,152,055 2,142,603 2,133,186 2,123,990 2,114,948
Borrowings:
FHLB advances........................ 1,096,430 1,060,280 1,026,135 993,863 963,340
Trust preferred...................... 230,117 221,266 212,915 205,029 197,575
Other borrowings..................... 121,148 121,148 121,148 121,148 121,148
-------------- ------------- ------------- -------------- -------------
Total borrowings..................... 1,447,695 1,402,694 1,360,198 1,320,040 1,282,063
-------------- ------------- ------------- -------------- -------------
Total interest-bearing liabilities..... $ 3,599,750 $ 3,545,297 $ 3,493,384 $ 3,444,030 $ 3,397,011
============== ============= ============= ============== =============
Loan commitments and interest rate caps... $ (19,815) $ (11,946) $ (4,180) $ 549 $ 3,667
============= ============ ============ ============== =============
</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
47
<PAGE>
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 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, 1998, as calculated by the OTS, based on
information provided to the OTS by the Bank.
<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 $ 273,973 $3,521,702 7.78% (16.72)%
+100 312,389 3,603,318 8.67 (4.73)
Static 328,964 3,666,638 8.97 -
-100 317,941 3,707,525 8.58 (3.35)
-200 304,220 3,747,892 8.12 (7.52)
</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.
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 fiscal years ended September 30, 1998
and 1997, the Company purchased $2.7 billion and $913.7 million, respectively,
of one-to-four family residential loans, of which $2.0 billion and $728.2
million, respectively, were ARM loans. At September 30, 1998 the Company's
residential loan portfolio included $1.6 billion of ARMs (55.2% of the Company's
gross loan portfolio). The ARMs purchased by the Company have annual interest
rate adjustment caps that limit rate increases or decreases to 2% per year.
Further, a portion of 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").
48
<PAGE>
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
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 September 30, 1998, $492.4 million of the Company's
ARM loans (17.3% of the Company's gross loan portfolio) were in the teaser rate
period with an average teaser rate of 6.21% and an average fully indexed rate of
7.48%. 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. A significant portion of the Company's loans receivable
are 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 mortgage 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 September 30, 1998, $492.4 million
of the Company's ARMs had teaser rates, which will be subject to interest rate
adjustments within the next twelve months. Teaser rate loans may tend to be
prepaid near the end of the teaser period in the current interest rate
environment, creating higher levels of prepayments on loans overall which the
Company may not be able to reinvest quickly enough and at sufficient interest
rates to mitigate the effect on it net interest margin.
Premiums, net of discounts and deferred origination costs, which at
September 30, 1998 were $29.9 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. As prepayments accelerate, the Company's historical prepayment
experience changes, resulting in a shortening of the estimated life of the loan
portfolio, and an increase in the rate at which premiums are expensed, resulting
in a greater reduction in interest income. Accelerated prepayments could,
therefore, have a material adverse effect on the Company's results of
operations. Based on a continuation of the current interest rate environment, a
significant portion of the premium may be expensed in a relatively short term
period.
AVAILABILITY OF MORTGAGE LOANS. The Company's net income depends
significantly on its ability to acquire mortgage loans an 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 depends on various factors,
including the level of interest rates, regional and national economic conditions
and changes 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.
RISKS ASSOCIATED WITH INVESTMENTS AND MORTGAGE-BACKED SECURITIES. The
Company purchases fixed and adjustable rate mortgage-backed and other securities
for liquidity, yield and risk management purposes. The Company has also, and
will continue to, securitize whole loans in its loan portfolio primarily for
liquidity and collateral purposes. Such securities provide liquidity through the
ability of the Company to dispose of certain securities from time to time and
the ability of the Company to use securities as collateral for borrowings,
thereby adding leverage capability and lower borrowing costs. Certain securities
are purchased for risk management purposes when the terms of those securities
mitigate interest rate, credit, prepayment or basis risk within the Company's
balance sheet. Certain purchases of securities may increase risk in one area
while decreasing risk in another, or may not mitigate any existing risk. The
Company manages its exposure to risk in its acquisition of securities through
its selection of prices, collateral and terms. Changes in market interest rates
and/or prepayment rates associated with the Company's investments and
mortgage-backed securities could negatively impact the Company's net interest
margin.
49
<PAGE>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BANKUNITED FINANCIAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Certified Public Accountants........................ 52
Consolidated Statements of Financial Condition as of September 30, 1998
and September 30, 1997................................................. 53
Consolidated Statements of Operations for the Years Ended
September 30, 1998, 1997 and 1996...................................... 54
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1998, 1997 and 1996...................................... 55
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1998, 1997 and 1996...................................... 58
Notes to Consolidated Financial Statements................................ 60
50
<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, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1998,
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.
PRICEWATERHOUSECOOPERS LLP
Miami, Florida
December 7, 1998
51
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1998 1997
------------- -------------
(Dollars in thousands)
<S> <C> <C>
ASSETS:
Cash................................................................................... $ 26,243 $ 10,571
Federal Home Loan Bank overnight deposits.............................................. 65,268 79,413
Tax certificates (net of reserves of $469 and $697 at September 30, 1998 and 1997,
respectively)........................................................................ 40,007 49,283
Investments held to maturity (market value of approximately $14,699 and $14,613 at
September 30, 1998 and 1997, respectively)........................................... 14,542 14,494
Investments available for sale, at market.............................................. 23,661 10,166
Mortgage-backed securities, held to maturity (market value of approximately $143,505
and $11,292 at September 30, 1998 and 1997, respectively)............................ 146,146 11,352
Mortgage-backed securities available for sale, at market............................... 199,610 108,919
Loans receivable, net.................................................................. 2,869,604 1,661,381
Mortgage loans held for sale (market value of approximately $179,503 and $105,980
at September 30, 1998 and 1997,respectively)........................................ 172,410 104,342
Other interest earning assets.......................................................... 51,313 33,599
Office properties and equipment, net................................................... 14,198 7,371
Real estate owned...................................................................... 1,974 611
Accrued interest receivable............................................................ 32,864 16,261
Mortgage servicing rights.............................................................. 8,917 4,783
Goodwill............................................................................... 32,106 14,278
Prepaid expenses and other assets...................................................... 39,520 18,582
------------- -------------
TOTAL................................................................................ $ 3,738,383 $ 2,145,406
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits............................................................................... $ 2,124,824 $ 1,195,892
Securities sold under agreements to repurchase......................................... 121,148 30,000
Advances from Federal Home Loan Bank................................................... 1,021,466 671,484
Company obligated mandatorily redeemable trust preferred securities of subsidiary trust
holding solely junior subordinated deferrable interest debentures of the Company..... 218,500 116,000
Interest payable (primarily on deposits and advances from Federal Home Loan Bank)...... 7,825 3,844
Advance payments by borrowers for taxes and insurance.................................. 12,645 10,688
Accrued expenses and other liabilities................................................. 32,683 17,853
------------- -------------
TOTAL LIABILITIES.................................................................... 3,539,091 2,045,761
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 8 and 17)
STOCKHOLDERS' EQUITY:
Preferred stock, Series B, Series 1993, Series 9% and Series 1996, $0.01 par
value. Authorized shares--10,000,000; issued and outstanding shares -
926,697 and 2,175,296 at September 30, 1998 and 1997, respectively................... 9 22
Class A Common Stock, $.01 par value. Authorized shares--30,000,000; issued and
outstanding shares - 17,816,213 and 9,257,098 at September 30, 1998 and 1997,
respectively......................................................................... 178 92
Class B Common Stock, $.01 par value. Authorized shares--3,000,000; issued and
outstanding shares - 331,743 and 275,685 at September 30, 1998 and 1997,
respectively........................................................................ 3 3
Additional paid-in capital............................................................. 178,777 86,679
Retained earnings...................................................................... 18,448 11,988
Net unrealized gains on securities available for sale, net of tax...................... 1,877 861
------------- -------------
TOTAL STOCKHOLDERS' EQUITY........................................................... 199,292 99,645
------------- -------------
TOTAL.............................................................................. $ 3,738,383 $ 2,145,406
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
52
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30:
---------------------------------------------
1998 1997 1996
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans............................................... $ 177,252 $ 94,655 $ 41,313
Interest on mortgage-backed securities................................... 16,588 7,035 4,250
Interest on short-term investments....................................... 5,013 1,613 2,359
Interest and dividends on long-term investments and other
interest-earning assets................................................ 8,714 5,471 4,210
---------- ---------- ----------
Total interest income................................................ 207,567 108,774 52,132
---------- ---------- ----------
Interest expense:
Interest on deposits..................................................... 93,431 50,136 20,791
Interest on borrowings................................................... 57,160 19,351 13,831
Preferred dividends of Trust Subsidiary.................................. 16,952 6,473 -
---------- ---------- ----------
Total interest expense................................................. 167,543 75,960 34,622
---------- ---------- ----------
Net interest income before provision (credit) for loan losses........ 40,024 32,814 17,510
Provision (credit) for loan losses.......................................... 1,700 1,295 (120)
---------- ---------- ----------
Net interest income after provision (credit) for loan losses............. 38,324 31,519 17,630
---------- ---------- ----------
Non-interest income:
Service fees, net........................................................ 1,139 2,993 597
Net gain on sale of loans and mortgage-backed securities................. 4,429 819 5
Net gain (loss) on sale of other assets.................................. 6 1 (6)
Other ................................................................... 651 247 53
---------- ---------- ----------
Total non-interest income.............................................. 6,225 4,060 649
---------- ---------- ----------
Non-interest expenses:
Employee compensation and benefits....................................... 10,943 8,880 4,275
Occupancy and equipment.................................................. 4,854 3,568 1,801
Insurance................................................................ 1,185 948 3,610
Professional fees--legal and accounting.................................. 1,891 1,605 929
Data processing.......................................................... 1,109 992 340
Loan servicing expense................................................... 5,313 1,796 979
Real estate owned operations............................................. 82 301 73
Other operating expenses................................................. 6,806 4,857 2,029
---------- ---------- ----------
Total non-interest expenses............................................ 32,183 22,947 14,036
---------- ---------- ----------
Income before income taxes and preferred stock dividends................. 12,366 12,632 4,243
Income taxes................................................................ 5,009 5,033 1,657
---------- ---------- ----------
Net income before preferred stock dividends.............................. 7,357 7,599 2,586
Preferred stock dividends of the Company.................................... 897 2,890 2,145
---------- ---------- ----------
Net income after preferred stock dividends............................... $ 6,460 $ 4,709 $ 441
========== ========== ==========
Basic earnings per share.................................................... $ 0.41 $ 0.57 $ 0.10
========== ========== ==========
Diluted earnings per share.................................................. $ 0.39 $ 0.54 $ 0.10
========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
53
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
---------------------------------------------------------------------
CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK
--------- ---------- ---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ---------- ---------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
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 gain 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
Issuance of Class A and Class B
Common Stock....................... - - 35,477 - 3,541 -
Conversion of Preferred Stock
to Common Class A..................(1,290,061) (13) 1,614,104 16 - -
Issuance of Series B Preferred Stock. 20,762 - - - - -
Preferred Stock, Series 9%
tender offer....................... (4,300) - - - - -
Underwritten public offering and
direct offering of the Company's Class A
and Class B Common Stock and
Series B Preferred Stock, net...... 25,000 - 4,761,500 48 30,000 -
Issuance of Stock in connection with
the Consumers Bancorp acquisition...... - - 562,508 6 - -
Issuance of Stock in connection with
the Central Bank acquisition........... - - 1,386,000 14 - -
Stock options and warrants exercised. - - 195,584 2 22,517 -
Payments of dividends on the
Company's Preferred Stock.......... - - 3,942 - - -
Net change in unrealized gain on
investments available for sale..... - - - - - -
Net income for the year ended
September 30, 1998................. - - - - - -
--------- ---------- ---------- --------- -------- ---------
BALANCE AT SEPTEMBER 30, 1998........... 926,697 $ 9 17,816,213 $ 178 331,743 $ 3
========= ========== ========== ========= ======== =========
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
UNREALIZED
GAIN(LOSS) ON
SECURITIES
AVAILABLE TOTAL
PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
CAPITAL EARNINGS NET OF TAX EQUITY
------------- ------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
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 gain 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
Issuance of Class A and Class B
Common Stock...................................... 237 - - 237
Conversion of Preferred Stock
to Common Class A................................. (463) - - (460)
Issuance of Series B Preferred Stock................ 398 - - 398
Preferred Stock, Series 9%
tender offer...................................... (43) - - (43)
Underwritten public offering and direct
offering of the Company's Class A
and Class B Common Stock and Series B Preferred
Stock, net........................................ 59,055 - - 59,103
Issuance of Stock in connection
with the Consumers Bancorp acquisition............ 7,647 - - 7,653
Issuance of Stock in connection
with the Central Bank acquisition................. 22,769 - - 22,783
Stock options and warrants exercised................ 2,438 - - 2,440
Payments of dividends on the
Company's Preferred Stock......................... 60 (897) - (837)
Net change in unrealized gain on
investments available for sale.................... - - 1,016 1,016
Net income for the year ended
September 30, 1998................................ - 7,357 - 7,357
------------- ------------- ------------- -------------
BALANCE AT SEPTEMBER 30, 1998.......................... $ 178,777 $ 18,448 $ 1,877 $ 199,292
============= ============= ============= =============
</TABLE>
(CONTINUED ON NEXT PAGE)
55
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997
AND 1996
The beginning balance at September 30, 1995 of each series of the Company's
preferred stock was as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- -------------
(Dollars in thousands)
<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, 1998 of each series of the Company's
preferred stock was as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------ -------------
(Dollars in thousands)
<S> <C> <C>
Series B....................................................... 229,580 $ 2
Series 9%...................................................... 697,117 7
------------- -------------
Total.......................................................... 926,697 $ 9
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
56
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------------------
1998 1997 1996
------------- -------------- -------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 7,357 $ 7,599 $ 2,586
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision (credit) for loan losses................................ 1,700 1,295 (120)
Provision (credit) for losses on tax certificates................. (166) 84 76
Depreciation and amortization..................................... 1,633 1,320 674
Amortization (accretion) of fees, discounts and premiums.......... 11,449 (431) (2,168)
Amortization of mortgage servicing rights......................... 2,236 931 -
Amortization of goodwill.......................................... 1,070 683 -
Net gain on sale of loans and mortgage-backed securities............ (4,429) (819) (5)
Net (gain) loss on sale of real estate owned........................ (39) 236 (185)
Loans originated for sale.......................................... (312,749) (28,467) (4,141)
Proceeds from sale of loans........................................ 177,504 39,890 4,362
Increase in accrued interest receivable............................ (15,506) (6,285) (1,239)
Increase in interest payable on deposits and FHLB advances......... 3,523 1,142 31
Decrease in accrued taxes.......................................... (9,418) (1,062) (3,429)
Increase (decrease) in other liabilities........................... 20,228 (18,818) 3,054
Increase in prepaid expenses and other assets...................... (17,475) (1,635) (224)
Proceeds from sale of mortgage servicing rights..................... - 4,215 -
Purchase of mortgage servicing rights............................... (678) - -
Other, net.......................................................... (2,523) 712 1,126
------------- -------------- -------------
Net cash provided by (used in) operating activities............... (136,283) 590 398
------------- -------------- -------------
Cash flows from investing activities:
Net increase in loans................................................. (1,392,617) (792,501) (185,457)
Purchase of investment securities..................................... (15,363) (22,144) (3,510)
Purchase of mortgage-backed securities................................ (118,336) (56,499) (19,228)
Purchase of other earning assets...................................... (46,325) (32,300) (650)
Proceeds from repayments of investment securities..................... 22,323 4,051 5,675
Proceeds from repayments of mortgage-backed securities................ 264,164 19,345 10,523
Proceeds from repayments of other earning assets...................... 29,423 14,176 750
Proceeds from sale of investment securities........................... - 126 2,097
Proceeds from sale of mortgage-backed securities...................... 15,572 7,653 -
Proceeds from sale of real estate owned............................... 1,225 2,257 2,661
Purchase of office properties and equipment........................... (8,140) (1,980) (1,170)
Sale of office properties and equipment............................... 23 1,364 -
Capitalized cost for loan securities.................................. (581) - -
Net (increase) decrease in tax certificates........................... 9,276 (9,278) (620)
Purchase of Bank of Florida, net of acquired cash equivalents......... - - 1,521
Cash and cash equivalents of Suncoast at date of acquisition.......... - 32,803 -
Purchase of Consumers, net of acquired cash equivalents............... 8,098 - -
Cash and cash equivalents of Central at date of acquisition........... 18,170 - -
------------- ------------- -------------
Net cash used in investing activities............................... $ (1,213,088) $ (832,927) $ (187,408)
------------- ------------- -------------
</TABLE>
(CONTINUED ON NEXT PAGE)
57
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------------------
1998 1997 1996
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits.............................................. $ 774,720 $ 366,049 $ 168,744
Net increase (decrease) in Federal Home Loan Bank advances............ 341,982 382,984 (4,000)
Net increase in other borrowings...................................... 74,199 30,000 -
Decrease in subordinated notes........................................ - (775) -
Net proceeds from issuance of trust preferred securities.............. 98,913 111,456 -
Net proceeds from issuance of preferred stock......................... 488 - -
Net proceeds from issuance of common stock............................ 60,502 1,329 23,198
Preferred Stock, Series 9% tender offer............................... (43) (4,486) -
Preferred Stock, Series 1996 redemption............................... (85) - -
Preferred Stock, Series 1993 redemption............................... (339) - -
Dividends paid on the Company's preferred stock....................... (837) (2,855) (2,086)
Increase in advances from borrowers for taxes and insurance........... 1,398 4,483 560
------------- -------------- -------------
Net cash provided by financing activities........................... 1,350,898 888,185 186,416
------------- -------------- -------------
Increase (decrease) in cash and cash equivalents......................... 1,527 55,848 (594)
Cash and cash equivalents at beginning of year........................... 89,984 34,136 34,730
------------- -------------- -------------
Cash and cash equivalents at end of year................................. $ 91,511 $ 89,984 $ 34,136
============= ============== =============
Supplemental disclosure of non-cash investing and financing activities:
Interest paid on deposits and borrowings.............................. $ 163,561 $ 73,385 $ 34,547
Income taxes paid..................................................... $ 3,884 $ 3,390 $ 4,626
Transfers from loans to real estate owned............................. $ 2,226 $ 2,296 $ 1,154
Transfer of mortgage-backed securities from held to maturity to
available for sale.................................................. $ - $ - $ 31,780
Issuance of Class A Common Stock upon conversion of preferred stock $ (460) $ - $ -
Issuance of Class A Common Stock in connection with the Suncoast
acquisition......................................................... $ - $ 27,812 $ -
Issuance of Class A Common Stock in connection with the Consumers
acquisition......................................................... $ 7,653 $ - $ -
Issuance of Class A Common Stock in connection with the Central
acquisition......................................................... $ 22,783 $ - $ -
Securitization of loans receivable.................................... $ 355,469 $ - $ -
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
58
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(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 and West 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 effect of
prepayments on premiums on purchased loans, the valuation of mortgage servicing
rights, and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. Premiums on purchased loans are
amortized based, in part, on management's estimate of future prepayment rates.
If actual prepayments exceed these estimates, premium amortization is increased
through charges to interest income in the period the excess prepayments occur.
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 income 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.
Gains 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 deemed 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 fair value, net of selling costs, of
collateral dependent loans or the estimated net realizable value of other loans.
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 more than 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.
59
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(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, LOAN PREMIUMS 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.
Premiums paid on purchased loans are capitalized and recognized as an
adjustment to interest income over the contractual life of the loans, adjusted
for estimated prepayments based on the Company's historical prepayment
experience. If actual prepayments exceed those estimated by the Company, premium
amortization is increased through charges to interest income in the period the
excess prepayments occur.
(F) OTHER INTEREST EARNING ASSETS
Other interest earning assets includes Federal Home Loan Bank of
Atlanta ("FHLB") stock and an equity investment in the Community Reinvestment
Group. The fair value is estimated to be the carrying value which is par.
(G) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation is provided using the estimated
service lives of the assets for furniture, fixtures and equipment (7 to 10
years), and computer equipment and software (3 to 5 years), or with leases, the
term of the lease or the useful life (10 years), whichever is shorter. Repair
and maintenance costs are charged to operations as incurred, and improvements
are capitalized.
(H) ACCRUED INTEREST RECEIVABLE
Recognition of interest on the accrual method is generally discontinued
when interest or principal payments are greater than 90 days in arrears, unless
the loan is well secured and in the process of collection. At the time a loan is
placed on nonaccrual status, previously accrued and uncollected interest is
reversed against interest income in the current period.
(I) REAL ESTATE OWNED
Property acquired through foreclosure or deeds in lieu of 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 carrying value is charged to the allowance for loan
losses when the property is classified as real estate owned. The carrying 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) IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, assets to be disposed of and certain identifiable
intangibles, such as mortgage servicing rights, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In performing the review for recoverability,
the Company estimates the future cash flows expected to result from the use of
the asset and its eventual disposition. If the sum of the expected future cash
flows (undiscounted and without interest charges) is less than the carrying
amount of the asset, an impairment is recognized. Measurement of an impairment
loss for long-lived assets, assets to be disposed of and identifiable
intangibles that an entity expects to hold and use is based upon the fair value
of the asset.
(K) GOODWILL
Goodwill is amortized on a straight-line basis over its estimated
beneficial life of 10 to 25 years. Goodwill is evaluated by management for
impairment on an annual basis based upon undiscounted cash flows of the related
net assets acquired.
60
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(L) 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.
(M) EARNINGS PER SHARE
Basic earnings per common share is computed on the weighted average
number of common shares outstanding during the year. The weighted average number
of common shares outstanding for the years ended September 30, 1998, 1997 and
1996 were 15,693,000, 8,211,000, and 4,306,000, respectively. Earnings per
common share, assuming dilution, assume the maximum dilutive effect of the
average number of shares from stock options and the conversion equivalents of
preferred stocks and certain warrants. The weighted average number of diluted
common shares outstanding during the years ended September 30, 1998, 1997 and
1996 were 16,667,000, 9,148,000 and 4,558,000, respectively. Stock dividends
have been included in the calculation of earnings per share for all years
presented.
(N) STOCK OPTIONS
When stock options are granted to employees and directors, a
determination is made of any compensation component based on the excess, if any,
of the fair market value of the underlying stock and the option price of the
grant. The proceeds from the exercise of options are credited to common stock
for the par value of the shares issued, and the excess, adjusted for any tax
benefit, is credited to paid-in capital. (See Note 15.)
(O) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("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
Statement No. 125" (collectively "SFAS No. 125"). SFAS 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 SFAS 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 SFAS No. 125 has not been material to the Company's financial position
or the results of operations.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 "Earnings per Share" ("SFAS No. 128"). SFAS 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. All amounts
presented have been restated to conform to the requirements of SFAS No. 128.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS
No. 129"). SFAS No. 129 continues previous requirements to disclose certain
information about an entity's capital structure. The Company currently complies
with the disclosure requirements of SFAS No. 129.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS No. 130"), which
requires that an enterprise report, by major components and as a single total,
the change in its net assets during the period from non-owner sources; and
Statement of Financial Accounting Standards No. 131 "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"), which establishes
annual and interim reporting standards for an enterprise's operating segments
and related disclosures about its products, services, geographic areas, and
major customers. Adoption of these statements will not impact the Company's
consolidated financial position, results of operations or cash flows, and any
effect will be limited to the form and content of its disclosures. Both
statements are effective for fiscal years beginning after December 15, 1997,
with earlier application permitted.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133") which is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999 (October 1, 1999 for the Company). SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivative instruments are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative instrument is designated as part of a hedge
transaction and, if it is, the type of hedge transaction as set forth in the
guidance. The Company currently utilizes derivative instruments on a limited
basis to hedge the interest rate risks of certain financial instruments.
Interest Rate Cap contracts have been acquired by the Company to hedge the risk
on an increase in market interest rates for variable rate sources of funds which
are partially funding financial instruments which
61
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
have interest rate terms which are fixed for certain periods of time (see Note
17 "Commitments and Contingencies" for further discussion of the Interest Rate
Cap contracts). The Interest Rate Cap contracts will be treated as cash flow
hedges under SFAS No. 133 and it is anticipated that any change in their fair
value will be substantially offset by an opposite change in the fair value of
the financial instruments designated in the hedge transaction. Under SFAS No.
133, the portion of change in fair value of any derivative instrument designated
as a hedge which is not effective will be recognized in current period earnings.
Management does not expect the adoption of SFAS No. 133 for its current
derivative instruments to have any material effect on the Company's financial
position or results of operations.
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise" ("SFAS No. 134") which applies
to mortgage banking enterprises and other entities conducting similar
operations. SFAS No. 134 requires that securities retained after a
securitization of loans held for sale be accounted for in accordance with SFAS
No. 115, unless the entity has entered into a commitment to sell the retained
securities before or during the securitization process. Such securities would be
classified as trading. SFAS No. 134 is effective for the first fiscal quarter
beginning after December 15, 1998. The adoption of SFAS No. 134 is not expected
to be material to the Company's financial position or results of operations.
(P) FINANCIAL STATEMENT RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
September 30, 1998 consolidated financial statements.
(2) EARNINGS PER SHARE
Earnings per common share is calculated as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
------------------------------
1998 1997 1996
-------- -------- -------
(In thousands, except
per share amounts)
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Numerator:
Net income after preferred stock dividends........................................... $ 6,460 $ 4,709 $ 441
======== ======== ========
Denominator:
Weighted average common shares outstanding........................................... 15,693 8,211 4,306
======== ======== ========
Basic earnings per share............................................................... $ 0.41 $ 0.57 $ 0.10
======= ======== ========
DILUTED EARNINGS PER SHARE:
Numerator:
Net income after preferred stock dividends........................................... $ 6,460 $ 4,709 $ 441
Plus:
Reduction of interest expense...................................................... - - 3
Reduction of preferred stock dividends............................................. 111 217 -
-------- -------- --------
Diluted net income available to common shareholders.................................. $ 6,571 $ 4,926 $ 444
======== ======== ========
Denominator:
Weighted average common shares outstanding........................................... 15,693 8,211 4,306
Plus:
Number of common shares from the conversion of options and warrants................ 655 468 252
Number of common shares from the conversion of dilutive preferred stock(1)......... 319 469 -
-------- -------- --------
Diluted weighted average shares outstanding.......................................... 16,667 9,148 4,558
======== ======== ========
Diluted earnings per share............................................................. $ 0.39 $ 0.54 $ 0.10
======== ======== ========
</TABLE>
(1) For the years ended September 30, 1998, 1997 and 1996 there were
233,000, 2,040,000 and 1,841,000, respectively, common stock
equivalent shares of convertible preferred stock that were not
included in the computation of diluted earnings per share because of
their antidilutive effect.
During October 1998, the Company repriced stock options on Class A and
Class B Common Stock and Series B Preferred Stock. (See Note 15)
62
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(3) ACQUISITIONS
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 had 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.
As part of the purchase of Suncoast, the Company issued warrants to
Suncoast's warrant holders to purchase 80,000 shares of 8% Noncumulative
Convertible Preferred Stock, Series 1996, and assumed Suncoast's outstanding
stock options. The warrants were exercisable to purchase one share of the 8%
Noncumulative Convertible Preferred Stock, Series 1996 at a per share price of
$18.00, or to purchase 1.68595 shares, subject to adjustment, of Class A Common
Stock at a per share price of $10.68, also subject to adjustment under certain
conditions. A total of 42,655 warrants were converted into 71,259 shares of
Class A Common Stock during June 1998. The 5,545 warrants which remained
unexercised after July 9, 1998 expired pursuant to the terms of the warrant
agreements.
At the date of acquisition, the fair value of the assets and liabilities
acquired from Suncoast were as follows (in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents................................$ 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 were 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
Basic..............................................................$ .53 $ .10
Diluted............................................................$ .52 $ .10
</TABLE>
The proforma combined condensed statement of operations assumes the
acquisition occurred as of October 1, 1995.
On January 23, 1998, the Company acquired Consumers Bancorp, Inc.
("Consumers") for approximately $12 million in a combination of cash and stock
and merged its wholly-owned subsidiary, Consumers Savings Bank, which had assets
of $104.4 million and deposits of $88.3 million as of January 23, 1998, into the
Bank. The acquisition was accounted for as a purchase and resulted in goodwill
of approximately $5.6 million. This acquisition did not have a material impact
on the financial condition or results of operations of the Company.
On June 19, 1998, the Company acquired Central Bank ("Central"), for
1,386,000 shares of the Company's Class A Common Stock, and merged Central,
which had assets of $93.9 million and deposits of $65.9 million as of June 19,
1998 into the Bank. The acquisition was accounted for as a purchase and resulted
in goodwill of approximately $12.8 million. This acquisition did not have a
material impact on the financial condition or results of operations of the
Company.
63
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(4) TAX CERTIFICATES
Tax certificates are certificates representing delinquent real estate taxes
owed to the respective counties. A substantial percentage of tax certificates
are for properties located in southeast Florida. The Company's policy is to
purchase tax certificates only for properties located in Florida.
The net carrying value of tax certificates was $40.0 million and $49.3
million at September 30, 1998 and 1997, respectively. Included in these amounts
at September 30, 1998 and 1997 were $0.2 million and $1.3 million, respectively,
of tax certificates for which the Company had made application for tax deeds.
The Company maintains loss reserves for tax certificates which were $469,000 and
$697,000 at September 30, 1998 and 1997, 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.
(5) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Interest income from securities purchased under agreements to resell
aggregated approximately $2.5 million for the year ended September 30, 1998.
The following sets forth information concerning the Company's agreements to
resell for the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR
THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1998 1997 1996
------------- ------------- ------------
(dollars in thousands)
<S> <C>
Maximum amount of outstanding agreements at any month end
during the period.....................................................$ 95,032 $ - $ -
Average amount outstanding during the period............................$ 44,009 $ - $ -
Weighted average interest rate for the period........................... 5.56% -% -%
Maturity................................................................ -- - -
</TABLE>
(6) INVESTMENTS AND MORTGAGE-BACKED SECURITIES
INVESTMENTS
Presented below is an analysis of the carrying values and approximate
market values of investments held to maturity.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
------------ ----------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
U.S. government agency securities............................ $ 14,481 $ 157 $ - $ 14,638
State of Israel Bonds........................................ 61 - - 61
----------- ----------- ----------- -----------
Total...................................................... $ 14,542 $ 157 $ - $ 14,699
=========== =========== =========== ===========
SEPTEMBER 30, 1997
Gross Gross
Carrying Unrealized Unrealized Market
VALUE GAINS LOSSES VALUE
(Dollars in thousands)
U.S. government agency securities............................ $ 14,483 $ 119 $ - $ 14,602
State of Israel Bonds........................................ 11 - - 11
----------- ----------- ----------- -----------
Total...................................................... $ 14,494 $ 119 $ - $ 14,613
=========== =========== =========== ===========
</TABLE>
64
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(6) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
All investments held to maturity at September 30, 1998 and 1997 had
maturities between one and five years.
Presented below is analysis of the investments designated as available for
sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------ ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury notes.......................................... $ 2,821 $ 18 $ - $ 2,839
U.S. government agency securities............................ 5,316 45 - 5,361
Other........................................................ 15,681 183 (403) 15,461
------------ ----------- ----------- -----------
Total...................................................... $ 23,818 $ 246 $ (403) $ 23,661
============ =========== =========== ===========
SEPTEMBER 30, 1997
----------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST 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>
MORTGAGE-BACKED SECURITIES
The market value and historical cost of mortgage-backed securities held to
maturity are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities.............................. $ 59 $ 4 $ - $ 63
FHLMC mortgage-backed securities............................. 1,731 - (13) 1,718
Collateralized mortgage obligations.......................... 6,165 193 - 6,358
Mortgage pass-through certificates........................... 138,191 - (2,825) 135,366
------------ ----------- ----------- -----------
Total...................................................... $ 146,146 $ 197 $ (2,838) $ 143,505
=========== =========== =========== ===========
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
Collateralized mortgage obligations.......................... 7,844 - (22) 7,822
----------- ----------- ----------- -----------
Total...................................................... $ 11,352 $ 6 $ (66) $ 11,292
=========== =========== =========== ===========
</TABLE>
65
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(6) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
The carrying value and historical cost of mortgage-backed securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(Dollars in thousands)
GNMA mortgage-backed securities.............................. $ 56,168 $ 1,288 $ (91) $ 57,365
FNMA mortgage-backed securities.............................. 26,618 213 (262) 26,569
FHLMC mortgage-backed securities............................. 78,236 1,183 (209) 79,210
Other........................................................ 35,404 1,062 - 36,466
----------- ----------- ----------- -----------
Total...................................................... $ 196,426 $ 3,746 $ (562) $ 199,610
=========== =========== =========== ===========
SEPTEMBER 30, 1997
----------------------------------------------------------
Gross Gross
Historical Unrealized Unrealized Carrying
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(Dollars in thousands)
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>
The mortgage-backed securities have contractual maturities which range from
the years 1998 to 2028, however, expected maturities will differ from
contractual maturities as borrowers have the right to prepay obligations.
Gross proceeds on sales of mortgage-backed securities and collateralized
mortgage obligations were $15.6 million for the year ended September 30, 1998
and $7.7 million for the year ended September 30, 1997. There were no sales of
mortgage-backed securities and collateralized mortgage obligations in 1996.
Gross realized gains were $423,000 and $250,000 on sales of mortgage-backed
securities and collateralized mortgage obligations during the years ended
September 30, 1998 and 1997, respectively. There were no realized losses during
the years ended September 30, 1998 and 1997.
At September 30, 1998 , GNMA and FNMA mortgage-backed securities with
carrying values of approximately $25.5 million were pledged as collateral for
public funds on deposit.
At September 30, 1998, investment and mortgage-backed securities with an
aggregate carrying value of approximately $5.2 million were pledged as
collateral for retail repurchase agreements and a portion of a real estate
mortgage investment conduit pass-through security, securitized by the Company
from its whole loan portfolio, with a carrying value of approximately $121.1
million was pledged as collateral for a $107.1 million repurchase agreement.
66
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(7) LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------
1998 1997
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Mortgage loans-conventional............................................................ $ 317,807 $ 387,096
Mortgage loans-conventional serviced by others......................................... 2,271,474 1,110,686
Mortgage loans-other................................................................... 203,375 140,393
Commercial loans:
Secured.............................................................................. 17,547 9,475
Unsecured............................................................................ 5,223 1,168
Line of credit loans................................................................... 3,331 1,456
Share loans............................................................................ 789 835
Installment loans...................................................................... 26,281 836
------------- -------------
Total................................................................................ 2,845,827 1,651,945
Less allowance for loan losses......................................................... (6,128) (3,693)
Deferred loan fees, discounts and premiums............................................. 29,905 13,129
------------- -------------
Loans receivable, net................................................................ $ 2,869,604 $ 1,661,381
============= =============
</TABLE>
Of the total gross loans receivable of $2.8 billion at September 30,
1998, approximately $0.5 billion, or 17.5%, represents loans secured by
properties in California and $0.4 billion, or 14.1%, represents loans secured by
properties in Florida. No other state represents more than 10% of the Company's
loan portfolio.
At September 30, 1998, the Bank had pledged approximately $1.6 billion of
mortgage loans as collateral for advances from the Federal Home Loan Bank of
Atlanta (see Note 11).
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------
1998 1997 1996
------------ ------------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at beginning of the period......................... $ 3,693 $ 2,158 $ 1,469
Provision (credit)....................................... 1,700 1,295 (120)
Allowance from Bank of Florida........................... - - 183
Allowance from Suncoast.................................. - 775 -
Allowance from Consumers and Central..................... 1,262 - -
Loans charged-off........................................ (599) (604) (493)
Recoveries............................................... 72 69 1,119
------------- ------------- -------------
Balance at end of the period............................. $ 6,128 $ 3,693 $ 2,158
============= ============= =============
</TABLE>
As of September 30, 1998 and 1997, the Company had impaired or non-accrual
loans of $16.0 million and $10.9 million, respectively, and had recorded
specific reserves on these loans of $521,000 and $704,000, respectively. For the
years ended September 30, 1998, 1997 and 1996 the average amounts of impaired
loans were $12.1 million, $8.0 million and $4.8 million, respectively. No income
is recognized on loans during the period for which the loan is deemed impaired.
67
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(8) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------
1998 1997
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Office buildings......................................... $ 2,599 $ 2,600
Leasehold improvements................................... 6,568 2,700
Furniture, fixtures and equipment........................ 7,331 3,504
Computer equipment and software.......................... 5,388 3,548
----------- -----------
Total.................................................. 21,886 12,352
Less: accumulated depreciation........................... (7,688) (4,981)
----------- -----------
Office properties and equipment, net..................... $ 14,198 $ 7,371
=========== ===========
</TABLE>
Depreciation expense was $1.6 million, $1.2 million and $674,000, for the
years ended September 30, 1998, 1997, and 1996, respectively.
The Company has entered into non-cancelable leases with approximate minimum
future rentals as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
----------------------
(Dollars in thousands)
<S> <C>
1999.................................................................. $ 3,365
2000.................................................................. 2,365
2001.................................................................. 1,802
2002.................................................................. 1,282
2003.................................................................. 739
Thereafter............................................................ 1,023
---------------------
Total............................................................... $ 10,576
====================
</TABLE>
Rent expense for the years ended September 30, 1998, 1997, and 1996 was
$2.2 million, $1.6 million, and $905,000, respectively.
68
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(9) DEPOSITS
The weighted average nominal interest rate payable on all deposit
accounts at September 30, 1998 and 1997 was 5.18% and 5.20%, respectively.
Types of deposits and related range of interest rates were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------------------------
1998 1997
-------------------------------- --------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing deposits................... -% - -% $ 46,748 -% - -% $ 21,436
Super NOW deposits.............................. 0.00% - 5.16% 71,431 0.00% - 3.93% 57,471
Money market deposits........................... 1.64% - 4.58% 115,104 0.00% - 3.10% 20,325
Passbook and statement savings deposits......... 2.00% - 5.13% 258,158 2.00% - 5.16% 160,557
Certificates of deposit - retail................ 4.51% - 6.45% 1,472,224 3.92% - 6.06% 914,103
Certificates of deposit - public funds.......... 4.80% - 5.63% 86,159 5.74% - 5.81% 22,000
Certificates of deposit - brokered funds........ 5.25% - 5.40% 75,000 -% - -% -
------------ -------------
Total......................................... $ 2,124,824 $ 1,195,892
============= =============
</TABLE>
Deposit accounts with balances of $100,000 or more totaled
approximately $469.1 million and $174.0 million at September 30, 1998 and 1997,
respectively. Included in balances of $100,000 or more are $161.2 million and
$22.0 million in public and brokered funds at September 30, 1998 and 1997,
respectively.
Interest expense on deposits for the years ended September 30, 1998,
1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Super NOW and money market deposits...................... $ 5,083 $ 2,236 $ 775
Passbook and statement savings deposits.................. 8,983 6,342 2,627
Certificates of deposit.................................. 79,365 41,558 17,389
------------- ------------- -------------
Total.................................................. $ 93,431 $ 50,136 $ 20,791
============= ============= =============
</TABLE>
Early withdrawal penalties on deposits are recognized as a reduction of interest
on deposits. For the years ended September 30, 1998, 1997 and 1996, early
withdrawal penalties totaled $217,000, $101,000, and $42,000, respectively.
The amounts and scheduled maturities of certificate accounts at
September 30, 1998 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- ------------------------- ---------------------
(Dollars in thousands)
<S> <C>
1999..................................................................... $ 1,552,266
2000..................................................................... 31,228
2001..................................................................... 7,524
2002..................................................................... 32,741
2003..................................................................... 9,581
Thereafter............................................................... 43
----------------------
Total.................................................................. $ 1,633,383
======================
</TABLE>
69
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(10) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE
Interest expense on securities sold under an agreement to repurchase
aggregated $5.5 million and $506,000 for the years ended September 30, 1998 and
1997, respectively.
The following sets forth information concerning repurchase agreements for the
periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED
SEPTEMBER 30,
------------------------------------------------
1998 1997 1996
------------- ------------- -------------
(dollars in thousands)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at any month
end during the period...................................................$ 192,610 $ 30,000 $ -
Average amount outstanding during the period............................$ 97,292 $ 8,828 $ -
Weighted average interest rate for the period........................... 5.77% 5.73% -
</TABLE>
Of the $121.1 million of repurchase agreements outstanding at September 30,
1998, $114.3 million matures in October 1998, $0.4 million matures in November
1998, $5.4 million matures in December 1998, $0.3 million matures in March 1999,
$0.2 million matures in May 1999 and $0.5 million matures in June 1999.
At September 30, 1998 and 1997, the Company had $126.3 million and $34.0
million, respectively, of investment and mortgage-backed securities pledged
under repurchase agreements. At September 30, 1996, the Company had no pledged
securities under repurchase agreements.
(11) 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 1998 1997
- ------------------------------------------ ----------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
1998............................................... 5.63% - 6.55% $ - $ 480,000
1999............................................... 5.28% - 5.80% 255,000 25,000
2000(1)............................................ 5.13% - 5.85% 125,000 --
2001(2)............................................ 5.54% - 5.92% 140,000 15,000
2002(3)............................................ 5.43% - 6.24% 150,000 150,000
2003(4)............................................ 4.70% - 5.94% 125,000 --
2005............................................... 6.65% 1,466 1,484
2007(5)............................................ 4.99% - 5.06% 75,000 --
2008(6)............................................ 4.75% - 5.50% 150,000 --
------------- -------------
Total.............................................. $ 1,021,466 $ 671,484
============= =============
</TABLE>
______________
(1) Advances for $25 million are callable by the FHLB in 1998.
(2) Advances for $15 million are callable by the FHLB in 1998 and $25 million
in 1999.
(3) Advances for $25 million are callable by the FHLB in 1998 and $125 million
in 1999.
(4) Advances for $25 million are callable by the FHLB in each of 1998, 1999 and
2000.
(5) Advances for $75 million are callable by the FHLB in 1998.
(6) Advances for $25 million are callable by the FHLB in each of 1998, 1999 and
2003 and $75 million in 2000.
The terms of a security agreement with the FHLB of Atlanta include a
specific assignment of collateral 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 85% of the unpaid
principal balance. The FHLB of Atlanta stock, which is recorded at cost, is also
pledged as collateral for these advances.
70
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(12) COMPANY OBLIGATED MANDATORILY REDEEMABLE 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 (the "Series A Preferred Securities") 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 (the "Series A Subordinated Debentures") issued by
BankUnited Financial Corporation with terms similar to the Series A Preferred
Securities, which are the sole assets of BankUnited Capital.
On March 24, 1997, BankUnited Capital issued an additional $20 million
of the Series A Preferred Securities and $800,000 of common securities, which
common securities are also wholly owned by the Company. BankUnited Capital
simultaneously purchased an additional $20.8 million of the Series A
Subordinated Debentures 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 Series A
Preferred Securities.
The Series A Preferred Securities are subject to mandatory redemption,
in whole or in part, upon the maturity or earlier redemption of the Series A
Subordinated Debentures. The Series A Subordinated Debentures are redeemable on
or after December 31, 2006 at a redemption price of 105.125% during the 12-month
period beginning December 31, 2006 and declining 51 basis points annually
thereafter to 100% on December 31, 2016.
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 (the "9.60% 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 (the
"9.60% Subordinated Debentures") issued by BankUnited Financial Corporation with
terms similar to the 9.6% 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 rate of 9.60%. The Company and BankUnited Capital
II have the right to defer payment of interest for up to five years. BankUnited
Financial Corporation has guaranteed all the obligations of the 9.60% Preferred
Securities. The 9.60% Subordinated Debentures rank PARI PASU with the Series A
Subordinated Debentures.
The 9.60% Preferred Securities are subject to mandatory redemption, in
whole or in part, upon the maturity or earlier redemption of the 9.60%
Subordinated Debentures. The 9.60% Subordinated Debentures are redeemable on or
after June 30, 2002 at a redemption price equal to the accrued and unpaid
interest on the 9.60% Subordinated Debentures to be redeemed to the date fixed
for redemption, plus 100% of the principal amount.
On March 11, 1998, BankUnited Capital III, a newly formed trust
subsidiary created under the laws of Delaware, issued $102.5 million of 9%
Cumulative Trust Preferred Securities (the "9% Preferred Securities") and $4.1
million of common securities. The common securities are wholly owned by the
Company. In connection with this transaction, BankUnited Capital III
simultaneously purchased $106.6 million 9% Junior Subordinated Deferrable
Interest Debentures (the "9% Subordinated Debentures") issued by BankUnited
Financial Corporation with terms similar to the 9% Preferred Securities, which
are the sole assets of BankUnited Capital III.
These securities mature March 31, 2028 and pay a preferential
cumulative cash distribution at an annual rate of 9%. The Company and BankUnited
Capital III have the right to defer payment of interest for up to five years.
BankUnited Financial Corporation has guaranteed all the obligations of the 9%
Preferred Securities. The 9% Subordinated Debentures rank PARI PASU with the
Series A Subordinated Debentures.
The 9% Preferred Securities are subject to mandatory redemption, in
whole or in part, upon the maturity or earlier redemption of the 9% Subordinated
Debentures. The 9% Subordinated Debentures are redeemable on or after March 31,
2003 at a redemption price equal to the accrued and unpaid interest on the 9%
Subordinated Debentures to be redeemed to the date fixed for redemption, plus
100% of the principal amount.
Considered together the back-up undertakings constitute a full and
unconditional guarantee by the Company of the obligations of the Trust Preferred
Securities.
71
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(13) REGULATORY CAPITAL
The Bank's required, actual and excess regulatory capital levels as of
September 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
REGULATORY CAPITAL
------------------------------------------------------------------------------------------
REQUIRED ACTUAL EXCESS
----------------------------- ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997
-------------- ------------- ------------- ------------- ------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Core Capital................ $ 108,958 $ 63,084 $ 316,586 $ 169,708 $ 207,628 $ 106,624
3.0% 3.0% 8.7% 8.1% 5.7% 5.1%
Risk-based capital.......... $ 146,972 $ 123,365 $ 322,238 $ 173,725 $ 175,266 $ 50,360
8.0% 8.0% 17.5% 11.3% 9.5% 3.3%
</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, 1998,
1997 and 1996 did not differ from regulatory capital and net income amounts
reported to the OTS.
On August 31, 1993, the OTS adopted an amendment to its regulatory capital
regulations to take into account a savings institution's exposure to the risk of
loss from changing interest rates. Under the regulation as amended, a savings
institution with an above normal level of interest rate risk exposure will be
required to deduct an interest rate risk ("IRR") component from its total
capital when determining its compliance with the risk-based capital
requirements. An "above normal" level of interest rate risk exposure is a
projected decline of 2% in the net present value of an institution's assets and
liabilities resulting from a 2% swing in interest rates. The IRR component will
equal one-half of the difference between the institution's measured interest
rate exposure and the "normal" level of exposure. Savings institutions will be
required to file data with the OTS that the OTS will use to calculate, on a
quarterly basis (but with a two-quarter lag), institutions' measured interest
rate risk and IRR components. Implementation of the IRR requirements have been
delayed pending the testing of the OTS appeals process. If the IRR component had
been required as of September 30, 1998, the Bank would not have been required to
deduct an IRR component from its total capital when determining its compliance
with its risk-based capital requirements.
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.
72
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(14) 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, 1998, 10,000,000 shares of
Preferred Stock were authorized, of which 7,012,628 shares were 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- 500,000 shares as of September 30, 1998 and 200,000
shares as of September 30, 1997.
Issued and outstanding shares-229,580 as of September 30, 1998 and 183,818
shares as of September 30, 1997.
Dividends-noncumulative cash dividends payable quarterly in cash or shares
of Class A Common Stock at the option of the holder, at the fixed
annual rate of $0.55 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 Preferred Stock in 1995, for which the redemption price is
$11.0625 until September 30, 2001, the redemption price is $7.375 per
share. Effective October 1, 1997, the Company agreed, in exchange for
the reduction in the dividend rate described above, 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.
Voting rights-two-and-one-half votes per share.
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.
Issuances-During the fiscal year ended September 30, 1998, the Company
awarded 20,762 shares to directors and officers of the Company and, in
April 1998, issued 25,000 shares in a direct offering to certain
directors and principal shareholders.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C:
In February 1997 all outstanding shares of Noncumulative Convertible
Preferred Stock, Series C were converted into shares of Class A Common
Stock.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C-II:
In February 1997 all outstanding shares of Noncumulative Convertible
Preferred Stock, Series C-II were converted into shares of Class A
Common Stock.
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993:
In February 1998 the Company redeemed all outstanding shares of
Noncumulative Convertible Preferred Stock, Series 1993 at a redemption
price of $10.00 per share.
73
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(14) STOCKHOLDERS' EQUITY--(CONTINUED)
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK:
Authorized shares- 1,554,942 shares as of September 30, 1998 and 1,851,417
shares as of September 30, 1997.
Issued and outstanding- 697,117 as of September 30, 1998 and 701,417 as of
September 30, 1997.
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- at the option of the Company at a redemption price of $10.00
per share.
Voting rights- nonvoting, except under certain circumstances.
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1996:
In October 1997 the Company redeemed all outstanding shares of its
Noncumulative Convertible Preferred Stock, Series 1996 at a redemption
price of $15.00 per share.
CLASS A COMMON STOCK- Issuable in series with rights and preferences to be
designated by the Board of Directors. As of September 30, 1998 and 1997,
30,000,000 shares of Class A Common Stock were authorized, of which
10,000,000 shares were not designated to a series.
SERIES I CLASS A COMMON STOCK:
Authorized shares- 20,000,000 at September 30, 1998 and 1997.
Issued and outstanding- 17,816,213 shares as of September 30, 1998 and
9,257,098 shares as of September 30, 1997.
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.
Issuances-During the fiscal year ended September 30, 1998, the Company
issued 195,584 shares with the exercise of options and warrants, 39,419
shares in awards and issuances to directors, officers and employees of
the Company, 1,948,508 shares with the acquisitions of Consumers and
Central and 1,614,104 shares from the conversion of preferred stock.
Additionally, the Company issued 3,680,000 shares in a public stock
offering in October 1997 and, in April 1998, issued 977,500 shares in a
publicly underwritten offering and 104,000 shares to certain directors
and principal shareholders in a direct offering.
74
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(14) STOCKHOLDERS' EQUITY--(CONTINUED)
CLASS B COMMON STOCK:
Authorized shares- 3,000,000.
Issued and outstanding- 331,743 shares as of September 30, 1998 and 275,685
shares as of September 30, 1997.
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.
Issuances-During the fiscal year ended September 1998, the Company issued
30,000 shares in a direct offering to certain directors and principal
shareholders of the Company, awarded 3,541 shares to directors and
officers and issued 22,517 shares in connection with the exercise of
stock options.
(15) 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 of Class A and Class B Common Stock to provide
long-term incentives and rewards to officers, directors and employees of the
Company. As of September 30, 1998, 70,221 shares of Class A Common Stock and
54,779 shares of Class B Common Stock had been issued under the 1992 Stock Bonus
Plan. As of September 30, 1998, there were 6,000 shares available for grant
under the 1992 Stock Bonus Plan, due to stock awards which had been forfeited by
officers and employees who terminated service with the Company prior to full
vesting of such awards.
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 have been
granted. As of September 30, 1998, no shares were available for the grant of
options under this plan, and 101,528 options had been exercised.
The Company also maintains the 1994 Incentive Stock Option Plan under which
options for up to 250,000 shares of Class A and Class B Common Stock have been
granted. As of September 30, 1998, 28,906 shares were available for the grant of
options under this plan (due to options which had been forfeited by officers and
employees who terminated service with the Company prior to full vesting of these
options), and options for 23,327 shares had been exercised.
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, 1998, the Agreements are exercisable for a total of
155,367 shares at the exercise price of $4.64 per share.
The Company maintains the 1996 Incentive Compensation 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 (as amended in January 1998) 1,300,000 shares of
Class A and Class B Common Stock and up to 375,000 shares of Series B Preferred.
As of September 30, 1998, options to purchase 449,540 shares of Class A Common
Stock, 287,500 shares of Class B Common Stock and 315,000 shares of Series B
Preferred Stock had been granted and options for 20,571 shares of Class A Common
Stock had been exercised. In addition, 32,733 shares of Class A Common Stock and
20,762 shares of Series B Preferred Stock had been issued pursuant to other
awards under this plan. As of September 30, 1998, 594,745 shares of Class A
Common Stock and Class B Common Stock and 39,238 shares of Series B Preferred
Stock were available for grant under this plan.
Options granted under the Company's stock option plans expire ten years
after the date of grant unless extended by the Board of Directors, and are
exercisable at the fair market value of the stock on the date of grant. Options
granted under the 1994 Incentive Stock Option Plan and the 1996 Incentive
Compensation and Stock Award Plan may become exercisable over a period of three
or five years, subject to forfeiture as to any portion which is not exercisable
upon termination of employment.
75
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(15) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
The following table presents additional data concerning the Company's
outstanding stock options:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE AGGREGATE
OF SHARES PER SHARE OPTION PRICE
------------ ------------------- -------------
<S> <C> <C> <C> <C> <C>
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
Options granted..................................................... 665,705 9.63 - 21.07 10,726,793
Options exercised................................................... (120,991) 3.00 - 13.25 (646,547)
Options expired..................................................... (106,924) 5.73 - 13.24 (1,069,860)
Reduction of option price(1)........................................ - 9.30 - 13.91 (2,999,259)
------------ ------------------- -------------
Options outstanding, September 30, 1998(2).......................... 2,025,315 $ 3.00 - $13.91 $ 16,770,736
============ =================== =============
</TABLE>
(1) On September 3, 1998, the Company repriced options to purchase Class A
Common Stock, Class B Common Stock and Series B Preferred Stock which
had exercise prices which exceeded the fair market value of the
underlying stock on that date. As a result of this repricing the
exercise price of options to purchase 302,850 shares of Class A Common
Stock and 77,500 shares of Class B Common Stock was reduced to $9.298
per share, and the exercise price of options to purchase 315,000
shares of Series B Preferred Stock was reduced to $13.909 per share.
(2) On October 14, 1998, the Company repriced options to purchase Class A
Common Stock, Class B Common Stock and Series B Preferred Stock which
had exercise prices which exceeded the fair market value of the
underlying stock on that date. As a result of this repricing the
exercise price of options to purchase 456,368 shares of Class A Common
Stock and 595,800 shares of Class B Common Stock was reduced to $7.25
per share, and the exercise price of options to purchase 315,000
shares of Series B Preferred Stock was reduced to $10.8452 per share.
The aggregate option price is reduced to approximately $14.4 million
as a result of this reduction.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" and as permitted by SFAS No. 123, the Company continues to follow
the measurement provisions of Accounting Principles Board Option No. 25,
"Accounting for Stock Issued to Employees, " and, accordingly, does not
recognize compensation expense for its stock-based incentive plans. Had
compensation cost for the Company's stock based incentive compensation plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the methodology prescribed by SFAS No. 123, the
Company's net income and earnings per share for fiscal 1998, 1997 and 1996 would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------- -------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
As Reported.............................................................$ 6,460 $ 4,709 $ 441
Pro forma...............................................................$ 4,011 $ 3,328 $ 204
Basic earnings per common share:
As reported.............................................................$ 0.41 $ 0.57 $ 0.10
Pro forma...............................................................$ 0.26 $ 0.41 $ 0.03
Diluted earnings per common share:......................................
As reported.............................................................$ 0.39 $ 0.54 $ 0.10
Pro forma...............................................................$ 0.26 $ 0.38 $ 0.03
</TABLE>
The pro forma results of operations reported above are not likely to be
representative of the effects on reported income of future years due to vesting
arrangements and additional option grants.
76
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(15) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
The fair value of each option has been 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 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Dividend yields......................................................... - - -
Expected volatility..................................................... 33.7% 30.1% 30.1%
Risk-free interest rates................................................ 5.55% 6.30% 6.52%
Expected life (in years)................................................ 7.00 9.52 7.88
</TABLE>
Based upon the above assumptions, the weighted average fair value of
options granted during 1998, 1997 and 1996 was $5,565,000, $2,484,000 and
$334,000, respectively.
The Company has a 401(k) savings plan pursuant to which eligible employees
are permitted to contribute up to 15% of their annual salary to the savings
plan. Currently, the Company intends to make matching contributions at a rate of
33% of such contributions, up to a maximum of 6% of an employee's salary. The
amount of such matching by the Company for the years ended September 30, 1998,
1997, and 1996 totaled approximately $71,900, $34,600, and $7,000 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%.
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, after the third year, up to 100%. The Board of Directors
authorized a contribution of $100,000, $170,000 and $100,000 in 1998, 1997 and
1996, 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, 1998, all of these options had been exercised.
(16) INCOME TAXES
The Company's effective tax rate differs from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------
1998 1997 1996
-------------------- ------------------- -------------------
AMOUNT % AMOUNT % AMOUNT %
---------- --- ---------- ---- ----------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tax at federal income tax rate.................... $ 4,229 34.2% $ 4,295 34.0% $ 1,443 34.0%
Increase resulting from:
State tax......................................... 480 3.9 314 2.5 154 3.6
Other, net........................................ 300 2.4 424 3.3 60 1.5
----------- --- ---------- ---- ---------- ---
Total........................................... $ 5,009 40.5% $ 5,033 39.8% $ 1,657 39.1%
=========== ===== ========== ===== =========== =====
</TABLE>
<PAGE>
The components of the provision for income taxes for the year ended September
30, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
------------------------------------------------
1998 1997 1996
------------- ------------- -------------
(Dollars in Thousands)
<S> <C> <C> <C>
Current-federal.................... $ 3,874 $ 1,150 $ 1,324
Current-state...................... 663 125 227
Deferred-federal................... 407 3,391 90
Deferred-state..................... 65 367 16
------------- ------------- -------------
Total............................ $ 5,009 $ 5,033 $ 1,657
============= ============= =============
</TABLE>
77
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(16) INCOME TAXES--(CONTINUED)
The tax effects of significant temporary differences included in the deferred
tax asset as of September 30, 1998 and 1997 were:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1998 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
Deferred tax asset:
Non-accrual interest................................ $ 325 $ 200
Loan loss and other reserves........................ 1,711 875
Fixed assets........................................ 132 77
Deferrals and amortization.......................... - 250
Purchase accounting................................. 1,088 1,605
Other............................................... 771 765
-------- ---------
Gross deferred tax asset.......................... 4,027 3,772
-------- ---------
Deferred tax liability:
FHLB Atlanta stock dividends........................ 106 159
Deferrals and amortizations......................... 1,219 912
Unrealized gains on securities available for sale... 1,150 529
Other............................................... 314 91
-------- ---------
Gross deferred tax liability...................... 2,789 1,691
-------- ---------
Net deferred tax asset............................ $ 1,238 $ 2,081
======== =========
</TABLE>
At September 30, 1998, the Company had $565,000 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.
The components of deferred income tax provision (benefit) relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------
1998 1997 1996
--------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Differences in book/tax depreciation.............................. $ 15 $ - $ (10)
Delinquent interest............................................... (71) (18) (7)
FHLB Stock dividends.............................................. (19) - -
Loan fees......................................................... - 15 -
Loan loss and other reserves...................................... (494) (294) 156
Deferrals and amortization........................................ (76) (145) (33)
SAIF special assessment........................................... - 758 -
Purchase accounting............................................... 540 2,635 -
Other............................................................. 577 807 -
--------- -------- --------
Total deferred taxes............................................ $ 472 $ 3,758 $ 106
========= ======== ========
</TABLE>
78
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(16) INCOME TAXES--(CONTINUED)
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.
In connection with the acquisition of Consumers and Central, 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. With respect to the Consumers and Central acquisitions,
approximately $19,000 and $7,000, respectively, of net deferred tax assets have
been recognized as net deferred tax benefit during the year ended September 30,
1998 and $287,000 and $16,000, respectively, represent the tax effect at
September 30, 1998 of amounts not deductible for tax purposes in future periods.
The Company also acquired net deferred tax liabilities of approximately
$189,000 in connection with its acquisition of Consumers and net deferred tax
assets of approximately $332,000 in connection with its acquisition of Central.
(17) 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, purchase whole loans and securities, standby letters of credit
and derivative financial instruments. 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 is represented by the contractual amount
and collateral value, if any, of those instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Total commitments to extend credit at
September 30, 1998 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-------------------------------------------------
FIXED VARIABLE
RATE RATE TOTAL
-------------- ------------ ---------------
(in thousands)
<S> <C> <C> <C>
Commitments to fund loans.................................... $ 54,512 $ 13,394 $ 67,906
Loans in process............................................. 56,211 14,010 70,221
Domestic letters of credit................................... 3,994 - 3,994
International letters of credit.............................. 340 - 340
Commitments to purchase loans................................ 100,000 152,659 252,659
-------------- ------------- --------------
Total...................................................... $ 215,057 $ 180,063 $ 395,120
============== ============= ==============
</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.
79
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(17) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
During April 1998, the Bank entered into two interest rate cap contracts
with a major Wall Street firm, in notional amounts of $90.0 million and $60.0
million, terminating on October 23, 1999 and April 23, 2000, respectively. The
contracts require the counter-party to pay the Bank quarterly interest payments
based on the notional amounts and the difference between the "London Inter Bank
Offering Rate", ( the "LIBOR rate") and 5.90% when the LIBOR rate exceeds 5.90%,
in return for a one-time payment by the Bank.
During May 1998, the Bank entered into a third interest rate cap contract
with another major Wall Street firm in a notional amount of $75.0 million
terminating on May 30, 2000. The contract requires the counter-party to pay the
Bank quarterly interest payments based on the notional amount and the difference
between the LIBOR rate and 6.10% when the LIBOR rate exceeds 6.10%, in return
for a one-time payment by the Bank.
The Bank entered into these contracts for the purpose of hedging a portion of
the Company's interest rate risk for rising interest rates. As of September 30,
1998, the 3-month LIBOR rate was 5.42%.
The following table provides additional information regarding the interest
rate caps:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1998
-----------------------
(Dollars in thousands)
<S> <C>
Aggregate notional amount.................................................... $ 225,000
Amortized costs.............................................................. $ 67
Aggregate market value....................................................... $ (55)
</TABLE>
The interest rate caps are accounted for as a non-trading hedge for rising
interest rates against certain short-term borrowings.
During November 1998, the Bank completed a program to issue up to $500
million aggregate principal amount of its Senior Notes backed by an irrevocable
standby letter of credit of the FHLB of Atlanta. These notes may have either a
fixed or floating rate of interest determined at the time of issuance and will
mature no sooner than 9 months and no more than 10 years from the date of issue.
The Bank intends to use the net proceeds from the sale of the notes for general
corporate purposes that will ultimately promote home financing or other housing
activity and encourage and assist the Bank's asset/liability management. The
notes have been rated "Aaa" by Moody's Investors Service, Inc. and "AAA" by
Standard & Poor's Ratings Services.
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.
(18) 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, 1998, 1997 and 1996, total fees (a
portion of which were capitalized) paid to this law firm totaled approximately
$2.2 million, $2.2 million, and $986,000, respectively, and amounts paid to this
insurance company totaled approximately $445,000, $373,000, and $147,000,
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 $138,000.
80
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(19) BANKUNITED FINANCIAL CORPORATION
The following summarizes the major categories of the Company's (parent
company only) financial statements:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
--------------------------------
1998 1997
-------------- -------------
(in thousands)
<S> <C> <C>
Assets:
Cash......................................................................... $ 1,128 $ 623
FHLB overnight deposits...................................................... 10,608 2,822
Tax certificates............................................................. 1,694 40
Investments, net (market value of approximately $60 and $10 at
September 30, 1998 and 1997, respectively)................................. 60 10
Investments available for sale............................................... 15,073 --
Mortgage-backed securities, available for sale............................... 31,642 18,644
Accrued interest receivable.................................................. 885 173
Investment in the Bank....................................................... 350,904 183,807
Investment in subsidiaries................................................... 8,644 4,640
Other assets................................................................. 9,445 9,622
------------- -------------
Total...................................................................... $ 430,083 $ 220,381
============= =============
Liabilities..................................................................... $ 3,551 $ 96
------------- -------------
Junior subordinated deferrable interest debentures.............................. 227,240 120,640
------------- -------------
Stockholders' equity:
Preferred stock.............................................................. 9 22
Common stock................................................................. 181 95
Paid-in capital.............................................................. 178,777 86,679
Retained earnings............................................................ 18,448 11,988
Net unrealized gains on securities available for sale,
net of taxes............................................................... 1,877 861
------------- -------------
Total stockholders' equity................................................. 199,292 99,645
------------- -------------
Total liabilities and stockholders' equity................................. $ 430,083 $ 220,381
============= =============
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------------------
1998 1997 1996
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Interest income....................................................... $ 4,808 $ 2,626 $ 803
Interest expense...................................................... 17,621 6,726 17
Equity income of the subsidiaries..................................... 16,227 10,927 2,406
Operating expenses.................................................... 1,495 1,166 491
------------- ------------- -------------
Income before income taxes.......................................... 1,919 5,661 2,701
Income tax expense (benefit).......................................... (5,438) (1,938) 115
------------- ------------- -------------
Net income before preferred stock dividends......................... 7,357 7,599 2,586
Preferred stock dividends of the Company.............................. 897 2,890 2,145
------------- ------------- -------------
Net income after preferred stock dividends.......................... $ 6,460 $ 4,709 $ 441
============= ============= =============
</TABLE>
81
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(19) BANKUNITED FINANCIAL CORPORATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------------------
1998 1997 1996
------------ ------------- -------------
(in thousands)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income.......................................................... $ 7,357 $ 7,599 $ 2,586
Less: Undistributed income of the subsidiaries...................... (16,227) (11,551) (406)
Other............................................................... (2,508) (2,792) 242
------------- ------------- -------------
Net cash provided by (used in) operating activities............... (11,378) (6,744) 2,422
------------- ------------- -------------
Cash from investing activities:
Equity contributions to the Bank.................................... (110,000) (85,000) (16,000)
Equity contributions to subsidiaries................................ (4,100) (4,640) -
Purchase of investment securities................................... (15,363) - (155)
Proceeds from sale of investments................................... - 155 -
Purchase of mortgage-backed securities.............................. (30,734) (27,411) -
Proceeds from repayments of mortgage-backed securities.............. 18,821 5,054 368
Proceeds from sales of mortgage-backed securities................... - 5,021 -
Net (increase) decrease in tax certificates......................... (1,654) 269 145
------------- ------------- -------------
Net cash used in investing activities............................. (143,030) (106,552) (15,642)
------------- ------------- -------------
Cash flow from financing activities:
Net proceeds from issuance of Junior subordinated
deferrable interest debentures.................................... 103,013 114,776 -
Net proceeds from issuance of common stock.......................... 60,502 1,329 23,198
Net proceeds from issuance of preferred stock....................... 488 - -
Dividends paid on preferred stock................................... (837) (2,855) (2,086)
Preferred Stock, Series 9% tender offer............................. (43) (4,486) -
Preferred Stock redemption.......................................... (424) - -
------------- ------------- -------------
Net cash provided by financing activities......................... 162,699 108,764 21,112
------------- ------------- -------------
(Decrease) increase in cash and cash equivalents...................... 8,291 (4,532) 7,892
Cash and cash equivalents at beginning of year........................ 3,445 7,977 85
------------- ------------- -------------
Cash and cash equivalents at end of year.......................... $ 11,736 $ 3,445 $ 7,977
============= ============= =============
</TABLE>
82
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1998
(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated
fair value of the Company's financial instruments. Management has made estimates
of fair value discount rates that it believes to be reasonable. However, because
there is no market for many of these financial instruments, management has no
basis to determine whether the fair value presented would be indicative of the
value negotiated in an actual sale. The fair value estimates do not consider the
tax effect that would be associated with the disposition of the assets or
liabilities at their fair value estimates.
Fair values are estimated for loan portfolios with similar financial
characteristics. Loans are segregated by category, such as commercial,
commercial real estate, residential mortgage, second mortgages, and other
installment. Each loan category is further segmented into fixed and adjustable
rate interest terms and by performing and non-performing status. The fair value
of loans, except residential mortgage and adjustable rate loans, is calculated
by discounting scheduled cash flows through the estimated maturity using
estimated market discount rates that reflect the credit 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.
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 10-1/4% Trust Preferred Securities is estimated
at book value as these securities are privately-placed and have no active
market. The fair value of the 9.60% and 9% Trust Preferred Securities is
estimated based on quoted market prices.
The following table presents information for the Company's financial
instruments at September 30, 1998 and 1997:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
-----------------------------------
CARRYING VALUE FAIR VALUE
-------------- ---------------
(in thousands)
<S> <C> <C>
Financial assets:
Cash and overnight investments.......................................... $ 91,511 $ 91,511
Tax certificates and other investments.................................. 78,210 78,367
Mortgage-backed securities.............................................. 345,756 343,115
Loans receivable........................................................ 3,042,014 3,253,845
Mortgage servicing rights............................................... 8,917 8,917
Other interest-earning assets........................................... 51,313 51,313
Financial liabilities:
Deposits................................................................ $ 2,124,824 $ 2,133,186
Borrowings.............................................................. 1,142,614 1,147,283
Trust Preferred Securities.............................................. 218,500 212,915
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-----------------------------------
CARRYING VALUE FAIR VALUE
-------------- ---------------
(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 rights............................................... 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>
83
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information contained under the caption "Election of Directors" to appear
in the Company's definitive proxy statement relating to the Company's 1999
Annual Meeting of Stockholders, which definitive proxy statement will be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the Company's fiscal year covered by this report on Form 10-K
(hereinafter referred to as the "Annual Meeting Proxy Statement"), is
incorporated herein by reference. Information concerning the executive officers
of the Company is included in Part I of this Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the caption "Executive Compensation" to
appear in the Annual Meeting Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" to appear in the Annual Meeting Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and Related
Transactions" to appear in the Annual Meeting Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) Financial Statements.
The following consolidated financial statements of the
Company and the report of the independent certified public
accountants thereon filed with this report:
Report of Independent Certified Public Accountants
(PricewaterhouseCoopers LLP).
Consolidated Statements of Financial Condition as of
September 30, 1998 and 1997.
Consolidated Statements of Operations for the years
September 30, 1998, 1997 and 1996.
Consolidated Statements of Stockholder's Equity for the
years ended September 30, 1998, 1997 and 1996.
84
<PAGE>
Consolidated Statements of Cash Flows for the years ended
September 30, 1998, 1997 and 1996.
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).
2.3 Agreement and Plan of Merger between BankUnited and
Central Bank dated December 30, 1997 (Exhibit 20.1 to
BankUnited's 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 BankUnited (Exhibit 3.1 to
BankUnited's Form 10-K Report for the year ended September
30, 1997 [the "1997 10-K"]).
3.2 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).
4.1 Statement of Designation of Series 1 Class A Common Stock
and Class B Common Stock of BankUnited (included as an
appendix to Exhibit 3.1).
4.2 Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series A of BankUnited (included as
appendix to Exhibit 3.1).
4.3 Statement of Designation of Noncumulative Convertible
Preferred Stock, Series B of BankUnited (included as
appendix to Exhibit 3.1).
4.4 Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1993 of BankUnited (included as
appendix to Exhibit 3.1).
4.5 Statement of Designation of 9% Noncumulative Perpetual
Preferred Stock of BankUnited (included as an appendix to
Exhibit 3.1).
4.6 Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1996 of BankUnited (included as
appendix to Exhibit 3.1).
4.7 Form of Letter Agreement between BankUnited and the
holders of shares of BankUnited's Noncumulative
Convertible Preferred Stock, Series B.
4.8 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).
4.9 The Advances, Specific Collateral Pledge and Security
Agreement dated March 30, 1998 between BankUnited, FSB and
the Federal Home Loan Bank of Atlanta.
4.91 Indenture dated November 4, 1998 between the Bank and the
Bank of New York to which the Federal Home Loan Bank of
Atlanta has joined as a consenting party (the
"Indenture").
4.92 Form of the Bank's Senior Note (Fixed Rate) issuable
pursuant to the Indenture.
4.93 Form of the Bank's Senior Note (Floating Rate) issuable
pursuant to the Indenture.
4.94 The Letter of Credit Reimbursement Agreement dated
November 14, 1998 between the Bank and the Federal Home
Loan Bank of Atlanta.
85
<PAGE>
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, as amended by
approval of the Company's stockholders on January 26,
1998.**
10.6 Form of Employment Agreement between BankUnited and Alfred
R. Camner .***
10.7 Form of Employment Agreement between the Bank and Alfred
R. Camner .***
10.8 Form of Employment Agreement between BankUnited, the Bank
and Mehdi Ghomeshi .***
10.9 Junior Subordinated Indenture with respect to BankUnited'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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 Underwriting Agreement dated June 1997 between the Company
and BankUnited Capital II and Raymond James and
Associates, Inc. and Ryan, Beck and Co. (Exhibit 1 to
Amendment No. 1 to Form S-2, No. 333-27397, as filed with
the Securities and Exchange Commission on May 30, 1997).
10.19 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).
10.20 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).
10.21 Form of Amended and Restated Trust Agreement of BankUnited
Capital 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).
86
<PAGE>
10.22 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).
10.23 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).
10.24 Purchase Agreement between the Company and BankUnited
Capital III and PaineWebber Incorporated (Exhibit 1.1 to
the Company's Amendment No. 3 to Form S-3, No. 333-28677,
as filed with the Securities and Exchange Commission on
March 6, 1998).
10.25 Form of Indenture with respect to BankUnited's 9% Junior
Subordinated Debentures (Exhibit 4.3 to Amendment No. 3 to
the Company's Registration Statement on Form S-3, No.
333-28677, as filed with the Securities and Exchange
Commission on March 6, 1998).
10.26 Trust Agreement of BankUnited Capital III. (Exhibit 4.6 to
the Company's Registration Statement on Form S-3, No.
333-28677, as filed with the Securities and Exchange
Commission on June 6, 1997).
10.27 Form of Amended and Restated Trust Agreement of BankUnited
Capital III. (Exhibit 4.3 to Amendment No. 3 to the
Company's Registration Statement on Form S-3, No.
333-28677, as filed with the Securities and Exchange
Commission on March 6, 1998).
10.28 Form of Guarantee Agreement for BankUnited Capital III.
(Exhibit 4.3 to Amendment No. 3 to the Company's
Registration Statement on Form S-3, No. 333-28677, as
filed with the Securities and Exchange Commission on March
6, 1998).
10.29 Form of Agreement as to Expenses and Liabilities (Exhibit
4.3 to Amendment No. 3 to the Company's Registration
Statement on Form S-3, No. 333-28677, as filed with the
Securities and Exchange Commission on March 6, 1998).
11.1 Statement regarding calculation of earnings per common
share (set forth in Footnote (2) to the Notes to
Consolidated Financial Statements contained in Part II,
Item 8 of this report on Form 10- K for the year ended
September 30, 1998).
12.1 Statement regarding calculation of ratio of earnings to
combined fixed charges and preferred stock dividends.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
24.1 Power of attorney (set forth on the signature page in Part
IVof this Report on Form 10-K for the year ended September
30, 1998).
27.1 Financial Data Schedule.
- -------------------------
* 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.
*** Contracts with Management.
(B) REPORTS ON FORM 8-K.
During the quarter ended September 30, 1998, no Current Reports on Form
8-K were filed by the Company.
SUPPLEMENTAL INFORMATION
As of the date of filing of this report on Form 10-K no annual report or
proxy material has been sent to security holders. Such material will be
furnished to security holders and the Securities and Exchange Commission
subsequent to the filing of this report on Form 10-K.
87
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on
December 29, 1998.
BANKUNITED FINANCIAL CORPORATION
BY: /s/ ALFRED R. CAMNER
----------------------------
Alfred R. Camner
Chairman of the Board, and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Alfred R. Camner, Earline G. Ford and
Marc Jacobson and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
to this report on Form 10-K and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on December 29, 1998 on behalf of the Registrant by
the following persons and in the capacities indicated.
/s/ ALFRED R. CAMNER
- ------------------------------------- Chairman of the Board,
ALFRED R. CAMNER Chief Executive Officer,
and Director
(Principal Executive Officer)
/s/ MEHDI GHOMESHI
- ------------------------------------- President and Chief
MEHDI GHOMESHI Operating Officer and Director
/s/ LAWRENCE H. BLUM
- ------------------------------------- Vice Chairman of the Board
LAWRENCE H. BLUM and Director
/s/ EARLINE G. FORD
- ------------------------------------- Executive Vice President,
EARLINE G. FORD Treasurer and Director
/s/ MARC LIPSITZ
- ------------------------------------- Director and Corporate Secretary
MARC LIPSITZ
/s/ MARC D. JACOBSON
- ------------------------------------- Director
MARC D. JACOBSON
/s/ ALLEN M. BERNKRANT
- ------------------------------------- Director
ALLEN M. BERNKRANT
/s/ ANNE W. SOLLOWAY
- ------------------------------------- Director
ANNE W. SOLLOWAY
88
<PAGE>
/s/ NEIL MESSINGER
- ------------------------------------- Director
NEIL MESSINGER
/s/ BRUCE FRIESNER
- ------------------------------------- Director
BRUCE FRIESNER
/s/ DIANE DELELLA
- ------------------------------------- Vice President, Chief
DIANE DELELLA Financial Officer and Controller
89
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
4.7 Form of Letter Agreement between BankUnited and the holders of shares
of BankUnited's Noncumulative Convertible Preferred Stock, Series B.
4.9 The Advances, Specific Collateral Pledge and Security Agreement dated
March 30, 1998 between BankUnited, FSB and the Federal Home Loan Bank
of Atlanta.
4.91 Indenture dated November 4, 1998 between the Bank and the Bank of New
York to which the Federal Home Loan Bank of Atlanta has joined as a
consenting party (the "Indenture").
4.92 Form of the Bank's Senior Note (Fixed Rate) issuable pursuant to the
Indenture.
4.93 Form of the Bank's Senior Note (Floating Rate) issuable pursuant to the
Indenture.
4.94 The Letter of Credit Reimbursement Agreement dated November 14, 1998
between the Bank and the Federal Home Loan Bank of Atlanta.
10.5 1996 Incentive Compensation and Stock Award, as amended by approval of
the Company's stockholders on January 26, 1998.*
10.6 Form of Employment Agreement between BankUnited and Alfred R. Camner.
10.7 Form of Employment Agreement between the Bank and Alfred R. Camner.
10.8 Form of Employment Agreement between BankUnited, the Bank and Mehdi
Ghomeshi.
12.1 Statement regarding calculation of ratio of earnings to combined fixed
charges and preferred stock dividends.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule
- -----------------------
* Compensatory plan or arrangement.
EXHIBIT 4.7
SHAREHOLDER AGREEMENT
By this agreement (this "Agreement"), BankUnited Financial Corporation
(the "Company") and the holders (the "Holders") of the Company's Noncumulative
Convertible Preferred Stock, Series B (the "Series B Preferred Stock"), agree as
follows, effective as of October 1, 1997:
1. Notwithstanding the annual dividend rate of $0.7375 stated in
Section 2 of the Statement of Designation for the Series B
Preferred Stock (the "Statement of Designation"), Appendix C
to the Company's Articles of Incorporation, the Holders agree
that they shall accept, when, as, and if declared by the Board
of Directors and out of the assets of the Company which are by
law available for the payment of dividends, preferential cash
dividends payable quarterly on the last day of February, May,
August and November of each year (unless such day is a
non-business day, in which event on the next business day), at
the fixed annual rate of $0.55 per share and no more.
2. In consideration of this decrease in the annual dividend rate,
and notwithstanding the provisions of Section 4 of the
Statement of Designation, the Company agrees it shall not
redeem any of the shares of the Series B Preferred Stock prior
to October 1, 2007, unless such redemption is approved by the
holders of at least 50% of the outstanding shares of the
Series B Preferred Stock.
3. This Agreement shall not be deemed to modify or cancel any
other rights of the Holders, not expressly changed herein.
4. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to constitute an original, but
all of which together shall constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the Company and the Holders have executed this
Agreement, or have caused this Agreement to be executed by their duly authorized
representatives, as of the date first written above.
BANKUNITED FINANCIAL CORPORATION
By:-----------------------------------
Name: --------------------------------
Title: -------------------------------
HOLDERS
-------------------------------------
ALFRED R. CAMNER
-------------------------------------
LAWRENCE H. BLUM
-------------------------------------
ALLEN M. BERNKRANT
-------------------------------------
EARLINE G. FORD
-------------------------------------
MARC D. JACOBSON
-------------------------------------
CHARLES B. STUZIN
-------------------------------------
JAMES M. STUZIN, AS TRUSTEE
-------------------------------------
HARVEY MILLER
-------------------------------------
BARRY SHULMAN
EXHIBIT 4.9
FEDERAL HOME LOAN BANK OF ATLANTA
ADVANCES, SPECIFIC COLLATERAL PLEDGE AND SECURITY AGREEMENT
AGREEMENT, dated as of March 30, 1998, between BankUnited, FSB having its
principal place of business at 255 Alhambra Circle, Coral Cables, FL 33134
("Member") and the Federal Home Loan Bank of Atlanta, 1475 Peachtree Street, N.
E., Atlanta, Georgia 30309 ("Bank").
WHEREAS, the Member desires from time to time to participate in the Bank's
credit program(s) under the terms of this Agreement, and the Bank is authorized
to extend credit to the Member pursuant to the provisions of the Federal Home
Loan Bank Act, as now and hereafter amended (the "Act"), and the regulations and
guidelines of the Federal Housing Finance Board (the "Board") or any successor
entity now and hereafter in effect (collectively, the "Regulations"); and
WHEREAS, the Bank requires that advances by the Bank be secured pursuant
to this Agreement, and the Member agrees to provide such security as requested
by the Bank by the means set forth in this Agreement;
NOW THEREFORE, the Member and the Bank agree as follows:
ARTICLE 1: DEFINITIONS
SECTION 1.01 DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(A) "Advance" or "Advances" means any and all loans or other extensions of
credit, including all Commitments, heretofore, now or hereafter granted by
the Bank to, on benalf of, or for the account of, the Member.
(B) "Application" means a writing, signed by the Member, in such form or
forms as shall be specified by the Bank from time to time, by which the
Member requests, and which it executed by the Bank shall together with
this Agreement evidence the terms of, an Advance or a commitment for an
Advance.
(C) "Capital Stock" means all of the capital stock of the Bank held by the
Member, and all payments which have been or hereafter are made on account
of subscriptions to and all unpaid dividends on such capital stock.
(D) "Collateral" means all property, including the proceeds thereof,
heretofore assigned, transferred or pledged to the Bank by the Member as
collateral for Advances or other extensions of credit prior to the date
hereof, and all Capital Stock, First Mortgage Collateral, Government and
Agency Securities Collateral, other Collateral and Other Securities
Collateral, including the proceeds thereof, which is now or hereafter
pledged to the Bank pursuant to Section 3.01 hereof.
<PAGE>
(E) "Collateral Maintenance Level" means the aggregate dollar amount equal
to such percentage(s) as the Bank may specify from time to time of (1) the
outstanding amounts of all Advances, (2) with respect to each outstanding
Swap Transaction, the amount of which the Member is required to maintain
Collateral: and (3) any additional obligations and liabilities of the
Member to the Bank. The Bank may increase or decrease the Collateral
Maintenance Level at any Time.
(F) "Commitment" or "Commitments" means any and all agreements under wnich
the Bank is contractually obligated to make a loan to, or to make a future
payment on behalf or for the account of the Member (but excluding any
obligations that the Bank may now or hereafter have to honor items or
transfer orders under a depository or similar agreement between the Bank
and the Member), regardless of whether such obligation is contingent in
whole or in part, including, without limitation, letters of credit issued
for the account of the Member.
(G) "Confirmation of Advance" means a writing or machine readable
electronic transmission, in such form or forms as the Bank may generate
from time to time, by which the Bank agrees to and confirms the Member's
request for an Advance or a commitment for an Advance and which, together
with this Agreement, shall evidence the terms of such Advance or
commitment.
(H) "First Mortgage Collateral" means First Mortgage Documents (excluding
participation or other fractional interests therein) and all ancillary
security agreements, policies and certificates of insurance or guarantees,
evidences of recordation, applications, underwriting materials, surveys,
appraisals, approvals, permits, notices, opinions of counsel and loan
servicing data and all other electronically stored and written records or
materials relating to the loans evidenced or Secured by the First Mortgage
Documents.
(I) "First Mortgage Documents" mean mortgages and deeds of trust
(herein "mortgages") secured by a first lien on one-to-four unit single
family dwellings, and all notes, bonds or other instruments (herein
"mortgage notes") evidencing fully disbursed loans secured by such
mortgages and any endorsements or assignments thereof to the Member.
(J) "Government and Agency Securities Collateral" means mortgage-backed
securities (including participation certificates) issued by the Federal
Home Loan Mortgage Corporation or the Federal National Mortgage
Association, obligations guaranteed by the Government National Mortgage
Association, and obligations issued or guaranteed by the United States or
an agency thereof.
(K) "Indebtedness" means all indebtedness, now or hereafter outstanding,
of the Member to the Bank, including, without limitation, all Advances and
all other obligations to pay and liabilities of the Member to the Bank.
(L) "Lendable Collateral Value" means an amount equal to such percentage
as the Bank shall from time to time in its sole discretion, ascribe to the
market value or unpaid principal balances of items of Qualifying
Collateral.
2
<PAGE>
(M) "Other Collateral" means items of property other than Capital Stock
First Mortgage Collateral, Government and Agency Securities Collateral and
Other Securities Collateral which are offered as Collateral by the Member
to the Bank and are specifically accepted by the Bank as Collateral.
(N) "Other Mortgage Documents" mean mortgages secured by a first lien on
real property other than on a one-to-four unit single family dwelling and
all mortgage notes secured by such mortgages and any endorsements or
assignments thereof to the Member.
(O) "Other Securities Collateral" means securities (other than Government
and Agency Securities Collateral) representing unsubordinated interests
in, or collateralized by first lien security interests in, both the
interest and principal payments on first lien residential mortgages.
(P) "Qualifying Collateral" means Collateral other than Capital Stock
which: (i) is eligible as collateral that can be used to support the
origination of Advances under the terms and conditions of the Act and the
Regulations and satisfies such other requirements as may be established by
the Bank; (ii) is owned by the Member free and clear of any liens,
encumbrances or other interests other than the assignment to the Bank
hereunder; (iii) has not been in default within the most recent 12-month
period, excepting only in the case of First Mortgage Collateral payments
which are not past due except as permitted by the Bank's Credit Policy;
(iv) in the case of First Mortgage Collateral, relates to residential real
property on which is located a one-to-four unit single family dwelling
trial is covered by fire and hazard insurance in an amount at least
sufficient to discharge the mortgage loan in full in case of loss and as
to which all real estate taxes are current; (v) has not been classified as
substandard, doubtful, or loss by the Member's regulatory authority or its
management; (vi) in the case of First Mortgage Collateral and Other
Collateral does not secure an indebtedness on which any director, officer,
employee, attorney or agent of the Member or any Federal Home Loan Bank Is
personally liable unless the acceptance of such Collateral by the Bank nas
been specifically approved by formal resolution of the Board; and (vii) in
the case of Other Collateral, Government and Agency Securities Collateral
and Other Securities Collateral has been offered by the Member to the Bank
and specifically accepted by the Bank as Qualifying Collateral.
(Q) "Swap Transaction" means an interest rate swap, interest rate cap,
floor or collar, currency exchange transaction or similar transaction
entered into between the Bank and the Member.
ARTICLE II: ADVANCES AGREEMENT
SECTION 2.01 ADVANCE DOCUMENTATION. The Member may apply for Advances and
commitments for Advances by completing and submitting an Application to the Bank
or by telephonic or other unsigned communication. The Bank may suspend the use
of telephonic applications at any time. The terms of each Advance or commitment
shall be conclusively established by this Agreement and by either (i) the
Member's Application when such Application is executed by the Bank without any
change, or (ii) in the case of an Application received, completed or modified by
the Bank pursuant to a telephonic or other
3
<PAGE>
unsigned communication from the Member ("telephonic application"), by a
Confirmation of Advance generated by the Bank. The Member shall be estopped from
asserting any claim or defense with respect to the terms applicable to an
Advance or commitment entered into pursuant to a telephonic application unless,
within two (2) business days of receipt of the Bank's Confirmation of Advance,
the Member delivers to the Bank a written notice specifying the disputed term(s)
or condition(s) of the Advance or commitment. Within three (3) business days of
the date of the Member's receipt of the Bank's Confirmation of Advance, the
Member shall prepare, sign and submit to the Bank a completed Application
conforming to such Confirmation of Advance. Upon the request of the Bank, the
Member shall sign and deliver to the Bank a promissory note or notes in such
form as the Bank may reasonably require evidencing any Advance. Unless otherwise
agreed to by the Bank in writing, each Advance shall be made by crediting the
Member's demand deposit account(s) with the Bank.
SECTION 2.02 REPAYMENT OF ADVANCES. The Member agrees to repay each Advance in
accordance with this Agreement and the terms and conditions of the Application
or Confirmation of Advance evidencing such Advance. Interest shall be paid on
each Advance at the times specified by the Bank in writing and shall be charged
for each day that an Advance is outstanding at the rate applicable to the
Advance. The Member shall pay to the Bank, immediately and without demand,
interest on any past due principal of and interest on any Advance at an interest
rate which is the greater of (1) the rate applicable to such Advance plus one
percent (1%) or (ii) The rate in effect and being charged by the Bank from time
to time on overdrafts on demand deposit accounts of its members, but in no event
more than any applicable limit set by the Regulations. The Member shall ensure
that, on any day on which any payment is due to the Bank with respect to
Advances or other indebtedness, the Member's demand deposit account(s) with the
Bank has an available balance in an amount at least equal to the amounts then
due and payable to the Bank, and the Member hereby authorizes the Bank to debit
the Member's demand deposit account(s) with the Bank for all amounts due and
payable with respect to any Advance and for all other amounts due and payable
hereunder. In the event that the available balance in the Member's demand
deposit account(s) is insufficient to pay such due and payable amounts, the Bank
may, without notice to or request from the Member, apply any other deposits,
credits, or monies of the Member then in the possession of the Bank to the
payment of amounts due and payable. All payments with respect to Advances shall
be applied first to any fees or charges applicable thereto and to interest due
thereon, in such order as the Bank may determine, and then to any principal
amount thereof that is then due and payable.
SECTION 2.03 RIGHT OF BANK TO MAKE ADVANCES WITH RESPECT TO OUTSTANDING
COMMITMENTS. In the event that there are one or more outstanding Commitments at
the time of an Event of Default under Section 4.01 hereof, the Bank may at its
option, and without notice to or request from the Member, make an Advance by
crediting a special account of the Member with the Bank in an amount equal to
the outstanding Commitments. Amounts credited to such special account shall be
utilized by the Bank for the purpose of satisfying the Bank=s obligations under
such Commitments. When all such obligations have expired or have been satisfied,
the Bank shall disburse the balance, if any, in such special account first to
the satisfaction of any amounts then due and owing by the Member to the Bank and
then to the Member or its successors in interest. Advances made pursuant to this
Section 2.03 shall be payable on demand and shall bear interest from the date
the same shall be made until paid at the rate in effect and being charged by the
Bank from time to time on overdrafts on demand deposit accounts of its members,
but in no event more than any applicable limit set by the Regulations
4
<PAGE>
SECTION 2.04 AMORTIZATION OF ADVANCES. In the event that the Bank determines
that the creditworthiness of the Member, as determined from time to time by the
Bank, does not meet the requirements of the Bank, the Bank may, without
limitation of the Bank=s rights upon the occurrence of an Event of Default
hereunder, require amortization by means of monthly payments of principal on all
or part of the Member's Advances. The Member agrees to begin making such monthly
amortization payments, upon thirty (30) days written notice from the Bank, in
such monthly amounts as the Bank shall specify in writing. No monthly payment
shall exceed ten percent (10%) of the original principal balance of the Advance
being amortized. Unless otherwise specified by the Bank in writing to the
Member, such monthly amortizing payments shall not extend or modify its maturity
date or other scheduled payment dates applicable to the Advance being amortized.
ARTICLE III: SECURITY AGREEMENT
SECTION 3.01 CREATION OF SECURITY INTEREST. As security for all Indebtedness,
the Member hereby assigns, transfers, and pledges to the Bank, and grants to the
Bank a security interest in: (i) all of the Capital Stock and (ii) all of the
First Mortgage Collateral, Government and Agency Securities Collateral, Other
Collateral, and Other Securities Collateral now or hereafter owned by the
Member, and all proceeds thereof, which is specified pursuant to Section 3.04 or
delivered pursuant to Section 3.05. Without limitation of the foregoing, all
property heretofore assigned, transferred or pledged by the Member to the Bank
as Collateral securing Indebtedness and other obligations of the Member prior to
the date hereof is hereby assigned, transferred and pledged to the Bank as
Collateral hereunder.
SECTION 3.02 MEMBER'S REPRESENTATION AND WARRANTIES CONCERNING COLLATERAL. The
Member represents and warrants to the Bank, as of the date hereof and the date
of each Advance hereunder, as follows:
(A) The Member owns and has marketable title to the Collateral and has the
right and authority to grant a security interest in the Collateral and to
subject all of the Collateral to this Agreement;
(B) The information given from lime to time by the Member as to each item
of Collateral is true, accurate and complete in all material respects;
(C) All the Collateral meets the standards and requirements with respect
thereto from time to time established by the Act, the Regulations and the
Bank;
(D) The lien of the First Mortgage Collateral and Other Collateral on the
real property securing the same is a perfected lien under applicable law;
(E) The Member has not conveyed or otherwise created, and there does not
otherwise exist, any participation interest or other direct indirect,
legal. or beneficial interest in any Collateral on the part of anyone
other than the Bank and the Member;
5
<PAGE>
(F) Except as may be approved in writing by the Bank, no account holder or
other obligor owing any obligation to the Member with respect to any item
of First Mortgage Collateral or Other Collateral has or will have any
defenses, offsetting claims, or other rights affecting the right of the
Member or the Bank to enforce such mortgage, mortgage note or promissory
obligation, and no defaults (or conditions that, with the passage of time
or the giving of notice or both, would constitute a default) exist under
any such writings; and
(G) No part of any real property or interest in real property that is, or
is the subject of mortgages, included in the Qualifying Collateral
contains or is subject to the effects of toxic or hazardous materials or
other hazardous substances (including those defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended,
42 U.S.C. /section/9601, el seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. /section/1801 et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. /section/6901 et seq.; and in the regulations
adopted and publications promulgated pursuant to said laws) the presence
of which could subject the Bank to any liability under applicable state or
Federal law or local ordinance either at any time that such property is
placed to the Bank or upon the enforcement by the Bank of its security
interest therein. The Member hereby agrees to indemnify and hold the Bank
harmless against all costs, claims, expenses, damages, and liabilities
resuming in any way from the presence or effects of any such toxic or
hazardous substances or materials in, on, or under any real property or
interest in real property that is subject to or included in the
Collateral.
SECTION 3.03 COLLATERAL MAINTENANCE REQUIREMENT.
(A) The Member shall at all times maintain as Collateral an amount of
Qualifying Collateral which has a Lendable Collateral Value that is at
least equal to the then current required Collateral Maintenance Level. In
addition, the Member agrees to maintain such additional amounts of
Collateral (which may be Collateral that is not Qualifying Collateral) as
may be required by the Bank in order to protect its security position with
respect to outstanding indebtedness. The Member shall not assign, pledge,
transfer, create any security interest in, sell, or otherwise dispose of
any Collateral without the express written consent of the Bank.
(B) It any Collateral that was Qualifying Collateral ceases to be
Qualifying Collateral, the Member shall promptly notify the Bank in
writing of that fact and, if so requested by the Bank, of the reason that
the Collateral has ceased to be Qualifying Collateral. The Member shall
promptly specify, or deliver, as the case may be, other Qualifying
Collateral having at least the same Lendable Collateral Value as the
Collateral so requested to be withdrawn.
(C) The Bank may review the form and sufficiency of all documents
pertaining to the Collateral. Such documents must be satisfactory to the
Bank and, if not, such Collateral may not be acceptable as Qualifying
Collateral or may have a Lendable Collateral Value applied thereto that is
less than the Lendable Collateral Value otherwise applicable under the
Bank's Credit Policy, as the Bank may specify. The Bank may require that
the Member make any or all documents pertaining to the Collateral
available to the Bank for its inspection and approval.
6
<PAGE>
SECTION 3.04 SPECIFICATION AND IDENTIFICATION OF COLLATERAL.
(A) Upon execution of this Agreement, the Member shall deliver to the Bank
a status report and accompanying securities, all in the form(s) prescribed
by the Bank, specifying and describing Qualifying Collateral in an amount
sufficient to satisfy the requirements of Section 3.03(A) hereof.
(B) Specified Collateral shall be held by the Member in trust for the
benefit of, and subject to the direction and control of the Bank, and will
be physically safeguarded by the Member with at least the same degree of
care as the Member uses in physically safeguarding its other property.
Without limitation of the foregoing, the Member shall take all action
necessary or desirable to protect and preserve the Collateral and the
Bank's interest therein, including without limitation the maintaining of
insurance on property securing Mortgages constituting Collateral (such
policies and certificates of insurance or guaranty relating to such
mortgages are herein called Ainsurance"), the collection of payments under
all mortgages and under all insurance, and otherwise assuring that all
mortgages are serviced in accordance with the standards of a reasonable
and prudent mortgagee.
(C) The Member shall hold each set of First mortgage Documents and all
Other mortgage Documents which are a part of such specified Collateral in
a separate file folder with each file folder clearly labeled with the loan
identification number and the name of the borrower(s). Each such file
folder shall be clearly marked or stamped with the statement: AThe
Mortgage/Deed of Trust and Note Relating to This Loan Have Been Assigned
To the Federal Home Loan Bank of Atlanta," or such other statement that
may be approved by the Bank from time to time. If so requested by the
Bank, in writing, the Member shall physically segregate First Mortgage
Documents and Other Mortgage Documents which are a part of such specified
Collateral from all other property of the Member in a manner satisfactory
to the Bank.
SECTION 3.05 DELIVERY OF COLLATERAL.
(A) Upon the Bank's written or oral request, or promptly at any time that
the Member becomes subject to any mandatory collateral delivery
requirements that may be established in writing by the Bank, and until
such time as may be agreed upon by the Bank in writing, the Member shall
deliver to the Bank, or to a custodian designated by the Bank, such
Qualifying Collateral as may be necessary so that the Lendable Collateral
Value of Qualifying Collateral held by the Bank, or such custodian, meets
or exceeds the Collateral Maintenance Level at all times. The Member shall
also deliver to the Bank, or to a custodian designated by the Bank,
additional Collateral (which may be Collateral that is not Qualifying
Collateral) in such amount as may be required by the Bank. Collateral
delivered to the Bank, shall be endorsed or assigned, as appropriate, in
recordable form by the Member to the Bank, as specified by the Bank.
Unless otherwise indicated by the Bank, such endorsements or assignments
may be in blanket form and, in the case of First Mortgage Documents and
Other Mortgage Documents, there shall be separate endorsements and
assignments for each county or recording district in which the real
property covered by such mortgage loans is located. With respect to First
Mortgage Collateral and mortgage loans which are Other Collateral that are
delivered hereunder, the Member need only
7
<PAGE>
deliver the First Mortgage Documents and Other Mortgage Documents together
with recordable assignments of the mortgages, unless otherwise directed by
the Bank. Concurrently with the initial delivery of Collateral, the Member
shall deliver to the Bank a status report and accompanying schedules, all
in the form(s) prescribed by the Bank. specifying and describing the
Collateral need by the Bank or its custodian and identifying those items
of Collateral that are Qualifying Collateral.
(B) With respect to any uncertificated securities pledged to the Bank as
Collateral hereunder, the delivery requirements contained in this
Agreement shall be satisfied by the transfer of a security interest in
such securities to the Bank, such transfer to be effected in such manner
and to be evidenced by such documents as shall be reasonably specified by
the Bank.
(C) The Member agrees to pay to the Bank such reasonable fees and charges
as may be assessed by the Bank to cover the Bank's overhead and other
costs relating to the receipt, holding, redelivery and reassignment of
Collateral and to reimburse the Bank upon request for all recording fees
and other reasonable expenses, disbursements and advances incurred or made
by the Bank in connection therewith (including the reasonable compensation
and the expenses and disbursements of any custodian that may be appointed
by the Bank hereunder, and the agents and legal counsel of the Bank and of
such custodian).
(D) The Member shall, upon request of the Bank, immediately take such
other actions as the Bank shall deem necessary or appropriate to perfect
the Bank's security interest in the Collateral or otherwise to obtain.
preserve, protect, enforce or collect the Collateral.
SECTION 3.06 WITHDRAWAL OF COLLATERAL. Upon receipt by the Bank of writings in
the form specified by the Bank constituting; (i) a request from the Member for
the withdrawal of Collateral which has been specified or identified pursuant to
Section 3.04 hereof, delivered pursuant to Section 3 05 hereof, or as to which
the Bank has otherwise perfected its security interest; (ii) a detailed listing
of the Collateral to be withdrawn; and (iii) a certificate of a responsible
officer of the Member certifying as to the Qualifying Collateral that is
specified and identified by the Member, or held by the Bank, as appropriate,
after such withdrawal, and upon the Bank's determination that the Lendable
Collateral value of the remaining Qualifying Collateral is not less than the
current required Collateral Maintenance Level, the Bank shall promptly
redeliver, release or reassign to the Member the Collateral identified in the
Member's listing of Collateral to be withdrawn, provided that the Collateral
requested to be withdrawn is not required by the Bank to be maintained as
additional Collateral. Notwithstanding anything to the contrary herein
contained, while an Event of Default hereunder shall have occurred and be
continuing, or at any time trial the Bank reasonably and in good faith seems
itself insecure, the Member may not obtain any such withdrawal.
SECTION 3.07 REPORTS: COLLATERAL AUDITS: ACCESS.
(A) The Member shall furnish to the Bank annually, and at such other times
as the Bank may request, an audit report with respect to the Member's
Collateral, prepared by the Member's external auditor and in form or
substance acceptable to the Bank, and such financial reports and
8
<PAGE>
Other information relating to The Member's financial condition as the Bank
may reasonably request.
(B) The Member shall furnish to the Bank at such times as line Bank may
request, or as necessary to satisfy the requirements of the Bank, a status
report with respect to the Members Collateral prepared by the Member in
form and substance acceptable to the Bank and as of a date within two
weeks of the report due date. The status report shall be a written report
covering such matters regarding the Collateral as the Bank may require,
including listings of mortgages and unpaid principal balances thereof and
certifications concerning the status of payments on mortgages and of Taxes
and insurance on property securing mortgages.
(C) If so requested by the Bank, the Member shall promptly report to the
Bank any event which reduces the principal balance of any mortgage or
security or other item of Collateral by five percent (5%) or more, whether
by prepayment, foreclosure sale, insurance or guaranty payment or
otherwise.
(D) The Member shall give the Bank access at all reasonable times to
Collateral in the Members possession and to the Member's books and records
of account relating to such Collateral, for the purpose of the Bank's
examining, verifying or reconciling the Collateral and the Member's
reports to the Bank thereon.
(E) If the Member becomes aware or has reason to believe That the Lendable
Collateral Value of the Member's Qualifying Collateral has fallen below
the Collateral Maintenance Level, or that a contingency exists which with
the lapse of time could result in The Member failing to meet the
Collateral Maintenance Level, the Member shall immediately notify the
Bank.
(F) All Collateral and any matters relating thereto shall be subject to
audit and verification by or on behalf of the Bank. Such audits and
verifications may occur without notice during the Member's normal business
hours or upon reasonable notice at such other times as the Bank may
reasonably request. The Member shall provide access to, and shall make
adequate working facilities available to, line representatives or agents
of the Bank for purposes of such audits. Reasonable fees and charges may
be assessed to the Member by the Bank to cover overhead and other costs
relating to such audit and verification.
(G) Notwithstanding anything to the contrary, the Member shall De solely
responsible for the accuracy and adequacy of all information and data in
each audit or status report (Or other writing specifying and describing
any Collateral) submitted to the Bank, regardless of the form in which
submitted. The Bank shall have no duty to make any independent examination
of or calculation with respect to the information submitted in an audit or
status report (or in any written schedule that may be Submitted by the
Member) and, without limiting the generality of the foregoing, the Bank
makes no representation or warranty as to line validity, accuracy or
completeness of any information contained in any written records of the
Bank concerning or of any response to, such audit or status report.
9
<PAGE>
SECTION 3.08 ADDITIONAL DOCUMENTATION. The Member shall make execute. record and
deliver to the Bank such financing statements, notices, assignments, listings,
powers, and other documents with respect to the Collateral and the Bank's
security interest therein and in such form as the Bank may reasonably require.
SECTION 3.09 BANK'S RESPONSIBILITIES AS TO COLLATERAL. The Bank's duty as to the
Collateral shall be Solely to use reasonable care in the custody and
preservation of the Collateral in ITS possession. which shall not include any
steps necessary to preserve rights against prior parties nor the duty to send
notices, perform services or take any action in connection with the management
at the Collateral. The Bank shall not nave any responsibility or liability for
the form, sufficiency, correctness, genuineness or legal effect of any
instrument or document constituting a pan of the Collateral, or any signature
thereon or the description or misdescription, or value of property represented,
or purported to be represented, by any such, document or instrument. The Member
agrees that any and all Collateral may be removed by the Bank from The state or
location where situated and may be subsequently dealt with by the Bank as
provided in this Agreement.
SECTION 3.10 BANK'S RIGHTS AS TO COLLATERAL: POWER OF ATTORNEY. At any time or
times, at the expense of the Member, the Bank may in its discretion, before or
after the occurrence of an Event of Default as defined in Section 4.01 hereof,
in its own name or in the name of its nominee or of the Member, do any or all
things and take any and all actions that are pertinent to the protection of the
Bank's interest hereunder and are lawful under the laws of the State of Georgia,
including, out not limited to, the following:
(A) Terminate any consent given hereunder;
(B) Notify obligors on any Collateral to make payments thereon directly to
the Bank;
(C) Endorse any Collateral in the Members name;
(D) Enter into any extension, compromise, settlement, or other agreement
relating to or affecting any Collateral;
(E) Take any action The Member is required to take or which is otherwise
reasonably necessary to (i) sign and record a financing statement or
otherwise perfect a security interest in any or all of the Collateral, or
(ii) to obtain, preserve, protect, enforce or collect the Collateral;
(F) Take control of any funds or other proceeds generated by the
Collateral and use the same to reduce Indebtedness as it becomes due; and
(G) Cause The Collateral to be transferred to its name or the name of its
nominee.
The Member hereby appoints the Bank as its True and lawful attorney, for and on
behalf of the Member and in its name, place and stead, to prepare, execute and
record endorsements and assignments to the Bank of all or any item of
Collateral, giving or granting to the Bank, as such attorney, full power and
authority to co or perform every lawful act necessary or proper in connection
therewith as fully as the
10
<PAGE>
Member might or could do. The Member hereby ratifies and confirms all that the
Bank shall lawfully do or cause to be done by virtue of this special power of
anorney. This special power of attorney is granted for a period commencing on
the date hereof and continuing until the discharge of all indebtedness and all
obligations of theMember hereunder regardless of any default by the Member, is
coupled wiln an interest, and is irrevocable for the period granted.
SECTION 3.11 SUBORDINATION OF OTHER LOANS TO COLLATERAL. The Member hereby
agrees that all mortgage notes which are part of first Mortgage Collateral or
Other Collateral (Apledged notes") shall have priority in right and remedy over
any other loans, whenever made and, however evidenced, which are also secured by
the mortgages or security agreements securing the pledged notes. The pledged
notes shall be satisfied out or the property (or proceeds thereof) covered by
such mortgages or security agreements before any payment is made on the loans
which are not part or the Collateral. To this end, the Member hereby
subordinates the lien of such mortgages and security agreements with respect to
such other loans to the lien of such mortgages and security agreements with
respect to the pledged notes. The Member further agrees to retain possession of
all notes or other instruments evidencing such other loans and not to pledge,
assign, or transfer the same, except insofar as such other loans may be pledged
to the Bank as part of the Collateral.
ARTICLE IV: DEFAULT; REMEDIES
SECTION 4.01 EVENTS OF DEFAULT: ACCELERATION. Upon the occurrence of any of the
following events or conditions of defaults (AEvent of Default"), the Bank may at
its option, by a notice to the Member, declare all or any part(s) of the
indebtedness and accrued interest thereon, including any prepayment fees or
charges which are applicable to any Advance, to be immediately due and payable
without presentment, demand, protest, or any further notice:
(A) Failure of the Member to pay when due any interest on or principal of
any Advance; or
(B) Failure of the Member to perform any promise or obligation or to
satisfy any condition or liability contained herein, in any Application,
in any Confirmation of Advance or in any other agreement to which the
Member and the Bank are parties; or
(C) Evidence coming to the attention of the Bank that any representations,
statements, or warranties made or furnished in any manner to the Bank by
or on behalf of the Member in connection with any Advance or Swap
Transaction, any specification or description of Qualifying Collateral was
false in any material respect when made or furnished; or
(D) Failure of the Member to maintain adequate (Qualifying Collateral free
of any encumbrances or claims as required herein; or
(E) The issuance of any tax, levy, seizure, attachment, garnishement, levy
of execution, or other process with respect to the Collateral; or
11
<PAGE>
(F) Any suspension of payment by the Member to any creditor of sums due
tor the occurrence of any event which results in another creditor having
the right to accelerate the maturity of any indebtedness of the Member
under any security agreement, indenture, loan agreement, or comparable
undertaking; or
(G) Appointment of a conservator, receiver, or similar official for the
Member or any subsidiary of the Member or the Member's property, entry of
a judgment or decree adjudicating the Member or any subsidiary of the
Member insolvent or bankrupt or an assignment by the Member or any
subsidiary of the Member for benefit of creditors; or
(H) Sale by the Member of all or a material part of the Member=s assets or
the taking of any other action by the Member to liquidate or dissolve; or
(I) Termination for any reason of the Member's membership in the Bank, or
the Member's ceasing to be a type of entity that is eligible under the Act
to become a member of the Bank; or
(J) Merger, consolidation or other combination of the Member with an
entity which is not a member of te Bank if the nonmember entity is the
surviving entity; or
(K) With respect to Advances made pursuant to Section 11(g)(4) of the Act,
if the creditor liabilities of the Member, excepting liabilities to the
Bank, are increased in any manner to an amount exceeding five percent (5%)
of the Member's net assets; or
(L) The Bank reasonably and in good faith determines that a material
adverse change has occurred in the financial condition of the Member from
trial disclosed at the time of the making of any Advance or from the
condition of the Member as theretofore most recently discloseed to the
Bank.
SECTION 4.02 REMEDIES. Upon the occurrence of any Event of Default, the Bank
shall have all of the rights and remedies provided by applicable law which shall
include, but not be limited to, all of the remedies of a secured party under the
Uniform Commercial Code as in effect in the State of Georgia. In addition, the
Bank may take immediate possession of any of the Collateral or any part thereof
wherever the same may be found. The Bank may sell, assign and deliver the
Collateral or any part thereof at public or private sale for such price as line
Bank deems appropriate without any liability for any loss due to decrease in the
market value of the Collateral during the period held. The Bank shall have the
right to purchase all or pan of the Collateral at such sale. If the Collateral
includes insurance or securities which will be redeemed by the issuer upon
surrender, or any accounts or deposits in the possession of the Bank, the Bank
may realize upon such Collateral without notice to the Member. If any
notification of intended disposition of any of the Collateral is required by
applicable law, such notification shall be deemed reasonable and property given
if given as provided by applicable law or in accordance with Section 5.06 hereof
at least 5 days before any such disposition. The proceeds of any sale shall be
applied in the order that the Bank, In its sole discretion, may choose. The
Member agrees to pay all the costs and expenses of the Bank in the collateral of
the Indebtedness and enforcement of the Banks rights and remedies in case of
default, including, without limitation, reasonable attorneys' fees. The Bank
shall, to the extent required by law, apply any surplus, after (i) payment of
the Indebtedness,
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<PAGE>
(ii) provision for repayment to the Bank of any amounts to be paid or advanced
under Outstanding Commitments, and (iii) payment of all costs of collection and
enforcement, to the claims of person(s) legally entitled thereto, with any
remaining surplus paid to the Member. The Member shall be liable to the Bank for
any deficiency remaining.
SECTION 4.03 PAYMENT OF PREPAYMENT CHARGES. Any prepayment fees or charges
applicable to an Advance shall be payable at the time of any voluntary or
involuntary payment of all or part of the principal of such Advance prior to the
originally scheduled maturity thereof, including without limitation payments
treat are made as a part of a liquidation of the Member or that become due by
operation of law or as a result of an acceleration pursuant to Section 4.01
hereof, whether such payment is made by the Member, by a conservator, receiver,
liquidator or trustee of or for theMember, or by any successor to or any
assignee of the Member.
ARTICLE V: MISCELLANEOUS
SECTION 5.01 GENERAL REPRESENTATIONS AND WARRANTIES BY THE MEMBER. The Member
hereby represents and warrants that, as of the date hereof and the date of each
Advance hereunder:
(A) The Member is not, and neither the execution of nor the performance of
any of the transactions or obligations of the Member under inis Agreement
shall, cause the Member to be; (i) in violation of its charter or articles
of incorporation, Bylaws the Act or the Regulations, any other law or
administrative regulation, or any court decree; or (ii) in default under
or in breach of any material indenture, contract or other instrument or
agreement to which the Member is a party or by which it or any of its
property is bound.
(B) The Member has full corporate power and authority and has received all
corporate and governmental authorizations and approvals (including without
limitation those required under the Act and the Regulations) as may be
required to enter into and perform its obligations under this Agreement to
borrow each Advance and to obtain each commitment for an Advance.
(C) The information given by the Member in any document provided, or in
any oral statement made, in connection with an application or request for
an Advance or commitment for an Advance, is true, accurate and complete in
all material respects.
SECTION 5.02 ASSIGNMENT. The Bank may assign or negotiate to any other Federal
Home Loan Bank or to any other person or entiry, with or without recourse, any
indebtedness of the Member or participations therein, and Bank may assign or
transfer all or any part of Bank's right, title, and interest in and to this
Agreement and may assign and deliver the whole or any pan of the Collateral to
the transferee, which shall succeed to all the powers and rights of the Bank in
respect hereof, and the Bank shall thereafter be forever relieved and fully
discharged from any liability or responsibility with respect to the transferred
Collateral. The Member may not assign or transfer any of its rights or
obligations hereunder without the express prior written consent of the Bank.
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<PAGE>
SECTION 5.03 DISCRETION OF THE BANK TO GRANT OR DENY ADVANCES. Nothing contained
herein or in any documents describing or setting forth the Bank's Credit Program
and credit policies shall be construed as an agreement or commitment on the part
of the Bank to grant Advances or extend commitments for Advances hereunder, the
right and power of the Bank in its discretion to either grant or deny any
Advance or commitment for an Advance requested hereunder being expressly
reserved. The determination by the Bank of Lendable Collateral Value shall not
constitute a determination by the Bank that the Member may obtain Advances or
commitments for Advances in amounts up to such Lendable Collateral Value.
SECTION 5.04 AMENDMENT: WAIVERS. No modification, amendment or waiver of any
provision of this Agreement or consent to any departure therefrom shall be
effective unless in a writing executed by a responsible officer of the party
against whom such change is asserted and shall be effective only in the specific
instance and for the purpose of which given. No notice to or demand on the
Member in any case shall entitle the Member to any other or further notice or
demand in the same, or similar or other circumstances. Any forbearance, failure
or delay by the Bank in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver thereof, and any single or partial exercise by the
Bank of any right, power or remedy hereunder shall not preclude the further
exercise thereof. Every right, power and remedy of the Bank shall continue in
full force and effect until specifically waived by the Bank.
SECTION 5.05 JURISDICTION: LEGAL FEES. In any action or proceeding brought by
the Bank or the Member in order to enforce any right or remedy under this
Agreement, the parties hereby consent to, and agree that they will submit to,
the jurisdiction of the United States District Court for the Northern District
of Georgia or, if such action or proceeding may not be brought in Federal court,
the jurisdiction of the courts of the State of Georgia located in the City of
Atlanta. The Member agrees trial if any action or proceeding is brought by the
Member seeking to obtain any legal or equitable relief against the Bank under or
arising out of this Agreement or any transaction contemplated hereby and such
relief is not granted by the final decision, after any and all appeals, of a
court of competent jurisdiction, the Member will pay all attorneys' fees and
other costs incurred by the Bank in connection therewith.
SECTION 5.06 NOTICES. Except as provided in the last sentence of this Section
any written notice, advice, request, consent or direction given, made or
withdrawn pursuant to this Agreement shall be either in writing or transmitted
electronically and reproduces mechanically by the addressee and small be given
by first class mail, postage prepaid, by telecopy or other facsimile
transmission or by private courier or delivery service. All non-oral notices
shall be deemed given when actually received at the principal office of the Bank
or the Member, as appropriate. All notices shall be designated to the attention
of an office or section of the Bank or of the Member it the Bank or the Member
has made a request for the notice to be so addressed. Any notice by the Bank to
the Member pursuant to Sections 3.04 or 3.05 hereof may be oral and shall be
deemed to have been duly given to and received by the Member at the time of the
oral communication.
SECTION 5.07 SIGNATURES OF MEMBER. For purposes of this Agreement, documents
shall be deemed signed by the Member when a signature of an authorized signatory
or an authorized facsimile thereof appears on the document. The Bank may rely on
any signature or facsimile thereof which reasonably appears to the Bank to be
the signature of an authorized person, including signatures appearing on
documents transmitted electronically to and reproduced mechanically at the Bank.
The Secretary or an
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<PAGE>
Assistant Secretary of the Member shall from time to time certify to the Bank on
forms provided by the Bank the names and specimen signatures of the persons
authorized to apply on behalf of the Member to the Bank for Advances and
commitments tor Advances and otherwise act for and on behalf of the Member in
accordance with this Agreement. Such certifications are incorporated herein and
made a part of this Agreement and shall continue in effect until expressly
revoked by the Member notwithstanding that subsequent certifications may
authorize additional persons to act for and on behalf of the Member.
SECTION 5.08 APPLICABLE LAW: SEVERABILITY. In addition to the terms and
conditions specifically set forth herein and in any Application or Confirmation
of Advance between the Bank and the Member, this Agreement and all Advances and
all commitments for Advances granted hereunder shall be governed by me statutory
and common law of the United States and, io the extent Federal law incorporates
or defers to state law, the laws (exclusive of the choice of law provisions) of
the State of Georgia. Notwithstanding the foregoing, the Uniform Commercial Code
as in effect in the Staie of Georgia shall be deemed applicable to this
Agreement and to any Advance thereunder and shall govern the attachment and
perfection of any security interest granted hereunder. In the event that any
portion of this Agreement conflicts with applicable law, such conflict shall not
affect other provisions of this Agreement which can be given effect without the
conflicting provision, and to this end the provisions of this Agreement are
declared to be severable.
SECTION 5.09 SUCCESSORS AND ASSIGNS. This Agreement shall beginning upon and
inure to the benefit of the successors and permitted assigns of the Member and
the Bank.
SECTION 5.10 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto relating to the subject matter hereof
and supersedes all prior agreements between such parties which relate to such
subject matter. Notwithstanding the above, rates of interest, repayment
schedules, and fees ana other charges applicable to Advances and commitments for
Advances made by the Bank to the Member prior to the execution of this Agreement
shall continue to be governed exclusively by the terms of the prior agreements
pursuant to which such Advances and commitments were made, provided, however,
that Section 4.03 hereof shall apply to all Advances.
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<PAGE>
IN WITNESS WHEREOF, Member and Bank have caused this Agreement to be
signed in their names by their duly authorized officers as of the date first
above mentioned.
BankUnited, FSB
(Full Corporate Name of Member)
By: /s/ JAMES A. DOUGHERTY JAMES A. DOUGHERTY, EVP & COO
-------------------------------- ------------------------------------
(Typed Name and Title of Signer)
By:/s/ SAMUEL A. MILNE SAMUEL A. MILNE, EVP & CFO
-------------------------------- ------------------------------------
(Typed Name and Title of Signer)
(MEMBER'S CORPORATE SEAL)
FEDERAL HOME LOAN BANK OF ATLANTA
SENIOR VICE PRESIDENT AND CHIEF
By: CAROL JACKSON CREDIT OFFICER
-------------------------------- ------------------------------------
(Authorized Officer) (Title)
VICE PRESIDENT AND DIRECTOR
By: WILLIAM C. BRIN OF COLLATERAL SERVICES
-------------------------------- ------------------------------------
(Authorized Officer) (Title)
16
<PAGE>
FEDERAL HOME LOAN BANK OF ATLANTA
MEMBER ACKNOWLEDGMENT
AND NOTARIZATION
STATE OF Florida}
ss:
County of Miami-Dade}
On this 31st day of March, 1998, before me personally came
James A. Dougherty and Samuel A. Milne, to me known, who,
being by me duty sworn, did depose and state that they are the Chief Operating
Officer and Chief Financial Officer of said Member; the Member
described in and which executed the above instrument; that they know the seal of
said Member; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors or other governing
body of said Member; and that they signed their names thereto be order of the
Board of Directors or other governing body of said Member and that said James A.
Dougherty and Samuel A. Milne acknowledged the execution of said
instrument to be the voluntary act and deed of said Member.
/s/ PILAR BARROS
- -----------------------------------------------
Notary Public Signature
Notary Public in and
for the State of: Florida
(NOTARY PUBLIC'S
SEAL)
My commission expires: November 23, 2001
17
EXHIBIT 4.91
- -------------------------------------------------------------------------------
BANKUNITED, FSB
to
THE BANK OF NEW YORK
Trustee
-----------
INDENTURE
Dated as of November 4, 1998
-----------
Senior Notes
- -------------------------------------------------------------------------------
<PAGE>
INDENTURE, dated as of November 4, 1998, among BANKUNITED, FSB, a
federally chartered savings bank (hereinafter called the "Bank") having its
principal executive offices at 255 Alhambra Circle, Coral Gables, Florida 33134,
and The Bank of New York, 101 Barclay Street, New York, New York 10286
(hereinafter called the "Trustee"), and the FEDERAL HOME LOAN BANK OF ATLANTA
(hereinafter called the "FHLB of Atlanta") which has joined in this Indenture as
a consenting party.
RECITALS OF THE BANK
The Bank has duly authorized the issuance from time to time of its
Senior Notes (hereinafter called the "Notes") of substantially the tenor and
amount hereinafter set forth, and to provide therefor and to secure the Notes
the Bank has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Notes, when executed by the Bank and
authenticated and delivered by the Trustee hereunder and duly issued by the
Bank, the valid obligations of the Bank, and to make this Indenture a valid
agreement of the Bank, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal
proportionate benefit of all Holders of the Notes, as follows:
2
<PAGE>
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them from time to time in accordance with
generally accepted accounting principles; and
(3) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not any
particular Article, Section or other subdivision.
"ACT" when used with respect to any Holder has the meaning specified in
Section 104.
"ADJUSTED TREASURY RATE" means, with respect to any Redemption Date for
a Designated Fixed Rate Note, the sum of (i) the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such Redemption
Date, plus (ii) the Adjusted Treasury Rate Spread, if any, for such Note;
provided, however, that in no event will the Adjusted Treasury Rate for such
Note be less than the Minimum Adjusted Treasury Rate for such Note.
"ADJUSTED TREASURY RATE SPREAD" means, with respect to a Designated
Fixed Rate Note, the "Adjusted Treasury Rate Spread" as set forth in such Note.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGENTS" mean the agents named in the Distribution Agreement.
"AUTHENTICATING AGENT" means the Trustee or such other Person appointed
by the Trustee pursuant to Section 612.
3
<PAGE>
"BANK" means the Person named as the "Bank" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Bank" shall mean
such successor corporation.
"BANK REQUEST" and "BANK ORDER" mean, respectively, a written request
or order signed in the name of the Bank by the Chairman of the Board, a Vice
Chairman of the Board, the President or a Vice President (any reference to a
Vice President of the Bank herein shall be deemed to include any Vice President
of the Bank whether or not designated by a number or word or words added before
or after the title "Vice President"), and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Bank, and delivered to
the Trustee.
"BASE RATES" means the base rates for the interest rates applicable to
Notes which bear a floating rate of interest as set forth in such Notes.
"BOARD OF DIRECTORS" means either the board of directors of the Bank or
any committee of that board duly authorized by that board to act with respect to
any matter relating hereto.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Bank to have been duly adopted by the
Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY" means any day which is not a Saturday or a Sunday and
that in The City of New York and Atlanta, Georgia is not a day on which banking
institutions are authorized or required by law, regulation or executive order to
close and, with respect to which LIBOR is an applicable interest rate formula,
is also a London Business Day. "London Business Day" means any day on which
dealings in deposits in US Dollars are transacted in the London interbank
market.
"CALCULATION AGENT" means the Trustee or such other Person appointed by
the Bank pursuant to Section 1506 hereof and includes any successor thereto.
"CALCULATION DATE" shall mean the earlier of (i) the tenth calendar day
after such Interest Determination Date or, if such day is not a Business Day,
the next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date, maturity date or date of earlier
redemption, as the case may be.
"CODE" means the Internal Revenue Code of 1986, as it may be amended
from time to time, and regulations of the United States Department of the
Treasury promulgated thereunder.
"COMPARABLE TREASURY ISSUE" means, with respect to a Designated Fixed
Rate Note, the United States Treasury security selected by the Quotation Agent
as having comparable scheduled payments of interest from the Redemption Date to
the Maturity Date of such Note 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 such
Note.
4
<PAGE>
"COMPARABLE TREASURY PRICE" means, with respect to the Redemption Date
for a Designated Fixed Rate Note, the average of the Reference Treasury Dealer
Quotations for the Redemption Date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or if the Quotation Agent obtains fewer
than three such Reference Treasury Dealer Quotations, the average of all such
Quotations.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at
which at any particular time the corporate trust business shall be administered;
at the date hereof the Corporate Trust Office of the Trustee is located at 101
Barclay Street, New York, New York 10286.
"CREDIT AMOUNT" means the amount specified in the Letter of Credit up
to which the Trustee is authorized to draw on the FHLB of Atlanta under the
Letter of Credit, as such amount may be increased or reduced or reinstated from
time to time in accordance with the terms hereof and of the Letter of Credit.
"DEPOSITARY" means, with respect to Notes issuable or issued in whole
or in part in the form of one or more Global Notes, the Person designated as
Depositary by the Bank pursuant to Section 301 (or any successor thereto).
"DESIGNATED FIXED RATE NOTE" means a Fixed Rate Note, the terms of
which provide for the payment of a Redemption Premium upon the redemption of
such Note.
"DISTRIBUTION AGREEMENT" means the Distribution Agreement dated
November 4, 1998 among the Bank and the Agents named therein, as it may from
time to time be amended or supplemented.
"DOLLARS" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States of America as at the time shall be legal tender
for the payment of public and private debt.
"EVENT OF DEFAULT" has the meaning specified in Article Five.
"FDIC" means the Federal Deposit Insurance Corporation, as from time to
time constituted, or if at any time after the execution of this Indenture the
FDIC is not existing and performing the duties now assigned to it, then the body
performing such duties on such date.
"FHLB OF ATLANTA" means the Federal Home Loan Bank of Atlanta and any
successor thereto.
"FIXED RATE NOTE" means a Note that bears interest at a fixed rate of
interest.
"GLOBAL NOTE" means a Note that pursuant to Section 301 is issued to
evidence a Note, that is delivered to the Depositary or pursuant to the
instructions of the Depositary and that shall be registered in the name of the
Depositary or its nominee.
"HOLDER" means a Person in whose name a Note is registered in the
Note Register.
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<PAGE>
"INDENTURE" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"INTEREST PAYMENT DATE" when used with respect to any Note, means each
date on which an installment of interest on such Note is due.
"LETTER OF CREDIT" means (i) the Irrevocable Letter of Credit, in the
form of Exhibit A to this Indenture, which has been delivered to the Trustee by
the FHLB of Atlanta in compliance with the provisions of Section 1101 hereof, as
the same may be amended or renewed from time to time in accordance with the
terms hereof and thereof, or (ii) any Substitute Letter of Credit which is then
in full force and effect and in the possession of the Trustee.
"MATURITY" when used with respect to any Note means the date on which
the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"MAXIMUM RATE OF INTEREST" means, with respect to each Note bearing
interest at a fixed rate, the fixed rate of interest specified in such Note and,
with respect to each Note bearing interest at a rate other than a fixed rate,
the rate of interest specified in such Note as the "maximum interest rate," in
each case calculated on the basis specified in such Note.
"MINIMUM ADJUSTED TREASURY RATE" means, with respect to a Designated
Fixed Rate Note, the "Minimum Adjusted Treasury Rate" as set forth in such Note.
"MOODY'S" means Moody's Investors Service, Inc., located on the date
hereof at 99 Church Street, New York, New York 10017, and includes any successor
thereto.
"NOTE ACCOUNT" means the special purpose trust account established by
the Trustee pursuant to Section 1201.
"NOTE ACCOUNT DEPOSIT DATE" means each date on which the Bank is
required to remit immediately available funds to the Trustee for deposit in the
Note Account pursuant to Section 1202(b).
"NOTE FACE VALUE" means, at the time any determination thereof is to be
made, an amount equal to the sum of (i) the aggregate principal amount of the
Notes Outstanding, plus (ii) an amount equal to the maximum amount of interest
with respect to each Note Outstanding which could accrue and be outstanding at
any one time prior to the respective next immediately succeeding Interest
Payment Date of each such Note Outstanding calculated at the Maximum Rate of
Interest applicable to each such Note and based upon the assumption that there
is no default in the payment of principal or such interest when due, plus (iii)
an amount equal to the maximum amount of interest which could accrue on such
Outstanding Note for an additional period of 27 calendar days calculated at the
Maximum Rate of Interest applicable to each such Note, plus (iv) an amount equal
to the maximum amount of Redemption Premium with respect to all Notes
Outstanding which would be payable on the next succeeding Redemption Date for
each such Note Outstanding, assuming in the case of each such Note Outstanding
that such next
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succeeding Redemption Date is a date which occurs on the sixth calendar day
after the next immediately succeeding Interest Payment Date for such Note.
"NOTE REGISTER" has the meaning specified in Section 305.
"NOTE REGISTRAR" means the Trustee or such other Person appointed by
the Bank pursuant to Section 305 hereof and includes any successor.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Bank, and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Bank or the FHLB of Atlanta (including, except as otherwise
expressly provided in this Indenture, the in house general counsel for the Bank
or the FHLB of Atlanta, as the case may be), and, in the case of an opinion of
the Bank, who shall be reasonably acceptable to the FHLB of Atlanta.
"ORIGINAL ISSUE DATE" means the date of issuance specified in each
Note.
"OTS" means the Office of Thrift Supervision, as from time to time
constituted, or if at any time after the execution of this Indenture the OTS is
not existing and performing the duties now assigned to it, the body performing
such duties on such date.
"OUTSTANDING" when used with respect to Notes means, as of the date of
determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee in
trust for the Holders of such Notes, provided that, if such Notes are
to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the Trustee has
been made; and
(iii) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to this Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Notes Outstanding are present at a meeting of Holders of
Notes for quorum purposes or have taken or concurred in any action under this
Indenture, including the making of any request, demand, authorization,
direction, notice, consent or waiver hereunder, Notes owned by the Bank or any
other obligor upon the Notes or any Affiliate of the Bank or such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
which a Responsible Officer of the Trustee actually knows to be
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so owned shall be so disregarded. Notes so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee certifies to the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Bank or any other obligor upon the Notes or any Affiliate of the Bank or
such other obligor.
"PAYING AGENT" means the Trustee or any Person authorized by the Bank
to pay the principal of or interest on any Notes on behalf of the Bank.
"PAYMENT DATE" means any Interest Payment Date, any Redemption Date and
any date on which a payment of principal of any Note is due by the terms of such
Note or this Indenture.
"PERMITTED INVESTMENTS" has the meaning specified in Section 1203.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PREDECESSOR NOTES" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"PRIMARY TREASURY DEALER" means a primary U.S. Government securities
dealer in The City of New York.
"QUOTATION AGENT" means the Reference Treasury Dealer specified as the
Quotation Agent in the applicable Designated Fixed Rate Note, and its
successors.
"RECORD DATE" means a Regular Record Date or a Special Record Date.
"REDEMPTION DATE" when used with respect to any Note to be redeemed
means the date fixed for such redemption by or pursuant to this Indenture.
"REDEMPTION PREMIUM" means, with respect to a Designated Fixed Rate
Note, an amount equal to the present value, as determined by the Quotation
Agent, of the scheduled payments of interest on such Note from the Redemption
Date for such Note to but excluding the Maturity Date for such Note, discounted
to such Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate.
"REDEMPTION PRICE" when used with respect to any Note to be redeemed
means the price at which it is to be redeemed pursuant to this Indenture.
"REDEMPTION RECORD DATE" when used with respect to any Redemption Date
means a date fixed by the Trustee pursuant to Section 1303.
"REDUCTION CERTIFICATE" means a Reduction Certificate in the form of
Exhibit D to the Letter of Credit, which has been delivered to the Trustee
pursuant to Section 1103.
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"REFERENCE TREASURY DEALERS" means: (i) Credit Suisse First Boston
Corporation, PaineWebber Incorporated and Prudential Securities Incorporated and
their respective successors; PROVIDED, HOWEVER, that if any of the foregoing
shall cease to be a Primary Treasury Dealer, the Quotation Agent shall
substitute therefor another Primary Treasury Dealer, and (ii) two other Primary
Treasury Dealers selected by the Quotation Agent.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and the Redemption Date for a Designated Fixed Rate
Note, the average, as determined by the Quotation Agent, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Quotation Agent by such
Reference Treasury Dealers at 5:00 p.m., New York City time, on the fourth
Business Day preceding such Redemption Date.
"REGULAR RECORD DATE" when used with respect to any Note means with
respect to any Interest Payment Date, unless otherwise specified in such Note,
the date 15 calendar days next preceding such Interest Payment Date (whether or
not a Business Day); provided, however, that interest payable at Maturity shall
be payable to the person to whom the principal of such Note shall be payable.
"REIMBURSEMENT AGREEMENT" means the Letter of Credit Reimbursement
Agreement, dated as of November 4, 1998, between the Bank and the FHLB of
Atlanta pursuant to which the FHLB of Atlanta has agreed to issue the Letter of
Credit, as the same may at any time be amended or modified and in effect.
"RESPONSIBLE OFFICER" when used with respect to the Trustee means any
Vice President (whether or not, designated by a number or a word or words added
before or after the title "Vice President"), the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, any Senior Trust Officer or
Trust Officer or any other officer of the Trustee 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 his knowledge of and
familiarity with the particular subject.
"SAIF" means the Savings Association Insurance Fund of the FDIC, and
includes any successor thereto.
"SPECIAL RECORD DATE" for the payment of any overdue installment of
interest means a date fixed by the Trustee pursuant to Section 309.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., located on the date hereof at 25 Broadway, New
York, New York 10004, and includes any successor thereto.
"STATED MATURITY" when used with respect to any Note means the date
specified in such Note as the fixed date on which the principal of such Note is
due and payable.
"SUBSIDIARY" means any corporation, association or business trust at
least a majority of the shares of Voting Stock of which is at the time owned,
directly or indirectly, by the Bank or by one or more Subsidiaries or by the
Bank and one or more Subsidiaries.
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"SUBSTITUTE LETTER OF CREDIT" means any irrevocable letter of credit
issued by the FHLB of Atlanta to the Trustee which complies with the provisions
of Section 1104.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor trustee.
"VOTING STOCK" as applied to the stock (or the equivalent thereof, in
the case of corporations incorporated outside the continental limits of the
United States of America) of any corporation, means stock (or such equivalent)
of any class or classes, however designated, having ordinary voting power for
the election of a majority of the directors of such corporation, other than
stock (or such equivalent) having such power only by reason of the happening of
a contingency.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Bank to the Trustee to take any
action under any provision of this Indenture, the Bank shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any other provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished pursuant to this Section.
Every certificate or opinion furnished by the Bank to the Trustee with
respect to compliance with a condition or covenant provided for in this
Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person, or
that they be so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters
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and one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Bank may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate of, or representations by, an
officer or officers of the Bank stating that the information with respect to
such factual matters is in the possession of the Bank, unless such counsel
knows, or in the exercise of reasonable are should know, that the certificate or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by (i) one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing, (ii) resolutions duly adopted by Holders voting in favor
thereof, either in person or by proxy duly appointed in writing, at any meeting
of Holders duly called and held in accordance with the provisions of Article
Fourteen as indicated by the records of such meeting or (iii) any combination of
any such instrument or instruments and any such resolutions. Except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments and, in the case of resolutions, a signed and verified
record of such meeting as provided in Section 1406, are delivered to the Trustee
and, where it is hereby expressly required, to the Bank. Such instrument or
instruments and resolutions (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments or voting in favor of such resolutions. Proof of
execution of any such instrument or of a writing appointing any such agent or
proxy and execution by such agent or proxy shall be sufficient for any purpose
of this Indenture and (subject to Section 601) conclusive in favor of the
Trustee and the Bank, if made in the manner provided in this Section.
(b) The fact and date of execution of any such instrument or writing,
or the authority of the Person executing the same, may be proved in any
reasonable manner which the Trustee deems sufficient and in accordance with such
reasonable rules as the Trustee may determine; and the Trustee may in any
instance require further proof with respect to any of the matters referred to in
this Section.
(c) The principal amount and ownership of Notes, and the serial
number(s) of the Notes held by any Person, shall be proved by the Note Register.
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(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future Holder
of the same Note and the Holder of every Note issued upon the transfer thereof
or in exchange therefor or in lieu thereof, in respect of anything done or
suffered to be done by the Trustee or the Bank in reliance thereon, whether or
not notation of such action is made upon such Note.
SECTION 105. NOTICES BY HOLDERS TO TRUSTEE AND BANK.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing with the
Trustee at its Corporate Trust Office, or
(2) the Bank by any Holder shall be sufficient for every purpose
hereunder if in writing and mailed, first-class postage prepaid, to the
Bank addressed to the attention of its Chief Financial Officer at the
address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing
to the Trustee by the Bank.
SECTION 106. NOTICES TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder at his
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders, and any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given. In case, by
reason of the suspension of regular mail service or by reason of any other
cause, it shall be impracticable to give notice by mail, then such notification
to the Holders as shall be made with the approval of the Trustee shall
constitute sufficient notification to such Holders for every purpose hereunder.
SECTION 107. NOTICES, ETC., BY PARTIES.
(a) Any telephonic instructions, notices or other communications given
to any party hereto (including the FHLB of Atlanta) by any other party hereto
(including the FHLB of Atlanta) shall be confirmed in writing by the party
giving the same in accordance with the provisions of this Section 107 (according
to the recipient's written records), and, except as otherwise provided herein,
the Trustee, the Bank or the FHLB of Atlanta, as the case may be,
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shall incur no liability for acting in accordance with such telephonic
instructions, notices or other communications reasonably believed by it in good
faith to be genuine.
(b) Except where telephonic instructions or notices are authorized
herein to be given, all notices, demands, instructions and other communications
required or permitted to be given to or made upon any parties hereto (including
the FHLB of Atlanta) shall be in writing and shall be personally delivered or
sent by first class mail, by express mail or similar service, or by facsimile or
shall be electronically transmitted, and shall be deemed to be given for
purposes of this Indenture on the day that such writing is received by the
intended recipient thereof in accordance with the provisions of this Section
107. Unless otherwise sent or delivered in accordance with the foregoing
provisions of this Section 107, notices, demands, instructions and other
communications in writing shall be given to or made upon the respective parties
hereto at their respective addresses indicated below, and, in the case of
telephonic instructions or notices, by calling the telephone number or numbers
indicated for such party below.
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Telephone: (212) 815-5939
Facsimile: (212) 815-5915
If to the FHLB of Atlanta:
FEDERAL HOME LOAN BANK OF ATLANTA
1475 Peachtree Street, N.E.
Atlanta, GA 30309
Attention: Credit Operations Manager
Telephone: 404 888-8000
Facsimile: 404 888-5649
If to the Bank:
BANKUNITED, FSB
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: Clifford Hope, Chief Financial Officer
Telephone: (305) 569-2000
Facsimile: (305) 569-2026
(c) If any day on which any notice, demand, instruction or other
communication is given by any party hereto (including the FHLB of Atlanta) is
not a Business Day, such notice, demand, instruction or other communication
shall be deemed to have been given on the Business Day next succeeding such
non-Business Day.
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(d) For purposes of this Indenture, any officer of the FHLB of Atlanta
holding any of the following positions shall be authorized to act, and to give
notices and instructions, on behalf of the FHLB of Atlanta: the Executive Vice
President; the Senior Vice President and General Counsel; the Vice President -
Credit Services; and the Vice President - Collateral Service or any other
officer of the FHLB of Atlanta so authorized to act; provided the FHLB of
Atlanta provides to the Trustee written notification of such other officer's
authorization.
SECTION 108. EFFECT OF READINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Bank shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Notes 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 111. BENEFITS OF INDENTURE; ASSIGNMENT.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders of Notes, any benefit or any legal or equitable right, remedy or
claim under this Indenture; provided, however, no party hereto (including the
FHLB of Atlanta) may assign any of its rights or obligations hereunder, except
with the prior written consent of all parties hereto (including the FHLB of
Atlanta) or except as otherwise expressly permitted by the provisions of this
Indenture.
SECTION 112. GOVERNING LAW.
This Indenture shall be governed by and construed in accordance with
the laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such State, without regard to the
conflicts of laws principles thereof.
SECTION 113. LEGAL HOLIDAYS.
Unless otherwise specified in such Note, in any case where any Interest
Payment Date, Redemption Date or Stated Maturity of any Note shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or
such Note) payment of principal, Redemption Premium, if any, or interest need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity, and no interest shall accrue with
respect to such payment for the period from and after such Interest Payment
Date, Redemption Date or Stated Maturity, as the case may be, to and including
such next succeeding Business Day.
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SECTION 114. BANK'S OBLIGATIONS.
No recourse may be taken, directly or indirectly, against any
stockholder, officer, member of the Board of Directors or employee of the Bank
(or any predecessor or successor of the Bank) with respect to the Bank's
obligations on the Notes or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith.
ARTICLE TWO
NOTE FORMS
SECTION 201. FORMS GENERALLY.
The Notes shall be in the form established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes. A copy of the form of Note
established by action taken pursuant to a Board Resolution, and a copy of such
Board Resolution shall be delivered to the Trustee at or prior to the delivery
of the Bank Order contemplated by Section 301 for the authentication and
delivery of Notes.
The definitive Notes shall be printed, lithographed or engraved on
steel engraved borders or may be produced by any combination of these methods or
in any other manner, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's Certificate of Authentication on all Notes shall be in
substantially the following form:
This is one of the Notes described in the within-mentioned Indenture.
The Bank of New York,
as Trustee
Dated:
By:
----------------------------------------------
Authorized Signatory
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ARTICLE THREE
THE NOTES
SECTION 301. ISSUANCE AND AUTHENTICATION.
(a) The aggregate principal amount of the Notes which may be
authenticated and delivered from time to time under this Indenture shall be
limited to such aggregate principal amount as may have been authorized for
issuance by the Bank as evidenced by one or more Board Resolutions, exclusive of
Notes authenticated and delivered under Sections 305 and 306. If at any time the
Bank shall authorize for issuance an aggregate principal amount of the Notes
which is greater than the aggregate principal amount theretofore authorized,
then, prior to any issuance of Notes pursuant to such authorization, the Bank
shall deliver to the Trustee and to Moody's and S&P one or more Board
Resolutions evidencing such authorization.
(b) From time to time during the term of this Indenture and in
accordance with a Bank Order or procedures specified therein, the Trustee, in
accordance therewith, shall complete, authenticate and deliver Notes pursuant to
the provisions of this Section. Upon receipt of a Bank Order pursuant to this
Section, the Trustee shall promptly notify the FHLB of Atlanta of the
instructions so received.
(c) In connection with the initial issuance of Notes, the Bank shall
deliver to the Trustee:
(i) a Board Resolution authorizing and approving (A) the
execution and delivery of this Indenture, and (B) the form of,
authentication, execution and delivery at any time and from time to
time of Notes;
(ii) the Letter of Credit and related documentation referred
to in Section 1101;
(iii) a Bank Order directing the Trustee to authenticate and
deliver Notes, which Bank Order shall establish and set forth the
following for each such Note to be issued:
(1) the Original Issue Date;
(2) the Stated Maturity;
(3) the principal amount of the Note;
(4) the rate (or manner of determining the same) at which the
Note shall bear interest and the Interest Payment Dates on
which such interest shall be payable;
(5) whether or not the Notes shall be issued in whole or in
part in the form of a Global Notes and, if so, the Depositary
for such Global Note;
(6) if such Note is a Fixed Rate Note, whether or not such
Note shall be a Designated Fixed Rate Note, and if so, the
Adjusted Treasury Spread, if applicable, and the Minimum
Adjusted Treasury Rate for such Note; and
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(7) any other terms of the Note (which terms shall not be
inconsistent with the provisions of this Indenture);
(iv) an Officer's Certificate, dated no later than the date of
authentication and delivery of such Notes, stating that (A) the Bank is
not, and by the granting of the request then being made, will not be,
in default under any of the provisions of this Indenture or the
Reimbursement Agreement; (B) the issuance and authentication of such
Notes will not conflict with, result in a breach of or constitute a
default, or with the giving of notice or passage of time or both, would
not constitute a default, under the charter or by laws of the Bank or
result in such a default or violation; (C) no Event of Default
hereunder or event of default under the Reimbursement Agreement has
occurred which has not been cured; (D) each such Note has been duly and
validly authorized by all necessary corporate action on behalf of the
Bank; (E) each such Note has been validly executed by the Bank; (F)
each such Note, when completed, authenticated and delivered pursuant
hereto, will constitute the legal, valid and binding obligation of the
Bank enforceable in accordance with its terms; and (G) all conditions
precedent provided for in this Indenture relating to the authentication
and delivery of the Notes in the aggregate principal amount specified
in the aforesaid instructions or directions delivered to the Trustee
have been complied with; and
(v) an Opinion of Counsel, dated no later than the date of the
authentication and delivery of such Notes, stating that all conditions
precedent provided for in this Indenture relating to the authentication
and delivery of the aggregate principal amount of such Notes
established by or pursuant to the authority granted in one or more
Board Resolutions have been complied with and such Notes may lawfully
be authenticated and delivered under this Indenture and that such
Notes, when completed, authenticated and delivered by the Trustee and
issued by the Bank, will constitute valid and legally binding
obligations of the Bank, enforceable in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency
or other laws relating to or affecting enforcement of creditors' rights
or by general equity principles or by the rights of creditors of
federally chartered savings banks the accounts of which are insured by
the SAIF of the FDIC.
(d) In connection with all subsequent issuances of Notes, the Bank
shall deliver to the Trustee:
(i) a Bank Order relating to such Notes substantially to the
same effect as the Bank Order required by Section 301(c)(iii);
(ii) an Officers' Certificate substantially to the same effect
as the Officers' Certificate set forth in Section 301(c)(iv); and
(iii) an Opinion of Counsel substantially to the same effect
as the Opinion of Counsel required by Section 301(c)(v).
(e) Notwithstanding any directions or instructions of the Bank to issue
any Notes pursuant to this Section, the Trustee shall not authenticate or
deliver any Notes (i) if a
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Responsible Officer of the Trustee has actual knowledge of any Event of Default
that has occurred and is continuing, (ii) if a demand under the Letter of Credit
has been made and a Responsible Officer of the Trustee has not received notice
from the FHLB of Atlanta that the Credit Amount of the Letter of Credit has been
reinstated in full or (iii) if a Responsible Officer of the Trustee has received
a Bank Request pursuant to Section 401.
(f) Notwithstanding any Bank Order to authenticate and deliver any
Notes pursuant to this Section, the Trustee shall not authenticate or deliver
any Notes if upon such authentication and delivery:
(i) the Note Face Value of Notes Outstanding,
together with the Note Face Value of all other Notes for which
instructions to authenticate have been received by the Trustee
(assuming such other Notes to be Outstanding), would exceed
the Credit Amount; or
(ii) the aggregate principal amount of Notes
Outstanding, together with the aggregate principal amount of
all other Notes for which instructions to authenticate have
been received by the Trustee, would exceed the aggregate
principal amount of Notes theretofore approved for issuance by
or pursuant to authority granted by one or more Board
Resolutions, exclusive of Notes authenticated and delivered
under Sections 305 and 306.
(g) No Notes shall be authenticated by the Trustee unless it shall have
received all instructions, directions and/or accompanying documentation required
pursuant to this Section. Notwithstanding any instructions or directions
received by the Trustee pursuant to Section 301(b), if the Trustee shall
receive, prior to the time of delivery of the relevant Notes, written or
telephonic instructions (which telephonic instructions shall be promptly
confirmed in writing) from the Bank or the FHLB of Atlanta not to authenticate
or deliver Notes, which instructions may be specific with respect to a
particular issue of Notes or may be general and applicable to all Notes
authenticated and delivered, after receipt of such instructions until revoked or
superseded by further written instructions from the Bank or the FHLB of Atlanta,
the Trustee shall not authenticate or deliver Notes and, subject to Section 601,
the Bank shall hold the Trustee harmless against liability arising from the
Trustee's compliance with this provision.
SECTION 302. DENOMINATIONS.
The Notes shall be issuable only in registered form without coupons in
a minimum denomination of $250,000 and any integral multiple of $1,000 in excess
thereof.
SECTION 303. EXECUTION, AUTHENTICATION AND DELIVERY; TERMS.
The Notes shall all be executed on behalf of the Bank by its Chairman
of the Board, a Vice Chairman of the Board, its President or one of its Vice
Presidents and by its Secretary or one of its Assistant Secretaries under its
corporate seal reproduced thereon or affixed thereto. The signature of any of
these officers on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile Signatures of individuals who
were at any time the proper officers of the Bank shall bind the Bank,
notwithstanding that such individuals or any of
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them have ceased to hold such offices prior to the authentication and delivery
of such Notes or did not hold such offices at the date of such Notes.
Forthwith upon the execution and delivery of this Indenture, or from
time to time thereafter, Notes may be executed by the Bank and delivered to the
Trustee for authentication, and, subject to Section 301, shall thereupon be
authenticated and delivered by the Trustee upon Bank Order, without any further
action by the Bank.
Each Note shall be dated the date of its authentication and bear its
Original Issue Date or the Original Issue Date of its Predecessor Note first in
time and shall mature on the Stated Maturity set forth on the face of such Note.
No Note shall have a Stated Maturity which (i) is less than nine months or more
than 10 years or such later date as may be set by the Bank pursuant to a Board
resolution from its Original Issue Date or (ii) is a date that is later than two
Business Days prior to the Business Day on which the Letter of Credit expires.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by manual Signature, and such
certificate upon any Note shall be conclusive evidence that such has been duly
authenticated and delivered hereunder and is entitled to the benefits of this
Indenture.
SECTION 304. TEMPORARY NOTES.
Pending the preparation of definitive Notes, the Bank may execute, and
upon Bank Order, the Trustee shall authenticate and deliver, temporary Notes
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denominations, substantially of the tenor of the
definitive Notes in lieu of which they are issued, with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as evidenced by their signatures on such
Notes.
If temporary Notes are issued, the Bank will cause definitive Notes to
be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at each office or agency of the Bank maintained
for such purpose pursuant to Section 1002, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Bank shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of authorized denominations having the
identical Original Issue Date, Stated Maturity and provisions with respect to
payment of interest as such temporary Notes. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.
SECTION 305. REGISTRATION, TRANSFER AND EXCHANGE.
The Bank shall cause to be kept at an office or agency to be
maintained by the Bank in accordance with the provisions of Section 1002, a
register (herein sometimes referred to as the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Bank shall
provide for the registration of Notes and of transfers of Notes as herein
provided. The
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Trustee is hereby appointed "Note Registrar" for the purpose of registering
Notes and transfers and exchanges of Notes as herein provided.
Upon surrender for registration of transfer of any Note at any office
or agency of the Bank maintained for such purpose pursuant to Section 1002, the
Bank shall execute, and the Authenticating Agent shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more new Notes
of any authorized denominations of a like aggregate principal amount having the
identical Original Issue Date, Stated Maturity and provisions with respect to
payment of interest.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denominations, of a like aggregate principal amount having the
identical Original Issue Date, Stated Maturity and provisions with respect to
payment of Redemption Premium, if any and interest, upon surrender of the Notes
to be exchanged at such office or agency, and upon payment, if the Bank shall so
require, of the charges hereinafter provided. Whenever any Notes are so
surrendered for exchange, the Bank shall execute, and the Authenticating Agent
shall authenticate and deliver, the Notes which the Holder making the exchange
is entitled to receive.
All Notes issued upon any transfer or exchange of Notes shall be the
valid obligations of the Bank, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Notes surrendered for such transfer
or exchange.
Every Note presented or surrendered for transfer or exchange shall (if
so required by the Bank or the Authenticating Agent) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Bank, the Authenticating Agent and the Note Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge to the Holder will be made for any transfer or
exchange of Notes. The Bank may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Notes, other than exchanges expressly provided in this
Indenture to be made at the Bank's own expense or without expense or without
charge to the Holders.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Notes:
(1) Each Global Note authenticated under this Indenture shall
be registered in the name of the Depositary designated for such Global
Note or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Note shall
constitute a single Note for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Note may be exchanged in whole or in part for Notes registered,
and no transfer of a Global Note in whole or in part may be registered,
in the name of any Person other than the Depositary for such Global
Note or a nominee thereof unless (A) such Depositary (i) has notified
the Bank that it is unwilling or unable to continue as Depositary for
such Global Note or (ii) has ceased to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended, at a time when
the Depositary is required to be so registered to act as depositary, in
each case unless the Bank has approved a successor Depositary
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within 90 days, (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Note, (C) the Bank in its
sole discretion determines that such Global Note will be so
exchangeable or transferable or (D) there shall exist such
circumstances, if any, in addition to or in lieu of the foregoing as
have been specified for this purpose as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global Note
for other Notes may be made in whole or in part, and all Notes issued
in exchange for a Global Note or any portion thereof shall be
registered in such names as the Depositary for such Global Note shall
direct.
(4) Every Note authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Note or any
portion thereof, whether pursuant to this Section or otherwise, shall
be authenticated and delivered in the form of, and shall be, a Global
Note, unless such Note is registered in the name of a Person other than
the Depositary for such Global Note or a nominee thereof.
The Bank shall not be required (i) to issue, transfer or exchange any
Note during a period beginning at the opening of business 15 days before the day
of the mailing of a notice of redemption of Notes and ending at the close of
business on the day of such mailing or (ii) to transfer or exchange any Note so
to be redeemed.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
If (i) any mutilated Note is surrendered to the Trustee, or the Bank
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, and (ii) there is delivered to the Bank and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Bank or the Trustee that such
Note has been acquired by a bona fide purchaser, the Bank shall execute and upon
its request the Trustee shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of like
tenor and principal amount, having the identical original Issue Date, Stated
Maturity and provisions with respect to payment of Redemption Premium, if any,
and interest and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Bank in its discretion may, instead
of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Bank may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Bank, whether or not the destroyed, lost or stolen
Note shall be at any time enforceable by anyone, and shall be entitled to
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all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. PERSONS DEEMED OWNERS.
Prior to due presentation of a Note for registration or transfer, the
Bank and the Trustee, or any agent of the foregoing, may treat the Person in
whose name any Note is registered as the owner of such Note for the purpose of
receiving payment of principal of, Redemption Premium, if any, and (subject to
Section 309) interest on, such Note and for all other purposes whatsoever
whether or not such Note be overdue, and neither the Bank or the Trustee nor any
agent of the Bank or the Trustee shall be affected by notice to the contrary.
SECTION 308. CANCELLATION.
All Notes surrendered for payment, redemption, transfer or exchange
shall, if surrendered to the Bank or any agent of the Bank, be delivered to the
Trustee and, if not already cancelled, shall be promptly cancelled by it. The
Bank may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Bank may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
cancelled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Notes held by the Trustee
shall be disposed of in accordance with the Trustee's policies and procedures in
effect at such time.
SECTION 309. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Note which is payable, and is punctually paid or duly
provided for, on the applicable Interest Payment Date shall be paid to the
Person in whose name that Note (or one or more Predecessor Notes) is registered
at the close of business on the Regular Record Date for such interest (unless
the Note or one or more Predecessor Notes is called for redemption on a date
which is prior to such Interest Payment Date, in which case interest shall be
paid thereon as provided in Article Thirteen), except that interest payable on
the Stated Maturity of a Note shall be paid to the Person to whom principal is
paid.
Any interest on any Note which is payable, but is not timely paid or
duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the registered Holder on the relevant Regular Record Date by virtue
of having been such Holder and the interest payment shall be made by the Bank,
at its election, in each case, as provided in Clause (1) or (2) below:
(1) The Bank may elect to pay such overdue amounts to the
Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date
for the payment of such overdue amounts, which Special Record Date
shall be fixed in the following manner. The Bank shall notify the
Trustee in writing of the amount of overdue interest proposed to be
paid on each Note
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and the date of the proposed payment (which shall be at least 30 days
after the date of such notice), and at the same time the Bank shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such overdue amounts or shall
make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled thereto as in this
paragraph provided; thereupon the Trustee shall fix a Special Record
Date for the payment of such overdue amounts, which Special Record Date
shall be not more than 15 nor less than 10 days prior to the date of
the proposed payment and not less than 15 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Bank of such Special Record Date and, in the name
and at the expense of the Bank, shall cause notice of the proposed
payment of such overdue interest and the Special Record Date therefor
to be mailed, first class postage prepaid, not less than 10 days prior
to such Special Record Date, to each Holder at his address as it
appears in the Note Register as of the date of such notice, and such
overdue interest shall be paid to the Persons in whose names the Notes
(or their respective predecessor Notes) are registered as of the close
of business on such Special Record Date.
(2) The Bank may make payment of any overdue interest in any
other lawful manner if, after notice given by the Bank to the Trustee
of the proposed payment, such manner of payment shall be deemed
practicable by this Trustee.
Notwithstanding the foregoing, no such payment of overdue interest
shall affect the status of the failure to pay interest on any Interest Payment
Date as an Event of Default under Section 501.
Subject to the foregoing provisions of this Section each Note delivered
under this Indenture upon transfer or exchange for or in lieu of any other Note
shall carry the rights to accrued and unpaid interest which were carried by such
other Note.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301, interest
on the Notes for any period shall be computed on the basis of a 360- day year of
twelve 30-day months and, for any period less than a full calendar month, the
number of days elapsed in such month.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Bank Request cease to be of further effect
(except as to any surviving rights of transfer or exchange of Notes herein
expressly provided for), and the Trustee, at the expense of the Bank, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, and shall make arrangements with the FHLB of Atlanta for surrender of
the Letter of Credit, when
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(1) either
(A) all Outstanding Notes have been delivered to the
Trustee cancelled or for cancellation or the Trustee has
received destruction certificates with respect thereto as
provided in Section 308 hereof; or
(B) all Outstanding Notes not theretofore delivered
to the Trustee for cancellation have become due and payable
and the Bank has deposited or caused to be deposited with the
Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Trustee for
cancellation, for principal and interest to the date of such
deposit (in the case of Notes which have become due and
payable), or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Bank has paid or caused to be paid all other sums
payable hereunder by the Bank; and
(3) the Bank has delivered to the Trustee an Officers
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Bank to the Trustee under Section 607 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment to the Persons entitled thereto, of the
principal, Redemption Premium, if any, and interest for the payment of which
money has been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"EVENT OF DEFAULT" wherever used herein, 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):
(1) default in the payment of any interest upon any Note when
it becomes due and payable and continuance of such failure for a period
of more than two Business Days; or
(2) default in the payment of the principal of, or Redemption
Premium, if any, on any Note when and as the same shall become due
whether at its maturity, call for redemption or otherwise; or
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(3) failure of the Trustee to receive notice from the FHLB of
Atlanta within five Business Days after a draw on the Letter of Credit
that the Credit Amount of the Letter of Credit has been reinstated in
full; or
(4) any failure to maintain the Letter of Credit in full force
and effect until its expiration date and any change whatsoever in the
terms of the Letter of Credit which is not expressly permitted by the
provisions of Article Eleven; or
(5) failure on the part of the Bank duly to observe or perform
in any material respect any other of the covenants or agreements on the
part of the Bank in the Notes or in this Indenture contained, and
continuance of such failure unremedied for a period of 30 days after
the date on which written notice of such failure, requiring the Bank to
remedy the same, shall have been given to the Bank by the Trustee, or
to the Bank and the Trustee by the holders of at least twenty-five
percent (25%) in aggregate principal amount of the Notes at the time
Outstanding; or
(6) a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or other similar official) shall be
appointed to take or shall take possession of the Bank or any
substantial part of its property without its consent, or a court having
jurisdiction in the premises shall enter a decree or order for relief
in respect of the Bank in an involuntary case under any applicable
bankruptcy, insolvency, moratorium or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or other similar
official) of the Bank or for any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and such decree
or order shall remain unstayed in effect for a period of 90 consecutive
days; or
(7) the Bank shall commence a voluntary case under any
applicable bankruptcy, insolvency, moratorium or other similar law now
or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, conservator, sequestrator (or other
similar official) of the Bank or of any substantial part of its
property, or shall make any general assignment for the benefit of
creditors, or shall take any corporate action in furtherance of any of
the foregoing.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Notes Outstanding may declare the principal of all the Notes to be due and
payable, by a notice in writing to the Bank (and to the Trustee if given by
Holders), and upon any such declaration, such principal and, in the case of
Designated Fixed Rate Notes, the Redemption Premium shall become due and payable
by mandatory redemption pursuant to Section 1301; provided, however, that if the
Letter of Credit, for any reason, is not in full force and effect, the Trustee
or the Holders may declare the principal of, and, in the case of Designated
Fixed Rate Notes, the Redemption Premium on, all the Notes to be due and payable
immediately; provided further, that if an Event of Default set forth in clause
(6) or (7) of Section 501 shall occur and a receiver, conservator, liquidator,
assignee,
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trustee or sequestrator (or other similar official) shall be appointed in
respect of the Bank, no acceleration of maturity of the Notes or declaration
thereof shall occur pursuant to this Section 502 unless and until consistent
with the rights of such receiver or conservator (or similar official) under
applicable law; provided further, however, that the foregoing proviso shall not
apply if (i) any Event of Default other than those set forth in clauses (6) or
(7) shall have occurred and be continuing or (ii) the Notes are repudiated or
the maturity of the Notes is accelerated by a receiver or conservator (or other
similar official) or by a court.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Notes Outstanding, by written notice to the Bank and
the Trustee, or the Trustee if such declaration of acceleration has not been
made by the Holders of Notes, by written notice to the Bank, may rescind and
annul such declaration and its consequences if
(1) the Bank has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue installments of interest on all
Notes,
(B) the principal of any Notes which have become due
otherwise than by such declaration of acceleration and
interest thereon at the respective rates borne by such Notes,
(C) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest at the
respective rates borne by such Notes, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
(2) all Events of Default, other than the non-payment of the
principal of, or Redemption Premium, if any, on Notes which have become
due solely by such acceleration, have been cured or waived as provided
in Section 513; and
(3) notice of redemption has not been given pursuant to
Section 1303.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.
The Bank covenants that if
(1) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and
such default continues for a period of more than two Business Days, or
(2) default is made in the payment of the principal of, or
Redemption Premium, if any, on any Note at the Maturity thereof,
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the Bank will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Notes, the whole amount then due and payable on such Notes for
principal, Redemption Premium, if any, and interest, with interest upon the
overdue principal and Redemption Premium, if any, and, to the extent that
payment of such interest shall be legally enforceable, upon overdue installments
of interest, at the rates borne by the Notes; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Bank fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Bank or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Bank or any other obligor upon the Notes, wherever situated.
Without limiting the generality of the foregoing, if the FHLB of Atlanta fails
to make payment under the Letter of Credit after a proper demand for payment has
been made by the Trustee, in its own name and as trustee of an express trust,
the Trustee may institute a judicial proceeding for the collection of the sums
so due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the FHLB of Atlanta in the manner provided by law
out of the property of the FHLB of Atlanta.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any conservatorship or receivership or any
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other similar proceeding relative to the Bank or any other
obligor upon the Notes or the property of the Bank or of such other obligor or
their creditors or relating to the FHLB of Atlanta, the Trustee (irrespective of
whether the principal or Redemption Premium, if any, of the Notes shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made a demand on the Bank for the
payment of overdue principal, Redemption Premium, if any, or interest or shall
have made any drawing under the Letter of Credit) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal, Redemption Premium, if any, and interest owing and unpaid in
respect of the Notes or for the Credit Amount of the Letter of Credit
and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders
allowed in such proceeding, and
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(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any conservator, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such proceeding is
hereby authorized by each Holder to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts
due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept, or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Notes in respect of which such judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article, other than
(i) any money received by the Trustee as a result of any demand for payment
under the Letter of Credit or (ii) any money held in trust for the benefit of
Holders of Notes, shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal, Redemption Premium, if any, or interest, upon presentation of the
Notes and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607;
SECOND: To the payment of the amounts then due and unpaid for interest
on the Notes 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 Notes for interest;
THIRD: To the payment of the amounts then due and unpaid for principal
and Redemption Premium, if any, on the Notes 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 Notes for
principal and Redemption Premium, if any; and
FOURTH: The balance, if any, to the Bank.
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SECTION 507. LIMITATION ON SUITS.
No Holder of any Note shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to a
Responsible Officer of the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding;
(5) no direction inconsistent with such written request has
been given to the Trustee during such 30-day period by the Holders of a
majority in principal amount of the Outstanding Notes; and
(6) such Event of Default is continuing;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the Holders
of Notes.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL
AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right which is absolute and unconditional to receive
payment of the principal of, and (subject to Section 309) interest on, such Note
on the Stated Maturity expressed in such Note (or, in the case of redemption,
principal of, Redemption Premium, if any, and (subject to Section 309) interest
on such Note on the Redemption Date fixed for such Note) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Bank, the Trustee
and the Holders shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights
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and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding Notes
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 that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Notes may, at any time prior to the giving of notice of redemption
pursuant to Section 1303, on behalf of the Holders of all the Notes waive any
past default hereunder and its consequences, except a default
(1) in the payment of the principal of, Redemption Premium,
if any, or interest on any Note, or
(2) of the type specified in Section 501(3), or
(3) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
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Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of or interest on any Note on or after the Stated Maturity expressed
in such Note (or, in the case of redemption, principal of, Redemption Premium,
if any, or interest on or after the Redemption Date).
SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Bank covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Bank (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 516. CALCULATION OF ORIGINAL ISSUE DISCOUNT
The Bank shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount accrued on Notes Outstanding as of the end of such year and (ii) such
other specific information relating such original issue discount as may then be
relevant under the Code.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee;
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
which by any 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 on their face they conform to the
requirements of this Indenture; and
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Notes 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.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it 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.
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(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 602. NOTICE OF DEFAULTS.
Within 60 days after the occurrence of any default hereunder, the
Trustee shall transmit by mail to all Holders, as their names and addresses
appear in the Note Register, notice of such default hereunder actually known to
a Responsible Officer of the Trustee, unless such default shall have been cured
or waived; PROVIDED, HOWEVER, that, except in the case of a default in the
payment of the principal of, Redemption Premium, if any, or interest on any Note
or an Event of Default of the type specified in Section 501(3), the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interests of the Holders; and PROVIDED, FURTHER, that
in the case of any default of the character specified in Section 501(5), no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "DEFAULT" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 601:
(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, direction, consent, order, bond,
debenture or other paper or document reasonably believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request or direction of the Bank mentioned herein shall be
sufficiently evidenced by a Bank Request or Bank Order and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
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(f) the Trustee shall not be bound to make any investigation into facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Bank, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein and in the Notes, except the Trustee's
certificate of authentication, shall be taken as the statements of the Bank, and
the Trustee or any Authenticating Agent assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes. The Trustee represents that it is
duly authorized to execute and deliver this Indenture and to perform its duties
hereunder. The Trustee or any Authenticating Agent shall not be accountable for
the use or application by the Bank of Notes or the proceeds thereof.
SECTION 605. MAY HOLD NOTES.
The Trustee, any Authenticating Agent, any Paying Agent the Note
Registrar and any other agent of the Bank or the Trustee, in its individual or
any other capacity, may become the owner or pledgee of, or may hold or acquire
other rights in, Notes and may otherwise deal with the Bank with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent, Note
Registrar or such agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other trust funds except to the extent required by law or by the express
provisions hereof. The Trustee shall not be under any liability for interest on
any money received by it hereunder except as provided herein or otherwise agreed
with the Bank.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Bank agrees
(1) to pay to the Trustee from time to time such compensation
as agreed upon from time to time in writing for all services rendered
by it hereunder (which compensation shall not be limited by any
provisions 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 expenses, disbursements
and advances incurred or made by the Trustee
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in accordance with any provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
willful misconduct on its part, arising out of or in connection with
the acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The FHLB of Atlanta shall have no liability to the Trustee with respect
to any sums payable to the Trustee under this Section 607 or otherwise
hereunder.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 subject to supervision or examination by Federal or
state authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until (i) the
acceptance of appointment by the successor Trustee under Section 610, (ii) a
Substitute Letter of Credit has been issued by the FHLB of Atlanta to the
successor Trustee conforming to the requirements of Section 1104 and (iii) the
successor Trustee has established a Note Account.
(b) The Trustee may resign at any time by giving written notice thereof
to the Bank. If the requirements of paragraph (a) of this Section shall not have
been satisfied within 30 days after the giving of such notice of resignation or
removal, the resigning or removed Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Notes, delivered to the Trustee
and to the Bank.
(d) If at any time:
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(1) the Trustee shall cease to be eligible under Section 608
and shall fail to resign after written request therefor by the Bank or
by any Holder who has been a bona fide Holder of a Note for at least
six months, or
(2) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Bank by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Bank, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Notes delivered to
the Bank and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Bank. If no successor
Trustee shall have been so appointed by the Bank or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Bank shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Notes at their addresses as shown in the Note Register. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Bank and the retiring Trustee an instrument accepting such
appointment, and, subject to Section 609, the resignation or removal of the
retiring Trustee shall thereupon 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 request of
the Bank 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, subject nevertheless to its lien,
if any, provided for in Section 607. Upon request of any such successor Trustee,
the Bank and the FHLB of Atlanta shall execute any and all instruments
reasonably determined by such parties to be necessary for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
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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.
SECTION 611. MERGER OR CONSOLIDATION.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes 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 Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
SECTION 612. APPOINTMENT OF AUTHENTICATING AGENT.
As of the date of this Indenture and at any time when any of the Notes
remain Outstanding, the Trustee may appoint an Authenticating Agent or
Authenticating Agents with respect to any Notes which the Authenticating Agent
or Authenticating Agents shall be authorized to act on behalf of the Trustee to
authenticate, and Notes so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the completion, authentication and delivery of Notes by the Trustee
or the Trustee's certificate of authentication, such reference shall be deemed
to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Bank and shall at
all times be a corporation organized and doing business under the laws of the
United States of America or of any State, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
Authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be
Authenticating Agent without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
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An Authenticating Agent may at any time resign by providing no less
than 120 days advance written notice of resignation to the Trustee and to the
Bank, unless the Bank agrees in writing to a shorter notice period, such
resignation not to become effective prior to the date of appointment of a
successor Authenticating Agent. The Bank or the Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Bank. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Bank and shall mail notice of such
appointment to all Holders of Notes with respect to which such Authenticating
Agent will serve, as their names and addresses appear on the Note Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent
herein. No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section.
The Bank agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Notes may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
This is one of the Notes referred to in the within-mentioned Indenture.
--------------------------------------
As Trustee
By:
-----------------------------------
As Authenticating Agent
By:
-----------------------------------
Authorized Signatory
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. BANK TO FURNISH NAMES AND ADDRESSES OF HOLDERS.
The Bank will furnish or cause to be furnished by the Note Registrar to
the Trustee on a semi-annual basis, on each Regular Record Date for the Notes,
and at such other times as the Trustee may request in writing, within 30 days
after receipt by the Bank of any such request, a list in such form as the
Trustee may reasonably require containing all the information in the possession
or control of the Bank as to the names and addresses of the Holders, obtained
since the date as of which the next previous list, if any, was furnished;
PROVIDED, HOWEVER, that no such list need be furnished so long as the Trustee is
the Note Registrar. Any such list may be dated as of a date not more than 15
days prior to the time such information is furnished or caused to be furnished
and need not include information received after such date.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as reasonably
practicable, all information (i) as to the names and addresses of Holders
contained in the most recent list furnished to it as provided in Section 701,
and (ii) received by it in the capacity of Note Registrar hereunder.
The Trustee may (i) destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished, (ii) destroy any
information received by it as Note Registrar hereunder upon delivering to itself
as Trustee, not earlier than 45 days after an Interest Payment Date, a list
containing the names and addresses of the Holders obtained from such information
since the delivery of the next previous list, if any, and (iii) destroy any list
delivered to itself as Trustee which was compiled from information received by
it as Note Registrar hereunder upon the receipt of a new list so delivered.
(b) If three or more Holders (hereinafter referred to as "applicants")
apply in writing to the Trustee, and furnish to the Trustee reasonable proof
that each such applicant has owned a Note for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Indenture or under the Notes and is accompanied by a copy of the form
of proxy or other communication which such applicants propose to transmit, then
the Trustee shall, within five Business Days after the receipt of such
application, at its election, either
(i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with Section 702(a) and as to
the approximate cost of mailing to such Holders the form of proxy or
other communication, if any, specified in such application.
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If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder whose name and address appears in the information preserved
at the time by the Trustee in accordance with Section 702(a), a copy of the form
of proxy or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within five Business Days after such tender, the Trustee shall
mail to such applicants a written statement to the effect that, in the opinion
of the Trustee, such mailing would be contrary to the best interests of the
Holders or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. In the event the applicants decide to proceed
despite the Trustee's opinion and obtain an order of a court of competent
jurisdiction directing the Trustee to mail the applicable material, the Trustee
shall mail copies of such material to all such Holders with reasonable
promptness after the entry of such order and the renewal of such tender;
otherwise the Trustee shall be relieved of any obligation or duty to such
applicants respecting their application.
(c) Each and every Holder of the Notes, by receiving and holding the
same, agrees with the Bank and the Trustee and the FHLB of Atlanta that neither
the Bank nor the Trustee nor any Note Registrar nor the FHLB of Atlanta shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders in accordance with Section 702(b), regardless
of the source from which such information was derived, and that the Trustee
shall not be held accountable by reason of mailing any material pursuant to a
request made under Section 702(b).
SECTION 703. REPORTS BY THE TRUSTEE TO THE FHLB OF ATLANTA AND THE BANK;
NOTICE TO RATING AGENCY.
(a) Within ten Business Days after the last day of each calendar month,
the Trustee shall prepare a written statement showing the aggregate principal
amount and the Note Face Value of all Notes Outstanding as of the last day of
such month, which statement shall include the certificate identification number,
Original Issue Date, Stated Maturity, principal amount and maximum Rate of
Interest of each such Note and shall show the Note Face Value of each such Note
by total principal amount of such Note having the same Original Issue Date,
Stated Maturity and Maximum Rate of Interest. Such statement shall be signed by
a Responsible Officer of the Trustee and shall be sent to the Bank by first
class mail no later than the Business Day following the preparation of such
statement.
(b) The Trustee agrees to use its reasonable best efforts to give prior
notice, and if unable, to promptly notify Moody's and S&P, if such rating agency
is then rating the Notes, of:
(1) expiration, renewal, extension or replacement of the
Letter of Credit;
(2) redemption or declaration of acceleration of the principal
of the Notes;
(3) any amendment to this Indenture or the Letter of Credit;
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(4) receipt by the Trustee of any amendment to the
Reimbursement Agreement pursuant to Section 1105 or any Board
Resolution authorizing an increase in aggregate principal amount of
Notes which may be issued hereunder;
(5) any resignation or removal of the Trustee or appointment
of a successor Trustee pursuant to Section 609 hereof; or
(6) any issuance of Notes hereunder.
The Trustee shall incur no liability to Moody's or S&P or any other
person for failure to provide such notice.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. BANK MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Bank shall not consolidate with or merge into any other
corporation, association or other similar entity or entities (hereinafter
referred to as "corporation" or "corporations") or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, unless:
(1) the corporation (if other than the Bank) formed by such
consolidation or into which the Bank is merged or the Person which
acquires by conveyance, transfer or lease the properties and assets of
the Bank substantially as an entirety shall be a corporation organized
and existing under the laws of the United States of America or any
state or the District of Columbia, and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee
and the FHLB of Atlanta, in form satisfactory to the Trustee and the
FHLB of Atlanta, the due and punctual payment of the principal of,
Redemption Premium, if any, and interest on all the Notes and the
performance of every covenant of this Indenture on the part of the Bank
to be performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time, or
both, would become an Event of Default, shall have happened and be
continuing; and
(3) the Bank has delivered to the Trustee and the Bank an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or lease and such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
SECTION 802. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any conveyance, transfer or lease
of the properties and assets of the Bank substantially as an entirety in
accordance with Section 801, the Successor
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corporation formed by such consolidation or into which the Bank is
merged or to which such conveyance transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and
power of, the Bank under this Indenture with the same effect as if such
successor corporation had been named as the Bank herein; and in the
event of any such conveyance or transfer (but not lease), the Bank
(which term for this purpose shall mean the Person named as the "Bank"
in the first paragraph of this instrument or any successor corporation
which shall theretofore have become such in the manner prescribed in
this Article) shall be discharged from all obligations and covenants
under the Indenture and may be dissolved and liquidated.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Subject to the written consent of the FHLB of Atlanta, without the
consent of any Holders, the Bank, when authorized by a Board Resolution, and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(1) to evidence the succession of another corporation to the
Bank, and the assumption by any such successor of the covenants of the
Bank herein and in the Notes contained; or
(2) to add to the covenants of the Bank, for the benefit of
the Holders of all or any Notes, to convey, transfer, assign, mortgage
or pledge any property to or with the Trustee, or to surrender any
right or power herein conferred upon the Bank; or
(3) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture, PROVIDED such
action shall not materially adversely affect the interests of the
Holders; or
(4) to establish the form of Notes as permitted by Section
201; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(6) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to qualify this
Indenture (including any supplemental indenture), if necessary, under
the Trust Indenture Act of 1939, or under any similar federal statute
hereafter enacted, and to add to this Indenture such other provisions
as may be expressly permitted by the Trust Indenture Act of 1939,
excluding, however, the provisions referred to in Section 316(a)(2) of
the Trust Indenture Act of 1939 as in effect at the date as of which
this Indenture was executed or any corresponding provision in any
similar federal statute hereafter enacted.
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SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
Subject to the written consent of the FHLB of Atlanta, with the consent
of the Holders of not less than a majority in principal amount of the
Outstanding Notes, by Act of said Holders delivered to the Bank and the Trustee,
the Bank, when authorized by a Board Resolution and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Note affected thereby:
(1) change the Stated Maturity of the principal of, or
interest on, any Note, or reduce the principal amount thereof or the
Redemption Premium or interest thereon, or change the coin or currency
in which, any Note or the Redemption Premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the
Outstanding Notes, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) modify any of the provisions of this Section or Section
513 or Section 906, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Note
affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this
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Indenture for all purposes; and every Holder of Notes theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
SECTION 905. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Bank shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such supplemental indenture may be prepared and executed by
the Bank and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
SECTION 906. WAIVER OF COMPLIANCE BY HOLDERS OF NOTES.
Anything in this Indenture to the contrary notwithstanding, any of the
acts which the Bank is required to do or is prohibited from doing by any of the
provisions of this Indenture may, to the extent that such provisions might be
changed or eliminated by a supplemental indenture pursuant to Section 902 hereof
upon consent of Holders of not less than a majority in aggregate principal
amount of the Notes at the time outstanding, be omitted or done by the Bank, if
there is obtained the written consent thereto of the FHLB of Atlanta and of the
Holders of not less than a majority of the aggregate principal amount of the
Notes at the time Outstanding or the written waiver of compliance with any such
provision or provisions signed by such Holders. The Bank agrees promptly to file
with the Trustee and the FHLB of Atlanta a duplicate original of each such
consent or waiver.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, REDEMPTION PREMIUM AND INTEREST.
The Bank will duly and punctually pay the principal of, Redemption
Premium, if any, and interest on the Notes in accordance with the terms of the
Notes and this Indenture; PROVIDED, HOWEVER, that amounts properly withheld
under the Code by any Person from a payment to any Holder of Notes shall be
considered as having been paid by the Bank to such Holder for all purposes of
this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY; CALCULATION AGENTS.
The Bank will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be presented or surrendered for
payment, where the issuance of Notes may be registered, where Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Bank in respect of the Notes and this Indenture may be
served. The Bank initially appoints the Trustee as its agent for such purposes.
The Trustee agrees to deliver promptly copies of all notices and demands to or
upon the Bank received by the Trustee in such capacity.
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The Bank agrees that there shall at all times be one Calculation Agent
in respect of the Notes that bear interest at a floating rate, and such
Calculation Agent shall be a financial institution or investment bank and shall
not control, be controlled by, or be under common control with, the Bank. In the
event that the Calculation Agent is unwilling or unable to act as such
Calculation Agent or shall fail to perform, the Bank shall promptly appoint a
Calculation Agent (qualified as aforesaid) to act in its place. Pursuant to
Article 15 hereof, the Bank has appointed the Trustee as the initial Calculation
Agent.
SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
Whenever the Bank shall have one or more Paying Agents for the Notes,
the Trustee will, at the Bank's written request, on each Payment Date, withdraw
from the Note Payment Account and wire transfer to such Paying Agent or Paying
Agents, in Federal Reserve or other immediately available funds, a sum
sufficient for the payment of the principal of or interest on the Notes so
becoming due.
The Bank will cause each Paying Agent for the Notes to execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee, subject to the provisions of this Section, that such Paying Agent
will hold all sums held by it for the payment of the principal of, Redemption
Premium, if any, or interest on the Notes in trust for the benefit of the
Holders of Notes entitled thereto until such sums shall be paid to such Holders
or otherwise disposed of as provided herein.
Any money deposited with the Trustee or any Paying Agent in trust for
the payment of the principal of, Redemption Premium, if any, or interest on any
Note and remaining unclaimed for two years after such principal, Redemption
Premium, if any, or interest has become due and payable shall be paid to the
Bank on Bank Request; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Bank for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the Bank
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and that after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Bank.
Any money deposited with the Trustee or any Paying Agent, in trust for
payment of principal of, Redemption Premium, if any, or interest on any Note and
which is unclaimed, shall only be invested in Permitted Investments with
maturities of less than one day or held in the form of cash.
SECTION 1004. MAINTENANCE OF EXISTENCE.
Subject to the provisions of Article Eight and, except as otherwise
specifically permitted in this Indenture, the Bank, at its own cost and expense,
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence as a depository financial institution deposits in
which are insured by the FDIC.
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SECTION 1005. FURTHER ASSURANCES.
From time to time, whenever reasonably demanded by the Trustee, the
Bank will make, execute and deliver or cause to be made, executed and delivered
any and all such further and other instruments and assurances, and will furnish
such information, as may be reasonably necessary or proper to carry out the
intention of or to facilitate the performance of the terms of this Indenture or
to secure the rights and remedies hereunder of the Holders of the Notes.
SECTION 1006. CERTIFICATES TO BE DELIVERED.
The Bank will:
(1) deliver to a Responsible Officer of the Trustee forthwith
upon becoming aware of any default or defaults in the performance of
any covenant, agreement or condition contained in this Indenture, an
Officers' Certificate specifying such default or defaults, and
(2) deliver to a Responsible Officer of the Trustee on or
before a date not more than 120 days after the end of each fiscal year
of the Bank ending after the date hereof, an Officers' Certificate
stating that a review of the activities of the Bank during such year
and of performance under this Indenture has been made under the
supervision of such officers and stating whether or not, to the best
knowledge of the signers, based on such review, the Bank is in default
in the performance of any covenant, agreement or condition contained in
this Indenture, and, if so, specifying each such default of which the
signers have knowledge and the nature and status thereof.
SECTION 1007. MAINTENANCE OF BOOKS OF RECORD AND ACCOUNT; FINANCIAL
STATEMENTS OF THE BANK.
(a) The Bank will keep proper books of record and account in which full
and correct entries will be made of its transactions in conformity with
generally accepted accounting principles, except as may be required or permitted
by applicable Federal or State law or rules, regulations or policy statements
promulgated thereunder, including, but not limited to, the rules, regulations
and policy statements of the OTS and the FDIC. The Bank will permit the Trustee
and its agents, auditors, attorneys and counsel, at all reasonable times, to
examine all the books of record and account of the Bank and to make copies and
take extracts therefrom, and will from time to time furnish, or cause to be
furnished, to the Trustee such information and statements as the Trustee may
reasonably request, all as may be reasonably necessary for the purpose of
determining performance or observance by the Bank of the covenants, conditions
and obligations contained in this Indenture, but the Trustee will not be under
any obligation to examine the books of record and account of the Bank. The
Trustee will, and will cause its agents, auditors, attorneys and counsel to,
keep all such information confidential in accordance with its customary
procedures, except to the extent that disclosure thereof is required in
connection with the performance of its duties hereunder.
(b) The Bank will deliver to the Trustee and to each rating agency then
rating any of the Notes, within 120 days after the expiration of each fiscal
year of the Bank during which there are any Notes Outstanding, a consolidated
statement of operations for such fiscal year and a
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consolidated statement of condition of the Bank and its consolidated
subsidiaries as of the last day of such fiscal year. Such consolidated
statements of operations and condition shall set forth in reasonable detail the
results of operations for the period ended, and the financial condition of the
Bank and its consolidated subsidiaries as at the date thereof, and shall be
accompanied by the report or opinion of the independent public accountants who
have audited the books of the Bank for such fiscal year. The Bank will also
deliver to the Trustee and to each rating agency then rating any of the Notes,
within 30 days after the filing thereof with the OTS, each quarterly report and
each annual report filed by the Bank with the OTS.
ARTICLE ELEVEN
LETTER OF CREDIT
SECTION 1101. DELIVERY OF THE LETTER OF CREDIT.
(a) On or prior to the date of the initial authentication and delivery
of Notes, the Bank shall cause the FHLB of Atlanta, as issuer of the Letter of
Credit, to deliver the Letter of Credit to the Trustee for the account of the
Bank and for the purpose of assuring payment of the Notes. The Letter of Credit
shall be in the form of Exhibit A hereto, shall be irrevocable and shall:
(1) identify the Trustee as the beneficiary thereof, for the
benefit of Holders of Notes;
(2) have an original Credit Amount at least equal to the
greater of $225,000,000 or the Note Face Value of all Notes to be
Outstanding upon such initial authentication and delivery;
(3) have an effective date no later than the date of such
initial authentication and delivery of Notes;
(4) have an expiration date which is a Business Day and which
is no earlier than November 4, 2008 or such later date as the FHLB of
Atlanta may agree to; and
(5) authorize the Trustee to draw upon the Letter of Credit at
any time from the effective date until the close of the FHLB of
Atlanta's business on the expiration date set forth in the Letter of
Credit.
(b) In connection with the issuance and delivery of the Letter of
Credit, the Bank shall deliver to, and deposit with, the Trustee the following
documents or instruments with respect to the Letter of Credit:
(1) a fully executed counterpart of the Reimbursement
Agreement between the Bank and the FHLB of Atlanta, pursuant to which
the FHLB of Atlanta has agreed to issue the Letter of Credit; and
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(2) a fully executed counterpart of the Confirmation of Letter
of Credit issued pursuant to the Reimbursement Agreement, the terms of
which confirmation shall agree in every particular with the Letter of
Credit delivered pursuant to this Section.
SECTION 1102. ACCEPTANCE BY TRUSTEE.
The Trustee declares that it will hold the Letter of Credit, together
with any amounts held in any fund or account established pursuant to this
Indenture and any proceeds of any draw upon the Letter of Credit, in trust for
the use and benefit of all present and future Holders of Notes.
SECTION 1103. AMENDMENTS TO THE LETTER OF CREDIT; RENEWALS OF THE LETTER OF
CREDIT; INCREASING OR REINSTATING THE CREDIT AMOUNT;
REDUCTION OF THE CREDIT AMOUNT.
Any amendment to the Letter of Credit, other than a reinstatement of or
increase in the Credit Amount or an extension or renewal of the expiration date
of the Letter of Credit, must be consented to by the Trustee in writing.
Upon application by the Bank to the FHLB of Atlanta, and subject to the
FHLB of Atlanta's regulations and credit guidelines, the expiration date of the
Letter of Credit may be extended and the Letter of Credit may be renewed from
time to time, by a Certificate of Renewal issued by the FHLB of Atlanta to the
Trustee in the form of Exhibit F to the Letter of Credit, which shall be
effective upon receipt by the Trustee. Any expiration date established by any
Certificate of Renewal shall be a Business Day and shall not be earlier than the
then existing expiration date of the Letter of Credit nor later than the date
which is ten years from the effective date of such Certificate of Renewal or
such later date as the FHLB of Atlanta may agree to.
The Credit Amount may be increased from time to time or, as the same
may be reduced by a drawing upon the Letter of Credit, may be reinstated by a
Certificate Increasing the Credit Amount or a Certificate Reinstating the Credit
Amount in the form of Exhibits E or C, respectively, to the Letter of Credit
which shall be effective upon receipt by the Trustee.
In addition, the Bank may, subject to the provisions of this Section,
reduce the Credit Amount of the Letter of Credit from time to time by
presentation to the Trustee of a Reduction Certificate. Upon receipt by the
Trustee of a Reduction Certificate, the Bank shall determine the Note Face
Value, which calculation shall be confirmed by the Trustee. If the Credit
Amount, after giving effect to the Reduction Certificate, shall be equal to or
greater than the Note Face Value of the Notes Outstanding as verified by the
Trustee, the Trustee shall consent to such Reduction Certificate as provided
thereon and shall present such Certificate to the FHLB of Atlanta.
SECTION 1104. SUBSTITUTE LETTER OF CREDIT.
At the direction of the FHLB of Atlanta, the Letter of Credit may be
replaced with a Substitute Letter of Credit provided that:
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(1) The FHLB of Atlanta certifies that its direction to
replace the Letter of Credit and the Substitute Letter of Credit are in
compliance with and pursuant to the Reimbursement Agreement;
(2) such Substitute Letter of Credit:
(a) is in the form of Exhibit A hereto;
(b) is irrevocable;
(c) is issued by the FHLB of Atlanta to the Trustee
as the beneficiary thereof for the benefit of Holders of the
Notes;
(d) has a Credit Amount at least equal to the Note
Face Value of the Notes Outstanding;
(e) has an expiration date which is no earlier than
the latest Stated Maturity of any Note Outstanding plus two
Business Days or such later date as the FHLB of Atlanta may
agree to and an effective date which is no later than the date
of replacement;
(f) is otherwise identical to the outstanding Letter
of Credit; and
(3) the Trustee receives written confirmation from Moody's and
S&P (in each case, if then in the business of rating securities such as
the Notes) that replacement of the Letter of Credit with such
Substitute Letter of Credit will not, in and of itself, reduce or
result in the withdrawal of any rating on the Notes then in effect.
SECTION 1105. INSPECTION OF DOCUMENTS BY HOLDERS OF NOTES.
The Trustee shall keep fully executed or conformed copies of this
Indenture, the Letter of Credit and the Reimbursement Agreement (together with
all amendments, modifications, supplements, waivers and consents made or given
with respect hereto and thereto) on file at its Corporate Trust Office and shall
provide to the Holder of any Note or by an officer, employee or agent of such
Holder, provided that the person purporting to be such Holder establishes to the
satisfaction of the Trustee he is in fact such Holder and, in cases where
inspection is sought to be made by a person purporting to be an officer,
employee or agent of such Holder, that such person submits evidence satisfactory
to the Trustee of his authority to make inspection on behalf of such Holder. The
Bank shall promptly advise the Trustee of any amendment, modification, waiver or
consent made or given with respect to the Reimbursement Agreement, and promptly
after the effectiveness thereof, shall furnish a fully executed or conformed
copy of such amendment, modification, waiver or consent to the Trustee.
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ARTICLE TWELVE
PAYMENT OF NOTES
SECTION 1201. ESTABLISHMENT OF NOTE ACCOUNT.
At the time of the execution and delivery of this Indenture, and for
the purposes of this Indenture, the Trustee shall establish a special purpose
trust account for the benefit of Holders of Notes to be referred to herein as
the "Note Account" and over which the Trustee shall have exclusive control and
the sole right of withdrawal. Any and all funds at any time on deposit in, or
otherwise to the credit of, the Note Account shall be held in trust by the
Trustee for the benefit of Holders of Notes. Except as provided in Section 1203
hereof, the only permitted withdrawal from or application of funds on deposit
in, or otherwise to the credit of, the Note Account shall be to pay the interest
on and principal of the Notes in accordance with their terms and the provisions
of this Indenture. The Trustee agrees to give the Bank and the FHLB of Atlanta
immediate notice if the Note Account or any funds on deposit in, or otherwise to
the credit of, the Note Account shall become subject to any writ, order,
judgment, warrant of attachment, execution or similar process. Neither the Bank
nor the FHLB of Atlanta shall have any legal, equitable or beneficial interest
in the Note Account.
SECTION 1202. PAYMENT OF NOTES; DRAWS UPON THE LETTER OF CREDIT.
(a) The Trustee agrees that, to the extent sufficient funds are
available in the Note Account or are available subject to a drawing under the
Letter of Credit, the Trustee shall, subject to Section 1003, make payment from
such available funds of interest on and principal of the Notes as herein
provided.
(b) By 10:00 a.m. (Atlanta, Georgia time) on the third Business Day
before each Payment Date, the Bank shall remit to the Trustee in immediately
available funds for deposit in the Note Account the amount payable on the Notes
on such Payment Date. Each such date on which the Bank is required to remit
funds to the Trustee for deposit in the Note Account is hereinafter referred to
as a "Note Account Deposit Date."
(c) As promptly as may be practicable on each Note Account Deposit
Date, the Trustee shall determine whether sufficient immediately available funds
are then on deposit in the Note Account (for purposes hereof, funds shall not be
considered immediately available to the extent they are subject to any writ,
order, judgment, warrant of attachment, execution or similar process) to enable
the Trustee to pay when due the interest and Redemption Premium, if any, on, and
principal of, each Note due on the next succeeding Payment Date. If, at such
time, the immediately available funds then on deposit in the Note Account are
insufficient to pay all of such interest, Redemption Premium, if any, and
principal in full when due, then the Trustee shall promptly notify the Bank by
telephone, and, if the Trustee has not received from the Bank by 3:15 p.m.
(Atlanta, Georgia time) on such Note Account Deposit Date, sufficient
immediately available funds to pay all the interest, Redemption Premium, if any,
and principal due on the Notes on the next succeeding Payment Date, then on the
Business Day immediately following such Note Account Deposit Date, the Trustee
shall, no later than 4:45 p.m. (Atlanta, Georgia time), make a demand for
payment in accordance with the terms of the Letter of Credit in an
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amount equal to the amount due on the Notes on such Payment Date less the amount
of immediately available funds then on deposit in the Note Account. Pursuant to
the Letter of Credit, if the FHLB of Atlanta receives a conforming drawing
certificate not later than 4:45 P.M., Atlanta, Georgia time, it will on the
second Business Day thereafter make available to the Trustee immediately
available funds in the amount of the drawing not later than 10:00 A.M., Atlanta,
Georgia time. If the FHLB of Atlanta receives a conforming drawing certificate
after 4:45 P.M., Atlanta, Georgia time, such drawing shall be deemed to have
been received on the next succeeding Business Day. If the Trustee receives
notice from the FHLB of Atlanta that a demand for payment under the Letter of
Credit is non-conforming, the Trustee will take prompt steps to submit to the
FHLB of Atlanta a conforming demand. The Trustee, to the extent that it has
taken all steps required hereunder and pursuant to the Letter of Credit to
present to the FHLB of Atlanta a conforming drawing certificate on a timely
basis, shall not be liable for the failure of the FHLB of Atlanta to make a
disbursement of the proceeds of such Letter of Credit to the Trustee.
(d) Any funds received by the Trustee as a result of any drawing or
demand for payment under the Letter of Credit shall be applied by the Trustee,
subject to Section 1003, together with the funds, if any, to be withdrawn from
the Note Account, directly to the payment in full of the interest, Redemption
Premium, if any, and principal payments due on the Notes (including Notes held
for the Trustee's own account). Funds received by the Trustee as a result of any
drawing or demand for payment under the Letter of Credit shall be held by the
Trustee until disbursed to Holders of Notes in a separate trust account
established for this purpose for the benefit of the Holders of Notes, and shall
not be deposited in the Note Account or applied or used for any other purpose
whatsoever.
SECTION 1203. INVESTMENT OF FUNDS IN THE NOTE ACCOUNT.
Any immediately available funds remitted by the Bank to the Trustee for
deposit in the Note Account in accordance with Section 1202(b) hereof shall,
between the date such funds are remitted to the Trustee and the next succeeding
Payment Date, be invested by the Trustee at the written direction of the Bank in
the following permitted investments ("Permitted Investments"): (i) direct
obligations of the United States, (ii) repurchase agreements with respect to
such direct obligations with the lead bank (which may include the Trustee if the
Trustee so qualifies) of a bank holding company the senior debt of which has a
rating of at least "Aaa" from Moody's and "AAA" by S&P, or (iii) such other
investments as may be acceptable to the rating agency or agencies rating the
Notes, such acceptability to be evidenced in writing, which would not result in
a reduction or withdrawal of the rating on the Notes by any such rating agency
or agencies; PROVIDED, HOWEVER, that such Permitted Investments shall mature or
be redeemable at par at the option of the holder within such periods as to
permit timely payments in respect of the Notes. If as a result of any investment
by the Trustee in Permitted Investments listed above, there shall be
insufficient immediately available funds in the Note Account to pay when due the
interest and Redemption Premium, if any, on, and principal of, the Notes with
respect to which the funds were deposited by the Bank, the Trustee shall
promptly and in any event prior to or on the Payment Date of such payments
notify the Bank of such deficiency and the Bank shall deposit additional funds
for the payment of Notes in the amount of such insufficiency prior to or at the
opening of business on the earlier of (i) the following Business Day and (ii)
the Payment Date of such payments. Any funds remaining in the Note Account on
any Payment Date after payment in
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full of all amounts of interest, Redemption Premium, if any, and principal due
on the Notes on such Payment Date shall belong to the Bank and be returned to
the Bank at its written direction; PROVIDED, HOWEVER, that no such withdrawal
will be permitted if as a result thereof the Note Face Value of the Notes
Outstanding would exceed the Credit Amount. Subject to Section 601, the Trustee
shall have no liability for losses to the Note Account caused by investments
made according to the terms of this Section 1203. Interest shall not accrue on
uninvested funds.
SECTION 1204. NOTE ACCOUNT STATEMENTS.
The Trustee shall give the Bank a monthly statement reflecting all
deposits to and withdrawals from the Note Account since the date of the last
statement furnished pursuant to this Section.
ARTICLE THIRTEEN
REDEMPTION OF NOTES
SECTION 1301. MANDATORY REDEMPTION.
(a) The Notes may not be redeemed at the option of the Bank prior to
the Stated Maturity of the Notes.
(b) However, the Notes are subject to mandatory redemption, and the
Trustee shall call for redemption all Notes Outstanding, upon the occurrence of
any of the following events:
(1) if any payment of principal of or interest on any Note has
been made with funds drawn under the Letter of Credit and the Trustee
does not receive from the FHLB of Atlanta a Certificate Reinstating the
Credit Amount (in the form described in Section 1103 hereof)
reinstating the Credit Amount in full by the close of business of the
fifth Business Day after the date the Trustee submitted a drawing
certificate under the Letter of Credit;
(2) if an Event of Default specified in clauses (1), (2) or
(3) of Section 501 shall have occurred; or
(3) if an Event of Default other than those specified in
clauses (1), (2) and (3) of Section 501 shall have occurred and a
declaration of acceleration has been made pursuant to Section 502 and
such declaration of acceleration has not been rescinded prior to the
giving of notice of redemption by the Trustee.
Notwithstanding the foregoing, the Notes are not subject to redemption
upon the occurrence of an event specified in clause (b)(1) of this Section or an
Event of Default specified in clause (3) of Section 501 if (i) the Trustee
receives from the FHLB of Atlanta a Certificate Reinstating the Credit Amount
reinstating the Credit Amount in full prior to the giving of notice of
redemption by the Trustee and (ii) no other Event of Default shall have occurred
and be continuing.
52
<PAGE>
Any redemption of Notes required by this Section 1301 shall be made in
accordance with this Article Thirteen, shall be made in whole, but not in part,
on any date, and shall be at a Redemption Price equal to the principal amount of
the Notes plus interest accrued thereon to the Redemption Date plus, in the case
of Designated Fixed Rate Notes only, the Redemption Premium for such Notes.
There shall be no Redemption Premium in respect of Notes that bear a floating
rate of interest.
SECTION 1302. REDEMPTION DATE.
In the event the Notes are to be redeemed pursuant to Section 1301, the
Trustee shall establish the Redemption Date as follows:
(1) In the case of redemption pursuant to Section 1301(b)(1),
the Redemption Date shall be a Business Day not more than ten (10) days
after the end of the period of five Business Days allotted for receipt
by the Trustee of the Certificate Reinstating the Credit Amount; and
(2) In the case of redemption pursuant to clause (2) or (3) of
Section 1301(b), the Redemption Date shall be a Business Day not more
than ten (10) days after the occurrence of the Event of Default or the
declaration of acceleration, as the case may be.
SECTION 1303. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than six (6) days prior to the Redemption Date, to each
Holder of Notes to be redeemed, at his last address appearing in the Note
Register on the record date for the giving of such notice of redemption (the
"Redemption Record Date"). The Redemption Record Date shall be as set by the
Trustee. In addition, in the case of Designated Fixed Rate Notes, notice of
redemption shall also be given by facsimile to the Quotation Agent for receipt
by such Quotation Agent no later than six (6) days prior to the Redemption Date.
All notices of redemption shall state:
(1) a description of the issue, including Cusip number, if
any,
(2) the Redemption Date,
(3) that on the Redemption Date the Redemption Price will
become due and payable upon each Note, and that interest thereon shall
cease to accrue on and after said date, and
(4) the place or places where the Notes are to be surrendered
for payment of the Redemption Price, which shall include the office or
agency of the Bank maintained in accordance with Section 1002.
Notice of redemption of Notes shall be given by the Trustee in the name
of and at the expense of the Bank.
53
<PAGE>
SECTION 1304. DEPOSIT OF REDEMPTION PRICE.
In accordance with Section 1202(b), the Bank shall remit to the Trustee
an amount of money sufficient to pay the Redemption Price of all Notes on the
Note Account Deposit Date prior to the Redemption Date.
SECTION 1305. NOTES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Notes shall,
on the Redemption Date, become due and payable at the Redemption Price therein
specified and on and after such date (unless the Bank shall default in the
payment of the Redemption Price) the Notes shall cease to bear interest. Upon
surrender of any such Note for redemption in accordance with said notice, such
Note shall be paid by the Bank at the Redemption Price in accordance with the
terms thereof and of the Indenture.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption and if funds for all amounts payable upon such redemption
shall not be on deposit with the Trustee, the principal, and Redemption Premium,
if applicable (and, to the extent that interest thereon shall be legally
enforceable, the interest), shall, until paid, bear interest from the Redemption
Date at the rate borne by the Note.
ARTICLE FOURTEEN
MEETINGS OF HOLDERS OF NOTES
SECTION 1401. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Notes may be called at any time and from time
to time pursuant to this Article for any of the following purposes:
(1) to give any notice to the Bank or to the Trustee, or to
give any directions to the Trustee, or to waive any default hereunder
and its consequences, or to take any other action authorized to be
taken by Holders of Notes pursuant to Article Five;
(2) to remove the Trustee and appoint a successor Trustee
pursuant to Section 609;
(3) to consent to the execution of an indenture supplemental
hereto pursuant to Section 902; or
(4) to take any other action authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture or an indenture
supplemental hereto or under applicable law.
54
<PAGE>
SECTION 1402. PLACE OF MEETINGS.
Meetings of Holders of Notes may be held at such place in New York, New
York, or in such other place in the United States, as the Trustee, or, in the
case of its failure to act, the Bank or the Holders of Notes calling the
meeting, shall from time to time determine.
SECTION 1403. CALL AND NOTICE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders to be held at
such time and at such place in the location designated in Section 1402 as the
Trustee shall determine. Notice of every meeting of Holders, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be given in the manner provided in Section 106
not less than 10 nor more than 120 days prior to the date set for such meeting
to each Holder affected by the business to be submitted to such meeting. The
Trustee may fix, in advance, a date as the record date for determining the
Holders entitled to notice of or to vote at any such meeting not less than 25
nor more than 135 days prior to the date fixed for such meeting.
(b) In case at any time the Bank or the Holders of at least 10% in
aggregate principal amount of outstanding Notes affected by the business to be
submitted to the meeting, shall, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, have requested the
Trustee to call a meeting of Holders to take any action authorized to be taken
under Section 1401 and the Trustee shall not have given notice of such meeting
within 20 days after receipt of such request, then the Bank or the Holders of
Notes in the amount above specified may determine the time and the place for
such meeting pursuant to Section 1402, the record date for determining the
Holders entitled to notice of or to vote at such meeting, and may call such
meeting by giving notice thereof at the time and in the manner as provided in
subsection (a) of this Section.
SECTION 1404. PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote on any particular item of business at any
meeting of Holders, a Person shall be (i) a Holder of one or more Outstanding
Notes affected by such item of business or (ii) a Person appointed by an
instrument in writing as proxy by a Holder of one or more such Notes. The only
Persons who shall be entitled to be present or to be heard at any meeting of
Holders shall be the Persons entitled to vote at such meeting and their counsel
and any representatives of the Trustee and its counsel and any representatives
of the Bank and its counsel, provided that the Persons entitled to vote at such
meeting and their counsel shall be entitled to speak only as to items of
business on which such Persons are entitled to vote.
SECTION 1405. CONDUCT OF MEETINGS; ADJOURNMENT.
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders in regard to proof of the holding of Notes and of the appointment of
proxies (subject to the provisions of Section 104), the appointment and duties
of inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall deem appropriate.
55
<PAGE>
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the Bank
or by Holders as provided in Section 1403, in which case the Bank or the Holders
calling the meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote.
(c) Subject to the provisions of Section 1404, at any meeting each
Holder or proxy shall be entitled to one vote for each $1,000 principal amount
of Notes held or represented by him; PROVIDED, HOWEVER, that no vote shall be
cast or counted at any meeting in respect of any Note challenged as not
Outstanding and ruled, by the chairman of the meeting to be not Outstanding. The
chairman of the meeting shall have no right to vote, except as a Holder or
proxy. Any meeting of Holders duly called pursuant to the provisions of Section
1403 at which a quorum is present may be adjourned from time to time, by the
Holders of a majority in principal amount of the Notes represented at the
meeting and entitled to vote, and the meeting may be held as so adjourned
without further notice.
(d) At any meeting of Holders, the presence of Persons holding or
representing Notes in an aggregate principal amount sufficient to take action
upon the business for the transaction of which such meeting was called shall
constitute a quorum, but, if less than a quorum be present, the Persons holding
or representing a majority in aggregate principal amount of the Notes
represented at the meeting may adjourn such meeting with the same effect, for
all interests and purposes, as though a quorum had been present, and the meeting
may be held as so adjourned without further notice.
(e) Any resolution passed, or action or decision taken, at any meeting
of Holders duly held in accordance with this Section shall be binding on all
Holders, whether or not present or represented at the meeting.
SECTION 1406. MANNER OF VOTING.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the Holders
or proxies and the serial numbers of the Notes held or represented by them. The
permanent chairman of the meeting shall appoint an inspector of votes who shall
count all votes cast at the meeting for or against any resolution and who shall
make and file with the secretary of the meeting a verified written report in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Holders shall be prepared by the permanent
secretary of the meeting and there shall be attached to said record the original
report of the inspector of votes on any vote by ballot taken thereat and
affidavits by one or more Persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was given as
provided in Section 1403. The record shall be signed and verified by the
affidavits of the permanent chairman and permanent secretary of the meeting and
one of the duplicates shall be delivered to the Bank and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto or
be accompanied by the ballots voted at the meeting. Any record so signed and
verified shall be conclusive evidence of the matters therein stated.
56
<PAGE>
SECTION 1407. CALL OF MEETINGS NOT TO HINDER TRUSTEE OR HOLDERS.
Nothing in this Article contained shall be deemed or construed to
authorize or permit, by reason of any call of a Holders' meeting or the exercise
of any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any rights conferred upon or reserved to
the Trustee or to the Holders under the provisions of this Indenture or any
indenture supplemental hereto or of the Notes.
ARTICLE FIFTEEN
APPOINTMENT OF TRUSTEE AS CALCULATION AGENT
SECTION 1501. APPOINTMENT OF TRUSTEE AS CALCULATION AGENT; DUTIES.
The Bank hereby appoints the Trustee as the initial Calculation Agent
in respect of, and for the purposes set forth in, Notes that bear interest at a
floating rate. The Trustee agrees to accept its obligations as Calculation Agent
as set forth herein.
57
<PAGE>
SECTION 1502. CALCULATION OF BASE RATES.
The Trustee shall determine the Base Rates and communicate the same to
the Bank in the manner provided in the Notes and upon the terms and conditions
contained herein. The Trustee shall notify by telephone or electronic
transmission the applicable Agents (at the Agents' notice addresses set forth in
the Distribution Agreement) of such Base Rate calculation on the applicable
Calculation Date (defined herein below).
SECTION 1503. STATUS OF CALCULATION AGENT.
Any acts of the Trustee in its capacity as Calculation Agent or in
connection with the Notes shall be solely as agent of the Bank and shall not
create or imply any obligation to, or any relationship with, the Holders of the
Notes in respect of its duties as Calculation Agent.
SECTION 1504. RIGHTS AND LIABILITIES OF CALCULATION AGENT.
The Trustee, in its capacity as Calculation Agent, shall incur no
liability for, or in respect of, any action taken or omitted to be taken, or
anything suffered by it in reliance upon any Note, written instruction, notice,
request, direction, certificate, affidavit, statement or other paper, document
or communication reasonably believed by it to be genuine. Any order,
certificate, affidavit, instruction, notice, request, direction, statement or
other communication from the Bank made or given by it and sent, delivered or
directed to the Trustee, in its capacity as Calculation Agent, under, pursuant
to or as permitted by any provision herein contained shall be sufficient if such
communication is in writing and signed by any officer of the Bank, who prior
thereto has been designated in writing by the Bank as authorized to make such
communications, such designation having been delivered to the Trustee. The
Trustee, as Calculation Agent, may consult with counsel satisfactory to it and
the advice or opinion of such counsel shall be full and complete authorization
and protection with respect to any action taken, omitted to be taken, or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel.
SECTION 1505. DUTIES OF CALCULATION AGENT.
The Trustee, as Calculation Agent, shall be obligated to perform such
duties and only such duties as are specifically set forth herein and in the
Notes. Any order, certificate, notice, request, direction or other communication
from the Bank made or given by it shall be sufficient if signed by any officer
of the Bank.
SECTION 1506. TERMINATION, RESIGNATION OR REMOVAL OF CALCULATION AGENT.
(a) The Trustee may at any time resign as Calculation Agent by giving
no less than 30 days written notice to the Bank unless the Bank agrees in
writing to a shorter time. The Bank may terminate the Trustee as Calculation
Agent at any time by giving written notice to the Trustee and specifying the
date when the termination of its status as Calculation Agent shall become
effective; however, the Trustee, as Calculation Agent, hereby agrees that no
termination by it or by the Bank shall become effective prior to the date of the
appointment by the Bank of a successor Calculation Agent meeting the
requirements of Section 1002 hereof and the acceptance of such appointment by
such successor Calculation Agent. Upon termination by either party under this
Section, the Trustee shall be entitled to the payment of any amount owed to it
by the
58
<PAGE>
Bank for its services as Calculation Agent and to the reimbursement of all
reasonable expenses incurred in connection with the services rendered by it
hereunder, and the provisions of Section 1507 shall remain in effect.
(b) Any successor Calculation Agent appointed shall execute and deliver
to the Trustee and to the Bank an instrument accepting such appointment, and
thereupon such successor Calculation Agent shall, without any further act, deed
or conveyance, become vested with all the authority, rights, powers, trusts,
immunities, duties and obligations of Calculation Agent, and with like effect as
if originally named as Calculation Agent hereunder and the Trustee shall
thereupon be obligated to transfer and deliver, and such subsequent Calculation
Agent shall be entitled to receive, copies of any relevant records maintained by
the Trustee.
SECTION 1507. INDEMNIFICATION.
The Bank agrees to indemnify and hold harmless the Trustee, its
officers and employees, in each case in respect of the Trustee's role as
Calculation Agent, from and against all actions, claims, damages, liabilities,
losses and expenses (including legal fees and expenses) relating to or arising
out of actions or inactions in its capacity as Calculation Agent, except
actions, claims, damages, liabilities, losses and expenses caused by the
negligence or willful misconduct of the Trustee, its officers or employees, in
each case in respect of the Trustee's role as Calculation Agent.
* * * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
BANKUNITED, FSB
By
-----------------------------------
[SEAL]
Attest
---------------------------
THE BANK OF NEW YORK
By
-----------------------------------
Consented and Agreed to:
FEDERAL HOME LOAN BANK OF
ATLANTA
By
-------------------------------
Authorized Signatory
By
-------------------------------
Authorized Signatory
60
<PAGE>
STATE OF FLORIDA )
) ss.:
COUNTY OF MIAMI-DADE )
On this __ day of __________________, before me, a notary public in and
for said State, personally appeared __________________________, known to me to
be the __________________________ of BANKUNITED, FSB, one of the entities that
executed the within instrument, and also known to me to be the persons who
executed it on behalf of said entity, and acknowledged to me that such entity
executed the within instrument pursuant to its By-Laws or a resolution of its
Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------
NOTARY PUBLIC
61
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, before me, a notary public in and for
said State, personally appeared __________________________________, known to me
to be the __________________________________ of THE BANK OF NEW YORK, one of the
entities that executed the within instrument, and also known to me to be the
person who executed it on behalf of said entity, and acknowledged to me that
such entity executed the within instrument pursuant to its By-Laws or a
resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------
NOTARY PUBLIC
62
<PAGE>
STATE OF GEORGIA )
) ss.:
COUNTY OF FULTON )
On this __ day of __________________, before me, a notary public in and
for said State, personally appeared ____________________________ and
____________________________, known to me to be the ___________________________
and ___________________________ of the FEDERAL HOME LOAN BANK OF ATLANTA, one of
the entities that executed the within instrument, and also known to me to be the
person who executed it on behalf of said entity, and acknowledged to me that
such entity executed the within instrument pursuant to its By-Laws or a
resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------
NOTARY PUBLIC
63
<PAGE>
EXHIBIT A
LETTER OF CREDIT
64
EXHIBIT 4.92
THIS NOTE IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC").
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITARY") TO THE
BANK OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
NOTE ISSUED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF,
THIS NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
THIS NOTE IS ISSUABLE ONLY IN FULLY REGISTERED FORM IN MINIMUM DENOMINATIONS OF
$250,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
No. FXR-________ REGISTERED
CUSIP NO.: _______
GLOBAL SENIOR NOTE
(Fixed Rate)
ORIGINAL ISSUE DATE: MATURITY DATE: INTEREST RATE: ___%
ORIGINAL ISSUE DISCOUNT: Total Amount of OID:
[ ] Yes Yield to Maturity:
[ ] No Initial Accrual Period:
REDEMPTION PREMIUM OTHER PROVISIONS:
[ ] No
[ ] Yes
Quotation Agent:
Adjusted Treasury Rate Spread:
<PAGE>
<TABLE>
<CAPTION>
IF REDEEMED PRIOR TO SCHEDULED MAXIMUM REDEMPTION PRICE
NOVEMBER 15, (AS A PERCENTAGE OF NOTE PRINCIPAL AMOUNT)
-------------------- ------------------------------------------
<S> <C>
Scheduled Maximum ---------%
Redemption Price: ---------%
---------%
---------%
---------%
---------%
---------%
---------%
---------%
---------%
</TABLE>
2
<PAGE>
BankUnited, FSB (the "Bank"), a federal savings bank, for value received,
hereby promises to pay to CEDE & CO., or registered assigns, the principal sum
of _____________________________________________________________ United States
Dollars on the Maturity Date shown above, and to pay interest thereon at the
rate per annum shown above until the principal hereof is paid or duly made
available for payment. The Bank will pay interest semi-annually on each ________
_______and ______________________ (herein called an "Interest Payment Date"),
commencing with the first Interest Payment Date following the Original Issue
Date shown above, and on the Maturity Date shown above; provided, however, that
if the Original Issue Date shown above is between a Regular Record Date (as
defined herein) and an Interest Payment Date, interest payments will commence on
the Interest Payment Date following the next succeeding Regular Record Date.
Interest on this Note will accrue from the most recent Interest Payment Date to
which interest has been paid or fully provided for or, if no interest has been
paid on this Note, from the Original Issue Date shown above until the principal
hereof has been paid or duly provided for or made available for payment in
accordance with the terms of the Indenture. 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. The interest so payable, and punctually paid or duly
provided for on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture be paid only to the Person in whose name this Note (or
one or more Predecessor Notes) is registered at the close of business on the
Regular Record Date for such Interest Payment Date. The "Regular Record Date"
shall be the date which is 15 calendar days prior to the related Interest
Payment Date, whether or not such date shall be a Business Day; provided,
however, that interest payable on the Maturity Date shown above or upon
redemption will be payable to the Person to whom the principal hereof shall be
payable. Any such interest which is payable, but is not punctually paid or duly
provided for on any Interest Payment Date, shall forthwith cease to be payable
to the registered Holder on such Regular Record Date, and shall be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on a Special Record Date for the payment of such
overdue interest to be fixed by the Trustee, notice of which shall be given to
the Holder of this Note not less than ten days prior to such Special Record
Date, or may be paid at any time in any other lawful manner, all as more fully
provided in the Indenture.
Payments of principal, the Redemption Premium, if any, and interest on
this Note shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private
debts. Payments of interest on this Note (other than on the Maturity Date or
upon earlier redemption or repayment) will be made by wire transfer to such
account as has been appropriately designated to the Paying Agent (as defined
herein) by the person entitled to such payments.
If any Interest Payment Date, Maturity Date or date of earlier redemption
falls on a day that is not a Business Day, the required payment of principal,
Redemption Premium, if any, and/or interest shall be made on the next succeeding
Business Day with the same force and effect as if made on the date such payment
was due, and no interest shall accrue with respect to such payment for the
period from and after such Interest Payment Date, the Maturity Date or date of
earlier redemption, as the case may be, to the date of such payment on the next
succeeding Business Day.
3
<PAGE>
As used herein, "Business Day" means any day which is not a Saturday or a
Sunday and that in The City of New York and Atlanta, Georgia is not a day on
which banking institutions are authorized or required by law.
The principal amount hereof, Redemption Premium, if any, and interest due
at maturity or redemption will be paid upon maturity or redemption in
immediately available funds against presentation of this Note at the Corporate
Trust Office of the Trustee, as paying agent (the "Paying Agent") in New York,
New York (as of the date of this Note, such office being located at 101 Barclay
Street, New York, New York 10286), or at such other office or agency of the
Trustee as the Bank shall designate by written notice to the registered Holder
of this Note. The Bank of New York is also the authenticating agent (the
"Authenticating Agent") and the note registrar (the "Note Registrar") for the
Notes (as defined on the reverse hereof).
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Note shall not be entitled to any benefits
under the Indenture or be valid or obligatory for any purpose.
4
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Note to be duly executed.
BANKUNITED, FSB
By:
---------------------------------
Authorized Signatory
By:
---------------------------------
Authorized Signatory
[SEAL]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
as Trustee
By:
-------------------------------------
Authorized Signatory
Dated:
5
<PAGE>
[Reverse]
This Note is one of a duly authorized issue of Senior Notes (herein called
the "Notes") of the Bank, issued and to be issued under an Indenture dated as of
November 4, 1998 (herein called the "Indenture"), between the Bank and the Bank
of New York, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture) to which the Federal Home Loan Bank of
Atlanta (herein called the "FHLB of Atlanta"), has joined as a consenting party,
to which Indenture and all Indentures supplemental thereto reference is hereby
made for a statement of the respective rights, duties and obligations thereunder
of the Bank, the Trustee and the Holders of the Notes and the terms upon which
the Notes are, and are to be, authenticated and delivered. The Notes may bear
different dates, mature at different times and bear interest at different fixed
or floating rates and differ in such other respects as may be provided pursuant
to the terms of the Indenture.
Payment of the principal of, Redemption Premium, if any, and interest on,
this Note is supported by an irrevocable standby letter of credit (herein called
the "Letter of Credit") issued to the Trustee by the FHLB of Atlanta pursuant to
a certain Letter of Credit Reimbursement Agreement (herein called the
"Reimbursement Agreement") between the Bank and the FHLB of Atlanta.
Copies of the Indenture, the Letter of Credit, the Reimbursement Agreement
and other related credit documents are on file with the Trustee at its Corporate
Trust Office and are available for inspection at such office. Reference is made
to those documents for the terms upon which the Letter of Credit has been
issued, the liability of the FHLB of Atlanta under the Letter of Credit with
respect to payment of this Note and the procedure governing demands for payment
under the Letter of Credit by the Trustee.
This Note is subject to mandatory redemption in whole, but not in part, at
any time, at the Redemption Price (as defined below) in the event that a demand
under the Letter of Credit has been made for a payment of principal of or
interest on this Note or any Note issued pursuant to the Indenture and the
Trustee fails to receive notice from the FHLB of Atlanta within five Business
Days thereafter (I.E., within five Business Days after submission to the FHLB of
Atlanta by the Trustee of a drawing certificate under the Letter of Credit) that
the Credit Amount of the Letter of Credit has been reinstated or (ii) upon the
occurrence of certain Events of Default, or upon the declaration of acceleration
of the principal, and Redemption Premium, if any, of all the Notes following the
occurrence of certain other Events of Default, all in accordance with the
provisions of the Indenture. In the event this Note shall be called for
redemption, notice thereof shall be given by the Trustee by mailing a copy of
the redemption notice to the Holder hereof at the address shown in the Note
Register and, if a Quotation Agent is named on the face hereof, to the Quotation
Agent in accordance with the provisions of the Indenture. If notice of
redemption shall have been duly given, and funds for the payment of Interest to
the Redemption Date shall be on deposit with the Trustee on such Redemption
Date, this Note shall cease to bear interest on the Redemption Date.
The "Redemption Price" means the sum of (i) the principal amount hereof,
(ii) if specified on the face hereof, the Redemption Premium, if any, plus (iii)
accrued interest to the
6
<PAGE>
Redemption Date; provided, however, that if a Redemption Premium is payable in
respect of this Note, the Redemption Price shall not exceed the applicable
Scheduled Maximum Redemption Price set forth on the face hereof plus accrued
interest to the Redemption Date. There shall be no Redemption Premium payable in
respect of this Note unless so specified on the face hereof.
"Redemption Premium" means the amount equal to the present value, as
determined by the Quotation Agent, of the scheduled payments of interest hereon
from the Redemption Date to but excluding the Maturity Date shown on the face
hereof, discounted to the Redemption Date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate.
"Adjusted Treasury Rate" means the sum of (i) the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such Redemption
Date, plus (ii) the Adjusted Treasury Rate Spread, if and as specified on the
face hereof.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having comparable scheduled payments of
interest to this Note from the Redemption Date to the Maturity Date 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 this Note.
"Quotation Agent" means the Quotation Agent specified on the face
hereof, and its successors.
"Reference Treasury Dealers" means: (i) Credit Suisse First Boston
Corporation, PaineWebber Incorporated and Prudential Securities Incorporated and
their respective successors; PROVIDED, HOWEVER, that if any of the foregoing
shall cease to be a Primary Treasury Dealer, the Quotation Agent shall
substitute therefor another Primary Treasury Dealer, and (ii) two other Primary
Treasury Dealers selected by the Quotation Agent.
"Comparable Treasury Price" means, with respect to the Redemption Date for
a Fixed Rate Note, the average of the Reference Treasury Dealer Quotations for
the Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or if the Quotation Agent 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 the Redemption Date, the average, as determined by
the Quotation Agent, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Quotation Agent by such Reference Treasury Dealers at 5:00 p.m.,
New York City time, on the fourth Business Day preceding the Redemption Date.
"Primary Treasury Dealer" means a primary U.S. Government securities
dealer in The City of New York.
7
<PAGE>
Except as provided in the preceding paragraph, this Note is not redeemable
prior to the Maturity Date shown on the face hereof or otherwise subject to
prepayment; provided, however, that if an Event of Default, as defined in the
Indenture, shall occur, the principal of all the Notes and the Redemption
Premium thereon may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the Bank
and the rights of the Holders of the Notes at any time by the Bank and the
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of the Notes at the time Outstanding affected thereby. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding
on behalf of the Holders of all Notes to waive compliance by the Bank with
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Bank, which is
absolute and unconditional, to pay the principal of, Redemption Premium, if any,
and interest on this Note at the time, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Bank, upon surrender of this Note for registration of transfer at the office
or agency of the Note Registrar in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Bank and the Note Registrar, duly executed by, the
Holder hereof or by his attorney duly authorized in writing, and thereupon one
or more new Notes, of authorized denominations and for the same aggregate
principal amount, having the identical Original Issue Date, Maturity Date and
provisions with respect to payment of interest, will be issued to the designated
transferee or transferees.
Prior to due presentment of this Note for registration of transfer, the
Bank and the Trustee, and any agent of the Bank and the Trustee, may treat the
Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Bank or the
Trustee, nor any such agent, shall be affected by notice to the contrary.
The Notes are issuable only in fully registered form in minimum
denominations of $250,000 and integral multiples of $1,000 in excess thereof.
Beneficial interests represented by this Note are exchangeable for
definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, only if (x) The Depository Trust Company, as Depositary (the
"Depositary") notifies the Bank that it is unwilling or unable to continue as
Depositary for this Note or if at any time the Depositary ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, and a successor depositary is not appointed by the Bank within 90 days,
(y) there shall
8
<PAGE>
have occurred and be continuing an Event of Default with respect to this Note,
or (z) the Bank in its sole discretion determines that this Note will be so
exchangeable. Any Note representing such beneficial interests that is
exchangeable pursuant to the preceding sentence shall be exchangeable in whole
for definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, in minimum denominations of $250,000 and integral multiples of
$1,000 in excess thereof. Such definitive Notes shall be registered in the name
or names of such person or persons as the Depositary shall instruct the Trustee.
No service charge shall be made for any such registration of transfer or
exchange, but the Bank may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of New York, without regard to conflicts of laws
principles.
9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
the within Note, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -- _______________ Custodian _____________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------------------------
(State)
Additional abbreviations may also be used though not in the
above list.
10
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),_________________
assign(s) and transfer(s) unto__________________________________________________
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
------------------------------------
/------------------------------/
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including postal zip code, of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
to transfer said Note on the books of the Trustee with full power of
substitution in the premises.
Dated:_________________________ ______________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of
the within Note in every
particular, without alteration or
enlargement or any change
whatsoever.
_______________________________________
Signature Guarantee
11
EXHIBIT 4.93
THIS NOTE IS A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC").
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITARY") TO
BANKUNITED, FSB OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR, OR IN
LIEU OF, THIS NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
THIS NOTE IS ISSUABLE ONLY IN FULLY REGISTERED FORM IN MINIMUM DENOMINATIONS OF
$250,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
No. FLR-_____ REGISTERED
CUSIP NO.: _____
GLOBAL SENIOR NOTE
(Floating Rate)
ORIGINAL ISSUE DATE: MATURITY DATE:
INITIAL INTEREST RATE: _____% INDEX MATURITY:
INTEREST RATE MINIMUM INTEREST RATE:
IF LIBOR:
[ ] Libor Telerate MAXIMUM INTEREST RATE:
Page:
[ ] Libor Reuters INTEREST PAYMENT PERIOD:
Page:
Designated LIBOR Currency: INTEREST RATE RESET PERIOD:
IF CMT: CALCULATION AGENT (if other than the
[ ] Telerate Page 7055 Trustee):
[ ] Telerate Page 7052
<PAGE>
[ ] Weekly Average
[ ] Monthly Average
Designated CMT Maturity Index:
SPREAD (PLUS OR MINUS) ORIGINAL ISSUE DISCOUNT
AND/OR SPREAD MULTIPLIER: [ ] Yes
[ ] No
Total Amount of OID:
INTEREST PAYMENT DATES: Yield to Maturity:
Initial Accrual Period:
INITIAL INTEREST RESET DATE:
INTEREST RESET DATES:
2
<PAGE>
BankUnited, FSB (the "Bank"), for value received, hereby promises to pay
to CEDE & CO., or registered assigns, the principal sum of _____________________
United States Dollars on the Maturity Date shown above, and to pay interest
thereon, at a rate per annum equal to the Initial Interest Rate shown above
until the first Interest Reset Date shown above following the Original Issue
Date shown above and thereafter at a rate determined in accordance with the
provisions on the reverse hereof under the heading or headings "Determination of
CMT Rate," "Determination of Commercial Paper Rate," "Determination of Eleventh
District Cost of Funds Rate," "Determination of Federal Funds Rate,"
"Determination of LIBOR," "Determination of Prime Rate," or "Determination of
Treasury Rate," depending upon the Interest Rate Basis shown on the face hereof,
until the principal hereof is paid or duly made available for payment.
The Bank will pay interest monthly, quarterly, semi-annually or annually
as shown above under "Interest Payment Period," on each Interest Payment Date
shown above, commencing with the first Interest Payment Date shown above next
succeeding the Original Issue Date shown above, and on the Maturity Date shown
above; provided, however, that if the Original Issue Date is between a Regular
Record Date (as hereinafter defined) and an Interest Payment Date, interest
payments will commence on the Interest Payment Date following the next
succeeding Regular Record Date, and provided further, that if an Interest
Payment Date would fall on a day that is not a Business Day (as defined on the
reverse hereof), such Interest Payment Date shall be the following day that is a
Business Day, except that in the case the Interest Rate Basis is LIBOR, as
indicated above, if such next Business Day falls in the next calendar month,
such Interest Payment Date shall be the next preceding day that is a Business
Day. Except as provided above and in the Indenture, interest payments will be
made on the Interest Payment Dates shown above. The "Regular Record Date" shall
be the date 15 calendar days prior to such Interest Payment Date, whether or not
such date shall be a Business Day. Interest on this Note will accrue from the
most recent Interest Payment Date to which interest has been paid or duly
provided for. The interest payment on the Maturity Date will include interest
accrued to and excluding such Maturity Date, or, if no interest has been paid on
this Note, from the Original Issue Date, until the principal hereof has been
paid or made available for payment. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, subject to certain
exceptions provided in the Indenture, be paid only to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such Interest Payment Date; provided,
however, that interest payable on the Maturity Date shown above or upon
redemption will be payable to the Person to whom the principal hereof shall be
payable. Any such interest which is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date shall forthwith cease to be payable
to the registered Holder hereof on such Regular Record Date, and shall be paid
to the Person in whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on a Special Record Date for the payment of
such overdue interest to be fixed by the Trustee, notice of which shall be given
to the Holder hereof not less than ten days prior to such Special Record Date,
or may be paid at any time in any other lawful manner, all as more fully
provided in the Indenture.
Payments of principal and interest on this Note shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts. Payments of interest on this
Note (other than on the Maturity Date or upon earlier redemption or repayment)
will be made by wire transfer to such account as has been
3
<PAGE>
appropriately designated to the Paying Agent (as defined herein) by the person
entitled to such payments.
The principal amount hereof and interest due at maturity or redemption
will be paid upon maturity or redemption in immediately available funds against
presentation of this Note at the Corporate Trust Office of the Trustee, as
paying agent (the "Paying Agent") in New York, New York (as of the date of this
Note, such office being located at 101 Barclay Street, New York, New York
10286), or at such other office or agency of the Paying Agent as the Bank shall
designate by written notice to the registered Holder of this Note. The Trustee
is also the authenticating agent (the "Authenticating Agent") and the note
registrar (the "Note Registrar") for the Notes (as defined on the reverse
hereof).
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
4
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Note to be duly executed.
BANKUNITED, FSB
By:
------------------------------------
Authorized Signatory
By:
------------------------------------
Authorized Signatory
[SEAL]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
as Trustee
By:
--------------------------
Authorized Signatory
Dated:
5
<PAGE>
[Reverse]
This Note is one of a duly authorized issue of Senior Notes (herein called
the "Notes") of the Bank issued and to be issued under an Indenture, dated as of
November 4, 1998 (herein called the "Indenture"), between the Bank and The Bank
of New York, as trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which the Federal Home Loan Bank of
Atlanta (herein called the "FHLB of Atlanta") has joined as a consenting party,
to which Indenture and all Indentures supplemental thereto reference is hereby
made for a statement of the respective rights, duties and obligations thereunder
of the Bank, the Trustee and the Holders of the Notes, and the terms upon which
the Notes are, and are to be, authenticated and delivered. The Notes may bear
different dates, mature at different times, bear interest at different fixed or
floating rates, and differ in such other respects as provided herein or as may
be provided pursuant to the terms of the Indenture.
Payment of the principal of and interest on this Note is supported by an
irrevocable standby letter of credit (herein called the "Letter of Credit")
issued to the Trustee by the FHLB of Atlanta pursuant to a certain Letter of
Credit Reimbursement Agreement (herein called the "Reimbursement Agreement")
between the Bank and the FHLB of Atlanta.
Copies of the Indenture, the Letter of Credit, the Reimbursement Agreement
and other related credit documents are on file with the Trustee at its Corporate
Trust Office and are available for inspection at such office. Reference is made
to those documents for the terms upon which the Letter of Credit has been
issued, the liability of the FHLB of Atlanta under the Letter of Credit with
respect to payment of this Note and the procedures governing demands for payment
under the Letter of Credit by the Trustee.
Commencing with the first Interest Reset Date shown on the face hereof
following the Original Issue Date shown on the face hereof, the rate at which
interest on this Note is payable (herein, called the "Interest Rate") shall be
adjusted weekly, monthly, quarterly, semi-annually or annually as shown on the
face hereof under "Interest Rate Reset Period." Each such adjusted rate shall be
applicable on and after the Interest Reset Date to which it relates to but not
including the next succeeding Interest Reset Date or until maturity or
redemption, as the case may be.
If any Interest Reset Date would be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding day that is a
Business Day, except that in the case of a LIBOR Note, if such Business Day is
in the next succeeding calendar month, such Interest Reset Date shall be the
next preceding Business Day. "Business Day" means any day which is not a
Saturday or a Sunday and that in The City of New York and Atlanta, Georgia is
not a day on which banking institutions are authorized or required by law,
regulation or executive order to close and, with respect to which LIBOR is an
applicable interest rate formula, is also a London Business Day. "London
Business Day" means any day on which dealings in deposits in US Dollars are
transacted in the London interbank market.
The interest rate applicable to each Interest Rate Reset Period commencing
on an Interest Reset Date will be the rate determined on the "Interest
Determination Date." The Interest
6
<PAGE>
Determination Date with respect to the CMT Rate, the Commercial Paper Rate, the
Federal Funds Rate and the Prime Rate will be the second Business Day preceding
each Interest Reset Date; the Interest Determination Date with respect to the
Eleventh District Cost of Funds Rate will be the last working day of the month
immediately preceding each Interest Reset Date on which the Federal Home Loan
Bank of San Francisco publishes the Index (as herein defined); and the Interest
Determination Date with respect to LIBOR will be the second London Business Day
immediately preceding each Interest Reset Date. With respect to the Treasury
Rate, the Interest Determination Date will be the day in the week in which the
related Interest Reset Date falls on which day Treasury Bills (as defined below)
are normally auctioned (Treasury Bills are normally sold at auction on Monday of
each week, unless the day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held on
the preceding Friday); provided, however, that if an auction is held on the
Friday of the week preceding the related Interest Reset Date, the related
Interest Determination Date will be such preceding Friday; and provided further
that if an auction falls on any Interest Reset Date, then the related Interest
Reset Date will instead be the first Business Day following such auction.
The "Calculation Date", if applicable, pertaining to any Interest
Determination Date shall be the earlier of (i) the tenth calendar day after such
Interest Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date, Maturity Date or date of earlier redemption,
as the case may be.
All percentages resulting from any calculation on this Note will be
rounded to the nearest one hundred-thousandth of a percent, with five
one-millionths of a percent rounded upward, e.g. 9.876545% (or .09876545) being
rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting
from such calculation on this Note will be rounded to the nearest cent (with
one-half cent being rounded upward).
Subject to applicable provisions of law and except as specified herein, on
each Interest Reset Date, the Interest Rate on this Note shall be the rate
determined in accordance with the provisions of the applicable heading or
headings below.
DETERMINATION OF CMT RATE. If an Interest Rate Basis for this Note is the
CMT Rate, as indicated on the face hereof, the CMT Rate shall be determined as
of the applicable Interest Determination Date ("the CMT Rate Interest
Determination Date"), as the rate displayed on the Designated CMT Telerate Page
under the caption "...Treasury Constant Maturities...Federal Reserve Board
Release H.15...Mondays Approximately 3:45 P.M.," under the column for the
Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the weekly or monthly average, as
specified on the face hereof, for the week or the month, as applicable, ended
immediately preceding the week or the month, as applicable, in which the related
CMT Rate Interest Determination Date falls. If such rate is no longer displayed
on the relevant page or is not so displayed by 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for such CMT Rate Interest
7
<PAGE>
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in H.15(519). If such rate is no
longer published or is not so published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate on such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in
H.15(519). If such information is not so provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
offered rates as of approximately 3:30 P.M., New York City time, on such CMT
Rate Interest Determination Date reported, according to their written records,
by three leading primary United States government securities dealers in The City
of New York (which may include Credit Suisse First Boston Corporation,
PaineWebber Incorporated and Prudential Securities Incorporated (the "Agents")
or their affiliates) (each, a "Reference Dealer") selected by the Calculation
Agent (from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent is unable to obtain three such Treasury Note quotations, the
CMT Rate on such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offered rates as of approximately 3:30 P.M., New York
City time, on such CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offered rates obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided, however,
that if fewer than three Reference Dealers so selected by the Calculation Agent
are quoting as mentioned herein, the CMT Rate determined as of such CMT Rate
Interest Determination Date will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent will
obtain quotations for the Treasury Note with the shorter remaining term to
maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.
(or any successor service) on the page specified on the face hereof (or any
other page as may replace such page on such service) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519) or, if no such
page is specified on the face hereof, page 7052.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified on the face hereof with
8
<PAGE>
respect to which the CMT Rate will be calculated or, if no such maturity is
specified on the face hereof, 2 years.
"H.15(519)" means the weekly statistical release designated as such, or
any successor publication, published by the Board of Governors of the Federal
Reserve System.
DETERMINATION OF COMMERCIAL PAPER RATE. If an Interest Rate Basis for this
Note is the Commercial Paper Rate, as indicated on the face hereof, the
Commercial Paper Rate shall be determined as of the applicable Interest
Determination Date (a "Commercial Paper Rate Interest Determination Date"), as
the Money Market Yield (as hereinafter defined) on such date of the rate for
commercial paper having the Index Maturity specified on the face hereof as
published in H.15(519) under the caption "Commercial Paper-Nonfinancial" or, if
not so published by 3:00 P.M., New York City time, on the related Calculation
Date, the rate on such Commercial Paper Rate Interest Determination Date for
commercial paper having the Index Maturity specified on the face hereof as
published in H.15 Daily Update, or such other recognized electronic source used
for the purpose of displaying such rate, under the caption "Commercial
Paper-Nonfinancial." If such rate is not yet published in H.15(519), H.15 Daily
Update or another recognized electronic source by 3:00 P.M., New York City time,
on the related Calculation Date, then the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include the Agents or their
affiliates) selected by the Calculation Agent for commercial paper having the
Index Maturity specified on the face hereof placed for industrial issuers whose
bond rating is "Aa", or the equivalent, from a nationally recognized statistical
rating organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined as of such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
Money Market Yield = D X 360
--------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the applicable Interest Reset Period.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at HTTP://WWW.BOG.FRB.FED.US/RELEASES/H15/UPDATE, or any successor site or
publication.
DETERMINATION OF ELEVENTH DISTRICT COST OF FUNDS RATE. If an Interest Rate
Basis for this Note is the Eleventh District Cost of Funds, as indicated on the
face hereof, the Eleventh District Cost of Funds shall be determined as of the
applicable Interest Determination Date (an
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"Eleventh District Cost of Funds Interest Determination Date"), as the rate
equal to the monthly weighted average cost of funds for the calendar month
immediately preceding the month in which such Eleventh District Cost of Funds
Rate Interest Determination Date falls as set forth under the caption "11th
District" on the display on Bridge Telerate, Inc. (or any successor service) on
page 7058 ("Telerate Page 7058") as of 11:00 A.M., San Francisco time, on such
Eleventh District Cost of Funds Rate Interest Determination Date. If such rate
does not appear on Telerate Page 7058 on such Eleventh District Cost of Funds
Rate Interest Determination Date, then the Eleventh District Cost of Funds Rate
on such Eleventh District Cost of Funds Rate Interest Determination Date shall
be the monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the FHLB of San Francisco as such cost of funds for the calendar
month immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date. If the FHLB of San Francisco fails to announce the Index on
or prior to such Eleventh District Cost of Funds Rate Interest Determination
Date for the calendar month immediately preceding such Eleventh District Cost of
Funds Rate Interest Determination Date, the Eleventh District Cost of Funds Rate
determined as of such Eleventh District Cost of Funds Rate Interest
Determination Date will be the Eleventh District Cost of Funds Rate in effect on
such Eleventh District Cost of Funds Rate Interest Determination Date.
DETERMINATION OF FEDERAL FUNDS RATE. If an Interest Rate Basis for this
Note is the Federal Funds Rate, as indicated on the face hereof, the Federal
Funds Rate shall be determined as of the applicable Interest Determination Date
(a "Federal Funds Rate Interest Determination Date"), as the rate on such date
for United States dollar federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)," as such rate is displayed on Bridge
Telerate, Inc. (or any successor service) on page 120 ("Telerate Page 120"), or,
if such rate does not appear on Telerate Page 120 or is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on such
Federal Funds Rate Interest Determination Date for United States dollar federal
funds as published in H.15 Daily Update, or such other recognized electronic
source used for the purpose of displaying such rate, under the caption "Federal
Funds (Effective)." If such rate does not appear on Telerate Page 120 or is not
yet published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 P.M., New York City time, on the related Calculation Date, then
the Federal Funds Rate on such Federal Funds Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the rates for the last transaction in overnight United States dollar federal
funds arranged prior to 9:00 A.M., New York City time, on such Federal Funds
Rate Interest Determination Date by three leading brokers of federal funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if any of the brokers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate determined as of such Federal Funds Rate Interest Determination Date
shall be the Federal Funds Rate in effect on such Federal Funds Rate Interest
Determination Date.
DETERMINATION OF LIBOR. If an Interest Rate Basis for this Note is LIBOR,
as indicated on the face hereof, LIBOR shall be determined by the Calculation
Agent as of the applicable Interest Determination Date (a "LIBOR Interest
Determination Date") in accordance with the following provisions:
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(i) LIBOR will be either: (a) if "LIBOR Reuters" is specified is specified
on the face hereof, the arithmetic mean of the offered rates (unless the
Designated LIBOR Page by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Designated
LIBOR Currency having the Index Maturity specified on the face hereof,
commencing on the applicable Interest Reset Date, that appear (or, if only
a single rate is required as aforesaid, appears) on the Designated LIBOR
Page as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date, or (b) if "LIBOR Telerate" is specified on the face hereof or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified on the face
hereof as the method for calculating LIBOR, the rate for deposits in the
Designated LIBOR Currency having the Index Maturity specified on the face
hereof, commencing on such Interest Reset Date, that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates so
appear, or if no such rate so appears, as applicable, LIBOR on such LIBOR
Interest Determination Date will be determined in accordance with the
provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of
four major reference banks (which may include affiliates of the Agents) in
the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in
the Designated LIBOR Currency for the period of the Index Maturity
specified on the face hereof, commencing on the applicable Interest Reset
Date, to prime banks in the London interbank market at approximately 11:00
A.M., London time, on such LIBOR Interest Determination Date and in a
principal amount that is representative for a single transaction in the
Designated LIBOR Currency in such market at such time. If at least two
such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If
fewer than two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M., in the applicable Principal Financial
Center, on such LIBOR Interest Determination Date by three major banks
(which may include affiliates of the Agents) in such Principal Financial
Center selected by the Calculation Agent for loans in the Designated LIBOR
Currency to leading European banks, having the Index Maturity specified on
the face hereof commencing on the second London Business Day following
that LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in the Designated LIBOR Currency
in such market at such time; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
"Designated LIBOR Currency" means the currency or composite currency
specified on the face hereof as to which LIBOR shall be calculated or, if no
such currency or composite currency is specified on the face hereof, United
States dollars.
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"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified on the
face hereof, the display on the Reuter Monitor Money Rates Service (or any
successor service) on the page specified on the face hereof (or any other page
as may replace such page on such service) for the purpose of displaying the
London interbank rates of major banks for the Designated LIBOR Currency, or (b)
if "LIBOR Telerate" is specified on the face hereof or neither "LIBOR Reuters"
nor "LIBOR Telerate" is specified on the face hereof as the method for
calculating LIBOR, the display on Bridge Telerate, Inc. (or any successor
service) on the page specified on the face hereof (or any other page as may
replace such page on such service) for the purpose of displaying the London
interbank rates of major banks for the Designated LIBOR Currency.
"Principal Financial Center" means the capital city of the country to
which the Designated LIBOR Currency relates (or, in the case of ECU,
Luxembourg), except, in each case, that with respect to United States dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders and Swiss
francs, the "Principal Financial Center" shall be The City of New York, Sydney,
Toronto, Frankfurt, Amsterdam and Zurich, respectively.
DETERMINATION OF PRIME RATE. If an Interest Rate Basis for this Note is
the Prime Rate, as indicated on the face hereof, the Prime Rate shall be
determined as of the applicable Interest Determination Date (a "Prime Rate
Interest Determination Date"), as the rate on such date as such rate is
published in H.15(519) under the caption "Bank Prime Loan" or, if not published
by 3:00 P.M., New York City time, on the related Calculation Date, the rate on
such Prime Rate Interest Determination Date as published in H.15 Daily Update,
or such other recognized electronic source used for the purpose of displaying
such rate, under the caption "Bank Prime Loan." If such rate is not yet
published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 P.M., New York City time, on the related Calculation Date, then
the Prime Rate shall be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Screen USPRIME1 Page (as
hereinafter defined) as such bank's prime rate or base lending rate as in effect
for such Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen USPRIME1 Page for such Prime Rate Interest
Determination Date, then the Prime Rate shall be the arithmetic mean of the
prime rates or base lending rates quoted on the basis of the actual number of
days in the year divided by a 360-day year as of the close of business on such
Prime Rate Interest Determination Date by four major money center banks (which
may include affiliates of the Agents) in The City of New York selected by the
Calculation Agent. If fewer than four such quotations are so provided, then the
Prime Rate shall be the arithmetic mean of four prime rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as of the
close of business on such Prime Rate Interest Determination Date as furnished in
The City of New York by the major money center banks, if any, that have provided
such quotations and by a reasonable number of substitute banks or trust
companies (which may include affiliates of the Agents) to obtain four such prime
rate quotations, provided such substitute banks or trust companies are organized
and doing business under the laws of the United States, or any State thereof,
each having total equity capital of at least $500 million and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks or trust companies so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Prime Rate determined as of such Prime Rate
Interest Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
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"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
DETERMINATION OF TREASURY RATE. If an Interest Rate Basis for this Note is
the Treasury Rate, as indicated on the face hereof, the Treasury Rate shall be
determined as of the applicable Interest Determination Date (a "Treasury Rate
Interest Determination Date"), as the rate from the auction held on such
Treasury Rate Interest Determination Date (the "Auction") of direct obligations
of the United States ("Treasury Bills") having the Index Maturity specified on
the face hereof under the caption "AVGE INVEST YIELD" on the display on Bridge
Telerate, Inc. (or any successor service) on page 56 ("Telerate Page 56") or
page 57 ("Telerate Page 57") or, if not so published by 3:00 P.M., New York City
time, on the related Calculation Date, the auction average rate of such Treasury
Bills (expressed as a bond equivalent on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis) as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
Auction of Treasury Bills having the Index Maturity specified on the face hereof
are not so published by 3:00 P.M., New York City time, on the related
Calculation Date, or if no such Auction is held, then the Treasury Rate will be
the rate (expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) on such Treasury Rate
Interest Determination Date of Treasury Bills having the Index Maturity
specified on the face hereof as published in H.15(519) under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market" or, if not yet published
by 3:00 P.M., New York City time, on the related Calculation Date, the rate on
such Treasury Rate Interest Determination Date of such Treasury Bills as
published in H.15 Daily Update, or such other recognized electronic source used
for the purpose of displaying such rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market." If such rate is not yet published
in H.15(519), H.15 Daily Update or another recognized electronic source, then
the Treasury Rate will be calculated by the Calculation Agent and will be a
yield to maturity (expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Treasury Rate Interest Determination Date, of three leading
primary United States government securities dealers (which may include the
Agents or their affiliates) selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity specified
on the face hereof; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate determined as of such Treasury Rate Interest Determination Date will be the
Treasury Rate in effect on such Treasury Rate Interest Determination Date.
Notwithstanding the foregoing, the interest rate hereon shall not be
greater than the Maximum Interest Rate specified on the face hereof or less than
the Minimum Interest Rate, if any, specified on the face hereof. In addition to
any Maximum Interest Rate applicable hereto pursuant to the above provisions,
the interest rate on this Note will in no event be higher than the maximum rate
permitted by New York law, as the same may be modified by United States law of
general application. The Calculation Agent shall calculate the interest rate
hereon in accordance with the foregoing on or before each Calculation Date.
Unless otherwise specified on the face hereof, the Trustee will be the
Calculation Agent.
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At the request of the Holder hereof, the Calculation Agent shall provide
to the Holder hereof the interest rate hereon then in effect and, if determined,
the interest rate which shall become effective as of the next Interest Reset
Date.
Interest payments hereon made on any Interest Payment Date or at maturity
or upon redemption will include interest accrued to but not including such
Interest Payment Date or date of maturity or redemption, as the case may be.
Accrued interest hereon from the Original Issue Date or from the last date to
which interest hereon has been paid, as the case may be, shall be an amount
calculated by multiplying the face amount hereof by an accrued interest factor.
Such accrued interest factor shall be computed by adding the interest factor
calculated for each day from the Original Issue Date or from the last date to
which interest shall have been paid, as the case may be, to the date for which
accrued interest is being calculated. The interest factor for each such day
shall be computed by dividing the Interest Rate applicable to such day by 360 if
the Interest Rate Basis is the Commercial Paper Rate, the Eleventh District Cost
of Funds Rate, the Federal Funds Rate, LIBOR or the Prime Rate Notes, as
indicated on the face hereof or by the actual number of days in the year if the
Interest Rate Basis is the CMT Rate or the Treasury Rate as indicated on the
face hereof.
This Note is subject to mandatory redemption in whole, but not in part, at
any time, at a Redemption Price equal to the principal amount hereof plus
accrued interest to the Redemption Date (i) in the event that a demand under the
Letter of Credit has been made for a payment of principal of or interest on this
Note or any Note issued pursuant to the Indenture and the Trustee fails to
receive notice from the FHLB of Atlanta within five Business Days thereafter
(I.E., within five Business Days after submission to the FHLB of Atlanta by the
Trustee of a drawing certificate under the Letter of Credit) that the Credit
Amount of the Letter of Credit has been reinstated or (ii) upon the occurrence
of certain Events of Default, or upon the declaration of acceleration of the
principal of all the Notes following the occurrence of certain other Events of
Default, all in accordance with the provisions of the Indenture. In the event
this Note shall be called for redemption, notice thereof shall be given by the
Trustee by mailing a copy of the redemption notice to the Holder hereof at the
address shown in the Note Register. If notice of redemption shall have been duly
given, and funds for the payment of interest to the Redemption Date shall be on
deposit with the Trustee on such Redemption Date, this Note shall cease to bear
interest on the Redemption Date.
Except as provided in the preceding paragraph, this Note is not redeemable
prior to the Maturity Date shown on the face hereof or otherwise subject to
prepayment; provided, however, that if an Event of Default, as defined in the
Indenture, shall occur, the principal of all the Notes may be declared due and
payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of rights and obligations of the Bank and
the rights of the Holders of the Notes at any time by the Bank and the Trustee
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Notes at the time Outstanding affected thereby. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all Notes, to waive compliance by the Bank with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent of waiver by the
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<PAGE>
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Bank, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the time, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Bank, upon surrender of this Note for registration of transfer at the office
or agency of the Note Registrar in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Bank and the Note Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of authorized denominations and for the same aggregate principal
amount, having the identical Original Issue Date, Maturity Date and provisions
with respect to payment of interest, will be issued to the designated transferee
or transferees.
Prior to due presentment of this Note for registration of transfer, the
Bank and the Trustee, and any agent of the Bank and the Trustee, may treat the
Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Bank or the
Trustee, nor any such agent, shall be affected by notice to the contrary.
The Notes are issuable only in fully registered form in minimum
denominations of $250,000 and integral multiples of $1,000 in excess thereof.
Beneficial interests represented by this Note are exchangeable for
definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, only if (x) The Depository Trust Company, as Depositary (the
"Depositary") notifies the Bank that it is unwilling or unable to continue as
Depositary for this Note or if at any time the Depositary ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, and a successor depositary is not appointed by the Bank within 90 days,
(y) there shall have occurred and be continuing an Event of Default with respect
to this Note, or (z) the Bank in its sole discretion determines that this Note
will be so exchangeable. Any Note representing such beneficial interests that is
exchangeable pursuant to the preceding sentence shall be exchangeable in whole
for definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, in minimum denominations of $250,000 and integral multiples of
$1,000 in excess thereof. Such definitive Notes shall be registered in the name
or names of such person or persons as the Depositary shall instruct the Trustee.
No service charge shall be made for any such registration of transfer or
exchange, but the Bank may require a payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
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All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of New York, without regard to conflicts of laws
principles.
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ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
the within Note, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - ___________ Custodian ___________
(Cust) (Minor)
under Uniform Gifts to Minors Act
______________________________
(State)
Additional abbreviations may also be used though not in the
above list.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto__________________________________________________
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
_________________________
/____________________/
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address,
including postal zip code, of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
to transfer said Note on the books of the Trustee, with full power of
substitution in the premises.
Dated:____________________ ______________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within Note in every particular,
without alteration or enlargement
or any change whatsoever.
_______________________________
Signature Guarantee
18
EXHIBIT 4.94
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
THIS AGREEMENT, dated as of November 4, 1998, is between BANKUNITED, FSB, having
its principal office at 255 Alhambra Circle, Coral Gables, Florida 33134 (the
"Member"), and FEDERAL HOME LOAN BANK OF ATLANTA, Atlanta, Georgia (the "Bank").
WHEREAS, the Member proposes to issue from time to time its promissory notes in
an aggregate principal amount up to $500 million (the "Senior Notes"), pursuant
to an Indenture to be dated as of November 4, 1998, a copy of which has
heretofore been furnished to the Bank (the "Indenture") between the Member and
The Bank of New York, as Trustee (the "Beneficiary"), to which the Bank shall
join as a consenting party; and
WHEREAS, the issuance of the Senior Notes will provide funds to the Member that
will promote home financing or housing activity and encourage and assist the
Member's asset and liability management; and
WHEREAS, to provide for the payment of interest, principal and Redemption
Premium (as defined in the Indenture), if any, on the Senior Notes, the Member
has requested the Bank to issue its letter of credit in the form attached as
Exhibit A hereto (such letter of credit, as the same may from time to time be
supplemented or amended, being hereinafter referred to as the "Credit") for the
benefit of the Beneficiary, whereby the Bank would agree, subject to the terms
and conditions set forth therein, to honor drawings by the Beneficiary in such
amount as is set forth in the outstanding Credit (such amount, as the same may
from time to time be changed subject to the terms and conditions herein, being
hereinafter referred to as the "Credit Amount"); and
WHEREAS, in connection with the issuance of the Credit, the Member on the date
hereof (the "Closing Date") delivered to the Bank (i) the written opinion of
counsel to the Member dated as of the Closing Date in the form referred to in
Section 5(a) of the Distribution Agreement dated as of November 4, 1998 (the
"Distribution Agreement"), between the Member, Credit Suisse First Boston
Corporation, PaineWebber Incorporated, and Prudential Securities Incorporated
(the "Agents") and (ii) certified copies of the resolutions of the Board of
Directors of the Member referred to in Section 301(c) of the Indenture; and
WHEREAS, the Bank is issuing the Credit on the date hereof with an initial
Credit Amount of $225,000,000.00 and an initial expiration date as of the close
of business of the Bank on November 4, 2008 (such initial expiration date as the
same may be extended in the manner provided herein is hereinafter referred to as
the "Expiration Date"); and
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WHEREAS, the Member and the Bank have entered into an Advances, Specific
Collateral Pledge and Security Agreement dated March 30, 1998 (such agreement,
including any amendments thereto and any successor agreement that may be entered
into by the Member and the Bank in substitution for such agreement, is
hereinafter referred to as the "Advances Agreement"), whereby the Bank may
advance funds to the Member from time to time under the terms and conditions
thereof; and
WHEREAS, subject to the provisions of the Federal Home Loan Bank Act (the
"Act"), and the regulations and guidelines of the Federal Housing Finance Board
("FHFB") or any successor entity (the "Regulations"), and the Bank's Credit
Policy, the Bank is authorized to issue the Credit.
NOW, THEREFORE, the Member and the Bank agree as follows:
1. The Credit.
(a) CONFIRMATION. The Member agrees to be bound by the terms and conditions
contained herein, and in the Confirmation of Letter of Credit, in the
form attached hereto as Exhibit B (the "Confirmation"), issued with
respect to the Credit.
(b) APPLICATIONS. From time to time during the period this Agreement is
effective, the Member may submit applications under the Credit, in the
form and manner to be provided by the Bank, which applications the Bank
may deny on grounds that (i) the Member fails to meet the Bank's
guidelines for extension of credit; (ii) the purpose of the underlying
obligation supported by the Credit is contrary to the Act, Regulation
or policies applicable to advances and letters of credit established by
the FHFB, any successor entity, or the Board of Directors of the Bank;
(iii) the Bank determines that approval of such application would
expose the Bank to an unreasonable risk; or (iv) such other reasons as
the Bank may reasonably establish.
(c) AMENDMENTS TO CREDIT. From time to time during the currency of the
Credit, the Bank agrees that it will, subject to the terms and
conditions set forth herein, supplement or amend the terms of the
Credit, upon the application of the Member. The obligation of the Bank
to supplement or amend the terms of the Credit, including any increase
in the Credit Amount or any extension of the Expiration Date of the
Credit, is subject to the fulfillment, at no cost to the Bank, of the
following conditions precedent: (i) the Bank shall have received by
2:00 p.m., Atlanta time, in form and substance reasonably satisfactory
to it, one business day's prior oral and written notice from the Member
of the effective date; (ii) the representations and
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warranties of the Member contained in Section 6 hereof shall be true
and correct as of the effective date of such change as though made upon
and as of such date; (iii) no event shall have occurred and be
continuing, or would result from the change of the Credit, which would
constitute an Event of Default under this Agreement or would constitute
such an Event of Default but for the requirement that notice be given
or time elapse or both; (iv) no change shall have occurred in any
federal, state or foreign law or regulation or in the interpretation
thereof which, in the opinion of counsel for the Bank, may make it
impermissible for the Bank to change the Credit as contemplated hereby;
and (v) the Member shall have submitted an application for the
amendment to the Credit in the form to be provided by the Bank, which
application the Bank may deny on the grounds set forth in Section
1(b)(i)-(iv) hereof. The Expiration Date of the Credit may be extended
by an amendment to the terms of the Credit pursuant to this Section
1(c), provided that the period from the date such extension is
effective through the Expiration Date shall not exceed such period as
the Act, the Regulations, and the Bank's Credit Policy may allow. The
Bank's approval of (A) an increase in the Credit Amount pursuant to
this Section 1(c) shall be evidenced by a Certificate Increasing Credit
Amount in the form attached hereto as Exhibit C, an original copy of
which will be sent by the Bank to the Beneficiary by overnight mail;
and (B) an extension in the Expiration Date pursuant to this Section
1(c) shall be evidenced by a Certificate Renewing Letter of Credit by
Amending Expiration Date to Later Date in the form attached hereto as
Exhibit D.
Upon the Bank's issuance of any amendment of the Credit, the Member
shall promptly sign and return to the Bank the Confirmation of
Amendment to Letter of Credit, in the form attached hereto as Exhibit E
(the "Amendment Confirmation"), setting forth the terms upon which the
Bank and the Member have agreed with respect to the amendment to the
Credit. Notwithstanding the foregoing, however, the failure of the
Member to deliver to the Bank, prior to the effective date of any
amendment of the Credit as specified in the related Amendment
Confirmation, written notice to the Bank specifying any disputed term
or condition set forth in the Amendment Confirmation shall constitute
the agreement and acknowledgment by the Member that the terms and
conditions of the Credit as amended are valid and are those which the
Member requested and by which the Member agreed to be bound, and the
Member shall be estopped from asserting any claim or defense with
respect to the repayment of any draw under the Credit as amended or
otherwise with respect to those terms and conditions.
(d) REDUCTION OF CREDIT AMOUNT. From time to time and at any time
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<PAGE>
during the currency of the Credit, the Member may request the Bank to
reduce the undrawn Credit Amount by such amount as specified in a
Certificate Regarding Reduction of Credit, in the form attached as
Exhibit F hereto (the "Reduction Certificate"), presented to the Bank
by the Beneficiary under the Credit, provided, however, that the Bank
is entitled to rely upon the Reduction Certificate as presented. The
Credit Amount shall be reduced automatically in accordance with the
related Reduction Certificate upon receipt of the same by the Bank.
2. PAYMENTS UNDER THE CREDIT. For purposes of this Agreement and the Advances
Agreement the Credit Amount plus any unreimbursed payment made by the Bank
shall constitute "Advances" by the Bank to the Member and "Advances" as
such term is used in the Advances Agreement. The Member agrees that any
such payment made by the Bank under the Credit shall be reimbursed by the
Member unconditionally and immediately upon demand by the Bank. Upon the
Bank's receipt of a certificate demanding payment under the Credit, the
Bank will make an oral or written demand to the Member for reimbursement.
Any oral demands by the Bank for reimbursement shall be confirmed
concurrently in writing. For purposes of this Section 2, an Advance shall
be deemed to have been reimbursed immediately if payment is received by
the Bank (or credited to the Member's account) not later than 2:00 p.m.,
Atlanta time, on the next Business Day after an oral or written demand for
reimbursement has been made by the Bank. Any failure by the Member to
provide such immediate reimbursement shall constitute a default under this
Agreement. The Member agrees to pay the Bank interest on such amounts in
default at the rate in effect and charged by the Bank from time to time on
overdrafts on demand deposit accounts of its members, but in no event more
than any applicable limit set by Regulations. Nothing herein shall prevent
the Member from applying for an Advance under any other advance plan of
the Bank for the funding of such reimbursement. The Member agrees to pay
any reasonable costs of collection including reasonable attorneys' fees,
if such reimbursements are collected by or through an attorney at law. The
Member hereby authorizes the Bank to debit the Member's demand account(s)
with the Bank for any and all reimbursement due the Bank and for all fees,
charges and other amounts payable in connection with the Credit hereunder.
In the event that the balance in such demand account(s) is insufficient to
pay such amounts, the Bank may without prior notice to the Member apply
any other deposits, credits, monies or other property of the Member then
in the possession of the Bank (and not held as bailee for a third party)
to the payment of such due and payable amounts. The Bank will promptly
notify the Member following the taking of any such action.
Upon any payment by the Bank of a drawing under the Credit, the Credit
Amount shall be reduced as provided in the Credit, and by the close of
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business on the fifth Business Day after the date of such drawing the
Credit Amount shall be reinstated by the amount of such drawing provided
that the Beneficiary has received from the Bank by telecopy or otherwise, a
Certificate Reinstating the Credit Amount substantially in the form of
Exhibit G hereto with respect to such drawing. The Bank will reinstate the
Credit Amount, provided that each of the following conditions shall be
satisfied by 12:00 noon, Atlanta time, on the fifth Business Day following
the date of demand by the Beneficiary under the Credit (i.e., the
submission by the Beneficiary of a conforming drawing certificate under the
Credit): (a) the Bank shall have been reimbursed in full by the Member for
the amount of any payment made, or to be made as a result of such drawing,
by the Bank under the Credit, together with interest thereon as provided
herein; (b) the Bank shall have received from the Member a written request
for such reinstatement; and (c) the Bank shall not have determined that
there has occurred and is continuing an "Event of Default" or any event
which with the giving of notice or the passage of time or both would
constitute such an Event of Default.
3. COLLATERAL AND SECURITY INTEREST. In consideration of the issuance of the
Credit and to secure all Advances and all of the other obligations of the
Member hereunder, the Member hereby assigns, transfers and pledges to the
Bank and grants to the Bank a security interest in all collateral now or
hereafter pledged to the Bank under the Advances Agreement and applicable
Bank Credit and Collateral Policies ("Collateral"). The terms and
conditions in the Advances Agreement applicable to security and collateral
shall apply to Advances to the same extent and in the same manner in which
they apply to advances made under the Advances Agreement. Without limiting
the generality of the foregoing, the collateral requirements otherwise
applicable to Advances made by the Bank under the Advances Agreement and
applicable Bank Credit and Collateral Policies shall apply to Advances
hereunder, and the amount of Collateral that the Member is required to
pledge to the Bank shall be based on the amount of outstanding Advances to
the Member under the Advances Agreement plus Advances hereunder.
4. ACCEPTANCE AND HONOR OF CREDIT. The Bank agrees to: (a) accept and pay
drafts or other documents requesting payment under the Credit drawn in
conformity with this Credit; (b) honor drafts or other documents
requesting payment drawn under the Credit for less than or equal to the
Credit Amount; (c) accept or pay, as complying with the terms of the
Credit, any drafts or other documents requesting payments signed or issued
by any trustee in bankruptcy, debtor-in-possession, assignee for benefit
of creditors, liquidator, receiver, conservator, attorney-in-fact or other
representative of the Beneficiary or of any successor or assign approved
in writing by the Bank; (d) accept or pay any drafts or other
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documents requesting payment dated and presented on or before the
Expiration Date of the Credit, regardless of when drawn and when or whether
negotiated; and (e) accept documents of any character which comply with the
terms of the Credit.
5. FEES AND OTHER CHARGES. The Member agrees to pay the Bank, on demand, any
and all reasonable charges and expenses (including, but not limited to,
attorneys' and accountants' fees and expenses) paid or incurred by the
Bank in connection with the preparation, negotiation and enforcement of
this Agreement or any amendment hereto. In addition, the Member agrees to
pay to the Bank the applicable fees for the establishment and maintenance
of the Credit issued hereunder (plus any applicable fees for any increase,
extension, amendment, renewal or partial renewal thereof) as shall be
contemplated by the Bank's Credit Policy and by that certain letter
agreement of even date herewith between the Bank and the Member. The
Member agrees to pay or reimburse the Bank, upon its request, for all
reasonable third party expenses incurred by the Bank in the administration
of the Credit.
6. MEMBER'S WARRANTIES, REPRESENTATIONS AND COVENANTS. The Member represents,
warrants and covenants to the Bank that the following are and shall remain
true, complete and correct as of the date hereof and for so long as the
Credit shall be outstanding: (a) this Agreement has been duly and validly
executed and delivered by the Member and its execution, delivery and
performance have been authorized by all necessary corporate action on
behalf of the Member; (b) neither this Agreement nor the Credit nor any
transaction to which this Agreement or the Credit relates violates any law
or regulation applicable to the Member, including, without limitation, any
applicable federal or state securities laws and regulations; (c) the
Member has duly entered into the Advances Agreement and the same is
currently in full force and effect; and (d) the Member will maintain one
or more demand accounts with the Bank at all times during which any Credit
issued hereunder remains outstanding.
In addition, the Member represents and warrants to the Bank as of the date
hereof and as of each subsequent date contemplated in Section 1of the
Distribution Agreement to the same effect as set forth in and contemplated
by Section1 of the Distribution Agreement, and the Member further agrees
that each confirmation of the parties' agreement to an amendment to the
Credit as evidenced by the Member's signing and returning to the Bank an
Amendment Confirmation in accordance with Section 1 hereof shall be deemed
(a) an affirmation by the Member that its representations, warranties and
covenants as set forth in this Section 6 are true and correct at the time
of return of the related Amendment Confirmation to the Bank, as though made
at and as of each such
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time, (b) an undertaking that such representations and warranties will be
true and correct at the time such amendment to the Credit becomes effective
and (c) an affirmation by the Member that it is in compliance with its
covenants as set forth in this Section 6.
The Member covenants to the Bank that (a) it will furnish to the Bank
copies of the financial statements and other documents as contemplated by
Section 5 of the Distribution Agreement at such time as the same are
furnished to the Agents thereunder, (b) it will immediately inform the Bank
as to any matters notice of which is given to the Agents pursuant to
Section 5 of the Distribution Agreement, and (c) it will furnish to the
Bank, a reasonable time prior to the use thereof, any Offering Circular (as
defined in the Distribution Agreement) or other material which the Member
proposes to use in connection with the offer or sale of the Senior Notes
which refers to the Bank or the Credit and that it will not use any
Offering Circular (as defined in the Distribution Agreement) or other
material to which the Bank has objected.
7. LIABILITIES AND RESPONSIBILITIES OF THE BANK. It is agreed that the Bank
shall not be responsible for, and no obligation of the Bank under the
Credit shall be affected by or in respect of: (a) the use which may be
made of the Credit or any act or omission of any Beneficiary or assignee
of the Credit; (b) the validity, authenticity, sufficiency, completeness,
genuineness or collectibility of any drafts, instruments, notices of
default, or other documents, including endorsements and signatures
thereon; (c) any breach of contract (other than in respect of the Senior
Notes), including, without limitation, the Distribution Agreement between
the Member and any other party other than the Bank; (d) compliance with or
circumstances resulting from the existence or exercise of applicable laws,
regulations, customs, controls or restrictions by any government or by any
group asserting or exercising de facto or de jure governmental powers; (e)
any failure of drafts or other evidences of withdrawal to bear reference
or adequate reference to the Credit, or failure of any person to
surrender, take up or forward the Credit, or to note thereon any
withdrawal thereunder, each of which requirements the Bank may waive even
if included in the Credit; (f) any errors, omissions, interruptions or
delays in transmission or delivery of any messages, however sent and
whether plain or in code or cipher, or errors in translation or in
interpretation of technical or other terms, absent the Bank's gross
negligence or bad faith; (g) any event, fact or condition beyond the
control of the Bank; and (h) without limiting the foregoing, any act or
omission of the Bank or any confirming or advising bank or any of the
Bank's correspondents, agents or subagents done or omitted in good faith
(excepting, however, any such act or omission that contravenes the Bank's
obligations under the governing laws and
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authorities referred to in Section 11 of this Agreement). The Bank is
expressly authorized and directed to honor any draft or other request for
payment which is made under and in compliance with the Credit without
regard to, and without any duty to inquire into, the existence of any
disputes or controversies between the Member, the Beneficiary or any other
person or firm, or their respective rights, duties or liabilities or
whether any fact or event referred to in any notice of default or other
document presented under the Credit is true and correct. Except for the
obligation of the Bank set forth in the last sentence of Section 2 hereof,
the sole obligation of the Bank to the Member in connection with drawings
under the Credit is limited to honoring requests for payment made under and
in compliance with the Credit, and the Bank shall have no liability to the
Member in connection with any such drawing even though the Bank may have
prepared the Credit or any notice of default or other document required to
be presented thereunder and even though the Bank may otherwise be aware of
facts concerning the transaction which gives rise to the drawing under the
Credit.
8. EVENTS OF DEFAULT. The following occurrences shall be Events of Default:
(a) any Event of Default as defined in the Advances Agreement; (b) the
failure of the Member to pay any amount due hereunder; (c) the breach by
the Member of, or the failure by the Member to comply in all respects
with, any covenant, agreement, term or condition under or in connection
with this Agreement if the Member shall not have cured such breach or
failure within 10 days after notice thereof from the Bank; (d) any failure
at any time of any representation or warranty or information, furnished by
the Member to the Bank in any context, to be and remain true, correct and
complete in all material respects; or (e) any failure by the Member to
furnish the Bank such information, and such access to all its books and
records, and copies thereof, as the Bank may reasonably require.
9. REMEDIES Upon the occurrence of an Event of Default, without limiting any
other rights and remedies which may be available at law or in equity, the
Bank shall have all rights and remedies as provided for in respect of a
default under the Advances Agreement.
10. ISSUANCE OF FURTHER NOTES. Upon the occurrence of an Event of Default, the
Bank may, in its sole discretion, without limiting any other rights and
remedies which may be available at law or in equity, issue written
instructions (or telephonic instructions, confirmed in writing in
accordance with Section 107 of the Indenture promptly thereafter) to the
Beneficiary not to issue or deliver Senior Notes, which instructions may
be specified with respect to a particular issue of Senior Notes or may be
general and applicable to all Senior Notes requested to be issued or
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delivered after receipt of such instructions, until revoked or superseded
by further instructions from the Bank.
11. GOVERNING LAW; CUMULATIVE REMEDIES. In addition to the terms and
conditions specifically set forth herein and in any Confirmation between
the Bank and the Member, this Agreement and the Credit shall be governed
by the Federal Home Loan Bank Act, Rules and Regulations of the FHFB,
policies, guidelines and directives of the FHFB, and the statutory and
common law of the United States and, to the extent federal law
incorporates or defers to state law, the laws of the State of Georgia
(without giving effect to choice of law principles included therein).
Notwithstanding the foregoing, Article 9 of the Uniform Commercial Code as
in effect in the State of Georgia shall be deemed applicable to this
Agreement and to any Credit hereunder. It is further agreed that this
Agreement shall be supplemented by the provisions (to the extent that such
provisions are consistent with the provisions of this Agreement) of the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 and, to the extent
not inconsistent therewith, by the provisions of Article 5 of the Uniform
Commercial Code as in effect in the State of Georgia. All rights and
remedies of the Bank hereunder are cumulative of each other and of every
other right or remedy which the Bank may otherwise have at law or in
equity or under any contract or other writing for the enforcement of the
security interest herein or the collection of any amount due hereunder.
12. WAIVER; AMENDMENT; SEVERABILITY. No delay or failure on the part of the
Bank in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power
or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or be construed to be a waiver of any
Event of Default. No waiver by the Bank of any Event of Default shall be
effective unless in writing and signed by an authorized officer of the
Bank, and no such waiver shall be deemed to be a waiver of a subsequent
Event of Default or be deemed to be a continuing waiver. No course of
dealing between the Member and the Bank or its agents or employees shall
be effective to change, modify or discharge any provision of this
Agreement or to constitute a waiver of any default. If any provision of
this Agreement is held invalid or unenforceable to any extent or in any
application, the remainder of this Agreement, or the application of such
provision to different persons or circumstances or in different
jurisdictions, shall not be affected thereby.
13. INDEMNITY. Member agrees to defend, indemnify and hold harmless the Bank
and the Bank's correspondents, agents and subagents, and its directors,
officers and employees, from and against any and all demands,
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actions, damages, claims, losses, penalties, liabilities and expenses
(including reasonable attorneys' fees and expenses whether or not suit is
instituted), not involving any Indemnitee's (as defined below) bad faith or
any willful breach of any Indemnitee's obligations under this Agreement or
the Credit, or involving any violation by any Indemnitee of obligations
under the governing laws and authorities referred to in Section 11 of this
Agreement, resulting from or incurred, suffered or paid by any of them in
connection with this Agreement, the Credit, or any breach or failure in
respect of the Member of any representation, warranty, covenant, agreement,
term or condition set forth in or referred to in this Agreement.
The Member further agrees to assume liability for and to indemnify,
protect, save and hold harmless the Bank, each individual, corporation,
partnership, trust, association or other entity ("Person") controlling the
Bank, any affiliate of any such Person or the Bank and their respective
directors, officers, incorporators, shareholders, partners, servants,
trustees, employees and agents (the "Indemnitees") from and against any and
all losses, liabilities, claims, damages, penalties, causes of action,
suits, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses whether or not suit is instituted) or
judgments of whatever kind and nature, imposed upon, incurred by or
asserted against the Indemnitees, which are (x) based upon or arising under
the securities laws of the United States of America or of any state or any
regulation, rule, or interpretation thereunder or thereof to the extent
arising from the transactions contemplated hereby and by the Distribution
Agreement, (y) based upon the inaccuracy of any representation made or
reaffirmed by the Member, or (z) based upon any untrue statement or alleged
untrue statement of a material fact in the Offering Circular (as defined in
the Distribution Agreement), or the omission or alleged omission therefrom
of a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If any
action, suit or proceeding arising from any of the foregoing is brought
against any of the Indemnitees, the Member will, if requested in writing
within a reasonable time to do so, and at its own expense, resist and
defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by the Member (which counsel shall be
satisfactory to such Indemnitees) and regardless of whether the Member is a
party to the same, pay all reasonable costs and expenses of such defense
(including, without limitation, reasonable attorneys' fees and expenses).
It is agreed, however, that the obligations of the Member under this
Section 13 shall not extend to any liability of any Indemnitee arising out
of any untrue statement by any Indemnitee (whether written or oral)
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of a material fact in connection with the issue and sale of the Senior
Notes, or any omission by any Indemnitee to state a material fact necessary
to make any statement by any Indemnitee, in light of the circumstances
under which it was made, not misleading, in connection with the issue and
sale of the Senior Notes, except to the extent such untrue statement or
omission was made by such Indemnitee on the basis of information provided
by or omitted to be provided by the Member. The provisions of this Section
13 shall not be deemed to constitute a waiver on the part of the Member of
any of its rights at law or in equity against any Indemnitee in any
circumstance contemplated by the preceding sentence hereof.
The foregoing indemnity will also extend to any supplemental material
subsequently furnished to the Agents by the Member and distributed to
purchasers or prospective purchasers during the term of the Distribution
Agreement.
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Section 13 is for any reason
held unavailable (otherwise than in accordance with the terms of this
Section 13), the Member and any Indemnitees sought to be charged with any
liability shall contribute to the aggregate costs of satisfying such
liability in the proportion of their respective economic interests. For
purposes of this Section 13, the "economic interests" of the Member shall
be equal to the aggregate proceeds of the Senior Notes issued in connection
with the Distribution Agreement received by the Member and the "economic
interests" of any Indemnitee shall be equal to the aggregate commissions
and fees earned by the Bank as a result of the issuance of the Credit.
The obligations of the Member under this Section 13 shall survive any
termination of the Indenture, in whole or in part, or of the Credit or this
Agreement, in whole or in part.
14. OTHER LETTER OF CREDIT REIMBURSEMENT AGREEMENTS. In the event that at any
time there shall be in effect any Letter of Credit Reimbursement Agreement
between the Member and the Bank other than this Agreement, the terms and
provisions of this Agreement shall be the sole terms and provisions
applicable to the Credit and the respective rights and obligations of the
parties hereunder.
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument,
and any of the parties hereto may execute this Agreement by signing any
such counterpart.
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IN WITNESS WHEREOF, the Member and the Bank have caused this Agreement to be
signed in their names by their duly authorized officers as of the date first
above mentioned.
FEDERAL HOME LOAN BANK BANKUNITED, FSB
OF ATLANTA
By: By:
------------------------------ -------------------------------
Vice President and Director of Title:
Credit Services ----------------------------
By: By:
------------------------------ -------------------------------
Vice President and Director of Title:
Collateral Services ----------------------------
NOTE: This form must be signed on behalf of the Member by two authorized
signers as identified on the Member's Credit and Collateral Signature
Card.
12
EXHIBIT 10.5
BANKUNITED FINANCIAL CORPORATION
1996 INCENTIVE COMPENSATION AND STOCK AWARD PLAN
(as amended on January 26, 1998)
1. PURPOSE. The purpose of this 1996 Incentive Compensation and Stock
Award Plan (the "Plan") is to assist BankUnited Financial Corporation (the
"Company") and its subsidiaries and affiliates in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers,
directors and affiliates enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company's stockholders, and providing
such persons with annual and long term performance incentives to expend their
maximum efforts in the creation of shareholder value.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and
its Subsidiaries that is designated by the Board or the Committee as a
participating employer under the Plan, provided that such entity is controlled
by or under common control with the Company.
(b) "Award" means any Option, Restricted Stock, Restricted
Stock Units, Stock Bonus or Stock Award in Lieu of Cash, or Other Stock-Based
Award granted to a Participant under the Plan.
(c) "Award Agreement" means any written agreement, contract or
other instruments or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts
which have been designated by such Participant in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under this Plan upon the death of the Participant, or, if there is no designated
Beneficiary or surviving designated Beneficiary, then the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means Change in Control as defined
with related terms in Section 8.
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.
(h) "Committee" means the Compensation Committee of the Board,
or such other Board committee as may be designated by the Board to administer
the Plan; provided, however, that Committee action shall be taken by act of such
members specified in, and otherwise in accordance with, Section 3(b). The
Committee shall consist solely of two or more directors of the Company. In
appointing members of the Committee, the Board will consider whether each member
will qualify as a "non-employee director" within the meaning of Rule
16b-3(b)(3), but such members are not required to so qualify at the time of
appointment or during their term of service on the Committee.
(i) "Company" means BankUnited Financial Corporation, a
corporation organized under the laws of the State of Florida, or any successor
corporation.
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(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(k) "Fair Market Value" means, with respect to Stock, Awards,
or other property, the fair market value of such Stock, Awards, or other
property determined by such methods or procedures as shall be established from
time to time by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Stock as of any given date shall mean the per share value
of Stock as determined by using the average of the mean of the closing prices of
such Stock as quoted on the NASDAQ system on each of the immediately preceding
five days on which the stock was traded, as reported for such dates in the table
contained in The Wall Street Journal or an equivalent successor table.
(l) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "NQSO" means any Option that is not an ISO.
(n) "Option" means a right, granted to a Participant under
Section 6(b), to purchase Stock or other Awards. An Option may be either an ISO
or an NQSO.
(o) "Participant" means a person who, as an executive officer,
officer, director, or employee or independent contractor of the Company (which
includes employees of Subsidiaries or Affiliates), has been granted an Award
under the Plan.
(p) "Restricted Stock" means an award of shares of Stock to a
Participant under Section 6(d) that may be subject to certain restrictions and
to a risk of forfeiture.
(q) "Restricted Stock Unit" means a right, granted to a
Participant under Section 6(d), to receive Stock or cash at the end of a
specified deferral period.
(r) "Plan" means this 1996 Incentive Compensation and Stock
Award Plan.
(s) "Rule 16b-3" means Rule 16b-3, as from time to time in
effect and applicable to the Plan and Participants, promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act.
(t) "Stock" means the Series I Class A Common Stock, the Class
B Common Stock (which together shall be referred to as "Common Stock"), or the
Noncumulative Convertible Preferred Stock, Series B ("Preferred Stock") of the
Company or such other securities as may be substituted or resubstituted therefor
pursuant to Section 5.
(u) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if each
of the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
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3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. Except as otherwise provided
herein, the Plan shall be administered by the Committee. The Committee shall
have full and final authority to take the following actions, in each case
subject to and consistent with the provisions of the Plan:
(i) to select Participants to whom Awards may be
granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be
granted to each Participant;
(iv) to determine the type and number of Awards to be
granted, the number and type of shares of Stock to which an Award may
relate, the terms and conditions of any Award granted under the Plan
(including, but not limited to, any exercise price, grant price, or
purchase price, any restriction or condition, any schedule for lapse of
restrictions or conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waivers or accelerations
thereof, and waivers of performance conditions relating to an Award,
based in each case on such considerations as the Committee shall
determine), and all other matters to be determined in connection with
an Award;
(v) to determine whether, and to what extent, the
right of a Participant to exercise or receive a grant or settlement of
any Award, and the timing thereof, may be subject to such performance
conditions as may be specified by the Committee. The Committee may use
such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under
any Award subject to performance conditions;
(vi) to determine whether, to what extent, and under
what circumstances an Award may be settled or the exercise price of an
Award may be cancelled, forfeited, exchanged, or surrendered;
(vii) to determine whether, to what extent, and under
what circumstances an Award will be deferred either automatically, at
the election of the Committee, or at the election of the Participant,
and whether to create trusts and deposit Stock or other property
therein;
(viii) to prescribe the form of each Award Agreement,
which need not be identical for each Participant;
(ix) to adopt, amend, suspend, waive, and rescind
such rules and regulations and appoint such agents as the Committee may
deem necessary or advisable to administer the Plan;
(x) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to construe and interpret
the Plan and any Award, rules and regulations, Award Agreement, or
other instrument hereunder; and
(xi) to make all other decisions and determinations
as may be required under the terms of the Plan or as the Committee may
deem necessary or advisable for the administration of the Plan.
Other provisions of the Plan notwithstanding, the Board may perform any function
of the Committee under the Plan, including without limitation for the purpose of
ensuring that transactions under the Plan by Participants who are then subject
to Section 16 of the Exchange Act in respect of the Company are exempt under
Rule 16b-3. In any case in which the Board is performing a function of the
Committee under the Plan, each reference to the Committee herein shall be deemed
to refer to the Board.
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(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. At any time
that a member of the Committee is not a Non-Employee Director as defined in Rule
16b-3, any action of the Committee relating to an Award granted or to be granted
to a Participant who is then subject to Section 16 of the Exchange Act in
respect of the Company may be taken either (i) by a subcommittee, designated by
the Committee, composed solely of two or more members who are Non-Employee
Directors, or (ii) by the Committee but with each such member who is not a
Non-Employee Director abstaining or recusing himself or herself from such
action; PROVIDED, HOWEVER, that, upon such abstention or recusal, the Committee
remains composed solely of two or more members who are Non-Employee Directors.
Such action, authorized by such a subcommittee or by the Committee upon the
abstention or recusal of such non-qualifying member(s), shall be the action of
the Committee for purposes of the Plan. Any action of the Committee with respect
to the Plan shall be final, conclusive, and binding on all persons, including
the Company, Subsidiaries, Affiliates, Participants, any person claiming any
rights under the Plan from or through any Participant, and stockholders. The
express grant of any specific power to the Committee, and the taking of any
action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or managers
of the Company or any Subsidiary the authority, subject to such terms as the
Committee shall determine, to perform administrative functions and such other
functions as the Committee may determine, to the extent permitted under
applicable law, and in the case of a Participant then subject to Section 16 of
the Exchange Act with respect to the Company, to the extent that such delegation
will not result in the loss of an exemption under Rule 16b-3(d)(1).
(c) LIMITATION OF LIABILITY. Each member of the Committee
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or other employee of the
Company or any Subsidiary or Affiliate, the Company's independent certified
public accountants, or other professional retained by the Company to assist in
the administration of the Plan. No member of the Committee, nor any officer or
employee of the Company acting on behalf of the Committee, shall be personally
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Committee and any officer
or employee of the Company or its Subsidiaries acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
with respect to any such action, determination, or interpretation.
4. ELIGIBILITY.
(a) GENERALLY. Executive officers, officers, directors and
employees of the Company, including employees of the Company's Subsidiaries and
Affiliates who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company or its Subsidiaries are
eligible to be granted Awards under the Plan.
(b) ANNUAL PER-PERSON LIMITATION. Subject to adjustment as
hereinafter provided in Sections 5(a) and 5(d), in each calendar year during any
part of which the Plan is in effect, a Participant may be granted Stock Options
relating to no more than 95,000 shares of Stock.
5. STOCK SUBJECT TO THE PLAN; ADJUSTMENT.
(a) NUMBER OF SHARES. Subject to adjustment as hereinafter
provided, the number of shares of Common Stock for which Options may be granted
under the Plan shall be 875,000, and the number of shares of Common Stock which
may be issued in connection with Stock Bonuses, Stock Awards, Restricted Stock
and Restricted Stock Units in lieu of cash or other Stock-Based Awards shall be
425,000, provided however that to the extent that the total number of shares of
Common Stock does not exceed 1,300,000 the Committee may reallocate the split
between the number of shares of Common Stock for which Options may be granted
and the number of shares of Common Stock which may be issued in connection with
Stock Bonuses, Stock Awards, Restricted Stock and Restricted Stock Units in lieu
of cash or other Stock-Based Awards. Additionally, subject to adjustment as
hereinafter provided the number of shares of Noncumulative Convertible Preferred
Stock, Series B for which Options may be granted and which may be
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issued in connection with Stock Bonuses, Stock Awards, Restricted Stock and
Restricted Stock Units in lieu of cash or other Stock-Based Awards shall be
375,000.
(b) MANNER OF COUNTING SHARES. If any shares subject to an
Award are forfeited, cancelled, exchanged, or surrendered or such Award
otherwise terminates without a distribution of shares to the Participant such
number of shares will again be available for Awards under the Plan. The
Committee may make determinations and adopt regulations for the counting of
shares relating to any Awards to ensure appropriate counting, avoid double
counting (in the case of tandem or substitute awards), and provide for
adjustments in any case in which the number of shares actually distributed
differs from the number of shares previously counted in connection with such
Award.
(c) TYPE OF SHARES DISTRIBUTABLE. Any shares of Stock
distributed pursuant to an Award may consist, in whole or in part, of authorized
and unissued shares or treasury shares, including shares acquired by purchase in
the open market or in private transactions.
(d) ADJUSTMENTS. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Stock, or other property) which is special, large, and non-recurring,
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems appropriate and, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock which may thereafter be issued in connection with Awards, (ii) the number
of and kind of shares of Stock issued or issuable in respect of outstanding
Awards or, if deemed appropriate, make provisions for payment of cash or other
property with respect to any outstanding Award, (iii) the per-person limit,
number and kind of shares subject to Options which may be granted pursuant to
Section 4(b) and (iv) the exercise price, grant price, or purchase price
relating to any Award; provided, however, in each case that, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code, unless the Committee determines otherwise. In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
and performance objectives included in Awards, in recognition of unusual or
non-recurring events (including, without limitation, events described in the
preceding sentence, as well as acquisitions and dispositions of businesses and
assets) affecting the Company or any Subsidiary, or business unit, or the
financial statements thereof, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations, or business
conditions or in view of the Committee's assessment of the business strategy of
the Company, a Subsidiary, or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to Section
9(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
regarding forfeiture of Awards or continued exercisability of Awards in the
event of termination of employment by the Participant.
(b) OPTIONS. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) EXERCISE PRICE. Unless otherwise required by
applicable law, the exercise price per share of Stock purchasable under
an Option shall be determined by the Committee; provided, however,
that, except as provided in Section 7(a), such exercise price shall be
not less than the Fair Market Value of a share on the date of grant of
such Option.
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(ii) TIME AND METHOD OF EXERCISE. The Committee shall
determine at the date of grant or thereafter the time or times at which
an Option may be exercised in whole or in part, the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Stock, other Awards,
notes or other property, and the methods by which Stock will be
delivered or deemed to be delivered to Participants (including, without
limitation, deferral of delivery of shares under a deferral
arrangement).
(iii) ISOS. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of Section 422 of
the Code.
(c) RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock or Restricted Stock Units ("RSU") to Participants on the
following terms and conditions:
(i) ISSUANCE AND RESTRICTIONS. Restricted Stock and
RSU shall be subject to such
restrictions on transferability and other restrictions, if any, as the committee
may impose at the date of grant or thereafter, which restrictions may lapse
separately or in combination at such times, under such circumstance, in such
installments, or otherwise, as the Committee may determine. Except to the extent
restricted under the Award Agreement relating to the Restricted Stock or RSU, a
Participant granted Restricted Stock or RSU shall have all of the rights of a
stockholder including, without limitation, the right to vote Restricted Stock
and the right to receive dividends thereon.
(ii) FORFEITURE. Except as otherwise determined by
the Committee, at the date of grant
or thereafter, upon termination of employment (as determined under criteria
established by the Committee) during the applicable restriction period,
Restricted Stock or RSU, and any accrued but unpaid dividend(s) that is or are
then subject to a risk of forfeiture shall be forfeited; provided, however, that
the Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that restrictions or forfeiture conditions
relating to Restricted Stock or RSU will be waived in whole or in part in the
event of terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock or RSU
granted under the Plan may be
evidenced in such manner as the Committee shall determine. If certificates
representing Restricted Stock are registered in the name of the participant,
such certificates shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock, the Company
shall retain physical possession of the certificate, and the Company may require
the Participant to deliver a stock power, endorsed in blank, relating to the
Restricted Stock. Upon expiration of the deferral period specified for RSU by
the Committee (or, if permitted by the Committee, as elected by the participant)
the stock underlying such RSU shall be delivered.
(iv) DIVIDENDS. Dividends paid on Restricted Stock or
RSU shall be either paid at the
dividend payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or the payment of such
dividends shall be deferred or the amount or value thereof automatically
reinvested in additional Restricted Stock, RSU, other Awards, or other
investment vehicles, as the Committee shall determine or permit the Participant
to elect. Stock distributed in connection with a Stock split or Stock dividend,
and other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Stock or RSU with
respect to which such Stock or other property has been distributed.
(d) STOCK BONUSES AND STOCK AWARDS IN LIEU OF CASH AWARDS. The
Committee is authorized to grant Stock as a bonus, or to grant other Awards, in
lieu of Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other terms as
shall be determined by the Committee.
(e) OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock or other securities,
as deemed by the Committee to
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be consistent with the purposes of the Plan, including, without limitation,
rights convertible or exchangeable into Stock or such securities, purchase
rights for Stock or such other securities, and Awards with value or payment
contingent upon performance of the Company, or a Subsidiary, or upon any other
factor or performance condition designated by the Committee. The Committee is
authorized to make cash awards pursuant to this Section 6(f) as an element of or
supplement to any other Award under the Plan.
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in exchange or
substitution for, any other Award granted under the Plan or any award granted
under any other plan of the Company, any Subsidiary or Affiliate, or any
business entity to be acquired by the Company or a Subsidiary or Affiliate, or
any other right of a Participant to receive payment from the Company or any
Subsidiary or Affiliate. Awards may be granted in addition to or in tandem with
such other Awards or awards and may be granted either as of the same time as or
a different time from the grant of such other Awards or awards. The per share
exercise price of any Option, or purchase price of any other Award conferring a
right to purchase Stock which is granted, in connection with the substitution of
awards granted under any other plan of the Company or any Subsidiary or
Affiliate or any business entity to be acquired by the Company or any Subsidiary
or Affiliate, shall be determined by the Committee, in its discretion.
(b) TERMS OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee; provided, however, that in no
event shall the term of any ISO exceed a period of ten years from the date of
its grant (or such shorter period as may be applicable under Section 422 of the
Code).
(c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the
Plan and any applicable Award Agreement, payments to be made by the Company upon
the grant, maturation, or exercise of an Award may be made in such forms as the
Committee shall determine at the date of grant or thereafter, including, without
limitation, cash, Stock, or other property, and may be made in a single payment
or transfer, in installments, or on a deferred basis. The Committee may make
rules relating the installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to such payments.
(d) RULE 16B-3 COMPLIANCE.
(i) SIX-MONTH HOLDING PERIOD. Unless a Participant
could otherwise dispose of equity securities, including derivative
securities, acquired under the Plan without incurring liability under
Section 16(b) of the Exchange Act, equity securities acquired under the
Plan must be held for a period of six months following the date of such
acquisition, provided that this condition shall be satisfied with
respect to a derivative security if at least six months elapse from the
date of acquisition of the derivative security to the date of
disposition of the derivative security (other than upon exercise or
conversion) or its underlying equity security.
(ii) OTHER COMPLIANCE PROVISIONS. With respect to a
Participant who is then subject to Section 16 of the Exchange Act in
respect of the Company, the Committee shall implement transactions
under the Plan and administer the Plan in a manner that will ensure
that each transaction by such a Participant is exempt from liability
under Rule 16b-3, except that such a Participant may be permitted to
engage in a non-exempt transaction under the Plan if written notice has
been given to the Participant regarding the non-exempt nature of such
transaction. Unless otherwise specified by the Participant, equity
securities, including derivative securities, acquired under the Plan
which are disposed of by a Participant shall be deemed to be disposed
of in the order acquired by the Participant.
8. CHANGE IN CONTROL PROVISIONS.
(a) ACCELERATION UPON CHANGE IN CONTROL. In the event of a
"Change in Control," as defined in this Section:
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(i) any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully exercisable
and vested; and
(ii) the restrictions, deferral limitations, and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested, and any
performance conditions imposed with respect to Awards shall be deemed
to be fully achieved; provided, however, that, the Board may determine,
by entry of a resolution prior to the occurrence of a Change in
Control, that a Change in Control will not result in some or all of the
consequences specified in (i) or (ii) or will not result in such
consequences for specified Participants.
(b) "CHANGE IN CONTROL" DEFINED. For purposes of the Plan, a
"Change in Control" shall have occurred if:
(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company; any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company; any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company; or any person or group of
persons who as of the date of approval of this Plan by the Board of
Directors of the Company owns, directly or indirectly 10% or more of
the combined voting power of the securities of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding voting securities;
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity) 50%
or more of the combined voting power of the voting securities of the
Company or such surviving or parent entity outstanding immediately
after such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquired 50%
or more of the combined voting power of the Company's then outstanding
securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets (or any transaction having a similar effect).
9. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND EXCHANGE REQUIREMENTS. The
Company shall not be obligated to take any action under the Plan and any Award
Agreement, unless and until it is satisfied that all applicable federal and
state laws, rules and regulations, and approvals by any regulatory or
governmental agency have been complied with or obtained. The Company, in its
discretion, may postpone the issuance or delivery of Stock under any Award until
completion of such stock exchange listing or registration or qualification of
such Stock or other required action under any state, federal or foreign law,
rule or regulation as the Company may consider appropriate, and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Stock in
compliance with applicable laws, rules and regulations.
(b) NONTRANSFERABILILTY. Except as otherwise provided in this
Section 9(b), Awards shall not be transferable by a Participant other than by
will or the laws of descent and distribution or pursuant to a designation of a
Beneficiary, and Awards shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal representative. In
addition, except as otherwise provided in this Section 9(b), no rights under the
Plan
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may be pledged, mortgaged, hypothecated, or otherwise encumbered, or subject to
the claims of creditors. The foregoing notwithstanding, the Committee may, in
its sole discretion, provide that Awards (or rights or interests therein) other
than ISOs shall be transferable, including but not limited to permitting
transfers to a Participant's immediate family members (I.E., spouse, children,
or grandchildren, as well as the Participant), to trusts for the benefit of such
family members or other transfers deemed by the Committee to be not inconsistent
with the purposes of the Plan.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
action taken thereunder shall be construed as giving any Participant the right
to be retained in the employ or service of the Company or any of its
Subsidiaries or Affiliates, nor shall it interfere in any way with the right of
the Company or any of its Subsidiaries or Affiliates to terminate any
Participant's employment or services at any time.
(d) TAXES. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Stock, or any payroll or other
payment to a Participant, amounts of withholding and other taxes due in
connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend,
alter, suspend, discontinue, or terminate the Plan or the Committee's authority
to grant Awards under the Plan without the consent of stockholders or
Participants, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's stockholders within one year after such Board action if such
stockholder approval is required by any federal law or regulation or the rules
of any stock exchange or automated quotation system on which the Stock may then
be listed or quoted; provided, however, that, without the consent of an affected
Participant, no amendment, alteration, suspension, discontinuations, or
termination oft he Plan may materially adversely affect the rights of such
Participant under any Award theretofore granted to him or her. The Committee may
waive any conditions or rights under, or amend, alter, suspend, discontinue, or
terminate any Award theretofore granted and any Award Agreement relating
thereto: provided, however, that, without the consent of an affected
Participant, no such amendment, alteration, suspension, discontinuation, or
termination of any Award may materially adversely affect the rights of such
Participant under such Awards. Following the occurrence of a Change in Control,
the Board may not terminate this Plan or amend this Plan in any manner adverse
to Participants.
(f) NO RIGHT TO AWARDS; NO STOCKHOLDER RIGHTS. No Participant
or employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants and
employees. No Award shall confer on any Participant any of the rights of a
stockholder of the Company unless and until Stock is duly issued or transferred
to the Participant in accordance with the terms of the Award.
(g) UNFUNDED STATUS OF AWARDS AND TRUSTS. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant. If an to the extent authorized by the Committee, the
Company may deposit into such a trust Stock or other assets for delivery to the
Participant in satisfaction of the Company's obligations under any Award. If so
provided by the Committee, upon such a deposit of Stock or other assets for the
benefit of a Participant, there shall be substituted for the rights of the
Participant to receive delivery of Stock and other payments under the Plan a
right to receive the assets of the trust (to the extent that the deposited Stock
or other assets represented the full amount of the Company's obligation under
the Award at the date of deposit). The trustee of the trust may be authorized to
dispose of trust assets and reinvest the proceeds in alternative investments,
subject to such terms and conditions as the Committee may specify and in
accordance with applicable law.
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(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including without limitation, the granting of stock options and other awards
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
(i) NO FRACTIONAL SHARES. No fractional shares of Stock shall
be issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction, and effect of
the Plan, any rules and regulations relating to the Plan, and any Award
Agreement shall be determined in accordance with the laws of the state of
Florida, without giving effect to principles of conflicts of laws, and
applicable federal law.
(k) EFFECTIVE DATE AND APPROVAL DATE; PLAN TERMINATION. The
Plan shall become effective upon approval by the Board of Directors (the
"Effective Date"), provided, however, that the Plan shall be subject to the
subsequent approval by the affirmative votes of the holders of a majority of
voting securities present in person or represented by proxy, and entitled to
vote on the subject matter, at a meeting of Company stockholders duly held in
accordance with the Florida Corporation Code, or any adjournment thereof in
accordance with applicable provisions of the Florida Corporation Code, such
stockholder approval to be obtained not later than one year after the Effective
Date (the "Approval Date"). Any Awards granted under the Plan prior to such
approval of stockholders shall be subject to such approval and in the absence of
such approval, such Awards shall be null and void. Unless earlier terminated by
the Board, the Plan will terminate at such time as the Company has no further
obligations with respect to any Award granted under the Plan; provided, however,
that ISOs may not be granted later than 10 years after the Effective Date..
(l) TITLE AND HEADINGS. The titles and headings of the
sections in the Plan are for convenience of reference only. In the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
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EXHIBIT 10.6
AMENDED AND RESTATED
COMPANY EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made
and entered into effective as of November 14, 1997, by and between BANKUNITED
FINANCIAL CORPORATION, a publicly held business corporation organized and
operating under the laws of the State of Florida and having an office at 255
Alhambra Circle, Coral Gables, Florida 33134 ("Company") and ALFRED R. CAMNER,
an individual residing at 6855 S.W. 101st Street, Miami, Florida 33156
("Executive"). Any reference to the "Bank" herein shall mean BankUnited, FSB, a
wholly-owned subsidiary of the Company.
W I T N E S S E T H :
WHEREAS, the Company, the Bank and the Executive entered into
an Employment Agreement dated as of November 14, 1996 ("Prior Employment
Agreement") pursuant to which the Executive has served as Chairman of the Board,
President and Chief Executive Officer of the Company and the Bank; and
WHEREAS, the Company desires to assure for itself and for the
Bank the continued availability of the Executive's services and the ability of
the Executive to perform such services with a minimum of personal distraction in
the event of a threatened or pending Change in Control (as defined herein); and
WHEREAS, the Executive is willing to continue to serve in the
employ of the Company and the Bank on such basis; and
WHEREAS, the Company and the Executive each hereby agree that
in order to achieve the foregoing objectives it is necessary to amend and
restate the terms and conditions of the Prior Employment Agreement, as set forth
herein and for the Bank to enter into a separate amended and restated employment
agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the Company and the
Executive hereby agree as follows:
SECTION 1. EMPLOYMENT.
The Company agrees to continue to employ the Executive, and
the Executive hereby agrees to such continued employment, during the period and
upon the terms and conditions set forth in this Agreement.
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SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
PERIOD.
(a) The terms and conditions of this Agreement shall be and
remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for a term of five years
beginning on the date of this Agreement and ending on the fifth anniversary date
of this Agreement (each, an "Anniversary Date"), plus such extensions, if any,
as are provided by the Board of Directors of the Company ("Board") pursuant to
section 2(b).
(b) Except as provided in section 2(c), beginning on the date
of this Agreement, the Employment Period shall automatically be extended for one
(1) additional day each day, unless either the Company or the Executive elects
not to extend the Agreement further by giving written notice to the other party,
in which case the Employment Period shall end on the fifth anniversary of the
date on which such written notice is given. For all purposes of this Agreement,
the term "Remaining Unexpired Employment Period" as of any date shall mean the
period beginning on such date and ending on: (i) if a notice of non-extension
has been given in accordance with this section 2(b), the fifth anniversary of
the date on which such notice is given; and (ii) in all other cases, the fifth
anniversary of the date as of which the Remaining Unexpired Employment Period is
being determined. Upon termination of the Executive's employment with the
Company for any reason whatsoever, any daily extensions provided pursuant to
this section 2(b), if not therefore discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the
Company at any time from terminating the Executive's employment during the
Employment Period with or without notice for any reason; PROVIDED, HOWEVER, that
the relative rights and obligations of the Company and the Executive in the
event of any such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
The Executive shall serve as the Chairman of the Board and the
President and Chief Executive Officer of the Company, having such power,
authority and responsibility and performing such duties as are prescribed by or
under the By-Laws of the Company and as are customarily associated with such
position. Except as provided in section 7 hereof, the Executive shall devote his
full business time and attention (other than during weekends, holidays, approved
vacation periods, and periods of illness or approved leaves of absence) to the
business and affairs of the Company and shall use his best efforts to advance
the interests of the Company.
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SECTION 4. CASH COMPENSATION.
In consideration for the services to be rendered by the
Executive hereunder, the Company shall pay to him a salary at an annual rate of
Three Hundred Thousand And 00/100 Dollars ($300,000), payable in approximately
equal installments in accordance with the Company's customary payroll practices
for senior officers. Prior to each Anniversary Date occurring during the
Employment Period, the Board shall review the Executive's annual rate of salary
and may, in its discretion, approve an increase therein. In addition to salary,
the Executive may receive other cash or stock compensation from the Company for
services rendered hereunder at such times, in such amounts and on such terms and
conditions as the Board, in its discretion, may determine from time to time. For
purposes of section 9(b)(iv), the term "Salary" shall mean the aggregate value
of the annual rate of cash compensation and the fair market value, determined at
the time of grant, of the stock compensation paid to the Executive pursuant to
this section 4 hereof.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
During the Employment Period, the Executive shall be treated
as an employee of the Company and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover similarly
situated executives of, the Company, in accordance with the terms and conditions
of such employee benefit plans and programs and compensation plans and programs
and consistent with the Company's customary practices. In lieu of Class A Common
Stock or Class B Common Stock, the Executive may, at his election, receive stock
options and/or stock awards granted pursuant to the 1996 Incentive Compensation
and Stock Award Plan in shares of BankUnited's Noncumulative Convertible
Preferred Stock, Series B ("Series B Stock"), adjusted to reflect the fair
market value of the Series B Stock as compared to the Class A Common Stock or
Class B Common Stock. The Executive's estate or his designee shall be the
beneficiary of life insurance policies on the life of the Executive having a
face amount of at least $4,000,000.00.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six (6)
years thereafter, the Company shall cause the Executive to be covered by and
named as an insured under any policy or contract of insurance obtained by it to
insure its directors and officers against personal liability for acts or
omissions in connection with service as an officer or director of the Company or
service in other capacities at the request of the Company. The coverage provided
to the Executive pursuant to this section 6 shall be of the same scope and on
the same terms and conditions as the coverage (if any) provided to other
officers or directors of the Company.
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(b) To the maximum extent permitted under applicable law,
during the Employment Period and for a period of six (6) years thereafter, the
Company shall indemnify the Executive against and hold him harmless from any
costs, liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company or any subsidiary or affiliate thereof.
SECTION 7. OUTSIDE ACTIVITIES.
During the Employment Period, it shall not be a violation of
this Agreement and shall not permit the Company to terminate the Executive's
employment for Cause if the Executive engages in the activities described below
or any activities similar in nature and scope, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
in accordance with this Agreement and do not constitute a violation of any
applicable law, rule, regulation or code of conduct or policy established by the
Company and applicable to similarly situated executives: (i) engaging in the
practice of law, including, without limitation, as a member of the firm of
Stuzin and Camner, Professional Association, (ii) serving on industry,
corporate, civic or charitable boards or committees, (iii) managing personal
investments (including, without limitation, family-controlled enterprises), or
(iv) investing in, advising or serving as an officer or director of other
corporations or business entities. It is expressly understood and agreed that to
the extent any such activities have been conducted by the Executive prior to the
date of this Agreement, the continued conduct of such activities (or the conduct
of activities similar in nature and scope) shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company. The Executive may also serve as an officer or director of the Bank on
such terms and conditions as the Company and the Bank may mutually agree upon,
and such service shall not be deemed to materially interfere with the
Executive's performance of his duties hereunder or otherwise result in a
material breach of this Agreement. If the Executive is discharged or suspended,
or is subject to any regulatory prohibition or restriction with respect to
participation in the affairs of the Bank, he shall continue to perform services
for the Company in accordance with this Agreement but shall not directly or
indirectly provide services to or participate in the affairs of the Bank in a
manner inconsistent with the terms of such discharge or suspension or any
applicable regulatory order.
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the
Company's executive offices at the address first above written, or at such other
location within Coral Gables at which the Company shall maintain its principal
executive offices, or at such other location as the Company and the Executive
may mutually agree upon. The Company shall provide the Executive at his
principal place of employment with a private office, secretarial services and
other support services and facilities including, but not limited to, Internet
and Bloomberg Financial Market Commodities and News Access Subscriptions,
cellular telephones, pagers and a lap-top computer, suitable to his position
with the Company and necessary or appropriate in connection with the per-
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formance of his assigned duties under this Agreement. The Company shall provide
to the Executive for his exclusive use an automobile owned or leased by the
Company which shall be a BMW 740 (or an automobile of similar stature and
caliber), to be used in the performance of his duties hereunder, including
commuting to and from his personal residence. The Company shall reimburse the
Executive for his ordinary and necessary business expenses, including, without
limitation, all expenses associated with his business use of the aforementioned
automobile, fees for memberships in such clubs and organizations as the
Executive and the Company shall mutually agree are necessary and appropriate for
business purposes, and his travel and entertainment expenses incurred in
connection with the performance of his duties under this Agreement, in each case
upon presentation to the Company of an itemized account of such expenses in such
form as the Company may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
(a) The Executive shall be entitled to the severance benefits
described herein in the event that his employment with the Company terminates
during the Employment Period under any of the following circumstances:
(i) The Executive's voluntary resignation from employment with
the Company within ninety (90) days following:
(A) the failure of the Board to appoint or re-appoint
or elect or re-elect the Executive to the office of Chairman
of the Board, President and Chief Executive Officer of the
Company;
(B) the failure of the stockholders of the Company to
elect or re-elect the Executive or the failure of the Board
(or the nominating committee thereof) to nominate the
Executive for such election or re-election;
(C) the expiration of a thirty (30) day period
following the date on which the Executive gives written notice
to the Company of its material failure, whether by amendment
of the Company's Charter or By-laws, action of the Board or
the Company's stockholders or otherwise, to vest in the
Executive the functions, duties, or responsibilities
prescribed in section 3 of this Agreement, unless, during such
thirty (30) day period, the Company cures such failure in a
manner determined by the Executive, in his discretion, to be
satisfactory; or
(D) the expiration of a thirty (30) day period
following the date on which the Executive gives written notice
to the Company of its material breach of any term, condition
or covenant contained in this Agreement (including, without
limitation any reduction of the Executive's rate of base
salary in effect from time to time and any change in the terms
and conditions of any compensation or benefit program in which
the Executive participates which, either individually or
together
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with other changes, has a material adverse effect on the
aggregate value of his total compensation package), unless,
during such thirty (30) day period, the Company cures such
failure in a manner determined by the Executive, in his
discretion, to be satisfactory; or
(E) the relocation of the executive offices of the
Company, a distance of more than 25 miles from its current
Coral Gables, Florida location.
(ii) subject to the provisions of section 10, the termination
of the Executive's employment by the Company for any other reason;
then, the Company shall provide the benefits and pay to the Executive the
amounts described in section 9(b).
(b) Upon the termination of the Executive's employment with
the Company under circumstances described in section 9(a) of this Agreement, the
Company shall pay and provide to the Executive (or, in the event of his death
following such termination of employment to his estate):
(i) his earned but unpaid compensation (including, without
limitation, all items which constitute wages under applicable state law
and the payment of which is not otherwise provided for under this
section 9(b)) as of the date of the termination of his employment with
the Company, such payment to be made at the time and in the manner
prescribed by law applicable to the payment of wages but in no event
later than thirty (30) days after termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the officers and
employees of the Company or the Bank, as applicable;
(iii) continued group life, health (including hospitalization,
medical, major medical and any supplemental insurance coverages),
dental, accident and long term disability insurance benefits, in
addition to that provided pursuant to section 9(b)(ii), and after
taking into account the coverage provided by any subsequent employer,
if and to the extent necessary to provide for the Executive, for the
Remaining Unexpired Employment Period, coverage equivalent to the
coverage to which he would have been entitled under such plans (as in
effect on the date of his termination of employment, or, if his
termination of employment occurs after a Change in Control, on the date
of such Change in Control, whichever benefits are greater), if he had
continued working for the Company or the Bank, as applicable during the
Remaining Unexpired Employment Period at the highest annual rate of
compensation achieved during that portion of the Employment Period
which is prior to the Executive's termination of employment with the
Company and with such continued coverages to be provided to the
Executive at the Company's expense through COBRA or
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<PAGE>
in any other manner determined by the Board to be appropriate
including, but not limited to, through the purchase of an individual
policy or policies;
(iv) within thirty (30) days following his termination of
employment with the Company, a lump sum payment, in an amount equal to
the present value of the Salary that the Executive would have earned if
he had continued working for the Company or the Bank, as applicable
during the Remaining Unexpired Employment Period at the highest annual
Salary achieved during that portion of the Employment Period which is
prior to the Executive's termination of employment with the Company or
the Bank, as applicable, where such present value is to be determined
using a discount rate equal to the applicable short-term federal rate
prescribed under section 1274(d) of the Internal Revenue Code of 1986
("Code"), compounded using the compounding period corresponding to the
regular payroll periods of the Company or the Bank, as applicable for
its officers, such lump sum to be paid in lieu of all other payments of
Salary provided for under this Agreement in respect of the period
following any such termination;
(v) within thirty (30) days following his termination of
employment with the Company, a lump sum payment in an amount equal to
the excess, if any, of:
(A) the present value of the aggregate benefits to
which he would be entitled under any and all qualified and
non-qualified defined benefit pension plans maintained by, or
covering employees of, the Company or the Bank, as applicable,
if he were 100% vested thereunder and had continued working
for the Company or the Bank, as applicable during the
Remaining Unexpired Employment Period, such benefits to be
determined as of the date of termination of employment by
adding to the service actually recognized under such plans an
additional period equal to the Remaining Unexpired Employment
Period and by adding to the compensation recognized under such
plans for the year in which termination of employment occurs
all amounts payable under sections 9(b)(i), (iv), (vii),
(viii) and (ix); over
(B) the present value of the benefits to which he is
actually entitled under such defined benefit pension plans as
of the date of his termination;
where such present values are to be determined using the mortality
tables prescribed under section 415(b)(2)(E)(v) of the Code and a
discount rate, compounded monthly equal to the annualized rate of
interest prescribed by the Pension Benefit Guaranty Corporation for the
valuation of immediate annuities payable under terminating
single-employer defined benefit plans for the month in which the
Executive's termination of employment occurs ("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of
employment with the Company, a lump sum payment in an amount equal to
the present value of the additional
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employer contributions to which he would have been entitled under any
and all qualified and non-qualified defined contribution plans
maintained by, or covering employees of, the Company or the Bank, as
applicable, if he were 100% vested thereunder and had continued working
for the Company or the Bank, as applicable during the Remaining
Unexpired Employment Period at the highest annual rate of compensation
achieved during that portion of the Employment Period which is prior to
the Executive's termination of employment with the Company, and making
the maximum amount of employee contributions, if any, required under
such plan or plans, such present value to be determined on the basis of
a discount rate, compounded using the compounding period that
corresponds to the frequency with which employer contributions are made
to the relevant plan, equal to the Applicable PBGC Rate;
(vii) the payments that would have been made to the Executive
under any cash bonus or long-term or short-term cash incentive
compensation plan maintained by, or covering employees of, the Company
or the Bank, as applicable if he had continued working for the Company
or the Bank, as applicable during the Remaining Unexpired Employment
Period and had earned the maximum bonus or incentive award in each
calendar year that ends during the Remaining Unexpired Employment
Period, such payments to be equal to the product of:
(A) the maximum percentage rate at which an award was
ever available to the Executive under such incentive
compensation plan; multiplied by
(B) the salary that would have been paid to the
Executive during each such calendar year at the highest annual
rate of salary achieved during that portion of the Employment
Period which is prior to the Executive's termination of
employment with the Company:
such payments to be made (without discounting for early payment) within
thirty (30) days following the Executive's termination of employment;
(viii) at the election of the Company made within thirty (30)
days following his termination of employment with the Company, upon the
surrender of options or appreciation rights issued to the Executive
under any stock option and appreciation rights plan or program
maintained by, or covering employees of, the Company or the Bank, as
applicable, a lump sum payment in an amount equal to the product of:
(A) the excess of (I) the fair market value of a
share of stock of the same class as the stock subject to the
option or appreciation right, determined as of the date of
termination of employment, over (II) the exercise price per
share for such option or appreciation right, as specified in
or under the relevant plan or program; multiplied by
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(B) the number of shares with respect to which
options or appreciation rights are being surrendered.
For purposes of this section 9(b)(viii) and for purposes of determining
the Executive's right following his termination of employment with the
Company to exercise any options or appreciation rights not surrendered
pursuant hereto, the Executive shall be deemed fully vested in all
options and appreciation rights under any stock option or appreciation
rights plan or program maintained by, or covering employees of, the
Company, even if he is not vested under such plan or program;
(ix) at the election of the Company made within thirty (30)
days following the Executive's termination of employment with the
Company, upon the surrender of any shares awarded to the Executive
under any restricted stock plan maintained by, or covering employees
of, the Company or the Bank, as applicable, a lump sum payment in an
amount equal to the product of:
(A) the fair market value of a share of stock of the
same class of stock granted under such plan, determined as of
the date of the Executive's termination of employment;
multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(ix) and for purposes of determining
the Executive's right following his termination of employment with the
Company to any stock not surrendered pursuant hereto, the Executive
shall be deemed fully vested in all shares awarded under any restricted
stock plan maintained by, or covering employees of, the Company, even
if he is not vested under such plan.
(x) In addition, the Company shall provide the Executive with
(A) personal use, at the Company expense for the Remaining Unexpired
Employment Period, of a late model automobile comparable to that used
by the Executive prior to his termination of employment; (B) the right
of the Executive to purchase, at book value, the membership in up to
two country clubs which the Company has maintained for the benefit of
the Executive; (C) the transfer to the Executive of two $1 million life
insurance policies that the Company then maintains on the life of the
Executive as part of his benefits; and (D) continued use, at the
Company expense for the Remaining Unexpired Employment Period, of the
secretarial services, Internet and Bloomberg Financial Market
Commodities and News Access Subscriptions, cellular telephones, pagers
and the lap-top computer which had been provided to the Executive
immediately prior to his termination of employment.
The Company and the Executive hereby stipulate that the damages which may be
incurred by the Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section
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9(b) constitute reasonable damages under the circumstances and shall be payable
without any requirement of proof of actual damage and without regard to the
Executive's efforts, if any, to mitigate damages. The Company and the Executive
further agree that the Company may condition the payments and benefits (if any)
due under sections 9(b)(iii), (iv), (v), (vi), (vii) and (x) on the receipt of
the Executive's resignation from any and all positions which he holds as an
officer, director or committee member with respect to the Company, the Bank or
any subsidiary or affiliate of either of them. In no event shall any of the
foregoing provisions of this section 9(b) entitle the Executive to additional
grants of statutory or non-statutory options to purchase shares of common stock
of the Company pursuant to any incentive stock option plan, then in effect.
SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
(a) In the event that the Executive's employment with the
Company shall terminate during the Employment Period on account of:
(i) the discharge of the Executive for "cause," which, for
purposes of this Agreement shall mean: (A) the Executive intentionally
engages in dishonest conduct in connection with his performance of
services for the Company resulting in his conviction of a felony; (B)
the Executive is convicted of, or pleads guilty or NOLO CONTENDERE to,
a felony or any crime involving moral turpitude; (C) the Executive
willfully fails or refuses to perform his duties under this Agreement
and fails to cure such breach within sixty (60) days following written
notice thereof from the Company; (D) the Executive breaches his
fiduciary duties to the Company for personal profit; or (E) the
Executive's willful breach or violation of any law, rule or regulation
(other than traffic violations or similar offenses), or final cease and
desist order in connection with his performance of services for the
Company; or
(ii) the Executive's voluntary resignation from employment
with the Company for reasons other than those specified in section
9(a);
then, the Company shall have no further obligations under this Agreement, other
than the payment to the Executive (or, in the event of his death, to his estate)
of his earned but unpaid salary as of the date of the termination of his
employment, and the provision of such other benefits, if any, to which he is
entitled as a former employee under the employee benefit plans and programs and
compensation plans and programs maintained by, or covering employees of, the
Company.
(b) For purposes of section 10(a)(i)(A) or (B), no act or
failure to act, on the part of the Executive, shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or based upon the
written advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the
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Executive shall not be deemed to be for "cause" within the meaning of section
10(a)(i) unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of three-fourths of
the non-employee members of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in section 10(a)(i) above, and specifying the
particulars thereof in detail.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE IN CONTROL.
(a) A Change in Control of the Company ("Change in Control")
shall be deemed to have occurred upon the happening of any of the following
events:
(i) approval by the stockholders of the Company of a
transaction that would result in the reorganization, merger or
consolidation of the Company, respectively, with one or more other
persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of
the entity resulting from such transaction are beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions
by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the
outstanding equity ownership interests in the Company; and
(B) at least 51% of the securities entitled to vote
generally in the election of directors of the entity resulting
from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding securities of the Company entitled to vote generally in the
election of directors by any person or by any persons acting in
concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such
liquidation or dissolution;
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(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of the
Company on the date of this Agreement; or
(B) individuals who first became members of the Board
of the Company after the date of this Agreement either:
(I) upon election to serve as a member of
the Board of directors of the Company by affirmative
vote of three-quarters of the members of such board,
or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of
the Board to serve as a member of the board of
directors of the Board, but only if nominated for
election by affirmative vote of three-quarters of the
members of the board of directors of the Board, or of
a nominating committee thereof, in office at the time
of such first nomination;
PROVIDED, HOWEVER, that such individual's election or
nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents
(within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf
of the Board of the Company; or
(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change in Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 11(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change in Control, the Executive shall
be entitled to the payments and benefits contemplated by section 9(b) in the
event of his termination of employment with the Company under any of the
circumstances described in section 9(a) of this Agreement or under any of the
following circumstances:
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(i) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following his demotion, loss of
title, office or significant authority or responsibility, or following
any reduction in any element of his package of compensation and
benefits;
(ii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following any relocation of his
principal place of employment or any change in working conditions at
such principal place of employment which the Executive, in his
reasonable discretion, determines to be embarrassing, derogatory or
otherwise adverse;
(iii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following the failure of any
successor to the Company in the Change in Control to include the
Executive in any compensation or benefit program maintained by it or
covering any of its executive officers, unless the Executive is already
covered by a substantially similar plan of the Company which is at
least as favorable to him; or
(iv) resignation, voluntary or otherwise, for any reason
whatsoever following the effective date of the Change in Control.
SECTION 12. TERMINATION OF EMPLOYMENT DUE TO DEATH OR
DISABILITY.
(a) In the event that the Executive's employment with the
Company shall terminate during the Employment Period on account of:
(i) the Executive's death; or
(ii) a determination that the Executive is eligible for
long-term disability benefits under the Company's long-term disability
insurance program or, if there is no such program, under the federal
Social Security Act;
then, subject to the provisions of subsection 12(b) and the next immediately
succeeding sentence, to be applicable in the event of the Executive's death, the
Company shall have no further obligations under this Agreement, other than the
payment to the Executive (or, in the event of his death, to his estate) of his
earned but unpaid salary as of the date of the termination of his employment,
and the provision of such other benefits, if any, to which he is entitled as a
former employee under the employee benefit plans and programs and compensation
plans and programs maintained by, or covering employees of, the Company. In the
event of the Executive's death, the payments and benefits described in sections
9(b)(ii), 9(b)(iii) and 9(b)(x)(A), (B) and (C) hereof shall be provided to the
Executive's surviving spouse.
(b) Notwithstanding the provisions of subsection 12(a) hereof,
in the event a Change in Control (as defined in section 11 of this Agreement)
occurs within eighteen (18) months
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following the effective date of the Executive's termination of employment with
the Company due to his death or disability, the Executive (or his estate, in the
event of his death) shall be entitled to receive the payments and benefits that
would have been paid to the Executive pursuant to section 9(b) of this Agreement
assuming the Executive's employment with the Company had terminated following
the date such Change in Control occurs; PROVIDED, HOWEVER, the Company's
obligations under this section 12(b) shall be offset by any compensation,
benefits or perquisites previously provided to the Executive's surviving spouse
pursuant to section 12(a) hereof as a result of the Executive's death during the
Employment Period. For purposes of the compensation, benefits or perquisites to
be provided to the Executive pursuant to section 9(b) of this Agreement, the
Executive's "employment termination date" shall be the date immediately
following the date such Change in Control occurs and any elections permitted to
be made by the Executive pursuant to section 9(b) may be made by the Executive
or his legally appointed representative, whatever the case may be.
SECTION 13. TAX INDEMNIFICATION.
(a) This section 13 shall apply if the Executive's employment
is terminated upon or following (i) a Change in Control (as defined in section
11 of this Agreement); or (ii) a change "in the ownership or effective control"
of the Company or the Bank or "in the ownership of a substantial portion of the
assets" of the Company or the Bank within the meaning of section 280G of the
Code. If this section 13 applies, then, if for any taxable year, the Executive
shall be liable for the payment of an excise tax under section 4999 of the Code
with respect to any payment in the nature of compensation made by the Company,
the Bank or any direct or indirect subsidiary or affiliate of the Company or the
Bank to (or for the benefit of) the Executive, the Company shall pay to the
Executive an amount equal to X determined under the following formula:
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under
section 4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this section
13;
FI = the highest marginal rate of income tax applicable
to the Executive under the Code for the taxable year
in question;
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SLI= the sum of the highest marginal rates of income tax
applicable to the Executive under all applicable
state and local laws for the taxable year in
question; and
M = the highest marginal rate of Medicare tax
applicable to the Executive under the Code for the
taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) the Executive under the terms of this Agreement, or
otherwise, and on which an excise tax under section 4999 of the Code will be
assessed, the payment determined under this section 13(a) shall be made to the
Executive on the earlier of (i) the date the Company, the Bank or any direct or
indirect subsidiary or affiliate of the Company or the Bank is required to
withhold such tax, or (ii) the date the tax is required to be paid by the
Executive.
(b) Notwithstanding anything in this section 13 to the
contrary, in the event that the Executive's liability for the excise tax under
section 4999 of the Code for a taxable year is subsequently determined to be
different than the amount determined by the formula (X + P) x E, where X, P and
E have the meanings provided in section 13(a), the Executive or the Company, as
the case may be, shall pay to the other party at the time that the amount of
such excise tax is finally determined, an appropriate amount, plus interest,
such that the payment made under section 13(a), when increased by the amount of
the payment made to the Executive under this section 13(b) by the Company, or
when reduced by the amount of the payment made to the Company under this section
13(b) by the Executive, equals the amount that should have properly been paid to
the Executive under section 13(a). The interest paid under this section 13(b)
shall be determined at the rate provided under section 1274(b)(2)(B) of the
Code. To confirm that the proper amount, if any, was paid to the Executive under
this section 13, the Executive shall furnish to the Company a copy of each tax
return which reflects a liability for an excise tax payment made by the Company,
at least 20 days before the date on which such return is required to be filed
with the Internal Revenue Service.
SECTION 14. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR
PROGRAMS.
The termination of the Executive's employment during the term
of this Agreement or thereafter, whether by the Company or by the Executive,
shall have no effect on the rights and obligations of the parties hereto under
the Company's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Company from time to time.
SECTION 15. SUCCESSORS AND ASSIGNS.
Page 15 of 19
<PAGE>
This Agreement will inure to the benefit of and be binding
upon the Executive, his legal representatives and testate or intestate
distributees, and the Company and its successors and assigns, including any
successor by merger or consolidation or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Failure of the
Company to obtain from any successor its express written assumption of the
Company's obligations hereunder at least sixty (60) days in advance of the
scheduled effective date of any such succession shall be deemed a material
breach of this Agreement.
SECTION 16. NOTICES.
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to the Executive:
Mr. Alfred R. Camner
6855 S.W. 101st Street
Miami, Florida 33156
WITH A COPY TO:
Stuzin & Camner
550 Biltmore Way
Suite 700
Coral Gables, Florida 33134
Attention: MARSHA BILZIN, ESQ.
If to the Company:
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: COMPENSATION COMMITTEE OF THE BOARD OF
---------------------------------------
DIRECTORS
---------
Page 16 of 19
<PAGE>
WITH A COPY TO:
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, Suite 800
Washington, D.C. 20006
Attention: V. GERARD COMIZIO, ESQ.
SECTION 17. INDEMNIFICATION FOR ATTORNEYS' FEES.
The Company shall indemnify, hold harmless and defend the
Executive against rea sonable costs, including legal fees, incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement; PROVIDED, HOWEVER, that the Executive shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Company's obligations hereunder shall be conclusive evidence of the Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.
SECTION 18. SEVERABILITY.
A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
SECTION 19. WAIVER.
Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 20. COUNTERPARTS.
This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
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<PAGE>
SECTION 21. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced
in accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the State of Florida
applicable to contracts entered into and to be performed entirely within the
State of Florida.
SECTION 22. HEADINGS AND CONSTRUCTION.
The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated.
SECTION 23. ENTIRE AGREEMENT; MODIFICATIONS.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or representations relating to the subject
matter hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 24. GUARANTEE.
The Company hereby agrees to guarantee the payment by the Bank
of any benefits and compensation to which the Executive is or may be entitled to
under the terms and conditions of the employment agreement dated effective as of
the 14th day of November, 1997 between the Bank and the Executive, a copy of
which is attached hereto as Exhibit A ("Bank Agreement").
SECTION 25. NON-DUPLICATION.
In the event that the Executive shall perform services for the
Bank or any other direct or indirect subsidiary of the Company, any
compensation, benefits or perquisites provided to the Executive by such other
employer shall be applied to offset the obligations of the Company hereunder, it
being intended that this Agreement set forth the aggregate compensation,
benefits and perquisites payable to the Executive for all services to the
Company and all of its direct or indirect subsidiaries.
SECTION 26. REQUIRED REGULATORY PROVISIONS.
Notwithstanding anything herein contained to the contrary, any
payments to the Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. /section/1828(k), and any
regulations promulgated thereunder.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and the Executive has hereunto set his hand, all as of the day and
year first above written.
------------------------------
ALFRED R. CAMNER
ATTEST: BANKUNITED FINANCIAL CORPORATION
By -------------------------
Secretary By ----------------------------
NAME:
TITLE:
[Seal]
Page 19 of 19
EXHIBIT 10.7
AMENDED AND RESTATED
BANK EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement")
is made and entered into effective as of November 14, 1997, by and between
BANKUNITED, FSB, a savings bank organized and operating under the federal laws
of the United States and having an office at 255 Alhambra Circle, Coral Gables,
Florida 33134 ("Bank") and ALFRED R. CAMNER, an individual residing at 6855 S.W.
101st Street, Miami, Florida 33156 ("Executive"). Any reference to the "Company"
herein shall mean BankUnited Financial Corporation.
W I T N E S S E T H :
WHEREAS, the Company, the Bank and the Executive entered into
an Employment Agreement dated as of November 14, 1996 ("Prior Employment
Agreement") pursuant to which the Executive has served as Chairman of the Board,
President and Chief Executive Officer of the Company and the Bank; and
WHEREAS, the Bank desires to assure for itself the continued
availability of the Executive's services and the ability of the Executive to
perform such services with a minimum of personal distraction in the event of a
threatened or pending Change in Control (as defined herein); and
WHEREAS, the Executive is willing to continue to serve in the
employ of the Bank on such basis; and
WHEREAS, the Bank and the Executive each hereby agree that in
order to achieve the foregoing objectives it is necessary to amend and restate
the terms and conditions of the Prior Employment Agreement, as set forth herein
and for the Company to enter into a separate amended and restated employment
agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the Bank and the
Executive hereby agree as follows:
SECTION 1. EMPLOYMENT.
The Bank agrees to continue to employ the Executive, and the
Executive hereby agrees to such continued employment, during the period and upon
the terms and conditions set forth in this Agreement.
Page 1 of 17
<PAGE>
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
PERIOD.
(a) The terms and conditions of this Agreement shall be and
remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for a term of three
years beginning on the date of this Agreement. Prior to the first anniversary of
the date of this Agreement and on or prior to each anniversary date thereafter
(each, an "Anniversary Date"), the Board of Directors of the Bank ("Board")
shall review the terms of this Agreement and the Executive's performance of
services hereunder and may, in the absence of objection from the Executive,
approve an extension of the Employment Agreement. In such event, the Employment
Agreement shall be extended to the third anniversary of the relevant Anniversary
Date.
(b) For all purposes of this Agreement, the term "Remaining
Unexpired Employment Period" as of any date shall mean the period beginning on
such date and ending on the Anniversary Date on which the Employment Period (as
extended pursuant to section 2(a) of this Agreement) is then scheduled to
expire.
(c) Nothing in this Agreement shall be deemed to prohibit the
Bank at any time from terminating the Executive's employment during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Bank and the Executive in the event
of any such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
The Executive shall serve as the Chairman of the Board and the
President and Chief Executive Officer of the Bank, having such power, authority
and responsibility and performing such duties as are prescribed by or under the
By-Laws of the Bank and as are customarily associated with such position. Except
as provided in section 7 hereof, the Executive shall devote his full business
time and attention (other than during weekends, holidays, approved vacation
periods, and periods of illness or approved leaves of absence) to the business
and affairs of the Bank and shall use his best efforts to advance the interests
of the Bank.
SECTION 4. ANNUAL COMPENSATION.
In consideration for the services to be rendered by the
Executive hereunder, the Bank shall pay to him a salary at an annual rate of
Three Hundred Thousand And 00/100 Dollars ($300,000), payable in approximately
equal installments in accordance with the Bank's customary payroll practices for
senior officers. Prior to each Anniversary Date occurring during the Employment
Period, the Board shall review the Executive's annual rate of salary and may, in
its discretion, approve an increase therein. In addition to salary, the
Executive may receive other cash from the Bank for services rendered hereunder
at such times, in such amounts and on such terms and conditions as the Board, in
its discretion, may determine from time to time. For purposes of section
9(b)(iv), the term "Salary" shall mean the aggregate value of the annual rate
Page 2 of 17
<PAGE>
of cash compensation and the fair market value, determined at the time of grant,
of the stock compensation paid to the Executive pursuant to this section 4
hereof.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
During the Employment Period, the Executive shall be treated
as an employee of the Bank and shall be entitled to participate in and receive
benefits under any and all qualified or non-qualified retirement, pension,
savings, profit-sharing or stock bonus plans, any and all group life, health
(including hospitalization, medical and major medical), dental, accident and
long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover similarly
situated executives of, the Bank, in accordance with the terms and conditions of
such employee benefit plans and programs and compensation plans and programs and
consistent with the Bank's customary practices. The Executive's estate or his
designee shall be the beneficiary of life insurance policies on the life of the
Executive having a face amount of at least $4,000,000.00.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six (6)
years thereafter, the Bank shall cause the Executive to be covered by and named
as an insured under any policy or contract of insurance obtained by it to insure
its directors and officers against personal liability for acts or omissions in
connection with service as an officer or director of the Bank or service in
other capacities at the request of the Bank. The coverage provided to the
Executive pursuant to this section 6 shall be of the same scope and on the same
terms and conditions as the coverage (if any) provided to other officers or
directors of the Bank.
(b) To the maximum extent permitted under applicable law,
during the Employment Period and for a period of six (6) years thereafter, the
Bank shall indemnify the Executive against and hold him harmless from any costs,
liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Bank or any subsidiary or affiliate thereof.
SECTION 7. OUTSIDE ACTIVITIES.
During the Employment Period, it shall not be a violation of
this Agreement and shall not permit the Bank to terminate the Executive's
employment for Cause if the Executive engages in the activities described below
or any activities similar in nature and scope, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
in accordance with this Agreement and do not constitute a violation of any
applicable law, rule, regulation or code of conduct or policy established by the
Bank and applicable to similarly situated executives: (i) engaging in the
practice of law, including, without limitation, as a member of the firm of
Stuzin and Camner, Professional Association, (ii) serving
Page 3 of 17
<PAGE>
on industry, corporate, civic or charitable boards or committees, (iii) managing
personal investments (including, without limitation, family-controlled
enterprises), or (iv) investing in, advising or serving as an officer or
director of other corporations or business entities. It is expressly understood
and agreed that to the extent any such activities have been conducted by the
Executive prior to the date of this Agreement, the continued conduct of such
activities (or the conduct of activities similar in nature and scope) shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Bank. The Executive may also serve as an officer or
director of the Company on such terms and conditions as the Bank and the Company
may mutually agree upon, and such service shall not be deemed to materially
interfere with the Executive's performance of his duties hereunder or otherwise
result in a material breach of this Agreement.
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the
Bank's executive offices at the address first above written, or at such other
location within Coral Gables at which the Bank shall maintain its principal
executive offices, or at such other location as the Bank and the Executive may
mutually agree upon. The Bank shall provide the Executive at his principal place
of employment with a private office, secretarial services and other support
services and facilities including, but not limited to, Internet and Bloomberg
Financial Market Commodities and News Access Subscriptions, cellular telephones,
pagers and a lap-top computer, suitable to his position with the Bank and
necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Bank shall provide to the Executive for his
exclusive use an automobile owned or leased by the Bank which shall be a BMW 740
(or an automobile of similar stature and caliber), to be used in the performance
of his duties hereunder, including commuting to and from his personal residence.
The Bank shall reimburse the Executive for his ordinary and necessary business
expenses, including, without limitation, all expenses associated with his
business use of the aforementioned automobile, fees for memberships in such
clubs and organizations as the Executive and the Bank shall mutually agree are
necessary and appropriate for business purposes, and his travel and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement, in each case upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
(a) The Executive shall be entitled to the severance benefits
described herein in the event that his employment with the Bank terminates
during the Employment Period under any of the following circumstances:
(i) The Executive's voluntary resignation from employment with
the Bank within ninety (90) days following:
Page 4 of 17
<PAGE>
(A) the failure of the Board to appoint or re-appoint
or elect or re-elect the Executive to the office of Chairman
of the Board, President and Chief Executive Officer of the
Bank;
(B) the failure of the stockholders of the Bank to
elect or re-elect the Executive or the failure of the Board
(or the nominating committee thereof) to nominate the
Executive for such election or re-election;
(C) the expiration of a thirty (30) day period
following the date on which the Executive gives written notice
to the Bank of its material failure, whether by amendment of
the Bank's Organization Certificate or By-laws, action of the
Board or the Bank's stockholders or otherwise, to vest in the
Executive the functions, duties, or responsibilities
prescribed in section 3 of this Agreement, unless, during such
thirty (30) day period, the Bank cures such failure in a
manner determined by the Executive, in his discretion, to be
satisfactory; or
(D) the expiration of a thirty (30) day period
following the date on which the Executive gives written notice
to the Bank of its material breach of any term, condition or
covenant contained in this Agreement (including, without
limitation any reduction of the Executive's rate of base
salary in effect from time to time and any change in the terms
and conditions of any compensation or benefit program in which
the Executive participates which, either individually or
together with other changes, has a material adverse effect on
the aggregate value of his total compensation package),
unless, during such thirty (30) day period, the Bank cures
such failure in a manner determined by the Executive, in his
discretion, to be satisfactory; or
(E) the relocation of the executive offices of the
Bank, a distance of more than 25 miles from its current Coral
Gables, Florida location.
(ii) subject to the provisions of section 10, the termination
of the Executive's employment by the Bank for any other reason;
then, the Bank shall provide the benefits and pay to the Executive the amounts
described in section 9(b).
(b) Upon the termination of the Executive's employment with
the Bank under circumstances described in section 9(a) of this Agreement, the
Bank shall pay and provide to the Executive (or, in the event of his death
following such termination of employment to his estate):
(i) his earned but unpaid compensation (including, without
limitation, all items which constitute wages under applicable state law
and the payment of which is not otherwise provided for under this
section 9(b)) as of the date of the termination of his
Page 5 of 17
<PAGE>
employment with the Bank, such payment to be made at the time and in
the manner prescribed by law applicable to the payment of wages but in
no event later than thirty (30) days after termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Bank's officers
and employees;
(iii) continued group life, health (including hospitalization,
medical, major medical and any supplemental insurance coverages),
dental, accident and long term disability insurance benefits, in
addition to that provided pursuant to section 9(b)(ii), and after
taking into account the coverage provided by any subsequent employer,
if and to the extent necessary to provide for the Executive, for the
Remaining Unexpired Employment Period, coverage equivalent to the
coverage to which he would have been entitled under such plans (as in
effect on the date of his termination of employment, or, if his
termination of employment occurs after a Change in Control, on the date
of such Change in Control, whichever benefits are greater), if he had
continued working for the Bank during the Remaining Unexpired
Employment Period at the highest annual rate of compensation achieved
during that portion of the Employment Period which is prior to the
Executive's termination of employment with the Bank and with such
continued coverages to be provided to the Executive at the Bank's
expense through COBRA or in any other manner determined by the Board to
be appropriate including, but not limited to, through the purchase of
an individual policy or policies;
(iv) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment, in an amount equal to the
present value of the Salary that the Executive would have earned if he
had continued working for the Bank during the Remaining Unexpired
Employment Period at the highest annual Salary achieved during that
portion of the Employment Period which is prior to the Executive's
termination of employment with the Bank, where such present value is to
be determined using a discount rate equal to the applicable short-term
federal rate prescribed under section 1274(d) of the Internal Revenue
Code of 1986 ("Code"), compounded using the compounding period
corresponding to the Bank's regular payroll periods for its officers,
such lump sum to be paid in lieu of all other payments of Salary
provided for under this Agreement in respect of the period following
any such termination;
(v) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the
excess, if any, of:
(A) the present value of the aggregate benefits to
which he would be entitled under any and all qualified and
non-qualified defined benefit pension plans maintained by, or
covering employees of, the Bank, if he were 100% vested
thereunder and had continued working for the Bank during the
Remaining
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<PAGE>
Unexpired Employment Period, such benefits to be determined as
of the date of termination of employment by adding to the
service actually recognized under such plans an additional
period equal to the Remaining Unexpired Employment Period and
by adding to the compensation recognized under such plans for
the year in which termination of employment occurs all amounts
payable under sections 9(b)(i), (iv), (vii), (viii) and (ix);
over
(B) the present value of the benefits to which he is
actually entitled under such defined benefit pension plans as
of the date of his termination;
where such present values are to be determined using the mortality
tables prescribed under section 415(b)(2)(E)(v) of the Code and a
discount rate, compounded monthly equal to the annualized rate of
interest prescribed by the Pension Benefit Guaranty Corporation for the
valuation of immediate annuities payable under terminating
single-employer defined benefit plans for the month in which the
Executive's termination of employment occurs ("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the
present value of the additional employer contributions to which he
would have been entitled under any and all qualified and non-qualified
defined contribution plans maintained by, or covering employees of, the
Bank, if he were 100% vested thereunder and had continued working for
the Bank during the Remaining Unexpired Employment Period at the
highest annual rate of compensation achieved during that portion of the
Employment Period which is prior to the Executive's termination of
employment with the Bank, and making the maximum amount of employee
contributions, if any, required under such plan or plans, such present
value to be determined on the basis of a discount rate, compounded
using the compounding period that corresponds to the frequency with
which employer contributions are made to the relevant plan, equal to
the Applicable PBGC Rate;
(vii) the payments that would have been made to the Executive
under any cash bonus or long-term or short-term cash incentive
compensation plan maintained by, or covering employees of, the Bank if
he had continued working for the Bank during the Remaining Unexpired
Employment Period and had earned the maximum bonus or incentive award
in each calendar year that ends during the Remaining Unexpired
Employment Period, such payments to be equal to the product of:
(A) the maximum percentage rate at which an award was
ever available to the Executive under such incentive
compensation plan; multiplied by
(B) the salary that would have been paid to the
Executive during each such calendar year at the highest annual
rate of salary achieved during that portion
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<PAGE>
of the Employment Period which is prior to the Executive's
termination of employment with the Bank:
such payments to be made (without discounting for early payment) within
thirty (30) days following the Executive's termination of employment;
(viii) at the election of the Bank made within thirty (30)
days following his termination of employment with the Bank, upon the
surrender of options or appreciation rights issued to the Executive
under any stock option and appreciation rights plan or program
maintained by, or covering employees of, the Bank, a lump sum payment
in an amount equal to the product of:
(A) the excess of (I) the fair market value of a
share of stock of the same class as the stock subject to the
option or appreciation right, determined as of the date of
termination of employment, over (II) the exercise price per
share for such option or appreciation right, as specified in
or under the relevant plan or program; multiplied by
(B) the number of shares with respect to which
options or appreciation rights are being surrendered.
For purposes of this section 9(b)(viii) and for purposes of determining
the Executive's right following his termination of employment with the
Bank to exercise any options or appreciation rights not surrendered
pursuant hereto, the Executive shall be deemed fully vested in all
options and appreciation rights under any stock option or appreciation
rights plan or program maintained by, or covering employees of, the
Bank, even if he is not vested under such plan or program;
(ix) at the election of the Bank made within thirty (30) days
following the Executive's termination of employment with the Bank, upon
the surrender of any shares awarded to the Executive under any
restricted stock plan maintained by, or covering employees of, the
Bank, a lump sum payment in an amount equal to the product of:
(A) the fair market value of a share of stock of the
same class of stock granted under such plan, determined as of
the date of the Executive's termination of employment;
multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(ix) and for purposes of determining
the Executive's right following his termination of employment with the
Bank to any stock not surrendered pursuant hereto, the Executive shall
be deemed fully vested
Page 8 of 17
<PAGE>
in all shares awarded under any restricted stock plan maintained by, or
covering employees of, the Bank, even if he is not vested under such
plan.
(x) In addition, the Bank shall provide the Executive with (A)
personal use, at the Bank expense for the Remaining Unexpired
Employment Period, of a late model automobile comparable to that used
by the Executive prior to his termination of employment; (B) the right
of the Executive to purchase, at book value, the membership in up to
two country clubs which the Bank has maintained for the benefit of the
Executive; (C) the transfer to the Executive of two $1 million life
insurance policies that the Bank then maintains on the life of the
Executive as part of his benefits; and (D) continued use, at the Bank
expense for the Remaining Unexpired Employment Period, of the
secretarial services, Internet and Bloomberg Financial Market
Commodities and News Access Subscriptions, cellular telephones, pagers
and the lap-top computer which had been provided to the Executive
immediately prior to his termination of employment.
The Bank and the Executive hereby stipulate that the damages which may be
incurred by the Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to the Executive's efforts, if any, to
mitigate damages. The Bank and the Executive further agree that the Bank may
condition the payments and benefits (if any) due under sections 9(b)(iii), (iv),
(v), (vi), (vii) and (x) on the receipt of the Executive's resignation from any
and all positions which he holds as an officer, director or committee member
with respect to the Bank, the Bank or any subsidiary or affiliate of either of
them. In no event shall any of the foregoing provisions of this section 9(b)
entitle the Executive to additional grants of statutory or non-statutory options
to purchase shares of common stock of the Company pursuant to any incentive
stock option plan, then in effect.
SECTION 10. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.
In the event that the Executive's employment with the Bank
shall terminate during the Employment Period on account of:
(a) the discharge of the Executive for "cause," which, for
purposes of this Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final cease
and desist order, or any material breach of this Agreement, in each case as
measured against standards generally prevailing at the relevant time in the
savings and community banking industry; PROVIDED, HOWEVER, that the Executive
shall not be deemed to have been discharged for cause unless and until the
following procedures shall have been followed:
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(i) the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose calling for the Executive's termination for
cause and setting forth the purported grounds for such termination
("Proposed Termination Resolution");
(ii) as soon as practicable, and in any event within five (5)
days, after adoption of such resolution, the Board shall furnish to the
Executive a written notice of termination which shall be accompanied by
a certified copy of the Proposed Termination Resolution ("Notice of
Proposed Termination");
(iii) the Executive shall be afforded a reasonable opportunity
to make oral and written presentations to the members of the Board, on
his own behalf, or through a representative, who may be his legal
counsel, to refute the grounds set forth in the Proposed Termination
Resolution at one or more meetings of the Board to be held no sooner
than fifteen (15) days and no later than thirty (30) days after the
Executive's receipt of the Proposed Termination Notice ("Termination
Hearings"); and
(iv) within ten (10) days following the end of the Termination
Hearings, the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose (A) finding that in the good faith opinion of
the Board the grounds for termination set forth in the Proposed
Termination Resolution exist and (B) terminating the Executive's
employment ("Termination Resolution"); and
(v) as promptly as practicable, and in any event within one
(1) business day after adoption of the Termination Resolution, the
Board shall furnish to the Executive written notice of termination,
which notice shall include a copy of the Termination Resolution and
specify an effective date of termination that is not later than the
date on which such notice is given;
(b) The Executive's voluntary resignation from employment with
the Bank for reasons other than those specified in section 9(a)(i);
(c) The Executive's death; or
(d) a determination that the Executive is eligible for
long-term disability benefits under the Bank's long-term disability insurance
program or, if there is no such program, under the federal Social Security Act;
then subject to the provisions of the next immediately succeeding sentence,
which shall be applicable in the event of the Executive's death, the Bank shall
have no further obligations under this Agreement, other than the payment to the
Executive (or, in the event of his death, to his estate) of his earned but
unpaid salary as of the date of the termination of his employment, and the
Page 10 of 17
<PAGE>
provision of such other benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation plans
and programs maintained by, or covering employees of, the Bank. In the event of
the Executive's death, the payments and benefits described in sections 9(b)(ii),
9(b)(iii) and 9(b)(x)(A), (B) and (C) shall be provided to the Executive's
surviving spouse.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE IN CONTROL.
(a) A Change in Control of the Bank ("Change in Control")
shall be deemed to have occurred upon the happening of any of the following
events:
(i) approval by the stockholders of the Bank of a transaction
that would result in the reorganization, merger or consolidation of the
Bank, respectively, with one or more other persons, other than a
transaction following which:
(A) at least 51% of the equity ownership interests of
the entity resulting from such transaction are beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions
by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the
outstanding equity ownership interests in the Bank; and
(B) at least 51% of the securities entitled to vote
generally in the election of directors of the entity resulting
from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets
of the Bank or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the outstanding
securities of the Bank entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or
approval by the stockholders of the Bank of any transaction which would
result in such an acquisition;
(iii) a complete liquidation or dissolution of the Bank, or
approval by the stockholders of the Bank of a plan for such liquidation
or dissolution;
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of
the Bank do not belong to any of the following groups:
Page 11 of 17
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(A) individuals who were members of the Board of the
Bank on the date of this Agreement; or
(B) individuals who first became members of the Board
of the Bank after the date of this Agreement either:
(I) upon election to serve as a member of
the Board of directors of the Bank by affirmative
vote of three-quarters of the members of such board,
or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of
the Board to serve as a member of the board of
directors of the Board, but only if nominated for
election by affirmative vote of three-quarters of the
members of the board of directors of the Board, or of
a nominating committee thereof, in office at the time
of such first nomination;
PROVIDED, HOWEVER, that such individual's election or
nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents
(within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf
of the Board of the Bank; or
(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Company" were substituted for the term
"Bank" therein.
In no event, however, shall a Change in Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 11(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change in Control, the Executive shall
be entitled to the payments and benefits contemplated by section 9(b) in the
event of his termination of employment with the Bank under any of the
circumstances described in section 9(a) of this Agreement or under any of the
following circumstances:
(i) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period and within ninety (90) days
following his demotion, loss of title, office or significant authority
or responsibility, or following any material reduction in any element
of his package of compensation and benefits;
Page 12 of 17
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(ii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period and within ninety (90) days
following (A) any relocation of his principal place of employment
outside of a 25-mile radius of the principal place of employment
immediately prior to the Change of Control that would require a
relocation of his residence in order to be able to commute to such new
place of employment within a commuting time not in excess of the
greater of 60 minutes or the Executive's commuting time prior to the
Change of Control or (B) any material adverse change in working
conditions at such principal place of employment; or
(iii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following the failure of any
successor to the Bank in the Change of Control to include the Executive
in any compensation or benefit program maintained by it or covering any
of its executive officers, unless the Executive is already covered by a
substantially similar plan of the Bank which is at least as favorable
to him.
SECTION 12. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR
PROGRAMS.
The termination of the Executive's employment during the term
of this Agreement or thereafter, whether by the Bank or by the Executive, shall
have no effect on the rights and obligations of the parties hereto under the
Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Bank from time to time.
SECTION 13. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding
upon the Executive, his legal representatives and testate or intestate
distributees, and the Bank and its successors and assigns, including any
successor by merger or consolidation or a statutory receiver or any other per-
son or firm or corporation to which all or substantially all of the assets and
business of the Bank may be sold or otherwise transferred. Failure of the Bank
to obtain from any successor its express written assumption of the Bank's
obligations hereunder at least sixty (60) days in advance of the scheduled
effective date of any such succession shall be deemed a material breach of this
Agreement.
SECTION 14. NOTICES.
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
Page 13 of 17
<PAGE>
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to the Executive:
Mr. Alfred R. Camner
6855 S.W. 101st Street
Miami, Florida 33156
WITH A COPY TO:
Stuzin & Camner
550 Biltmore Way
Suite 700
Coral Gables, Florida 33134
Attention: MARSHA BILZIN, ESQ.
If to the Bank:
BankUnited, FSB
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
WITH A COPY TO:
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, Suite 800
Washington, D.C. 20006
Attention: V. GERARD COMIZIO, ESQ.
SECTION 15. INDEMNIFICATION FOR ATTORNEYS' FEES.
The Bank shall indemnify, hold harmless and defend the
Executive against reasonable costs, including legal fees, incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement; PROVIDED, HOWEVER, that the Executive shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts
Page 14 of 17
<PAGE>
in settlement of the Bank's obligations hereunder shall be conclusive evidence
of the Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly provides
otherwise.
SECTION 16. SEVERABILITY.
A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
SECTION 17. WAIVER.
Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 18. COUNTERPARTS.
This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
SECTION 19. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced
in accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the State of Florida
applicable to contracts entered into and to be performed entirely within the
State of Florida.
SECTION 20. HEADINGS AND CONSTRUCTION.
The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated.
SECTION 21. ENTIRE AGREEMENT; MODIFICATIONS.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or representations relating to the subject
matter hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
Page 15 of 17
<PAGE>
SECTION 22. REQUIRED REGULATORY PROVISIONS.
The following provisions are included for the purposes of
complying with various laws, rules and regulations applicable to the Bank:
(a) Notwithstanding anything herein contained to the contrary,
in no event shall the aggregate amount of compensation payable to the Executive
under section 9(b) hereof (exclusive of amounts described in section 9(b)(i))
exceed the lesser of (i) three times the Executive's average annual total
compensation for the last five consecutive calendar years to end prior to his
termination of employment with the Bank (or for his entire period of employment
with the Bank if less than five calendar years) and (ii) the maximum amount that
may be paid without producing an "excess parachute payment" (as such term is
defined in section 280G of the Code), the applicability of such provision to the
Executive and any such maximum amount to be determined in good faith by the firm
of independent certified public accountants regularly retained to audit the
Bank's books and records.
(b) Notwithstanding anything herein contained to the contrary,
any payments to the Executive by the Bank, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C.
/section/1828(k), and any regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the contrary,
if the Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank pursuant to a notice
served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
/section/1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service of such notice, unless stayed by
appropriate proceedings. If the charges in such notice are dismissed, the Bank,
in its discretion, may (i) pay to the Executive all or part of the compensation
withheld while the Bank's obligations hereunder were suspended and (ii)
reinstate, in whole or in part, any of the obligations which were suspended.
(d) Notwithstanding anything herein contained to the contrary,
if the Executive is removed and/or permanently prohibited from participating in
the conduct of the Bank's affairs by an order issued under section 8(e)(4) or
8(g)(1) of the FDI Act, 12 U.S.C. /section/1818(e)(4) or (g)(1), all prospective
obligations of the Bank under this Agreement shall terminate as of the effective
date of the order, but vested rights and obligations of the Bank and the
Executive shall not be affected.
(e) Notwithstanding anything herein contained to the contrary,
if the Bank is in default (within the meaning of section 3(x)(1) of the FDI Act,
12 U.S.C. /section/1813(x)(1), all prospective obligations of the Bank under
this Agreement shall terminate as of the date of default, but vested rights and
obligations of the Bank and the Executive shall not be affected.
Page 16 of 17
<PAGE>
(f) Notwithstanding anything herein contained to the contrary,
all prospective obligations of the Bank hereunder shall be terminated, except to
the extent that a continuation of this Agreement is necessary for the continued
operation of the Bank: (i) by the Director of the Office of Thrift Supervision
("OTS") or his designee or the Federal Deposit Insurance Corporation ("FDIC"),
at the time the FDIC enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in section 13(c) of the FDI
Act, 12 U.S.C. /section/1823(c); (ii) by the Director of the OTS or his designee
at the time such Director or designee approves a supervisory merger to resolve
problems related to the operation of the Bank or when the Bank is determined by
such Director to be in an unsafe or unsound condition. The vested rights and
obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be
executed and the Executive has hereunto set his hand, all as of the day and year
first above written.
---------------------------------
ALFRED R. CAMNER
ATTEST: BANKUNITED, FSB
By -------------------------
Secretary By ------------------------------
NAME:
TITLE:
[Seal]
Page 17 of 18
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
___ day of November 1998 by and between Mehdi Ghomeshi (hereinafter the
"Executive") and BankUnited Financial Corporation, a Florida corporation
("BankUnited"), and its principal wholly owned subsidiary, BankUnited, FSB
(BankUnited and BankUnited, FSB are collectively referred to herein as the
"Company" and are jointly and severally obligated hereunder subject to the
provisions of Section 17.4 hereof).
RECITALS
A. The Executive possesses intimate knowledge of, and experience in,
the banking industry.
B. The Boards of Directors of BankUnited and BankUnited, FSB
(collectively referred to herein as the "Board") have determined that it is in
the best interests of the Company and its stockholders to assure that the
Company will have the services of the Executive as its President and Chief
Operating Officer, and to compensate him therefor.
C. The Company, on behalf of itself and its shareholders, also wishes
to retain well-qualified key personnel (such as Executive), and to assure itself
of the continuity of its management.
D. The Company is concerned that in the event of a possible or
threatened Change in Control (as hereinafter defined), uncertainties necessarily
arise and the Executive may have concerns about his employment status and
responsibilities, and may be approached by others offering competing employment
opportunities, and the Company therefore desires to provide the Executive
assurances as to the continuation of his employment status and responsibilities
in such event. The Company further desires to assure that, if a possible or
threatened Change in Control should arise and the Executive should be involved
in deliberations or negotiations in connection therewith, the Executive would be
in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and, to this end,
desires to protect the Executive from any direct or implied threat to his
financial well-being.
E. The Board has determined that this Agreement will reinforce and
encourage the Executive's attention and dedication to the Company.
F. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth, but desires assurance
that in the event of such a threatened or actual Change in Control he will
continue to have the employment status and responsibilities he could reasonably
expect absent such event and, in the event of his termination or a Change in
Control, he will have fair and reasonable severance protection on the basis of
his service to the Company at that time.
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NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. DEFINITIONS. In addition to the words and terms defined elsewhere in
this Agreement, the following words and terms as used herein shall have the
meanings as set forth below, unless the context or use indicates a different
meaning:
(a) "DATE OF TERMINATION" means the date of receipt of a
Notice of Termination or any later date specified therein, as the case may be;
provided, however, that if the Executive's employment is terminated by reason of
the Executive's death or Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective Date, as the case may be.
(b) "DISABILITY" means any physical or mental condition that
wholly prevents the Executive from performing his duties for at least six months
after the commencement of such condition and that is determined to be of a
permanent duration by a physician acceptable to the Company and the Executive or
the Executive's legal representative (such agreement as to acceptability not to
be unreasonably withheld). If the Company determines in good faith that the
Disability of the Executive has occurred, it may give to the Executive written
notice of its intention to terminate the Executive's employment. In such event,
the Executive's employment with the Company shall terminate effective the
Disability Effective Date, provided that the Executive shall not have returned
to full-time performance of the Executive's duties prior to the Disability
Effective Date. Any subsequent Disability, whether of a similar nature or not,
shall not be deemed a continuation of a prior Disability and, the determination
of time periods for the purposes of this provision shall recommence.
(c) "DISABILITY EFFECTIVE DATE" means the date thirty (30)
days following receipt by the Executive of notice from the Company of the
Company's intention to terminate the Executive's employment because of the
Executive's Disability.
(d) "NOTICE OF TERMINATION" means a written notice that (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
in the case of termination for Cause, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment for Cause and includes the resolution of the Board regarding the
termination of the Executive's employment for Cause, and (iii) if the Date of
Termination is other than the date of receipt of such notice, specifies the
termination date.
(e) "TERMINATION PAYMENT" means a lump sum cash payment to the
Executive by the Company in an amount which equals three times the sum of the
Executive's Base Salary for the year in which the termination occurs and an
amount equal to the last Annual Bonus paid to the Executive.
(f) "VESTED BENEFITS" means all amounts earned by and vested
in the Executive pursuant to the plans, programs, policies and practices of the
Company, including, without
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limitation, the BankUnited Financial Corporation Profit Sharing Plan, disability
insurance plan, and group and supplemental life insurance plans.
2. EMPLOYMENT.
2.1 EMPLOYMENT AND TERM. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company, on the terms
and conditions set forth herein, for the thirty (30) month period commencing on
December 1, 1998 (hereinafter the "Commencement Date") and expiring at the
conclusion of May 31, 2001 (the "Term") unless sooner terminated as hereinafter
set forth; provided, however, that commencing on June 1, 2001 and each year
thereafter (the "Extension Date"), subject to review under Section 2.4 hereof,
the Term of this Agreement shall automatically be extended for an additional
period of twelve (12) months from that date unless at least six (6) months prior
to such Extension Date, the Company shall have delivered to the Executive, or
the Executive shall have delivered to the Company, written notice that the Term
of the Executive's employment hereunder will not be extended. In the event any
such notice is delivered by the Company to the Executive or by the Executive to
the Company, thereafter, so long as the Executive is performing his obligations
pursuant to this Agreement, the Executive may begin his search and may interview
for subsequent employment, which actions shall not constitute a breach of this
Agreement by the Executive or give rise to a basis for his termination for Cause
(as such term is defined in Section 5.1 hereof).
2.2 POSITION AND DUTIES OF EXECUTIVE. The Executive shall
serve as the President and Chief Operating Officer of BankUnited and BankUnited,
FSB, and shall have powers and authority superior to any other officer or
employee of the Company or of any subsidiary of the Company (excepting the
Chairman of the Board). The Executive shall be responsible for all lines of
business and all support functions, and shall manage the affairs of the Company
on a day-to-day basis. Subject to the preceding sentences, during the Term of
employment, the Executive shall diligently perform all services as may be
reasonably assigned to him by the Board (or its Chairman) and shall exercise
such power and authority as may from time to time be delegated to him by the
Board (or its Chairman). Executive shall be required to report solely to, and
shall be subject solely to the supervision and direction of, the Board (or its
Chairman) at duly called meetings thereof, and no other person or group shall be
given authority to supervise or direct Executive in the performance of his
duties. The Executive shall devote substantially all his working time and
attention to the business and affairs of the Company, render such services
efficiently and to the best of his ability, and use his best efforts to promote
the interests of the Company.
2.3 PLACE OF PERFORMANCE. In connection with his employment by
the Company, the Executive shall be based at the Company's principal executive
offices (which shall be in Miami-Dade County, Broward County or Palm Beach
County, Florida) unless a change of location is mutually satisfactory to the
Executive and the Company, except for required travel on the Company's business.
To the extent the Executive, as a consequence of his employment, is required to
relocate from Miami-Dade County, Florida, the Company shall reimburse the
Executive for all reasonable costs incurred in connection with the relocation
including, but not limited to, moving expenses and transaction costs related to
the sale of his home, such expenses to include brokerage commissions
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and transfer costs customarily paid by sellers of residential real property.
2.4 PERFORMANCE REVIEW. It is the intent of the parties that
the Executive's performance be reviewed with the Board of Directors once each
year (as said term is defined in Section 3.2 hereof).
3. COMPENSATION.
3.1 BASE SALARY. The Executive shall receive a base salary of
$325,000 (the "Base Salary") per year during the Term of this Agreement, with
such Base Salary payable in installments consistent with the Company's standard
payroll practice for executives. On each anniversary of the Commencement Date
commencing in 1999, the Compensation Committee of the Board (or the full Board
in the absence of such committee or a replacement therefor) may engage in good
faith negotiations with the Executive concerning an increase of the Executive's
then Base Salary . The Base Salary shall not be decreased for any reason. Any
increase in Base Salary shall not limit or reduce any obligation to the
Executive under this Agreement.
3.2 ANNUAL BONUS. The Executive shall be entitled to a cash
bonus (the "Annual Bonus") for each year of the Term (for purposes of this
Agreement a "year" shall mean, with respect to the first year, the period
starting on the Commencement Date of this Agreement and ending on the first
anniversary thereafter, and for each subsequent year, a period commencing on the
day after the end of the preceding year and ending twelve (12) months
thereafter). The Annual Bonus for a year shall be based upon merit during such
year (taking into account various factors including net income, assets and
deposit growth, and such other factors as may be deemed appropriate) and shall
be determined by the Compensation Committee of the Board (or the full Board in
the absence of such Committee or a replacement therefor); provided, however,
that the minimum amount of the Bonus shall be $50,000 for the year to which the
Bonus relates. The Annual Bonus for a year shall be paid, at the election of the
Executive, in the immediately following months of December or January.
4. ADDITIONAL BENEFITS.
4.1 EXPENSE REIMBURSEMENT. During the Term, the Company, upon
the submission of supporting documentation by the Executive in form sufficient
to permit deduction thereof under applicable tax law, shall promptly reimburse
the Executive for all reasonable expenses actually paid or incurred by the
Executive in the course of and pursuant to the business of the Company,
including expenses for entertainment and all travel and living expenses while
away from home on business or at the request of the Company, provided that such
expenses are incurred and accounted for in accordance with the Company's regular
policies and procedures.
4.2 OTHER BENEFITS. The Company shall obtain or shall continue
in force comprehensive major medical and hospitalization insurance coverages,
including dental coverage, either group or individual, for the Executive and his
dependents, and shall obtain or shall continue in force disability and life
insurance for the Executive (collectively, the "Policies"), which Policies the
Company shall keep in effect at its sole expense throughout the Term. To the
extent any Policies
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have an eligibility period, Executive may maintain his existing equivalent
coverage under COBRA and the Company shall reimburse him for that expense until
the eligibility period is satisfied. The Policies to be provided by the Company
shall be on terms as determined by the Board; provided, however, that the death
benefit under the life insurance policy(ies) maintained on behalf of the
Executive shall be at least equal to a face amount of $2,000,000 and shall be
payable to beneficiary(s) designated by the Executive. In addition to the group
disability insurance coverage provided by the Company to its executive
employees, the Company shall pay to the Executive $6,000 annually to reimburse
him for the cost of an individual disability policy which would provide the
Executive monthly disability benefits of $11,125 (or such disability benefits as
the Executive individually secures with the reimbursed amount), without
deduction for any payments provided under the Company's group disability
insurance coverage. Regardless of anything herein to the contrary, if at any
time during the Executive's employment hereunder, the Company agrees to provide
or provides any benefit to any other executive officer of the Company (excepting
the Chairman of the Board), which benefit is not otherwise provided to the
Executive hereunder, or which is greater than a similar benefit provided to the
Executive hereunder, the Company shall provide such benefit to the Executive or
increase his benefit to be at least equal to such benefit agreed to be provided
or provided to such other executive officer . Nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary or Annual Bonus payable
to the Executive pursuant to this Agreement.
4.3 WORKING FACILITIES AND SUPPORT STAFF. The Company shall
furnish the Executive with an office or offices, of a size and with furnishings
and other appointments, and secretarial and such other facilities and support
services suitable to his position and adequate for the performance of his duties
hereunder. The office facilities and support staff shall substantially equal the
most favorable provided to any other officer or employee of the Company.
4.4 AUTOMOBILE ALLOWANCE. During the Term, the Company shall
provide Executive with an automobile allowance of fifteen hundred dollars
($1,500) per month, which amount is intended to compensate Executive for wear
and tear and, in addition, reimburse the Executive for all costs of gasoline,
oil, repairs, maintenance, insurance and other expenses incurred by Executive by
reason of the use of Executive's automobile for Company business from time to
time. The amount of this allowance will be reviewed by the Company and the
Executive on each anniversary from the Commencement Date during the Term,
commencing in 1999, and increased prospectively as is necessary to compensate
and reimburse the Executive for such wear and tear and costs.
4.5 VACATION. The Executive shall be entitled to four (4)
weeks vacation per year, said vacation to be scheduled so as not to materially
interfere with the performance by the Executive of his duties pursuant to this
Agreement.
4.6 COUNTRY CLUB MEMBERSHIP. The Company shall pay initiation
fees (not to exceed $20,000) and dues for the Executive's membership at a
country club of his choice, and such luncheon clubs as he deems appropriate for
the discharge of his duties hereunder.
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4.7 INCENTIVE COMPENSATION. Executive shall be granted
annually options to purchase at least 30,000 shares of the Company's Class A
Common Stock, such grants to be based upon Executive's performance and the
market price of such stock. Any such future grants shall provide that the
options immediately vest upon a Change in Control as defined in Section 6, the
Executive's termination under Sections 5.2 or 5.3, or the Company or the
Executive advising the other pursuant to Section 2.1 that the Term of this
Agreement will not be extended. Executive shall also be eligible to participate
in stock option, incentive compensation and other plans providing opportunities
to receive additional compensation.
4.8 ESTATE PLANNING. The Company shall pay the cost for
reasonable estate planning services that the Executive receives from time to
time; provided, however, that the aggregate amount of the foregoing, shall not
exceed $5000 per year.
4.9 SECURITIES GRANTS. At the first meeting of the Board of
Directors of the Company following Commencement Date, Executive shall receive:
a) a grant of 35,000 shares of the Company's Class A Common
Stock, ownership of which is to vest on January 4, 1999;
b) a grant of options to purchase 70,000 shares of the
Company's Class A Common Stock at a price of $7 1/8 and with an expiration date
of ten (10) years, which options will vest 50% at the first anniversary from the
Commencement Date, 25% at the second anniversary from the Commencement Date, and
25% at the third anniversary from the Commencement Date, subject to immediate
vesting in the event of the Executive's termination under Sections 5.2 or 5.3,
the Company or the Executive advising the other pursuant to Section 2.1 that the
Term of this Agreement will not be extended, or in the event of a Change of
Control as defined in Section 6.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. Notwithstanding anything contained
herein to the contrary, this Agreement may be terminated by the Company for
Cause. As used in this Agreement, "Cause" shall only mean (i) any action or
omission of the Executive which constitutes a willful and material breach of
this Agreement which is not cured within sixty (60) days after receipt by
Executive of specific written notice of same, (ii) the Executive intentionally
engages in dishonest conduct in connection with his performance of services for
the Company and that results in his conviction for a felony, (iii) the
conviction of Executive for, or a plea of guilty or NOLO CONTENDERE to, a
criminal act which is a felony; (iv) the Executive willfully and materially
breaches a fiduciary duty owed to the Company, for personal profit; or (v) the
Executive's willful and material breach or violation of any law, rule,
regulation (other than traffic violations or similar offenses), or final cease
and desist order in connection with his performance of services for the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to be
terminated for Cause unless and until:
(a) the Board first holds a meeting, as to which the Executive
was provided ten (10) days advance notice and an opportunity to be heard, and
the Board delivers written notice to the Executive specifying in detail the
action or inaction of the Executive alleged to constitute Cause and
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demanding that he remedy such action or inaction;
(b) the Executive shall not have remedied such action or
inaction allegedly constituting Cause within twenty (20) days after his receipt
of such written notice; and
(c) there shall have been delivered to the Executive a Notice
of Termination and a certified copy of a resolution duly adopted by the
affirmative vote of at least a majority of the Board (excluding the Executive)
at a special meeting of the Board at which the Executive was given a further
opportunity to appear with legal counsel of his choosing to refute any
allegations of Cause, which meeting was called and held for the purpose of
finding that, in the good faith opinion of the Board, the Executive's action or
inaction constituted Cause and the Executive did not remedy such action or
inaction after demand by the Board.
Nothing in Section 5.1(b) shall, prior to delivery of a Notice
of Termination as provided herein, be deemed to suspend or extinguish the
Executive's entitlement to receive the compensation and other benefits provided
under Sections 3, 4, 5.2, 5.3 and 6. In the event that the Company terminates
the employment of the Executive for Cause and, within 30 days after receipt of
the Notice of Termination, the Executive notifies the Company that he disputes
such termination, the Executive shall still be subject to the obligations set
forth in Section 2 and entitled to receive the compensation and other benefits
provided under Sections 3, 4, 5.2, 5.3 and 6 until a final and binding judgment
is rendered by a court of competent jurisdiction finding that the termination
was properly for Cause, in which event all payments subsequent to termination to
which the Executive would not otherwise be entitled shall be recoverable by the
Company, except to the extent such payments constitute reasonable compensation
for services rendered.
5.2 TERMINATION FOR DEATH OR DISABILITY. This Agreement shall
terminate automatically upon the Executive's death and may be terminated by the
Company upon the Executive's Disability. Upon a termination by reason of the
Executive's Disability, the Company shall pay to the Executive or his
beneficiaries, as the case may be, (i) any compensation or other obligations
accrued for periods prior to the Date of Termination, all of which shall be paid
within 15 days after the Date of Termination, (ii) six months of Base Salary
plus an amount equal to one-half of the last Annual Bonus paid to the Executive,
all of which shall be paid in installments consistent with the Company's payroll
practice for executives, and (iii) implement the provisions for the Executive's
Vested Benefits as of the Date of Termination. If Termination is due to the
death of the Executive, the Company shall, within 15 days after the Date of
Termination, pay to the Executive's estate or beneficiaries, as the case may be,
(i) any unpaid Base Salary, Annual Bonus and benefits accrued for periods prior
to the Date of Termination, and (ii) the rights to the Vested Benefits, other
than life insurance and disability insurance, shall be provided to his spouse.
In
addition, the life insurance proceeds from the policies described in this
Agreement shall be paid to his personal representative or such other persons as
the Executive may have designated in writing.
5.3 TERMINATION WITHOUT CAUSE. At any time the Company shall
have the right to terminate Executive's employment hereunder by written notice
to Executive; provided, however, that the Company shall (i) pay to Executive any
unpaid Base Salary, Annual Bonus and benefits and
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amounts due under the programs described in Sections 4 and 6, (ii) continue to
pay Executive's Base Salary, Annual Bonus and benefits, described in Sections 4
and 6, for the balance of the then effective Term, and (iii) implement the
provisions for the Executive's Vested Benefits as of the Date of Termination. In
such event, the Executive shall be awarded an Annual Bonus of $75,000 per year
for the year to which the Annual Bonus relates for the balance of the then
effective Term. At the election of the Executive, such Base Salary, Annual
Bonus, Vested Benefits and amounts due shall be paid in one lump sum within
thirty (30) days after notice of such election is given to the Company by the
Executive. The Company shall be deemed to have terminated the Executive's
employment pursuant to this Section 5.3 if such employment is terminated (i) by
the Company without Cause, or (ii) by the Executive voluntarily as a result of
the occurrence of any of the following events which is not consented to in
writing, by the Executive prior to its occurrence or which is not cured by the
Company within thirty (30) days after its receipt of prompt written notice of
the Executive's objection to the occurrence: (a) Executive is assigned to any
position, duties or responsibilities that are diminished when compared with the
position, duties or responsibilities of the Executive on the date of this
Agreement, (b) the Executive's Base Salary or benefits are reduced or the
Executive's Annual Bonus is less than the minimum specified in Section 3.2, (c)
the Executive is requested to engage in conduct that is reasonably likely to
result in a violation of law, (d) the withdrawal from the Executive of any
authority described in Section 2.2 or a change of the reporting relationship
described in that Section, (e) the Company requiring, without his consent, the
Executive to maintain his principal office or conduct his principal activities
anywhere other than at the Company's principal executive offices in Miami-Dade
County, Broward County or Palm Beach County, Florida, (f) the failure by the
Company to obtain the assumption and agreement to perform this Agreement by any
successor as contemplated in Section 17.1 hereof, or (g) repudiation by the
Company of any material obligation of the Company under this Agreement. The
Executive shall have no duty or obligation to mitigate the obligations of the
Company (through seeking other employment or otherwise) in the event of
termination of his employment pursuant to this Section 5.3, and the Company's
obligations hereunder shall not be offset, mitigated or otherwise reduced by
reason of the Executive's subsequent employment or otherwise.
6. CHANGE IN CONTROL.
6.1 CHANGE IN CONTROL. A "Change in Control" shall be deemed
to have occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(a) any person, as defined in Section 3(a)(9) of the
Securities and Exchange Act of 1934 ("Exchange Act"), as such term is modified
in Sections 13(d) and 14(d) of the Exchange Act (other than (A) any employee
plan established by any "Corporation" [which for these purposes shall be deemed
to be the Company and any corporation, association, joint venture,
proprietorship or partnership which is connected with the Company either through
stock ownership or through common control, within the meaning of Sections 414(b)
and (c) and 1563 of the Internal Revenue Code of 1986, as amended], (B) the
Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the
Exchange Act), (C) an underwriter temporarily holding securities pursuant to an
offering of such securities, (D) a corporation owned, directly or indirectly, by
stockholders of the Company in substantially the same proportions as their
ownership of the Company or (E) Alfred R. Camner or a group acting in concert
with him) (a "Person"), is or becomes the beneficial owner
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(as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company) representing 25% or more of the combined voting power of the Company's
then outstanding voting securities;
(b) during any period of up to two consecutive years,
subsequent to the date hereof, the individuals who, at the beginning of such
period, constitute the Board cease for any reason to constitute at least a
majority thereof, provided that any person who becomes a director subsequent to
the beginning of such period and whose nomination for election is approved by at
least two-thirds of the directors then still in office who either were directors
at the beginning of such period or whose election or nomination for election was
previously so approved (other than a director (A) whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act, or (B) who was designated by a
Person who has entered into an agreement with the Company to effect a
transaction described in clause (a), (c) or (d) hereof) shall be deemed a
director as of the beginning of such period;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than (A) a merger
or consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit plan
of any Corporation, at least 51% of the combined voting power of the voting
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the beneficial owner (as
defined in clause (a) above), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company) representing 25% or more of the
combined voting power of the Company's then outstanding voting securities;
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets, other than a sale
or disposition by the Company of all or substantially all of the Company's
assets to an entity, at least 75% of the combined voting power of the voting
securities of which are owned by persons in substantially the same proportions
as their ownership of the Company immediately prior to such sale; or
(e) any "Person" (as such term is defined in Sections
407(q)(9)(A) and 408(a)(1)(G) of the National Housing Act of 1934, as amended
[the "NHA"]) or group of Persons, shall have acquired "control" (as such term is
defined in Sections 407(q)(9)(B) and 408(a)(2) of the NHA) of the Company.
6.2 PAYMENTS UPON A CHANGE IN CONTROL. Upon the first date on
which a Change
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in Control occurs:
(a) the Company shall, within thirty (30) days following the
Change in Control, pay the Executive a Termination Payment; and
(b) the Executive shall have the right, but not the
obligation, to resign and the Company shall pay the Executive any Base Salary,
Annual Bonus or other benefits accrued for dates prior to the date of
resignation and implement the provisions of the Executive's Vested Benefits;
provided, however, that the Executive must remain in the employ of the acquiring
entity for a period of time not to exceed six (6) months if the acquiring entity
so desires; and
(c) nothing in, or done pursuant to, Sections 6.2 (a) or (b)
shall be deemed to suspend or extinguish the Executive's rights under Section 5.
6.3 ARRANGEMENTS NOT EXCLUSIVE OR LIMITING. The specific
arrangements referred to herein are not intended to exclude or limit the
Executive's participation in other benefits available to executive personnel
generally, or to preclude or limit other compensation or benefits as may be
authorized by the Board of the Company at any time, or to limit or reduce any
compensation or benefit to which the Executive would be entitled but for this
Agreement.
7. GROSS-UP OF TERMINATION PAYMENTS. The parties intend that (i) the
net amount retained by the Executive (the "Net Termination Payment") upon the
receipt of the Termination Payment, after reduction for and payment of all
applicable federal, state and local income and employment taxes (the
"Withholding Taxes") or the tax (the "Excise Tax") imposed by Section 4999 of
the Internal Revenue Code of 1986 or any successor statute, rule or regulation
of similar effect (the "Code"), including interest and penalties, and payable by
or on behalf of the Executive, shall be an amount equal to three times the sum
of the Executive's Base Salary for the year in which the Executive's employment
is terminated plus the last Annual Bonus paid to the Executive, and (ii) the net
amount of all other payments or benefits retained or to be retained by the
Executive from the Company or from one of the Company's benefit plans as a
direct or indirect result of or in connection with a Change in Control or a
Potential Change in Control or in connection with a Termination, from whatever
source other than a Termination Payment (the "Other Payments"), that are or
become subject to the Excise Tax, shall be equal to the gross amount of Other
Payments payable to the Executive without regard to the reduction or payment of
any such Excise Tax, and without regard to this Section. Accordingly, the
Termination Payment shall include an amount (the "Gross-Up Payment") sufficient
that, after payment of all Withholding Taxes and Excise Tax payable by or on
behalf of the Executive in respect of the Termination Payment, the Other
Payments and any other payments payable pursuant to the provisions of this
Section (including the cumulative effect of the Gross-Up Payment on Withholding
Taxes and Excise Tax), the Executive will actually retain an amount equal to the
Net Termination Payment and will actually receive the value of the Other
Payments, without diminution for Withholding Taxes or Excise Tax.
(a) In determining the Withholding Taxes payable by or on
behalf of the Executive, the Executive shall be deemed to pay federal, state and
local income taxes on the date of Termination, at the highest marginal rates
imposed on individuals under Section 1 of the Code, with
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respect to federal income taxes, and at the highest marginal rates imposed under
the laws of the state and locale of the Executive's residence on the date of
Termination, with respect to state and local income taxes, as such laws are in
effect during the calendar year in which the date of Termination occurs. Such
federal income taxes shall be determined taking account of the maximum deduction
permitted for the payment of such state and local taxes. In addition, the
Executive shall be deemed to be subject to only the tax imposed by Section
3101(b) of the Code.
(b) In determining the Excise Tax payable by or on behalf of
the Executive, all Termination Payment and the Other Payments shall be deemed to
constitute "excess parachute payments" within the meaning of Section 280G(b)(1)
of the Code, except to the extent that, in the opinion of tax counsel selected
by the Company's independent auditors and acceptable to the Executive, such
payments (in whole or in part) do not constitute "parachute payments" within the
meaning of Section 280G(b)(2)(A) of the Code, or represent reasonable
compensation for services actually rendered or to be rendered within the meaning
of Section 280G(b)(4) of the Code.
(c) In determining the amount of the Other Payments, the value
of any non-cash benefits or any deferred payment or benefit shall be determined
by the Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
(d) In the event the amount or amounts of the Excise Tax or
Withholding Taxes are subsequently determined to be less than the amounts taken
into account hereunder at the time of the payment of the Gross-Up Payment, the
Executive shall repay the Company the portion of such payment attributable to
such reduction, taking into account the effect of any deductions allowable to
the Executive for such repayment, consistent with the provisions of Paragraph
(a) of this Section.
(e) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority
(collectively, the "IRS") that, if successful, would require the payment by the
Company of a Gross-Up Payment (other than a Gross-Up Payment previously paid).
Such notification shall be given as soon as practicable but no later than ten
(10) business days after the Executive is informed in writing of such claim, and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim;
(ii) take such action in connection with contesting
such claim as the Company reasonably requests in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
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(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Withholding Taxes or
Excise Tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Paragraph (e), the Company shall
control all proceedings taken in connection with such contest and may, at its
sole option, pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that the Executive shall not be required to extend the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due except with respect to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the IRS.
(f) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Paragraph (e)(iv), the Executive becomes
entitled to receive any refund or credit with respect to such contested claim,
the Executive shall (subject to the Company's complying with the requirements of
Paragraph (e)(iv)) promptly pay to the Company the amount of such refund or
credit (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of any such advance,
a determination is made that the Executive shall not be entitled to any refund
with respect to such contested claim, and the Company does not notify the
Executive in writing of its intent to contest such determination within thirty
(30) days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and shall be an offset against the amount of
Gross-Up Payment required to be paid.
8. CERTAIN REGULATORY CONSIDERATIONS.
8.1 If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of BankUnited, FSB's affairs by a
notice served under Sections 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. /sections/ 1818 (e)(3) or (g)(1)), (the "Act"), the Company's
obligations under this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in such notice are
dismissed, the Company shall pay to the Executive all of the compensation
withheld while the obligations under this Agreement were suspended and shall
reinstate its obligations hereunder.
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8.2 If the Executive is removed and/or permanently prohibited
from participating in the conduct of BankUnited, FSB's affairs by an order
issued under Sections 8(e)(4) or (g)(1) of the Act (12 U.S.C. /sections/ 1818
(e)(4) or (g)(1)), all obligations of the Company shall terminate as of the
effective date of the order, but vested rights of the parties hereto shall not
be affected.
8.3 If BankUnited, FSB is in default (as defined in Section
3(x)(1) of the Act), all obligations under this Agreement shall terminate as of
the date of default, but this subsection shall not affect any vested rights of
the parties hereto.
8.4 All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of BankUnited, FSB (i) by the Director of the Office
of Thrift Supervision or his/her designee (the "Director"), at the time the
Federal Deposit Insurance Corporation (the "FDIC") enters into an agreement to
provide assistance to or on behalf of BankUnited, FSB under the authority
contained in Section 13c of the Act; or (ii) by the Director, at the time the
Director approves a supervisory merger to resolve problems related to operation
of BankUnited, FSB or when BankUnited, FSB is determined by the Director to be
in an unsafe or unsound condition. Any rights of the parties hereto that have
already vested, however, shall not be affected by such action.
8.5 Notwithstanding anything herein contained to the contrary,
any payments to the Executive by BankUnited Financial Corporation, whether
pursuant to this Agreement or otherwise, are subject to and conditioned upon
their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12
U.S.C. /section/1828(k), and any regulations promulgated thereunder.
9. REPRESENTATION BY THE EXECUTIVE. The Executive will be required to
represent and warrant, as of the Commencement Date, that he is not a party to
any agreement, contract or understanding, whether of employment or otherwise, or
subject to any governmental restriction, which would in any way restrict or
prohibit him from undertaking or performing employment with the Company in
accordance with the terms and conditions of this Agreement. Executive has
disclosed that he has a contract of employment with his present employer and
that he has tendered his resignation to be effective December 1, 1998.
10. WITHHOLDING. The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulations.
11. ATTORNEYS' FEES. The Company agrees to pay such reasonable
attorneys' fees (not to exceed $10,000) as are incurred by the Executive with
respect to advice and counsel concerning or related to the negotiation and
preparation of this Agreement. The Company shall pay reasonable costs and
attorneys' fees incurred by the Executive in connection with any Board action
pursuant to Section 5.1 in the event that the Board does not determine that
"Cause" exists in accordance with the procedures in said Section. The Company
shall also indemnify, hold harmless and defend the Executive against reasonable
costs, including legal fees, incurred by him in connection with or arising out
of any action, suit or proceeding in which he may be involved, as a result of
his efforts, in good faith, to defend or enforce the terms of this Agreement;
provided, however, that the
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Executive shall have substantially prevailed on the merits pursuant to a
judgment, decree or order of a court of competent jurisdiction or of an
arbitrator in an arbitration proceeding, or in a settlement. For purposes of
this Agreement, any settlement agreement which provides for payment of any
amounts in settlement of the Company's obligations hereunder shall be conclusive
evidence of the Executive's entitlement to indemnification hereunder, and any
such indemnification payments shall be in addition to amounts payable pursuant
to such settlement agreement, unless such settlement agreement expressly
provides otherwise.
12. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of
a Change in Control, the Board of Directors or a stockholder of the Company may
then cause or attempt to cause the Company to refuse to comply with its
obligations under Section 6 of this Agreement, or may cause or attempt to cause
the Company to institute, or may institute, litigation seeking to have Section 6
of this Agreement declared unenforceable, or may take, or attempt to take, other
action to deny the Executive the benefits intended under Section 6 of this
Agreement. In these circumstances, the purpose of this Agreement could be
frustrated. It is the intent of the parties that the Executive not be required
to incur the legal fees and expenses associated with the protection or
enforcement of his rights under Section 6 of this Agreement by litigation or
other legal action because such costs would substantially detract from the
benefits intended to be extended to the Executive hereunder, nor be bound to
negotiate any settlement of his rights hereunder under threat of incurring such
costs. Accordingly, if at any time after the Commencement Date, it should appear
to the Executive that the Company is or has acted contrary to or is failing or
has failed to comply with any of its obligations under Section 6 of this
Agreement for the reason that it regards this Agreement to be void or
unenforceable or for any other reason, or in the event that the Company or any
other person takes any action to declare Section 6 of this Agreement void or
unenforceable, or institutes any litigation or other legal action designed to
deny, diminish or to recover from the Executive the benefits provided or
intended to be provided to him under Section 6, and the Executive has acted in
good faith to perform his obligations under this Agreement, the Company
irrevocably authorizes the Executive from time to time to retain counsel of his
choice at the expense of the Company to represent him in connection with the
protection and enforcement of his rights under Section 6, including without
limitation representation in connection with termination of his employment
contrary to Section 6 of this Agreement or with the initiation or defense of any
litigation or other legal action, whether by or against the Executive or the
Company or any director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction. The reasonable fees and expenses of counsel
selected from time to time by the Executive as herein above provided shall be
paid or reimbursed to the Executive by the Company on a regular, periodic basis
upon presentation by the Executive of a statement or statements prepared by such
counsel in accordance with its customary practices. Counsel so retained by the
Executive may be counsel representing other officers or key executives of the
Company in connection with the protection and enforcement of their rights under
similar agreements between them and the Company, and, unless in his sole
judgment use of common counsel could be prejudicial to him or would not be
likely to reduce the fees and expenses chargeable hereunder to the Company, the
Executive agrees to use his best efforts to agree with such other officers or
executives to retain common counsel.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
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14. NON-ALIENATION. The Executive shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts provided
under this Agreement, and no payments or benefits due hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary acts or
by operation of law. So long as the Executive lives, no person, other than the
parties hereto, shall have any rights under or interest in this Agreement or in
the subject matter hereof.
15. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing, and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company:
Alfred R. Camner, Chairman
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
If to the Executive:
Mehdi Ghomeshi
13454 S.W. 58th Avenue
Miami, Florida 33156
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
16. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted.
17. SUCCESSORS; BINDING AGREEMENT.
17.1 The Company shall require any successor, whether direct
or indirect to all or substantially all of the business or assets of the Company
whether by purchase, merger, consolidation or otherwise, prior to or
contemporaneously with such acquisition, by agreement in form and substance
reasonably satisfactory to the Executive and his legal counsel, to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such acquisition had taken
place (to the extent not previously performed by the Company). As used in this
Agreement, "Company" shall mean the Company as hereinbefore
15
<PAGE>
defined and any such successor which executes and delivers the agreement
provided for in this Section 17.1 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
17.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
17.3 This Agreement is personal to the Executive and, without
the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
17.4 BankUnited and BankUnited, FSB shall be jointly and
severally obligated under this Agreement to the extent permitted by applicable
law. BankUnited, FSB shall not be deemed to be a guarantor of payments required
under Section 7 hereof.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. ENTIRE AGREEMENT, MODIFICATIONS AND WAIVER. This Agreement
constitutes the entire agreement between the Company and the Executive with
respect to its subject matter and supersedes all prior negotiations, agreements,
understandings and arrangements, both oral and written, between the Company and
the Executive with respect to such subject matter including, but not limited to,
any employee manuals of the Company. No modification or waiver of any provision
of this Agreement shall be binding unless executed in writing by all parties
hereto. No waiver of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision (whether or not similar), nor shall
any such waiver constitute a continuing waiver. The failure of the Executive or
the Company to insist upon strict compliance with any provision hereof shall not
be deemed to be a waiver of such provision or any other provision thereof.
16
<PAGE>
IN WITNESS WHEREOF, the Executive and, pursuant to the authorization
from the Board, BankUnited and BankUnited, FSB have executed this Agreement as
of the date first above written.
BANKUNITED, FSB BANKUNITED FINANCIAL CORPORATION
/s/ ALFRED R. CAMNER /s/ ALFRED R. CAMNER
By:------------------------- By:-----------------------------
Name: Name:
Title: Title:
ATTEST: ATTEST:
/s/ PATRICIA R. SANTANA /s/ PATRICIA R. SANTANA
By:------------------------- By:-----------------------------
Secretary Secretary
EXECUTIVE:
/s/ MEHDI GHOMESHI
- ----------------------------
Mehdi Ghomeshi
17
EXHIBIT 12.1
BankUnited Financial Corp
Ratio of Earnings to Combined fixed Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fixed charges (excluding interest on deposits)
Interest on Borrowings 74,112 25,824 13,832 8,456 4,951
Rent (33%) 742 542 302 320 256
---------------------------------------------------------------------
Total Fixed Charges 74,854 26,366 14,134 8,776 5,207
Income before income taxed and Extraordinary items 12,366 12,632 4,243 9,981 3,607
---------------------------------------------------------------------
Earnings 87,220 38,998 18,377 18,757 8,814
=====================================================================
Total fixed charges 74,854 26,366 14,134 8,776 5,207
Preferred stock dividends an a pretax basis 1,448 4,661 3,460 3,536 3,016
---------------------------------------------------------------------
Combined fixed charges and preferred stock
dividends 76,302 31,027 17,594 12,312 8,223
=====================================================================
Ration of earnings to combined fixed charges and
preferred stock dividends 1.14:1 1.26:1 1.04:1 1.52:1 1.07:1
=====================================================================
Fixed charges (including interest on deposits)
Interest on Deposits 93,431 50,136 20,791 17,849 11,344
Interest on Borrowings 74,112 25,824 13,832 8,456 4,951
Rent (33%) 742 542 302 320 256
---------------------------------------------------------------------
Total Fixed Charges 168,285 76,502 34,925 26,625 16,551
Income before income taxed and Extraordiary items 12,366 12,632 4,243 9,981 3,607
---------------------------------------------------------------------
Earnings 180,651 89,134 39,168 36,606 20,158
=====================================================================
Total fixed charges 168,285 76,502 34,925 26,625 16,551
Preferred stock dividends on a pretax basis 1,448 4,661 3,460 3,536 3,016
---------------------------------------------------------------------
Combined fixed charges and preferred stock
dividends 169,733 81,163 38,385 30,161 19,567
=====================================================================
Ratio of earnings to combined fixed charges and
preferred stock dividends 1.06:1 1.10:1 1.02:1 1.21:1 1.03:1
=====================================================================
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
JURISDICTION OF
INCORPORATION OR
ORGANIZATION
----------------
BankUnited Financial Corporation owns 100% of: Florida
- ----BankUnited, FSB which owns 100% of: Federal
------T&D Properties of South Florida, Inc. Florida
------Bay Holdings, Inc. Florida
------SCG Holdings, Inc. Florida
------SCS Ventures, Inc. Florida
------SCG Mortgage Corporation Delaware
------SCS Management Corporation Delaware
------CRE Properties, Inc. Florida
- ----BU Ventures, Inc. Florida
- ----BankUnited Mortgage Corporation Florida
- ----BUFC Financial Services, Incorporated Florida
- ----BankUnited Financial Services, Inc. Florida
- ----BankUnited Capital (1) Delaware
- ----BankUnited Capital II (1) Delaware
- ----BankUnited Capital III (1) Delaware
(1) BankUnited Financial Corporation owns 100% of the common stock of
BankUnited Capital, BankUnited Capital II and BankUnited Capital III.
BankUnited Capital has also issued $70 million aggregate liquidation
value of its 10 1/4% Trust Preferred Securities, Series B ($1,000
liquidation amount per trust preferred security); BankUnited Capital II
has issued $46 million aggregate liquidation value of its 9.60%
Cumulative Trust Preferred Securities ($25 liquidation amount per trust
preferred security) and BankUnited Capital III has issued $102.5
million of its 9% Cumulative Trust Preferred Securities ($25
liquidation amount per trust preferred security). The trust preferred
securities issued by BankUnited Capital, BankUnited Capital II and
BankUnited Capital III are publicly held.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-76878, No. 33-76884, No. 33-76882 and No.
333-25595) of BankUnited Financial Corporation of our report dated December 7,
1998 appearing on page 52 of this Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Miami, Florida
December 28, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANKUNITED, FOR THE TWELVE MONTHS ENDED JUNE 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 26,243
<INT-BEARING-DEPOSITS> 65,268
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 223,271
<INVESTMENTS-CARRYING> 200,695
<INVESTMENTS-MARKET> 198,211
<LOANS> 3,048,142
<ALLOWANCE> 6,128
<TOTAL-ASSETS> 3,738,383
<DEPOSITS> 2,124,824
<SHORT-TERM> 376,148
<LIABILITIES-OTHER> 53,153
<LONG-TERM> 984,966
0
9
<COMMON> 181
<OTHER-SE> 199,102
<TOTAL-LIABILITIES-AND-EQUITY> 3,738,383
<INTEREST-LOAN> 177,252
<INTEREST-INVEST> 30,315
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 207,567
<INTEREST-DEPOSIT> 93,431
<INTEREST-EXPENSE> 167,543
<INTEREST-INCOME-NET> 40,024
<LOAN-LOSSES> 1,700
<SECURITIES-GAINS> 4,429
<EXPENSE-OTHER> 32,183
<INCOME-PRETAX> 12,366
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,366
<EPS-PRIMARY> .41
<EPS-DILUTED> .39
<YIELD-ACTUAL> 1.11
<LOANS-NON> 15,999
<LOANS-PAST> 2,313
<LOANS-TROUBLED> 1,137
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,693
<CHARGE-OFFS> 599
<RECOVERIES> 72
<ALLOWANCE-CLOSE> 6,128
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
