<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1997
REGISTRATION NO.: 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PACIFIC CREST CAPITAL, INC.
(Exact name of registrant as specified
in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
6036
(Primary Standard Industrial
Classification Code Number)
95-4437818
(I.R.S. Employer Identification No.)
30343 CANWOOD STREET
AGOURA HILLS, CALIFORNIA 91301
(818) 865-3300
(Address including zip code, and telephone number, including area code, of
registrant's principal executive office)
PCC CAPITAL I
(Exact name of co-registrant as specified
in charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
6719
(Primary Standard Industrial
Classification Code Number)
95-4648343
(I.R.S. Employer Identification No.)
C/O PACIFIC CREST CAPITAL, INC.
30343 CANWOOD STREET
AGOURA HILLS, CALIFORNIA 91301
(818) 865-3300
(Address including zip code, and telephone number, including area code, of
co-registrant's principal executive office)
------------------------
GARY L. WEHRLE
CHIEF EXECUTIVE OFFICER
PACIFIC CREST CAPITAL, INC.
30343 CANWOOD STREET
AGOURA HILLS, CALIFORNIA 91301
(818) 865-3300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
WILLIAM T. QUICKSILVER, ESQ. JEFFREY D. HAAS, ESQ.
MANATT, PHELPS & PHILLIPS, LLP ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
11355 WEST OLYMPIC BOULEVARD 734 15TH STREET, N.W., 12TH FLOOR
LOS ANGELES, CA WASHINGTON, DC 20005
90064-1614 TELEPHONE: (202) 347-0300
TELEPHONE: (310) 312-4210
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
% Cumulative Trust Preferred Securities
of PCC Capital I......................... 1,725,000 shares $10 $17,250,000 $5,228
Junior Subordinated Deferrable Interest
Debentures of Pacific Crest Capital,
Inc.(2).................................. -- -- -- --
Pacific Crest Capital, Inc. Guarantee with
respect to % Cumulative Trust Preferred
Securities(3)............................ -- -- -- --
Total(4)................................... -- -- -- $5,228
</TABLE>
(1) Estimated solely to calculate the registration fee pursuant to Rule 457(a).
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased by
PCC Capital I with the proceeds from the sale of the % Cumulative Trust
Preferred Securities. Such securities may later be distributed for no
additional consideration to the holders of the % Cumulative Trust
Preferred Securities of PCC Capital I upon its dissolution and the
distribution of its assets.
(3) No separate consideration will be received for the Pacific Crest Capital,
Inc. Guarantee.
(4) This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of Pacific Crest Capital, Inc., the rights of
holders of Junior Subordinated Deferrable Interest Debentures of Pacific
Crest Capital, Inc. under the Indenture, the rights of holders of Trust
Preferred Securities of PCC Capital I under the Trust Agreement, the rights
of holders of the % Cumulative Trust Preferred Securities under the
Guarantee and the Expense Agreement entered into by Pacific Crest Capital,
Inc. and certain backup undertakings as described herein, which taken
together, fully, irrevocably and unconditionally guarantee all of the
obligations of PCC Capital I under the % Cumulative Trust Preferred
Securities.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION DATED AUGUST 22, 1997
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
1,500,000 TRUST PREFERRED SECURITIES
PCC CAPITAL I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
PACIFIC CREST CAPITAL, INC.
The % Cumulative Trust Preferred Securities (the "Trust Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of PCC Capital I, a statutory business trust created under the
laws of the State of Delaware ("PCC Capital"). Pacific Crest Capital, Inc., a
Delaware corporation (referred to as the "Company" when such reference includes
Pacific Crest Capital, Inc. and its
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" COMMENCING ON PAGE HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, BY ANY OTHER
GOVERNMENTAL AGENCY, OR OTHERWISE.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PCC
PUBLIC DISCOUNT(1) CAPITAL(2)
<S> <C> <C> <C>
Per Trust Preferred Security.............. $10 (2) $10
Total(3).................................. $15,000,000 (2) $15,000,000
</TABLE>
(1) Pacific Crest and PCC Capital have each agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended the ("Securities Act"). See "Underwriting."
(2) In view of the fact that all of the proceeds of the sale of the Trust
Preferred Securities will be used to purchase the Junior Subordinated
Debentures, Pacific Crest has agreed to pay the Underwriters as compensation
for arranging the investment therein of such proceeds, $ per Trust
Preferred Security, or $ in the aggregate. See "Underwriting."
Pacific Crest has also agreed to pay the expenses of the offering estimated
to be $300,000.
(3) PCC Capital has granted the Underwriters an option exercisable within 30
days from the date of this Prospectus to purchase up to 225,000 additional
Trust Preferred Securities on the same terms and conditions set forth above
to cover over-allotments, if any. If all such additional Trust Preferred
Securities are purchased, the total Price to Public and Proceeds to PCC
Capital will be $17,250,000. See "Underwriting."
The Trust Preferred Securities are being offered by the Underwriters named
herein subject to prior sale and when, as and if delivered to and accepted by
the Underwriters. It is expected that the Trust Preferred Securities will be
ready for delivery in book-entry form only through the facilities of The
Depository Trust Company in New York, New York, on or about , 1997,
against payment therefor in immediately available funds.
SANDLER O'NEILL & PARTNERS, L.P. SUTRO & CO. INCORPORATED
, 1997
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
subsidiaries, collectively, or "Pacific Crest" when referring only to the parent
company), will be the owner of all of the beneficial interests represented by
common securities of PCC Capital (the "Common Securities" and, collectively with
the Trust Preferred Securities, the "Trust Securities"). PCC Capital exists for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in an equivalent amount of % Junior Subordinated Deferrable Interest
Debentures (the "Junior Subordinated Debentures") to be issued by Pacific Crest.
The Junior Subordinated Debentures will mature on , 2027, which date
may be shortened (such date, as it may be shortened, the "Stated Maturity") to a
date not earlier than , 2002 if certain conditions are met (including
Pacific Crest having received any necessary regulatory approval to do so if then
required under applicable capital guidelines or policies). Although Pacific
Crest is not currently subject to capital requirements, it is possible that in
the future it could become subject to capital requirements of the Board of
Governors of the Federal Reserve System (the "Federal Reserve") as a result of,
among other things, the acquisition of a bank or a change in law or applicable
regulations that subjects Pacific Crest to such Federal Reserve requirements.
The Trust Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities, which will be
held by Pacific Crest. See "Description of the Trust Preferred
Securities--Subordination of Common Securities of PCC Capital Held by Pacific
Crest."
Holders of the Trust Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the 15th day of March, June,
September and December of each year (subject to possible deferral as described
below), commencing , 1997, at the annual rate of % of the Liquidation
Amount (as defined herein) of $10 per Trust Preferred Security
("Distributions"). The amount of each Distribution due with respect to the Trust
Preferred Securities will include amounts accrued through the date the
Distribution payment is due. Pacific Crest will have the right, so long as no
Debenture Event of Default (as defined below) has occurred and is continuing, to
defer payments of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, Pacific Crest may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions on
the Trust Preferred Securities will also be deferred and Pacific Crest will not
be permitted, subject to certain exceptions described herein, to declare or pay
any cash distributions with respect to its capital stock or to make any payment
with respect to its debt securities that rank PARI PASSU with or junior to the
Junior Subordinated Debentures. During an Extension Period, interest on the
Junior Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Trust Preferred Securities are entitled
will accumulate) at the rate of % per annum, compounded quarterly, and holders
of the Trust Preferred Securities will be required to accrue income and will be
required to pay United States federal income tax on that income. See
"Description of Junior Subordinated Debentures--Option to Defer Interest Payment
Period" and "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
Pacific Crest has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of PCC Capital's obligations under the Trust
Preferred Securities. See "Relationship Among the Trust Preferred Securities,
the Junior Subordinated Debentures and the Guarantee--Full and Unconditional
Guarantee." Under the Guarantee, Pacific Crest guarantees the payment of
Distributions by PCC Capital and payments on liquidation of or redemption of the
Trust Preferred Securities (subordinate to the right to payment of Senior and
Subordinated Debt of
(CONTINUED ON NEXT PAGE)
2
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Pacific Crest, as defined herein) to the extent of funds held by PCC Capital.
See "Description of Guarantee." If Pacific Crest does not make required payments
on the Junior Subordinated Debentures held by PCC Capital, PCC Capital will have
insufficient funds to pay Distributions on the Trust Preferred Securities. The
Guarantee does not cover payment of Distributions when PCC Capital does not have
sufficient funds to pay such Distributions. In such event, a holder of the Trust
Preferred Securities may institute a legal proceeding directly against Pacific
Crest pursuant to the terms of the Indenture to enforce payment of such
Distributions to such holder. See "Description of Junior Subordinated
Debentures-- Enforcement of Certain Rights by Holders of the Trust Preferred
Securities." The obligations of Pacific Crest under the Guarantee and the Junior
Subordinated Debentures are subordinate and junior in right of payment to all
Senior and Subordinated Debt (as defined in "Description of Junior Subordinated
Debentures--Subordination") of Pacific Crest.
The Trust Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at the Stated
Maturity or their earlier redemption in each case at a redemption price equal to
the aggregate liquidation preference of the Trust Preferred Securities plus any
accumulated and unpaid Distributions thereon to the date of redemption. Subject
to regulatory approval, if then required under applicable regulatory policies,
the Junior Subordinated Debentures are redeemable prior to maturity at the
option of Pacific Crest (i) on or after , 2002, in whole at any time or
in part from time to time, or (ii) at any time, in whole (but not in part),
within 90 days following the occurrence of a Tax Event, an Investment Company
Event or a Capital Treatment Event (each as defined herein), in each case at a
redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures to the date fixed for redemption, plus 100% of the
principal amount thereof. See "Description of the Trust Preferred
Securities--Redemption."
Pacific Crest will have the right at any time to dissolve PCC Capital and,
after satisfaction of liabilities to creditors of PCC Capital as provided by
applicable law, cause a Like Amount (as defined herein) of the Junior
Subordinated Debentures to be distributed to the holders of the Trust Securities
in liquidation of PCC Capital, subject to Pacific Crest having received prior
approval of the primary federal regulator of Pacific Crest if then required
under applicable capital guidelines or policies of such primary regulator. See
"Description of the Trust Preferred Securities--Liquidation Distribution upon
Termination."
In the event of the dissolution of PCC Capital, after satisfaction of
liabilities to creditors of PCC Capital as required by applicable law, the
holders of Trust Preferred Securities will be entitled to receive a liquidation
amount of $10 per Trust Preferred Security ("Liquidation Amount"), plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a Distribution of such Like Amount of Junior Subordinated
Debentures, subject to certain exceptions. See "Description of the Trust
Preferred Securities--Liquidation Distribution Upon Dissolution."
The Junior Subordinated Debentures are unsecured and subordinated to all
Senior and Subordinated Debt. As of June 30, 1997, Pacific Crest had no Senior
and Subordinated Debt outstanding. The terms of the Junior Subordinated
Debentures place no limitation on the amount of Senior and Subordinated Debt
that Pacific Crest can issue. See "Risk Factors--Ranking of Pacific Crest's
Obligations Under the Junior Subordinated Debentures and the Guarantee" and
"Description of Junior Subordinated Debentures-- Subordination."
Application has been made to list the Trust Preferred Securities on The
Nasdaq Stock Market's National Market (the "Nasdaq National Market"). Although
the Underwriters have indicated an intention to make a market in the Trust
Preferred Securities, the Underwriters are not obligated to do so, and any
market making may be discontinued at any time at the sole discretion of either
Underwriter. There can be no assurance that a market will develop for the Trust
Preferred Securities. See "Risk Factors--Absence of Existing Public Market;
Market Prices" and "Underwriting."
(CONTINUED ON NEXT PAGE)
3
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company (the
"Depositary") or its nominee. Beneficial interests in the Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in the Depositary. Except as
described herein, the Trust Preferred Securities in certificate form will not be
issued in exchange for global certificates. See "Book-Entry Issuance."
AS USED HEREIN, (I) THE "INDENTURE" MEANS THE JUNIOR SUBORDINATED INDENTURE
DATED AS OF ,1997, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME,
BETWEEN PACIFIC CREST AND WILMINGTON TRUST COMPANY, AS TRUSTEE (THE "INDENTURE
TRUSTEE"), UNDER WHICH THE JUNIOR SUBORDINATED DEBENTURES WILL BE ISSUED, (II)
THE "TRUST AGREEMENT" MEANS THE AMENDED AND RESTATED TRUST AGREEMENT RELATING TO
PCC CAPITAL AMONG PACIFIC CREST, AS DEPOSITOR, WILMINGTON TRUST COMPANY, AS
PROPERTY TRUSTEE (THE "PROPERTY TRUSTEE"), WILMINGTON TRUST COMPANY, AS DELAWARE
TRUSTEE (THE "DELAWARE TRUSTEE"), THE ADMINISTRATIVE TRUSTEES NAMED THEREIN
(COLLECTIVELY, WITH THE PROPERTY TRUSTEE AND DELAWARE TRUSTEE, THE "ISSUER
TRUSTEES") AND THE HOLDERS, FROM TIME TO TIME, OF THE TRUST SECURITIES, (III)
THE "GUARANTEE AGREEMENT" MEANS THE GUARANTEE AGREEMENT RELATING TO THE
GUARANTEE BETWEEN PACIFIC CREST AND WILMINGTON TRUST COMPANY, AS GUARANTEE
TRUSTEE, AND (IV) THE "EXPENSE AGREEMENT" MEANS THE EXPENSE AGREEMENT BETWEEN
PACIFIC CREST AND PCC CAPITAL.
4
<PAGE>
AVAILABLE INFORMATION
Pacific Crest and PCC Capital have jointly filed with the Commission a
Registration Statement on Form S-2 (together with all amendments and exhibits
thereto the "Registration Statement") under the Securities Act, with respect to
the offering of the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company, PCC Capital and
the securities offered hereby, reference is made to the Registration Statement
and the exhibits and the financial statements, notes and schedules filed as a
part thereof or incorporated by reference therein, which may be inspected at the
public reference facilities of the Commission, at the addresses set forth below.
Statements made in this Prospectus concerning the contents of any documents
referred to herein are not necessarily complete, and in each instance are
qualified in all respects by reference to the copy of such document filed as an
exhibit to the Registration Statement.
Pacific Crest is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other information
filed by Pacific Crest can be inspected and copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C.
20549, and at the following Regional Offices of the Commission: Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and New York Regional Office, 7 World Trade Center, Suite 1300, New York,
New York 10048. The Commission also maintains a Web site (http://www.sec.gov) at
which reports, proxy and information statements and other information regarding
Pacific Crest may be accessed. In addition, such reports, proxy statements and
other information can also be inspected at the offices of The Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006.
No separate financial statements of PCC Capital have been included herein.
Pacific Crest and PCC Capital do not consider that such financial statements
would be material to holders of the Trust Preferred Securities because PCC
Capital is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Junior Subordinated
Debentures of Pacific Crest and issuing the Trust Securities. See "Prospectus
Summary--PCC Capital," "Description of the Trust Preferred Securities,"
"Description of Junior Subordinated Debentures" and "Description of Guarantee."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996; (attached hereto as Appendix A); and
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (attached hereto as Appendix B); and
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
4. The Company's Proxy Statement dated April 7, 1997.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
5
<PAGE>
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED BY REFERENCE HEREIN (OTHER
THAN EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS). REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO: PACIFIC
CREST CAPITAL, INC., 30343 CANWOOD STREET, AGOURA HILLS, CALIFORNIA 90343, ATTN:
CHIEF FINANCIAL OFFICER (TELEPHONE (818) 865-3300).
The Company will provide to the holders of the Trust Preferred Securities
quarterly reports containing unaudited financial statements and annual reports
containing financial statements audited by the Company's independent auditors.
The Company will also furnish annual reports on Form 10-K and quarterly reports
on Form 10-Q free of charge to holders of the Trust Preferred Securities who so
request in writing to the Company.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE TRUST PREFERRED
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTTING THE TRUST PREFERRED
SECURITIES AND BIDDING FOR AND PURCHASING SUCH TRUST PREFERRED SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." SUCH STABILIZING
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
6
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL INFORMATION APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS THE CONTEXT CLEARLY
SUGGESTS OTHERWISE, REFERENCES TO THE "COMPANY" INCLUDE PACIFIC CREST CAPITAL,
INC. AND ITS SUBSIDIARIES, COLLECTIVELY, AND REFERENCES TO "PACIFIC CREST"
INCLUDE THE PARENT COMPANY ONLY. IN ADDITION TO THE HISTORICAL INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN, CERTAIN STATEMENTS IN THIS
PROSPECTUS CONSTITUTE "FORWARD-LOOKING STATEMENTS" UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT") WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE
DISCUSSED HEREIN. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED UNDER THE CAPTION "RISK FACTORS" AS WELL AS
THOSE DISCUSSED ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
INCLUDING UNDER THE CAPTION "CAUTIONARY STATEMENTS FOR PURPOSES OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995" IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997, WHICH IS ATTACHED HERETO AS
APPENDIX B. SEE "RISK FACTORS--FORWARD-LOOKING STATEMENTS."
THE COMPANY
Pacific Crest is a financial institution holding company based in Agoura
Hills, California that was organized in 1993 to hold 100% of the stock of
Pacific Crest Bank which was being distributed in a spin-off from The Foothill
Group, Inc. As a result of the 1993 spin-off, Pacific Crest became a public
company with common and preferred stock traded on the Nasdaq National Market.
The Company operates primarily through its wholly owned subsidiary, Pacific
Crest Bank, a California industrial loan company. Pacific Crest is not a bank
holding company under the Bank Holding Company Act of 1956, as amended, or a
savings and loan association holding company under the Home Owners Loan Act, as
amended, and, therefore, is not regulated or supervised by the Federal Reserve
or the Office of Thrift Supervision. At June 30, 1997, the Company had
consolidated assets of $371.1 million, total loans of $227.7 million, total
deposits of $305.0 million and total shareholders' equity of $26.3 million.
PACIFIC CREST BANK
Pacific Crest Bank commenced operation in 1974 and until 1993 was known as
Foothill Thrift and Loan. From 1994 through July 31, 1997 Pacific Crest Bank was
known as Pacific Crest Investment and Loan until the name was changed in August,
1997. Pacific Crest Bank is subject to regulation by the California Department
of Financial Institutions and the Federal Deposit Insurance Corporation (the
"FDIC"). The deposits of Pacific Crest Bank are insured by the FDIC up to
applicable limits.
Pacific Crest Bank is headquartered in Agoura Hills, California and operates
three California deposit gathering branches located in Beverly Hills, Encino,
and San Diego and loan production offices in Northern and Southern California
and Portland, Oregon. As a specialized deposit institution, Pacific Crest Bank
offers a select number of competitive savings programs designed for customers
seeking high yield and liquidity. As a niche commercial real estate lender,
Pacific Crest Bank focuses on meeting the needs of entrepreneurs and investors.
In addition, Pacific Crest Bank expanded its federal Small Business
Administration ("SBA") lending program in mid-1996 by adding a dedicated staff
to run the program. While its deposit gathering activities are predominantly in
Southern California, and to a lesser extent national in scope through the use of
national media and electronic communication, lending activities target virtually
the entire West Coast.
Management's strategy is focused on reducing credit and collateral risk in
its lending operations, generating a higher level of fee income, controlling
general and administrative expense, maximizing investment portfolio yield
consistent with safety and liquidity goals and reducing funding costs.
Management attempts to achieve these goals while providing an exceptional level
of personal service in response to its customers needs. In furtherance of this
strategy, Pacific Crest Bank intends to continue to emphasize
7
<PAGE>
the SBA program as a way to reduce lending risk because of the government
guarantees and to increase fee income potential to the extent government
guaranteed loans are sold into the secondary market.
At June 30, 1997, Pacific Crest Bank had total assets of $371.1 million,
total loans of $227.7 million and total deposits of $305.0 million. At June 30,
1997, $221.1 million, or 97.1% of loans consisted of loans secured by commercial
real estate, which were primarily made for terms between one and ten years at
adjustable interest rates. In addition, as of June 30, 1997, Pacific Crest Bank
had $4.3 million in SBA loans of which $3.4 million were fully guaranteed by the
SBA.
PACIFIC COMMERCIAL REAL ESTATE LENDING, INC.
In April 1997, Pacific Crest formed a new corporation in partnership with
Barry S. Slatt Mortgage Company ("Slatt"), based in the San Francisco Bay area,
to focus on generating mortgage loans of between $2.0 million and $20.0 million
for funding by conduits, insurance companies and banks. The new corporation,
Pacific Commercial Real Estate Lending, Inc. ("PCREL"), will earn fees for
originating loans, but will not fund the loans or retain any credit risk. PCREL
is 50% owned by Pacific Crest and 50% by Slatt. Pacific Crest does not expect
that the operations of PCREL will be material to the financial condition and
results of operations of the Company in 1997.
PCC CAPITAL
PCC Capital is a statutory business trust created under Delaware law
pursuant to (i) the Trust Agreement and (ii) the filing of a Certificate of
Trust with the Delaware Secretary of State on August 18, 1997, as amended. PCC
Capital's business and affairs are conducted by the Property Trustee, Delaware
Trustee and three individual Administrative Trustees who are officers of the
Company. PCC Capital exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, (ii) using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures issued by Pacific
Crest, and (iii) engaging in only those other activities necessary, advisable or
incidental thereto. The Junior Subordinated Debentures will be the sole assets
of PCC Capital, and payments by Pacific Crest under the Junior Subordinated
Debentures and the Expense Agreement will be the sole revenues of PCC Capital.
All of the Common Securities will be owned by Pacific Crest. The Common
Securities will rank PARI PASSU, and payments will be made thereon pro rata,
with the Trust Preferred Securities, except that upon the occurrence and during
the continuance of an event of default under the Trust Agreement resulting from
an event of default under the Indenture, the rights of Pacific Crest as holder
of the Common Securities to payment in respect of Distributions and payments
upon liquidation, redemption or otherwise will be subordinated to the rights of
the holders of the Trust Preferred Securities. See "Description of the Trust
Preferred Securities--Subordination of Common Securities of PCC Capital Held by
Pacific Crest." Pacific Crest will acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of PCC Capital. PCC Capital
has a term of 31 years, but may dissolve earlier as provided in the Trust
Agreement.
PCC Capital's principal offices are located at 30343 Canwood Street, Agoura
Hills, California 91301 and its telephone number is (818) 865-3300.
8
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THE OFFERING
<TABLE>
<S> <C>
Trust Preferred Securities issuer... PCC Capital
Securities offered.................. 1,500,000 Trust Preferred Securities having a
Liquidation Amount of $10 per Trust Preferred
Security. The Trust Preferred Securities represent
preferred undivided beneficial interests in PCC
Capital's assets, which will consist solely of the
Junior Subordinated Debentures and payments
thereunder. PCC Capital has granted the Underwriters
an option, exercisable within 30 days after the date
of this Prospectus, to purchase up to an additional
225,000 Trust Preferred Securities at the initial
offering price, solely to cover over-allotments, if
any.
Distributions....................... The Distributions payable on each Trust Preferred
Security will be fixed at a rate per annum of % of
the Liquidation Amount of $10 per Trust Preferred
Security, will be cumulative, will accrue from the
date of issuance of the Trust Preferred Securities,
and will be payable quarterly in arrears on the 15th
day of March, June, September and December of each
year, commencing on , 1997 (subject to
possible deferral as described below). The amount of
each Distribution due with respect to the Trust
Preferred Securities will include amounts accrued
through the date the Distribution payment is due. See
"Description of the Trust Preferred ."
Extension periods................... So long as no Debenture Event of Default (as defined
herein) has occurred and is continuing, Pacific Crest
will have the right, at any time, to defer payments
of interest on the Junior Subordinated Debentures by
extending the interest payment period thereon for a
period not exceeding 20 consecutive quarters with
respect to each deferral period (each an "Extension
Period"), provided that no Extension Period may
extend beyond the Stated Maturity of the Junior
Subordinated Debentures. If interest payments are so
deferred, Distributions on the Trust Preferred
Securities will also be deferred and Pacific Crest
will not be permitted, subject to certain exceptions
described herein, to declare or pay any cash
distributions with respect to Pacific Crest's capital
stock or debt securities that rank PARI PASSU with or
junior to the Junior Subordinated Debentures. During
an Extension Period, Distributions will continue to
accumulate with income thereon compounded quarterly.
Because interest would continue to accrue and
compound on the Junior Subordinated Debentures, to
the extent permitted by applicable law, holders of
the Trust Preferred Securities will be required to
accrue income for United States federal income tax
purposes. See "Description of Junior Subordinated to
Defer Interest Payment Period" and
</TABLE>
9
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<TABLE>
<S> <C>
"Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount."
Maturity............................ The Junior Subordinated Debentures will mature on
, 2027 which date may be shortened (such
date, as it may be shortened, the "Stated Maturity")
to a date not earlier than , 2002 if
certain conditions are met (including Pacific Crest
having received prior approval of the primary federal
regulator of Pacific Crest to do so if then required
under applicable capital guidelines or policies of
such primary regulator).
Redemption.......................... The Trust Preferred Securities are subject to
mandatory redemption upon repayment of the Junior
Subordinated Debentures at their stated maturity or
their earlier redemption at a redemption price equal
to the aggregate Liquidation Amount of the Trust
Preferred Securities plus accumulated and unpaid
Distributions thereon to the date of redemption.
Subject to regulatory approval, if then required
under applicable regulatory policies, the Junior
Subordinated Debentures are redeemable prior to
maturity at the option of Pacific Crest (i) on or
after , 2002 in whole at any time or in
part from time to time, or (ii) at any time, in whole
(but not in part), within 90 days following the
occurrence of a Tax Event, an Investment Company
Event or a Capital Treatment Event, in each case at a
redemption price equal to 100% of the principal
amount of the Junior Subordinated Debentures so
redeemed, together with any accrued but unpaid
interest to the date fixed for redemption. See
"Description of the Trust Preferred Securities
Redemption" and "Description of Junior Subordinated
Debentures Redemption."
Distribution of Junior Subordinated
Debentures........................ Pacific Crest has the right at any time to dissolve
PCC Capital, and, after satisfaction of creditors of
PCC Capital as required by applicable law, cause the
Junior Subordinated Debentures to be distributed to
holders of Trust Preferred Securities in liquidation
of PCC Capital, subject to Pacific Crest having
received prior approval of the primary federal
regulator of Pacific Crest to do so if then required
under applicable capital guidelines or policies of
such primary regulator. See "Description of the Trust
Preferred Securities--Distribution of Junior
Subordinated Debentures."
Guarantee........................... Taken together, Pacific Crest's obligations under
various documents described herein, including the
Guarantee Agreement, provide a full guarantee of
payments by PCC Capital of Distributions and other
amounts due on the Trust Preferred Securities. Under
the Guarantee Agreement, Pacific Crest guarantees the
payment of Distributions by PCC Capital and payments
on liquidation of or redemption of the
</TABLE>
10
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<TABLE>
<S> <C>
Trust Preferred Securities (subordinate to the right
to payment of Senior and Subordinated Debt of Pacific
Crest, as defined herein) to the extent of funds held
by PCC Capital. If PCC Capital has insufficient funds
to pay Distributions on the Trust Preferred
Securities (i.e., if Pacific Crest has failed to make
required payments under the Junior Subordinated
Debentures), a holder of the Trust Preferred
Securities would have the right to institute a legal
proceeding directly against Pacific Crest to enforce
payment of such Distributions to such holder. See
"Description of Junior Subordinated Debentures
Enforcement of Certain Rights by Holders of the Trust
Preferred Securities," "Description of Junior
Subordinated Debentures Events of Default" and
"Description of Guarantee."
Ranking............................. The Trust Preferred Securities will rank PARI PASSU,
and payments thereon will be made pro rata, with the
Common Securities of PCC Capital held by Pacific
Crest, except as described under "Description of the
Trust Preferred Securities--Subordination of Common
Securities of PCC Capital Held by Pacific Crest." The
obligations of Pacific Crest under the Guarantee, the
Junior Subordinated Debentures and other documents
described herein are unsecured and rank subordinate
and junior in right of payment to all current and
future Senior and Subordinated Debt, the amount of
which is unlimited. At June 30, 1997, Pacific Crest
had no outstanding Senior and Subordinated Debt. In
addition, because Pacific Crest is a holding company,
all obligations of Pacific Crest relating to the
securities described herein will be effectively
subordinated to all existing and future liabilities
of Pacific Crest's subsidiaries, including Pacific
Crest Bank. Pacific Crest may cause additional Trust
Preferred Securities to be issued by trusts similar
to PCC Capital in the future, and there is no limit
on the amount of such securities that may be issued.
In this event, Pacific Crest's obligations under the
Junior Subordinated Debentures to be issued to such
other trusts and Pacific Crest's guarantees of the
payments by such trusts will rank PARI PASSU with
Pacific Crest's obligations under the Junior
Subordinated Debentures and the Guarantee,
respectively.
Voting rights....................... The holders of the Trust Preferred Securities will
generally have limited voting rights relating only to
the modification of the Trust Preferred Securities,
the dissolution, winding-up or termination of PCC
Capital and certain other matters described herein.
See "Description of the Trust Preferred Securities
Voting Rights; Amendment of the Trust Agreement."
ERISA considerations................ Prospective purchasers must carefully consider the
information set forth under "ERISA Considerations."
</TABLE>
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<S> <C>
Nasdaq National Market symbol....... Application has been made to list the Trust Preferred
Securities on the Nasdaq National Market under the
symbol PCCIP.
Use of proceeds..................... The proceeds to PCC Capital from the sale of the
Trust Preferred Securities offered hereby will be
invested by PCC Capital in the Junior Subordinated
Debentures of Pacific Crest. Pacific Crest intends to
invest $5.0 million of the net proceeds in Pacific
Crest Bank to increase its capital level to support
future growth. Pacific Crest intends to use the
remaining net proceeds for general corporate
purposes, which may include without limitation,
funding additional investments in, or extensions of
credit to, Pacific Crest Bank and possible future
acquisitions if and when suitable opportunities
arise. See "Use of Proceeds."
</TABLE>
12
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial information of the Company and
its subsidiaries as of and for the years ended December 31, 1996, 1995, 1994,
1993 and 1992 has been derived from the Company's audited consolidated financial
statements. The following summary consolidated financial information as of and
for the six months ended June 30, 1997 and 1996 has been derived from the
Company's unaudited consolidated quarterly financial statements which, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. The summary
consolidated financial information should be read in conjunction with the
Company's consolidated financial statements and related notes incorporated
herein by reference. The consolidated financial information for the six months
ended June 30, 1997 is not necessarily indicative of the operating results to be
expected for the entire year.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment securities........................ $ 136,330 $ 64,392 $ 83,494 -- $ 55,248 $ 898 $ 1,705
Total loans, net of deferred fees............ 227,063 181,344 211,095 $ 196,778 182,461 204,406 218,828
Allowance for loan losses.................... 3,795 3,292 3,400 4,500 8,075 3,910 3,195
Other real estate owned...................... 1,914 3,044 3,469 4,355 5,724 9,092 8,065
Other assets................................. 7,710 6,930 6,593 6,309 6,958 5,329 3,666
Total assets................................. 371,126 290,443 304,085 259,109 248,520 242,443 243,549
Total deposits............................... 304,954 264,780 266,695 234,510 226,350 213,162 222,598
Other borrowings............................. 36,900 -- 10,000 -- -- -- --
Subordinated debt............................ -- -- -- -- -- -- 1,000
Shareholders' equity......................... 26,288 23,422 24,468 21,952 19,628 27,179 15,830
STATEMENT OF OPERATION DATA:
Total interest income........................ $ 15,840 $ 13,230 $ 26,567 $ 23,799 $ 21,114 $ 21,583 $ 22,814
Total interest expense....................... 8,343 6,733 13,500 12,084 9,358 9,365 11,229
Net interest income.......................... 7,497 6,497 13,067 11,715 11,756 12,218 11,585
Provision for loan losses.................... 530 1,100 1,917 960 8,343 4,398 1,893
Net interest income after provision for loan
losses..................................... 6,967 5,397 11,150 10,755 3,413 7,820 9,692
Noninterest income:
Gain (loss) on investment securities......... -- 350 413 851 (780) (277) (71)
Other noninterest income(1).................. 450 344 1,068 470 404 375 295
Total noninterest income..................... 450 694 1,481 1,321 (376) 98 224
Noninterest expense:
Valuation adjustments to OREO................ 340 70 155 344 1,719 3,314 1,179
OREO expenses................................ 18 23 150 203 850 1,166 375
Other general & administrative expenses...... 4,183 3,631 7,818 8,362 8,841 6,794 7,596
Total noninterest expense.................... 4,541 3,724 8,123 8,909 11,410 11,274 9,150
Income (loss) before income taxes and
cumulative effect of accounting change..... 2,876 2,367 4,508 3,167 (8,373) (3,356) 766
Income tax provision (benefit)............... 1,146 910 1,505 (77) (1,914) (1,303) 203
Cumulative effect of accounting change(2).... -- -- -- -- -- (560) --
Net income (loss)............................ 1,730 1,457 3,003 3,244 (6,459) (1,493) 563
Preferred dividends declared................. -- -- -- (920) (1,104) -- --
Net income (loss) applicable to common
stock...................................... $ 1,730 $ 1,457 $ 3,003 $ 2,324 $ (7,563) $ (1,493) $ 563
</TABLE>
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<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL RATIOS:(3)
Return on average total assets(4)............ 1.03% 1.04% 1.06% 1.34% (2.56)% (0.62)% 0.24%
Return on average shareholders' equity(5).... 13.91% 13.00% 12.96% 16.02% (24.73)% (8.91)% 3.54%
Net interest rate spread(6).................. 4.27% 4.42% 4.41% 4.60% 4.49% 5.18% 4.74%
Net interest margin(7)....................... 4.59% 4.76% 4.76% 4.98% 4.82% 5.33% 5.03%
Ratio of other general & administrative
expenses to average total assets........... 2.49% 2.59% 2.77% 3.46% 3.50% 2.84% 3.23%
Total average shareholders' equity to total
average assets............................. 7.42% 7.99% 8.20% 8.38% 10.34% 7.01% 6.75%
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends:
Excluding interest paid on deposits........ 5.01x 21.65x 17.75x 2.93x * * 3.66x
Including interest paid on deposits........ 1.34x 1.35x 1.33x 1.17x 0.11x 0.65x 1.07x
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at end
of period(8)............................... 1.10% 2.51% 1.60% 3.60% 6.24% 6.26% 6.83%
Total nonaccrual loans & OREO as a percent of
total loans & OREO......................... 1.78% 3.95% 2.26% 4.63% 8.24% 6.69% 6.58%
Net loan charge-offs to average loans........ 0.13% 2.42% 1.68% 2.45% 2.14% 1.73% 0.61%
Net loan charge-offs & OREO valuation
adjustments to average loans and OREO...... 0.44% 2.44% 1.73% 2.57% 2.92% 3.16% 1.14%
Allowance for loan losses to total loans net
of deferred fees........................... 1.67% 1.82% 1.61% 2.29% 4.43% 1.91% 1.46%
Allowance for loans losses to nonaccrual
loans...................................... 176.10% 77.57% 245.31% 90.27% 82.57% 75.40% 46.58%
PER SHARE DATA(9)(10) (IN THOUSANDS):
Common shares outstanding.................... 2,968 2,960 2,960 2,954 1,102 1,099 N/A
Common stock equivalents of preferred
stock(11).................................. -- -- -- -- 1,558 1,558 N/A
Treasury shares.............................. (30) -- (12) -- -- N/A N/A
Other common stock equivalents............... 113 55 94 -- -- N/A N/A
Total common stock equivalents, assuming full
conversion of preferred stock.............. 3,051 3,015 3,042 2,954 2,660 2,657 N/A
Book value per common share.................. 8.95 7.91 8.35 7.43 7.38 10.23 N/A
Fully diluted earnings (loss) per common
share...................................... 0.57 0.49 1.00 1.20 (6.88) N/A N/A
PACIFIC CREST BANK REGULATORY CAPITAL RATIOS:
Tier 1 risk-based capital.................... 10.00 10.90 10.31 9.48 8.87 9.52 6.71
Total risk-based capital..................... 11.25 12.16 11.56 10.74 9.01 10.72 8.39
Leverage ratio(12)........................... 7.07 7.82 7.96 7.82 7.15 8.98 6.50
</TABLE>
- ------------------------
(1) 1996 includes a $264,000 gain on the sale of $28.2 million in deposits.
(2) Represents the cumulative effect of implementing Statement of Financial
Accounting Standards No. 109.
(3) The Company's performance ratios are based on actual daily averages and are
annualized where appropriate.
(4) Net income (loss) divided by average total assets.
(5) Net income (loss) divided by total average shareholders' equity.
(6) Average yield earned on interest-earning assets less the average rate paid
on interest-bearing liabilities.
(7) Net interest income divided by total average interest-earning assets.
(8) Nonperforming assets include total nonaccrual loans, OREO and nonperforming
investments.
(9) The Company did not have any assets and did not conduct any significant
business prior to December 23, 1993 when The Foothill Group, Inc.
contributed 100% of the outstanding shares of Pacific Crest Bank common
stock to Pacific Crest in exchange for 1,099,490 shares of its common stock.
Upon completion of a preferred stock offering by the Company, The Foothill
Group, Inc. then distributed to its shareholders as a stock dividend 100% of
the outstanding shares of the Company's common stock.
14
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(10) Per share data is based on actual daily averages.
(11) The conversion price of the preferred stock for these calculations is $9.00
per share. The preferred stock was converted into common stock of the
Company in December 1995.
(12) Based on quarter end asset balances of Pacific Crest Bank.
* The ratios of earnings to fixed charges and preferred stock dividends were
computed by dividing (x) income (loss) before income taxes and cumulative
effect of an accounting change, plus fixed charges by (y) fixed charges and
preferred stock dividends. Fixed charges represent total interest expense,
including and excluding interest on deposits, as applicable, as well as the
interest component of rental expense. Earnings for the years ended December
31, 1994 and 1993 were inadequate to cover fixed charges by $8.2 million and
$3.1 million, respectively.
15
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE FOLLOWING
FACTORS IN CONNECTION WITH A DECISION TO PURCHASE THE TRUST PREFERRED
SECURITIES.
RANKING OF PACIFIC CREST'S OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEE
All obligations of Pacific Crest under the Guarantee, the Junior
Subordinated Debentures and other documents described herein are unsecured and
rank subordinate and junior in right of payment to all current and future Senior
and Subordinated Debt, the amount of which is unlimited. At June 30, 1997,
Pacific Crest had no Senior and Subordinated Debt outstanding. In addition,
because Pacific Crest is a holding company, all obligations of Pacific Crest
relating to the securities described herein will be effectively subordinated to
all existing and future liabilities of Pacific Crest's subsidiaries, including
Pacific Crest Bank. As a holding company, the right of Pacific Crest to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Trust Preferred Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that subsidiary,
except to the extent that Pacific Crest may itself be recognized as a creditor
of that subsidiary. Accordingly, the Junior Subordinated Debentures and all
obligations of Pacific Crest relating to the Trust Preferred Securities will be
effectively subordinated to all existing and future liabilities of Pacific Crest
Bank, and holders of the Trust Preferred Securities should look only to the
assets of Pacific Crest, and not of its subsidiaries, for principal and interest
payments on the Junior Subordinated Debentures. None of the Indenture, the
Guarantee, the Guarantee Agreement or the Trust Agreement places any limitation
on the amount of secured or unsecured debt, including Senior and Subordinated
Debt, that may be incurred by Pacific Crest or its subsidiaries. Further, there
is no limitation on Pacific Crest's ability to issue additional Junior
Subordinated Debentures in connection with any further offerings of Trust
Preferred Securities, and such additional debentures would rank PARI PASSU with
the Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures--Subordination" and "Description of Guarantee--Status of the
Guarantee."
OPTION TO DEFER INTEREST PAYMENT PERIOD; TAX CONSEQUENCES OF A DEFERRAL OF
INTEREST PAYMENTS
So long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, Pacific Crest has the right under the Indenture to defer
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral, quarterly Distributions on the Trust Preferred Securities by PCC
Capital will be deferred (and the amount of Distributions to which holders of
the Trust Preferred Securities are entitled will accumulate additional amounts
thereon at the rate of % per annum, compounded quarterly, from the relevant
payment date for such Distributions, to the extent permitted by applicable law)
during any such Extension Period. During any such Extension Period, Pacific
Crest will be prohibited from making certain payments or distributions with
respect to Pacific Crest's capital stock (including dividends on or redemptions
of common or preferred stock) and from making certain payments with respect to
any debt securities of Pacific Crest that rank pari passu with or junior in
interest to the Junior Subordinated Debentures; however, Pacific Crest will not
be restricted from (a) paying dividends or distributions in common stock of
Pacific Crest, (b) redeeming rights or taking certain other actions under a
shareholders' rights plan, (c) making payments under the Guarantee or (d) making
purchases of common stock related to the issuance of common stock or rights
under any of Pacific Crest's benefit plans for its directors, officers or
employees. Further, during an Extension Period, Pacific Crest would have the
ability to continue to make payments on Senior and Subordinated Debt. Prior to
the termination of any Extension Period, Pacific Crest may further extend such
Extension Period provided that such extension does not cause such Extension
Period to exceed 20 consecutive quarters or to extend beyond the Stated
Maturity. Upon the termination of any Extension
16
<PAGE>
Period and the payment of all interest then accrued and unpaid (together with
interest thereon at the annual rate of %, compounded quarterly, to the extent
permitted by applicable law), Pacific Crest may elect to begin a new Extension
Period subject to the above requirements. There is no limitation on the number
of times that Pacific Crest may elect to begin an Extension Period. See
"Description of the Trust Preferred Securities--Distributions" and "Description
of Junior Subordinated Debentures--Option to Defer Interest Payment Period."
Because Pacific Crest has no current plan to exercise its option to defer
payments of interest, the Junior Subordinated Debentures will be treated as
issued without "original issue discount" for United States federal income tax
purposes. As a result, holders of Trust Preferred Securities will include
interest in taxable income under their own methods of accounting (i.e., cash or
accrual). If Pacific Crest exercises its right to defer payments of interest,
the holders of Trust Preferred Securities will be required to include their pro
rata share of original issue discount in gross income as it accrues for United
States federal income tax (and possibly other) purposes in advance of the
receipt of cash. See "Certain Federal Income Tax Consequences--Interest Income
and Original Issue Discount." Pacific Crest has no current intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Junior Subordinated Debentures. However, should Pacific
Crest elect to exercise its right to defer payments of interest in the future,
the market price of the Trust Preferred Securities is likely to be adversely
affected. A holder that disposes of such holder's Trust Preferred Securities
during an Extension Period, therefore, might not receive the same return on such
holder's investment as a holder that continues to hold the Trust Preferred
Securities.
TAX EVENT REDEMPTION, INVESTMENT COMPANY ACT REDEMPTION OR CAPITAL TREATMENT
EVENT REDEMPTION
Upon the occurrence and during the continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event (whether occurring before
or after , 2002), Pacific Crest has the right, if certain conditions
are met, to redeem the Junior Subordinated Debentures in whole (but not in part)
at 100% of the principal amount together with accrued but unpaid interest to the
date fixed for redemption within 90 days following the occurrence of such Tax
Event, Investment Company Event or Capital Treatment Event and therefore cause a
mandatory redemption of the Trust Securities. See "Description of the Trust
Preferred Securities--Redemption."
A "Tax Event" means the receipt by Pacific Crest and PCC Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
original issuance of the Trust Preferred Securities, there is more than an
insubstantial risk that (i) PCC Capital is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Junior Subordinated Debentures, (ii)
interest payable by Pacific Crest on the Junior Subordinated Debentures is not,
or within 90 days of such opinion, will not be, deductible by Pacific Crest, in
whole or in part, for United States federal income tax purposes, or (iii) PCC
Capital is, or will be within 90 days of the date of the opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges. See "--Possible Tax Law Changes Affecting the Trust Preferred
Securities" below for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit Pacific Crest to cause
a redemption of the Junior Subordinated Debentures (and therefore the Trust
Preferred Securities) prior to , 2002.
An "Investment Company Event" means the receipt by Pacific Crest and PCC
Capital of an opinion of counsel experienced in such matters to the effect that,
as a result of any change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, PCC Capital is or will be considered an
"investment company" that is
17
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required to be registered under the Investment Company Act, which change becomes
effective on or after the original issuance of the Trust Preferred Securities.
A "Capital Treatment Event" means, in the event that Pacific Crest becomes
subject to capital adequacy guidelines, the reasonable determination by Pacific
Crest that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such prospective change, pronouncement, or decision is announced on
or after the date of issuance of the Trust Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk of impairment of Pacific
Crest's ability to treat an amount equal to the Liquidation Amount of the Trust
Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the primary federal regulator of
Pacific Crest, as then in effect and applicable to Pacific Crest.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
Congress and the Clinton Administration have recently considered proposals
that would deny an issuer a deduction for United States income tax purposes for
the payment of interest on instruments with characteristics similar to the
Junior Subordinated Debentures. While no such adverse legislation has been
enacted, there can be no assurance that similar legislation enacted after the
date hereof would not adversely affect the tax treatment of the Junior
Subordinated Debentures. Such a change would give rise to a Tax Event which may
permit Pacific Crest to cause a redemption of the Trust Preferred Securities by
electing to prepay the Junior Subordinated Debentures. See "Description of the
Trust Preferred Securities--Redemption"; "Description of Junior Subordinated
Debentures--Redemption"; and "Certain Federal Income Tax Consequences."
POSSIBLE DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST
PREFERRED SECURITIES
Pacific Crest will have the right at any time to dissolve PCC Capital and,
after satisfaction of liabilities to creditors of PCC Capital as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in liquidation of PCC Capital.
Because holders of the Trust Preferred Securities may receive Junior
Subordinated Debentures in liquidation of PCC Capital and because Distributions
are otherwise limited to payments on the Junior Subordinated Debentures,
prospective purchasers of the Trust Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Dissolution" and "Description of
Junior Subordinated Debentures."
Under current United States federal income tax law and interpretations and
assuming, as expected, PCC Capital is classified as a grantor trust for such
purposes, a distribution of the Junior Subordinated Debentures upon a
liquidation of PCC Capital should not be a taxable event to holders of the Trust
Preferred Securities. However, if a Tax Event were to occur which would cause
PCC Capital to be subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, a distribution
of the Junior Subordinated Debentures by PCC Capital could be a taxable event to
PCC Capital and the holders of the Trust Preferred Securities. See "Certain
Federal Income Tax Consequences--Distribution of Junior Subordinated Debentures
to Holders of Trust Preferred Securities."
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
Pacific Crest will have the right at any time to shorten the maturity of the
Junior Subordinated Debentures to a date not earlier than five years from the
date of issuance and thereby cause the Trust
18
<PAGE>
Preferred Securities to be redeemed on such earlier date. The exercise of such
right is subject to Pacific Crest having received prior approval of the primary
federal regulator of Pacific Crest if then required under applicable capital
guidelines or policies of such primary regulator. See "Description of Junior
Subordinated Debentures--Redemption."
LIMITATIONS ON DIRECT ACTIONS AGAINST PACIFIC CREST AND ON RIGHTS UNDER THE
GUARANTEE
The Guarantee guarantees to the holders of the Trust Preferred Securities
the following payments, to the extent not paid by PCC Capital: (i) any
accumulated and unpaid Distributions required to be paid on the Trust Preferred
Securities, to the extent that PCC Capital has funds on hand available therefor
at such time, (ii) the redemption price with respect to any Trust Preferred
Securities called for redemption, to the extent that PCC Capital has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of PCC Capital (unless the Junior
Subordinated Debentures are distributed to holders of the Trust Preferred
Securities), the lesser of (a) the aggregate of the Liquidation Amount and all
accumulated and unpaid Distributions to the date of payment to the extent that
PCC Capital has funds on hand available therefor at such time (the "Liquidation
Distribution") and (b) the amount of assets of PCC Capital remaining available
for distribution to holders of the Trust Preferred Securities after satisfaction
of liabilities to creditors of PCC Capital as required by applicable law. The
holders of not less than a majority in aggregate liquidation amount of the Trust
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee Agreement. Any holder of the
Trust Preferred Securities may institute a legal proceeding directly against
Pacific Crest to enforce its rights under the Guarantee without first
instituting a legal proceeding against PCC Capital, the Guarantee Trustee or any
other person or entity. If Pacific Crest were to default on its obligation to
pay amounts payable under the Junior Subordinated Debentures, PCC Capital would
lack funds for the payment of Distributions or amounts payable on redemption of
the Trust Preferred Securities or otherwise, and, in such event, holders of the
Trust Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of Pacific Crest to pay interest on or principal of the Junior
Subordinated Debentures on the payment date on which such payment is due and
payable, then a holder of Trust Preferred Securities may institute a legal
proceeding directly against Pacific Crest for enforcement of payment to such
holder of the principal of or interest on such Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder (a "Direct Action"). In connection with such
Direct Action, Pacific Crest will have a right of set-off under the Indenture to
the extent of any payment made by Pacific Crest to such holder of Trust
Preferred Securities in the Direct Action. Except as described herein, holders
of Trust Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures or assert
directly any other rights in respect of the Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Trust Preferred Securities" and "Description of Guarantee." The Trust
Agreement provides that each holder of Trust Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee Agreement and the Indenture.
ABILITY TO MAKE PAYMENTS ON THE TRUST PREFERRED SECURITIES AND JUNIOR
SUBORDINATED DEBENTURES
Pacific Crest is a legal entity separate and distinct from its subsidiaries,
including Pacific Crest Bank. The ability of PCC Capital to pay amounts due on
the Trust Preferred Securities is solely dependent upon Pacific Crest making
payments on the Junior Subordinated Debentures as and when required. As a
holding company without significant assets other than its equity interest in
Pacific Crest Bank, Pacific Crest's ability to pay interest on the Junior
Subordinated Debentures to PCC Capital (and consequently, PCC Capital's ability
to pay distributions on the Trust Preferred Securities and Pacific Crest's
ability to pay its obligations under the Guarantee) depends primarily on cash
and liquid investments at Pacific Crest and upon cash
19
<PAGE>
dividends Pacific Crest may receive in the future from Pacific Crest Bank.
Pacific Crest Bank's ability to pay dividends to Pacific Crest is restricted by
California state law, which requires that retained earnings are available to pay
such dividends. Pacific Crest Bank had retained earnings of $1.5 million at June
30, 1997, which amount of retained earnings is unrestricted and available for
dividend payments to Pacific Crest. At June 30, 1997, Pacific Crest had cash and
liquid investments of approximately $243,000. See "Use of Proceeds."
LIMITED COVENANTS
The covenants in the Indenture are limited, and there are no covenants
relating to Pacific Crest in the Trust Agreement. As a result, neither the
Indenture nor the Trust Agreement protects holders of Junior Subordinated
Debentures, or Trust Preferred Securities, respectively, in the event of a
material adverse change in Pacific Crest's or the Company's financial condition
or results of operations or limits the ability of Pacific Crest or any
subsidiary to incur additional indebtedness. Therefore, the provisions of these
governing instruments should not be considered a significant factor in
evaluating whether Pacific Crest will be able to comply with its obligations
under the Junior Subordinated Debentures or the Guarantee.
LIMITED VOTING RIGHTS
Holders of Trust Preferred Securities will generally have limited voting
rights relating only to the modification of the Trust Preferred Securities, the
dissolution, winding-up or liquidation of PCC Capital, and the exercise of PCC
Capital's rights as holder of Junior Subordinated Debentures. Holders of Trust
Preferred Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee, and such voting rights are vested
exclusively in the holder of the Common Securities except upon the occurrence of
certain events described herein. In no event will the holders of the Trust
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the holder
of the Common Securities. The Property Trustee, the Administrative Trustees and
Pacific Crest may amend the Trust Agreement without the consent of holders of
Trust Preferred Securities to ensure that PCC Capital will be classified for
United States federal income tax purposes as a grantor trust or to ensure that
PCC Capital will not be required to register as an "investment company," even if
such action adversely affects the interests of such holders. See "Description of
Trust Preferred Securities--Voting Rights; Amendment of the Trust Agreement" and
"--Removal of Trustees."
ABSENCE OF EXISTING PUBLIC MARKET; MARKET PRICES
There is no existing market for the Trust Preferred Securities. Application
has been made to list the Trust Preferred Securities on the Nasdaq National
Market. There can be no assurance that an active and liquid trading market for
the Trust Preferred Securities will develop or that a continued listing of the
Trust Preferred Securities will be available on the Nasdaq National Market.
Although the Underwriters have informed PCC Capital and the Company that the
Underwriters intend to make a market in the Trust Preferred Securities offered
hereby, the Underwriters are not obligated to do so and any such market making
activity may be terminated at any time without notice to the holders of the
Trust Preferred Securities. Future trading prices of the Trust Preferred
Securities will depend on many factors including, among other things, prevailing
interest rates, the operating results and financial condition of the Company,
and the market for similar securities. As a result of the existence of Pacific
Crest's right to defer interest payments on or shorten the Stated Maturity of
the Junior Subordinated Debentures, the market price of the Trust Preferred
Securities may be more volatile than the market prices of debt securities that
are not subject to such optional deferrals or reduction in maturity. There can
be no assurance as to the market prices for the Trust Preferred Securities or
the Junior Subordinated Debentures that may be distributed in exchange for the
Trust Preferred Securities if Pacific Crest exercises its right to terminate PCC
Capital. Accordingly, the Trust Preferred Securities that an investor may
purchase, or the Junior Subordinated
20
<PAGE>
Debentures that a holder of the Trust Preferred Securities may receive in
liquidation of PCC Capital, may trade at a discount from the price that the
investor paid to purchase the Trust Preferred Securities offered hereby.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," or incorporated by reference "expects" and words of similar import,
constitute "forward-looking statements" within the meaning of the Reform Act.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economics and business
conditions in those areas in which the Company operates; demographic changes;
competition; fluctuations in interest rates; changes in business strategy or
development plans; changes in governmental regulation; credit quality; the
availability of capital to fund the expansion of the Company's business; and
other factors referenced in this Prospectus or incorporated by reference herein,
including, without limitation, under the captions "Prospectus Summary" and "Risk
Factors." Given these uncertainties, prospective investors are cautioned not to
place undue reliance on such forward-looking statements. The Company disclaims
any obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward-looking statements contained or incorporated
by reference herein to reflect future events or developments.
21
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of Trust Preferred Securities will be
invested by PCC Capital in the Junior Subordinated Debentures. The net proceeds
to Pacific Crest from the sale of the Junior Subordinated Debentures are
estimated to be $ ($ if the Underwriters' over-allotment option
is exercised in full), net of estimated underwriting commission and other
estimated offering expenses. Pacific Crest intends to invest $5.0 million of the
net proceeds in Pacific Crest Bank to increase its capital level to support
future growth. Pacific Crest intends to use the remaining net proceeds for
general corporate purposes, which may include without limitation, funding
additional investments in, or extensions of credit to, Pacific Crest Bank and
possible future acquisitions if and when suitable opportunities arise. The
Company is not currently engaged in negotiations with respect to any
acquisitions. Pending their application, the net proceeds may be invested in
investment grade financial securities.
ACCOUNTING TREATMENT
For financial reporting purposes, PCC Capital will be treated as a
subsidiary of Pacific Crest and, accordingly, the accounts of PCC Capital will
be included in the consolidated financial statements of the Company. The Trust
Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of the Company under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures," and appropriate disclosures about the Trust
Preferred Securities, the Guarantee and the Junior Subordinated Debentures will
be included in the notes to consolidated financial statements. For financial
reporting purposes, the Company will record Distributions payable on the Trust
Preferred Securities as an interest expense in the consolidated statements of
operations.
Future reports of Pacific Crest filed under the Securities Exchange Act of
1934, as amended ("the Exchange Act"), will include a footnote to the financial
statements stating that (i) PCC Capital is wholly owned, (ii) the sole assets of
PCC Capital are the Junior Subordinated Debentures (specifying the principal
amount, interest rate and maturity date of such Junior Subordinated Debentures),
and (iii) the back up obligations, in the aggregate, constitute a full and
unconditional guarantee by Pacific Crest of the obligations of PCC Capital under
the Trust Preferred Securities. PCC Capital will not provide separate reports
under the Exchange Act.
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<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1997 and as adjusted to give effect to the issuance of the
Trust Preferred Securities offered by PCC Capital and receipt by Pacific Crest
of the proceeds from the corresponding sale of the Junior Subordinated
Debentures to PCC Capital and assuming the Underwriters' over-allotment option
was not exercised.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Company obligated mandatorily redeemable trust preferred securities of
subsidiary trust holding solely junior subordinated debentures(1)... $ -- $ 15,000
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value: 2,000,000 shares authorized, none
issued............................................................ -- --
Common stock, $.01 par value: 10,000,000 shares authorized,
2,968,449 outstanding............................................. 27,910 27,910
Accumulated deficit................................................. (1,129) (1,129)
Net unrealized loss on securities, available for sale............... (238) (238)
Common stock in treasury, at cost, 30,000 shares.................... (255) (255)
--------- -----------
Total shareholders' equity........................................ $ 26,288 $ 26,288
--------- -----------
Total capitalization................................................ $ 26,288 $ 41,288
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) The subsidiary trust is PCC Capital, which will hold the Junior Subordinated
Debentures as its sole asset. The Trust Preferred Securities are issued by
PCC Capital. The sole assets of PCC Capital consist of the Junior
Subordinated Debentures issued by Pacific Crest to PCC Capital. The Junior
Subordinated Debentures will bear interest at the rate of % per annum and
will mature on , 2027 which date may be shortened to a date not
earlier than , 2002 if certain conditions are met. The Junior
Subordinated Debentures are redeemable prior to maturity at the option of
Pacific Crest, subject to Pacific Crest having received prior approval of
the primary federal regulator of Pacific Crest if then required under
applicable capital guidelines or policies of such primary regulator, (i) on
or after , 2002, in whole at any time or in part from time to time,
or (ii) at any time, in whole (but not in part), within 90 days following
the occurrence and continuation of a Tax Event, an Investment Company Event
or a Capital Treatment Event (each as defined herein). See "Description of
Junior Subordinated Debentures--Redemption." Pacific Crest owns all of the
Common Securities of PCC Capital.
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<PAGE>
MANAGEMENT
The table below sets forth certain information for the directors and certain
executive officers of the Company, as of June 30, 1997.
<TABLE>
<CAPTION>
NAME POSITION(S) AGE
- ------------------------------ --------------------------------------------------------------------------- ---
<S> <C> <C>
Gary L. Wehrle................ Chairman of the Board, President and Chief Executive Officer of the Company 54
and Pacific Crest Bank
Rudolph I. Estrada............ Director 49
Martin J. Frank............... Director 60
Richard S. Orfalea............ Director 55
Steven J. Orlando............. Director 45
Barry L. Otelsberg............ Executive Vice President of the Company, Executive Vice President of 46
Pacific Crest Bank
Lyle C. Lodwick............... Executive Vice President of the Company and Pacific Crest Bank 43
Gonzalo Fernandez............. Executive Vice President of the Company and Pacific Crest Bank 54
Robert J. Dennen.............. Vice President and Chief Financial Officer of the Company and Pacific Crest 44
Bank
Joseph Finci.................. Senior Vice President of the Company and Pacific Crest Bank 39
</TABLE>
GARY L. WEHRLE, Chairman of the Board and Chief Executive Officer of Pacific
Crest. Mr. Wehrle has served as Chairman of the Board of Pacific Crest since
October 1993, and President and Chief Executive Officer of Pacific Crest since
September 1993. Mr. Wehrle has served as President and Chief Executive Officer
of Pacific Crest Bank since 1984. Mr. Wehrle served as Executive Vice President
of The Foothill Group, Inc. from 1980 to 1993.
RUDOLPH I. ESTRADA, Director of Pacific Crest since October 1993. Mr.
Estrada has served as President and Chief Executive Officer of The Summit Group,
a banking and business consulting company, since 1988, as Chairman of the
California Small Business Roundtable since 1995, and as Professor (Adjunct) of
Finance and Management and Director of the Small Business Institute at
California State University since 1986. Mr. Estrada served as Presidential
appointee to the White House Commission on Small Business in 1993, as Corporate
Lending Manager, Tokai Bank, from 1982 to 1987, and as Los Angeles District
Director, U.S. Small Business Administration, from 1980 to 1982.
MARTIN J. FRANK, Director of Pacific Crest since October 1993. Mr. Frank is
self-employed in movie development and currently serves as a Managing Member of
Cadillac LLC, a movie production company. Mr. Frank has also served as Chairman
of Moonshadow Entertainment, a movie production company, since January 1995. Mr.
Frank served as Chairman of A. Frank Productions, a movie production company,
from February 1992 to December 1993. Mr. Frank was the owner of Martin J. Frank
Consulting, a management consulting company, from February 1992 to December
1996, and served as Managing Director of Towers, Perrin, Forster & Crosby, Inc.
from 1969 to 1992.
RICHARD S. ORFALEA, Director of Pacific Crest since October 1993. Mr.
Orfalea has served as Director of Mergers and Acquisitions and Director of
International Expansion at Kinko's Graphics Corp., from 1990 to present. Mr.
Orfalea served as Manager of the Merchant Banking Unit in the Los Angeles
Commercial Banking Office of California Federal Bank from 1983 to 1990.
24
<PAGE>
STEVEN J. ORLANDO, Director of Pacific Crest since May 1995. Mr. Orlando is
a Certified Public Accountant and currently serves as Chief Financial Officer of
Java Centrale, Inc., a gourmet coffee franchiser which has a class of securities
registered under Section 12 of the Exchange Act. Mr. Orlando also has served as
Director and President of RJN Enterprises, a private investment company, from
July 1988 to present, as Director of Bel Foods, a company supplying products to
ice cream manufacturers, from 1988 to present, and as Director and a consultant
to Southwest Products Company, an aerospace specialty bearing manufacturer, from
1988 to present. Mr. Orlando served as a Director and consulting Chief Financial
Officer of FRS, Inc. from 1988 to 1994, and was self-employed as a financial
advisor and consultant from 1988 to 1994.
BARRY L. OTELSBERG, Executive Vice President of the Company since 1993;
Executive Vice President of Pacific Crest Bank since 1985.
LYLE C. LODWICK, Executive Vice President of the Company since 1993;
Executive Vice President of Pacific Crest Bank since 1992.
GONZALO FERNANDEZ, Executive Vice President of the Company since 1994;
Executive Vice President of Pacific Crest Bank since 1994.
ROBERT J. DENNEN, Vice President and Chief Financial Officer of the Company
since 1993; Vice President and Chief Financial Officer of Pacific Crest Bank
since 1993.
JOSEPH FINCI, Senior Vice President of the Company since 1995; Senior Vice
President of Pacific Crest Bank since 1995.
25
<PAGE>
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of the
Trust Agreement. The Trust Agreement will be qualified as an indenture under the
Trust Indenture Act. Initially, Wilmington Trust Company will be the Delaware
Trustee and the Property Trustee and will act as trustee for the purpose of
complying with the Trust Indenture Act. The terms of the Trust Preferred
Securities will include those stated in the Trust Agreement and those made part
of the Trust Agreement by the Trust Indenture Act. This summary of certain terms
and provisions of the Trust Preferred Securities and the Trust Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Trust Agreement, including the
definitions therein of certain terms, and the Trust Indenture Act. Wherever
particular defined terms of the Trust Agreement (as amended or supplemented from
time to time) are referred to herein, such defined terms are incorporated
herein. The form of the Trust Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Administrative Trustees on
behalf of PCC Capital will issue the Trust Preferred Securities and the Common
Securities (collectively, the "Trust Securities"). The Trust Preferred
Securities will represent preferred undivided beneficial interests in the assets
of PCC Capital and the holders thereof will be entitled to a preference over the
Common Securities of PCC Capital (which will be held by Pacific Crest) in
certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation, as well as other benefits as described in the Trust
Agreement.
The Trust Preferred Securities will rank PARI PASSU, and payments will be
made thereon pro rata, with the Common Securities of PCC Capital except as
described under "Subordination of Common Securities of PCC Capital Held by
Pacific Crest" below. Legal title to the Junior Subordinated Debentures will be
held by the Property Trustee in trust for the benefit of the holders of the
Trust Securities. The Guarantee executed by Pacific Crest for the benefit of the
holders of the Trust Preferred Securities (the "Guarantee") will be a guarantee
on a subordinated basis with respect to the Trust Preferred Securities but will
not guarantee payment of Distributions or amounts payable on redemption or on
liquidation of the Trust Preferred Securities if PCC Capital does not have funds
on hand available to make such payments. See "Description of Guarantee."
DISTRIBUTIONS
PAYMENT OF DISTRIBUTIONS. Distributions on the Trust Preferred Securities
will be payable at the annual rate of % of the stated Liquidation Amount of
$10, payable quarterly in arrears on the 15th day of March, June, September and
December in each year to the holders of the Trust Preferred Securities on the
relevant record dates (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). The amount of each
Distribution due with respect to the Trust Preferred Securities will include
amounts accrued through the date the Distribution payment is due. Distributions
on the Trust Preferred Securities will be payable to the holders thereof as they
appear on the register of PCC Capital on the relevant record date which, for so
long as the Trust Preferred Securities remain in book-entry form, will be one
Business Day (as defined below) prior to the relevant Distribution Date and, in
the event the Trust Preferred Securities are not in book-entry form, will be the
first day of the month in which the relevant Distribution Date occurs.
Distributions will accumulate from the date of original issuance. The first
Distribution Date for the Trust Preferred Securities will be , 1997.
The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Trust Preferred Securities is not a
Business Day, payment of the Distribution payable on such date will be made on
the next Business Day (and without any interest or other payment in respect to
any such delay), with the same force
26
<PAGE>
and effect as if made on the date such payment was originally payable. As used
in this Prospectus, a "Business Day" shall mean any day other than a Saturday or
a Sunday, or a day on which banking institutions in the State of California are
authorized or required by law or executive order to remain closed or a day on
which the corporate trust office of the Property Trustee or the Indenture
Trustee is closed for business.
The funds of PCC Capital available for distribution to holders of its Trust
Preferred Securities will be limited to payments by Pacific Crest under the
Junior Subordinated Debentures in which PCC Capital will invest the proceeds
from the issuance and sale of its Trust Preferred Securities. See "Description
of Junior Subordinated Debentures." If Pacific Crest does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Trust Preferred Securities. The
payment of Distributions (if and to the extent PCC Capital has funds legally
available for the payment of such Distributions and cash sufficient to make such
payments) is guaranteed by Pacific Crest. See "Description of Guarantee."
EXTENSION PERIOD. So long as no Debenture Event of Default has occurred and
is continuing, Pacific Crest has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect to
each such period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. As a consequence of any such election, quarterly Distributions on
the Trust Preferred Securities will be deferred by PCC Capital during any such
Extension Period. Distributions to which holders of Trust Preferred Securities
are entitled will accumulate additional amounts thereon at the rate per annum of
% thereof, compounded quarterly from the relevant Distribution Date, to the
extent permitted under applicable law. The term "Distributions" as used herein
shall include any such additional accumulated amounts. During any such Extension
Period, Pacific Crest may not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of Pacific Crest's capital stock (which includes common and preferred
stock), (ii) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of Pacific Crest that rank PARI
PASSU with or junior in interest to the Junior Subordinated Debentures or make
any guarantee payments with respect to any guarantee by Pacific Crest of the
debt securities of any subsidiary of Pacific Crest if such guarantee ranks PARI
PASSU with or junior in interest to the Junior Subordinated Debentures (other
than (a) dividends or distributions in common stock of Pacific Crest, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee and (d) purchases of common stock for issuance of
common stock or rights under any of Pacific Crest's benefit plans for its
directors, officers or employees) or (iii) redeem, purchase or acquire less than
all of the Junior Subordinated Debentures or any of the Trust Preferred
Securities. Prior to the termination of any such Extension Period, Pacific Crest
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 20 consecutive quarters or extend beyond
the Stated Maturity. Upon the termination of any such Extension Period and the
payment of all amounts then due, and subject to the foregoing limitations,
Pacific Crest may elect to begin a new Extension Period. Subject to the
foregoing, there is no limitation on the number of times that Pacific Crest may
elect to begin an Extension Period. Pacific Crest has no current intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Junior Subordinated Debentures.
REDEMPTION
MANDATORY REDEMPTION. Upon the repayment or redemption at any time, in
whole or in part, of any Junior Subordinated Debentures, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' notice of a date of redemption (the "Redemption Date"),
at the Redemption Price (as defined below). See "Description of Junior
Subordinated Debentures--Redemption." If less than
27
<PAGE>
all of the Junior Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption of the Trust Securities PRO RATA. The amount of
premium, if any, paid by Pacific Crest upon the redemption of all or any part of
the Junior Subordinated Debentures to be repaid or redeemed on a Redemption Date
shall be allocated to the redemption pro rata of the Trust Securities.
OPTIONAL REDEMPTION. Pacific Crest will have the right to redeem the Junior
Subordinated Debentures (i) on or after , 2002, in whole at any time or
in part from time to time at a redemption price equal to the accrued and unpaid
interest on the Junior Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof, or (ii) at any time, in
whole (but not in part), upon the occurrence of a Tax Event, an Investment
Company Event or a Capital Treatment Event at a redemption price equal to the
accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to
the date fixed for redemption, plus 100% of the principal amount thereof, in
each case subject to Pacific Crest having received prior approval of the primary
federal regulator of Pacific Crest if then required under applicable capital
guidelines or policies of such primary regulator. See "Description of Junior
Subordinated Debentures--Redemption."
TAX EVENT REDEMPTION, INVESTMENT COMPANY EVENT REDEMPTION, CAPITAL TREATMENT
EVENT REDEMPTION OR DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES. If a Tax
Event, a Capital Treatment Event or an Investment Company Event shall occur and
be continuing, Pacific Crest has the right to redeem the Junior Subordinated
Debentures in whole (but not in part) and thereby cause a mandatory redemption
of the Trust Securities in whole (but not in part) at the Redemption Price (as
defined below) within 90 days following the occurrence of such Tax Event,
Capital Treatment Event or Investment Company Event. If a Tax Event, Capital
Treatment Event or an Investment Company Event has occurred and is continuing
and Pacific Crest does not elect to redeem the Junior Subordinated Debentures
and thereby cause a mandatory redemption of the Trust Securities or to liquidate
PCC Capital and cause the Junior Subordinated Debentures to be distributed to
holders of the Trust Securities in liquidation of PCC Capital as described
below, such Trust Securities will remain outstanding and Additional Sums (as
defined below) may be payable on the Junior Subordinated Debentures.
DEFINITIONS
"Additional Sums" means the additional amounts as may be necessary to be
paid by Pacific Crest with respect to the Junior Subordinated Debentures in
order that the amount of Distributions then due and payable by PCC Capital on
the outstanding Trust Securities of PCC Capital shall not be reduced as a result
of any additional taxes, duties and other governmental charges to which PCC
Capital has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Trust Preferred Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of PCC Capital, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, allocated on a pro rata basis (based on
Liquidation Amounts) among the Trust Securities.
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DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Subject to Pacific Crest and PCC Capital having received an opinion of
counsel to the effect that such distribution will not be a taxable event to the
holders of the Trust Preferred Securities, Pacific Crest will have the right at
any time to dissolve PCC Capital and, after satisfaction of the liabilities of
creditors of PCC Capital as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of Trust Securities in
liquidation of PCC Capital. After the liquidation date fixed for any
distribution of Junior Subordinated Debentures for Trust Preferred Securities
(i) such Trust Preferred Securities will no longer be deemed to be outstanding,
(ii) the Depositary or its nominee, as the record holder of the Trust Preferred
Securities, will receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing Trust Preferred Securities
not held by the Depositary or its nominee will be deemed to represent the Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of such Trust Preferred Securities, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on the Trust
Preferred Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Trust Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Preferred Securities if a dissolution and liquidation of
PCC Capital were to occur. Accordingly, the Trust Preferred Securities that an
investor may purchase, or the Junior Subordinated Debentures that the investor
may receive on dissolution and liquidation of PCC Capital, may trade at a
discount to the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
REDEMPTION PROCEDURES
Trust Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of
the Trust Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that PCC Capital has funds on
hand available for the payment of such Redemption Price. See "--Subordination of
Common Securities of PCC Capital Held by Pacific Crest" herein and "Description
of Guarantee."
If PCC Capital gives a notice of redemption in respect of the Trust
Preferred Securities, then, by 12:00 noon, Eastern time on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit with the
Depositary funds sufficient to pay the aggregate Redemption Price and will give
the Depositary irrevocable instructions and authority to pay the Redemption
Price to the holders of such Trust Preferred Securities. See "Book-Entry
Issuance." If such Trust Preferred Securities are no longer in book-entry form,
the Property Trustee, to the extent funds are available, will deposit with the
paying agent for such Trust Preferred Securities funds sufficient to pay the
aggregate Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Trust Preferred Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Trust Preferred
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required, then
upon the date of such deposit, all rights of the holders of the Trust Preferred
Securities will cease, except the right of the holders of the Trust Preferred
Securities to receive the applicable Redemption Price, but without interest on
such Redemption Price, and such Trust Preferred Securities will cease to be
outstanding. In the event that any date fixed for redemption of such Trust
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding Business Day (and
without any interest or other payment in respect of any such delay), with the
same force and effect as if made on the date such payment was originally
payable. In the event that payment of the Redemption Price in respect of Trust
Preferred Securities called for redemption is improperly withheld or refused and
not paid either by PCC
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Capital or by Pacific Crest pursuant to the Guarantee, Distributions on such
Trust Preferred Securities will continue to accrue at the then applicable rate,
from the Redemption Date originally established by PCC Capital for such Trust
Preferred Securities to the date such Redemption Price is actually paid, in
which case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price. See "Description of Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), and further provided that Pacific Crest is not then
exercising its right to defer interest payments on the Junior Subordinated
Debentures, the Company (other than PCC Capital) may at any time and from time
to time purchase outstanding Trust Preferred Securities by tender, in the open
market or by private agreement.
Payment of the Redemption Price on the Trust Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Trust Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register of such Trust Preferred Securities on the relevant record date,
which date shall be one Business Day prior to the relevant Redemption Date or
Liquidation Date, as applicable; provided, however, that in the event that any
Trust Preferred Securities are not in book-entry form, the relevant record date
for such Trust Preferred Securities shall be a date at least 15 days prior to
the Redemption Date or Liquidation Date, as applicable. In the case of a
liquidation, the record date shall be no more than 45 days before the
Liquidation Date.
If less than all of the Trust Securities issued by PCC Capital are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata to the Trust
Preferred Securities and Common Securities based upon the relative Liquidation
Amounts of such classes. The particular Trust Preferred Securities to be
redeemed shall be selected by the Property Trustee from the outstanding Trust
Preferred Securities not previously called for redemption, by such method as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $10 or an integral multiple
thereof) of the Liquidation Amount of Trust Preferred Securities. The Property
Trustee shall promptly notify the Security registrar in writing of the Trust
Preferred Securities selected for redemption and, in the case of any Trust
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of the Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of Trust
Preferred Securities shall relate to the portion of the aggregate Liquidation
Amount of Trust Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at such
holder's registered address. Unless PCC Capital defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Trust Preferred Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES OF PCC CAPITAL HELD BY PACIFIC CREST
Payment of Distributions on, and the Redemption Price of, the Trust
Preferred Securities and Common Securities, as applicable, shall be made PRO
RATA based on the Liquidation Amounts of the Trust Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the outstanding Trust Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
applicable Redemption Price the full amount of such Redemption Price on all of
the outstanding Trust Preferred Securities then called for redemption, shall
have been made or provided for, and all funds available to the Property Trustee
shall first be applied to the payment in full in cash of all Distributions on,
or Redemption Price of, the Trust Preferred Securities then due and payable.
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In the case of any Event of Default under the Trust Agreement resulting from
a Debenture Event of Default, Pacific Crest as holder of the Common Securities
will be deemed to have waived any right to act with respect to any such Event of
Default until the effect of all such Events of Default have been cured, waived
or otherwise eliminated. Until any such Events of Default have been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on behalf
of the holders of the Trust Preferred Securities and not on behalf of Pacific
Crest as holder of the Common Securities, and only the holders of the Trust
Preferred Securities will have the right to direct the Property Trustee to act
on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pacific Crest will have the right at any time to dissolve PCC Capital and,
after satisfaction of liabilities to creditors of PCC Capital as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities. Such right is subject to Pacific
Crest having received prior approval of the primary federal regulator of Pacific
Crest if then required under applicable capital guidelines or policies of such
primary regulator. See "-- Distribution of Junior Subordinated Debentures"
below.
In addition, pursuant to the Trust Agreement, PCC Capital shall
automatically dissolve upon expiration of its term and shall earlier dissolve on
the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of Pacific Crest; (ii) the distribution of a Like Amount of the
Junior Subordinated Debentures to the holder of its Trust Securities, if Pacific
Crest, as Depositor, has delivered written direction to the Property Trustee to
dissolve PCC Capital (which direction is optional and, except as described
above, wholly within the discretion of Pacific Crest, as Depositor); (iii)
redemption of all of the Trust Preferred Securities as described under
"--Redemption--Mandatory Redemption"; and (iv) the entry of an order for the
dissolution of PCC Capital by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii), or (iv)
above, PCC Capital shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of PCC Capital as provided by applicable law, to the
holders of such Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practical, in which event such holders will be entitled to receive out of
the assets of PCC Capital available for distribution to holders, after
satisfaction of liabilities to creditors of PCC Capital as provided by
applicable law, an amount equal to, in the case of holders of Trust Preferred
Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because PCC Capital has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by PCC
Capital on the Trust Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Trust Preferred
Securities, except that if a Debenture Event of Default has occurred and is
continuing, the Trust Preferred Securities shall have a priority over the Common
Securities.
Under current United States federal income tax law and interpretations and
assuming, as expected, PCC Capital is treated as a grantor trust, a distribution
of the Junior Subordinated Debentures should not be a taxable event to holders
of the Trust Preferred Securities. Should there be a change in law, a change in
legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences." If Pacific Crest
elects neither to redeem the Junior Subordinated Debentures prior to maturity
nor to liquidate PCC Capital and distribute the Junior Subordinated Debentures
to holders of the Trust Preferred Securities, the Trust Preferred Securities
will remain outstanding until the repayment of the Junior Subordinated
Debentures.
If Pacific Crest elects to dissolve PCC Capital and thereby causes the
Junior Subordinated Debentures to be distributed to holders of the Trust
Preferred Securities in liquidation of PCC Capital, Pacific Crest
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shall continue to have the right to shorten the maturity of such Junior
Subordinated Debentures, subject to certain conditions. See "Description of
Junior Subordinated Debentures--General."
EVENTS OF DEFAULT; NOTICE
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Trust Agreement (an "Event of
Default") with respect to the Trust Preferred Securities (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(i) the occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures--Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Property Trustee in the Trust Agreement
(other than a default or breach in the performance of a covenant or warranty
which is addressed in clause (ii) or (iii) above), and continuation of such
default or breach, for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Property Trustee by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Trust Preferred Securities, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by Pacific Crest to appoint
a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Trust Preferred
Securities, the Administrative Trustees and Pacific Crest, as Depositor, unless
such Event of Default shall have been cured or waived. Pacific Crest as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities shall have a preference over the Common Securities upon
termination of PCC Capital as described above. See "--Liquidation Distribution
upon Dissolution" herein. Upon a Debenture Event of Default, unless the
principal of all the Junior Subordinated Debentures has already become due and
payable, either the Property Trustee or the holders of not less than 25% in
aggregate principal amount of the Junior Subordinated Debentures then
outstanding may declare all of the Junior Subordinated Debentures to be due and
payable immediately by giving notice in writing to Pacific Crest (and to the
Property Trustee, if notice is given by holders of the Junior Subordinated
Debentures). If the Property Trustee or the holders of the Junior Subordinated
Debentures fail to declare the principal of all of the Junior Subordinated
Debentures due and payable upon a Debenture Event of Default, the holders of at
least 25% in Liquidation Amount of the Trust Preferred Securities then
outstanding shall have the right to declare the Junior Subordinated Debentures
immediately due and payable. In either event, payment of principal and interest
on the Junior Subordinated Debentures shall remain subordinated to the extent
provided in the Indenture. In addition, holders of the Trust Preferred
Securities have the right in certain circumstances to bring a Direct Action (as
hereinafter defined). See "Description of Junior Subordinated Debentures--
Enforcement of Certain Rights by Holders of Trust Preferred Securities."
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REMOVAL OF TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any of
the Property Trustee, the Depositary Trustee or the Administrative Trustees may
be removed at any time by the holder of the Common Securities. If a Debenture
Event of Default has occurred and is continuing, the Property Trustee and the
Delaware Trustee may be removed at such time by the holders of a majority in
Liquidation Amount of the outstanding Trust Preferred Securities. In no event
will the holders of the Trust Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustees, which voting rights are
vested exclusively in Pacific Crest as the holder of the Common Securities. No
resignation or removal of a Trustee and no appointment of a successor trustee
shall be effective until the acceptance of appointment by the successor trustee
in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of Trust Property may at
the time be located, Pacific Crest, as the holder of the Common Securities, and
the Administrative Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to act as separate trustee of any such property,
in either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. In case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person (as defined in the Trust Agreement) into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
such Issuer Trustee shall be a party, or any person succeeding to all or
substantially all the corporate trust business of such Issuer Trustee, shall be
the successor of such Issuer Trustee under the Trust Agreement, provided such
corporation shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF PCC CAPITAL
PCC Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below or as described in "--Liquidation Distribution Upon
Dissolution." PCC Capital may, at the request of Pacific Crest, with the consent
of the Administrative Trustees and without the consent of the holders of the
Trust Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to a trust organized as such under the laws of any State;
provided, that (i) such successor entity either (a) expressly assumes all of the
obligations of PCC Capital with respect to the Trust Preferred Securities or (b)
substitutes for the Trust Preferred Securities other securities having
substantially the same terms as the Trust Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) Pacific Crest expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Trust Preferred
Securities are then listed, if any, (iv) such merger, consolidation,
amalgamation, conveyance, transfer or lease does not cause the Trust Preferred
Securities to be downgraded by any nationally recognized statistical rating
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organization which gives ratings to the Trust Preferred Securities; (v) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Trust Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose substantially
identical to that of PCC Capital, (vii) the Successor Securities will be listed
or traded on any national securities exchange or other organization on which the
Trust Preferred Securities may then be listed, (viii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, Pacific
Crest has received an opinion from independent counsel to PCC Capital
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Preferred Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither PCC Capital nor such
successor entity will be required to register as an investment company under the
Investment Company Act and (ix) Pacific Crest or any permitted successor or
designee owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, PCC Capital shall not, except with the consent of holders of 100% in
Liquidation Amount of the Trust Preferred Securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace it
if such consolidation, amalgamation, merger, replacement, conveyance, transfer
or lease would cause PCC Capital or the successor entity to be classified as
other than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee--Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Trust Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by Pacific Crest, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that PCC Capital will be classified for United States
federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that PCC Capital will not be required to
register as an "investment company" under the Investment Company Act; provided,
however, that in the case of clause (i), such action shall not adversely affect
in any material respect the interests of any holder of Trust Securities, and any
such amendments of the Trust Agreement shall become effective when notice
thereof is given to the holders of the Trust Securities. The Trust Agreement may
be amended by the Issuer Trustees and the Company with (i) the consent of
holders representing not less than a majority of the aggregate Liquidation
Amount of the outstanding Trust Securities, and (ii) receipt by the Issuer
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Issuer Trustees in accordance with such
amendment will not affect PCC Capital's status as a grantor trust for United
States federal income tax purposes or PCC Capital's exemption from status as an
"investment company" under the Investment Company Act, provided that without the
consent of each holder of Trust Securities, the Trust Agreement may not be
amended to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date or (ii)
restrict the right of a holder of Trust Securities to institute suit for the
enforcement of any such payment on or after such date.
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So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is waivable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Junior Subordinated Debentures shall be due and
payable or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in aggregate Liquidation Amount of all outstanding the Trust
Preferred Securities; provided, however, that where a consent under the
Indenture would require the consent of each holder of Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the Trust Preferred
Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Trust Preferred
Securities except by subsequent vote of the holders of the Trust Preferred
Securities. The Property Trustee shall notify each holder of the Trust Preferred
Securities of any notice of default with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of such holders of
the Trust Preferred Securities, prior to taking any of the foregoing actions,
the Issuer Trustees shall obtain an opinion of counsel experienced in such
matters to the effect that PCC Capital will not be classified as other than a
grantor trust for United States federal income tax purposes.
Any required approval of holders of the Trust Preferred Securities may be
given at a meeting of holders of Trust Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a notice
of any meeting at which holders of the Trust Preferred Securities are entitled
to vote, or of any matter upon which action by written consent of such holders
is to be taken, to be given to each holder of record of the Trust Preferred
Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of the Trust Preferred Securities will be
required for PCC Capital to redeem and cancel the Trust Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Trust Preferred Securities that are owned by Pacific Crest, the Trustees or any
affiliate of Pacific Crest or any Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
GLOBAL TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of the Depositary or its nominee ("Global
Trust Preferred Security"). Beneficial interests in the Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in the Depositary. Except as
described below, Trust Preferred Securities in certificated form will not be
issued in exchange for the global certificates. See "Book-Entry Issuance."
A global security shall be exchangeable for Trust Preferred Securities
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies Pacific Crest that it is unwilling or unable to
continue as a depositary for such global security and no successor depositary
shall have been appointed, or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act, at a time when the Depositary
is required to be so registered to act as such depositary, (ii) Pacific Crest in
its sole discretion determines that such global security shall be so
exchangeable, or (iii) there shall have occurred and be continuing an Event of
Default under the Indenture. Any global security that is exchangeable pursuant
to the preceding sentence shall be exchangeable for definitive certificates
registered in such names as the Depositary shall direct. It is expected that
such instructions will be based upon directions received by the Depositary with
respect to ownership of beneficial interests in such global security. In the
event that Trust Preferred Securities are issued in definitive form, such Trust
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Preferred Securities will be in denominations of $10 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by the Depositary to a nominee
of such the Depositary or by a nominee of such the Depositary to such Depositary
or another nominee of such Depositary or by the Depositary or any nominee to a
successor Depositary or any nominee of such successor.
Payments on Trust Preferred Securities represented by a global security will
be made to the Depositary, as the depositary for the Trust Preferred Securities.
In the event the Trust Preferred Securities are issued in definitive form,
Distributions will be payable, the transfer of the Trust Preferred Securities
will be registrable, and Trust Preferred Securities will be exchangeable for
Trust Preferred Securities of other denominations of a like aggregate
Liquidation Amount, at the corporate office of the Property Trustee, or at the
offices of any paying agent or transfer agent appointed by the Administrative
Trustees, provided that payment of any Distribution may be made at the option of
the Administrative Trustees by check mailed to the address of the persons
entitled thereto or by wire transfer. In addition, if the Trust Preferred
Securities are issued in certificated form, the record dates for payment of
Distributions will be the first day of the month in which the relevant
Distribution Date occurs. For a description of the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a Global Trust Preferred Security, and the deposit of
such Global Trust Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Trust Preferred Security or its nominee will credit,
on its book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Trust Preferred Securities represented by
such Global Trust Preferred Securities to the accounts of Participants. Such
accounts shall be designated by the dealers, underwriters or agents with respect
to such Trust Preferred Securities. Ownership of beneficial interests in a
Global Trust Preferred Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Trust Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Trust Preferred Security.
So long as the Depositary for a Global Trust Preferred Security, or its
nominee, is the registered owner of such Global Trust Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Trust Preferred Securities represented by such Global
Trust Preferred Security for all purposes under the Trust Agreement governing
such Trust Preferred Securities. Except as provided below, owners of beneficial
interests in a Global Trust Preferred Security will not be entitled to have any
of the individual Trust Preferred Securities represented by such Global Trust
Preferred Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Trust Preferred Securities in definitive
form and will not be considered the owners or holders thereof under the Trust
Agreement.
None of Pacific Crest, the Property Trustee, any Paying Agent, or the
Securities Registrar (defined below) for such Trust Preferred Securities will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of the Global
Trust Preferred Security representing such Trust Preferred Securities or for
maintaining supervising or reviewing any records relating to such beneficial
ownership interests.
Pacific Crest expects that the Depositary for Trust Preferred Securities or
its nominee, upon receipt of any payment of the Liquidation Amount or
Distributions in respect of a permanent Global Trust Preferred
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Security immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Trust Preferred Security as shown on the
records of such Depositary or its nominee. Pacific Crest also expects that
payments by Participants to owners of beneficial interests in such Global Trust
Preferred Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
If the Depositary for the Trust Preferred Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by Pacific Crest within 90 days, PCC Capital will
issue individual Trust Preferred Securities in exchange for the Global Trust
Preferred Security. In addition, PCC Capital may at any time and in its sole
discretion, subject to any limitations described herein relating to such Trust
Preferred Securities, determine not to have any Trust Preferred Securities
represented by one or more Global Trust Preferred Securities and, in such event,
will issue individual Trust Preferred Securities in exchange for the Global
Trust Preferred Security or Securities representing the Trust Preferred
Securities. Further, if PCC Capital so specifies with respect to the Trust
Preferred Securities, an owner of a beneficial interest in a Global Trust
Preferred Security representing Trust Preferred Securities may, on terms
acceptable to Pacific Crest, the Property Trustee and the Depositary for such
Global Trust Preferred Security, receive individual Trust Preferred Securities
in exchange for such beneficial interests, subject to any limitations described
herein. In any such instance, an owner of a beneficial interest in a Global
Trust Preferred Security will be entitled to physical delivery of individual
Trust Preferred Securities represented by such Global Trust Preferred Security
equal in Liquidation Amount to such beneficial interest and to have such Trust
Preferred Securities registered in its name. Individual Trust Preferred
Securities so issued will be issued in denominations, unless otherwise specified
by PCC Capital, of $10 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Trust Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any of the Trust Preferred Securities are
not held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. The paying agent (the "Paying Agent") shall initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable to
the Administrative Trustees and Pacific Crest. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Property
Trustee and Trust Preferred. In the event that the Property Trustee shall no
longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and Pacific Crest) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the Trust
Preferred Securities. Registration of transfers of the Trust Preferred
Securities will be effected without charge by or on behalf of PCC Capital, but
upon payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. PCC Capital will not be required to
register or cause to be registered the transfer of the Trust Preferred
Securities after such Trust Preferred Securities have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would
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exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of Trust
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of the Trust
Preferred Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by Pacific Crest and if
not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate PCC Capital in such a way that PCC Capital will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or fail to be classified as a grantor trust for United
States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of Pacific Crest for United States
federal income tax purposes. In this connection, Pacific Crest and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of PCC Capital or the Trust Agreement,
that Pacific Crest and the Administrative Trustees determine in their discretion
to be necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the Trust Preferred
Securities. Holders of the Trust Preferred Securities have no preemptive or
similar rights.
PCC Capital may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Trust Preferred Securities, PCC
Capital will invest the proceeds thereof, together with the consideration paid
by Pacific Crest for the Common Securities, in Junior Subordinated Debentures
issued by Pacific Crest. The Junior Subordinated Debentures will be issued as
unsecured debt under the Junior Subordinated Indenture, dated as of ,
1997 (the "Indenture"), between Pacific Crest and the Indenture Trustee. The
following summary of the terms and provisions of the Junior Subordinated
Debentures and the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Indenture, which has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and to the Trust Indenture Act. The Indenture is qualified under the
Trust Indenture Act. Whenever particular defined terms of the Indenture are
referred to herein, such defined terms are incorporated herein or therein by
reference.
GENERAL
The Junior Subordinated Debentures will bear interest at the annual rate of
% of the principal amount thereof, payable quarterly in arrears on the 15th
day of March, June, September and December of each year (each, an "Interest
Payment Date"), commencing , 1997, to the person in whose name each Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
Notwithstanding the above, in the event that either the (i) Junior Subordinated
Debentures are held by the Property Trustee and the Trust Preferred Securities
are no longer in book-entry only form or (ii) the Junior Subordinated Debentures
are not represented by a Global Subordinated Debenture (as defined herein), the
record date for such payment shall be the first day of the month in which such
payment is made. The amount of each interest payment due with respect to the
Junior Subordinated Debentures will include amounts accrued through the date the
interest payment is due. It is anticipated that, until the liquidation, if any,
of PCC Capital, each Junior Subordinated Debenture will be held in the name of
the Property Trustee in trust for the benefit of the
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holders of the Trust Preferred Securities. The amount of interest payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next Business Day (and without any
interest or other payment in respect of any such delay), in each case with the
same force and effect as if made on the date such payment was originally
payable. Accrued interest that is not paid on the applicable Interest Payment
Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of % thereof, compounded quarterly.
The term "interest" as used herein shall include quarterly interest payments,
interest on quarterly interest payments not paid on the applicable Interest
Payment Date and Additional Sums (as defined below), as applicable.
The Junior Subordinated Debentures will mature on , 2026 (such
date, as it may be shortened as hereinafter described, the "Stated Maturity").
Such date may be shortened at any time by Pacific Crest to any date not earlier
than , 2002, subject to prior regulatory approval, if then required.
In the event that Pacific Crest elects to shorten the Stated Maturity of the
Junior Subordinated Debentures, it shall give notice to the Indenture Trustee,
and the Indenture Trustee shall give notice of such shortening to the holders of
the Junior Subordinated Debentures no less than 90 days prior to the
effectiveness thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior and Subordinated Debt of
Pacific Crest. Because Pacific Crest is a holding company, the right of Pacific
Crest to participate in any distribution of assets of any subsidiaries,
including Pacific Crest Bank, upon any such subsidiaries' liquidation or
reorganization or otherwise (and thus the ability of holders of the Trust
Preferred Securities to benefit indirectly from such distribution), is subject
to the prior claims of creditors of that subsidiary, except to the extent that
Pacific Crest may itself be recognized as a creditor of that subsidiary.
Accordingly, the Junior Subordinated Debentures will be effectively subordinated
to all existing and future liabilities of Pacific Crest Bank, and holders of
Junior Subordinated Debentures should look only to the assets of Pacific Crest
for payments on the Junior Subordinated Debentures. The Indenture does not limit
the incurrence or issuance of other secured or unsecured debt of Pacific Crest,
including Senior and Subordinated Debt, whether under the Indenture or any
existing or other indenture that Pacific Crest may enter into in the future or
otherwise. See "-- Subordination" below.
OPTION TO DEFER INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
Pacific Crest has the right under the Indenture at any time during the term of
the Junior Subordinated Debentures to defer the payment of interest at any time
or from time to time for a period not exceeding 20 consecutive quarters (each
such period an "Extension Period"), provided that no Extension Period may extend
beyond the Stated Maturity. At the end of such Extension Period, Pacific Crest
must pay all interest then accrued and unpaid (together with interest thereon at
the annual rate of %, compounded quarterly, to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and holders of Junior Subordinated Debentures will be required to accrue
interest income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, Pacific Crest may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of Pacific Crest's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of Pacific Crest (including other
Junior Subordinated Debentures) that rank PARI PASSU with or junior in interest
to the Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by Pacific Crest of the debt securities of any
subsidiary of Pacific Crest if such guarantee ranks PARI PASSU with or junior in
interest to the Junior
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Subordinated Debentures (other than (a) dividends or distributions in common
stock of Pacific Crest, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, and (d) purchases of common
stock related to the issuance of common stock or rights under any of Pacific
Crest's benefit plans for its directors, officers or employees) or (iv) redeem,
purchase or acquire less than all of the Junior Subordinated Debentures or any
of the Trust Preferred Securities. Prior to the termination of any such
Extension Period, Pacific Crest may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 20
consecutive quarters or extend beyond the Stated Maturity. Upon the termination
of any such Extension Period and the payment of all amounts then due on any
Interest Payment Date, Pacific Crest may elect to begin a new Extension Period
subject to the above requirements. No interest shall be due and payable during
an Extension Period, except at the end thereof. Pacific Crest must give the
Property Trustee, the Administrative Trustees and the Indenture Trustee notice
of its election of any Extension Period at least one Business Day prior to the
earlier of (i) the date the Distributions on the Trust Preferred Securities
would have been payable except for the election to begin or extend such
Extension Period or (ii) the date the Administrative Trustees are required to
give notice to the New York Exchange, the Nasdaq National Market or any
applicable stock exchange or automated quotation system on which the Trust
Preferred Securities are then listed or quoted or to the holders of the Trust
Preferred Securities of the record date or the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date. The Indenture Trustee shall give notice of Pacific Crest's election to
begin or extend a new Extension Period the holders of the Trust Preferred
Securities. There is no limitation on the number of times that Pacific Crest may
elect to begin an Extension Period.
Distributions on the Trust Preferred Securities will be deferred by PCC
Capital during any such Extension Period. See "Description of the Trust
Preferred Securities--Distributions." For a description of certain federal
income tax consequences and special considerations applicable to any such Junior
Subordinated Debentures, see "Certain Federal Income Tax Consequences."
ADDITIONAL SUMS
If PCC Capital is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, Pacific Crest will pay as
additional amounts on the Junior Subordinated Debentures such amounts
("Additional Sums") as shall be required so that the Distributions payable by
PCC Capital shall not be reduced as a result of any such additional taxes,
duties or other governmental charges.
REDEMPTION
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of Pacific Crest (i) on or after , 2002, in whole at any time
or in part from time to time, or (ii) at any time in whole (but not in part),
within 90 days upon the occurrence of a Tax Event, a Capital Treatment Event or
an Investment Company Event, in each case at a redemption price equal to the
accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to
the date fixed for redemption, plus 100% of the principal amount thereof.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless Pacific
Crest defaults in payment of the redemption price, on and after the redemption
date interest ceases to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
If PCC Capital is required to pay additional taxes, duties or other
governmental charges as a result of a Tax Event, Pacific Crest will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums (as
defined herein).
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The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Dissolution," under certain
circumstances involving the dissolution of PCC Capital, the Junior Subordinated
Debentures may be distributed to the holders of the Trust Preferred Securities
in liquidation of PCC Capital after satisfaction of liabilities to creditors of
PCC Capital as provided by applicable law and subject to prior regulatory
approval, if then required. If distributed to holders of the Trust Preferred
Securities in liquidation, the Junior Subordinated Debentures will initially be
issued in the form of one or more global securities and the Depositary, or any
successor depositary for the Trust Preferred Securities, will act as depositary
for the Junior Subordinated Debentures. It is anticipated that the depositary
arrangements for the Junior Subordinated Debentures would be substantially
identical to those in effect for the Trust Preferred Securities. If the Junior
Subordinated Debentures are distributed to the holders of Trust Preferred
Securities upon the liquidation of PCC Capital, Pacific Crest will use its best
efforts to list the
Junior Subordinated Debentures on the Nasdaq National Market or such other stock
exchanges or automated quotation system, if any, on which the Trust Preferred
Securities are then listed or quoted. There can be no assurance as to the market
price of any Junior Subordinated Debentures that may be distributed to the
holders of Trust Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there shall have occurred a Debenture Event of Default,
(ii) Pacific Crest shall have given notice of its election of an Extension
Period as provided in the Indenture with respect to the Junior Subordinated
Debentures and shall not have rescinded such notice, or such Extension Period,
or any extension thereof, shall be continuing, or (iii) while the Junior
Subordinated Debentures are held by PCC Capital, Pacific Crest shall be in
default with respect to its payment of any obligation under the Guarantee, then
Pacific Crest will not (1) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
Pacific Crest's capital stock, (2) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of
Pacific Crest (including other Junior Subordinated Debt) that rank PARI PASSU
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by Pacific Crest of the debt
securities of any subsidiary of Pacific Crest if such guarantee ranks PARI PASSU
with or junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in Common Stock, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Guarantee
and (d) purchases of Common Stock related to issuance of common stock or rights
under any of Pacific Crest's benefit plans for its directors, officers or
employees) or (3) redeem, purchase or acquire less than all of the Junior
Subordinated Debentures or any of the Trust Preferred Securities.
SUBORDINATION
In the Indenture, Pacific Crest has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior and Subordinated Debt to the extent provided in
the Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of Pacific Crest, the holders of Senior and Subordinated
Debt will first be entitled to receive payment in full of principal of all
Allocable Amounts (as defined below) on such Senior and Subordinated Debt before
the holders of Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect thereof.
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In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior and Subordinated Debt outstanding at the
time of such acceleration will first be entitled to receive payment in full of
all amounts due thereon (including any amounts due upon acceleration) before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior and Subordinated Debt
or an event of default with respect to any Senior and Subordinated Debt
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Allocable Amounts," when used with respect to any Senior and Subordinated
Debt, means all amounts due or to become due on such Senior and Subordinated
Debt less, if applicable, any amount which would have been paid to, and retained
by, the holders of such Senior and Subordinated Debt (whether as a result of the
receipt of payments by the holders of such Senior and Subordinated Debt from
Pacific Crest or any other obligor thereon or from any holders of, or trustee in
respect of, other indebtedness that is subordinate and junior in right of
payment to such Senior and Subordinated Debt pursuant to any provision of such
indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior and Subordinated Debt or otherwise)
but for the fact that such Senior and Subordinated Debt is subordinated or
junior in right of payment to (or subject to a requirement that amounts received
on such Senior and Subordinated Debt be paid over to obligees on) trade accounts
payable or accrued liabilities arising in the ordinary course of business.
"Debt" means with respect to any person, whether recourse is to all or a
portion of the assets of such person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such person; (vi) all
indebtedness of such person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another person and all dividends
of another person the payment of which, in either case, such person has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise.
"Senior and Subordinated Debt" means the principal of (and premium, if any)
and interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to Pacific Crest whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of Pacific Crest whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is PARI PASSU with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior and Subordinated
Debt shall not be deemed to include (i) any Debt of Pacific Crest which when
incurred and without respect to any election under section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to Pacific
Crest, (ii) any Debt of Pacific Crest to any of its subsidiaries, (iii) Debt to
any employee of Pacific Crest, and (iv) any other debt securities issued
pursuant to the Indenture.
The Indenture places no limitation on the amount of additional Senior and
Subordinated Debt that may be incurred by Pacific Crest. Pacific Crest expects
from time to time to incur additional indebtedness constituting Senior and
Subordinated Debt.
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DENOMINATIONS, REGISTRATION AND TRANSFER
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of the Depositary or its nominee ("Global
Subordinated Debenture"). Beneficial interests in the Junior Subordinated
Debentures will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary. Except as described below, Junior
Subordinated Debentures in certificated form will not be issued in exchange for
the global certificates. See "Book-Entry Issuance."
Unless and until a Global Subordinated Debenture is exchanged in whole or in
part for the individual Junior Subordinated Debentures represented thereby, it
may not be transferred except as a whole by the Depositary for such Global
Subordinated Debenture to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
A global security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies Pacific Crest that it is unwilling or unable to
continue as a depositary for such global security and no successor depositary
shall have been appointed, or if at any time the Depositary ceases to be a
clearing agency registered under the Securities Exchange Act, at a time when the
Depositary is required to be so registered to act as such depositary, (ii)
Pacific Crest in its sole discretion determines that such global security shall
be so exchangeable or (iii) there shall have occurred and be continuing a
Debenture Event of Default with respect to such global security. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as the
Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect to
ownership of beneficial interests in such global security. In the event that
Junior Subordinated Debentures are issued in definitive form, such Junior
Subordinated Debentures will be in denominations of $10 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures represented by a global security
will be made to the Depositary, as the depositary for the Junior Subordinated
Debentures. In the event Junior Subordinated Debentures are issued in definitive
form, principal and interest will be payable, the transfer of the Junior
Subordinated Debentures will be registrable, and Junior Subordinated Debentures
will be exchangeable for Junior Subordinated Debentures of other denominations
of a like aggregate principal amount, at the corporate office of the Indenture
Trustee, or at the offices of any paying agent or transfer agent appointed by
Pacific Crest, provided that payment of interest may be made at the option of
Pacific Crest by check mailed to the address of the persons entitled thereto or
by wire transfer. In addition, if the Junior Subordinated Debentures are issued
in certificated form, the record dates for payment of interest will be the first
day of the month in which such payment is to be made. For a description of the
Depositary and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance."
Pacific Crest will appoint the Indenture Trustee as securities registrar
under the Indenture (the "Securities Registrar"). Junior Subordinated Debentures
may be presented for exchange as provided above, and may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the Securities Registrar. Pacific Crest may at any time rescind the designation
of any such transfer agent or approve a change in the location through which any
such transfer agent acts, provided that Pacific Crest maintains a transfer agent
in the place of payment. Pacific Crest may at any time designate additional
transfer agents with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither Pacific Crest nor the Indenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of Junior
Subordinated
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Debentures and ending at the close of business on the day of mailing of the
relevant notice of redemption or (ii) transfer or exchange any Junior
Subordinated Debentures so selected for redemption, except, in the case of any
Junior Subordinated Debentures being redeemed in part, any portion thereof not
to be redeemed.
GLOBAL SUBORDINATED DEBENTURES
Upon the issuance of the Global Subordinated Debenture, and the deposit of
such Global Subordinated Debenture with or on behalf of the Depositary, the
Depositary for such Global Subordinated Debenture or its nominee will credit, on
its book-entry registration and transfer system, the respective principal
amounts of the individual Junior Subordinated Debentures represented by such
Global Subordinated Debenture to the accounts of persons that have accounts with
such Depositary ("Participants"). Ownership of beneficial interests in a Global
Subordinated Debenture will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Subordinated Debenture will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Subordinated Debenture.
So long as the Depositary for a Global Subordinated Debenture, or its
nominee, is the registered owner of such Global Subordinated Debenture, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Junior Subordinated Debentures represented by such Global
Subordinated Debenture for all purposes under the Indenture governing such
Junior Subordinated Debentures. Except as provided below, owners of beneficial
interests in a Global Subordinated Debenture will not be entitled to have any of
the individual Junior Subordinated Debentures represented by such Global
Subordinated Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Junior Subordinated Debentures
in definitive form and will not be considered the owners or holders thereof
under the Indenture.
Payments of principal of and interest on individual Junior Subordinated
Debentures represented by a Global Subordinated Debenture registered in the name
of the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner of the Global Subordinated Debenture
representing such Junior Subordinated Debentures. None of Pacific Crest, the
Indenture Trustee, any Paying Agent, or the Securities Registrar for such Junior
Subordinated Debentures will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Pacific Crest expects that the Depositary or its nominee, upon receipt of
any payment of principal or interest in respect of a permanent Global
Subordinated Debenture representing the Junior Subordinated Debentures,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
the Global Subordinated Debenture as shown on the records of such Depositary or
its nominee. Pacific Crest also expects that payments by Participants to owners
of beneficial interests in such Global Subordinated Debenture held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
If the Depositary is at any time unwilling, unable or ineligible to continue
as depositary and a successor depositary is not appointed by Pacific Crest
within 90 days, Pacific Crest will issue individual
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Junior Subordinated Debentures in exchange for the Global Subordinated
Debenture. In addition, Pacific Crest may at any time and in its sole
discretion, determine not to have the Junior Subordinated Debentures represented
by one or more Global Junior Subordinated Debentures and, in such event, will
issue individual Junior Subordinated Debentures in exchange for the Global
Subordinated Debenture. Further, if Pacific Crest so specifies with respect to
the Junior Subordinated Debentures, an owner of a beneficial interest in a
Global Subordinated Debenture representing Junior Subordinated Debentures may,
on terms acceptable to Pacific Crest, the Indenture Trustee and the Depositary
for such Global Subordinated Debenture, receive individual Junior Subordinated
Debentures in exchange for such beneficial interests. In any such instance, an
owner of a beneficial interest in a Global Subordinated Debenture will be
entitled to physical delivery of individual Junior Subordinated Debentures equal
in principal amount to such beneficial interest and to have such Junior
Subordinated Debentures registered in its name. Individual Junior Subordinated
Debentures so issued will be issued in denominations, unless otherwise specified
by Pacific Crest, of $10 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the office of the Indenture Trustee, except that at
the option of Pacific Crest payment of any interest may be made (i) except in
the case of Global Junior Subordinated Debentures, by check mailed to the
address of the person entitled thereto as such address shall appear in the
securities register or (ii) by transfer to an account maintained by the person
entitled thereto as specified in the securities register, provided that proper
transfer instructions have been received by the regular record date. Payment of
any interest on Junior Subordinated Debentures will be made to the person in
whose name such Junior Subordinated Debenture is registered at the close of
business on the regular record date for such interest. Pacific Crest may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent; however Pacific Crest will at all times be required to maintain a Paying
Agent in each place of payment for the Junior Subordinated Debentures. Any
moneys deposited with the Indenture Trustee or any Paying Agent, or then held by
Pacific Crest in trust, for the payment of the principal of or interest on the
Junior Subordinated Debentures and remaining unclaimed for two years after such
principal or interest has become due and payable shall, at the request of
Pacific Crest, be repaid to Pacific Crest and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to Pacific Crest for payment thereof.
MODIFICATION OF INDENTURE
From time to time Pacific Crest and the Indenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interests of the holders of the Junior
Subordinated Debentures or the Trust Preferred Securities so long as they remain
outstanding) and qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act. The Indenture contains provisions permitting
Pacific Crest and the Indenture Trustee, with the consent of the holders of not
less than a majority in principal amount of the outstanding Junior Subordinated
Debentures, to modify the Indenture in a manner affecting the rights of the
holders of the Junior Subordinated Debentures; provided, that no such
modification may, without the consent of the holder of each outstanding
Subordinated Debenture, (i) change the Stated Maturity of the Junior
Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of Junior Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture,
provided that so long as any of the Trust Preferred Securities remain
outstanding, no such modification may be made that adversely affects the holders
of such Trust Preferred Securities in any material respect, and no termination
of the Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective,
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without the prior consent of the holders of at least a majority of the aggregate
Liquidation Amount of the Trust Preferred Securities unless and until the
principal of the Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions are
satisfied. Where a consent under the Indenture would require the consent of each
holder of Junior Subordinated Debentures, no such consent shall be given by the
Property Trustee without the prior consent of each holder of Trust Preferred
Securities. In addition, Pacific Crest and the Indenture Trustee may execute,
without the consent of any holder of Junior Subordinated Debentures, any
supplemental Indenture for the purpose of creating any new series of Junior
Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default" with respect to the
Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due (subject to the deferral of any due date in the case of
an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at maturity, upon redemption by declaration or otherwise;
or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
Pacific Crest from the Indenture Trustee or to Pacific Crest and the
Indenture Trustee by the holders of at least 25% in aggregate outstanding
principal amount of the Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
Pacific Crest.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee. The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. If
the Indenture Trustee or such holders of such Junior Subordinated Debentures
fail to make such declaration, the holders of at least 25% in aggregate
Liquidation Amount of the Trust Preferred Securities shall have such right. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee.
Should the holders of the Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Trust Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
In case a Debenture Event of Default shall occur and be continuing as to the
Junior Subordinated Debentures, the Property Trustee will have the right to
declare the principal of and the interest on such Junior Subordinated
Debentures, and any other amounts payable under the Indenture, to be forthwith
due
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and payable and to enforce its other rights as a creditor with respect to such
Junior Subordinated Debentures.
Pacific Crest is required to file annually with the Indenture Trustee a
certificate as to whether or not Pacific Crest is in compliance with all the
conditions and covenants applicable to it under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of Pacific Crest to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of Trust Preferred Securities may
institute a legal proceeding directly against Pacific Crest for enforcement of
payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Trust Preferred Securities of such holder ("Direct
Action"). Pacific Crest may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of the holders
of all of the Trust Preferred Securities outstanding. If the right to bring a
Direct Action is removed, PCC Capital may become subject to the reporting
obligations under the Exchange Act. Pacific Crest shall have the right under the
Indenture to set-off any payment made to such holder of Trust Preferred
Securities by Pacific Crest in connection with a Direct Action.
The holders of the Trust Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of the Trust Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that Pacific Crest shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into Pacific Crest or convey, transfer or lease its
properties and assets substantially as an entirety to Pacific Crest, unless (i)
in case Pacific Crest consolidates with or merges into another Person or conveys
or transfers its properties and assets substantially as an entirety to any
Person, the successor Person is organized under the laws of the United States or
any state or the District of Columbia, and such successor Person expressly
assumes Pacific Crest's obligations on the Junior Subordinated Debentures issued
under the Indenture; (ii) immediately after giving effect thereto, no Debenture
Event of Default, and no event which, after notice or lapse of time or both,
would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving Pacific Crest that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Indenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and Pacific Crest deposits or causes
to be deposited with the Indenture Trustee trust funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Indenture Trustee for cancellation, for the principal and interest to the
date of the deposit or to the Stated Maturity, as the case may be, then the
Indenture will cease to be of further effect (except as to Pacific Crest's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers'
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certificates and opinions of counsel described therein), and Pacific Crest will
be deemed to have satisfied and discharged the Indenture.
COVENANTS OF PACIFIC CREST
Pacific Crest will covenant in the Indenture, as to the Junior Subordinated
Debentures, that if and so long as (i) PCC Capital is the holder of all such
Junior Subordinated Debentures, (ii) a Tax Event in respect of PCC Capital has
occurred and is continuing and (iii) Pacific Crest has elected, and has not
revoked such election, to pay Additional Sums (as defined under "Description of
the Trust Preferred Securities--Redemption") in respect of the Trust Preferred
Securities, Pacific Crest will pay to PCC Capital such Additional Sums. Pacific
Crest will also covenant, as to the Junior Subordinated Debentures, (i) to
maintain directly or indirectly 100% ownership of the Common Securities of PCC
Capital to which Junior Subordinated Debentures have been issued, provided that
certain successors which are permitted pursuant to the Indenture may succeed to
Pacific Crest's ownership of the Common Securities, (ii) not to voluntarily
dissolve, wind up or liquidate PCC Capital, except upon prior approval of the
primary federal regulator of Pacific Crest if then so required under applicable
capital guidelines or policies of such primary regulator, and except (a) in
connection with a distribution of Junior Subordinated Debentures to the holders
of the Trust Preferred Securities in liquidation of PCC Capital or (b) in
connection with certain mergers, consolidations, or amalgamations permitted by
the Trust Agreement and (iii) to use its reasonable efforts, consistent with the
terms and provisions of the Trust Agreement, to cause PCC Capital to remain
classified as a grantor trust and not as an association taxable as a corporation
for United States federal income tax purposes.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of California, except that
the immunities and standard of care of the Indenture Trustee will be governed by
Delaware law.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Trust
Preferred Securities and the Junior Subordinated Debentures. The Trust Preferred
Securities and the Junior Subordinated Debentures will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global certificates will be
issued for the Trust Preferred Securities and the Junior Subordinated Debentures
and will be deposited with the Depositary.
The Depositary is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its Participants deposit with the
Depositary. The Depositary also facilitates
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the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the Depositary system is also available to others such as securities brokers
and dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants are
on file with the Commission.
Purchases of Trust Preferred Securities or Junior Subordinated Debentures
within the Depositary system must be made by or through Direct Participants,
which will receive a credit for the Trust Preferred Securities or Junior
Subordinated Debentures on the Depositary's records. The ownership interest of
each actual purchaser of each Trust Preferred Securities and each Subordinated
Debenture ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Trust Preferred
Securities or Junior Subordinated Debentures. Transfers of ownership interests
in the Trust Preferred Securities or Junior Subordinated Debentures are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Trust Preferred Securities or Junior Subordinated
Debentures, except in the event that use of the book-entry system for the or
Junior Subordinated Debentures is discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the Trust
Preferred Securities or Junior Subordinated Debentures; the Depositary's records
reflect only the identity of the Direct Participants to whose accounts such
Trust Preferred Securities or Junior Subordinated Debentures are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Trust Preferred Securities or Junior Subordinated Debentures. If less than
all of the Trust Preferred Securities or the Junior Subordinated Debentures are
being redeemed, the Depositary will determine by lot or PRO RATA the amount of
the Trust Preferred Securities of each Direct Participant to be redeemed.
Although voting with respect to the Trust Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, as applicable, in those
instances in which a vote is required, neither the Depositary nor Cede & Co.
will itself consent or vote with respect to Trust Preferred Securities or Junior
Subordinated Debentures. Under its usual procedures, the Depositary would mail
an omnibus proxy (the "Omnibus Proxy") to the relevant Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts such
Trust Preferred Securities or Junior Subordinated Debentures are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
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Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to the Depositary.
The Depositary's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Trustee, PCC Capital or Pacific Crest, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to the Depositary is the responsibility of the relevant
Trustee, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursements of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Trust Preferred Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the relevant
Trustee and Pacific Crest. In the event that a successor securities depositary
is not obtained, definitive Trust Preferred Securities or Subordinated Debenture
certificates representing such Trust Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. Pacific Crest, at its
option, may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor depositary). After a Debenture Event of
Default, the holders of a majority in liquidation preference of Trust Preferred
Securities or aggregate principal amount of Junior Subordinated Debentures may
determine to discontinue the system of book-entry transfers through the
Depositary. In any such event, definitive certificates for such Trust Preferred
Securities or Junior Subordinated Debentures will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that PCC Capital
and Pacific Crest believe to be accurate, but PCC Capital and Pacific Crest
assume no responsibility for the accuracy thereof. Neither PCC Capital nor
Pacific Crest has any responsibility for the performance by the Depositary or
its Participants of their respective obligations as described herein or under
the rules and procedures governing their respective operations.
DESCRIPTION OF GUARANTEE
The Guarantee Agreement will be executed and delivered by Pacific Crest
concurrently with the issuance of the Trust Preferred Securities for the benefit
of the holders of the Trust Preferred Securities. Wilmington Trust Company will
act as Guarantee Trustee under the Guarantee Agreement for the purposes of
compliance with the Trust Indenture Act, and the Guarantee will be qualified as
an Indenture under the Trust Indenture Act. The following summary of certain
provisions of the Guarantee does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the provisions of the
Guarantee Agreement, including the definitions therein of certain terms, and the
Trust Indenture Act. The form of the Guarantee has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The Guarantee
Trustee will hold the Guarantee for the benefit of the holders of the Trust
Preferred Securities.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
PCC Capital's obligations under the Trust Preferred Securities, but will apply
only to the extent that PCC Capital has funds sufficient to make such payments,
and is not a guarantee of collection.
Pacific Crest will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Trust Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that PCC Capital may have or assert
other than the defense of payment. The following payments with respect to the
Trust Preferred Securities, to the
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extent not paid by or on behalf of PCC Capital (the "Guarantee Payments"), will
be subject to the Guarantee: (i) any accumulated and unpaid Distributions
required to be paid on the Trust Preferred Securities, to the extent that PCC
Capital has funds on hand available therefor at such time, (ii) the redemption
price with respect to any Trust Preferred Securities called for redemption, to
the extent that PCC Capital has funds on hand available therefor at such time,
and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation
of PCC Capital (unless the Junior Subordinated Debentures are distributed to
holders of the Trust Preferred Securities), the lesser of (a) the Liquidation
Distribution and (b) the amount of assets of PCC Capital remaining available for
distribution to holders of Trust Preferred Securities after satisfaction of
liabilities to creditors of PCC Capital as required by law. Pacific Crest's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by Pacific Crest to the holders of the Trust Preferred
Securities or by causing PCC Capital to pay such amounts to such holders.
If Pacific Crest does not make interest payments on the Junior Subordinated
Debentures held by PCC Capital, PCC Capital will not be able to pay
Distributions on the Trust Preferred Securities and will not have funds legally
available therefor. The Guarantee will rank subordinate and junior in right of
payment to all Senior and Subordinated Debt of Pacific Crest. See "Status of the
Guarantee" below. Because Pacific Crest is a holding company, the right of
Pacific Crest to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise, is subject to
the prior claims of creditors of that subsidiary, except to the extent Pacific
Crest may itself be recognized as a creditor of that subsidiary. Accordingly,
Pacific Crest's obligations under the Guarantee will be effectively subordinated
to all existing and future liabilities of Pacific Crest's subsidiaries, and
claimants should look only to the assets of Pacific Crest for payments
thereunder. Except as otherwise described herein, the Guarantee does not limit
the incurrence or issuance of other secured or unsecured debt of Pacific Crest,
including Senior and Subordinated Debt whether under the Indenture, any other
indenture that Pacific Crest may enter into in the future, or otherwise.
Pacific Crest has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed all
of PCC Capital's obligations under the Trust Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of PCC Capital's obligations under the Trust Preferred
Securities. See "Relationship Among the Trust Preferred Securities, the Junior
Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Pacific Crest and
will rank subordinate and junior in right of payment to all Senior and
Subordinated Debt in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of collection.
For example, the guaranteed party may institute a legal proceeding directly
against Pacific Crest to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The Guarantee
will be held for the benefit of the holders of the Trust Preferred Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by PCC Capital or upon distribution to the
holders of the Trust Preferred Securities of the Junior Subordinated Debentures
to the holders of the Trust Preferred Securities. The Guarantee does not place a
limitation on the amount of additional Senior and Subordinated Debt that may be
incurred by Pacific Crest. Pacific Crest expects from time to time to incur
additional indebtedness constituting Senior and Subordinated Debt.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Trust Preferred Securities (in which case no vote
will be required), the Guarantee Agreement may not be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Trust Preferred Securities. See "Description of the
Trust Preferred Securities--Voting Rights; Amendment of the Trust Agreement."
All guarantees and agreements contained in the Guarantee Agreement shall bind
the successors, assigns, receivers, trustees and representatives of Pacific
Crest and shall inure to the benefit of the holders of the Trust Preferred
Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee Agreement will occur upon the
failure of Pacific Crest to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Trust Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee
Agreement. Any holder of the Trust Preferred Securities may institute a legal
proceeding directly against Pacific Crest to enforce its rights under the
Guarantee without first instituting a legal proceeding against PCC Capital, the
Guarantee Trustee or any other person or entity.
Pacific Crest, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not Pacific Crest is in compliance with
all the conditions and covenants applicable to it under the Guarantee Agreement.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by Pacific Crest in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee Agreement and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee Agreement
at the request of any holder of the Trust Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of the Trust Preferred Securities, upon full
payment of the amounts payable upon liquidation of PCC Capital or upon
distribution of Junior Subordinated Debentures to the holders of the Trust
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Trust Preferred
Securities must restore payment of any sums paid under the Trust Preferred
Securities or the Guarantee.
GOVERNING LAW
The Guarantee Agreement will be governed by and construed in accordance with
the laws of the State of California.
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EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by Pacific Crest under the
Trust Agreement, Pacific Crest will irrevocably and unconditionally guarantee to
each person or entity to whom PCC Capital becomes indebted or liable, the full
payment of any costs, expenses or liabilities of PCC Capital, other than
obligations of PCC Capital to pay to the holders of the Trust Preferred
Securities or other similar interests in PCC Capital of the amounts due such
holders pursuant to the terms of the Trust Preferred Securities or such other
similar interests, as the case may be.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent PCC Capital has funds available for the payment of
such Distributions) are irrevocably guaranteed by Pacific Crest as and to the
extent set forth under "Description of Guarantee." Taken together, Pacific
Crest's obligations under the Junior Subordinated Debentures, the Indenture, the
Trust Agreement, the Expense Agreement, the Guarantee Agreement and the
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the Trust
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of those documents that has the
effect of providing a full, irrevocable and unconditional guarantee of PCC
Capital's obligations under the Trust Preferred Securities. If and to the extent
that Pacific Crest does not make payments on the Junior Subordinated Debentures,
PCC Capital will not pay Distributions or other amounts due on the Trust
Preferred Securities. The Guarantee does not cover payment of Distributions when
PCC Capital does not have sufficient funds to pay such Distributions. In such
event, the remedy of a holder of the Trust Preferred Securities is to institute
a legal proceeding directly against Pacific Crest for enforcement of payment of
such Distributions to such holder. The obligations of Pacific Crest under the
Guarantee are subordinate and junior in right of payment to all Senior and
Subordinated Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate Liquidation Amount of the
Trust Preferred Securities and Common Securities; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
Trust Preferred Securities; (iii) Pacific Crest shall pay for all and any costs,
expenses and liabilities of PCC Capital except PCC Capital's obligations to
holders of Trust Preferred Securities; and (iv) the Trust Agreement further
provides that PCC Capital will not engage in any activity that is not consistent
with its limited purposes.
Notwithstanding anything to the contrary in the Indenture, Pacific Crest has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent Pacific Crest has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE TRUST PREFERRED SECURITIES UNDER THE
GUARANTEE
A holder of any the Trust Preferred Securities may institute a legal
proceeding directly against Pacific Crest to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, PCC Capital or any other person or entity.
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A default or event of default under any Senior and Subordinated Debt would
not constitute a default or Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior and Subordinated Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior and
Subordinated Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default.
LIMITED PURPOSE OF PCC CAPITAL
The Trust Preferred Securities evidence a beneficial interest in PCC
Capital, and PCC Capital exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in Junior Subordinated Debentures.
A principal difference between the rights of a holder of the Trust Preferred
Securities and a holder of a Junior Subordinated Debenture is that a holder of a
Junior Subordinated Debenture is entitled to receive from Pacific Crest the
principal amount of and interest accrued on Junior Subordinated Debentures held,
while a holder of the Trust Preferred Securities is entitled to receive
Distributions from PCC Capital (or from Pacific Crest under the Guarantee) if
and to the extent PCC Capital has funds available for the payment of such
Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
PCC Capital involving the liquidation of the Junior Subordinated Debentures,
after satisfaction of liabilities to creditors of PCC Capital as provided by
applicable law, the holders of Trust Preferred Securities will be entitled to
receive, out of assets held by PCC Capital, the Liquidation Distribution in
cash. See "Description of the Trust Preferred Securities--Liquidation
Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation or
bankruptcy of Pacific Crest, the Property Trustee, as holder of the Junior
Subordinated Debentures, would be a subordinated creditor of Pacific Crest,
subordinated in right of payment to all Senior and Subordinated Debt as set
forth in the Indenture, but entitled to receive payment in full of principal and
interest, before any stockholders of Pacific Crest receive payments or
distributions. Since Pacific Crest is the guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of PCC Capital (other than
PCC Capital's obligations to the holders of its Trust Preferred Securities), the
positions of a holder of the Trust Preferred Securities and a holder of Junior
Subordinated Debentures relative to other creditors and to stockholders of
Pacific Crest in the event of liquidation or bankruptcy of Pacific Crest are
expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Manatt, Phelps & Phillips, LLP, counsel to the Company
("Counsel"), the following summary accurately describes the material United
States federal income tax consequences that may be relevant to the purchase,
ownership and disposition of Trust Preferred Securities. Unless otherwise
stated, this summary deals only with Trust Preferred Securities held as capital
assets by United States Persons (defined below) who purchase the Trust Preferred
Securities upon original issuance at their original offering price. As used
herein, a "United States Person" means a person that is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust the
income of which is subject to United States federal income taxation regardless
of its source; provided, however, that for taxable years beginning after
December 31, 1996 (or, if a trustee so elects, for taxable years ending after
August 20, 1996), a "United States Person" shall include any trust if a court is
able to exercise primary supervision over the administration of such trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of such trust. The tax treatment of holders may vary
depending on their particular situation. This summary does not address all the
tax consequences that may be relevant to a
54
<PAGE>
particular holder or to holders who may be subject to special tax treatment,
such as banks, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or foreign investors. In addition, this summary does not include any description
of any alternative minimum tax consequences or the tax laws of any state, local
or foreign government that may be applicable to a holder of Trust Preferred
Securities. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis.
The following discussion does not discuss the tax consequences that might be
relevant to persons that are not United States Persons ("non-United States
Persons"). Non-United States Persons should consult their own tax advisors as to
the specific United States federal income tax consequences of the purchase,
ownership and disposition of Trust Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Counsel are not binding on the Internal
Revenue Service ("Service") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the Service with
respect to the transactions described herein. Accordingly, there can be no
assurance that the Service will not challenge the opinions expressed herein or
that a court would not sustain such a challenge. Nevertheless, Counsel has
advised that it is of the view that, if challenged, the opinions expressed
herein more likely than not would be sustained by a court with jurisdiction in a
properly presented case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE
TRUST PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE
"DESCRIPTION OF THE TRUST PREFERRED SECURITIES--REDEMPTION."
CLASSIFICATION OF PCC CAPITAL
In connection with the issuance of the Trust Preferred Securities, Counsel
is of the opinion that, under current law and assuming compliance with the terms
of the Trust Agreement, and based on certain facts and assumptions contained in
such opinion, PCC Capital will be classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes. As a result, each beneficial owner of the Trust Preferred Securities
(a "Securityholder") will be treated as owning an undivided beneficial interest
in the Junior Subordinated Debentures. Accordingly, each Securityholder will be
required to include in its gross income its pro rata share of the interest
income or original issue discount that is paid or accrued on the Junior
Subordinated Debentures. See "--Interest Income and Original Issue Discount"
herein. No amount included in income with respect to the Trust Preferred
Securities will be eligible for the dividends received deduction.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a Trust
Preferred Security, each holder covenants to treat the Junior Subordinated
Debentures as indebtedness and the Trust Preferred Securities as evidence of an
indirect beneficial ownership interest in the Junior Subordinated Debentures. No
assurance can be given, however, that such position of the Company will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful. The remainder of this discussion assumes that
the Junior Subordinated Debentures will be classified for United States federal
income tax purposes as indebtedness of the Company. See "Risk
Factors--Uncertainty of Deductibility of Interest on the Junior Subordinated
Debentures."
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INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the Junior Subordinated
Debentures generally will be included in income by a Securityholder at the time
such interest income is paid or accrued in accordance with such Securityholder's
regular method of tax accounting.
Pacific Crest believes that, under the applicable Treasury regulations, the
Junior Subordinated Debentures will not be considered to have been issued with
"original issue discount" ("OID") within the meaning of Section 1273(a) of the
Code. If, however, Pacific Crest exercises its right to defer payments of
interest on the Junior Subordinated Debentures, the Junior Subordinated
Debentures will become OID instruments at such time and all Securityholders will
be required to accrue the stated interest on the Junior Subordinated Debentures
on a daily basis during the Extension Period, even though Pacific Crest will not
pay such interest until the end of the Extension Period, and even though some
Securityholders may use the cash method of tax accounting. Moreover, thereafter
the Junior Subordinated Debentures will be taxed as OID instruments for as long
as they remain outstanding. Thus, even after the end of the Extension Period,
all Securityholders would be required to continue to include the stated interest
on the Junior Subordinated Debentures in income on a daily economic accrual
basis, regardless of their method of tax accounting and in advance of receipt of
the cash attributable to such interest income. Under the OID economic accrual
rules, a Securityholder would accrue an amount of interest income each year that
approximates the stated interest payments called for under the Junior
Subordinated Debentures, and actual cash payments of interest on the Junior
Subordinated Debentures would not be reported separately as taxable income.
The Treasury regulations described above have not yet been addressed in any
definitive interpretations by the Service, and it is possible that the Service
could take a contrary position. If the Service were to assert successfully that
the stated interest on the Junior Subordinated Debentures was OID regardless of
whether Pacific Crest exercises its right to defer payments of interest on such
debentures, all Securityholders would be required to include such stated
interest in income on a daily economic accrual basis as described above.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST PREFERRED
SECURITIES
Under current law, a distribution by PCC Capital of the Junior Subordinated
Debentures as described under the caption "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Termination" will be non-taxable and
will result in the Securityholder receiving directly its pro rata share of the
Junior Subordinated Debentures previously held indirectly through PCC Capital,
with a holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Trust Preferred Securities
before such distribution. If, however, the liquidation of PCC Capital were to
occur because PCC Capital is subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debentures as a
result of a Tax Event or otherwise, the distribution of Junior Subordinated
Debentures to Securityholders by PCC Capital could be a taxable event to PCC
Capital and each Securityholder, and a Securityholder would recognize gain or
loss as if the Securityholder had exchanged its Trust Preferred Securities for
the Junior Subordinated Debentures it received upon the liquidation of PCC
Capital. A Securityholder would recognize interest income in respect of Junior
Subordinated Debentures received from PCC Capital in the manner described above
under "--Interest Income and Original Issue Discount" herein.
SALES OR REDEMPTION OF TRUST PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Trust
Preferred Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized (which for this purpose, will exclude
amounts attributable to accrued interest or OID not previously included in
income) and the Securityholder's adjusted tax basis in the Trust Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Trust Preferred Securities held for more than one year will generally
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be taxable as long-term capital gain or loss. Under recent tax legislation, the
maximum federal income tax rate applicable to net long term capital gains will
depend upon whether the capital asset sold or exchanged had a holding period in
excess of one year or a holding period in excess of 18 months. Amounts
attributable to accrued interest with respect to a Securityholder's pro rata
share of the Junior Subordinated Debentures not previously included in income
will be taxable as ordinary income.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Trust Preferred Securities held of record
by United States Persons (other than corporations and other exempt
Securityholders), if any, will be reported to the Service. "Backup" withholding
at a rate of 31% will apply to payments of interest to non-exempt United States
Persons unless the Securityholder furnishes its taxpayer identification number
in the manner prescribed in applicable Treasury Regulations, certifies that such
number is correct, certifies as to no loss of exemption from backup withholding
and meets certain other conditions. Any amounts withheld from a Securityholder
under the backup withholding rules will be allowed as a refund or a credit
against such Securityholder's United States federal income tax liability,
provided the required information is furnished to the Service.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
There can be no assurance that future legislative proposals or final
legislation will not affect the ability of the Company to deduct interest on the
Junior Subordinated Debentures. Such a change could give rise to a Tax Event,
which may permit Pacific Crest to cause a redemption of the Trust Preferred
Securities. See "Description of the Trust Preferred Securities--Redemption--Tax
Event Redemption" and "Description of Junior Subordinated
Debentures--Redemption."
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans"), generally may purchase Trust Preferred Securities subject to the
investing fiduciary's determination that the investment in Trust Preferred
Securities satisfies ERISA's fiduciary standards and other requirements
applicable to investments by the Plan.
In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
within the meaning of Section 4975 of the Code) with respect to certain Plans
(generally, those Plans maintained or sponsored by, or contributed to by, any
such persons with respect to which the Company or an affiliate is a fiduciary or
Plans for which the Company or an affiliate provide services). The acquisition
and ownership of Trust Preferred Securities by a Plan (or by an individual
retirement arrangement or other Plans described in Section 4975(e)(1) of the
Code ) with respect to which the Company or any of its affiliates is considered
a party in interest or a disqualified person may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless such
Trust Preferred Securities are acquired pursuant to and in accordance with an
applicable exemption.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Trust Preferred Securities unless such Trust Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any other Plans or
other entities whose assets include Plan assets subject to ERISA or Section 4975
of the Code proposing to acquire Trust Preferred Securities should consult with
their own counsel.
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UNDERWRITING
The Underwriters named below, represented by Sandler O'Neill & Partners,
L.P. and Sutro & Co. Incorporated (the "Representatives"), have severally
agreed, subject to the terms and conditions set forth in the Underwriting
Agreement, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, to purchase from PCC Capital
the number of Trust Preferred Securities set forth opposite their respective
names below. The several Underwriters have agreed in the Underwriting Agreement,
subject to the terms and conditions set forth therein, to purchase all the Trust
Preferred Securities offered hereby if any of the Trust Preferred Securities are
purchased. In the event of default by an Underwriter, the Underwriting Agreement
provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
<TABLE>
<CAPTION>
NUMBER OF TRUST
PREFERRED
UNDERWRITER SECURITIES
- -------------------------------------------------------------------------- ------------------
<S> <C>
Sandler O'Neill & Partners, L.P...........................................
Sutro & Co. Incorporated..................................................
----------
Total................................................................. 1,500,000
----------
----------
</TABLE>
The Representatives have advised PCC Capital that they propose initially to
offer the Trust Preferred Securities to the public at the public offering price
set forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per Trust Preferred Security. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per Trust Preferred Security to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will be used to purchase the Junior Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will pay as
compensation to the Underwriters arranging the investment therein of such
proceeds, an amount in immediately available funds of $ per Trust
Preferred Security (or $ in the aggregate) for the accounts of the several
Underwriters.
PCC Capital has granted the Underwriters an option to purchase up to an
additional 225,000 Trust Preferred Securities at the public offering price Such
option, which expires 30 days from the date of this Prospectus, may be exercised
solely to cover over-allotments. To the extent that the Underwriters exercise
such option, each of the Underwriters will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of the
additional Trust Preferred Securities that the number of Trust Preferred
Securities to be purchased initially by the Underwriter is of the 1,500,000
Trust Preferred Securities initially purchased by the Underwriters.
To the extent that the Underwriters exercise their option to purchase
additional Trust Preferred Securities, PCC Capital will issue and sell to
Pacific Crest additional Common Securities in such aggregate Liquidation Amount
as is required for Pacific Crest to continue to hold Common Securities in an
aggregate Liquidation Amount equal to at least 3% of the total capital of PCC
Capital and Pacific Crest will issue and sell to PCC Capital Junior Subordinated
Debentures in an aggregate principal amount equal to the total aggregate
Liquidation Amount of the additional Trust Preferred Securities being purchased
pursuant to the option and the additional Common Securities.
In connection with the offering of the Trust Preferred Securities, the
Underwriters and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Trust Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriters
create a short position for their own account
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by selling more Trust Preferred Securities than they are committed to purchase
from PCC Capital. In such case, to cover all or part of the short position, the
Underwriters may exercise the over-allotment option described above or may
purchase Trust Preferred Securities in the open market following completion of
the initial offering of the Trust Preferred Securities. The Underwriters may
also engage in stabilizing transactions in which they bid for, and purchase,
shares of the Trust Preferred Securities at a level above that which might
otherwise prevail in the open market for the purpose of preventing or retarding
a decline in the market price of the Trust Preferred Securities. The
Underwriters also may reclaim any selling concession allowed to an Underwriter
or dealer if the Underwriters repurchase shares distributed by that Underwriter
or dealer. Any of the foregoing transactions may result in the maintenance of a
price for the Trust Preferred Securities at a level above that which might
otherwise prevail in the open market. Neither the Company nor any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Trust Preferred Securities. The Underwriters are not required to
engage in any of the foregoing transactions and, if commenced, such transactions
may be discontinued at any time without notice.
During a period of 180 day from the date of this Prospectus, neither PCC
Capital nor the Company will, subject to certain exceptions, without the prior
written consent of the Representatives, directly or indirectly, sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any Trust Preferred
Securities, any security convertible into or exchangeable into or exercisable
for Preferred Securities or Junior Subordinated Debentures or any debt
securities substantially similar to the Junior Subordinated Debentures or equity
securities substantially similar to the Trust Preferred Securities (except for
Junior Subordinated Debentures and the Trust Preferred Securities offered
hereby).
Because the National Association of Securities Dealer, Inc. ("NASD") is
expected to view the Trust Preferred Securities as interests in a direct
participation program, the offering of the Trust Preferred Securities is being
made in compliance with the applicable provisions of Rule 2810 of the NASD's
Conduct Rules.
The Trust Preferred Securities are a new issue of securities with no
established trading market. Application has been made to list the Trust
Preferred Securities on the Nasdaq National Market. The Representatives have
advised PCC Capital that they presently intend to make a market in the Preferred
Securities after the commencement of trading on the Nasdaq National Market, but
no assurances can be made as to the liquidity of such Trust Preferred Securities
or that an active and liquid trading market will develop or, if developed, that
it will continue. The offering price and distribution rate have been determined
by negotiations among representatives of the Company and the Underwriters, and
the offering price of the PCC Capital Preferred Securities may not be indicative
of the market price following the Offering. The Representatives will have no
obligation to make a market in the Trust Preferred Securities, however, and may
cease market-making activities, if commenced, at any time.
The Trust and the Company have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act.
Sandler O'Neill & Partners, L.P. engages in transactions with, and, from
time to time, has performed services for, the Company in the ordinary course of
business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the creation
of PCC Capital will be passed upon by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special counsel to Pacific Crest and PCC Capital. The
validity of the Guarantee and the Junior Subordinated Debentures will be passed
upon for the Company by Manatt, Phelps & Phillips, LLP, Los Angeles, California,
counsel to the Company. Certain legal matters in connection with this Offering
will be passed upon for the Underwriters by Elias, Matz, Tiernan &
59
<PAGE>
Herrick L.L.P. Manatt, Phelps & Phillips, LLP and Elias, Matz, Tiernan & Herrick
L.L.P. will rely on the opinions of Richards, Layton & Finger, P.A. as to
matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for the Company by Manatt, Phelps
& Phillips, LLP.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996, and for the year ended December 31, 1996, included and incorporated by
reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports which are included and
incorporated by reference herein, and have been so included and incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The 1995 and 1994 consolidated financial statements of the Company included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
As used herein, the terms "Prospectus" and "herein" means this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
60
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 5
Incorporation of Certain Documents by Reference........................... 5
Prospectus Summary........................................................ 7
Summary Consolidated Financial Data....................................... 13
Risk Factors.............................................................. 16
Use of Proceeds........................................................... 22
Accounting Treatment...................................................... 22
Capitalization............................................................ 23
Management................................................................ 24
Description of the Trust Preferred Securities............................. 26
Description of Junior Subordinated Debentures . 38
Book-Entry Issuance....................................................... 48
Description of Guarantee.................................................. 50
Expense Agreement......................................................... 53
Relationship Among the Trust Preferred Securities, the Junior Subordinated
Debentures and the Guarantee............................................ 53
Certain Federal Income Tax Consequences................................... 54
ERISA Considerations...................................................... 57
Underwriting.............................................................. 58
Legal Matters............................................................. 59
Experts................................................................... 60
Appendix A--Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1996
Appendix B--Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1997
</TABLE>
------------------------
1,500,000 TRUST
PREFERRED SECURITIES
PCC CAPITAL I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER
TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
PACIFIC CREST CAPITAL, INC.
---------------------
PROSPECTUS
---------------------
SANDLER O'NEILL & PARTNERS, L.P.
SUTRO & CO. INCORPORATED
, 1997
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 5,228
NASD fee.......................................................... 2,225
Nasdaq fees....................................................... 7,750
Trustees' fees and expenses....................................... 16,000
Legal fees and expenses........................................... 135,000*
Blue Sky fees and expenses........................................ 10,000*
Accounting fees and expenses...................................... 43,000*
Printing expenses................................................. 50,000*
Miscellaneous expenses............................................ 30,797*
---------
Total......................................................... $ 300,000*
---------
---------
</TABLE>
- ------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware permits the
indemnification of directors, officers, employees and agents of Delaware
corporations.
Article Seventeenth of the Registrant's Restated Certificate of
Incorporation provides as follows:
"A director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, as the same exists or hereafter may be amended, or
(iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law hereafter is
amended to authorize the further elimination or limitation of the liability
of directors, then the liability of a director of the Corporation, in
addition to the limitation on personal liability provides herein, shall be
limited to the fullest extent permitted by the amended Delaware General
Corporation Law. No amendment to or repeal of this Article Seventeenth shall
apply to or have an effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
Article VI of the Registrant's Amended and Restated Bylaws provides as
follows:
"Section 6.1 RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director
or officer of the Corporation, is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, or was a director, officer,
employee or agent of a foreign or domestic corporation which was a
predecessor of the Corporation or of another enterprise at the request of
such predecessor corporation, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be
II-1
<PAGE>
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorney's
fees, judgments, fines, ERISA excise taxes of penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in Section 6.2 of this Article VI, the
Corporation shall indemnify and such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in this
Section 6.1 shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that if the Delaware
General Corporation Law requires the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not
in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or
on behalf of such director or officer, to repay, all amounts so advanced if
it shall ultimately be determined that such director or officer is not
entitled to be indemnified under this Section or otherwise. The Corporation
may by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as
the foregoing indemnification of directors and officers. This Article VI
shall create a right of indemnification for each such indemnifiable party
whether or not the proceeding to which the indemnification relates arose in
whole or in part prior to adoption of this Article VI (or the adoption of
the comparable provisions of the Bylaws of the Corporation's predecessor
corporation).
Section 6.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 6.1
of this Article VI is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper to the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard or conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 6.3 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article VI shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 6.4 INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation
II-2
<PAGE>
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law., in pertinent part, that each
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another foreign or domestic corporation or other entity,
shall be indemnified by the Registrant to the full extent permitted by the
General Corporation Law of the State of California or any other applicable laws.
Article IX also authorizes the Registrant to enter into one or more agreements
with any person which provides for indemnification greater or different than
that provided for in that Article.
The Registrant has entered into indemnification agreements with its officers
and directors in the form incorporated by reference as Exhibit 10 to this
Registration Statement.
Under the Trust Agreement, Pacific Crest will agree to indemnify each of the
Trustees of PCC Capital I or any predecessor Trustee for PCC Capital I, and to
hold each Trustee harmless against any loss, damage, claims, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties under the Trust Agreement.
Pacific Crest and PCC Capital I have agreed to indemnify the Underwriter,
and the Underwriter has agreed to indemnify PCC Capital I and Pacific Crest
against certain liabilities, including liabilities under the Securities Act of
1933, as amended. Reference is made to the Underwriting Agreement filed as
Exhibit 1.1 herewith.
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.*
4.1 Form of Subordinated Indenture dated , 1997 to be entered into
between Pacific Crest Capital, Inc. and Wilmington Trust Company, as
Indenture Trustee.
4.2 Form of Officers' Certificate and Company Order, dated , 1997.
4.3 Certificate of Trust of PCC Trust I dated August 18, 1997.
4.4 Trust Agreement of PCC Trust I dated as of August 18, 1997.
4.5 Certificate of Amendment to Certificate of Trust of PCC Trust I dated August
20, 1997.
4.6 Form of Amended and Restated Trust Agreement of PCC Capital I, dated ,
1997.
4.7 Form of Trust Preferred Certificate of PCC Capital I (included as an exhibit
to Exhibit 4.6).
4.8 Form of Common Securities Certificate of PCC Capital I (included as an exhibit
to Exhibit 4.6).
4.9 Form of Guarantee Agreement dated , 1997.
4.10 Form of Agreement as to Expenses and Liabilities (included as an exhibit to
Exhibit 4.6).
5.1 Opinion of Manatt, Phelps & Phillips, LLP.*
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.*
8.1 Opinion and Consent of Manatt, Phelps & Phillips, LLP, counsel to Pacific
Crest Capital, Inc., as to certain federal income tax matters.*
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.1 Form of Indemnification Agreement(2)**
10.2 Pacific Crest Capital, Inc. 1993 Equity Incentive Plan(4)(5)**
10.3 Pacific Crest Capital, Inc. Retirement Plan and Trust(2)**
10.4 1993 Employee Stock Purchase Plan(2)(6)**
10.5 Form of Split Dollar Agreement(2)**
10.6 Pacific Crest Capital, Inc. Supplemental Executive Retirement Plan(2)**
10.7 Form of Distribution Agreement(1)
10.8 Form of Tax Sharing Agreement between Pacific Crest Capital, Inc. and The
Foothill Group, Inc.(2)
10.9 Office Lease by and between Wilshire Masterpiece, Inc. and Pacific Crest
Investment and Loan, dated October 31, 1990 (Beverly Hills Branch)(3)
10.10 Office Lease between Fifth and Beech Associates and Pacific Crest Investment
and Loan (San Diego Branch)(3)
10.11.1 Shopping Center Lease dated April 18, 1978, between Frances Sarno and Robert
Sarno, as Trustees, and Le Chateau Boutiques, Inc. (Encino Branch)(3)
10.11.2 Assignment, Assumption and Consent to Assignment of Lease dated October 16,
1980, between Pacific Crest Investment and Loan, Frances Sarno and Robert
Sarno, as Trustees, and Le Chateau Boutiques, Inc.(3)
10.11.3 Exercise of Option to Renew Lease dated January 23, 1990(3)
10.12 Lease dated April 22, 1992 between The Klussman Family Trust and Pacific Crest
Investment and Loan (Agoura Hills office)(3)
10.14.1 Employment Agreement between the Company and Gary Wehrle(4)**
10.14.2 Employment Agreement between the Company and Barry Otelsberg(4)**
10.14.3 Employment Agreement between the Company and Lyle Lodwick(4)**
10.14.4 Employment Agreement between the Company and Robert J. Dennen(4)**
10.14.5 Employment Agreement between the Company and Gonzalo Fernandez(7)**
10.15 1996 Non-Employee Directors' Stock Plan(8)*
11.1 Statement re Computation of Ratios.
13.1 Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1996.
13.2 Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ernst & Young LLP.
23.6 Consent of Manatt, Phelps & Phillips, LLP (included in Exhibit 5.1 above).*
23.7 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above).*
24.1 A power of attorney is set forth on the signature page of the Registration
Statement.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Subordinated Indenture.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Trust Agreement.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Trust Preferred Securities Guarantee Agreement.
27.1 Financial Data Schedule of Pacific Crest Capital, Inc.
27.2 Financial Data Schedule of PCC Capital I.
</TABLE>
- ------------------------
* To be filed by amendment.
**Management contracts and compensatory plan or arrangements.
(1) Incorporated herein by reference from Registrant's Amendment No. 2 to Form
S-1 Registration Statement No. 33-68718, filed December 3, 1993.
(2) Incorporated herein by reference from Registrant's Amendment No. 1 to Form
S-1 Registration Statement No. 33-68718, filed October 28, 1993.
(3) Incorporated herein by reference from Registrant's Form S-1 Registration
Statement No. 33-68717, filed September 13, 1993.
(4) Incorporated herein by reference from Registrant's Annual Report on Form
10-K dated December 31, 1993, filed March 31, 1994.
(5) Incorporated herein by reference from Registrant's Form S-8 Registration
Statement No. 33-87990 filed December 27, 1994. Pacific Crest Capital, Inc.
1993 Equity Incentive Plan.
(6) Incorporated herein by reference from Registrant's Form S-8 Registration
Statement No. 33-87988 filed December 27, 1994. Pacific Crest Capital, Inc.
1995 Employee Stock Purchase Plan.
(7) Incorporated herein by reference from Registrant's Annual Report on Form 10K
dated December 31, 1994 filed March 30, 1995.
(8) Incorporated herein by reference from Registrant's Form S-8 Registration
Statement No. 333-23849, filed March 23, 1997. Pacific Crest Capital, Inc.
1996 Non-Employee Directors' Stock Plan.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
(c) The Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certificates that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Agoura Hills, State of California, on August 21,
1997.
<TABLE>
<S> <C> <C>
PACIFIC CREST CAPITAL, INC.
By: /s/ GARY L. WEHRLE
-----------------------------------------
Gary L. Wehrle
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Pacific Crest Capital, Inc.,
do hereby severally constitute and appoint Gary L. Wehrle and Robert J. Dennen,
and each of them singly, acting alone, our true and lawful attorneys and agents,
to do any and all things and acts in our names in the capacities indicated below
and to execute any and all instruments for us and in our names in the capacities
indicated below which said persons, or either of them, may deem necessary or
advisable to enable Pacific Crest Capital, Inc. to comply with the Securities
Act of 1993, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with the offering contemplated
by this Registration Statement on Form S-2, including specifically, but not
limited to, power and authority to sign for us or any of us in our names in the
capacities indicated below and any and all amendments, including post-effective
amendments to this Registration Statement and any Rule 462(b) registration
statement or amendment thereto; and we hereby ratify and confirm all that said
persons, or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the Requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 21st day of August, 1997, by
the following persons in the capacities indicated.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ GARY L. WEHRLE
- ------------------------------ Chairman of the Board and
Gary L. Wehrle Chief Executive Officer
Vice President, Chief
/s/ ROBERT J. DENNEN Financial Officer and
- ------------------------------ Secretary (Chief
Robert J. Dennen Accounting Officer)
- ------------------------------ Director
Rudolph I. Estrada
/s/ MARTIN J. FRANK
- ------------------------------ Director
Martin J. Frank
/s/ RICHARD S. ORFALEA
- ------------------------------ Director
Richard S. Orfalea
/s/ STEVEN J. ORLANDO
- ------------------------------ Director
Steven J. Orlando
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the registrant
certificates that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Agoura Hills, State of California, on August 21,
1997.
<TABLE>
<S> <C> <C>
PCC CAPITAL I
By: /s/ GARY L. WEHRLE
-----------------------------------------
Gary L. Wehrle
TRUSTEE
By: /s/ ROBERT J. DENNEN
-----------------------------------------
Robert J. Dennen
TRUSTEE
By: /s/ LYLE C. LODWICK
-----------------------------------------
Lyle C. Lodwick
TRUSTEE
</TABLE>
II-8
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC CREST CAPITAL, INC.
TO
WILMINGTON TRUST COMPANY
TRUSTEE
-----------------------------------------------------
JUNIOR SUBORDINATED INDENTURE
DATED AS OF AUGUST __, 1997
- --------------------------------------------------------------------------------
<PAGE>
PACIFIC CREST CAPITAL, INC.
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317 which,
pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the
Trust Reform Act of 1990, are a part of and govern the Indenture whether or not
physically contained therein) and the Junior Subordinated Indenture, dated as of
August __, 1997.
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- --------------- ---------
Section 310 (a) (1), (2) and (5) . . . . . . . . . . . . Not Applicable
(a) (3). . . . . . . . . . . . . . . . . . . Not Applicable
(a) (4). . . . . . . . . . . . . . . . . . . Not Applicable
(b). . . . . . . . . . . . . . . . . . . . . 6.8
. . . . . . . . . . . . . . . . . . . . . . 6.10
(c). . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 311 (a). . . . . . . . . . . . . . . . . . . . . 6.13(a)
(b). . . . . . . . . . . . . . . . . . . . . 6.13(b b) (2)
. . . . . . . . . . . . . . . . . . . . . . 7.3(a) (2)
. . . . . . . . . . . . . . . . . . . . . . 7.3(a) (2)
Section 312 (a). . . . . . . . . . . . . . . . . . . . . 7.1
. . . . . . . . . . . . . . . . . . . . . . 7.2(a)
(b). . . . . . . . . . . . . . . . . . . . . 7.2(b)
(c). . . . . . . . . . . . . . . . . . . . . 7.2(c)
Section 313 (a). . . . . . . . . . . . . . . . . . . . . 7.3(a)
(b). . . . . . . . . . . . . . . . . . . . . 7.3(b)
(c). . . . . . . . . . . . . . . . . . . . . 7.3(a), 7.3(b)
(d). . . . . . . . . . . . . . . . . . . . . 7.3(c)
Section 314 (a) (1), (2) and (3) . . . . . . . . . . . . 7.4
(a) (4). . . . . . . . . . . . . . . . . . . 10.5
(b). . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) (1). . . . . . . . . . . . . . . . . . . 1.2
(c) (2). . . . . . . . . . . . . . . . . . . 1.2
(c) (3). . . . . . . . . . . . . . . . . . . Not Applicable
(d). . . . . . . . . . . . . . . . . . . . . Not Applicable
(e). . . . . . . . . . . . . . . . . . . . . 1.2
(f). . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 315 (a). . . . . . . . . . . . . . . . . . . . . 6.1(a)
(b). . . . . . . . . . . . . . . . . . . . . 6.2
<PAGE>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- --------------- ---------
. . . . . . . . . . . . . . . . . . . . . . 7.3(a) (6)
(c). . . . . . . . . . . . . . . . . . . . . 6.1(b)
(d). . . . . . . . . . . . . . . . . . . . . 6.1 (c)
(d) (1). . . . . . . . . . . . . . . . . . . 6.1(a) (1)
(d) (2). . . . . . . . . . . . . . . . . . . 6.1(c) (2)
(d) (3). . . . . . . . . . . . . . . . . . . 6.1(c) (3)
(e). . . . . . . . . . . . . . . . . . . . . 5.14
Section 316 (a). . . . . . . . . . . . . . . . . . . . . 1.1
(a) (1) (A). . . . . . . . . . . . . . . . . 5.12
(a) (1) (B). . . . . . . . . . . . . . . . . 5.13
(a) (2). . . . . . . . . . . . . . . . . . . Not Applicable
(b). . . . . . . . . . . . . . . . . . . . . 5.8
(c). . . . . . . . . . . . . . . . . . . . . 1.4(f)
Section 317 (a) (1). . . . . . . . . . . . . . . . . . . 5.3
(a) (2). . . . . . . . . . . . . . . . . . . 5.4
(b). . . . . . . . . . . . . . . . . . . . . 10.3
Section 318 (a). . . . . . . . . . . . . . . . . . . . . 1.7
- --------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Junior Subordinated Indenture.
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of August __, 1997, between PACIFIC
CREST CAPITAL, INC., a Delaware corporation (hereinafter called the "Company")
having its principal office at 30343 Canwood Street, Agoura Hills, California
91301, and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Trustee
(hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "PCC Trust,"
and, collectively, the "PCC Trusts") of preferred trust interests in such Trusts
(the Preferred Securities") and common interests in such Trusts (the "Common
Securities" and, collectively with the Preferred Securities, the Trust
Securities), and to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the
premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;
(2) All other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(3) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and the term "generally accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such accounting
principles which are generally accepted at the date or time of such computation;
<PAGE>
provided, that when two or more principles are so generally accepted, it shall
mean that set of principles consistent with those in use by the Company; and
(4) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"1940 ACT" means the Investment Company Act of 1940, as amended.
"ACT" when used with respect to any Holder has the meaning specified in
Section 1.4.
"ADDITIONAL INTEREST" means the interest, if any, that shall accrue on any
interest on the Securities of any series the payment of which has not been made
on the applicable Interest Payment Date and which shall accrue at the rate per
annum specified or determined as specified in such Security.
"ADDITIONAL SUMS" has the meaning specified in Section 10.6.
"ADDITIONAL TAXES" means the sum of any additional taxes, duties and other
governmental charges to which a PCC Trust has become subject from time to time
as a result of a Tax Event.
"ADMINISTRATIVE TRUSTEE" means, in respect of any PCC Trust, each Person
identified as an "Administrative Trustee" or an "Administrative Agent" in the
related Trust Agreement, solely in such Person's capacity as Administrative
Trustee or an Administrative Agent, as the case may be, of such PCC Trust under
such Trust Agreement and not in such Person's individual capacity, or any
successor administrative trustee or successor administrative agent, as the case
may be, appointed as therein provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; PROVIDED, HOWEVER, no PCC Trust to which
Securities have been issued shall be deemed to be an Affiliate of the Company.
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.
"ALLOCABLE AMOUNTS," when used with respect to any Senior and Subordinated
Debt, means all amounts due or to become due on such Senior and Subordinated
Debt less, if applicable, any amount which would have been paid to, and retained
by, the holders of such Senior and Subordinated Debt (whether as a result of the
receipt of payments by the holders of such Senior and Subordinated Debt from the
Company or any other obligor thereon or from any holders of, or trustee in
respect of, other indebtedness that is subordinate and junior in right of
payment to such Senior and Subordinated Debt pursuant to any provision of such
indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior and Subordinated Debt or otherwise)
but for the fact that such Senior and Subordinated Debt is subordinate or junior
2
<PAGE>
in right of payment to (or subject to a requirement that amounts received on
such Senior and Subordinated Debt be paid over to obligees on) trade accounts
payable or accrued liabilities arising in the ordinary course of business.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant
to Section 6.14 to act on behalf of the Trustee to authenticate Securities of
one or more series.
"BOARD OF DIRECTORS" means either the board of directors of the Company or
any committee of that board duly authorized to act hereunder.
"BOARD RESOLUTION" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors, or such committee of the Board of Directors or officers of the
Company to which authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities of a
series initially issued to a PCC Trust, the principal office of the Property
Trustee under the related Trust Agreement, is closed for business.
"CAPITAL TREATMENT EVENT" means, in the event that the Company becomes
subject to capital adequacy guidelines, the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such prospective change, pronouncement or decision is announced on
or after the date of issuance of the Preferred Securities of such PCC Trust,
there is more than an insubstantial risk of impairment of the Company s ability
to treat the Preferred Securities (or any substantial portion thereof) as "Tier
I Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the primary federal regulator of the Company, as then in effect
and applicable to the Company.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"COMMON SECURITIES" has the meaning specified in the first recital of this
Indenture.
"COMMON STOCK" means the common stock, $.01 par value, of the Company.
3
<PAGE>
"COMPANY" means the Person named as the "Company" 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 "Company" shall mean
such successor corporation.
"COMPANY REQUEST" and "COMPANY ORDER" mean, respectively, the written
request or order signed in the name of the Company by the Chairman of the Board
of Directors, the Vice Chairman of the Board of Directors, its President or a
Vice President, and by its Chief Financial Officer, its Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered.
"CORPORATION" includes a corporation, association, company, joint-stock
company or business trust.
"DEBT" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or prior to the date of this
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.
"DEFAULTED INTEREST" has the meaning specified in Section 3.7.
"DEPOSITARY" means, with respect to the Securities of any series issuable
or issued in whole or in part in the form of one or more Global Securities, the
Person designated as Depositary by the Company pursuant to Section 3.1 with
respect to such series (or any successor thereto).
"DISCOUNT SECURITY" means any security which provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"DISTRIBUTIONS," with respect to the Trust Securities issued by a PCC
Trust, means amounts payable in respect of such Trust Securities as provided in
the related Trust Agreement and referred to therein as "Distributions."
4
<PAGE>
"DOLLAR" OR "U.S. $" means the currency of the United States of America
that, as at the time of payment, is legal tender for the payment of public and
private debts.
"EVENT OF DEFAULT" has the meaning specified in Article V unless otherwise
specified in the supplemental indenture or the Officers Certificate delivered
pursuant to Section 3.1 hereof creating a series of Securities.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"EXTENSION PERIOD" has the meaning specified in Section 3.11.
"GLOBAL SECURITY" means a Security in the form prescribed in Section 2.4
evidencing all or part of a series of Securities, issued to the Depositary or
its nominee for such series, and registered in the name of such Depositary or
its nominee.
"PCC GUARANTEE" means the guarantee by the Company of distributions on the
Preferred Securities of a PCC Trust to the extent provided in the related
Guarantee Agreement.
"PCC TRUST" has the meaning specified in the first recital of this
Indenture.
"GUARANTEE AGREEMENT" means the Guarantee Agreement substantially in the
form attached hereto as Annex C, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities of any
series, in each case as amended from time to time.
"HOLDER" means a Person in whose name a Security is registered in the
Securities Register.
"INDENTURE" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof or one or more
Officers' Certificates delivered pursuant to Section 3.1 and shall include the
terms of each particular series of Securities established as contemplated by
Section 3.1.
"INTEREST PAYMENT DATE" means as to each series of Securities the Stated
Maturity of an installment of interest on such Securities.
"INVESTMENT COMPANY EVENT" means, in respect of a PCC Trust, the receipt by
a PCC Trust of an Opinion of Counsel, rendered by a law firm experienced in such
matters, to the effect that, as a result of change in law or regulation or a
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, such PCC Trust is or
will be considered an "investment company" that is required to be registered
under the 1940 Act, which change becomes effective on or after the date of
original issuance of the Preferred Securities of such PCC Trust.
5
<PAGE>
"JUNIOR SUBORDINATED PAYMENT" has the meaning specified in Section 13.2.
"MATURITY" when used with respect to any Security means the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"NOTICE OF DEFAULT" means a written notice of the kind specified in Section
5.1(3).
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the
Board of Directors, a Vice Chairman of the Board of Directors, the President or
a Vice President, and by the Chief Financial Officer, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"ORIGINAL ISSUE DATE" means the date of issuance specified as such in each
Security.
"OUTSTANDING" means, when used in reference to any Securities, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent in trust for the
Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented
that any such Securities are held by Holders in whose hands such Securities are
valid, binding and legal obligations of the Company; PROVIDED, HOWEVER, that in
determining whether the Holders of the requisite principal amount of Outstanding
Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor. Upon the written request of the Trustee, the
Company shall furnish to the Trustee promptly an Officers' Certificate listing
and identifying all Securities, if any, known by the Company to be owned or held
by or for the account of the Company, or any other obligor on the Securities or
any Affiliate of the Company
6
<PAGE>
or such obligor, and, subject to the provisions of Section 6.1, the Trustee
shall be entitled to accept such Officers' Certificate as conclusive evidence of
the facts therein set forth and of the fact that all Securities not listed
therein are Outstanding for the purpose of any such determination.
"PAYING AGENT" means the Trustee or any Person authorized by the Company to
pay) the principal of or interest on any Securities on behalf of the Company.
"PERSON" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"PLACE OF PAYMENT" means, with respect to the Securities of any series, the
place or places where the principal of (and premium, if any) and interest on the
Securities of such series are payable pursuant to Sections 3.1 and 3.11.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"PREFERRED SECURITIES" has the meaning specified in the first recital of
this Indenture.
"PROCEEDING" has the meaning specified in Section 13.2.
"PROPERTY TRUSTEE" means, in respect of any PCC Trust, the commercial bank
or trust company identified as the "Property Trustee" in the related Trust
Agreement, solely in its capacity as Property Trustee of such PCC Trust under
such Trust Agreement and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as
therein provided.
"REDEMPTION DATE," when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"REDEMPTION PRICE," when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of a series, (i) in the case
of Securities of a series represented by one or more Global Securities, the
Business Day next preceding such Interest Payment Date and (ii) in the case of
Securities of a series not represented by one or more Global Securities, the
date which is fifteen days next preceding such Interest Payment Date (whether or
not a Business Day).
7
<PAGE>
"RESPONSIBLE OFFICER" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"SECURITIES" or "SECURITY" means any debt securities or debt security, as
the case may be, authenticated and delivered under this Indenture.
"SECURITIES REGISTER" and "SECURITIES REGISTRAR" have the respective
meanings specified in Section 3.5.
"SENIOR AND SUBORDINATED DEBT" means the principal of (and premium, if any)
and interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Company, whether incurred on or prior to the date of this Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Securities, PROVIDED,
HOWEVER, that Senior and Subordinated Debt shall not be deemed to include (a)
any Debt of the Company which, when incurred and without respect to any election
under Section 1111(b) of the Bankruptcy Reform Act of 1978, as amended, was
without recourse to the Company, (b) any Debt of the Company to any of its
Subsidiaries, (c) Debt to any employee of the Company, and (d) any Securities.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"STATED MATURITY" when used with respect to any Security or any installment
of principal thereof or interest thereon means the date specified pursuant to
the terms of such Security as the date on which the principal of such Security
or such installment of interest is due and payable, in the case of such
principal, as such date may be shortened or extended as provided pursuant to the
terms of such Security and this Indenture.
"SUBSIDIARY" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For purposes of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.
"TAX EVENT" means the receipt by the Company and the PCC Trust of an
Opinion of Counsel (as defined in the relevant PCC Trust Agreement) experienced
in such matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such prospective change,
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities of such PCC Trust, there is more than an insubstantial risk
that (i) such PCC
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<PAGE>
Trust is, or will be within 90 days of the date of such Opinion of Counsel,
subject to United States Federal income tax with respect to income received or
accrued on the corresponding series of Securities, (ii) interest payable by the
Company on such corresponding series of Securities is not, or within 90 days of
the date of such Opinion of Counsel, will not be, deductible by the Company, in
whole or in part, for United States Federal income tax purposes or (iii) such
PCC Trust is, or will be within 90 days of the date of such Opinion of Counsel,
subject to more than a DE MINIMIS amount of other taxes, duties or other
governmental charges.
"TRUST" has the meaning specified in the first recital of this Indenture.
"TRUST AGREEMENT" means the Trust Agreement substantially in the form
attached hereto as Annex A, as amended by the form of Amended and Restated Trust
Agreement substantially in the form attached hereto as Annex B, or substantially
in such form as may be specified as contemplated by Section 3.1 with respect to
the Securities of any series, in each case as amended from time to time.
"TRUSTEE" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder and, if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"TRUST SECURITIES" has the meaning specified in the first recital of this
Indenture.
"VICE PRESIDENT" when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
Section 1.2. COMPLIANCE CERTIFICATE AND OPINIONS.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with which
constitute a condition precedent), if any, have been complied with, except that
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
9
<PAGE>
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.5) shall include:
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.3. FORMS OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4. ACTS OF HOLDERS.
(A) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given to or taken by Holders
may be embodied in and
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evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by an agent or proxy duly appointed in writing; and,
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments is or are delivered to the
Trustee, and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(B) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(C) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(D) The ownership of Securities shall be proved by the Securities
Register.
(E) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security 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 Company in reliance thereon,
whether or not notation of such action is made upon such Security.
(F) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, PROVIDED that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, PROVIDED that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be
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canceled and of no effect), and nothing in this paragraph shall be construed to
render ineffective any action taken by Holders of the requisite principal amount
of Outstanding Securities of the relevant series on the date such action is
taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2) or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date, PROVIDED that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day, PROVIDED that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 10.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
(G) Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
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Section 1.5. NOTICES, ETC. TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Preferred Securities or the
Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
office, or
(2) the Company by the Trustee, any Holder or any holder of Preferred
Securities shall be sufficient for every purpose (except as otherwise provided
in Section 5.1) hereunder if in writing and mailed, first class, postage
prepaid, to the Company, addressed to it at the address of its principal office
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
Section 1.6. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. 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.
Section 1.7. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture
Act through operation of Section 318(c) thereof, such imposed duties shall
control.
Section 1.8. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
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Section 1.9. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 1.10. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, the Holders of Senior and Subordinated Debt, the Holders of the
Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9,
5.11, 5.13, 9.1 and 9.2, the holders of Preferred Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section 1.12. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of California, except that the immunities
and standard of care of the Trustee shall be governed by Delaware law.
Section 1.13. NON-BUSINESS DAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day (and no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, until such 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).
ARTICLE II
SECURITY FORMS
Section 2.1. FORMS GENERALLY.
The Securities of each series shall be in substantially the forms set forth
in this Article, or in such other form or forms as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions,
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substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with applicable tax laws or the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such securities,
as evidenced by their execution of the Securities. If the form of Securities of
any series is established by action taken pursuant to a Board Resolution, a copy
of an appropriate record of such action shall be certified by the Secretary or
an Assistant Secretary of the Company and delivered to the Trustee at or prior
to the delivery of the Company Order contemplated by Section 3.3 with respect to
the authentication and delivery of such Securities.
The Trustee's certificates of authentication shall be substantially in the
form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
Section 2.2. FORM OF FACE OF SECURITY.
PACIFIC CREST CAPITAL, INC.
__% JUNIOR SUBORDINATED DEBENTURE DUE ___________
Registered Principal Amount:
No. CUSIP No.:
PACIFIC CREST CAPITAL, INC., a corporation organized and existing under the
laws of Delaware (hereinafter called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to __________, or registered assigns, the
principal sum of $_______ Dollars on ________; provided that the Company may
shorten the Stated Maturity of the principal of this Security to a date not
earlier than ________. The Company further promises to pay interest on said
principal sum from ________ or from the most recent interest payment date (each
such date, an "Interest Payment Date") on which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
the last day of _____ and _____ of each year commencing ________ at the rate of
____% per annum, until the principal hereof shall have become due and payable,
plus Additional Interest, if any, until the principal hereof is paid or duly
provided for or made available for payment and on any overdue principal and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
rate of ____% per
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annum, compounded quarterly. The amount of interest payable for any period
shall be computed on the basis of twelve 30-day months and a 360-day year. The
amount of interest payable for any partial period shall be computed on the basis
of the number of days elapsed in a 360-day year of twelve 30-day months. In the
event that any date on which interest is payable on this Security is not a
Business Day, then a payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), with the same force and effect as
if made on the date the payment was originally payable. A "Business Day" shall
mean any day other than a Saturday or Sunday a day on which banking institutions
in the State of California are authorized or required by law or executive order
to remain closed or on a day on which the Corporate Trust Office of the Trustee,
or the principal office of the Property Trustee under the Trust Agreement
(hereinafter referred to) for [NAME OF TRUST] is closed for business. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
installment, which shall be [INSERT RECORD DATE] next preceding such Interest
Payment Date. Any such interest installment not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than ____ days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
[IF APPLICABLE INSERT--So long as no Event of Default has occurred and is
continuing, the Company shall have the right at any time during the term of this
Security to defer payment of interest on this Security, at any time or from time
to time, for up to 20 consecutive quarterly interest payment periods with
respect to each deferral period (each an "EXTENSION PERIOD"), (during which
Extension Periods the Company shall have the right to make partial payments of
interest on any Interest Payment Date, and at the end of which the Company shall
pay all interest then accrued and unpaid (together with Additional Interest
thereon to the extent permitted by applicable law)); PROVIDED, HOWEVER, that no
Extension Period shall extend beyond the Stated Maturity of the principal of
this Security; PROVIDED, FURTHER, that during any such Extension Period, the
Company shall not, and shall not permit any Subsidiary of the Company to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (which includes common and preferred stock), or (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt security of the Company (including Securities issued by the Company
pursuant to the Indenture other than the Securities represented by this
certificate) that ranks PARI PASSU with or junior in interest to this Security,
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any Subsidiaries of the Company (if such guarantee
ranks PARI PASSU in all respects with or junior in interest to this Security
(other than (a) dividends or distributions in capital stock of the Company
(which includes common and preferred stock), (b)any
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declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the PCC Guarantee related to the Preferred Securities issued by
[NAME OF TRUST], and (d) purchases of Common Stock related to the issuance of
Common Stock or rights under any of the Company's benefit plans for its
directors, officers or employees or related to the issuance of common stock (or
securities convertible into or exchangeable for common stock) or (iv) redeem,
purchase or acquire less than all of the Securities of this series or any of the
Preferred Securities. Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period, PROVIDED that such
extension does not cause such Extension Period to exceed ___ consecutive
interest payment periods or to extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and upon the payment of all amounts
then due on any Interest Payment Date, and subject to the foregoing limitation,
the Company may elect to begin a new Extension Period. No interest shall be due
and payable during an Extension Period except at the end thereof. The Company
shall give the Trustee, the Property Trustee and the Administrative Trustees of
[NAME OF TRUST] notice of its election to begin any Extension Period at least
___ Business Days prior to the earlier of (i) the date on which Distributions on
the Preferred Securities would be payable except for the election to begin such
Extension Period, or (ii) the date the Administrative Trustees are required to
give notice to the New York Stock Exchange, the Nasdaq National Market or other
applicable stock exchange or automated quotation system on which the Preferred
Securities are then listed or quoted or to holders of such Preferred Securities
of the record date or (iii) the date such Distributions are payable, but in any
event not less than ___ Business Days prior to such record date. The Trustee
shall give notice of the Company's election to begin a new Extension Period to
the holders of the Preferred Securities. There is no limitation on the number
of times that the Company may elect to begin an Extension Period.]
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee or at the office of
such paying agent or paying agents as the Company may designate from time to
time, maintained for that purpose in the United States, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; PROVIDED, HOWEVER, that at the option of
the Company payment of interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Securities
Register or (ii) by transfer to an account maintained by the person entitled
thereto, in immediately available funds, at such place and to such account as
may be designated by the Person entitled thereto as specified in the Securities
Register.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, unsecured and will rank junior and subordinate and subject in
right of payments to the prior payment in full of all Senior and Subordinated
Debt, and this Security is issued subject to the provisions of the Indenture
with respect thereto. Each Holder of this Security, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his behalf to take such actions as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes. Each Holder hereof, by his
acceptance hereof, waives all notice of the acceptance of the subordination
provisions contained
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herein and in the Indenture by each holder of Senior and Subordinated Debt,
whether now outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
PACIFIC CREST CAPITAL, INC.
By:
---------------------------
[PRESIDENT OR VICE PRESIDENT]
Attest:
- ------------------------------
[SECRETARY OR ASSISTANT SECRETARY]
Section 2.3. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Junior Subordinated Indenture, dated as of ________, 1997 (herein
called the "INDENTURE"), between the Company and __________ as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Trustee, the Company and the Holders of
the Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $_________.
All terms used in this Security that are defined in the Indenture and in
the Trust Agreement, dated as of _____________, ____, as amended (the "Trust
Agreement"), for [INSERT NAME OF TRUST] among Pacific Crest Capital, Inc., as
Depositor, and the Trustees named therein, shall have the meanings assigned to
them in the Indenture or the Trust Agreement, as the case may be.
[IF APPLICABLE, INSERT--The Company may at any time, at its option, on or
after ________, and subject to the terms and conditions of Article XI of the
Indenture], redeem this Security [in
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whole at any time] [or in part from time to time], without premium or penalty,
at a redemption price equal to [INSERT REDEMPTION PRICE] to the Redemption
Date.]
[IF APPLICABLE, INSERT--Upon the occurrence and during the continuation of
a Tax Event, Investment Company Event or Capital Treatment Event in respect of a
PCC Trust, the Company may, at its option, at any time within 90 days of the
occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event redeem this Security, [IF APPLICABLE, INSERT--in whole but not in part],
subject to the provisions of Section 11.7 and the other provisions of Article XI
of the Indenture, at a redemption price equal to [INSERT REDEMPTION PRICE] to
the Redemption Date.]
[IF APPLICABLE, INSERT--In the event of redemption of this Security in part
only, a new Security or Securities of this series for the portion hereof not
redeemed will be issued in the name of the Holder hereof upon the cancellation
hereof.]
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
[IF THE SECURITY IS NOT A DISCOUNT SECURITY,--As provided in and subject to
the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of this series may declare the
principal amount of all the Securities of this series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), PROVIDED that, in the case of the Securities of this series issued
to a PCC Trust, if upon an Event of Default, the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities of this series
fails to declare the principal of all the Securities of this series to be
immediately due and payable, the holders of at least 25% in aggregate
Liquidation Amount of the Preferred Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee; and upon any such
declaration the principal amount of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment
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of principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture.]
[IF THE SECURITY IS A DISCOUNT SECURITY,--As provided in and subject to the
provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than such portion
of the principal amount as may be specified in the terms of this series may
declare an amount of principal of the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Securities of this
series issued to a PCC Trust, if upon an Event of Default, the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of this series fails to declare the principal of all the Securities of this
series to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the Preferred Securities then outstanding shall
have such right by a notice in writing to the Company and the Trustee. Such
amount shall be equal to [INSERT FORMULA FOR DETERMINING THE AMOUNT]. Upon any
such declaration, such amount of the principal of and the accrued interest
(including any Additional Interest) on all the Securities of this series shall
become immediately due and payable, provided that the payment of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the Indenture. Upon
payment (i) of the amount of principal so declared due and payable and (ii) of
interest on any overdue principal and overdue interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Company's obligations in respect of the payment of the principal of and
interest, if any, on this Security shall terminate.]
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Securities Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company maintained under Section 10.2 of the Indenture duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
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The Securities of this series are issuable only in registered form without
coupons in denominations of minimum denominations of $10 and any integral
multiples of $10 in excess thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of such series
of a different authorized denomination, as requested by the Holder surrendering
the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
Section 2.4. ADDITIONAL PROVISIONS REQUIRED IN GLOBAL SECURITY.
Any Global Security issued hereunder shall, in addition to the provisions
contained in Sections 2.2 and 2.3, bear a legend in substantially the following
form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY."
Section 2.5. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
as Trustee
By:
------------------------------
Authorized Officer
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ARTICLE III
THE SECURITIES
Section 3.1. TITLE AND TERMS.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate (such Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of a series:
(A) the title of the securities of such series, which shall distinguish
the Securities of the series from all other Securities;
(B) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder); PROVIDED, HOWEVER, that the authorized
aggregate principal amount of such series may be increased above such amount by
a Board Resolution to such effect;
(C) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination thereof;
(D) the rate or rates, if any, at which the Securities of such series
shall bear interest, if any, the rate or rates and extent to which Additional
Interest, if any, shall be payable in respect of any Securities of such series,
the Interest Payment Dates on which such interest shall be payable, the right,
pursuant to Section 3.11 or as otherwise set forth therein, of the Company to
defer or extend an Interest Payment Date, and the Regular Record Date for the
interest payable on any Interest Payment Date or the method by which any of the
foregoing shall be determined;
(E) the place or places where the principal of (and premium, if any) and
interest on the Securities of such series shall be payable, the place or places
where the Securities of such series may be presented for registration of
transfer or exchange, and the place or places where notices and demands to or
upon the Company in respect of the Securities of such series may be made;
(F) the period or periods within or the date or dates on which, if any,
the price or prices at which and the terms and conditions upon which the
Securities of such series may be redeemed, in whole or in part, at the option of
the Company;
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(G) the obligation or the right, if any, of the Company to prepay, repay
or purchase the Securities of such series pursuant to any sinking fund,
amortization or analogous provisions, or at the option of a Holder thereof, and
the period or periods within which, the price or prices at which, the currency
or currencies (including currency unit or units) in which and the other terms
and conditions upon which Securities of the series shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(H) the denominations in which any Securities of such series shall be
issuable, if other than denominations of $10 and any integral multiples of $10
in excess thereof;
(I) if other than Dollars, the currency or currencies (including currency
unit or units) in which the principal of (and premium, if any) and interest, if
any, on the Securities of the series shall be payable, or in which the
Securities of the series shall be denominated;
(J) the additions, modifications or deletions, if any, in the Events of
Default or covenants of the Company set forth herein with respect to the
Securities of such series;
(K) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(L) the additions or changes, if any, to this Indenture with respect to
the Securities of such series as shall be necessary to permit or facilitate the
issuance of the Securities of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;
(M) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Securities of such series or the manner
in which such amounts will be determined;
(N) whether the Securities of the series, or any portion thereof, shall
initially be issuable in the form of a temporary Global Security representing
all or such portion of the Securities of such series and provisions for the
exchange of such temporary Global Security for definitive Securities of such
series;
(O) if applicable, that any Securities of the series shall be issuable in
whole or in part in the form of one or more Global Securities and, in such case,
the respective Depositaries for such Global Securities, the form of any legend
or legends which shall be borne by any such Global Security in addition to or in
lieu of that set forth in Section 2.4 and any circumstances in addition to or in
lieu of those set forth in Section 3.5 in which any such Global Security may be
exchanged in whole or in part for Securities registered, and any transfer of
such Global Security in whole or in part may be registered, in the name or names
of Persons other than the Depositary for such Global Security or a nominee
thereof;
(P) the appointment of any Paying Agent or Agents for the Securities of
such series;
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(Q) the terms of any right to convert or exchange Securities of such
series into any other securities or property of the Company, and the additions
or changes, if any, to this Indenture with respect to the Securities of such
series to permit or facilitate such conversion or exchange;
(R) the form or forms of the Trust Agreement, Amended and Restated Trust
Agreement and Guarantee Agreement, if different from the forms attached hereto
as Annexes A, B and C, respectively;
(S) the relative degree, if any, to which the Securities of the series
shall be senior to or be subordinated to other series of Securities in right of
payment, whether such other series of Securities are Outstanding or not; and
(T) any other terms of the Securities of such series (which terms shall
not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided herein or in or pursuant
to such Board Resolution and set forth in such Officers' Certificate or in any
such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall be subordinated in right of payment to Senior and
Subordinated Debt as provided in Article XIII.
Section 3.2. DENOMINATIONS.
The Securities of each series shall be in registered form without coupons
and shall be issuable in minimum denominations of $10 and integral multiples of
$10 in excess thereof, unless otherwise specified as contemplated by Section
3.1.
Section 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its President
or one of its Vice Presidents under its corporate seal reproduced or impressed
thereon and attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
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time after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or more
Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 2.1, that such
form has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the
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foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 3.9, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
Section 3.4. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any denomination, substantially of the tenor of the
definitive Securities of such series in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of such series to be prepared without unreasonable delay.
After the preparation of definitive Securities, the temporary Securities shall
be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for that purpose
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more definitive Securities
of the same series of authorized denominations having the same Original Issue
Date and Stated Maturity and having the same terms as such temporary Securities.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
Section 3.5. REGISTRATION, TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and of
transfers of Securities. Such register is herein sometimes referred to as the
"Securities Register." The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the office
or agency of the Company designated for that purpose the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of the same series of any
authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any securities are so surrendered for exchange,
the
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Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities shall be
the valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall (if
so required by the Company or the Securities Registrar) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.
No service charge shall be made to a Holder for any transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for such
Global Security or a nominee thereof and delivered to such Depositary
or a nominee thereof or custodian therefor, and each such Global
Security shall constitute a single Security for all purposes of this
Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
for such Global Security or a nominee thereof unless (A) such
Depositary (i) has notified the Company that it is unwilling or unable
to continue as Depositary for such Global Security or (ii) has ceased
to be a clearing agency registered under the Exchange Act at a time
when the Depositary is required to be so registered to act as
depositary, in each case unless the Company has approved a successor
Depositary within 90 days, (B) there shall have occurred and be
continuing an Event of Default with respect to such Global Security,
(C) the Company in its sole discretion determines that such Global
Security will be so exchangeable or transferable or (D) there shall
exist such circumstances, if any, in addition to or in lieu of the
foregoing as have been specified for this purpose as contemplated by
Section 3.1.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a
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Global Security or any portion thereof shall be registered in such names as
the Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security or
any portion thereof, whether pursuant to this Section, Section 3.4,
3.6, 9.6 or 11.6 or otherwise, shall be authenticated and delivered in
the form of, and shall be, a Global Security, unless such Security is
registered in the name of a Person other than the Depositary for such
Global Security or a nominee thereof.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any portion
thereof not to be redeemed.
Section 3.6. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to save
each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same issue
and series of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity, and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security, and
(ii) such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon its request the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security, a new Security of the same issue and
series of like tenor and principal amount, having the same Original Issue Date
and Stated Maturity as such destroyed, lost or stolen Security, and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or
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not the destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security of any series which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date, shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
in respect of Securities of such series, except that, unless otherwise provided
in the Securities of such series, interest payable on the Stated Maturity of the
principal of a Security shall be paid to the Person to whom principal is paid.
The initial payment of interest on any Security of any series which is issued
between a Regular Record Date and the related Interest Payment Date shall be
payable as provided in such Security or in the Board Resolution pursuant to
Section 3.1 with respect to the related series of Securities.
Any interest on any Security which is payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series in respect of which
interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon, the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first class, postage prepaid, to each Holder of a
Security of such series at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record Date.
The Trustee may, in its
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discretion, in the name and at the expense of the Company, cause a similar
notice to be published at least once in a newspaper, customarily published in
the English language on each Business Day and of general circulation in the
state of California, but such publication shall not be a condition precedent to
the establishment of such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in
whose names the Securities of such series (or their respective Predecessor
Securities) are registered on such Special Record Date and shall no longer be
payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of the series in respect of which interest is in default
may be listed and, upon such notice as may be required by such exchange (or by
the Trustee if the Securities are not listed), if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause, such
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.7, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
Section 3.8. PERSONS DEEMED OWNERS.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.7) any interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 3.9. CANCELLATION.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities shall be destroyed by the
Trustee and the Trustee shall deliver to the Company a certificate of such
destruction.
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Section 3.10. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 3.1 for Securities
of any series, interest on the Securities of each series for any period shall be
computed on the basis of a 360-day year of twelve 30-day months and interest on
the Securities of each series for any partial period shall be computed on the
basis of the number of days elapsed in a 360-day year of twelve 30-day months.
Section 3.11. DEFERRALS OF INTEREST PAYMENT DATES.
If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, so long as no Event of Default has
occurred and is continuing, the Company shall have the right, at any time during
the term of such series, from time to time to defer the payment of interest on
such Securities for such period or periods as may be specified as contemplated
by Section 3.1 (each, an "EXTENSION PERIOD") during which Extension Periods the
Company shall have the right to make partial payments of interest on any
Interest Payment Date. No Extension Period shall end on a date other than an
Interest Payment Date. At the end of any such Extension Period the Company shall
pay all interest then accrued and unpaid on the Securities (together with
Additional Interest thereon, if any, at the rate specified for the Securities of
such series to the extent permitted by applicable law); PROVIDED, HOWEVER, that
no Extension Period shall extend beyond the Stated Maturity of the principal of
the Securities of such series; PROVIDED, FURTHER, that during any such Extension
Period, the Company shall not, and shall not permit any Subsidiary to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (which includes common and preferred stock), (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company (including Securities other than the
Securities of such series) that ranks PARI PASSU in all respects with or junior
in interest to the Securities of such series or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any Subsidiary
of the Company if such guarantee rank PARI PASSU in all respects with or junior
in interest to the securities of such series (other than (a) dividends or
distributions in capital stock of the Company (which includes common and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the redemption or repurchase
of any such rights pursuant thereto, (c) payments under the PCC Guarantee
related to the Preferred Securities issued by the PCC Trust holding Securities
of such series, and (d) purchases of Common Stock related to the issuance of
Common Stock or rights under any of the Company's benefit plans for its
directors, officers or employees) or (iii) redeem, purchase or acquire less than
all of the Securities of such series or any of the Preferred Securities. Prior
to the termination of any such Extension Period, the Company may further extend
such Extension Period, PROVIDED that such extension does not cause such
Extension Period to extend beyond the Stated Maturity of the principal of such
Securities. Upon termination of any Extension Period and upon the payment of all
accrued and unpaid interest and any Additional Interest then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period, subject to
the above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company shall give the Trustee, the
Property Trustee and the Administrative Trustees of the PCC Trust holding
Securities of such series notice of its election of any Extension Period (or an
extension thereof) at
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least one Business Day prior to the earlier of (i) the next succeeding date on
which Distributions on the Preferred Securities of such PCC Trust would be
payable except for the election to begin or extend such Extension Period or (ii)
the date the Administrative Trustees are required to give notice to the New York
Stock Exchange, the Nasdaq National Market or other applicable stock exchange or
automated quotation system on which the Preferred Securities are then listed or
quoted or to holders of such Preferred Securities of the record date or (iii)
the date such Distributions are payable, but in any event not less than one
Business Day prior to such record date. The Trustee shall give notice of the
Company's election to begin a new Extension Period to the holders of the
Securities. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
The Trustee shall promptly give notice of the Company's election to begin
any such Extension Period to the Holders of the Outstanding Securities of such
series.
Section 3.12. RIGHT OF SET-OFF.
With respect to the Securities of a series issued to a PCC Trust,
notwithstanding anything to the contrary in the Indenture, the Company shall
have the right to set-off any payment it is otherwise required to make
thereunder in respect of any such Security to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee Agreement relating to such Security or under Section
5.8 of the Indenture.
Section 3.13. AGREED TAX TREATMENT.
Each Security issued hereunder shall provide that the Company and, by its
acceptance of a Security or a beneficial interest therein, the Holder of, and
any Person that acquires a beneficial interest in, such Security agree that for
United States Federal, state and local tax purposes it is intended that such
Security constitute indebtedness.
Section 3.14. SHORTENING OF STATED MATURITY.
If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, the Company shall have the right to
shorten the Stated Maturity of the principal of the Securities of such series at
any time to any date not earlier than the first date on which the Company has
the right to redeem the Securities of such series.
Section 3.15. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year of the date of deposit, or
(iii)are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of Clause (B) (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose an amount in the currency or currencies in which the Securities of
such series are payable sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest (including any Additional
Interest) to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
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(3) the Company 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 Company to the Trustee under Section 6.7, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 10.3 shall survive.
Section 4.2. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for the payment of which such money or obligations have been
deposited with or received by the Trustee.
ARTICLE V
REMEDIES
Section 5.1. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to the Securities of
any series, 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 Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension Period); or
(2) default in the payment of the principal of (or premium, if any, on)
any Security of that series at its Maturity; or
(3) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Company in this Indenture (other than a covenant or
warranty a default in the performance of which or the breach of which is
elsewhere in this Section 5.1 specifically dealt with), and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by
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the Holders of at least 25% in principal amount of the Outstanding Securities of
that series a written notice specifying such default or breach and requiring it
to be remedied; or
(4) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 90 consecutive days; or
(5) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit for creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due and
its willingness to be adjudicated a bankrupt, or the taking of corporate action
by the Company in furtherance of any such action; or
(6) any other Event of Default provided with respect to Securities of that
series.
Section 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in Section
5.1(4) or 5.1(5)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), PROVIDED that, in the case of
the Securities of a series issued to a PCC Trust, if, upon an Event of Default,
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series fail to declare the principal of all the
Securities of that series to be immediately due and payable, the holders of at
least 25% in aggregate liquidation amount of the corresponding series of
Preferred Securities then outstanding shall have such right by a notice in
writing to the Company and the Trustee; and upon any such declaration such
principal amount (or specified portion thereof) of and the accrued interest
(including any Additional Interest) on all the Securities of such series shall
become immediately due and payable. Payment of principal and interest (including
any Additional Interest) on such Securities shall remain subordinated to the
extent provided in Article XIII notwithstanding that such amount shall become
immediately due and payable as herein provided. If an Event of Default specified
in
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Section 5.1(4) or 5.1(5) with respect to Securities of any series at the time
Outstanding occurs, the principal amount of all the Securities of that series
(or, if the Securities of that series are Discount Securities, such portion of
the principal amount of such Securities as may be specified by the terms of that
series) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay:
(A) all overdue installments of interest (including any Additional
Interest) on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; and
(2) all Events of Default with respect to Securities of that series, other
than the non-payment of the principal of Securities of that series which has
become due solely by such acceleration, have been cured or waived as provided in
Section 5.13.
In the case of Securities of a series issued to a PCC Trust, the holders of
a majority in aggregate Liquidation Amount (as defined in the Trust Agreement
under which such PCC Trust is formed) of the related series of Preferred
Securities issued by such PCC Trust shall also have the right to rescind and
annul such declaration and its consequences by written notice to the Company and
the Trustee subject to the satisfaction of the conditions set forth in Clauses
(1) and (2) above of this Section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if:
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(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest becomes
due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (and premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest); and, in addition thereto, all amounts owing the Trustee
under Section 6.7.
If the Company 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 Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 5.4. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the Securities
of any series shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal (and premium, if
any) or interest (including any Additional Interest)) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest (including any Additional Interest) owing and
unpaid in respect to the Securities and to file such other papers or documents
as may be necessary or advisable and to take any and all actions as are
authorized under the Trust Indenture Act in order to have the claims of the
Holders and any predecessor to the Trustee under Section 6.7 allowed in any such
judicial proceedings; and
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(ii) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator, sequestrator
(or other similar official) in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee for distribution in
accordance with Section 5.6, and in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due to it and any predecessor Trustee under Section 6.7.
Nothing herein 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 Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
Section 5.5. TRUSTEE MAY ENFORCE CLAIM WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of all the amounts owing the Trustee and any predecessor Trustee
under Section 6.7, its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.
Section 5.6. APPLICATION OF MONEY COLLECTED.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts then due
and unpaid upon such series of Securities for principal (and premium, if any)
and interest (including any Additional Interest), in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such series
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of Securities for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
Section 5.7. LIMITATION ON SUITS.
No Holder of any Securities of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request:
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
Section 5.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST; DIRECT ACTION BY HOLDERS OF PREFERRED SECURITIES.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section 3.7)
interest (including any Additional Interest) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Securities of a series issued to a PCC Trust, any holder
of the corresponding series of Preferred Securities issued by such PCC Trust
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shall have the right, upon the occurrence of an Event of Default described in
Section 5.1(1) or 5.1(2), to institute a suit directly against the Company for
enforcement of payment to such holder of principal of (premium, if any) and
(subject to Section 3.7) interest (including any Additional Interest) on the
Securities having a principal amount equal to the aggregate Liquidation Amount
(as defined in the Trust Agreement under which such PCC Trust is formed) of such
Preferred Securities of the corresponding series held by such holder.
Section 5.9. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, any Holder or any holder of Preferred Securities has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, such Holder or such holder of
Preferred Securities, then and in every such case the Company, the Trustee, the
Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, the Holders and the holders of Preferred Securities shall continue as
though no such proceeding had been instituted.
Section 5.10. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of Section 3.6, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee, any Holder of any Security or any
holder of any Preferred Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to
the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Preferred
Securities, as the case may be.
Section 5.12. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any
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remedy available to the Trustee or exercising any trust or power conferred on
the Trustee, with respect to the Securities of such series, PROVIDED that:
(1) such direction shall not be in conflict with any rule of law or with
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have the
right to decline to follow such direction if a Responsible Officer or Officers
of the Trustee shall, in good faith, determine that the proceeding so directed
would be unjustly prejudicial to the Holders not joining in any such direction
or would involve the Trustee in personal liability.
Section 5.13. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series and, in the case of any Securities of a
series issued to a PCC Trust, the holders of Preferred Securities issued by such
PCC Trust may waive any past default hereunder and its consequences with respect
to such series except a default:
(1) in the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article IX
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities of such series or, in the case of a waiver by holders of Preferred
Securities issued by such PCC Trust, by all holders of Preferred Securities
issued by such PCC Trust.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 5.14. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
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
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Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities of any series, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest (including any Additional
Interest) on any Security on or after the respective Stated Maturities expressed
in such Security.
Section 5.15. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company 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 Company (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.
ARTICLE VI
THE TRUSTEE
Section 6.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default;
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
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(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
Holders pursuant to Section 5.12 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture with respect
to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(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
6.1.
Section 6.2. NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities of such series; and PROVIDED, FURTHER,
that, in the case of any default of the character specified in Section 5.1(3),
no such notice to Holders of Securities of such series shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section,
the term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
Section 6.3. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 6.1:
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(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, Security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel 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;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
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 6.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of the Securities or the proceeds thereof.
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Section 6.5. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Securities
Registrar or such other agent.
Section 6.6. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
Section 6.7. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time compensation for all services
rendered by it hereunder in such amounts as the Company and the Trustee shall
agree from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) incurred without
negligence or bad faith, arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall survive the termination of this
Agreement.
To secure the Company's payment obligations in this Section 6.7, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to
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constitute expenses of administration under the Bankruptcy Reform Act of 1978 or
any successor statute.
Section 6.8. DISQUALIFICATION; CONFLICTING INTERESTS.
The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of said Section 301(b).
Section 6.9. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal, State, Territorial or District
of Columbia authority, or
(b) a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to a
rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.9, 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
6.9, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article VI. Neither the Company nor any Person directly or
indirectly controlling, controlled by or under common control with the Company
shall serve as Trustee for the Securities of any series issued hereunder.
Section 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
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(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed 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 Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to all Securities, or (ii)
subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee with respect to the Securities of
that or those series. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee with respect to the Securities of such series and supersede
the successor Trustee appointed by the Company. If no successor Trustee with
respect to the Securities of any series shall have been so appointed by the
Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, subject to Section 5.14, on behalf of himself and all others
similarly situated, petition any court of
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competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities of such series as their names and addresses appear in the
Securities Register. Each notice shall include the name of the successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.
Section 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring
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Trustee shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in paragraph
(a) or (b) of this Section 6.11, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article VI.
Section 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VI, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
Section 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 6.14. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a
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corporation organized and doing business under the laws of the United States of
America, or of any State or Territory or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section 6.14
the combined capital and surplus of such Authenticating Agent shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section 6.14, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. 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 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all Holders
of Securities of the series with respect to which such Authenticating Agent will
serve. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant to
this Section 6.14, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
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This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
As Trustee
By:
----------------------------------
As Authenticating Agent
By:
----------------------------------
Authorized Officer
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after January 15 and July 15 in
each year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of January 1 and July 1 of such year, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, EXCLUDING from any such list names and addresses received by the
Trustee in its capacity as Securities Registrar.
Section 7.2. PRESERVATION OF INFORMATION, COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
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(b) The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
Section 7.3. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted no later than July 15 in each calendar year,
commencing with the first July 15 after the first issuance of Securities under
this Indenture.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed and also with the Commission. The Company will notify the
Trustee when any Securities are listed on any stock exchange.
Section 7.4. REPORTS BY COMPANY.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall continue to file with the Commission and provide the
Trustee with the annual reports and the information, documents and other reports
which are specified in Sections 13 and 15(d) of the Exchange Act. The Company
also shall comply with the other provisions of Trust Indenture Act Section
314(a).
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ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the principal of (and premium,
if any) and interest (including any Additional Interest) on all the Securities
and the performance of every covenant of this Indenture on the part of the
Company 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;
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and any such supplemental indenture comply with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Trustee, subject to Section 6.1,
may rely upon such Officers' Certificate and Opinion of Counsel as conclusive
evidence that such transaction complies with this Section 8.1.
Section 8.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1, the successor corporation formed by such consolidation or into which the
Company 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 Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein; and in the event of any such
conveyance, transfer or lease the Company shall be discharged from all
obligations and covenants under the Indenture and the Securities and may be
dissolved and liquidated.
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Such successor Person may cause to be signed, and may issue either in its
own name or in the name of the Company, any or all of the Securities issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor Person instead
of the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee for authentication pursuant to such provisions and
any Securities which such successor Person thereafter shall cause to be signed
and delivered to the Trustee on its behalf for the purpose pursuant to such
provisions. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form may be made in the Securities thereafter to be
issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, 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,
PROVIDED, HOWEVER, that the form and terms of Securities of any series may be
established by a Board Resolution, as set forth in the Officers' Certificate
delivered to the Trustee pursuant to Section 3.1, without entering into a
supplemental indenture for all purposes hereunder, for any of the following
purposes:
(1) to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company herein and in
the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon the
Company; or
(3) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 or 3.1; or
(4) to add to the covenants of the Company for the benefit of the Holders
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(5) to add any additional Events of Default for the benefit of the Holders
of all or any series of Securities (and if such additional Events of Default are
to be for the benefit of less than all
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series of Securities, stating that such additional Events of Default are
expressly being included solely for the benefit of such series); or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental indenture which is entitled to the benefit of such provision;
or
(7) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this clause (7) shall not
adversely affect the interest of the Holders of Securities of any series in any
material respect or, in the case of the Securities of a series issued to a PCC
Trust and for so long as any of the corresponding series of Preferred Securities
issued by such PCC Trust shall remain outstanding, the holders of such Preferred
Securities; or
(8) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act.
Section 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; PROVIDED, HOWEVER,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) except to the extent permitted by Sections 3.11 or 3.14 or as
otherwise specified as contemplated by Section 2.1 or Section 3.1 with respect
to the deferral of the payment of interest on the Securities of any series or
the shortening of the Stated Maturity of the Securities of any series, change
the Stated Maturity of the principal of, or any installment of interest
(including any Additional Interest) on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or reduce any premium payable
upon the redemption thereof, or reduce the amount of principal of a Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 5.2, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit
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for the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or Section
10.5, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Security affected thereby; or
(4) modify the provisions in Article XIII of this Indenture with respect
to the subordination of Outstanding Securities of any series in a manner adverse
to the Holders thereof; PROVIDED, FURTHER, that, in the case of the Securities
of a series issued to a PCC Trust, so long as any of the corresponding series of
Preferred Securities issued by such PCC Trust remains outstanding, (i) no such
amendment shall be made that adversely affects the holders of such Preferred
Securities in any material respect, and no termination of this Indenture shall
occur, and no waiver of any Event of Default or compliance with any covenant
under this Indenture shall be effective, without the prior consent of the
holders of at least a majority of the aggregate liquidation preference of such
Preferred Securities then outstanding unless and until the principal (and
premium, if any) of the Securities of such series and all accrued and, subject
to Section 3.7, unpaid interest (including any Additional Interest) thereon have
been paid in full and (ii) no amendment shall be made to Section 5.8 of this
Indenture that would impair the rights of the holders of Preferred Securities
provided therein without the prior consent of the holders of each Preferred
Security then outstanding unless and until the principal (and premium, if any)
of the Securities of such series and all accrued and (subject to Section 3.7)
unpaid interest (including any Additional Interest) thereon have been paid in
full.
A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Securities or Preferred Securities,
or which modifies the rights of the Holders of Securities or holders of
Preferred Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities or holders of Preferred Securities of any other series.
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 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing or accepting the additional series of Securities created by
any supplemental indenture permitted by this Article or the modifications
thereby of any series of Securities previously created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall
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be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture, and that all conditions precedent have been
complied with. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 9.4. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article IX or
delivery to the Trustee of the Officers' Certificate pursuant to Section 3.1
hereof (which Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
Section 9.5. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article IX and every
Officers' Certificate delivered to the trustee pursuant to Section 3.1 hereof
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX or delivery to the Trustee of
the Officers' Certificate pursuant to Section 3.1 hereof (which Officers'
Certificate shall have the effect of a supplemental indenture for all purposes
hereunder) may, and shall if required by the Company, bear a notation in form
approved by the Company as to any matter provided for in such supplemental
indenture or such Officers' Certificate. If the Company shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Company, to any such supplemental indenture or such Officers's Certificate may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
Section 10.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees for the benefit of each series of
securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of such Securities and this Indenture.
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Section 10.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in each Place of Payment for any series of
Securities, an office or agency where Securities of that series may be presented
or surrendered for payment and an office or agency where Securities of that
series may be surrendered for transfer or exchange and where notices and demands
to or upon the Company in respect of the Securities of that series and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The Company
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company shall fail to maintain
such office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
of such purposes, and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each Place of
Payment for Securities of any series for such purposes. The Company will give
prompt written notice to the Trustee of any such designation and any change in
the location of any such office or agency.
Section 10.3. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to 10:00 a.m. California time on each due date of the principal of or interest
on any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal and premium
(if any) or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section 10.3, that such
Paying Agent will:
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(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest:
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable to it
as a Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest on any Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall
(unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Company Request to the Company,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company 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 state of
California, 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 Company.
Section 10.4. STATEMENT AS TO COMPLIANCE.
The Company shall deliver to the Trustee, within 120 days after the end of
each calendar year of the Company ending after the date hereof, an Officers'
Certificate covering the preceding calendar year, stating whether or not to the
best knowledge of the signers thereof the Company is in default in the
performance, observance or fulfillment of or compliance with any of the terms,
provisions, covenants and conditions of this Indenture, and if the Company shall
be in default,
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specifying all such defaults and the nature and status thereof of which they may
have knowledge. For the purpose of this Section 10.4, compliance shall be
determined without regard to any grace period or requirement of notice provided
pursuant to the terms of this Indenture.
Section 10.5. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any covenant
or condition provided pursuant to Sections 3.1, 9.1(3), or 9.1(4) with respect
to the Securities of any series, if before or after the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company in respect of any such covenant
or condition shall remain in full force and effect.
Section 10.6. ADDITIONAL SUMS.
In the case of the Securities of a series issued to a PCC Trust, so long as
no Event of Default has occurred and is continuing and except as otherwise
specified as contemplated by Section 2.1 or Section 3.1, in the event that (i)
such PCC Trust is the Holder of all of the Outstanding Securities of such
series, (ii) a Tax Event in respect of such PCC Trust shall have occurred and be
continuing and (iii) the Company shall not have (A) redeemed the Securities of
such series pursuant to Section 11.7(b) or (B) terminated such PCC Trust
pursuant to Section 9.2(b) of the related Trust Agreement, the Company shall pay
to such PCC Trust (and its permitted successors or assigns under the related
Trust Agreement) for so long as such PCC Trust (or its permitted successor or
assignee) is the registered holder of any Securities of such series, such
additional amounts as may be necessary in order that the amount of Distributions
(including any Additional Amounts (as defined in such Trust Agreement)) then due
and payable by such PCC Trust on the related Preferred Securities and Common
Securities that at any time remain outstanding in accordance with the terms
thereof shall not be reduced as a result of any Additional Taxes (the
"ADDITIONAL SUMS"). Whenever in this Indenture or the Securities there is a
reference in any context to the payment of principal of or interest on the
Securities, such mention shall be deemed to include mention of the payments of
the Additional Sums provided for in this paragraph to the extent that, in such
context, Additional Sums are, were or would be payable in respect thereof
pursuant to the provisions of this paragraph and express mention of the payment
of Additional Sums (if applicable) in any provisions hereof shall not be
construed as excluding Additional Sums in those provisions hereof where such
express mention is not made; PROVIDED, HOWEVER, that the deferral of the payment
of interest pursuant to Section 3.11 or the Securities shall not defer the
payment of any Additional Sums that may be due and payable.
Section 10.7. ADDITIONAL COVENANTS.
The Company covenants and agrees with each Holder of Securities of any
series that it shall not, and it shall not permit any Subsidiary of the Company
to, (a) declare or pay any dividends or
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distributions on, or redeem purchase, acquire or make a liquidation payment with
respect to, any shares of the Company's capital stock (which includes common and
preferred stock), (b) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Company
(including Securities other than the Securities of such series) that rank PARI
PASSU in all respects with or junior in interest to the Securities of such
series or make any guarantee payments with respect to any guarantee by the
Company of debt securities of any subsidiary of the Company if such guarantee
ranks PARI PASSU in all respects with or junior in interest to the Securities
(other than (i) dividends or distributions in capital stock of the Company
(which includes common and preferred stock), (ii) any declaration of a dividend
in connection with the implementation of a rights plan or the redemption or
repurchase of any such rights pursuant thereto, (iii) payments under the PCC
Guarantee related to the Preferred Securities issued by the PCC Trust holding
Securities of such series, and (iv) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans for
its directors, officers or employees or related to the issuance of Common Stock
(or securities convertible into or exchangeable for common stock) as
consideration in an acquisition transaction) or (c) redeem, purchase or acquire
less than all of the Securities of such series or any of the Preferred
Securities if at such time (a) there shall have occurred an Event of Default
with respect to the Securities of such series (b) if the Securities of such
series are held by a PCC Trust, the Company shall be in default with respect to
its payment of any obligations under the PCC Guarantee relating to the Preferred
Securities issued by such PCC Trust or (c) the Company shall have given notice
of its election to begin an Extension Period with respect to the Securities of
such series as provided herein and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a series
issued to a PCC Trust (i) to maintain directly or indirectly 100% ownership of
the Common Securities of such PCC Trust; PROVIDED, HOWEVER, that any permitted
successor of the Company hereunder may succeed to the Company's ownership of
such Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate
such PCC Trust, except (a) in connection with a distribution of the Securities
of such series to the holders of Trust Securities in liquidation of such PCC
Trust or (b) in connection with certain mergers, consolidations or amalgamations
permitted by the related Trust Agreement and (iii) to use its reasonable
efforts, consistent with the terms and provisions of such Trust Agreement, to
cause such PCC Trust to remain classified as a grantor trust and not an
association taxable as a corporation for United States federal income tax
purposes.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1. APPLICABILITY OF THIS ARTICLE.
Redemption of Securities of any series (whether by operation of a sinking
fund or otherwise) as permitted or required by any form of Security issued
pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that if any provision of
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any such form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of such series shall be
subject to partial redemption only in the amount of $10 or, in the case of the
Securities of a series issued to a PCC Trust, $10, or integral multiples of $10
in excess thereof.
Section 11.2. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be evidenced by
or pursuant to a Board Resolution. In case of any redemption at the election of
the Company of less than all of the Securities of any particular series and
having the same terms, the Company shall, not less than 30 nor more than 60 days
prior to the Redemption Date (unless a shorter notice shall be satisfactory to
the Trustee), notify the Trustee of such date and of the principal amount of
Securities of that series to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities, the Company shall furnish the Trustee
with an Officers' Certificate and an Opinion of Counsel evidencing compliance
with such restriction.
Section 11.3. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series are to be redeemed (unless
all the Securities of such series and of a specified tenor are to be redeemed or
unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of a
portion of the principal amount of any Security of such series, provided that
the portion of the principal amount of any Security not redeemed shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the Securities
selected for partial redemption and the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed. If the
Company shall so direct, Securities registered in the name of the Company, any
Affiliate or any Subsidiary thereof shall not be included in the Securities
selected for redemption.
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Section 11.4. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not later than the thirtieth day, and not earlier than the sixtieth day,
prior to the Redemption Date, to each Holder of Securities to be redeemed, at
the address of such Holder as it appears in the Securities Register.
With respect to Securities of each series to be redeemed, each notice of
redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of such particular series and
having the same terms are to be redeemed, the identification (and, in the case
of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due and
payable upon each such Security or portion thereof, and that interest thereon,
if any, shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered for
payment of the Redemption Price; and
(f) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
Section 11.5. DEPOSIT OF REDEMPTION PRICE.
Prior to 12:00 noon, Eastern time on the Redemption Date specified in the
notice of redemption given as provided in Section 11.4, the Company will deposit
with the Trustee or with one or more Paying Agents (or if the Company is acting
as its own Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and any accrued interest (including Additional Interest) on, all the
Securities which are to be redeemed on that date.
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Section 11.6. PAYMENT OF SECURITIES CALLED FOR REDEMPTION.
If any notice of redemption has been given as provided in Section 11.4, the
Securities or portion of Securities with respect to which such notice has been
given shall become due and payable on the date and at the place or places stated
in such notice at the applicable Redemption Price. On presentation and surrender
of such Securities at a Place of Payment in said notice specified, the said
securities or the specified portions thereof shall be paid and redeemed by the
Company at the applicable Redemption Price, together with accrued interest
(including any Additional Interest) to the Redemption Date; PROVIDED, HOWEVER,
that, unless otherwise specified as contemplated by Section 3.1, installments of
interest whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Company, a new Security or Securities of the same series, of
authorized denominations, in aggregate principal amount equal to the portion of
the Security not redeemed so presented and having the same Original Issue Date,
Stated Maturity and terms. If a Global Security is so surrendered, such new
Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and premium, if any, on such Security
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
Section 11.7. RIGHT OF REDEMPTION OF SECURITIES INITIALLY ISSUED TO A PCC
TRUST.
In the case of the Securities of a series initially issued to a PCC Trust,
except as otherwise specified as contemplated by Section 3.1, the Company, at
its option, may redeem such Securities (i) on or after the date five years after
the Original Issue Date of such Securities, in whole at any time or in part from
time to time, or (ii) upon the occurrence and during the continuation of a Tax
Event, Investment Company Event, or Capital Treatment Event, at any time within
90 days following the occurrence of such Tax Event, Investment Company Event or
Capital Treatment Event in respect of such PCC Trust, in whole (but not in
part), in each case at a Redemption Price equal to 100% of the principal amount
thereof.
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ARTICLE XII
SINKING FUNDS
Section 12.1. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms of
any Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any sinking fund payment in excess of such minimum amount which is
permitted to be made by the terms of such Securities of any series is herein
referred to as an "optional sinking fund payment". If provided for by the terms
of any Securities of any series, the cash amount of any sinking fund payment may
be subject to reduction as provided in Section 12.2. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of such Securities.
Section 12.2. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Company may at its option, at
any time no more than 16 months and no less than 30 days prior to the date on
which such sinking fund payment is due, deliver to the Trustee Securities of
such series (together with the unmatured coupons, if any, appertaining thereto)
theretofore purchased or otherwise acquired by the Company, except Securities of
such series that have been redeemed through the application of mandatory or
optional sinking fund payments pursuant to the terms of the Securities of such
series, accompanied by a Company Order instructing the Trustee to credit such
obligations and stating that the Securities of such series were originally
issued by the Company by way of bona fide sale or other negotiation for value;
provided that the Securities to be so credited have not been previously so
credited. The Securities to be so credited shall be received and credited for
such purpose by the Trustee at the redemption price for such Securities, as
specified in the Securities so to be redeemed, for redemption through operation
of the sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.
Section 12.3. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
3.1) and the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities pursuant to Section 12.2 and will also deliver to the
Trustee any Securities to be so delivered. Such Officers' Certificate shall be
irrevocable and upon its delivery the Company shall be obligated to make the
cash payment
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or payments therein referred to, if any, on or before the succeeding sinking
fund payment date. In the case of the failure of the Company to deliver such
Officers' Certificate (or, as required by this Indenture, the Securities and
coupons, if any, specified in such Officers' Certificate), the sinking fund
payment due on the succeeding sinking fund payment date for such series shall be
paid entirely in cash and shall be sufficient to redeem the principal amount of
the Securities of such series subject to a mandatory sinking fund payment
without the right to deliver or credit securities as provided in Section 12.2
and without the right to make the optional sinking fund payment with respect to
such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in cash
plus any unused balance of any preceding sinking fund payments made with respect
to the Securities of any particular series shall be applied by the Trustee (or
by the Company if the Company is acting as its own Paying Agent) on the sinking
fund payment date on which such payment is made (or, if such payment is made
before a sinking fund payment date, on the sinking fund payment date immediately
following the date of such payment) to the redemption of Securities of such
series at the Redemption Price specified in such Securities with respect to the
sinking fund. Any sinking fund moneys not so applied or allocated by the Trustee
(or, if the Company is acting as its own Paying Agent, segregated and held in
trust by the Company as provided in Section 10.3) for such series and together
with such payment (or such amount so segregated) shall be applied in accordance
with the provisions of this Section 12.3. Any and all sinking fund moneys with
respect to the Securities of any particular series held by the Trustee (or if
the Company is acting as its own Paying Agent, segregated and held in trust as
provided in Section 10.3) on the last sinking fund payment date with respect to
Securities of such series and not held for the payment or redemption of
particular Securities of such series shall be applied by the Trustee (or by the
Company if the Company is acting as its own Paying Agent), together with other
moneys, if necessary, to be deposited (or segregated) sufficient for the
purpose, to the payment of the principal of the Securities of such series at
Maturity. The Trustee shall select the Securities to be redeemed upon such
sinking fund payment date in the manner specified in Section 11.3 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 11.4. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Section 11.6. On or before each sinking fund payment
date, the Company shall pay to the Trustee (or, if the Company is acting as its
own Paying Agent, the Company shall segregate and hold in trust as provided in
Section 10.3) in cash a sum in the currency in which Securities of such series
are payable (except as provided pursuant to Section 3.1) equal to the principal
and any interest accrued to the Redemption Date for Securities or portions
thereof to be redeemed on such sinking fund payment date pursuant to this
Section 12.3.
Neither the Trustee nor the Company shall redeem any Securities of a series
with sinking fund moneys or mail any notice of redemption of Securities of such
series by operation of the sinking fund for such series during the continuance
of a default in payment of interest, if any, on any Securities of such series or
of any Event of Default (other than an Event of Default occurring as a
consequence of this paragraph) with respect to the Securities of such series,
except that if the notice of redemption shall have been provided in accordance
with the provisions hereof, the Trustee (or the Company, if the Company is then
acting as its own Paying Agent) shall redeem such Securities
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if cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Company) for that purpose in accordance with the terms of this
Article XII. Except as aforesaid, any moneys in the sinking fund for such
series at the time when any such default or Event of Default shall occur and any
moneys thereafter paid into such sinking fund shall, during the continuance of
such default or Event of Default, be held as security for the payment of the
Securities and coupons, if any, of such series; provided, however, that in case
such default or Event of Default shall have been cured or waived herein, such
moneys shall thereafter be applied on the next sinking fund payment date for the
Securities of such series on which such moneys may be applied pursuant to the
provisions of this Section 12.3.
ARTICLE XIII
SUBORDINATION OF SECURITIES
Section 13.1. SECURITIES SUBORDINATE TO SENIOR AND SUBORDINATED DEBT.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XIII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
amounts then due and payable in respect of all Senior and Subordinated Debt.
Section 13.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior and
Subordinated Debt shall be entitled to receive payment in full of Allocable
Amounts of such Senior and Subordinated Debt, or provision shall be made for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior and Subordinated Debt, before the Holders of the
Securities are entitled to receive or retain any payment or distribution of any
kind or character, whether in cash, property or securities (including any
payment or distribution which may be payable or deliverable by reason of the
payment of any other Debt of the Company subordinated to the payment of the
Securities, such payment or distribution being hereinafter referred to as a
"Junior Subordinated Payment"), on account of principal of (or premium, if any)
or interest (including any Additional Interest) on the Securities or on account
of the purchase or other acquisition of Securities by the Company or any
Subsidiary and to that end the holders of Senior and Subordinated Debt shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
including any Junior Subordinated Payment, which may be payable or deliverable
in respect of the Securities in any such Proceeding.
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In the event that, notwithstanding the foregoing provisions of this Section
13.2, the Trustee or the Holder of any Security shall have received any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, including any Junior Subordinated Payment, before
all Allocable Amounts of all Senior and Subordinated Debt are paid in full or
payment thereof is provided for in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior and Subordinated Debt, and if such
fact shall, at or prior to the time of such payment or distribution, have been
made known to the Trustee or, as the case may be, such Holder, then and in such
event such payment or distribution shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of assets of the Company
for application to the payment of all Allocable Amounts of all Senior and
Subordinated Debt remaining unpaid, to the extent necessary to pay all Allocable
Amounts of all Senior and Subordinated Debt in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior and
Subordinated Debt.
For purposes of this Article XIII only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior and Subordinated Debt to
substantially the same extent as the Securities are so subordinated as provided
in this Article XIII. The consolidation of the Company with, or the merger of
the Company into, another Person or the liquidation or dissolution of the
Company following the sale of all or substantially all of its properties and
assets as an entirety to another Person upon the terms and conditions set forth
in Article VIII shall not be deemed a Proceeding for the purposes of this
Section 13.2 if the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by sale such properties and
assets as an entirety, as the case may be, shall, as a part of such
consolidation, merger, or sale comply with the conditions set forth in Article
VIII.
Section 13.3. PRIOR PAYMENT TO Senior and Subordinated Debt UPON ACCELERATION
OF SECURITIES.
In the event that any Securities are declared due and payable before their
Stated Maturity, then and in such event the holders of the Senior and
Subordinated Debt outstanding at the time such Securities so become due and
payable shall be entitled to receive payment in full of all Allocable Amounts
due on or in respect of such Senior and Subordinated Debt (including any amounts
due upon acceleration), or provision shall be made for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
and Subordinated Debt, before the Holders of the Securities are entitled to
receive any payment or distribution of any kind or character, whether in cash,
properties or securities (including any Junior Subordinated Payment) by the
Company on account of the principal of (or premium, if any) or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary;
PROVIDED, HOWEVER, that nothing in this Section 13.3 shall prevent the
satisfaction of any sinking fund payment in accordance with this Indenture or as
otherwise specified as contemplated by Section 3.1 for the Securities of any
series by delivering and crediting pursuant
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to Section 12.2 or as otherwise specified as contemplated by Section 3.1 for the
Securities of any series Securities which have been acquired (upon redemption or
otherwise) prior to such declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.3, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 13.3 shall not apply to any payment with
respect to which Section 13.2 would be applicable.
Section 13.4. NO PAYMENT WHEN SENIOR AND SUBORDINATED DEBT IN DEFAULT.
(a) In the event and during the continuation of any default in the payment
of principal of (or premium, if any) or interest on any Senior and Subordinated
Debt, or in the event that any event of default with respect to any Senior and
Subordinated Debt shall have occurred and be continuing and shall have resulted
in such Senior and Subordinated Debt becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist and such acceleration shall have been rescinded or
annulled, or (b) in the event any judicial proceeding shall be pending with
respect to any such default in payment or such event or default, then no payment
or distribution of any kind or character, whether in cash, properties or
securities (including any Junior Subordinated Payment) shall be made by the
Company on account of principal of (or premium, if any) or interest (including
any Additional Interest), if any, on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary, in
each case unless and until all Allocable Amounts of such Senior and Subordinated
Debt are paid in full; PROVIDED, HOWEVER, that nothing in this Section 13.4
shall prevent the satisfaction of any sinking fund payment in accordance with
this Indenture or as otherwise specified as contemplated by Section 3.1 for the
Securities of any series by delivering and crediting pursuant to Section 12.2 or
as otherwise specified as contemplated by Section 3.1 for the Securities of any
series Securities which have been acquired (upon redemption or otherwise) prior
to such default in payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.4, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 13.4 shall not apply to any payment with
respect to which Section 13.2 would be applicable.
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Section 13.5. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article XIII or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in Section 13.2 or under the
conditions described in Sections 13.3 and 13.4, from making payments at any time
of principal of (and premium, if any) or interest (including Additional
Interest) on the Securities, or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional Interest) on the
Securities or the retention of such payment by the Holders, if, at the time of
such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article XIII.
Section 13.6. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR AND SUBORDINATED DEBT.
Subject to the payment in full of all amounts due or to become due on all
Senior and Subordinated Debt, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior and
Subordinated Debt, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior and
Subordinated Debt pursuant to the provisions of this Article XIII (equally and
ratably with the holders of all indebtedness of the Company which by its express
terms is subordinated to Senior and Subordinated Debt of the Company to
substantially the same extent as the Securities are subordinated to the Senior
and Subordinated Debt and is entitled to like rights of subrogation by reason of
any payments or distributions made to holders of such Senior and Subordinated
Debt) to the rights of the holders of such Senior and Subordinated Debt to
receive payments and distributions of cash, property and securities applicable
to the Senior and Subordinated Debt until the principal of (and premium, if any)
and interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior and
Subordinated Debt of any cash, property or securities to which the Holders of
the Securities or the Trustee would be entitled except for the provisions of
this Article, and no payments over pursuant to the provisions of this Article
XIII to the holders of Senior and Subordinated Debt by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior and Subordinated Debt, and the Holders of the Securities, be deemed to be
a payment or distribution by the Company to or on account of the Senior and
Subordinated Debt.
Section 13.7. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article XIII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior and Subordinated Debt on the other hand.
Nothing contained in this Article XIII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as between the Company and the
Holders of the Securities, the obligations of the Company, which are absolute
and unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of
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the Securities and creditors of the Company other than their rights in relation
to the holders of Senior and Subordinated Debt; or (c) prevent the Trustee or
the Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture including, without limitation,
filing and voting claims in any Proceeding, subject to the rights, if any, under
this Article XIII of the holders of Senior and Subordinated Debt to receive
cash, property and securities otherwise payable or deliverable to the Trustee or
such Holder.
Section 13.8. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination provided in this
Article XIII and appoints the Trustee his or her attorney-in-fact for any and
all such purposes.
Section 13.9. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior and Subordinated
Debt to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior and Subordinated Debt may, at any time and from
to time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior and Subordinated Debt, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior and Subordinated Debt, or otherwise amend or supplement in any
manner Senior and Subordinated Debt or any instrument evidencing the same or any
agreement under which Senior and Subordinated Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior and Subordinated Debt; (iii) release any Person liable
in any manner for the collection of Senior and Subordinated Debt; and (iv)
exercise or refrain from exercising any rights against the Company and any other
Person.
Section 13.10. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article XIII or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
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and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior and Subordinated Debt or from any trustee, agent
or representative therefor; provided, however, that if the Trustee shall not
have received the notice provided for in this Section 13.10 at least two
Business Days prior to the date upon which by the terms hereof any monies may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest (including any Additional
Interest) on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
monies and to apply the same to the purpose for which they were received and
shall not be affected by any notice to the contrary which may be received by it
within two Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior and Subordinated Debt (or a trustee therefor) to
establish that such notice has been given by a holder of Senior and Subordinated
Debt (or a trustee therefor). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior and Subordinated Debt to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior and Subordinated Debt held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 13.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to in
this Article XIII, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior and
Subordinated Debt and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XIII.
Section 13.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR AND SUBORDINATED
DEBT.
The Trustee, in its capacity as trustee under this Indenture, shall not be
deemed to owe any fiduciary duty to the holders of Senior and Subordinated Debt
and shall not be liable to any such holders if it shall in good faith mistakenly
pay over or distribute to Holders of Securities or to the Company or to any
other Person cash, property or securities to which any holders of Senior and
Subordinated Debt shall be entitled by virtue of this Article or otherwise.
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Section 13.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR AND SUBORDINATED DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article XIII with respect to any Senior and Subordinated Debt
which may at any time be held by it, to the same extent as any other holder of
Senior and Subordinated Debt, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder.
Section 13.14. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article XIII shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIII in addition to or in place of the Trustee.
Section 13.15. CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT.
For the purposes of this Article XIII only, (a) the issuance and delivery
of junior securities upon conversion or exchange of Securities shall not be
deemed to constitute a payment or distribution on account of the principal of
(or premium, if any) or interest (including any Additional Interest) on
Securities or on account of the purchase or other acquisition of Securities, and
(b) the payment, issuance or delivery of cash, property or securities (other
than junior securities) upon conversion or exchange of a Security shall be
deemed to constitute payment on account of the principal of such security. For
the purposes of this Section 13.15, the term "junior securities" means (i)
shares of any stock of any class of the Company and (ii) securities of the
Company which are subordinated in right of payment to all Senior and
Subordinated Debt which may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article XIII.
* * * *
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.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
PACIFIC CREST CAPITAL, INC.
By:
-------------------------------
Its
-------------------------------
Attest:
By
-------------------------------
Its
----------------------------
WILMINGTON TRUST COMPANY
as Trustee
By
-------------------------------
Its
-------------------------------
Attest:
By
--------------------------------
Its
-----------------------------
74
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STATE OF CALIFORNIA )
) SS.
COUNTY OF )
On the _____ day of ________________, 1997 before me personally came
______________ to me known, who, being by me duly sworn, did depose and say that
he is ____________ of PACIFIC CREST CAPITAL, INC., one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; and that he signed his name thereto by authority of the Board of Directors
of said corporation.
[SEAL] _______________________________
Notary Public
STATE OF DELAWARE )
) SS.
COUNTY OF )
On the _____ day of ________________, 1997 before me personally came
______________ to me known, who, being by me duly sworn, did depose and say that
he is ____________ of WILMINGTON TRUST COMPANY one of the corporations described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
and that he signed his name thereto by authority of the Board of Directors of
said corporation.
[SEAL] _______________________________
Notary Public
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION.....................................................1
Section 1.1. DEFINITIONS................................................1
Section 1.2. COMPLIANCE CERTIFICATE AND OPINIONS........................9
Section 1.3. FORMS OF DOCUMENTS DELIVERED TO TRUSTEE...................10
Section 1.4. ACTS OF HOLDERS...........................................10
Section 1.5. NOTICES, ETC. TO TRUSTEE AND COMPANY......................13
Section 1.6. NOTICE TO HOLDERS; WAIVER.................................13
Section 1.7. CONFLICT WITH TRUST INDENTURE ACT.........................13
Section 1.8. EFFECT OF HEADINGS AND TABLE OF CONTENTS..................13
Section 1.9. SUCCESSORS AND ASSIGNS....................................14
Section 1.10. SEPARABILITY CLAUSE.......................................14
Section 1.11. BENEFITS OF INDENTURE.....................................14
Section 1.12. GOVERNING LAW.............................................14
Section 1.13. NONBUSINESS DAYS..........................................14
ARTICLE II SECURITY FORMS.................................................14
Section 2.1. FORMS GENERALLY...........................................14
Section 2.2. FORM OF FACE OF SECURITY..................................15
Section 2.3. FORM OF REVERSE OF SECURITY...............................18
Section 2.4. ADDITIONAL PROVISIONS REQUIRED IN GLOBAL SECURITY.........21
Section 2.5. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION...........21
ARTICLE III THE SECURITIES.................................................22
Section 3.1. TITLE AND TERMS...........................................22
Section 3.2. DENOMINATIONS.............................................24
Section 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING............24
Section 3.4. TEMPORARY SECURITIES......................................26
Section 3.5. REGISTRATION, TRANSFER AND EXCHANGE.......................26
Section 3.6. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES..........28
Section 3.7. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED............29
Section 3.8. PERSONS DEEMED OWNERS.....................................30
Section 3.9. CANCELLATION..............................................30
Section 3.10. COMPUTATION OF INTEREST...................................31
Section 3.11. DEFERRALS OF INTEREST PAYMENT DATES.......................31
Section 3.12. RIGHT OF SETOFF...........................................32
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Section 3.13. AGREED TAX TREATMENT......................................32
Section 3.14. SHORTENING OF STATED MATURITY.............................32
Section 3.15. CUSIP NUMBERS.............................................32
ARTICLE IV SATISFACTION AND DISCHARGE.....................................33
Section 4.1. SATISFACTION AND DISCHARGE OF INDENTURE...................33
Section 4.2. APPLICATION OF TRUST MONEY................................34
ARTICLE V REMEDIES.......................................................34
Section 5.1. EVENTS OF DEFAULT.........................................34
Section 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT........35
Section 5.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE....................................36
Section 5.4. TRUSTEE MAY FILE PROOFS OF CLAIM..........................37
Section 5.5. TRUSTEE MAY ENFORCE CLAIM WITHOUT POSSESSION
OF SECURITIES.............................................38
Section 5.6. APPLICATION OF MONEY COLLECTED............................38
Section 5.7. LIMITATION ON SUITS.......................................39
Section 5.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST; DIRECT ACTION BY HOLDERS OF
PREFERRED SECURITIES......................................39
Section 5.9. RESTORATION OF RIGHTS AND REMEDIES........................40
Section 5.10. RIGHTS AND REMEDIES CUMULATIVE............................40
Section 5.11. DELAY OR OMISSION NOT WAIVER..............................40
Section 5.12. CONTROL BY HOLDERS........................................40
Section 5.13. WAIVER OF PAST DEFAULTS...................................41
Section 5.14. UNDERTAKING FOR COSTS.....................................41
Section 5.15. WAIVER OF USURY, STAY OR EXTENSION LAWS...................42
ARTICLE VI THE TRUSTEE....................................................42
Section 6.1. CERTAIN DUTIES AND RESPONSIBILITIES.......................42
Section 6.2. NOTICE OF DEFAULTS........................................43
Section 6.3. CERTAIN RIGHTS OF TRUSTEE.................................43
Section 6.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES....44
Section 6.5. MAY HOLD SECURITIES.......................................45
Section 6.6. MONEY HELD IN TRUST.......................................45
Section 6.7. COMPENSATION AND REIMBURSEMENT............................45
Section 6.8. DISQUALIFICATION; CONFLICTING INTERESTS...................46
Section 6.9. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY...................46
Section 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.........46
Section 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR....................48
Section 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS...............................................49
Section 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.........49
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Section 6.14. APPOINTMENT OF AUTHENTICATING AGENT.......................49
ARTICLE VII HOLDERS' LISTS AND REPORTS BY
TRUSTEE AND COMPANY............................................51
Section 7.1. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS...................................................51
Section 7.2. PRESERVATION OF INFORMATION, COMMUNICATIONS TO HOLDERS....51
Section 7.3. REPORTS BY TRUSTEE........................................52
Section 7.4. REPORTS BY COMPANY........................................52
ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE..............................................53
Section 8.1. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS......53
Section 8.2. SUCCESSOR CORPORATION SUBSTITUTED.........................53
ARTICLE IX SUPPLEMENTAL INDENTURES........................................54
Section 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS........54
Section 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS...........55
Section 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES......................56
Section 9.4. EFFECT OF SUPPLEMENTAL INDENTURES.........................57
Section 9.5. CONFORMITY WITH TRUST INDENTURE ACT.......................57
Section 9.6. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES........57
ARTICLE X COVENANTS......................................................57
Section 10.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST................57
Section 10.2. MAINTENANCE OF OFFICE OR AGENCY...........................58
Section 10.3. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST...........58
Section 10.4. STATEMENT AS TO COMPLIANCE................................59
Section 10.5. WAIVER OF CERTAIN COVENANTS...............................60
Section 10.6. ADDITIONAL SUMS...........................................60
Section 10.7. ADDITIONAL COVENANTS......................................60
ARTICLE XI REDEMPTION OF SECURITIES.......................................61
Section 11.1. APPLICABILITY OF THIS ARTICLE.............................62
Section 11.2. ELECTION TO REDEEM; NOTICE TO TRUSTEE.....................62
Section 11.3. SELECTION OF SECURITIES TO BE REDEEMED....................62
Section 11.4. NOTICE OF REDEMPTION......................................63
Section 11.5. DEPOSIT OF REDEMPTION PRICE...............................63
Section 11.6. PAYMENT OF SECURITIES CALLED FOR REDEMPTION...............64
Section 11.7. RIGHT OF REDEMPTION OF SECURITIES INITIALLY ISSUED
TO A PCC TRUST............................................64
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ARTICLE XII SINKING FUNDS...................................................65
Section 12.1. APPLICABILITY OF ARTICLE..................................65
Section 12.2. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.....65
Section 12.3. REDEMPTION OF SECURITIES FOR SINKING FUND.................65
ARTICLE XIII SUBORDINATION OF SECURITIES....................................67
Section 13.1. SECURITIES SUBORDINATE TO SENIOR AND SUBORDINATED DEBT....67
Section 13.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC............67
Section 13.3. PRIOR PAYMENT TO Senior and Subordinated Debt UPON
ACCELERATION OF SECURITIES................................68
Section 13.4. NO PAYMENT WHEN SENIOR AND SUBORDINATED DEBT IN
DEFAULT...................................................69
Section 13.5. PAYMENT PERMITTED IF NO DEFAULT...........................70
Section 13.6. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR AND
SUBORDINATED DEBT.........................................70
Section 13.7. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS...............70
Section 13.8. TRUSTEE TO EFFECTUATE SUBORDINATION.......................71
Section 13.9. NO WAIVER OF SUBORDINATION PROVISIONS.....................71
Section 13.10. NOTICE TO TRUSTEE.........................................71
Section 13.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.........................................72
Section 13.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR AND
SUBORDINATED DEBT.........................................72
Section 13.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR AND
SUBORDINATED DEBT; PRESERVATION OF TRUSTEE'S RIGHTS.......73
Section 13.14. ARTICLE APPLICABLE TO PAYING AGENTS.......................73
Section 13.15. CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT...........73
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PACIFIC CREST CAPITAL, INC.
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE __________, 2027
OFFICERS' CERTIFICATE AND COMPANY ORDER
Pursuant to the Indenture dated as of August __, 1997 (the "Indenture"),
between Pacific Crest Capital, Inc., a Delaware corporation (the "Company") and
Wilmington Trust Company, as Debenture Trustee (the "Debenture Trustee") and
resolutions adopted by the Pricing Committee of the Company's Board of Directors
on _________, 1997; this Officers' Certificate is being delivered to the
Debenture Trustee to establish the terms of one series of securities (the
"Securities") in accordance with Section 3.1 of the Indenture, to establish the
form of the Securities of such series in accordance with Section 2.1 of the
Indenture, to request the authentication and delivery of the Securities of such
series pursuant to Section 3.3 of the Indenture and to comply with the
provisions of Section 1.2 of the Indenture. This Officers' Certificate shall be
treated for all purposes under the Indenture as a supplemental indenture
thereto.
All conditions precedent provided for in the Indenture relating to the
establishment of (i) a series of Securities and (ii) the form of Securities of
such series have been complied with.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Indenture.
I. ESTABLISHMENT OF SERIES OF SECURITIES PURSUANT TO SECTION 3.1 OF THE
INDENTURE.
There are hereby established pursuant to Section 3.1 of the Indenture a
series of Securities which shall have the following terms:
A. The Securities of such series shall bear the title "_____% Junior
Subordinated Deferrable Interest Debentures Due ____________, 2027."
B. The aggregate principal amount of such series of Securities to be
issued pursuant to this Officers' Certificate and Company Order shall be limited
to $_________ (except for Securities authenticated and delivered upon
registration of, transfer of, or in exchange for, or in lieu of, other
Securities of such series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7 of the
Indenture and except for any Securities which, pursuant to Section 3.3 of the
Indenture, are deemed never to have been authenticated and delivered
thereunder).
C. The date on which the principal of the Securities is due and
payable shall be ______________, 2027.
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D. The Securities shall bear interest at the rate of _____% per
annum (based upon a 360-day year of twelve 30-day months), from and including
the date of original issuance or from and including the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable quarterly in arrears on the 15th day of March, June, September
and December in each year (each, an "Interest Payment Date"), commencing
________, 1997, until the principal thereof is paid or made available for
payment. The Business Day next preceding an Interest Payment Date shall be the
"Regular Record Date" for the interest payable on such Interest Payment Date.
Accrued interest that is not paid on such applicable Interest Payment Date will
bear additional interest on the amount thereof (to the extent permitted by law)
at a rate per annum of ______% thereof compounded quarterly.
In addition, so long as no Event of Default with respect to the Securities
has occurred or is continuing, the Company has the right under the Indenture at
any time during the term of such Securities to defer the payment of interest at
any time or from time to time for a period not exceeding 20 consecutive
quarterly periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity. At the end of such
Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of _____%, compounded
quarterly, to the extent permitted by applicable law).
E. Principal of (and premium, if any) and interest on the Securities
will be payable, and, except as provided in Section 3.5 of the Indenture with
respect to a Global Security (as defined below), the transfer of the Securities
will be registrable and Securities (except as provided in paragraph (Q) hereof)
will be exchangeable for Securities bearing identical terms and provisions at
the corporate trust office of Wilmington Trust Company in the City of
Wilmington, Delaware.
F. The Securities will be redeemable in whole at any time and in
part from time to time, at the option of the Company at any time on or after
__________, 2002, subject to the Company having received prior regulatory
approval if then so required, at a redemption price equal to the accrued and
unpaid interest on the Securities so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof.
In addition, upon the occurrence of a Tax Event, an Investment Company
Event or a Capital Treatment Event (as each such term is defined below) the
Company may, at its option and subject to receipt of prior regulatory approval
if then required under applicable capital guidelines or policies, prepay the
Securities in whole (but not in part) at any time within 90 days of the
occurrence of such Tax Event, Investment Company Event or a Capital Treatment
Event, at a redemption price equal to the accrued and unpaid interest on the
Securities so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof.
2
<PAGE>
"Tax Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities of the Trust, there is more than an insubstantial risk that
(i) the Trust is, or will be within 90 days of the date of such opinion, subject
to United States Federal income tax with respect to income received or accrued
on the Securities, (ii) interest payable by the Company on the Securities is
not, or within 90 days of the date of such opinion, will not be, deductible by
the Company, in whole or in part, for United States Federal income tax purposes,
or (iii) the Trust is, or will be within 90 days of the date of such opinion,
subject to more than a DE MINIMIS amount of other taxes, duties or other
governmental charges.
"Investment Company Event" means, in respect of the Trust, the receipt by
the Trust of an Opinion of Counsel, rendered by a law firm experienced in such
matters, to the extent that, as a result of a change in law or regulation or a
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, the Trust is or will
be considered an "investment company" that is required to be registered under
the 1940 Act, which change becomes effective on or after the date of original
issuance of the Preferred Securities of the Trust.
"Capital Treatment Event" means, in the event that the Company becomes
subject to capital adequacy guidelines, the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision thereof or therein, or as a result
of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment
or change is effective or such prospective change, pronouncement or decision
is announced on or after the date of the issuance of the Preferred Securities
of the Trust, there is more than an insubstantial risk of impairment of the
Company's ability to treat an amount equal to the Liquidation Amount of the
Preferred Securities as "Tier I Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the primary federal regulator
of the Company, as then in effect and applicable to the Company.
G. The Company shall not be obligated to redeem or purchase any
Securities pursuant to any sinking fund or analogous provisions or at the option
of the Holder.
H. The Securities will be issued only in fully registered form and
the authorized minimum denomination of the Securities shall be $10.00 and any
integral multiple of $10.00 in excess thereof.
3
<PAGE>
I. The Securities shall be denominated, and payments of principal of
(and premium, if any) and interest on the Securities of such series will be
made, in United States dollars.
J. The Securities shall be subject to the Events of Default
specified in Section 5.1, paragraphs (1) through (5), of the Indenture.
K. The portion of the principal amount of the Securities which shall
be payable upon declaration of acceleration of maturity thereof shall not be
other than the principal amount thereof, provided, that, if such acceleration is
declared by the Holders of at least 25% in aggregate liquidation amount of the
Preferred Securities then outstanding, then, upon such declaration of
acceleration, the Securities which shall be payable shall be the principal
amount thereof plus accrued interest (including any Additional Interest).
L. The Securities will be issued in fully registered form, without
coupons. The Securities will not be issued in bearer form.
M. The amount of payments of principal of and any premium or
interest on the Securities will not be determined with reference to an index.
N. The Securities shall not be issued in the form of a temporary
Global Security (as defined below).
O. The Securities will initially be in certificated form registered
in the name of the name of Wilmington Trust Company as Property Trustee for the
Trust (the "Certificated Securities"). The Securities may, in the sole
discretion of the Company, be deposited with, and on behalf of, The Depository
Trust Company, New York, New York, as Depositary, and will be represented by a
global security (a "Global Security") registered in the name of a nominee of the
Depositary. If, and so long as the Depositary or its nominee is the registered
holder of any Global Security, the Depositary or its nominee, as the case may
be, will be considered the sole Holder of the Securities of such series
represented by such Global Security for all purposes under the Indenture and the
Securities. The Certificated Securities or the Global Securities, as the case
may be, shall bear no legends.
P. The Trustee shall be Paying Agent.
Q. The Securities will not be convertible into any other securities
or property of the Company. The Securities of any series may not be exchanged
for Securities of any other series.
R. The Trust Agreement, the Amended and Restated Trust Agreement and
the Guarantee Agreement are in the forms attached hereto as Exhibits A, B, and C
respectively.
4
<PAGE>
S. The Securities are subordinate and subject in right of payment to
the prior payment in full of all amounts then due and payable in respect of all
Senior and Subordinated Debt, as provided in the Indenture.
T. The Securities shall have additional terms, which terms shall not
be inconsistent with the provisions of the Indenture.
II. ESTABLISHMENT OF FORMS OF SECURITIES PURSUANT TO SECTION 2.1 OF
INDENTURE.
It is hereby established pursuant to Section 2.1 of the Indenture that the
Securities shall be substantially in the form attached as Exhibit D hereto.
III. ORDER FOR THE AUTHENTICATION AND DELIVERY OF SECURITIES PURSUANT TO
SECTION 3.3 OF THE INDENTURE.
It is hereby ordered pursuant to Section 3.3 of the Indenture that the
Trustee authenticate, in the manner provided by the Indenture, Securities in the
aggregate principal amount of $__________ registered in the name of Wilmington
Trust Company, as Property Trustee, which Securities have been heretofore duly
executed by the proper officers of the Company and delivered to you as provided
in the Indenture, and to deliver said authenticated Securities to Wilmington
Trust Company or its custodian on or before 9:30 a.m., Los Angeles time, on
__________, 1997.
IV. OTHER MATTERS.
Attached as Exhibit E hereto are true and correct copies of resolutions
adopted by the Pricing Committee of the Board of Directors of the Company at a
meeting on _________, 1997. Attached as Exhibit F hereto are true and correct
copies of resolutions adopted by the Board of Directors of the Company at a
meeting on August 6, 1997. Such resolutions have not been further amended,
modified or rescinded and remain in full force and effect; and such resolutions
(together with this Officers' Certificate) are the only resolutions or other
action adopted by the Company's Board of Directors or any committee thereof or
by any Authorized Officers relating to the offering and sale of the Securities.
The undersigned have read the pertinent sections of the Indenture including
the related definitions contained therein. The undersigned have examined the
resolutions adopted by the Board of Directors and the Pricing Committee of the
Board of Directors of the Company. In the opinion of the undersigned, the
undersigned have made such examination or investigation as is necessary to
enable the undersigned to express an informed opinion as to whether or not the
conditions precedent to the establishment of (i) a series of Securities, (ii)
the forms of such Securities and (iii) authentication of such series of
Securities, contained in the Indenture have been complied with. In the opinion
of the undersigned, such conditions have been complied with.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
___th day of ________ 1997.
PACIFIC CREST CAPITAL, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
6
<PAGE>
CERTIFICATE OF TRUST
OF
PCC TRUST I
THIS CERTIFICATE OF TRUST of PCC Trust I (the "Trust"), dated August 18,
1997, is being duly executed and filed by the undersigned, as trustees, to form
a business trust under the Delaware Business Trust Act (12 Del. C. (Section)
3801 et seq.).
1. NAME. The name of the business trust being formed hereby is PCC Trust I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY
as Trustee
By: /s/
------------------------------------
Name: W. Chris Sponenberg
Title: Senior Financial Services Officer
/s/
---------------------------------------
Gary L. Wehrle,
Administrative Trustee
/s/
---------------------------------------
Robert J. Dennen,
Administrative Truste
/s/
---------------------------------------
Lyle C. Lodwick,
Administrative Trustee
<PAGE>
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of August 18, 1997 (this "Trust
Agreement"), among Pacific Crest Capital, Inc., a Delaware corporation (the
"Depositor"), (ii) Wilmington Trust Company a Delaware banking corporation,
as trustee (the "Delaware Trustee"), and (iii) Gary L. Wehrle, Lyle C.
Lodwick, and Robert J. Dennen, each an individual, as trustees (the
"Administrative Trustees" and, together with the Delaware Trustee, the
"Trustees"). The Depositor and the Trustees hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "PCC
Trust I" in which name the Trustees, or the Depositor to the extent provided
herein, may engage in the transactions contemplated hereby, make and execute
contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trustees the sum of Ten Dollars ($10.00). The Trustees hereby acknowledge
receipt of such amount in trust from the Depositor, which amount shall
constitute the initial trust estate. The Trustees hereby declare that they will
hold the trust estate in trust for the Depositor. It is the intention of the
parties hereto that the Trust created hereby constitute a business trust under
Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801, ET SEQ.
(the "Business Trust Act"), and that this document constitutes the governing
instrument of the Trust. The parties hereto hereby ratify the Trustees'
filing of a Certificate of Trust with the Delaware Secretary of State under
the name "PCC Trust I." The parties hereto also hereby authorize the
Delaware Trustee to file a Certificate of Amendment to the Certificate of
Trust to change the name of the Trust to PCC Capital I.
3. The Depositor and the Trustees will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form included as an exhibit to the 1933 Act Registration Statement (as
defined below), to provide for the contemplated operation of the Trust created
hereby and the issuance of the Trust Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such amended and
restated Trust Agreement, the Trustees shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such execution and
delivery any licenses, consents or approvals required by applicable law or
otherwise.
4. The Depositor and the Trustees hereby authorize and direct the
Administrative Trustees, (i) to file with the Securities and Exchange
Commission (the "Commission") and execute, in each case on behalf of the
Trust, (a) the Registration Statement on Form S-2 (the "1933 Act Registration
Statement"), including any pre-effective or post-effective amendments to the
1933 Act Registration Statement, relating to the registration under the
Securities Act of 1933, as amended, of the Trust Preferred Securities of the
Trust and possibly
1
<PAGE>
certain other securities and (b) if required, a Registration Statement on
Form 8-A (the "1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the registration of the Trust
Preferred Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with the Nasdaq National Market or a national stock
exchange (each, an "Exchange") and execute on behalf of the Trust one or more
listing applications and all other applications, statements, certificates,
agreements and other instruments as shall be necessary or desirable to cause the
Trust Preferred Securities to be listed on any of the Exchanges; (iii) to file
and execute on behalf of the Trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and other
papers and documents as shall be necessary or desirable to register the Trust
Preferred Securities under the securities or blue sky laws of such jurisdictions
as the Depositor, on behalf of the Trust, may deem necessary or desirable; and
(iv) to execute on behalf of the Trust that certain Underwriting Agreement
relating to the Trust Preferred Securities, among the Trust, the Depositor and
the Underwriter named therein, substantially in the form included as an exhibit
to the 1933 Act Registration Statement. In the event that any filing referred
to in clauses (i), (ii) and (iii) above is required by the rules and regulations
of the Commission, an Exchange or state securities or blue sky laws to be
executed on behalf of the Trust by one or more of the Trustees, each of the
Trustees, in such Trustee's capacity as a trustee of the Trust, is hereby
authorized and, to the extent so required, directed to join in any such filing
and to execute on behalf of the Trust any and all of the foregoing, it being
understood that the Delaware Trustee in its capacity as a trustee of the
Trust shall not be required to join in any such filing or execute on behalf of
the Trust any such document unless required by the rules and regulations of the
Commission, the Exchange or state securities or blue sky laws. In connection
with the filings referred to above, the Depositor and Gary L. Wehrle, Lyle C.
Lodwick and Robert J. Dennen, each as Trustees and not in their individual
capacities, hereby constitutes and appoints Gary L. Wehrle, Lyle C. Lodwick and
Robert J. Dennen, and each of them, as the Depositor's or such Trustee's true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the Depositor or such Trustee or in the Depositor's or such
Trustee's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement (if required) and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Commission, the Exchange and administrators of the state securities or
blue sky laws, 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 connection therewith, as fully and to all intents and purposes as
the Depositor or such Trustee might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
respective substitute or substitutes, shall do or cause to be done by virtue
hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be four (4) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Depositor which may increase or decrease
the number of Trustees; provided, however, that
2
<PAGE>
to the extent required by the Business Trust Act, one Trustee shall either be a
natural person who is a resident of the State of Delaware or, if not a natural
person, an entity which has its principal place of business in the State of
Delaware and otherwise meets the requirements of applicable Delaware law.
Subject to the foregoing, the Depositor is entitled to appoint or remove without
cause any Trustee at any time. The Trustees may resign upon thirty (30) days'
prior notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws of principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
PACIFIC CREST CAPITAL, INC.
as Depositor
By:
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY
as Trustee
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Gary L. Wehrle, as Administrative Trustee
By:
---------------------------------------
Lyle C. Lodwick, as Administrative Trustee
By:
---------------------------------------
Robert J. Dennen, as Administrative Trustee
3
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF TRUST
OF
PCC TRUST I
THIS Certificate of Amendment of PCC Trust I (the "Trust"), dated August
20, 1997, is being duly executed and filed by the undersigned trustee to amend
a business trust formed under the Delaware Business Act (12 DEL. C. Section 3801
ET SEQ).
1. NAME. The name of the business trust amended hereby is PCC Trust I.
2. AMENDMENT OF TRUST. The Certificate of Trust of the Trust is hereby
amended by changing the name of the Trust to "PCC Capital I."
3. EFFECTIVE DATE. This Certificate of Amendment shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned trustee of the Trust has executed this
Certificate of Amendment as of the date and year first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/
----------------------
Name: Donald G. MacKelcan
Title: Assistant Vice
President
<PAGE>
AMENDED AND RESTATED
TRUST AGREEMENT
among
Pacific Crest Capital, Inc., as Depositor,
Wilmington Trust Company,
as Property Trustee,
Wilmington Trust Company,
as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF AUGUST __, 1997
PCC CAPITAL I
<PAGE>
PCC Capital I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Trust Agreement
Act Section Section
--------------- ---------------
(Section) 310 (a) (1) 8.7
(a) (2) 8.7
(a) (3) 8.7
(a) (4) 2.7 (a) (ii)
(b)
(Section) 311 (a) 8.13
(b) 8.13
(Section) 312 (a) 5.7
(b) 5.7
(c) 5.7
(Section) 313 (a) 8.14 (a)
(a) (4) 8.14 (b)
(b) 8.14 (b)
(c) 10.8
(d) 8.14 (c)
(Section) 314 (a) 8.15
(b) Not Applicable
(c) (1) 8.16
(c) (2) 8.16
(c) (3) Not Applicable
(d) Not Applicable
(e) 1.1, 8.16
(Section) 315 (a) 8.1 (a), 8.3 (a)
(b) 8.2, 10.8
(c) 8.1 (a)
(d) 8.1, 8.3
(e) Not Applicable
(Section) 316 (a) Not Applicable
(a) (1) (A) Not Applicable
(a) (1) (B) Not Applicable
(a) (2) Not Applicable
(b) 5.14
(c) 6.7
(Section) 317 (a) (1) Not Applicable
(a) (2) Not Applicable
(b) 5.9
(Section) 318 (a) 10.10
- ------------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Trust Agreement.
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT (this "Trust Agreement"), dated as of
August __, 1997, among (i) Pacific Crest Capital, Inc., a Delaware corporation
(including any successors or assigns, the "Depositor"), (ii) Wilmington Trust
Company, a Delaware banking corporation duly organized and existing under the
laws of the State of Delaware, as property trustee, (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Bank"), (iii) Wilmington Trust Company, a
Delaware banking corporation organized under the laws of the State of Delaware,
as Delaware trustee (the "Delaware Trustee"), (iv) Gary L. Wehrle, an
individual, Robert J. Dennen, an individual, and Lyle C. Lodwick, an individual,
each of whose address is c/o Pacific Crest Capital, Inc., 30343 Canwood Street,
Agoura Hills, California, 91301 (each an "Administrative Trustee" and
collectively the "Administrative Trustees") (the Property Trustee, the Delaware
Trustee and the Administrative Trustees are referred to collectively herein as
the "Trustees") and (v) the several Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor, the Delaware Trustee and Gary L. Wehrle and Robert
J. Dennen, and Lyle C. Lodwick, each as an Administrative Trustee, have
heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act by the entering into that certain Trust Agreement,
dated as of August 18, 1997 (the "Original Trust Agreement"), and by the
execution and filing by the Delaware Trustee with the Secretary of State of the
State of Delaware of the Certificate of Trust, filed on August 18, 1997,
attached as Exhibit A; and
WHEREAS, the Depositor and the Trustees desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities by the Trust to
the Depositor, (ii) the issuance and sale of the Preferred Securities by the
Trust pursuant to the Underwriting Agreement, (iii) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Debentures and
(iv) the appointment of the Administrative Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, each party, for the benefit of the other parties and for
the benefit of the Securityholders, hereby amends and restates the Original
Trust Agreement in its entirety and agrees as follows:
ARTICLE I.
DEFINED TERMS
SECTION 1.1 DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
1
<PAGE>
(a) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an "Article"
or a "Section" refers to an Article or a Section, as the case may be, of this
Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"ACT" has the meaning specified in Section 6.8.
"ADDITIONAL AMOUNT" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"ADDITIONAL SUMS" has the meaning specified in Section 10.6 of the
Indenture.
"ADMINISTRATIVE TRUSTEE" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust formed and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"BANK" has the meaning specified in the preamble to this Trust Agreement.
"BANKRUPTCY EVENT" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in the
premises judging such Person a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable Bankruptcy Law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Person or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 90 consecutive
days; or
2
<PAGE>
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Bankruptcy Law,
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its willingness
to be adjudicated a bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.
"BANKRUPTCY LAW" means any Federal or state bankruptcy, insolvency,
reorganization or similar law.
"BOARD RESOLUTION" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date of
such certification, and delivered to the appropriate Trustees.
"BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES" means a beneficial interest
in the Preferred Securities Certificates, ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 5.11.
"BUSINESS DAY" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"CERTIFICATE DEPOSITORY AGREEMENT" means the agreement among the Trust, the
Depositor and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date, relating to the Preferred Securities Certificates,
substantially in the form attached as Exhibit B, as the same may be amended and
supplemented from time to time.
"CERTIFICATE OF TRUST" means the certificate of trust filed with the
Secretary of State of the State of Delaware with Respect to the Trust, as
amended or restated from time to time.
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act. The Depository Trust Company will
be the initial Clearing Agency.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"CLOSING DATE" means the date of execution and delivery of this Trust
Agreement.
3
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, as amended, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"COMMON SECURITY" means an undivided beneficial interest in the assets of
the Trust, having a Liquidation Amount of $10 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"COMMON SECURITIES CERTIFICATE" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"CORPORATE TRUST OFFICE" means (i) when used with respect to the Property
Trustee, the principal office of the Property Trustee located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, and (ii) when used with respect to the Debenture
Trustee, the principal office of the Debenture Trustee located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
"DEBENTURE EVENT OF DEFAULT" means an "Event of Default" as defined in the
Indenture.
"DEBENTURE REDEMPTION DATE" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"DEBENTURE TAX EVENT" means a "Tax Event" as defined in the Indenture.
"DEBENTURE TRUSTEE" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any successor
thereto, as trustee under the Indenture.
"DEBENTURES" means the aggregate principal amount of the Depositor's ____%
Junior Subordinated Deferrable Interest Debentures, issued pursuant to the
Indenture.
"DEFINITIVE PREFERRED SECURITIES CERTIFICATES" means either or both (as the
context requires) of (a) Preferred Securities Certificates issued as Book-Entry
Preferred Securities Certificate as provided in Section 5.11(a) and (b)
Preferred Securities Certificates issued in certificated, fully registered form
as provided in Section 5.13.
"DELAWARE BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. (Section) 3801, ET SEQ., as it may be amended from time to
time.
"DELAWARE TRUSTEE" means the Person identified as the "Delaware Trustee" in
the preamble to this Trust Agreement solely in its capacity as Delaware Trustee
of the Trust formed and continued
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hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"DEPOSITOR" has the meaning specified in the preamble to this Trust
Agreement.
"DISTRIBUTION DATE" has the meaning specified in Section 4.1(a).
"DISTRIBUTIONS" means amounts payable in respect of the Trust Preferred
Securities as provided in Section 4.1.
"EARLY DISSOLUTION EVENT" has the meaning specified in Section 9.2.
"EVENT OF DEFAULT" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(c) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Property Trustee in this Trust Agreement (other
than a covenant or warranty a default in the performance or breach of which is
dealt with in clause (b) or (c) above) and continuation of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the defaulting Property Trustee by the Holders of at least
25% in aggregate liquidation preference of the Outstanding Preferred Securities
a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property Trustee
within 60 days thereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPENSE AGREEMENT" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"EXPIRATION DATE" has the meaning specified in Section 9.1.
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"GUARANTEE" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the holders
of the Preferred Securities, as amended from time to time.
"HOLDER" means a Securityholder.
"INDENTURE" means the Junior Subordinated Indenture, dated as of August __,
1997, between the Depositor and the Debenture Trustee, as trustee, as amended or
supplemented from time to time.
"INVESTMENT COMPANY EVENT" means the receipt by the Depositor and the Trust
of an Opinion of Counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which Change
in Investment Company Act Law becomes effective on or after the date or original
issuance of the Preferred Securities under this Trust Agreement.
"LIEN" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, adverse claim, hypothecation, assignment,
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"LIKE AMOUNT" means (a) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to the principal amount of
Debentures to be contemporaneously redeemed in accordance with the Indenture the
proceeds of which will be used to pay the Redemption Price of such Trust
Securities, and (b) with respect to a distribution of Debentures to Holders of
Trust Securities in connection with a dissolution or liquidation of the Trust,
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the Holder to whom such Debentures are distributed.
"LIQUIDATION AMOUNT" means the stated amount of $10 per Trust Security.
"LIQUIDATION DATE" means the date on which Debentures are to be distributed
to Holders of Trust Securities in connection with a dissolution and liquidation
of the Trust pursuant to Section 9.4(a).
"LIQUIDATION DISTRIBUTION" has the meaning specified in Section 9.4(d).
"1940 ACT" means the Investment Company Act of 1940, as amended.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman and
Chief Executive Officer, President or a Vice President, and by the Chief
Financial Officer, the Secretary or an Assistant Secretary, of the Depositor,
and delivered to the appropriate Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 8.16 shall be the principal
executive,
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financial or accounting officer of the Depositor. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel
for the Trust, the Property Trustee, the Delaware Trustee or the Depositor, but
not an employee of any thereof, and who shall be reasonably acceptable to the
Property Trustee.
"ORIGINAL TRUST AGREEMENT" has the meaning specified in the recitals to
this Trust Agreement.
"OUTSTANDING", when used with respect to Trust Securities, means, as of the
date of determination, all Trust Securities theretofore executed and delivered
under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property Trustee or
delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Trust Securities; PROVIDED that, if such
Trust Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in lieu
of which other Trust Securities have been executed and delivered pursuant to
Sections 5.4, 5.5, 5.11 and 5.13; PROVIDED, HOWEVER, that in determining whether
the Holders of the requisite Liquidation Amount of the Outstanding Preferred
Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Preferred Securities owned by the Depositor, any
Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded
and deemed not to be Outstanding, except that (a) in determining whether any
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Preferred Securities
that such Trustee knows to be so owned shall be so disregarded and (b) the
foregoing shall not apply at any time when all of the outstanding Preferred
Securities are owned by the Depositor, one or more of the Trustees and/or any
such Affiliate. Preferred Securities so owned which have been pledged
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in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Administrative Trustees the pledgee's right so to act with
respect to such Preferred Securities and that the pledgee is not the Depositor
or any Affiliate of the Depositor.
"OWNER" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
in the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly, in accordance with the rules of such Clearing Agency).
"PAYING AGENT" means any paying agent or co-paying agent appointed pursuant
to Section 5.9 and shall initially be the Bank.
"PAYMENT ACCOUNT" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust department
for the benefit of the Securityholders in which all amounts paid in respect of
the Debentures will be held and from which the Property Trustee, through the
Paying Agent, shall make payments to the Securityholders in accordance with
Sections 4.1 and 4.2.
"PERSON" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"PREFERRED SECURITY" means an undivided beneficial interest in the assets
of the Trust designated "___% Cumulative Trust Preferred Securities", having a
Liquidation Amount of $10 and having the rights provided therefor in this Trust
Agreement, including the right to receive Distributions and a Liquidation
Distribution as provided herein.
"PREFERRED SECURITIES CERTIFICATE" means a certificate evidencing ownership
of Preferred Securities, substantially in the form attached as Exhibit E.
"PROPERTY TRUSTEE" means the Person identified as the "Property Trustee" in
the preamble to this Trust Agreement solely in its capacity as Property Trustee
of the Trust heretofore formed and continued hereunder and not in its individual
capacity, or its successor in interest in such capacity, or any successor
property trustee appointed as herein provided.
"REDEMPTION DATE" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Trust Agreement;
PROVIDED that each Debenture Redemption Date and the stated maturity of the
Debentures shall be a Redemption Date for a Like Amount of Trust Preferred
Securities.
"REDEMPTION PRICE" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Preferred Securities.
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"RELEVANT TRUSTEE" shall have the meaning specified in Section 8.10.
"SECURITIES REGISTER" and "SECURITIES REGISTRAR" have the respective
meanings specified in Section 5.4.
"SECURITYHOLDER" means a Person in whose name a Trust Security is
registered in the Securities Register; any such Person shall be deemed to be a
beneficial owner within the meaning of the Delaware Business Trust Act.
"TAX EVENT" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under this Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days after the
date of such Opinion of Counsel, subject to United States Federal income tax
with respect to income received or accrued on the Debentures, (ii) interest
payable by the Depositor on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, will not be, deductible by the Depositor, in
whole or in part, for United States Federal income tax purposes or (iii) the
Trust is, or will be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges.
"TRUST" means the Delaware business trust created and continued hereby and
identified on the cover page to this Trust Agreement.
"TRUST AGREEMENT" means this Amended and Restated Trust Agreement, as the
same may be modified, amended or supplemented in accordance with the applicable
provisions hereof, including (i) all exhibits hereto and (ii) for all purposes
of this Trust Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Trust Agreement and any such modification, amendment or supplement,
respectively.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; PROVIDED, HOWEVER, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"TRUST PROPERTY" means (a) the Debentures, (b) the rights of the Property
Trustee under the Guarantee, (c) any cash on deposit in, or owing to, the
Payment Account and (d) all proceeds and rights in respect of the foregoing and
any other property and assets for the time being held or deemed to be held by
the Property Trustee pursuant to the trusts of this Trust Agreement.
"TRUST SECURITY" means any one of the Common Securities or the Preferred
Securities.
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"TRUST SECURITIES CERTIFICATE" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"TRUSTEES" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.
"UNDERWRITING AGREEMENT" means that certain Underwriting Agreement dated as
of _________, 1997, among the Trust, the Depositor, Sandler O'Neill & Partners,
L.P. and Sutro & Co., Incorporated.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SECTION 2.1 NAME.
The Trust continued hereby shall be known as "PCC Capital I," as such name
may be modified from time to time by the Administrative Trustees following
written notice to the Holders of Trust Securities and the other Trustees, in
which name the Trustees may engage in the transactions contemplated hereby, make
and execute contracts and other instruments on behalf of the Trust and sue and
be sued.
SECTION 2.2 OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration, or such other address in
the State of Delaware as the Delaware Trustee may designate by written notice to
the Securityholders and the Depositor. The principal executive office of the
Trust is c/o Pacific Crest Capital, Inc., 30343 Canwood Street, Agoura Hills,
California, 91301.
SECTION 2.3 INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES.
The Trustees acknowledges receipt in trust from the Depositor in connection
with the Original Trust Agreement of the sum of $10, which constituted the
initial Trust Property. The Depositor shall pay organizational expenses of the
Trust as they arise or shall, upon request of any Trustee, promptly reimburse
such Trustee for any such expenses paid by such Trustee. The Depositor shall
make no claim upon the Trust Property for the payment of such expenses.
SECTION 2.4 ISSUANCE OF THE PREFERRED SECURITIES.
On ________, 1997 the Depositor and an Administrative Trustee, on behalf of
the Trust and pursuant to the Original Trust Agreement, executed and delivered
the Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 5.2 and deliver to the
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Underwriter named in the Underwriting Agreement, Preferred Securities
Certificates, registered in the name of the nominee of the initial Clearing
Agency, in an aggregate amount of 1,500,000 Preferred Securities having an
aggregate Liquidation Amount of $15,000,000, against receipt of such aggregate
purchase price of such Preferred Securities of $15,000,000, which amount the
Administrative Trustee shall promptly deliver to the Property Trustee.
SECTION 2.5. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE
OF DEBENTURES.
Contemporaneously with the execution and delivery of this Trust Agreement,
an Administrative Trustee, on behalf of the Trust, shall execute in accordance
with Section 5.2 and deliver to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of 46,392 Common
Securities having an aggregate Liquidation Amount of $463,920 against payment by
the Depositor of such amount, which amount such Administrative Trustee shall
promptly deliver to the Property Trustee. Contemporaneously therewith, an
Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase
from the Depositor Debentures, registered in the name of the Trust and having an
aggregate principal amount equal to $15,463,920, and, in satisfaction of the
purchase price for such Debentures, the Property Trustee, on behalf of the
Trust, shall deliver to the Depositor the sum of $15,463,920 (being the sum of
the amounts delivered to the Property Trustee pursuant to (i) the second
sentence of Section 2.4 and (ii) the first sentence of this Section 2.5).
SECTION 2.6. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Trust Securities and use the proceeds from such sale to acquire the Debentures,
and (b) to engage in those activities necessary, advisable or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust,
to have all the rights, powers and duties to the extent set forth herein, and
the Trustees hereby accept such appointment. The Property Trustee hereby
declares that it will hold the Trust Property in trust upon and subject to the
conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
SECTION 2.7. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section and Section 2.6, and in accordance with the
following provisions (i) and (ii), the Trustees shall have the authority to
enter into all transactions and agreements determined by the Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to the Trustees under this Trust
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Agreement, and to perform all acts in furtherance thereof, including without
limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect to
the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense Agreement
and the Certificate Depository Agreement and such other agreements
as may be necessary or desirable in connection with the purposes and
function of the Trust;
(C) assisting in the registration (including the
execution of a registration statement on the appropriate form) of
the Preferred Securities under the Securities Act of 1933, as
amended, and under state securities or blue sky laws, and the
qualification of this Trust Agreement as a trust indenture under
the Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities
upon such securities exchange or exchanges as shall be determined by
the Depositor and the registration of the Preferred Securities under
the Securities Exchange Act of 1934, as amended, and the preparation
and filing of all periodic and other reports and other documents
pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities and
the Debentures to the Securityholders in accordance with this Trust
Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with this Trust
Agreement;
(G) registering transfer of the Trust Securities in
accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of cancellation
with the Secretary of State of the State of Delaware;
(I) unless otherwise determined by the Depositor, the
Property Trustee or the Administrative Trustees, or as otherwise
required by the Delaware Business Trust Act or the Trust Indenture
Act, to execute on behalf of the Trust (either acting alone or
together with any or all of the Administrative Trustees) any
documents that the Administrative Trustees have the power to execute
pursuant to this Trust Agreement; and
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(J) the taking of any action incidental to the foregoing as
the Trustees may from time to time determine is necessary or advisable
to give effect to the terms of this Trust Agreement for the benefit of
the Securityholders (without consideration of the effect of any such
action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the power,
duty and authority to act on behalf of the Trust with respect to the following
matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other
payments made in respect of the Debentures in the Payment Account;
(D) the distribution through the Paying Agent of amounts owed
to the Securityholders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and privileges
of a holder of the Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with
the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of cancellation
with the Secretary of State of the State of Delaware;
(I) after an Event of Default (other than under paragraph (b),
(c), (d) or (e) of the definition of such term if such Event of
Default is by or with respect to the Property Trustee) the taking of
any action incidental to the foregoing as the Property Trustee may
from time to time determine is necessary or advisable to give effect
to the terms of this Trust Agreement and protect and conserve the
Trust Property for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular
Securityholder); and
(J) so long as the Property Trustee is the Securities
Registrar, registering transfers of the Trust Securities in accordance
with this Trust Agreement; and
(K) except as otherwise provided in this Section 2.7(a)(ii),
the Property Trustee shall have none of the duties, liabilities,
powers or the authority of the Administrative Trustees set forth in
Section 2.7(a)(i).
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(b) So long as this Trust Agreement remains in effect, the Trust (or the
Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein, (iii) take any action that would cause the
Trust to fail or cease to qualify as a "grantor trust" for United States Federal
income tax purposes, (iv) incur any indebtedness for borrowed money or issue any
other debt or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred Securities,
the Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the Commission
of a registration statement on the appropriate form in relation to the
Preferred Securities, including any amendments thereto;
(ii) the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Preferred
Securities and the determination of any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and the advice to
the Trustees of actions they must take on behalf of the Trust, and the
preparation for execution and filing of any documents to be executed and
filed by the Trust or on behalf of the Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of any
such States;
(iii) the preparation for filing by the Trust and execution on behalf
of the Trust of an application to the New York Stock Exchange or any other
national stock exchange or the Nasdaq National Market for listing upon
notice of issuance of any Preferred Securities;
(iv) the preparation for filing by the Trust with the Commission and
the execution on behalf of the Trust of a registration statement on Form
8-A relating to the registration of the Preferred Securities under Section
12(b) or 12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution and delivery
of, the Underwriting Agreement providing for the sale of the Preferred
Securities; and
(vi) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
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(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust will not be deemed to be an "investment
company" required to be registered under the 1940 Act, or fail to be classified
as a grantor trust for United States Federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor for United States
Federal income tax purposes. In this connection, the Depositor and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or this Trust Agreement, that each of
the Depositor and any Administrative Trustee determines in its discretion to be
necessary or desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the holders of the
Preferred Securities.
SECTION 2.8. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 2.9. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III.
PAYMENT ACCOUNT
SECTION 3.1. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall establish
the Payment Account. The Property Trustee and any agent of the Property Trustee
shall have exclusive control and sole right of withdrawal with respect to the
Payment Account for the purpose of making deposits in and withdrawals from the
Payment Account in accordance with this Trust Agreement. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Property Trustee in the Payment Account for the exclusive benefit of
the Securityholders and for distribution as herein provided, including (and
subject to) any priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
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ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. DISTRIBUTIONS.
(a) The Trust Securities represent undivided beneficial interests in the
Trust Property, and Distributions (including of Additional Amounts) will be made
on the Trust Securities at the rate and on the dates that payments of interest
(including of Additional Interest, as defined in the Indenture) are made on the
Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative, and
will accumulate whether or not there are funds of the Trust available for
the payment of Distributions. Distributions shall accrue from the date of
original issuance of the Trust Securities, and, except in the event (and to
the extent) that the Depositor exercises its right to defer the payment of
interest on the Debentures pursuant to the Indenture, shall be payable
quarterly in arrears on March 15, June 15, September 15 and December 15 of
each year, commencing on __________. If any date on which a Distribution
is otherwise payable on the Trust Securities is not a Business Day, then
the payment of such Distribution shall be made on the next succeeding day
that is a Business Day (and without any interest or other payment in
respect of any such delay) with the same force and effect as if made on
such date (each date on which distributions are payable in accordance with
this Section 4.1(a), a "Distribution Date").
(ii) Assuming payments of interest on the Debentures are made when
due (and before giving effect to Additional Amounts, if applicable),
Distributions on the Trust Securities shall be payable at a rate of _____%
per annum of the Liquidation Amount of the Trust Securities. The amount of
Distributions payable for any full period shall be computed on the basis of
a 360-day year of twelve 30-day months. The amount of Distributions for
any partial period shall be computed on the basis of the number of days
elapsed in a 360-day year of twelve 30-day months. The amount of
Distributions payable for any period shall include the Additional Amounts,
if any.
(iii) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Distributions.
(b) Distributions on the Trust Securities with respect to a Distribution
Date shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
one Business Day prior to such Distribution Date; PROVIDED, HOWEVER, that in the
event that the Preferred Securities do not remain in book-entry-only form, the
relevant record date shall be the date 15 days prior to the relevant
Distribution Date.
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SECTION 4.2. REDEMPTION.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Trust will be required to redeem, subject to Section 4.3, a Like
Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will become due
and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has funds then on hand and available in the Payment Account for
the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any
Preferred Securities, then, by 12:00 noon, Eastern time, on the Redemption Date,
subject to Section 4.2(c), with respect to Preferred Securities held in
book-entry form, the Property Trustee will irrevocably deposit with the Clearing
Agency for the Preferred Securities funds sufficient to pay the applicable
Redemption Price and will give such Clearing Agency irrevocable instructions and
authority to pay the Redemption Price to the holders thereof. With respect to
Preferred Securities held in certificated form, the Property Trustee, subject to
Section 4.2(c), will irrevocably deposit with the Paying Agent funds sufficient
to pay the applicable Redemption Price and will give the Paying Agent
irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Register for the
Trust Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of Securityholders
holding Trust Securities so called for redemption will cease, except the right
of such
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Securityholders to receive the Redemption Price and any Distribution payable on
or prior to the Redemption Date, but without interest, and such Securities will
cease to be outstanding. In the event that any date on which any Redemption
Price is payable is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in respect of any Trust Securities called for
redemption is improperly withheld or refused and not paid either by the Trust or
by the Depositor pursuant to the Guarantee, Distributions on such Trust
Securities will continue to accrue, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities to
the date such Redemption Price is actually paid, in which case the actual
payment date will be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be made
to the recordholders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be one Business Day
prior to the relevant Redemption Date; PROVIDED, HOWEVER, that in the event that
the Preferred Securities do not remain in book-entry-only form, the relevant
record date shall be the date fifteen days prior to the relevant Redemption
Date.
(f) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected on a pro rata basis (based upon Liquidation Amounts) not more
than 60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Preferred Securities not previously called for redemption, by such
method (including, without limitation, by lot) as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to $10 or an integral multiple of $10 in excess thereof) of
the Liquidation Amount of Preferred Securities of a denomination larger than
$10. The Property Trustee shall promptly notify the Security Registrar in
writing of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Preferred Securities that has been or is to be redeemed.
SECTION 4.3. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if applicable)
on, and the Redemption Price of, the Trust Securities, as applicable, shall be
made, subject to Section 4.2(f), pro rata among the Common Securities and the
Preferred Securities based on the Liquidation Amount of the Trust Securities;
PROVIDED, HOWEVER, that if on any Distribution Date or Redemption Date any Event
of Default resulting from a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all
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accumulated and unpaid Distributions (including Additional Amounts, if
applicable) on all Outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all Outstanding Preferred
Securities, shall have been made or provided for, and all funds immediately
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions (including Additional Amounts, if applicable) on,
or the Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting from
any Debenture Event of Default, the Holder of Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default under
this Trust Agreement until the effect of all such Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated.
Until any such Event of Default under this Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the Holders of the Preferred
Securities and not the Holder of the Common Securities, and only the Holders of
the Preferred Securities will have the right to direct the Property Trustee to
act on their behalf.
SECTION 4.4. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable) in
respect of the Preferred Securities shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear on the Securities
Register or, if the Preferred Securities are held by a Clearing Agency, such
Distributions shall be made to the Clearing Agency in immediately available
funds, which shall credit the relevant Persons' accounts at such Clearing Agency
on the applicable Distribution Dates. Payments in respect of the Common
Securities shall be made in such manner as shall be mutually agreed between the
Property Trustee and the Common Securityholder.
SECTION 4.5. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
form required to be filed in respect of the Trust in each taxable year of the
Trust and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
provided on such form. The Administrative Trustees shall provide the Depositor
and the Property Trustee with a copy of all such returns and reports promptly
after such filing or furnishing. The Trustees shall comply with United States
Federal withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
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SECTION 4.6. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Sums, the Property Trustee
shall promptly pay any taxes, duties or governmental charges of whatsoever
nature (other than withholding taxes) imposed on the Trust by the United States
or any other taxing authority.
SECTION 4.7. PAYMENTS UNDER INDENTURE OR PURSUANT TO DIRECT ACTIONS.
Any amount payable hereunder to any Holder of Preferred Securities (and any
Owner with respect thereto) shall be reduced by the amount of any corresponding
payment such Holder (and Owner) has directly received pursuant to Section 5.8 of
the Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. INITIAL OWNERSHIP.
Upon the formation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION 5.2. THE TRUST SECURITIES CERTIFICATES.
The Preferred Securities Certificates shall be issued in minimum
denominations of $10 Liquidation Amount and integral multiples of $10 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $10 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual signature of at
least one Administrative Trustee. Trust Securities Certificates bearing the
manual signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 5.4, 5.11
and 5.13.
SECTION 5.3. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
At the Closing Date, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Section 2.4, to be executed on behalf of the Trust and delivered to or upon the
written order of the Depositor, signed by its chairman of the board, its
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president, any executive vice president or any vice president, treasurer or
assistant treasurer or controller without further corporate action by the
Depositor, in authorized denominations.
SECTION 5.4. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES
CERTIFICATES.
The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of
Preferred Securities Certificates (the "Securities Register") in which, the
registrar designated by the Depositor (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Property Trustee shall be the
initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee or
Trustees.
The Securities Registrar shall not be required to register the transfer of
any Preferred Securities that have been called for redemption. At the option of
a Holder, Preferred Securities Certificates may be exchanged for other Preferred
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Preferred Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 5.8.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by an
Administrative Trustee in accordance with such Person's customary practice. The
Trust shall not be required to (i) issue, register the transfer of, or exchange
any Preferred Securities during a period beginning at the opening of business 15
calendar days before the date of mailing of a notice of redemption of any
Preferred Securities called for redemption and ending at the close business on
the day of such mailing or (ii) register the transfer of or exchange any
Preferred Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
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SECTION 5.5. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES.
If (a) any mutilated Trust Securities Certificate shall be surrendered to
the Securities Registrar, or if the Securities Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate and (b) there shall be delivered to the Securities Registrar and the
Administrative Trustees such security or indemnity as may be required by them to
save each of them harmless, then in the absence of notice that such Trust
Securities Certificate shall have been acquired by a bona fide purchaser, the
Administrative Trustees, or any one of them, on behalf of the Trust shall
execute and make available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust
Securities Certificate of like class, tenor and denomination. In connection
with the issuance of any new Trust Securities Certificate under this Section,
the Administrative Trustees or the Securities Registrar may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Trust Securities Certificate
issued pursuant to this Section shall constitute conclusive evidence of an
undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
SECTION 5.6. PERSONS DEEMED SECURITYHOLDERS.
The Trustees or the Securities Registrar shall treat the Person in whose
name any Trust Securities Certificate shall be registered in the Securities
Register as the owner of such Trust Securities Certificate for the purpose of
receiving Distributions and for all other purposes whatsoever, and neither the
Trustees nor the Securities Registrar shall be bound by any notice to the
contrary.
SECTION 5.7. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or cause
to be furnished to the Property Trustee (a) semi-annually on or before January 1
and July 1 in each year, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Securityholders as of the
most recent Record Date and (b) promptly after receipt by any Administrative
Trustee or the Depositor of a request therefor from the Property Trustee, such
other information as the Property Trustee may reasonably require in order to
enable the Property Trustee to discharge its obligations under this Trust
Agreement, in each case to the extent such information is in the possession or
control of the Administrative Trustees or the Depositor and is not identical to
a previously supplied list or has not otherwise been received by the Property
Trustee in its capacity as Securities Registrar. The rights of Securityholders
to communicate with other Securityholders with respect to their rights under
this Trust Agreement or under the Trust Securities, and the corresponding rights
of the Trustee shall be as provided in the Trust Indenture Act. Each
Securityholder, by receiving and holding a Trust Securities Certificate, and
each Owner shall be deemed to have agreed not to hold the Depositor, the
Property Trustee or the Administrative Trustees accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
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SECTION 5.8. MAINTENANCE OF OFFICE OR AGENCY.
The Administrative Trustees shall maintain an office or offices or agency
or agencies where Preferred Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate the principal corporate trust office
of the Property Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, as
the principal corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
SECTION 5.9. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying
Agent shall initially be the Property Trustee, and any co-paying agent chosen by
the Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee shall
no longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and upon removal of a
Paying Agent such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall
apply to the Property Trustee also in its role as Paying Agent, for so long as
the Property Trustee shall act as Paying Agent and, to the extent applicable, to
any other paying agent appointed hereunder. Any reference in this Agreement to
the Paying Agent shall include any co-paying agent unless the context requires
otherwise.
SECTION 5.10 OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
At the Closing Date, the Depositor shall acquire and retain beneficial and
record ownership of the Common Securities. To the fullest extent permitted by
law, other than a transfer in connection with a consolidation or merger of the
Depositor into another corporation, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
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Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE".
SECTION 5.11. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE.
(a) The Preferred Securities Certificates, upon original issuance, will be
issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Preferred Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Preferred Securities Certificate representing such Owner's interest
in such Preferred Securities, except as provided in Section 5.13. Unless and
until Definitive Preferred Securities Certificates have been issued to Owners
pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full force
and effect;
(ii) the Securities Registrar, the Paying Agent and the Trustees
shall be entitled to deal with the Clearing Agency for all purposes of this
Trust Agreement relating to the Book-Entry Preferred Securities
Certificates (including the payment of the Liquidation Amount of and
Distributions on the Preferred Securities evidenced by Book-Entry Preferred
Securities Certificates) the Book-Entry Preferred Securities Certificates
and shall have no obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section 5.11
conflict with any other provisions of this Trust Agreement, the provisions
of this Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the Clearing Agency
and shall be limited to those established by law and agreements between
such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless and
until Definitive Preferred Securities Certificates are issued pursuant to
Section 5.13, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit payments on
the Preferred Securities to such Clearing Agency Participants. Any
Clearing Agency designated pursuant here to will not be deemed an agent of
the Trustee for any purpose.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 5.12. NOTICES TO CLEARING AGENCY.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Preferred
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications
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specified herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
SECTION 5.13. DEFINITIVE PREFERRED SECURITIES CERTIFICATES.
If (a) the Depositor advises the Trustees in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
with respect to the Preferred Securities Certificates, and the Depositor is
unable to locate a qualified successor, (b) the Depositor at its option advises
the Trustees in writing that it elects to terminate the book-entry system
through the Clearing Agency or (c) after the occurrence of a Debenture Event of
Default, Owners of Preferred Securities Certificates representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Property Trustee in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interest of the Owners of Preferred
Securities Certificates, then the Property Trustee shall notify the Clearing
Agency and the Clearing Agency shall notify all Owners of Preferred Securities
Certificates and the other Trustees of the occurrence of any such event and of
the availability of the Definitive Preferred Securities Certificates to Owners
of such class or classes, as applicable, requesting the same. Upon surrender to
the Property Trustee of the typewritten Preferred Securities Certificate or
Certificates representing the Book Entry Preferred Securities Certificates by
the Clearing Agency, accompanied by registration instructions, the
Administrative Trustees, or any one of them, shall execute the Definitive
Preferred Securities Certificates in accordance with the instructions of the
Clearing Agency. Neither the Securities Registrar nor the Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Preferred Securities Certificates, the Trustees shall recognize
the Holders of the Definitive Preferred Securities Certificates as
Securityholders. The Definitive Preferred Securities Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as evidenced by the
execution thereof by the Administrative Trustees or any one of them.
SECTION 5.14. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive or similar rights and when issued and
delivered to Securityholders against payment of the purchase price therefor will
be fully paid and nonassessable by the Trust. The Holders of the Trust
Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
(b) or so long as any Preferred Securities remain Outstanding, if, upon a
Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately
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due and payable, the Holders of at least 25% in Liquidation Amount of the
Preferred Securities then Outstanding shall have such right by a notice in
writing to the Depositor and the Debenture Trustee; and upon any such
declaration such principal amount of and the accrued interest on all of the
Debentures shall become immediately due and payable, provided that the payment
of principal and interest on such Debentures shall remain subordinated to the
extent provided in the Indenture.
At any time after such a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture Trustee
a sum sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest (as defined in the Indenture)) on all of the
Debentures,
(B) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures,
and
(C) all sums paid or advanced by the Debenture Trustee
under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee and the Property
Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures, other
than the non-payment of the principal of the Debentures which has become
due solely by such acceleration, have been cured or waived as provided in
Section 5.13 of the Indenture.
The holders of a majority in aggregate Liquidation Amount of the Preferred
Securities may, on behalf of the Holders of all the Preferred Securities, waive
any past default under the Indenture, except a default in the payment of
principal or interest (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of the Preferred
Securities all or part of which is represented by Book-Entry Preferred
Securities Certificates, a record date shall be established for determining
Holders of Outstanding Preferred Securities entitled to join in such notice,
which record date shall be at the close of business on the day the Property
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
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provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Preferred Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or interest on Debentures having a principal amount equal to
the Liquidation Amount of the Preferred Securities of such Holder (a "Direct
Action"). Except as set forth in Section 5.14(b) and this Section 5.14(c), the
Holders of Preferred Securities shall have no right to exercise directly any
right or remedy available to the holders of, or in respect of, the Debentures.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.1. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.2
and in the Indenture and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities, PROVIDED, HOWEVER, that where a consent under
the Indenture would require the consent of each Holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote
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of the Holders of Preferred Securities, except by a subsequent vote of the
Holders of Preferred Securities. The Property Trustee shall notify all Holders
of the Preferred Securities of any notice of default received from the Debenture
Trustee with respect to the Debentures. In addition to obtaining the foregoing
approvals of the Holders of the Preferred Securities, prior to taking any of the
foregoing actions, the Trustees shall, at the expense of the Depositor, obtain
an Opinion of Counsel experienced in such matters to the effect that such action
shall not cause the Trust to fail to be classified as a grantor trust for United
States Federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or the
Trustees otherwise propose to effect, (i) any action that would adversely affect
in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Preferred Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Trust to fail to be
classified as a grantor trust for United States Federal income tax purposes.
SECTION 6.2. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders, stating the time,
place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.8 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be
so considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 6.3. MEETINGS OF PREFERRED SECURITYHOLDERS.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Preferred
Securityholders to vote on any matter upon the written request of Holders of
record of 25% of the Outstanding Preferred Securities (based upon their
Liquidation Amount) and the Administrative Trustees or the Property Trustee may,
at any time in their discretion, call a meeting of Preferred Securityholders to
vote on any matters as to which Preferred Securityholders are entitled to vote.
Holders of record of 50% of the Outstanding Preferred Securities (based
upon their Liquidation Amount), present in person or by proxy, shall constitute
a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the Preferred
Securityholders of record present, in person or by proxy, holding more than a
majority of the Preferred Securities (based upon their Liquidation Amount) held
by the Preferred Securityholders of record present,
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either in person or by proxy, at such meeting shall constitute the action of the
Preferred Securityholders, unless this Trust Agreement requires a greater number
of affirmative votes.
SECTION 6.4. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each $10 of Liquidation
Amount represented by their Trust Securities in respect of any matter as to
which such Securityholders are entitled to vote.
SECTION 6.5. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the Property
Trustee. Only Securityholders of record shall be entitled to vote. When Trust
Securities are held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Trust Securities, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust Securities. A
proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
SECTION 6.6. SECURITYHOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Securityholders at a meeting may be taken
without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their aggregate Liquidation Amount)
entitled to vote in respect of such action (or such larger proportion thereof as
shall be required by any express provision of this Trust Agreement) shall
consent to the action in writing (based upon their aggregate Liquidation
Amount).
SECTION 6.7. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of a Distribution or other action, as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
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SECTION 6.8. ACTS OF SECURITYHOLDERS.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Trust Agreement to be given, made or
taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is
by a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to take
any action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
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A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust or any Person.
SECTION 6.9. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF THE BANK.
The Bank hereby represents and warrants for the benefit of the Depositor
and the Securityholders that:
(a) the Bank is a Delaware banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) the Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement and has
taken all necessary action to authorize the execution, delivery and performance
by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and delivered
by the Bank and constitutes the valid and legally binding agreement of the Bank
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles;
(d) the execution, delivery and performance of this Trust Agreement has
been duly authorized by all necessary corporate or other action on the part of
the Bank and does not require any approval of stockholders of the Bank and such
execution, delivery and performance will not (i) violate the charter or bylaws
of the Bank, (ii) violate any provision of, or constitute, with or without
notice or lapse of time, a default under, or result in the creation or
imposition of, any Lien on any properties included in the Trust Property
pursuant to the provisions of, any indenture, mortgage, credit agreement,
license or other agreement or instrument to which the Bank is a party or by
which it is bound, or (iii) violate any law, governmental rule or regulation of
the United States or the State of Delaware, as the case may be, governing the
banking, trust or general powers of the Bank or any order, judgment or decree
applicable to the Bank;
(e) neither the authorization, execution or delivery by the Bank of this
Trust Agreement nor the consummation of any of the transactions by the Property
Trustee or the Delaware Trustee
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(as appropriate in context) contemplated herein or therein requires the consent
or approval of, the giving of notice to, the registration with or the taking of
any other action with respect to any governmental authority or agency under any
existing Federal law governing the banking, trust or general powers of the Bank,
as the case may be, under the laws of the United States or the State of
Delaware;
(f) there are no proceedings pending or, to the best the Bank's knowledge,
threatened against or affecting the Property Trustee or the Delaware Trustee in
any court or before any governmental authority, agency or arbitration board or
tribunal which, individually or in the aggregate, would materially and adversely
affect the Trust or would question the right, power and authority of the Bank to
enter into or perform its obligations as one of the Trustees under this Trust
Agreement.
SECTION 7.2. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at the Closing Date on behalf
of the Trust have been duly authorized and will have been, duly and validly
executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust Agreement
and the Securityholders will be, as of each such date, entitled to the benefits
of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by the
Trust (or the Trustees on behalf of the Trust) under the laws of the State of
Delaware or any political subdivision thereof in connection with the execution,
delivery and performance by the Bank, the Property Trustee or the Delaware
Trustee, as the case may be, of Bank, this Trust Agreement.
ARTICLE VIII
THE TRUSTEES
SECTION 8.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as provided
by this Trust Agreement and, in the case of the Property Trustee, by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Trust
Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Section.
No Administrative Trustee or the Delaware Trustee shall be subject to any
liability under this Trust Agreement except for its own grossly negligent
action, its own grossly negligent failure to act, or its own willful misconduct.
To the
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extent that, at law or in equity, an Administrative Trustee or the Delaware
Trustee has duties (including fiduciary duties) and liabilities relating thereto
to the Trust or to the Securityholders, such Administrative Trustee or the
Delaware Trustee shall not be liable to the Trust or to any Securityholder for
such Trustee's good faith reliance on the provisions of this Trust Agreement.
The provisions of this Trust Agreement, to the extent that they restrict the
duties and liabilities of the Administrative Trustees or the Delaware Trustee
otherwise existing at law or in equity, are agreed by the Depositor and the
Securityholders to replace such other duties and liabilities of the
Administrative Trustees or the Delaware Trustee.
(b) All payments made by the Property Trustee or a Paying Agent in respect
of the Trust Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable the Property Trustee or a Paying
Agent to make payments in accordance with the terms hereof. Each
Securityholder, by its acceptance of a Trust Security, agrees that it will look
solely to the revenue and proceeds from the Trust Property to the extent legally
available for distribution to it as herein provided and that the Trustees are
not personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 8.1(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Trust Agreement or, in the case of the Property Trustee, in
the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent
in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of the Trust Securities given in accordance
with this Trust Agreement relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under
this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the Payment
Account shall be to deal with such Property in a similar manner as the
Property Trustee deals with similar property for its own account, subject
to the protections and limitations on liability afforded to the Property
Trustee under this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with the
Depositor; and money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
maintained by the Property Trustee pursuant to Section 3.1 and except to
the extent otherwise required by law; and
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(v) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor with their
respective duties under this Trust Agreement, nor shall the Property
Trustee be liable for the default or misconduct of the Administrative
Trustees or the Depositor.
SECTION 8.2. CERTAIN NOTICES.
(a) Within 5 Business Days after the occurrence of any Event of Default
actually known to a Responsible Officer of the Property Trustee, the Property
Trustee shall transmit, in the manner and to the extent provided in Section
10.9, notice of such Event of Default to the Securityholders, the Administrative
Trustees and the Depositor, unless the Event of Default shall have been cured or
waived. For purposes of this Section the term "Event of Default" means any
event that is, or after notice or lapse of time or both would become, and Event
of Default.
(b) The Administrative Trustees shall transmit, to the Securityholders in
the manner and to the extent provided in Section 10.9, notice of the Depositor's
election to begin or further extend an Extension Period on the Debentures
(unless such election shall have been revoked) within the time specified for
transmitting such notice to the holders of the Debentures pursuant to the
Indenture as originally executed.
SECTION 8.3. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with any other provisions
contained herein or (iii) the Property Trustee is unsure of the application of
any provision of this Trust Agreement, then, except as to any matter as to which
the Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor; PROVIDED, HOWEVER, that if the
Property Trustee does not receive such instructions of the Depositor within ten
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not be less than two Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Trust Agreement as
it shall deem advisable and in the best interests of the
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Securityholders, in which event the Property Trustee shall have no liability
except for its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative Trustees
contemplated by this Trust Agreement shall be sufficiently evidenced by an
Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the Property
Trustee shall deem it desirable that a matter be established before undertaking,
suffering or omitting any action hereunder, the Property Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Depositor or the Administrative
Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;
(f) the Property Trustee may consult with counsel (which counsel may be
counsel to the Depositor or any of its Affiliates, and may include any of its
employees) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice, such counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees; the Property Trustee shall
have the right at any time to seek instructions concerning the administration of
this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through its agents or
attorneys, provided that the Property Trustee shall be responsible for its own
negligence or recklessness with respect to selection of any agent or attorney
appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under
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the terms of the Trust Securities in respect of such remedy, right or action,
(ii) may refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in acting in
accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION 8.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 8.5. MAY HOLD SECURITIES.
Except as provided in the definition of the term "Outstanding" in Article
I, any Trustee or any other agent of any Trustee or the Trust, in its individual
or any other capacity, may become the owner or pledgee of Trust Securities and,
subject to Sections 8.8 and 8.13, may otherwise deal with the Trust with the
same rights it would have if it were not a Trustee or such other agent.
SECTION 8.6. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation for
all services rendered by them hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust) as specified in a separate agreement between any of the Trustees and the
Depositor;
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence, bad faith or willfulness;
and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any
officer, director, shareholder, employee,
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representative or agent of any Trustee, and (iv) any employee or agent of the
Trust or its Affiliates, (referred to herein as an "Indemnified Person") from
and against any loss, damage, liability, tax, penalty, expense or claim of any
kind or nature whatsoever incurred by such Indemnified Person by reason of the
creation, operation or dissolution of the Trust or any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the scope
of authority conferred on such Indemnified Person by this Trust Agreement,
except that no Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by reason of
gross negligence (or ordinary negligence in the case of the Property Trustee),
bad faith or willful misconduct with respect to such acts or omissions.
The provisions of this Section 8.6 shall survive the termination of this
Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a result
of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee may engage in or possess an interest in other
business ventures of any nature or description, independently or with others,
similar or dissimilar to the business of the Trust, and the Trust and the
Holders of Trust Securities shall have no rights by virtue of this Trust
Agreement in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. Neither the
Depositor, nor any Trustee, shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and the
Depositor or any Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Trustee may engage or be
interested in any financial or other transaction with the Depositor or any
Affiliate of the Depositor, or may act as depository for, trustee or agent for,
or act on any committee or body of holders of, securities or other obligations
of the Depositor or its Affiliates.
SECTION 8.7. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with respect
to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
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(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
SECTION 8.8 CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
SECTION 8.9. CO-TRUSTEES AND SEPARATE TRUSTEE.
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Depositor and the Administrative Trustees, by agreed
action of the majority of such Trustees, shall have power to appoint, and upon
the written request of the Administrative Trustees, the Depositor shall for such
purpose join with the Administrative Trustees in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Depositor does not join
in such appointment within 15 days after the receipt by it of a request so to
do, or in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section shall either
be (i) a natural person who is at least 21 years of age and a resident of the
United States or (ii) a legal entity with its principal place of business in the
United States that shall act through one or more persons authorized to bind such
entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by law,
but to such extent only, be appointed subject to the following terms, namely:
(a) The Trust Securities shall be executed and delivered and all rights,
powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder shall be exercised
solely by such Trustees and not by such co-trustee or separate trustee.
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(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing executed
by it, with the written concurrence of the Depositor, may accept the resignation
of or remove any co-trustee or separate trustee appointed under this Section,
and, in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee shall have power to accept the resignation of, or remove, any
such co-trustee or separate trustee without the concurrence of the Depositor.
Upon the written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally liable
by reason of any act or omission of the Property Trustee or any other trustee
hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be deemed
to have been delivered to each such co-trustee and separate trustee.
SECTION 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
No resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Common
Securityholder. If the instrument of acceptance by the successor Trustee
required by Section 8.11 shall not have been delivered to the Relevant Trustee
within 30 days after the giving of such notice of resignation, the Relevant
Trustee may petition, at the expense of the Trust, any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by Act of the Common Securityholder. If
a Debenture Event of Default shall have occurred and be continuing, the Property
Trustee or the Delaware Trustee, or both of them, may be removed at such time by
Act of the Holders of a majority in Liquidation Amount of
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the Preferred Securities, delivered to the Relevant Trustee (in its individual
capacity and on behalf of the Trust). In no event will the Holders of the
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustee. An Administrative Trustee may be removed by the Common
Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of acting as
Trustee, or if a vacancy shall occur in the office of any Trustee for any cause,
at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section 8.11. If an
Administrative Trustee shall resign, be removed or become incapable of acting as
Administrative Trustee, at a time when a Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder by Act of the Common
Securityholder delivered to the Administrative Trustee shall promptly appoint a
successor Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no successor Relevant Trustee shall have been so appointed
by the Common Securityholder or the Preferred Securityholders and accepted
appointment in the manner required by Section 8.11, any Securityholder who has
been a Securityholder of Trust Securities for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each removal
of a Trustee and each appointment of a successor Trustee to all Securityholders
in the manner provided in Section 10.8 and shall give notice to the Depositor.
Each notice shall include the name of the successor Relevant Trustee and the
address of its Corporate Trust Office if it is the Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
SECTION 8.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
In case of the appointment hereunder of a successor Trustee such successor
Trustee so appointed shall execute, acknowledge and deliver to the Trust and to
the retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or
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conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Depositor or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and if the Property Trustee is the
resigning Trustee shall duly assign, transfer and deliver to the successor
Trustee all property and money held by such retiring Property Trustee hereunder.
In case of the appointment hereunder of a successor Relevant Trustee, the
retiring Relevant Trustee and each successor Relevant Trustee with respect to
the Trust Securities shall execute and deliver an amendment hereto wherein each
successor Relevant Trustee shall accept such appointment and which (a) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified and
eligible under this Article.
SECTION 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such 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.
SECTION 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative
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to the Trust or any other obligor upon the Trust Securities or the property of
the Trust or of such other obligor or their creditors, the Property Trustee
(irrespective of whether any Distributions on the Trust Securities shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Property Trustee shall have made any demand on the
Trust for the payment of any past due Distributions) shall be entitled and
empowered, to the fullest extent permitted by law, by intervention in such
proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Trust Securities and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Property Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Property Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Property Trustee and, in the event the Property Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel, and
any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement adjustment or compensation affecting the Trust
Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 8.14. REPORTS BY PROPERTY TRUSTEE.
(a) Not later than March 31 of each year commencing with the year
commencing January 1, 1998, the Property Trustee shall transmit to all
Securityholders in accordance with Section 10.8, and to the Depositor, a brief
report dated as of the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if to
the best of its knowledge it has continued to be eligible under said
Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with all of
its obligations under this Trust Agreement during the twelve-month period
(or, in the case of the initial report, the period since the Closing Date)
ending with such December 31 or, if the Property Trustee has not complied
in any material respect with such obligations, a description of such
noncompliance; and
(iii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action taken by
the Property Trustee in the
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performance of its duties hereunder which it has not previously reported
and which in its opinion materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to Securityholders
such reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Property Trustee with each national stock exchange, the
Nasdaq National Market or such other interdealer quotation system or
self-regulatory organization upon which the Trust Securities are listed or
traded, with the Commission and with the Depositor.
SECTION 8.15. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
SECTION 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 8.17. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five (5) provided that the Holder of
all of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware Trustee
may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of a Trustee shall not operate to annul the
Trust. Whenever a vacancy in the number of Administrative Trustees shall occur,
until such vacancy is filled by the appointment of an Administrative Trustee in
accordance with Section 8.10, the Administrative Trustees in office, regardless
of their number (and notwithstanding any other provision of this Agreement),
shall have all the powers granted to the Administrative Trustees and shall
discharge all the duties imposed upon the Administrative Trustees by this Trust
Agreement.
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SECTION 8.18. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
2.7(a), including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from time to
time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of this Trust Agreement, as set forth herein.
SECTION 8.19. VOTING.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX.
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. DISSOLUTION UPON EXPIRATION DATE.
Unless dissolved earlier, the Trust shall automatically dissolve on
December 31, 2028 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
SECTION 9.2. EARLY DISSOLUTION.
The first to occur of any of the following events is an "Early Dissolution
Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the dissolution
or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the Depositor at
any time to dissolve the Trust and distribute Debentures to Securityholders in
exchange for a Like Amount of the Preferred Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Preferred Securities in connection with
the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
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SECTION 9.3. DISSOLUTION.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall dissolve upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders, and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Business Trust Act.
SECTION 9.4. LIQUIDATION.
(a) If an Early Dissolution Event specified in clause (a), (b) or (d) of
Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by
the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 9.4(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for certificates
representing the Like Amount of the Debentures, or if Section 9.4(d)
applies receive a Liquidation Distribution, as the Administrative Trustees
or the Property Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the
liquidation of the Trust and distribution of the Debentures to Securityholders,
the Administrative Trustees shall establish a record date for such distribution
(which shall be not more than 45 days prior to the Liquidation Date) and, either
itself acting as exchange agent or through the appointment of a separate
exchange agent, shall establish such procedures as it shall deem appropriate to
effect the distribution of Debentures in exchange for the Outstanding Trust
Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation
Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii)
certificates representing a Like Amount of Debentures will be issued to holders
of Trust Securities Certificates, upon surrender of such certificates to the
Administrative Trustees or their agent for exchange, (iii) the Depositor shall
use its best efforts to have the Debentures listed on the Nasdaq National Market
or on such other
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exchange, interdealer quotation system or self-regulatory organization as the
Preferred Securities are then listed, (iv) any Trust Securities Certificates not
so surrendered for exchange will be deemed to represent a Like Amount of
Debentures, accruing interest at the rate provided for in the Debentures from
the last Distribution Date on which a Distribution was made on such Trust
Securities Certificates until such certificates are so surrendered (and until
such certificates are so surrendered, no payments of interest or principal will
be made to Holders of Debentures represented by such certificates) and (v) all
rights of Securityholders holding Trust Securities will cease, except the right
of such Securityholders to receive a Like Amount of Debentures upon surrender of
Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee in such manner as the
Property Trustee determines. In such event, on the date of the dissolution,
winding-up or other termination of the Trust, Securityholders will be entitled
to receive out of the assets of the Trust available for distribution to
Securityholders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, an amount equal to the Liquidation Amount per Trust
Security plus accumulated and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If, upon any such
dissolution, winding up or termination, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Trust on the Trust Securities shall be paid
on a pro rata basis (based upon Liquidation Amounts). The holder of the Common
Securities will be entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as aforesaid) with
Holders of Preferred Securities, except that, if a Debenture Event of Default
has occurred and is continuing, Holders of the Preferred Securities shall have a
priority over the Holders of Common Securities.
SECTION 9.5. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE
TRUST.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except pursuant
to this Section 9.5. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; PROVIDED, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Preferred Securities or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii) the
Depositor expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Debentures,
(iii) the Successor Securities are listed or traded, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or other organization on
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which the Preferred Securities are then listed or traded, if any, (iv) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Preferred Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose identical to that of
the Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Depositor has received an Opinion of Counsel
to the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) the Depositor owns all of the
Common Securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in Liquidation Amount of the
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as other than a grantor trust for
United States Federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death or incapacity of any person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such person or any
Securityholder for such person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION 10.2. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the Property
Trustee, the Administrative Trustees and the Depositor, without the consent of
any Securityholders, (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, which shall not be inconsistent with the other provisions
of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions
of this Trust Agreement to such extent as shall be necessary to ensure that the
Trust will be classified for United States Federal
47
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income tax purposes as a grantor trust at all times that any Trust Securities
are outstanding or to ensure that the Trust will not be required to register as
an investment company under the 1940 Act; PROVIDED, HOWEVER, that in the case of
clause (i), such action shall not adversely affect in any material respect the
interests of any Securityholder, and any amendments of this Trust Agreement
shall become effective when notice thereof is given to the Securityholders.
(b) Except as provided in Section 10.2(c) hereof, any provision of this
Trust Agreement may be amended by the Administrative Trustees and the Property
Trustee with (i) the consent of Trust Securityholders representing not less than
a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the
effect that such amendment or the exercise of any power granted to the Trustees
in accordance with such amendment will not affect the Trust's status as a
grantor trust for United States Federal income tax purposes or the Trust's
exemption from status of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the consent of each affected Securityholder (such consent
being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
paragraph (c) of this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Administrative Trustee shall enter into or consent to any amendment to this
Trust Agreement which would cause the Trust to fail or cease to qualify for the
exemption from status of an investment company under the 1940 Act or fail or
cease to be classified as a grantor trust for United States Federal income tax
purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Delaware Trustee or the Depositor, as the case may
be, this Trust Agreement may not be amended in a manner which imposes any
additional obligation on the Depositor or the Delaware Trustee.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees shall promptly provide to the Depositor a copy of such
amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
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SECTION 10.3. COUNTERPARTS.
This Trust Agreement may be executed in one or more counterparts, each of
which shall be an original and all of which shall constitute one and the same
instrument.
SECTION 10.4. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 10.5. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION 10.6. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day that
is not a Business Day, then such payment need not be made on such date but may
be made on the next succeeding day that is a Business Day (except as otherwise
provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as
though made on the date fixed for such payment, and no interest shall accrue
thereon for the period after such date.
SECTION 10.7. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the benefit
of any successor to the Depositor, the Trust or the Relevant Trustee, including
any successor by operation of law. Except in connection with a consolidation,
merger or sale involving the Depositor that is permitted under Article Eight of
the Indenture and pursuant to which the assignee agrees in writing to perform
the Depositor's obligations hereunder, the Depositor shall not assign its
obligations hereunder.
SECTION 10.8. HEADINGS.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 10.9. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
any Securityholder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case
49
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of a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Pacific Crest
Capital, Inc., 30343 Canwood Street, Agoura Hills, California, 91301, Attention:
Gary L. Wehrle, facsimile number: (818) 865-3260. Any notice to Preferred
Securityholders shall also be given to such owners as have, within two years
preceding the giving of such notice, filed their names and addresses with the
Property Trustee for that purpose. Such notice, demand or other communication
to or upon a Securityholder shall be deemed to have been sufficiently given or
made, for all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees
shall be given in writing addressed (until another address is published by the
Trust) as follows: (a) with respect to the Property Trustee to Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington , Delaware
19890-0001; (b) with respect to the Delaware Trustee, to Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration; and (c) with respect to
the Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention Administrative Trustees of PCC Capital I." Such
notice, demand or other communication to or upon the Trust or the Property
Trustee shall be deemed to have been sufficiently given or made only upon actual
receipt of the writing by the Trust or the Property Trustee.
SECTION 10.10. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any Bankruptcy Laws or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 10.10, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor, it shall file an answer with the
bankruptcy court or otherwise properly contest the filing of such petition by
the Depositor against the Trust or the commencement of such action and raise the
defense that the Depositor has agreed in writing not to take such action and
should be stopped and precluded therefrom and such other defenses, if any, as
counsel for the Trustee or the Trust may assert. The provisions of this Section
10.9 shall survive the termination of this Trust Agreement.
SECTION 10.11. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee for
the purposes of the Trust Indenture Act.
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(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Trust Agreement as so modified
or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 10.12. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY
OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE
OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
PACIFIC CREST CAPITAL, INC.
By:
-------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
as Property Trustee
By:
-------------------------------------
Name:
Title:
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WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
-------------------------------------
Name:
Title:
-------------------------------------
Gary L. Wehrle,
as Administrative Trustee
-------------------------------------
Robert J. Dennen,
as Administrative Trustee
-------------------------------------
Lyle C. Lodwick,
as Administrative Trustee
52
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EXHIBIT A
CERTIFICATE OF TRUST
OF
PCC CAPITAL I
This Certificate of Trust of PCC Capital I (the "Trust"), dated __________,
1997, is being duly executed and filed by the undersigned, as trustees, to form
a business trust under the Delaware Business Trust Act (12 Del. C. (Section )
3801 et seq.).
1. NAME. The name of the business trust being formed hereby is PCC Capital
I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By:
------------------------------------
Name:
Title:
------------------------------------
Gary L. Wehrle,
Administrative Trustee
------------------------------------
Robert J. Dennen,
Administrative Trustee
------------------------------------
Lyle C. Lodwick,
Administrative Trustee
53
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EXHIBIT B
The Depository Trust Company,
55 Water Street, 49th Floor,
New York, New York 10041-0099
, 1997
- ----------
Attention:
---------------
General Counsel's Office
Re: PCC CAPITAL I ____% CUMULATIVE TRUST PREFERRED SECURITIES
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to the
issuance and deposit with The Depository Trust Company ("DTC") of the PCC
Capital I ____% Cumulative Trust Preferred Securities, (the "Trust Preferred
Securities"), of PCC Capital I, a Delaware business trust (the "Issuer"), formed
pursuant to a Trust Agreement between Pacific Crest Capital, Inc. ("Pacific
Crest") and Wilmington Trust Company, as Property Trustee, Wilmington Trust
Company, as Delaware Trustee, and the Administrative Trustees named therein.
The payment of distributions on the Trust Preferred Securities, and payments due
upon liquidation of the Issuer or redemption of the Trust Preferred Securities,
to the extent the Issuer has funds available for the payment thereof are
guaranteed by Pacific Crest to the extent set forth in a Guarantee Agreement
dated ____________, 1997 by Pacific Crest with respect to the Trust Preferred
Securities. Pacific Crest and the Issuer propose to sell the Trust Preferred
Securities to certain Underwriters (the "Underwriters") pursuant to a
Underwriting Agreement dated ____________, 1997 by and among the Underwriters,
the Issuer and Pacific Crest, and the Underwriters wish to take delivery of the
Trust Preferred Securities through DTC. Wilmington Trust Company is acting as
transfer agent and registrar with respect to the Trust Preferred Securities (the
"Transfer Agent and Registrar").
To induce DTC to accept the Trust Preferred Securities as eligible for
deposit at DTC, and to act in accordance with DTC's rules with respect to the
Trust Preferred Securities, the Issuer, the Transfer Agent and Registrar and DTC
agree among each other as follows:
1. Prior to the closing of the sale of the Trust Preferred Securities to
the Underwriters, which is expected to occur on or about ____________, 1997,
there shall be deposited with DTC one or more global certificates (individually
and collectively, the "Global Certificate") registered in the
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name of DTC's Trust Preferred Securities nominee, Cede & Co., representing an
aggregate of ____________ Trust Preferred Securities and bearing the following
legend:
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to
the Issuer or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede
& Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
2. The Amended and Restated Trust Agreement of the Issuer provides for the
voting by holders of the Trust Preferred Securities under certain limited
circumstances. The Issuer shall establish a record date for such purposes and
shall, to the extent possible, give DTC notice of such record date not less than
15 calendar days in advance of such record date.
3. In the event of a stock split, conversion, recapitalization,
reorganization or any other similar transaction resulting in the cancellation of
all or any part of the Trust Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice of such event at least 5
business days prior to the effective date of such event.
4. In the event of distribution on, or an offering or issuance of rights
with respect to, the Trust Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount
of and conditions, if any, applicable to the payment of any such distribution or
any such offering or issuance of rights; (b) any applicable expiration or
deadline date, or any date by which any action on the part of the holders of
Trust Preferred Securities is required; and (c) the date any required notice is
to be mailed by or on behalf of the Issuer to holders of Trust Preferred
Securities or published by or on behalf of the Issuer (whether by mail or
publication, the "Publication Date"). Such notice shall be sent to DTC by a
secure means (e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before the
Publication Date. The Issuer or the Transfer Agent and Registrar will forward
such notice either in a separate secure transmission for each CUSIP number or in
a secure transmission of multiple CUSIP numbers (if applicable) that includes a
manifest or list of each CUSIP number submitted in that transmission. (The
party sending such notice shall have a method to verify subsequently the use of
such means and the timeliness of such notice.) The Publication Date shall be not
less than 30 calendar days nor more than 60 calendar days prior to the payment
of any such distribution or any such offering or issuance of rights with respect
to the Trust Preferred Securities. After establishing the amount of payment to
be made on the Trust Preferred Securities, the Issuer or the Transfer Agent and
Registrar will notify DTC's Dividend Department of such payment 5 business days
prior to payment date. Notices to DTC's Dividend Department by telecopy shall
be sent to (212) 709-1723. Such notices by mail or by any other means shall be
sent to:
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<PAGE>
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt
of such telecopy by telephoning the Dividend Department at (212) 709-1270.
5. In the event of a redemption by the Issuer of the Trust Preferred
Securities, notice specifying the terms of the redemption and the Publication
Date of such notice shall be sent by the Issuer or the Transfer Agent and
Registrar to DTC not less than 30 calendar days prior to such event by a secure
means in the manner set forth in paragraph 4. Such redemption notice shall be
sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190,
and receipt of such notice shall be confirmed by telephoning (516) 227-4070.
Notice by mail or by any other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530-4719
6. In the event of any invitation to tender the Trust Preferred Securities,
notice specifying the terms of the tender and the Publication Date of such
notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by
a secure means and in a timely manner as described in paragraph 4. Notices to
DTC pursuant to this paragraph and notices of other corporate actions (including
mandatory tenders, exchanges and capital changes) shall be sent, unless
notification to another department is expressly provided for herein, by telecopy
to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094 and
receipt of such notice shall be confirmed by telephoning (212) 709-6884, or by
mail or any other means to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
7. All notices and payment advices sent to DTC shall contain the CUSIP
number or numbers of the Trust Preferred Securities and the accompanying
designation of the Trust Preferred Securities, which, as of the date of this
letter, is "PCC Capital I ____% Cumulative Trust Preferred Securities.
8. Distribution payments or other cash payments with respect to the Trust
Preferred Securities evidenced by the Global Certificate shall be received by
Cede & Co., as nominee of DTC, or its registered assigns in next day funds on
each payment date (or in accordance with existing arrangements between the
Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be
made payable to the order of Cede & Co., and shall be addressed as follows:
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<PAGE>
NDFS Redemption Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
9. DTC may by prior written notice direct the Issuer and the Transfer Agent
and Registrar to use any other telecopy number or address of DTC as the number
or address to which notices or payments may be sent.
10. In the event of a conversion, redemption, or any other similar
transaction (e.g., tender made and accepted in response to the Issuer's or the
Transfer Agent and Registrar's invitation) necessitating a reduction in the
aggregate number of Trust Preferred Securities outstanding evidenced by Global
Certificates, DTC, in its discretion: (a) may request the Issuer or the Transfer
Agent and Registrar to issue and countersign a new Global Certificate; or (b)
may make an appropriate notation on the Global Certificate indicating the date
and amount of such reduction.
11. DTC may discontinue its services as a securities depositary with
respect to the Trust Preferred Securities at any time by giving at least 90
days' prior written notice to the Issuer and the Transfer Agent and Registrar
(at which time DTC will confirm with the Issuer or the Transfer Agent and
Registrar the aggregate number of Trust Preferred Securities deposited with it)
and discharging its responsibilities with respect thereto under applicable law.
Under such circumstances, the Issuer may determine to make alternative
arrangements for book-entry settlement for the Trust Preferred Securities, make
available one or more separate global certificates evidencing Trust Preferred
Securities to any Participant having Trust Preferred Securities credited to its
DTC account, or issue definitive Trust Preferred Securities to the beneficial
holders thereof, and in any such case, DTC agrees to cooperate fully with the
Issuer and the Transfer Agent and Registrar, and to return the Global
Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
12. In the event that the Issuer determines that beneficial owners of Trust
Preferred Securities shall be able to obtain definitive Trust Preferred
Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of
the availability of certificates. In such event, the Issuer or the Transfer
Agent and Registrar shall issue, transfer and exchange certificates in
appropriate amounts, as required by DTC and others, and DTC agrees to cooperate
fully with the Issuer and the Transfer Agent and Registrar and to return the
Global Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
13. This letter may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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Nothing herein shall be deemed to require the Transfer Agent and Registrar
to advance funds on behalf of PCC Capital I.
Very truly yours,
PCC CAPITAL I
(as Issuer)
By:
------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
as Trustee, Paying Agent and Registrar
By:
------------------------------------
Name:
Title:
RECEIVED AND ACCEPTED:
THE DEPOSITORY TRUST COMPANY
By:
------------------------------------
AUTHORIZED OFFICER
58
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER C-1 NUMBER OF COMMON SECURITIES ____
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
PCC CAPITAL I
____% COMMON SECURITIES
(LIQUIDATION AMOUNT $10 PER COMMON SECURITY)
PCC Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that Pacific Crest Capital,
Inc. (the "Holder") is the registered owner of ________ common securities of
the Trust representing beneficial interests of the Trust and designated the
____% Common Securities (liquidation amount $10 per Common Security) (the
"Common Securities"). In accordance with Section 5.10 of the Trust Agreement
(as defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of ___________,1997, as the same may be amended from time to time (the "Trust
Agreement") including the designation of the terms of the Common Securities as
set forth therein. The Trust will furnish a copy of the Trust Agreement to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of ______________,1997.
PCC CAPITAL I
By:
-----------------------------------------
Name:
ADMINISTRATIVE TRUSTEE
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EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement"), dated as of
____________, 1997, between Pacific Crest Capital, Inc., a Delaware corporation
("Pacific"), and PCC Capital I, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from Pacific and to issue and sell ____%
Cumulative Trust Preferred Securities (the "Trust Preferred Securities") with
such powers, preferences and special rights and restrictions as are set forth in
the Amended and Restated Trust Agreement of the Trust dated as of _________,
1997 as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, Pacific will directly or indirectly own all of the Common
Securities of the Trust and will issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Trust Preferred Securities, which purchase Pacific hereby agrees shall benefit
Pacific and which purchase Pacific acknowledges will be made in reliance upon
the execution and delivery of this Agreement, Pacific and the Trust hereby agree
as follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY PACIFIC.
Subject to the terms and conditions hereof, Pacific hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment,
when and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to holders
of any Trust Preferred Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Trust Preferred Securities
or such other similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
SECTION 1.2. TERM OF AGREEMENT.
This Agreement shall terminate and be of no further force and effect upon
the later of (a) the date on which full payment has been made of all amounts
payable to all holders of all the Trust Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise) and (b) the date on which there
are no Beneficiaries remaining; PROVIDED, HOWEVER, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any holder of Trust Preferred Securities or any Beneficiary must restore
payment of any sums paid under the Trust Preferred Securities, under any
Obligation, under the Guarantee Agreement dated the date hereof
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by Pacific and Wilmington Trust Company, a Delaware banking corporation, as
guarantee trustee or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
SECTION 1.3. WAIVER OF NOTICE.
Pacific hereby waives notice of acceptance of this Agreement and of any
Obligation to which it applies or may apply, and Pacific hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 1.4. NO IMPAIRMENT.
The obligations, covenants, agreements and duties of Pacific under this
Agreement shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the obligations;
(b) any failure, omission, delay or lack of diligence on the part of the
Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind;
or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, Pacific with respect to the happening of any of the foregoing.
SECTION 1.5. ENFORCEMENT.
A Beneficiary may enforce this Agreement directly against Pacific and
Pacific waives any right or remedy to require that any action be brought against
the Trust or any other person or entity before proceeding against Pacific.
SECTION 1.6. SUBROGATION.
Pacific shall be subrogated to all (if any) rights of the Trust in respect
of any amounts paid to the Beneficiaries by Pacific under this Agreement;
PROVIDED, HOWEVER, that Pacific shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Agreement, if, at the
time of any such payment, any amounts are due and unpaid under this Agreement.
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ARTICLE II
SECTION 2.1. BINDING EFFECT.
All guarantees and agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives of Pacific and
shall inure to the benefit of the Beneficiaries.
SECTION 2.2. AMENDMENT.
So long as there remains any Beneficiary or any Trust Preferred Securities
of any series are outstanding, this Agreement shall not be modified or amended
in any manner adverse to such Beneficiary or to the holders of the Trust
Preferred Securities.
SECTION 2.3. NOTICES.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail), telex or by registered
or certified mail, addressed as follows (and if so given, shall be deemed given
when mailed or upon receipt of an answer-back, if sent by telex):
PCC Capital I
c/o Pacific Crest Capital, Inc.
30343 Canwood Street
Agoura Hills, California 91301
Facsimile No.: (818) 865-3260
Attention: Gary L. Wehrle
Pacific Crest Capital, Inc.
30343 Canwood Street
Agoura Hills, California 91301
Facsimile No.: (818) 865-3260
Attention: Gary L. Wehrle
SECTION 2.4. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD
TO CONFLICT OF LAW PRINCIPLES).
62
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
PACIFIC CREST CAPITAL, INC.
By:
---------------------------------------
Name:
Title:
PCC CAPITAL I
By:
---------------------------------------
Name:
ADMINISTRATIVE TRUSTEE
63
<PAGE>
EXHIBIT E
This Preferred Security is a Global Certificate within the meaning of the Trust
Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository.
This Preferred Security is exchangeable for Trust Preferred Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Trust Agreement and no transfer of
this Preferred Security (other than a transfer of this Preferred Security as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to PCC Capital I or its
agent for registration of transfer, exchange or payment, and any Preferred
Security issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
CERTIFICATE NUMBER P-__ NUMBER OF TRUST PREFERRED SECURITIES _______
CUSIP NO.
----------
CERTIFICATE EVIDENCING TRUST PREFERRED SECURITIES
OF
PCC CAPITAL I
____% CUMULATIVE TRUST PREFERRED SECURITIES,
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
PCC Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that ________________ (the
"Holder") is the registered owner of ________ ( ) Trust Preferred Securities
of the Trust representing an undivided beneficial interest in the assets of the
Trust and designated the PCC Capital I ____% Cumulative Trust Preferred
Securities, (liquidation amount $10 per Preferred Security) (the "Trust
Preferred Securities"). The Trust Preferred Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer as
provided in Section 5.4 of the Trust Agreement (as defined below). The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Trust Preferred Securities are set forth in, and this
certificate and the Trust Preferred Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended and
64
<PAGE>
Restated Trust Agreement of the Trust dated as of __________, 1997, as the same
may be amended from time to time (the "Trust Agreement") including the
designation of the terms of Trust Preferred Securities as set forth therein.
The Holder is entitled to the benefits of the Guarantee Agreement entered into
by Pacific Crest Capital, Inc., a Delaware corporation, and [insert name of
Guarantee Trustee], as guarantee trustee, dated as of ___________, 1997, (the
"Guarantee"), to the extent provided therein. The Trust will furnish a copy of
the Trust Agreement and the Guarantee to the Holder without charge upon written
request to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ___ day of ___________, 1997.
PCC Capital I
By:
---------------------------------------
Name:
ADMINISTRATIVE TRUSTEE
65
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
----------------
Signature:
-------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Preferred
Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
SEC Rule 17Ad-15.
66
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINED TERMS......................................................1
Section 1.1. DEFINITIONS.................................................1
ARTICLE II. ESTABLISHMENT OF THE TRUST.......................................10
Section 2.1. NAME.......................................................10
Section 2.2. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS...................................................10
Section 2.3. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES...................................................10
Section 2.4. ISSUANCE OF THE PREFERRED SECURITIES.......................10
Section 2.5. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND
PURCHASE OF DEBENTURES.....................................11
Section 2.6. DECLARATION OF TRUST.......................................11
Section 2.7. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS...........11
Section 2.8. ASSETS OF TRUST............................................15
Section 2.9. TITLE TO TRUST PROPERTY....................................15
ARTICLE III. PAYMENT ACCOUNT.................................................15
Section 3.1. PAYMENT ACCOUNT............................................15
ARTICLE IV. DISTRIBUTIONS; REDEMPTION.......................................16
Section 4.1. DISTRIBUTIONS..............................................16
Section 4.2. REDEMPTION.................................................17
Section 4.3. SUBORDINATION OF COMMON SECURITIES.........................18
Section 4.4. PAYMENT PROCEDURES.........................................19
Section 4.5. TAX RETURNS AND REPORTS....................................19
Section 4.6. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST................20
Section 4.7. PAYMENTS UNDER INDENTURE OR PURSUANT TO DIRECT ACTIONS.....20
ARTICLE V. TRUST SECURITIES CERTIFICATES.....................................20
Section 5.1. INITIAL OWNERSHIP..........................................20
Section 5.2. THE TRUST SECURITIES CERTIFICATES..........................20
Section 5.3. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES....20
Section 5.4. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES....................................21
Section 5.5. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES...............................................22
Section 5.6. PERSONS DEEMED SECURITYHOLDERS.............................22
Section 5.7. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.....22
Section 5.8. MAINTENANCE OF OFFICE OR AGENCY............................23
i
<PAGE>
Section 5.9. APPOINTMENT OF PAYING AGENT...............................23
Section 5.10. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR...............23
Section 5.11. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE....................................24
Section 5.12. NOTICES TO CLEARING AGENCY................................24
Section 5.13. DEFINITIVE PREFERRED SECURITIES CERTIFICATES..............25
Section 5.14. RIGHTS OF SECURITYHOLDERS.................................25
ARTICLE VI. ACTS OF SECURITYHOLDERS; MEETINGS; VOTING.......................27
Section 6.1. LIMITATIONS ON VOTING RIGHTS..............................27
Section 6.2. NOTICE OF MEETINGS........................................28
Section 6.3. MEETINGS OF PREFERRED SECURITYHOLDERS.....................28
Section 6.4. VOTING RIGHTS.............................................29
Section 6.5. PROXIES, ETC..............................................29
Section 6.6. SECURITYHOLDER ACTION BY WRITTEN CONSENT..................29
Section 6.7. RECORD DATE FOR VOTING AND OTHER PURPOSES.................29
Section 6.8. ACTS OF SECURITYHOLDERS...................................30
Section 6.9. INSPECTION OF RECORDS.....................................31
ARTICLE VII. REPRESENTATIONS AND WARRANTIES................................31
Section 7.1. REPRESENTATIONS AND WARRANTIES OF THE BANK................31
Section 7.2. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR...............32
ARTICLE VIII. THE TRUSTEES..................................................32
Section 8.1. CERTAIN DUTIES AND RESPONSIBILITIES.......................32
Section 8.2. CERTAIN NOTICES...........................................34
Section 8.3. CERTAIN RIGHTS OF PROPERTY TRUSTEE........................34
Section 8.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES....36
Section 8.5. MAY HOLD SECURITIES.......................................36
Section 8.6. COMPENSATION; INDEMNITY; FEES.............................36
Section 8.7. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF
TRUSTEES..................................................37
Section 8.8. CONFLICTING INTERESTS.....................................38
Section 8.9. CO-TRUSTEES AND SEPARATE TRUSTEE..........................38
Section 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.........39
Section 8.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR....................40
Section 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS..................................................41
Section 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST.....................................................41
Section 8.14. REPORTS BY PROPERTY TRUSTEE...............................42
Section 8.15. REPORTS TO THE PROPERTY TRUSTEE...........................43
Section 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT..........43
Section 8.17. NUMBER OF TRUSTEES........................................43
ii
<PAGE>
Section 8.18. DELEGATION OF POWER.......................................44
Section 8.19. VOTING....................................................44
ARTICLE IX. DISSOLUTION, LIQUIDATION AND MERGER.............................44
Section 9.1. DISSOLUTION UPON EXPIRATION DATE..........................44
Section 9.2. EARLY DISSOLUTION.........................................44
Section 9.3. DISSOLUTION...............................................45
Section 9.4. LIQUIDATION...............................................45
Section 9.5. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
OF THE TRUST..............................................46
ARTICLE X. MISCELLANEOUS PROVISIONS.........................................47
Section 10.1. LIMITATION OF RIGHTS OF SECURITYHOLDERS...................47
Section 10.2. AMENDMENT.................................................47
Section 10.3. COUNTERPARTS..............................................49
Section 10.4. SEPARABILITY..............................................49
Section 10.5. GOVERNING LAW.............................................49
Section 10.6. PAYMENTS DUE ON NON-BUSINESS DAY..........................49
Section 10.7. SUCCESSORS................................................49
Section 10.8. HEADINGS..................................................49
Section 10.9. REPORTS, NOTICES AND DEMANDS..............................49
Section 10.10. AGREEMENT NOT TO PETITION.................................50
Section 10.11. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT....50
Section 10.12. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE
AND INDENTURE.............................................51
EXHIBIT A....................................................................53
EXHIBIT B ...................................................................54
EXHIBIT C ...................................................................59
EXHIBIT D....................................................................60
EXHIBIT E ...................................................................64
iii
<PAGE>
-------------------------------------------------
GUARANTEE AGREEMENT
BETWEEN
PACIFIC CREST CAPITAL, INC.
(AS GUARANTOR)
AND
WILMINGTON TRUST COMPANY
(AS TRUSTEE)
DATED AS OF
AUGUST ___, 1997
-------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust Section of
Indenture Act Of 1939, As Amended Guarantee Agreement
- ---------------------------------- -------------------
310(a). 4.1(a)
310(b). 4.1(c), 2.8
310(c). Inapplicable
311(a). 2.2(b)
311(b). 2.2(b)
311(c). Inapplicable
312(a). 2.2(a)
312(b). 2.2(b)
313. 2.3
314(a). 2.4
314(b). Inapplicable
314(c). 2.5
314(d). Inapplicable
314(e). 1.1, 2.5, 3.2
314(f). 2.1, 3.2
315(a). 3.1 (d)
315(b). 2.7
315(c). 3.1
315(d). 3.1(d)
316(a). 1.1, 2.6, 5.4
316(b). 5.3
316(c). 9.2
317(a). Inapplicable
317(b). Inapplicable
318(a). 2.1(b)
318(b). 2.1
318(c). 2.1(a)
- ------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS........................................................1
SECTION 1.1. DEFINITIONS.........................................1
ARTICLE II. TRUST INDENTURE ACT...............................................4
SECTION 2.1. TRUST INDENTURE ACT; APPLICATION....................4
SECTION 2.2. LIST OF HOLDERS.....................................4
SECTION 2.3. REPORTS BY THE GUARANTEE TRUSTEE....................4
SECTION 2.4. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE...........5
SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT....5
SECTION 2.6. EVENTS OF DEFAULT; WAIVER...........................5
SECTION 2.7. EVENT OF DEFAULT; NOTICE............................5
SECTION 2.8. CONFLICTING INTERESTS...............................6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE................6
SECTION 3.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE..........6
SECTION 3.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.................7
SECTION 3.3. INDEMNITY...........................................9
ARTICLE IV. GUARANTEE TRUSTEE.................................................9
SECTION 4.1. GUARANTEE TRUSTEE: ELIGIBILITY......................9
SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF THE
GUARANTEE TRUSTEE..................................10
ARTICLE V. GUARANTEE........................................................10
SECTION 5.1. GUARANTEE..........................................10
SECTION 5.2. WAIVER OF NOTICE AND DEMAND........................10
SECTION 5.3. OBLIGATIONS NOT AFFECTED...........................11
SECTION 5.4. RIGHTS OF HOLDERS..................................11
SECTION 5.5. GUARANTEE OF PAYMENT...............................12
SECTION 5.6. SUBROGATION........................................12
SECTION 5.7. INDEPENDENT OBLIGATIONS............................12
<PAGE>
ARTICLE VI. COVENANTS AND SUBORDINATION......................................12
SECTION 6.1. SUBORDINATION......................................12
SECTION 6.2. PARI PASSU GUARANTEES..............................13
ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE................................................13
SECTION 7.1. GUARANTOR MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS..............................................13
SECTION 7.2. SUCCESSOR GUARANTOR SUBSTITUTED....................13
ARTICLE VIII. TERMINATION.....................................................14
SECTION 8.1. TERMINATION........................................14
ARTICLE IX. MISCELLANEOUS....................................................14
SECTION 9.1. SUCCESSORS AND ASSIGNS.............................14
SECTION 9.2. AMENDMENTS.........................................14
SECTION 9.3. NOTICES............................................14
SECTION 9.4. BENEFIT............................................16
SECTION 9.5. INTERPRETATION.....................................16
SECTION 9.6. GOVERNING LAW......................................16
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of August ___, 1997, is executed and
delivered by PACIFIC CREST CAPITAL, INC., a Delaware corporation (the
"Guarantor") having its principal office at 30343 Canwood Street, Agoura Hills,
California, 91301, and WILMINGTON TRUST COMPANY, a Delaware banking corporation,
as trustee (the "Guarantee Trustee"), for the benefit of the Holders from time
to time of the Preferred Securities (as defined herein) of PCC Capital I, a
Delaware statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of
August ___, 1997 (the "Trust Agreement"), among the Guarantor, as Depositor,
Wilmington Trust Company as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, the Administrative Trustees named therein and the Holders
from time to time of undivided beneficial interests in the assets of the
Trust, the Trust issued $15,000,000 aggregate Liquidation Amount (as defined
in the Trust Agreement) of its _____% Cumulative Trust Preferred Securities,
Liquidation Amount $10 per Trust Preferred Security (the "Preferred
Securities"), and may issue up to an additional $2,250,000 aggregate
Liquidation Amount of the Preferred Securities, representing preferred
undivided beneficial interests in the assets of the Trust and having the
terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which was deposited with
Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets;
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement and
pursuant to Section 5.1 hereof extends the Guarantee for the benefit of the
Holders from time to time of the Preferred Securities.
ARTICLE I. DEFINITIONS
SECTION 1.1. DEFINITIONS.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement and the Indenture (as
defined herein), each as in effect on the date hereof.
1
<PAGE>
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; PROVIDED, HOWEVER, that an Affiliate of the
Guarantor shall not be deemed to be an Affiliate of the Trust. For the purposes
of this definition, "CONTROL" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "CONTROLLING" AND "CONTROLLED" have meanings
correlative to the foregoing.
"BOARD OF DIRECTORS" means either the board of directors of the Guarantor
or any committee of that board duly authorized to act hereunder.
"COMMON SECURITIES" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"EVENT OF DEFAULT" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; PROVIDED, HOWEVER, that,
except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"GUARANTEE" has the meaning set forth in Section 5.1.
"GUARANTEE PAYMENTS" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by or on behalf of the Trust: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) required to be paid on the Preferred Securities,
to the extent the Trust shall have funds on hand available therefor at such
time, (ii) the applicable Redemption Price (as defined in the Trust Agreement),
to the extent the Trust shall have funds on hand available therefor at such
time, and (iii) upon a voluntary or involuntary termination, winding up or
liquidation of the Trust, unless Debentures are distributed to the Holders, the
lesser of (a) the aggregate of the Liquidation Distribution (as defined in the
Trust Agreement) and (b) the amount of assets of the Trust remaining available
for distribution to Holders of Preferred Securities after satisfaction of
liabilities to creditors of the Trust as required by applicable law.
"GUARANTEE TRUSTEE" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"HOLDER" means any holder, as registered on the books and records of the
Trust, of any Preferred Securities; PROVIDED, HOWEVER, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.
2
<PAGE>
"INDENTURE" means the Junior Subordinated Indenture dated as of August
___, 1997, as supplemented and amended between the Guarantor and Wilmington
Trust Company, as trustee.
"LIST OF HOLDERS" has the meaning specified in Section 2.2(a).
"MAJORITY IN LIQUIDATION AMOUNT OF THE PREFERRED SECURITIES" means, except
as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the Liquidation Amount of all then
outstanding Preferred Securities issued by the Trust.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate
signed by the Chairman or a Vice Chairman of the Board of Directors of such
Person or the President or a Vice President of such Person, and by the Chief
Financial Officer, the Secretary or an Assistant Secretary of such Person, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.
"OTHER GUARANTEES" means any guarantees similar to the Guarantee issued,
from time to time, by the Guarantor on behalf of holders of one or more series
of Preferred Securities issued by one or more PCC Trusts (as defined in the
Indenture) other than the Trust.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"RESPONSIBLE OFFICER" means, with respect to the Guarantee Trustee, any
officer of the Corporate Trust Department of the Guarantee Trustee and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
3
<PAGE>
"SUCCESSOR GUARANTEE TRUSTEE" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended.
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.2. LIST OF HOLDERS.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of each
year, a list, in such form as the Guarantee Trustee may reasonably require, of
the names and addresses of the Holders ("List of Holders") as of a date not more
than 15 days prior to the delivery thereof, and (b) at such other times as the
Guarantee Trustee may request in writing, within 30 days after the receipt by
the Guarantor of any such request, a List of Holders as of a date not more than
15 days prior to the time such list is furnished, in each case to the extent
such information is in the possession or control of the Guarantor and is not
identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. REPORTS BY THE GUARANTEE TRUSTEE.
Not later than July 15 of each year, commencing on the year beginning
January 1, 1998, the Guarantee Trustee shall provide to the Holders such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
4
<PAGE>
SECTION 2.4. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.
The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders such documents, reports and information, if
any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Guarantee Trustee, on an annual basis,
such evidence of compliance with such conditions precedent, if any, provided for
in this Guarantee Agreement that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)(1) may be given in the form
of an Officers' Certificate.
SECTION 2.6. EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in Liquidation Amount of the Preferred Securities
may, by vote, on behalf of the Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Guarantee Agreement, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent therefrom.
SECTION 2.7. EVENT OF DEFAULT; NOTICE.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default known to the Guarantee Trustee, unless
such defaults have been cured before the giving of such notice, provided, that,
except in the case of a default in the payment of a Guarantee Payment, the
Guarantee Trustee shall be protected in withholding such notice if and so long
as the Board of Directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of
Default.
5
<PAGE>
SECTION 2.8. CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee shall be held by the Guarantee Trustee for the
benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee to any Person except to a Holder exercising his or her rights pursuant
to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor, Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Guarantee Agreement; and
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<PAGE>
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Guarantee Trustee and conforming to the requirements of this
Guarantee Agreement; but in the case of any such certificates or
opinions that by any provision hereof or of the Trust Indenture Act
are specifically required to be furnished to the Guarantee Trustee,
the Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Guarantee Agreement;
(ii) The Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in
Liquidation Amount of the Preferred Securities relating to the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee, or exercising any trust or power conferred upon the
Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if the Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Guarantee
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document reasonably believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
7
<PAGE>
(iii) Whenever, in the administration of this Guarantee Agreement,
the Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which, upon receipt of such
request from the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and
the written advice or opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its Affiliates and
may be one of its employees. The Guarantee Trustee shall have the right at
any time to seek instructions concerning the administration of this
Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such Holder
shall have provided to the Guarantee Trustee such adequate security and
indemnity as would satisfy a reasonable person in the position of the
Guarantee Trustee, against the costs, expenses (including attorneys' fees
and expenses) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as may
be requested by the Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys, and the Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent
or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee Agreement
the Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the
Holders, (B) may refrain from enforcing such remedy or right or taking
8
<PAGE>
such other action until such instructions are received, and (C) shall be
protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.3. INDEMNITY.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on the part of the Guarantee Trustee, arising out of or in connection
with the acceptance or administration of this Guarantee Agreement, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1. GUARANTEE TRUSTEE: ELIGIBILITY.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of Section
310(a) of the Trust Indenture Act. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority, then, for the purposes of this
Section 4.1(a)(ii) and to the extent permitted by the Trust Indenture Act,
the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
9
<PAGE>
SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE TRUSTEE.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
ARTICLE V. GUARANTEE
SECTION 5.1. GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full on a
subordinated basis to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust
may have or assert other than the defense of payment (the "Guarantee"). The
Guarantee is a continuing guarantee, and the Guarantor fully, knowingly and
unconditionally waives any right the Guarantor may have to revoke the
Guarantee as to any future transactions under Section 2815 of the California
Civil Code or othewise. The Guarantor's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Guarantor to the Holders or by causing the Trust to pay such amounts to the
Holders.
SECTION 5.2. WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of the Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Guarantee Trustee, Trust or
any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
10
<PAGE>
SECTION 5.3. OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. RIGHTS OF HOLDERS.
The Guarantor expressly acknowledges that: (i) this Guarantee will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(ii) the Guarantee Trustee has the right
11
<PAGE>
to enforce this Guarantee on behalf of the Holders; (iii) the Holders of a
Majority in Liquidation Amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of this Guarantee Agreement or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other Person.
SECTION 5.5. GUARANTEE OF PAYMENT.
This Guarantee creates, a guarantee of payment and not of collection. This
Guarantee will not be discharged except by payment of the Guarantee Payments in
full (without duplication of amounts theretofore paid by the Trust) or upon
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.6. SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Trust in respect of any amounts paid to the Holders by the Guarantor
under this Guarantee Agreement and shall have the right to waive payment by the
Trust pursuant to Section 5.1; PROVIDED, HOWEVER, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Guarantee. If any amount shall be paid to the Guarantor
in violation of the preceding sentence, the Guarantor agrees to hold such amount
in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7. INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Trust with respect to the Preferred Securities and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
SECTION 6.1. SUBORDINATION.
The obligations of the Guarantor under this Guarantee will constitute
unsecured obligations of the Guarantor and will rank subordinate and junior in
right of payment to all Senior and Subordinated Debt (as defined in the
Indenture) in the same manner as Debentures (as defined in the Trust Agreement).
12
<PAGE>
SECTION 6.2. PARI PASSU GUARANTEES.
The obligations of the Guarantor under this Guarantee shall rank PARI PASSU
with the obligations of the Guarantor under all Other Guarantees.
ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 7.1. GUARANTOR MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Guarantor shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Guarantor
or convey, transfer or lease its properties and assets substantially as an
entirety to the Guarantor, unless:
(1) in case the Guarantor shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the Person formed by such consolidation or into which
the Guarantor is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Guarantor substantially as an
entirety shall be a corporation, partnership or trust organized and existing
under the laws of the United States of America or any State or the District of
Columbia, and shall expressly assume the Guarantor's obligations under this
Guarantee;
(2) immediately after giving effect thereto, no Event of Default, and
no event which, after notice or lapse of time, or both, would become an Event of
Default, shall have happened and be continuing;
(3) such consolidation, merger, conveyance, transfer or lease is
permitted under the Trust Agreement and the Indenture and does not give rise to
any breach or violation of the Trust Agreement or the Indenture; and
(4) the Guarantor has delivered to the Guarantee Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and assumption of the Guarantor's
obligations under this Guarantee Agreement comply with this Article and that all
conditions precedent herein provided for relating to such transaction have been
complied with; and the Guarantee Trustee, subject to Section 3.1 hereof, may
rely upon such Officers' Certificate and Opinion of Counsel as conclusive
evidence that such transaction complies with this Section 7.1.
SECTION 7.2. SUCCESSOR GUARANTOR SUBSTITUTED.
Upon any consolidation or merger by the Guarantor with or into any other
Person, or any conveyance, transfer or lease by the Guarantor of its properties
and assets substantially as an entirety
13
<PAGE>
to any Person in accordance with Section 7.1, the successor Person formed by
such consolidation or into which the Guarantor 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 Guarantor under this Guarantee
Agreement with the same effect as if such successor Person had been named as the
Guarantor herein; and in the event of any such conveyance, transfer or lease the
Guarantor shall be discharged from all obligations and covenants under this
Guarantee Agreement.
ARTICLE VIII. TERMINATION
SECTION 8.1. TERMINATION.
This Guarantee Agreement shall terminate and be of no further force and
effect upon the earliest of (i) full payment of the applicable Redemption Price
of all Preferred Securities, (ii) the distribution of Debentures to the Holders
in exchange for all of the Preferred Securities or (iii) full payment of the
amounts payable in accordance with the Trust Agreement upon liquidation of the
Trust. Notwithstanding the foregoing clauses (i) through (iii), this Guarantee
Agreement will continue to be effective or will be reinstated if it has been
terminated pursuant to one of such clauses (i) through (iii), as the case may
be, if at any time any Holder must restore payment of any sums paid with respect
to Preferred Securities or this Guarantee Agreement.
ARTICLE IX. MISCELLANEOUS
SECTION 9.1. SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VII hereof and
Article VIII of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 9.2. AMENDMENTS.
Except with respect to any changes which do not adversely affect the rights
of the Holders in any material respect (in which case no vote will be required),
this Guarantee Agreement may not be amended without the prior approval of the
Holders of not less than a Majority in Liquidation Amount of the Preferred
Securities. The provisions of Article VI of the Trust Agreement concerning
meetings of the Holders shall apply to the giving of such approval.
SECTION 9.3. NOTICES.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
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<PAGE>
(a) if given to the Guarantor, to the address set forth below or such
other address, facsimile number or to the attention of such other Person as the
Guarantor may give notice to the Holders:
Pacific Crest Capital, Inc.
30343 Canwood Street
Agoura Hills, California 91301
Facsimile No.: (818) 865-3261
Attention: Gary L. Wehrle
(b) if given to the Trust, in care of the Guarantee Trustee, at the
Trust's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Trust may give notice to the
Holders:
PCC Capital I
c/o Pacific Crest Capital, Inc.
30343 Canwood Street
Agoura Hills, California 91301
Facsimile No.: (818) 865-3261
Attention: Gary L. Wehrle
with a copy to:
Wilmington Trust Company
1100 North Market
Wilmington, Delaware 19890
Facsimile No.: (302) 651-1000
Attention: Corporate Trust Administration
(c) if given to any Holder, at the address set forth on the books and
records of the Trust.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
15
<PAGE>
SECTION 9.4. BENEFIT.
This Guarantee is solely for the benefit of the Holders and is not
separately transferable from the Preferred Securities.
SECTION 9.5. INTERPRETATION.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined
in the preamble hereto have the respective meanings assigned to them in Section
1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include
the masculine, feminine and neuter genders.
SECTION 9.6. GOVERNING LAW.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
16
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
PACIFIC CREST CAPITAL, INC.
By:
-----------------------------------
Name:
Title:
Wilmington Trust Company
as Guarantee Trustee
By:
-----------------------------------
Name:
Title:
17
<PAGE>
PACIFIC CREST CAPITAL, INC.
STATEMENT REGARDING COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
INFORMATION FOR RATIO CALCULATION 1997 1996 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest on deposits 7,739 6,733 13,457 12,069 9,358 9,269 11,180
Interest on borrowings 604 - 43 15 - 96 49
Total interest expense 8,343 6,733 13,500 12,084 9,358 9,365 11,229
Total Rents 375 382 754 757 686 563 797
Percent of rents allocable to interest (Rents x 30%) 113 115 226 227 206 169 239
Income (loss) before income taxes and
cumulative effect of accounting change 2,876 2,367 4,508 3,167 (8,373) (3,356) 766
Add: Portion of rents allocable to interest 113 115 226 227 206 169 239
Total earnings 2,989 2,482 4,734 3,394 (8,167) (3,187) 1,005
Preferred dividends - - - 920 1,104 - -
Total earnings + total interest expense A 11,332 9,215 18,234 15,478 1,191 6,178 12,234
Total earnings + interest on borrowings B 3,593 2,482 4,777 3,409 (8,167) (3,091) 1,054
Total interest expense + allocable rents
+ preferred dividends C 8,456 6,848 13,726 13,231 10,668 8,534 11,468
Interest on borrowings + allocable rents
+ preferred dividends D 717 115 269 1,162 1,310 265 288
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
RATIOS 1997 1996 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges:
Excluding interest on deposits (B/D) 5.01x 21.85x 17.75x 2.93x - - 3.66x
Including interest on deposits (A/C) 1.34x 1.35x 1.33x 1.17x 0.11x 0.65x 1.07x
</TABLE>
*EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993 WERE INADEQUATE TO
COVER FIXED CHARGES BY $8.2 MILLION AND $3.1 MILLION, RESPECTIVELY.
<PAGE>
As filed with the Securities and Exchange Commission on March 25, 1997
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission file number: 0-22732
PACIFIC CREST CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4437818
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
30343 Canwood Street 91301
Agoura Hills, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (818) 865-3300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of 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. [X]
At March 12, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $36,478,000.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated Part of Form 10-K into which Incorporated
--------------------- -----------------------------------------
Definitive Proxy Statement for the Part III
1997 Annual Meeting of Stockholders
At March 12, 1997, registrant had 2,967,367 shares of Common Stock, $.01
par value, outstanding.
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INDEX
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PART I
Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-16
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . 16
Item 4(a). Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . 18
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . 19-20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 21-33
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . 34-53
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 54
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . 55
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . 55
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . 55
PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K . . . . . . . . . . 56
</TABLE>
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PART I
ITEM 1. BUSINESS.
Pacific Crest Capital, Inc. ("Pacific Crest" or "parent company") is a
financial services company principally engaged in commercial and industrial real
estate lending through its wholly owned subsidiary, Pacific Crest Investment and
Loan ("Pacific Crest Investment"). Unless the context otherwise indicates, the
"Company" refers to Pacific Crest and its wholly owned subsidiary, Pacific Crest
Investment.
PACIFIC CREST INVESTMENT AND LOAN
Pacific Crest Investment is a California licensed industrial loan company
that commenced business in 1974 and is supervised and regulated by the
California Department of Corporations and the Federal Deposit Insurance
Corporation ("FDIC"). The deposits of Pacific Crest Investment are insured by
the FDIC up to applicable limits.
Pacific Crest Investment concentrates on marketing to and serving the
needs of individuals and small and medium sized businesses in California.
Pacific Crest Investment conducts its operations through three branch offices,
located in Beverly Hills, Encino and San Diego, California. Pacific Crest
Investment offers savings accounts, money market checking accounts and
certificates of deposit, but does not offer traditional banking services, such
as demand deposit checking accounts, travelers' checks or safe deposit boxes.
In addition, Pacific Crest Investment offers VISA and MasterCard credit cards on
an agency basis and is a member of Cirrus, Star and Explore ATM networks.
Pacific Crest Investment has focused its lending activities on real estate loans
secured by commercial real estate.
COMPETITION
Pacific Crest Investment faces significant competition in California for
new loans from industrial loan companies, commercial banks, savings and loan
associations, credit unions, credit companies, mortgage bankers, life insurance
companies and pension funds. Some of the largest savings and loans and banks in
the United States are headquartered in California, and have extensive branch
systems and advertising programs which Pacific Crest Investment does not have.
Large banks frequently also enjoy a lower cost of funds than Pacific Crest
Investment and can therefore charge less than Pacific Crest Investment for
loans. Pacific Crest Investment attempts to compensate for competitive
disadvantages that may exist by providing a higher level of personal service to
borrowers and "hands-on" involvement by senior officers to meet borrower's
needs.
Pacific Crest Investment also faces competition for depositor's funds from
other industrial loan companies, banks, savings and loans, credit unions and
increasingly, from brokerage firms, mutual funds and life insurance annuity
products. Many of Pacific Crest Investment's competitors offer a greater array
of products to customers than Pacific Crest Investment. Pacific Crest Investment
does not offer demand deposit checking accounts, travelers' checks or safe
deposit boxes and thus has a competitive disadvantage to commercial banks and
savings associations in attracting depositors. Pacific Crest Investment attempts
to compensate for the lack of a full array of services in its branches by
offering slightly higher interest rates for deposits than most of its
competitors.
LOAN ORIGINATION AND UNDERWRITING
Pacific Crest Investment's loans are primarily originated through
referrals from commercial loan brokers, banks, realtors, and other third parties
for which the borrower pays a referral fee ranging from 1/2% to 1% of the loan
amount. Pacific Crest Investment currently employs four commercial marketing
representatives, who maintain contacts with loan referral sources in California,
screen referred transactions and provide customer service. The credit approval
process includes an examination of the cash flow and debt service coverage of
the property serving as loan collateral, as well as the financial condition and
credit references of the borrower. Following analysis of the borrower's credit,
cash flows and collateral, loans are submitted to the Credit Committee for
approval. Pacific Crest Investment's senior management is actively involved in
its commercial lending activities and collateral valuation process. Pacific
Crest Investment obtains independent third party appraisals of all properties
securing its loans. In addition, Pacific Crest Investment employs individuals
which serve as internal property analysts to inspect properties and review the
third party appraisals for the benefit of Pacific Crest's Credit Committee. The
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Credit Committee consists of Pacific Crest's President and Chief Executive
Officer, three Executive Vice Presidents, one Senior Vice President, Vice
President-Credit and the Chief Financial Officer.
At December 31, 1996, the maximum amount that Pacific Crest Investment
could loan to one borrower was approximately $4.8 million. At December 31,
1996, the largest loan to one borrower was $3.0 million. It is anticipated by
management that Pacific Crest Investment's Board of Directors will periodically
adjust and modify its underwriting criteria in response to economic conditions
and business opportunities.
LENDING
Pacific Crest Investment's primary focus in lending activities is the
origination of adjustable rate commercial real estate loans and Small Business
Administration (SBA) loans in California. Loans are generally made for terms of
one to ten years. At December 31, 1996, 80.8% of Pacific Crest Investment's
loans were priced at a margin over Bank of America's prime lending rate, 14.5%
were priced at a margin over the Federal Home Loan Bank Board's 11th District
Cost of Funds Index, 1.0% were priced at a margin over either the 6-month or 1-
year Treasury bill rate, 2.6% were priced at a margin over the 6 month LIBOR
rate and 1.1% represented fixed rate loans. Virtually all of Pacific Crest
Investment's adjustable rate loans adjust quarterly. As of December 31, 1996,
the loan portfolio was comprised of 339 commercial real estate loans.
EFFECT OF GOVERNMENTAL POLICIES AND RECENT LEGISLATION
Banking is a business that depends on interest rate differentials. In
general, the difference between the interest rate paid by Pacific Crest
Investment on its deposits and its other borrowings and the interest rate
received by Pacific Crest Investment on loans extended to its customers and
securities held in its portfolio comprises the major portion of the Company's
earnings. These rates are highly sensitive to many factors that are beyond the
control of the Company. Accordingly, the earnings and growth of the Company are
subject to the influence of domestic and foreign economic conditions, including
inflation, recession and unemployment.
Pacific Crest Investment's business is not only affected by general
economic conditions but is also influenced by the monetary and fiscal policies
of the federal government and the policies of regulatory agencies, particularly
the Board of Governors of the Federal Reserve Systems (the "Federal Reserve
Board"). The Federal Reserve Board implements national monetary policies (with
objectives such as curbing inflation and combating recession) by its open-market
operations in United States Government securities, by adjusting the required
level of reserves for financial institutions subject to its reserve requirements
and by varying the discount rates applicable to borrowings by depository
institutions. The actions of the Federal Reserve Board in these areas influence
the growth of bank loans, investments and deposits and also affect interest
rates charged on loans and paid on deposits. The nature and impact of any
future changes in monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial service providers. Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding companies and other
financial service providers are frequently made in Congress, in the California
legislature and before various bank regulatory and other professional agencies.
The likelihood of any major changes and the impact such changes might have on
the Company are impossible to predict. See "Item 1. Business Supervision and
Regulation."
SUPERVISION AND REGULATION
Pacific Crest Investment is subject to regulation, supervision and
examination under both California and federal law. Pacific Crest Investment is
currently subject to supervision and regulation by the Commissioner of
Corporations of the State of California through the Department of Corporations
and, as a nonmember bank, by the FDIC. Effective July 1, 1997, California's
supervision and regulation of Pacific Crest Investment will be taken over by the
Commissioner of Financial Institutions through the newly created Department of
Financial Institutions. Throughout this report, references to the
"Commissioner" should be construed to mean the Commissioner of Corporations
prior to July 1, 1997, and the Commissioner of Financial Institutions on or
after July 1, 1997. Similarly, references to the "Department" should be
construed to mean the Department of Corporations prior to July 1, 1997, and the
Department of Financial Institutions on or after July 1, 1997. Pacific Crest
Investment is not regulated or supervised by the Office of Thrift Supervision,
which regulates savings and loan institutions.
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Pacific Crest (Parent Company) is not directly regulated or supervised by
the Commissioner, the FDIC, the Federal Reserve Board or any other bank
regulatory authority, except with respect to the general regulatory and
enforcement authority of the Commissioner and the FDIC over transactions and
dealings between Pacific Crest and Pacific Crest Investment, and except with
respect to both the specific limitations regarding ownership of the capital
stock of the parent corporation of any industrial loan company, and the specific
limitations regarding the payment of dividends from Pacific Crest Investment.
CALIFORNIA LAW
The industrial loan business conducted by Pacific Crest Investment is
currently governed by the California Industrial Loan Law and the rules and
regulations of the Commissioner which, among other things, regulate collateral
requirements and maximum maturities of the various types of loans that are
permitted to be made by California-chartered industrial loan companies, also
known as thrift and loan companies.
Subject to restrictions imposed by applicable California law, Pacific
Crest Investment is permitted to make secured and unsecured consumer and
non-consumer loans. The maximum term of repayment of loans made by
industrial loan companies ranges up to 40 years and 30 days depending upon
collateral and priority of the secured position, except that loans with
repayment terms in excess of 30 years and 30 days may not in the aggregate
exceed 5% of the total outstanding loans and obligations of the company.
Although secured loans may generally be repayable in unequal periodic
payments during their respective terms, consumer loans secured by real
property with terms in excess of three years must be repayable in
substantially equal periodic payments unless such loans are covered under the
Garn-St. Germain Depository Institutions Act of 1982 (primarily single-family
residential mortgage loans). Real property loans in excess of $10,000 must be
secured by real or personal property having a combined fair market value at
the time the loan is made of at least 110% of the principal amount owing on
the loan and on prior encumbrances, except tax liens, secured by the same
real property. This requirement does not apply to loans to facilitate the
sale of other real estate owned ("OREO"). In addition, the term of a
nonconsumer loan secured solely or primarily by personal property may not
exceed 15 years and 30 days from the date the loan is made or acquired by the
company. California law limits lending activities outside of California by
industrial loan companies to no more than 20% of total assets unless the
Commissioner has authorized a higher level.
California law contains extensive requirements for the diversification of
the loan portfolios of industrial loan companies. An industrial loan company
with outstanding investment certificates may not, among other things, place more
than 25% of its loans or other obligations in loans or obligations which are
secured only partially, but not primarily, by real property; may not make any
one loan secured primarily by improved real property which exceeds 20% of its
paid-up and unimpaired capital stock and surplus not available for dividends;
may not lend an amount in excess of 5% of its paid-up and unimpaired capital
stock and surplus not available for dividends upon the security of the stock of
any one corporation; may not make loans to, or hold the obligations of, any one
person as primary obligor in an aggregate principal amount exceeding 20% of its
paid-up and unimpaired capital stock and surplus not available for dividends;
and may have no more than 70% of its total assets in loans which have remaining
terms to maturity in excess of seven years which are secured solely or primarily
by real property. Based on existing loans in Pacific Crest Investment's
portfolio at December 31, 1996, the ratio of loans secured solely or primarily
by real property with terms in excess of seven years to total assets was
approximately 29%. At December 31, 1996, Pacific Crest Investment satisfied all
of the above requirements.
An industrial loan company generally may not make any loan to, or hold an
obligation of, any of its directors or officers or any director or officer of
its holding company or affiliates, except in specified cases and subject to
regulation by the Commissioner. Nor may an industrial loan company make any
loan to, or hold an obligation of, any of its shareholders or any shareholder or
its holding company or affiliates, except that this prohibition does not apply
to persons who own less than 10% of the stock of a holding company or affiliate
which is listed on a national securities exchange. Any person who wishes to
acquire 10% or more of the capital stock of a California industrial loan company
or 10% or more of the voting capital stock or other securities giving control
over management of its parent company must obtain the prior written approval of
the Commissioner.
An industrial loan company is subject to certain leverage limitations
which are not generally applicable to commercial banks or savings and loan
associations. In particular, industrial loan companies which have been in
operation in excess of 60 months may, with written approval of the
Commissioner, have outstanding at any time investment certificates not to
exceed 20 times paid-up and unimpaired capital and surplus. Increases in
leverage under California law must also meet specified minimum standards for
liquidity reserves in cash, loan loss reserves, minimum capital stock levels
and minimum unimpaired paid-in surplus levels. In order for an industrial
loan
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company to increase its deposits to in excess of 15 times the aggregate
amount of its paid-up and unimpaired capital and unimpaired surplus not
available for dividends, the thrift must, among other things, maintain a
liquidity reserve in cash or cash equivalent equal to 1 1/2 % of its total
deposits outstanding and maintain a special allowance for losses as required
by the Commissioner. Pacific Crest Investment satisfied all of these
standards at December 31, 1996. As approved by the Commissioner, Pacific
Crest Investment can currently operate with an investment certificate to
unimpaired capital and unimpaired surplus ratio of 18.5 to 1. At December
31, 1996, Pacific Crest Investment's investment certificate to capital ratio
was approximately 11.0 to 1. Limitations have also been imposed with respect
to a depository institution's authority to accept, renew or rollover brokered
deposits. Pacific Crest Investment had no brokered deposits as of December
31, 1996.
Industrial loan companies are not permitted to borrow, except by the sale
of investment or thrift certificates, in an amount exceeding 300% of outstanding
capital stock, surplus and undivided profits, without the Commissioner's prior
consent. All sums borrowed in excess of 150% of outstanding capital stock,
surplus and undivided profits must be unsecured borrowings or, if secured,
approved in advance by the Commissioner, and be included as investment or thrift
certificates for purposes of computing the maximum amount of certificates an
industrial loan company may issue.
Under California law, industrial loan companies are generally permitted to
invest their funds in investments which are legal investments for California
commercial banks. In general, California commercial banks are prohibited from
investing an amount exceeding 15% of shareholders' equity in the security of any
one issuer, except for specified obligations of the United States, California,
and local governments and agencies. An industrial loan company may acquire real
property only in satisfaction of debts previously contracted, pursuant to
certain foreclosure transactions or as may be necessary as premises for the
transaction of its business, in which case such investment is limited to one
third of an industrial loan company's paid in capital stock and surplus not
available for dividends.
California industrial loan law allows an industrial loan company to
increase its secondary capital by issuing interest bearing capital notes in the
form of subordinated notes and debentures. Such notes are not deposits and are
not insured by the FDIC or any other governmental agency, and are generally
required to have an initial maturity of at least seven years and are
subordinated to deposit holders, general creditors and secured creditors of the
issuing thrift. Pacific Crest Investment had no subordinated debentures
outstanding at December 31, 1996.
Although investment authority and other activities that may be engaged in
by Pacific Crest Investment generally are prescribed under the California
Industrial Loan Law, certain provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991, (the "FDICIA"), may limit Pacific Crest
Investment's ability to engage in certain activities that otherwise are
authorized under the California Industrial Loan Law.
FEDERAL LAW
Pacific Crest Investment's deposits are insured by the FDIC to the full
extent permissible by law. As an insurer of deposits, the FDIC issues
regulations, conducts examinations, requires the filing of reports and generally
supervises the operations of institutions to which it provides deposit
insurance. Among the numerous applicable regulations are those issued under the
Community Reinvestment Act of 1977 ("CRA") to encourage members of insured state
nonmember banks to meet the credit needs of local communities, including low and
moderate income neighborhoods consistent with safety and soundness, and a rating
system to measure performance. Inadequacies of performance may result in
regulatory action by the FDIC.
Pacific Crest Investment is subject to the rules and regulations of the
FDIC to the same extent as other financial institutions which are insured by
that entity. The approval of the FDIC is required prior to any merger,
consolidation or change in control, or the establishment or relocation of any
branch office of Pacific Crest Investment. This supervision and regulation is
intended primarily for the protection of the deposit insurance funds.
CAPITAL STANDARDS
The FDIC has adopted risk-based minimum capital guidelines intended to
provide a measure of capital that reflects the degree of risk associated with a
banking organization's operations for both transactions reported on the balance
sheet as assets and transactions, such as letters of credit and recourse
arrangements, which are recorded as off balance sheet items. Under these
guidelines, nominal dollar amounts of assets and credit equivalent amounts of
off balance sheet items are multiplied by one of several risk adjustment
percentages, which range from 0% for
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assets with low credit risk, such as certain U.S. Treasury securities, to
100% for assets with relatively high credit risk, such as commercial loans.
A banking organization's risk-based capital ratios are obtained by
dividing its qualifying capital by its total risk adjusted assets. The FDIC
measures risk-adjusted assets, which includes off balance sheet items,
against both total qualifying capital (the sum of Tier 1 Capital and limited
amounts of Tier 2 Capital) and Tier 1 Capital. Tier 1 Capital consists of,
among other things, (i) common stockholders' equity capital (includes common
stock and related surplus, and undivided profits); (ii) noncumulative
perpetual preferred stock (cumulative perpetual preferred stock for bank
holding companies), including any related surplus; and (iii) minority
interests in certain subsidiaries, less most intangible assets. Tier 2
Capital may consist of: (i) a limited amount of the allowance for possible
loan and lease losses; (ii) cumulative perpetual preferred stock; (iii)
perpetual preferred stock (and any related surplus); (iv) term subordinated
debt and certain other instruments with some characteristics of equity. The
inclusion of elements of Tier 2 Capital is subject to certain other
requirements and limitations of the federal banking agencies. The federal
banking agencies require a minimum ratio of qualifying total capital to
risk-adjusted assets of 8% and a minimum ratio of Tier 1 Capital to
risk-adjusted assets of 4%.
In addition to the risked-based guidelines, the FDIC requires banking
organizations to maintain a minimum amount of Tier 1 Capital to total assets,
referred to as the leverage ratio. For a banking organization rated in the
highest of the five categories used by regulators to rate banking organizations,
the minimum leverage ratio of Tier 1 Capital to total assets must be 3%. For
all banking organizations not rated in the highest category, the minimum
leverage ratio must be at least 100 to 200 basis points above the 3% minimum, or
4% to 5%. In addition to these uniform risk-based capital guidelines and
leverage ratios that apply across the industry, the FDIC has the discretion to
set individual minimum capital requirements for specific institutions at rates
significantly above the minimum guidelines and ratios. See "Item 1. Business -
Effect of Government Policies and Recent Legislation." At the present time,
Pacific Crest, unlike Pacific Crest Investment, is not subject to any minimum
capital requirements.
In June 1996, the federal banking agencies adopted a joint agency policy
statement to provide guidance on managing interest rate risk. These agencies
indicated that the adequacy and effectiveness of a bank's interest rate risk
management process and the level of its interest rate exposures are critical
factors in the agencies' evaluation of the bank's capital adequacy. A bank with
material weaknesses in its risk management process or high levels of exposure
relative to its capital will be directed by the agencies to take corrective
action. Such actions will include recommendations or directions to raise
additional capital, strengthen management expertise, improve management
information and measurement systems, reduce levels of exposure, or some
combination thereof depending upon the individual institution's circumstances.
This policy statement augments the August 1995 regulations adopted by the
federal banking agencies which addressed risk-based capital standards for
interest rate risk.
In December 1993, the federal banking agencies issued an interagency
policy statement on the allowance for loan and lease losses ("ALLL") which,
among other things, establishes certain benchmark ratios of loan loss
reserves to classified assets. The benchmark set forth by such policy
statement is the sum of (a) 100% of assets classified loss; (b) 50% of assets
classified doubtful; (c) 15% of assets classified substandard; and (d)
estimated credit losses on other assets over the upcoming 12 months. This
amount is neither a "floor" nor a "safe harbor" level for an institution's
ALLL.
Federally supervised banks and savings associations are currently
required to report deferred tax assets in accordance with SFAS No. 109. The
federal banking agencies issued final rules governing banks and bank holding
companies which became effective April 1, 1995, which limit the amount of
deferred tax assets that are allowable in computing an institution's
regulatory capital. Deferred tax assets that can be realized for taxes paid
in prior carryback years and from future reversals of existing taxable
temporary differences are generally not limited. Deferred tax assets that
can only be realized through future taxable earnings are limited for
regulatory capital purposes to the lesser of (i) the amount that can be
realized within one year of the quarter-end report date based on projected
taxable income for that year, or (ii) 10% of Tier 1 Capital. The amount of
any deferred tax in excess of this limit is excluded from Tier 1 Capital and
total assets and regulatory capital calculations.
Future changes in regulations or practices could further reduce the amount
of capital recognized for purposes of capital adequacy. Such a change could
affect the ability of Pacific Crest Investment to grow and could restrict the
amount of profits, if any, available for the payment of dividends. Pacific
Crest Investment was able to fully utilize the $3.3 million in deferred tax
assets at December 31, 1996 for the FDIC capital ratio calculations.
The following table sets forth Pacific Crest Investment's regulatory
capital ratios at December 31, 1996 and December 31, 1995:
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<TABLE>
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AT DECEMBER 31, 1996 AT DECEMBER 31, 1995
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PACIFIC CREST INVESTMENT REQUIRED ACTUAL EXCESS REQUIRED ACTUAL EXCESS
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Leverage capital ratio 4.00% 7.96% 3.96% 4.00% 7.82% 3.82%
Tier 1 risk-based capital ratio 4.00% 10.31% 6.31% 4.00% 9.48% 5.48%
Total risk-based capital ratio 8.00% 11.56% 3.56% 8.00% 10.74% 2.74%
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</TABLE>
PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS
Federal law requires each federal banking agency to take prompt corrective
action to resolve the problems of insured depository institutions, including but
not limited to those that fall below one or more prescribed minimum capital
ratios. In accordance with federal law, each federal banking agency has
promulgated regulations defining the following five categories in which an
insured depository institution will be placed, based on the level of its capital
ratios: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. An insured
depository institution generally will be classified in the following categories
based on capital measures indicated below:
<TABLE>
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<S> <C>
"Well capitalized" "Adequately capitalized"
- ------------------------------------------------- -------------------------------------------------
Total risk-based capital of 10%; Total risk-based capital of 8%;
Tier 1 risk-based capital of 6%; and Tier 1 risk-based capital of 4%; and
Leverage ratio of 5%. Leverage ratio of 4%.
"Undercapitalized" "Significantly undercapitalized"
- ------------------------------------------------- -------------------------------------------------
Total risk-based capital less than 8%; Total risk-based capital less than 6%;
Tier 1 risk-based capital less than 4%; or Tier 1 risk-based capital less than 3%; or
Leverage ratio less than 4%. Leverage ratio less than 3%.
"Critically undercapitalized"
- -------------------------------------------------
Tangible equity to total assets less than 2%.
</TABLE>
An institution that, based upon its capital levels, is classified as "well
capitalized," "adequately capitalized" or undercapitalized" may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat a significantly undercapitalized institution as
"critically undercapitalized" unless its capital ratio actually warrants such
treatment.
The law prohibits insured depository institutions from paying
management fees to any controlling persons or, with certain limited
exceptions, making capital distributions if after such transaction the
institution would be undercapitalized. If an insured depository institution
is undercapitalized, it will be closely monitored by the appropriate federal
banking agency, subject to asset growth restrictions and required to obtain
prior regulatory approval for acquisitions, branching and engaging in new
lines of business. Any undercapitalized depository institution must submit
an acceptable capital restoration plan to the appropriate federal banking
agency 45 days after receiving notice, or it is deemed to have notice, that
the institution is undercapitalized. The appropriate federal banking agency
cannot accept a capital plan unless, among other things, it determines that
the plan (i) specifies: (a) the steps the institution will take to become
adequately capitalized; (b) the levels of capital to be attained during each
year in which the plan will be in effect; (c) how the institution will comply
with the restrictions or requirements then in effect under Section 38 of the
Federal Deposit Insurance Act ("FDIA"); and (d) the types and levels of
activities in which the institution will engage; (ii) is based on realistic
assumptions and is likely to succeed in restoring the depository
institution's capital; and (iii) would not appreciably increase the risk
(including credit risk, interest rate risk, and other types of risk) to which
the institution is exposed. In addition, each company controlling an
undercapitalized depository institution must guarantee that the institution
will comply with the capital plan until the depository institution has been
adequately capitalized on average during each of four consecutive calendar
quarters and must otherwise provide appropriate assurances of performance.
The aggregate liability of such guarantee is limited to the lesser of (a) an
amount equal to 5% of the depository institution's total assets at the time
the institution became undercapitalized or (b) the amount which is necessary
to bring the institution into compliance with all capital standards
applicable to such institution as of the time the
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institution fails to comply with its capital restoration plan. Finally, the
appropriate federal banking agency may impose any of the additional
restrictions or sanctions that it may impose on significantly
undercapitalized institutions if it determines that such action will further
the purpose of the prompt correction action provisions.
An insured depository institution that is significantly undercapitalized,
or is undercapitalized and fails to submit, or in a material respect to
implement, an acceptable capital restoration plan, is subject to additional
restrictions and sanctions. These include, among other things: (i) a forced
sale of voting shares to raise capital or, if grounds exist for appointment of a
receiver or conservator, a forced merger; (ii) restrictions on transactions with
affiliates; (iii) further limitations on interest rates paid on deposits; (iv)
further restrictions on growth or required shrinkage; (v) modification or
termination of specified activities; (vi) replacement of directors or senior
executive officers; (vii) prohibitions on the receipt of deposits from
correspondent institutions; (viii) restrictions on capital distributions by the
holding companies of such institutions; (ix) required divestiture of
subsidiaries by the institution; or (x) other restrictions as determined by the
appropriate federal banking agency. Although the appropriate federal banking
agency has discretion to determine which of the foregoing restrictions or
sanctions it will seek to impose, it is required to: (i) force a sale of shares
or obligations of the bank, or require the bank to be acquired by or combine
with another institution; (ii) impose restrictions on affiliate transactions and
(iii) impose restrictions on rates paid on deposits unless it determines that
such actions would not further the purpose of the prompt corrective action
provisions. In addition, without the prior written approval of the appropriate
federal banking agency, a significantly undercapitalized institution may not pay
any bonus to its senior executive officers or provide compensation to any of
them at a rate that exceeds such officer's average rate of base compensation
during the 12 calendar months preceding the month in which the institution
became undercapitalized.
Further restrictions and sanctions are required to be imposed on insured
depository institutions that are critically undercapitalized. For example, a
critically undercapitalized institution generally would be prohibited from
engaging in any material transaction other than in the ordinary course of
business without prior regulatory approval and could not, with certain
exceptions, make any payment of principal or interest on its subordinated debt
beginning 60 days after becoming critically undercapitalized. Most importantly,
however, except under limited circumstances, the appropriate federal banking
agency, not later than 90 days after an insured depository institution becomes
critically undercapitalized, is required to appoint a conservator or receiver
for the institution. The board of directors of an insured depository
institution would not be liable to the institution's shareholders or creditors
for consenting in good faith to the appointment of a receiver or conservator or
to an acquisition or merger as required by the regulator.
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by the federal regulators for unsafe or unsound practices
in conducting their businesses or for violations of any law, rule, regulation
or any condition imposed in writing by the agency or any written agreement
with the agency. See "Item 1. Business - Supervision and Regulation -
Potential Enforcement Actions."
SAFETY AND SOUNDNESS STANDARDS
Effective July 1995, the federal banking agencies adopted final guidelines
establishing standards for safety and soundness, as required by FDICIA. These
standards are designed to identify potential safety-and-soundness concerns and
ensure that action is taken to address those concerns before they pose a risk to
the deposit insurance funds. The standards relate to (i) internal controls,
information systems and internal audit systems; (ii) loan documentation; (iii)
credit underwriting; (iv) asset growth; (v) earnings; and (vi) compensation,
fees and benefits. If a federal banking agency determines that an institution
fails to meet any of these standards, the agency may require the institution to
submit to the agency an acceptable plan to achieve compliance with the standard.
In the event the institution fails to submit an acceptable plan within the time
allowed by the agency or fails in any material respect to implement an accepted
plan, the agency must, by order, require the institution to correct the
deficiency.
Effective October 1, 1996, the federal banking agencies promulgated safety
and soundness regulations and accompanying interagency compliance guidelines on
asset quality and earnings standards. These new guidelines provide six
standards for establishing and maintaining a system to identify problem assets
and prevent those assets from deteriorating. The institution should: (i)
conduct periodic asset quality reviews to identify problem assets; (ii) estimate
the inherent losses in those assets and establish reserves that are sufficient
to absorb estimated losses; (iii) compare problem asset totals to capital (iv)
take appropriate corrective action to resolve problem assets: (v) consider the
size and potential risks of material asset concentrations; and (vi) provide
periodic asset reports with adequate information for management and the board of
directors to assess the level of asset risk. These new
7
<PAGE>
guidelines also set forth standards for evaluating and monitoring earnings
and for ensuring that earnings are sufficient for the maintenance of adequate
capital and reserves. If an institution fails to comply with a safety and
soundness standard, the appropriate federal banking agency may require the
institution to submit a compliance plan. Failure to submit a compliance plan
or to implement an accepted plan may result in enforcement action.
PREMIUMS FOR DEPOSIT INSURANCE
The FDIC has adopted final regulations implementing a risk-based premium
system required by federal law. On November 14, 1995, the FDIC issued
regulations that establish a new assessment rate schedule ranging from 0 cents
per $100 of deposits to 27 cents per $100 of deposits applicable to members of
the Bank Insurance Fund ("BIF"). To determine the risk-based assessment for
each institution, the FDIC will categorize an institution as well capitalized,
adequately capitalized or undercapitalized based on its capital ratios using the
same standards used by the FDIC for its prompt corrective action regulations. A
well-capitalized institution is generally one that has at least a 10% total
risk-based capital ratio, a 6% Tier 1 risk-based capital ratio and a 5% Tier 1
leverage capital ratio. An adequately capitalized institution will generally
have at least an 8% total risk-based capital ratio, a 4% Tier 1 risk-based
capital ratio and a 4% Tier 1 leverage capital ratio. An undercapitalized
institution will generally be one that does not meet either of the above
definitions. The FDIC will also assign each institution to one of three
subgroups based upon reviews by the institution's primary federal or state
regulator, statistical analyses of financial statements and other information
relevant to evaluating the risk posed by the institution. The three supervisory
categories are: financially sound with only a few minor weaknesses (Group A),
demonstrates weaknesses that could result in significant deterioration (Group
B), and poses a substantial probability of loss (Group C).
The BIF assessment rates are set forth below for institutions based on
their risk-based assessment categorization:
ASSESSMENT RATES EFFECTIVE THROUGH JANUARY 1, 1997*
---------------------------------------------------
GROUP A GROUP B GROUP C
------- ------- -------
Well Capitalized . . . . . . 0 3 17
Adequately Capitalized . . . 3 10 24
Undercapitalized . . . . . . 10 24 27
*Assessment figures are expressed in terms of cents per $100 of deposits.
On September 30, 1996, Congress passed the Budget Act which capitalized
the Savings Association Insurance Fund ("SAIF") through a special assessment
on SAIF-insured deposits and required banks to share in part of the interest
payments on the Financing Corporation ("FICO") bonds which were issued to
help fund the federal government costs associated with the savings and loan
crisis of the late 1980's. The special thrift SAIF assessment has been set
at 65.7 cents per $100 insured by the thrift funds as of March 31, 1995.
Effective January 1, 1997, for the FICO payments, SAIF-insured institutions
will pay 3.2 cents per $100 in domestic deposits and BIF-insured
institutions, like Pacific Crest Investment, will pay 0.64 cents per $100 in
domestic deposits. Full pro rata sharing of the FICO interest payments takes
effect on January 1, 2000.
The federal banking regulators are also authorized to prohibit depository
institutions and their holding companies from facilitating or encouraging the
shifting of deposits from SAIF to BIF for the purpose of evading thrift
assessment rates. The Budget Act also prohibits the FDIC from setting premiums
under the risk-based schedule above the amount needed to meet the designated
reserve ratio (currently 1.25%)
INTERSTATE BANKING AND BRANCHING
On September 29, 1994, the President signed into law the Riegel-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act").
Under the Interstate Act, beginning one year after the date of enactment, a bank
holding company that is adequately capitalized and managed may obtain approval
under the Bank Holding Company Act (the "BHCA") to acquire an existing bank
located in another state without regard to state law. A bank holding company is
not permitted to make such an acquisition if, upon consummation, it would
control (a) more than 10% of the total amount of deposits of insured depository
institutions in the United States or (b) 30% or more of the deposits in the
state in which the bank is located. A state may limit the percentage of total
deposits that may be held in that state by any one bank or bank holding company
if application of such limitation does not discriminate against out-of-state
banks or bank holding companies. An out-of-state bank holding
8
<PAGE>
company may not acquire a state bank in existence for less than a minimum
length of time that may be prescribed by state law except that a state may
not impose more than a five year existence requirement.
The Interstate Act also permits, beginning June 1, 1997, mergers of
insured banks located in different states and conversion of the branches of
the acquired bank into branches of the resulting bank. Each state may permit
such combinations earlier than June 1, 1997, and may adopt legislation to
prohibit interstate mergers after that date in that state or in other states
by that state's banks. The same concentration limits discussed in the
preceding paragraph apply. The Interstate Act also permits a national or
state bank to establish branches in a state other than its home state if
permitted by the laws of that state, subject to the same requirements and
conditions as for a merger transaction.
The Interstate Act is likely to increase competition in the Company's
market areas especially from larger financial institutions and their holding
companies. It is difficult to assess the impact such likely increased
competition will have on the Company's operations.
Under the Interstate Act, the extent of a commercial bank's ability to
branch into a new state will depend on the law of the state. In October
1995, California adopted an early "opt in" statute under the Interstate Act
that permits out-of-state banks to acquire California banks that satisfy a
five-year minimum age requirement (subject to exceptions for supervisory
transactions) by means of merger or purchases of assets, although entry
through acquisition of individual branches of California institutions and de
novo branching into California are not permitted. The Interstate Act and the
California branching statute will likely increase competition form
out-of-state banks in the markets in which the Company operates, although it
is difficult to assess the impact that such increased competition may have on
the Company's operations.
COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS
Pacific Crest Investment is subject to certain fair lending requirements
and reporting obligations involving home mortgage lending operations and
Community Reinvestment Act ("CRA") activities. The CRA generally requires the
federal banking agencies to evaluate the record of a financial institution in
meeting the credit needs of their local communities, including low and
moderate income neighborhoods. In addition to substantial penalties and
corrective measures that may be required for a violation of certain fair
lending laws, the federal banking agencies may take compliance with such laws
and CRA into account when regulating and supervising other activities
In May 1995, the federal banking agencies issued final regulations which
change the manner in which they measure a bank's compliance with its CRA
obligations. The final regulations adopt a performance-based evaluation
system which bases CRA ratings on an institutions actual lending service and
investment performance rather than the extent to which the institution
conducts needs assessments, documents community outreach or complies with
other procedural requirements.
In March 1994, the Federal Interagency Task Force on Fair Lending issued
a policy statement on discrimination in lending. The policy statement
describes the three methods that federal agencies will use to prove
discrimination: overt evidence of discrimination, evidence of disparate
treatment and evidence of disparate impact.
In connection with its assessment of CRA performance, the FDIC assigns a
rating of "outstanding," "satisfactory," "needs to improve" or "substantial
noncompliance." Based on an examination conducted during the third quarter
of 1995, Pacific Crest was rated satisfactory.
RESTRICTIONS ON TRANSFERS OF FUNDS TO PACIFIC CREST BY PACIFIC CREST INVESTMENT
Pacific Crest is a legal entity separate and distinct from Pacific Crest
Investment. Pacific Crest's ability to pay cash dividends is limited by
Delaware state law. At present, substantially all of the Pacific Crest's
revenues, including funds available for the payment of dividends and other
operating expenses will be dependent in the future on dividends paid by
Pacific Crest Investment.
Under California law, an industrial loan company is not permitted to
declare dividends on its capital stock unless it has at least $750,000 of
unimpaired capital plus additional capital of $50,000 for each branch office
maintained. In addition, no distribution of dividends is permitted unless:
(i) such distribution would not exceed retained earnings; or, (ii) in the
alternative, after giving effect to the distribution, (y) the sum of assets
(net of goodwill, capitalized research and development expenses and deferred
charges) would be not less than 125% of its liabilities (net of deferred
taxes, income and other credits), or (z) current assets would be not less
than current liabilities (except that if average earnings before taxes for
the last two years had been less than average interest expenses, current
assets must be not less than 125% of current liabilities).
9
<PAGE>
In addition, an industrial loan company is prohibited from paying
dividends from that portion of capital which its board of directors has
declared restricted for dividend payment purposes. The amount of restricted
capital maintained by an industrial loan company provides the basis of
establishing the maximum permissible loan to one single borrower. Pacific
Crest Investment is prohibited from any dividend payments since its Board of
Directors has declared its capital accounts restricted at December 31, 1996.
In policy statements, the FDIC has advised insured institutions that the
payment of cash dividends in excess of current earnings from operations is
inappropriate and may be cause for supervisory action. Under the Financial
Institutions Supervisory Act and Financial Institutions Reform, Recovery, and
Enforcement Act ("FIRREA"), federal regulators also have authority to
prohibit financial institutions from engaging in business practices which are
considered to be unsafe or unsound.
Pacific Crest Investment's ability to pay dividends to Pacific Crest is
restricted by California state law, which requires that sufficient retained
earnings are available to pay the dividend. At December 31, 1996, Pacific
Crest Investment had deficit retained earnings of $358,000. Under California
state law, this deficit would have to be turned into a positive figure before
dividends could be paid from Pacific Crest Investment to its parent company.
It is unlikely Pacific Crest Investment will pay dividends to Pacific Crest
prior to the third quarter of 1997. Pacific Crest Investment is subject to
certain restrictions imposed by federal law on any extensions of credit to,
or investments in stock or other securities thereof, the taking of such
securities as collateral for loans and the purchase of assets of Pacific
Crest or other affiliates. Such restrictions prevent Pacific Crest and such
other affiliates from borrowing from Pacific Crest Investment unless the
loans are secured by marketable obligations of designated amounts. Further,
such secured loans and investments by Pacific Crest Investment to or in
Pacific Crest or to or in any other affiliate is limited to 10% of Pacific
Crest Investment's capital and surplus (as defined by federal regulations)
and such secured loans and investments are limited, in the aggregate, to 20%
of Pacific Crest Investment's capital and surplus (as defined by federal
regulations). California law also imposes certain restrictions with respect
to transactions involving Pacific Crest and other affiliates of Pacific Crest
Investment. See "Item 1. Business - Supervision and Regulation - California
Law." Additional restrictions on transactions with affiliates may be imposed
on Pacific Crest Investment under the prompt corrective action provisions of
federal law. See "Item 1. Business Supervision and Regulation - Prompt
Corrective Action and Other Enforcement Mechanisms."
POTENTIAL ENFORCEMENT ACTIONS
Insured depository institutions, such as Pacific Crest Investment, and
their institution-affiliated parties, which includes Pacific Crest, may be
subject to potential enforcement actions by the FDIC and the DOC for unsafe
or unsound practices in conducting their businesses or for violations of any
law, rule, regulation or any condition imposed in writing by the agency or
any written agreement with the agency. Enforcement actions may include the
imposition of a conservator or receiver, the issuance of a cease-and-desist
order that can be judicially enforced, the termination of insurance of
deposits (in the case of Pacific Crest Investment), the imposition of civil
money penalties, the issuance of directives to increase capital, the issuance
of formal and informal agreements, the issuance of removal and prohibition
orders against institution-affiliated parties and the imposition of
restrictions and sanctions under the prompt corrective action provisions of
the FDIC Improvement Act. In the event Pacific Crest Investment is placed in
conservatorship or receivership, the Company's ability to perform its
obligations would be adversely impacted.
During 1996, Pacific Crest Investment was subject to a Memorandum of
Understanding ("MOU") with the FDIC and the Commissioner, which required Pacific
Crest Investment to (i) maintain certain capital and ALLL levels; (ii) limit the
increase in total assets; (iii) have and retain qualified management; (iv)
notify the FDIC and the Department in writing of any changes in directors and
certain executive officers; (v) eliminate from its books certain "loss" and
"substandard" assets; (vi) amend its written investment policies; and (vii)
restrict payment of cash dividends without prior written consent of FDIC and the
Department. The MOU was terminated on February 5, 1997 following regulatory
examinations by the FDIC and the Department completed during the fourth quarter
of 1996.
ACCOUNTING CHANGES
In June 1996, the Federal Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." This statement provides accounting and reporting standards for
transfers and
10
<PAGE>
servicing of financial assets and extinguishments of liabilities. This
statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings. A
transfer of financial assets in which the transferor surrenders control over
those assets is accounted for as a sale to the extent that consideration
other than beneficial interests in the transferred assets is received in
exchange. This statement also requires that liabilities and derivatives
incurred or obtained by transferors as part of a transfer of financial assets
be initially measured at fair value, if practicable. It also requires that
servicing assets and other retained interests in the transferred assets be
measured by allocating the previous carrying amount between the assets sold,
if any, and retained interests, if any, based on their relative fair value at
the date of the transfer. Furthermore, this statement requires that debtors
reclassify financial assets pledged as collateral, and that secured parties
recognize those assets and their obligation to return them in certain
circumstances in which the secured party has taken control of those assets.
In addition, the statement requires that a liability be derecognized if and
only if either (a) the debtor pays the creditor and is relieved of its
obligation for the liability or (b) the debtor is legally released from being
the primary obligor under the liability either judicially or by the creditor.
Accordingly, a liability is not considered extinguished by an in-substance
defeasance. SFAS 125 is effective for transfers and servicing of financial
assets and extinguishment of liabilities occurring after December 31, 1996,
and is to be applied prospectively. This statement was adopted by the Company
as of January 1, 1997. Management does not believe that the application of
this statement will have a material impact on Pacific Crest Investment's
financial statements in future years.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-based Compensation." This statement establishes a fair value based
method of accounting for stock based compensation plans and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. The accounting
and disclosure requirements of this statement are effective for Pacific Crest
Investment's fiscal year ending December 31, 1996. Pacific Crest has elected
to continue to account for its stock-based compensation plans under
Accounting Principles Board ("APB") 25. Adoption of this pronouncement by the
Company has not had a material impact on Pacific Crest Investment's financial
statements for 1996.
In May 1995, the FASB issued SFAS No. 122 "Accounting for Mortgage
Servicing Rights." SFAS 122 amends certain provisions of SFAS No. 65
"Accounting for Certain Mortgage Banking Activities" to require that a
mortgage banking enterprise recognize as separate assets rights to service
mortgage loans for others, however those servicing rights are acquired. A
mortgage banking enterprise that acquires mortgage servicing rights through
either the purchase or origination of mortgage loans and sells or securitizes
those loans with servicing rights retained should allocate the total cost of
the mortgage loans to the mortgage servicing rights and the loans (without
the mortgage servicing rights) based on their relative fair value, if it is
practicable to estimate those fair values. If it is not practicable to
estimate those fair values, the entire cost of the acquisition should be
allocated to the mortgage loans only. SFAS 122 is effective for Pacific Crest
Investment's fiscal year covered by this annual report. Adoption of this
pronouncement did not have a material impact on Pacific Crest Investment's
financial statements.
In March 1995, the FASB issued SFAS No. 121 "Accounting for the
Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed
Of." This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. An impairment loss shall be
measured as the amount by which the carrying amount of the asset exceeds the
fair value of the asset. After an impairment is recognized, the reduced
carrying amount of the asset shall be accounted for as its new cost. SFAS No.
121 is effective for Pacific Crest Investment's fiscal year covered by this
annual report. Adoption of this statement did not have a material impact on
Pacific Crest Investment's financial statements.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." SFAS No. 114 prescribes the recognition criterion for
loan impairment and the measurement methods for certain impaired loans and
loans whose terms are modified in troubled debt restructurings. SFAS No. 114
states that a loan is impaired when it is probable that a creditor will be
unable to collect all principal and interest amounts due according to the
contracted terms of the loan agreement. A creditor is required to measure
impairment by discounting expected future cash flows at the loan's effective
interest rate, or by reference to an observable market price, or by
determining that foreclosure is probable. SFAS No. 114 also clarifies the
existing accounting for in-substance foreclosures by stating that a
collateral-dependent real estate loan would be reported as real estate owned
only if the lender had taken possession of collateral.
11
<PAGE>
SFAS No. 118 amended SFAS No. 114, to allow a creditor to use existing
methods for recognizing interest income on an impaired loan. To accomplish
that it eliminated the provisions in SFAS No. 114 that described how a
creditor should report income on an impaired loan. SFAS No. 118 did not
change the provisions in SFAS No. 114 that require a creditor to measure
impairment based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or as a practical
expedient, at the observable market price of the loan or the fair value of
the collateral if the loan is collateral dependent. SFAS No. 118 amends the
disclosure requirements in SFAS No. 114 to require information about the
recorded investments in certain impaired loans and about how a creditor
recognizes interest income related to those impaired loans. Pacific Crest
Investment adopted SFAS No. 114 and No. 118 for the year ended December 31,
1995. Adoption of these statements has not had a material impact on Pacific
Crest Investment's financial statements.
EMPLOYEES
As of December 31, 1996, the Company employed 62 persons. Management
believes that its relations with its employees are good. The Company is not a
party to any collective bargaining agreement.
SELECTED STATISTICAL DISCLOSURE REGARDING THE BUSINESS OF THE COMPANY
The following statistical data relating to the Company's operations
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and Consolidated Financial
Statements and Notes to Consolidated Financial Statements. Average balances
are determined on a daily basis.
LOAN PORTFOLIO
Pacific Crest Investment focuses its lending activities on commercial
real estate loans to investors and small and medium sized businesses. At
December 31, 1996, approximately 97% of the loan portfolio was secured by
commercial real property. The following table presents the categories of
Pacific Crest Investment's loans at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992
(DOLLARS IN THOUSANDS) BALANCE % BALANCE % BALANCE % BALANCE % BALANCE %
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOAN CATEGORIES:
Commercial real estate mortgage $206,107 97% $193,332 97% $183,173 98% $205,075 99% $220,223 100%
Real estate construction 65 -- -- -- -- -- 1,181 1% 567 --
Residential mortgage 1,596 1% 3,169 2% 1,336 1% -- -- -- --
Commercial business loans 3,912 2% 2,232 1% 1,125 1% -- -- -- --
Installment and other 32 -- 10 -- 8 -- 77 -- 168 --
- ------------------------------------------------------------------------------------------------------------------
Gross loans 211,712 100% 198,743 100% 185,642 100% 206,333 100% 220,958 100%
Less deferred loan fees 617 1,965 3,181 1,927 2,130
- ------------------------------------------------------------------------------------------------------------------
Total loans 211,095 196,778 182,461 204,406 218,828
Less allowance for loan losses 3,400 4,500 8,075 3,910 3,195
- ------------------------------------------------------------------------------------------------------------------
Net loans $207,695 $192,278 $174,386 $200,496 $215,633
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Real estate mortgage loans include loans primarily to investors and
small and middle market businesses for industrial and commercial use. These
loans are secured by the property underlying the loan.
12
<PAGE>
MATURITIES AND INTEREST SENSITIVITIES OF LOAN PORTFOLIO
The first table below sets forth the contractual maturities of Pacific
Crest Investment's loan portfolio at December 31, 1996. The second table
below sets forth the amounts of such loans that have fixed interest rates and
floating or adjustable interest rates. Loans which have adjustable or
floating interest rates are shown as maturing in the period during which the
contract is due. The following tables do not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN YEARS BUT WITHIN AFTER
(DOLLARS IN THOUSANDS) ONE YEAR FIVE YEARS TEN YEARS TEN YEARS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MATURITY DISTRIBUTION OF LOAN BY CATEGORY:
Commercial real estate mortgage $ 25,586 $ 90,727 $ 63,125 $ 26,256 $ 205,694
Residential mortgage loans -- 1,028 -- 568 1,596
Commercial business loans 664 566 323 2,252 3,805
- ------------------------------------------------------------------------------------------------------------------------
Total loans, net of deferred fees $ 26,250 $ 92,321 $ 63,448 $ 29,076 $ 211,095
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN YEARS BUT WITHIN AFTER
(DOLLARS IN THOUSANDS) ONE YEAR FIVE YEARS TEN YEARS TEN YEARS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MATURITY DISTRIBUTION OF LOAN BY
INTEREST RATE TYPE:
Loans with fixed interest rates -- -- $ 2,397 -- $ 2,397
Loans with variable interest rates $ 26,250 $ 92,321 61,051 $ 29,076 208,698
- ------------------------------------------------------------------------------------------------------------------------
Total loans, net of deferred fees $ 26,250 $ 92,321 $ 63,448 $ 29,076 $ 211,095
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
CLASSIFIED ASSETS
In connection with examinations of insured institutions, the FDIC and
the DOC examiners have the authority to identify problem assets and, if
necessary, require them to be classified. There are three primary
classifications for problem assets: "substandard," "doubtful" and "loss".
"Substandard" assets are assets that are characterized by the "distinct
possibility" that the institution will sustain "some loss" if deficiencies
are not corrected. "Doubtful" assets have all of the weaknesses inherent in
"substandard" loans, but also have the characteristic that, on the basis of
existing facts, conditions and values, "collection or liquidation in full" is
"highly questionable and improbable." "Loss" assets are assets that are
considered uncollectible. Assets that are classified "loss" require the
institution either to establish a specific reserve in the amount of 100% of
the portion of the asset classified "loss" or to charge-off the asset. In
addition, the FDIC characterizes certain assets as "special mention". These
are assets which do not currently warrant classification but possess
weaknesses deserving management's close attention.
In addition, the Company utilizes an internally developed loan grading
and monitoring system in determining the appropriate level of the allowance
for loan losses. This system involves periodic reviews of the entire loan
portfolio and loan classifications based on that review.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for
loan losses based on management's evaluation of the risk inherent in the loan
portfolio. Since the Company's loan portfolio consists almost exclusively of
term loans secured by commercial real property, general loan loss reserves
are typically established by assigning all loans to specified risk categories
and then determining the appropriate levels of reserve for each risk
category. A special management "Reserve Committee" meets monthly to review
the loan portfolio and delinquency trends, collateral value trends,
nonperforming asset data and other material. The amount of the allowance is
based upon management's evaluation of numerous factors, including the
adequacy of collateral securing the loans in the Company's portfolio,
delinquency trends and historical loan loss experience.
Based on evaluations of the aforementioned considerations, the Company
establishes its allowance for loan losses. The allowance for loan losses
expressed as a percentage of total net loans was 1.6% at December 31, 1996,
2.3% at December 31, 1995, 4.4% at December 31, 1994, and 1.9% at December
31, 1993.
<PAGE>
The Board of Directors reviews the adequacy of the allowance for loan
losses on a quarterly basis. Management utilizes its best judgment in providing
for possible loan losses and establishing the allowance for loan losses.
However, the allowance is an estimate which is inherently uncertain and depends
on the outcome of future events. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the Company to recognize
additions to the allowance based upon their judgment of the information
available to them at the time of their examination.
Adverse economic conditions or a declining real estate market in California
could adversely affect certain Pacific Crest Investment borrowers' abilities to
contractually repay their loans. A decline in the California economy could
result in deterioration in the quality of the loan portfolio and could result in
high levels of nonperforming assets and charge-offs, which would adversely
affect the financial condition and results of operations of the Company.
The following table sets forth certain information with respect to the
Company's allowance for loan losses and valuation adjustments to OREO as of the
dates or for the periods indicated:
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of period $ 4,500 $ 8,075 $ 3,910 $ 3,195 $ 2,600
Chargeoffs: Commercial real estate mortgage 3,452 4,757 4,278 3,683 1,298
Recoveries: Commercial real estate mortgage 244 222 100 - -
- ------------------------------------------------------------------------------------------------------
Net loan charge-offs 3,208 4,535 4,178 3,683 1,298
Purchased loan reserve 191 - - - -
Provision for loan losses 1,917 960 8,343 4,398 1,893
- ------------------------------------------------------------------------------------------------------
Balance at end of period $ 3,400 $ 4,500 $ 8,075 $ 3,910 $ 3,195
Net loan charge-offs $ 3,208 $ 4,535 $ 4,178 $ 3,683 $ 1,298
Valuation adjustments to OREO 155 344 1,719 3,314 1,179
- ------------------------------------------------------------------------------------------------------
Total net loan charge-offs &
OREO valuation adjustments $ 3,363 $ 4,879 $ 5,897 $ 6,997 $ 2,477
- ------------------------------------------------------------------------------------------------------
Net loan charge-offs to average loans 1.68% 2.45% 2.14% 1.73% 0.61%
Net loan charge-offs & OREO valuation
adjustments to average loans and OREO 1.73% 2.57% 2.92% 3.16% 1.14%
Allowance for loan losses to total loans,
net of deferred fees 1.61% 2.29% 4.43% 1.91% 1.46%
Allowance for loan losses
to nonperforming loans 245% 90% 83% 75% 47%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------------------------
ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF
FOR LOAN TOTAL FOR LOAN TOTAL FOR LOAN TOTAL FOR LOAN TOTAL FOR LOAN TOTAL
DOLLARS IN THOUSANDS LOSSES ALLL LOSSES ALLL LOSSES ALLL LOSSES ALLL LOSSES ALLL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOAN CATEGORIES:
Commercial
real estate mortgage $ 3,172 93% $ 4,365 97% $ 7,913 98% $ 3,910 100% $ 3,195 100%
Residential Mortgage 155 5% 90 2% 81 1% - - - -
Commercial
business loans 73 2% 45 1% 81 1% - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 3,400 100% $ 4,500 100% $ 8,075 100% $ 3,910 100% $ 3,195 100%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment Activities
The Company's investment portfolio is used for both liquidity purposes and
for investment income. The following table sets forth certain information
regarding the Company's investment portfolio as of the dates indicated:
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1996 1995 1994
-----------------------------------------------------------------
Book % of Book % of Book % of
(DOLLARS IN THOUSANDS) Balance Total Balance Total Balance Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. government sponsored agency issued securities
- --------------------------------------------------------------------------------------------------------------------
Available for sale 52,534 63% - - - -
Held to maturity 30,960 37% - - $ 55,248 100%
- --------------------------------------------------------------------------------------------------------------------
Total investment securities 83,494 100% - - $ 55,248 100%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
OTHER INTEREST EARNING ASSETS:
Interest earning deposits $ - - $ 300 1% $ 395 8%
Repurchase agreements 262 100% 53,749 99% 4,614 92%
- --------------------------------------------------------------------------------------------------------------------
Total other interest-earning assets $ 262 100% $ 54,049 100% $ 5,009 100%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
For additional information on the investment portfolio, see Note 4 of Notes
to Consolidated Financial Statements.
REPURCHASE AGREEMENTS
The Company invests excess cash overnight and up to 3 months in securities
purchased under agreements to resell ("repurchase agreements"). The maximum
investment with one brokerage firm or bank may not exceed $25 million. The
Company has master repurchase agreements with several nationally recognized
banks and broker/dealers. Collateral securing repurchase agreements is limited
to U.S. Treasury bonds, notes and bills, and securities issued by either U.S.
government agencies or U.S. government sponsored agencies. Collateral securing
the repurchase agreements is restricted to non derivative types of securities by
the aforementioned agencies. Collateral securing repurchase agreements is held
for safekeeping under third-party custodial agreements and is required to be
segregated and separately accounted for from all other securities held by the
custodian for its other customers or for its own account.
SOURCES OF FUNDS
DEPOSITS
The Company's major source of funds is FDIC-insured deposits, raised
through its subsidiary Pacific Crest Investment, which consists of term
certificates of deposit and money market savings accounts. At December 31,
1996, the Company had total deposits of $266.7 million with 8,478 accounts.
The Company has deposit-gathering branches located in Beverly Hills, Encino
and San Diego, California. The Company's headquarters office in Agoura Hills is
an administrative office and does not take deposits. The Company offers money
market checking accounts, money market savings accounts and term certificates of
deposit, with maturities from 30 days to 5 years. The Company attracts
depositors by offering rates that are generally higher than rates offered by
independent commercial banks that offer a broader array of services. The
Company also conducts a wholesale deposit operation through which deposits from
other financial institutions located throughout the United States are solicited.
The Company does not purchase brokered deposits. Management believes its
deposits are a stable and reliable funding source.
The following table sets forth information regarding the composition of the
Company's deposit mix for average balances and rates paid on deposits for the
years indicated:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) Average Rate Average Rate Average Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DEPOSIT CATEGORIES:
Savings accounts $ 176,742 5.19% $ 141,981 5.55% $ 79,053 4.11%
Certificates of deposit 62,747 5.51% 76,600 5.48% 145,569 4.20%
Money market checking 16,717 4.92% - - - -
- ------------------------------------------------------------------------------------------------------------
Total deposits $ 256,206 5.25% $ 218,581 5.52% $ 224,622 4.17%
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The remaining maturities of the certificates of deposit at December 31,
1996 are set forth in the following table:
15
<PAGE>
<TABLE>
<CAPTION>
3 MONTHS OVER 3 TO OVER
(DOLLARS IN THOUSANDS) OR LESS 12 MONTHS 12 MONTHS TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificates of deposit less than $100,000 $ 23,030 $ 40,681 $ 21,182 $ 84,893
Certificates of deposit of $100,000 or more 1,110 1,505 1,318 3,933
----------- ----------- ----------- -----------
Total certificates of deposit $ 24,140 $ 42,186 $ 22,500 $ 88,826
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER BORROWINGS
The Company had $10.0 million in short term borrowings which represented
40.9% of shareholders equity at December 31, 1996. The rates paid during the
year on the Company's short term borrowing ranged from 5.4% to 6.0%. The
Company set up borrowing lines with two brokers aggregating $50 million in
availability during 1996. The repayment terms on this short term debt range
from one day to two weeks. The interest rate paid can vary daily, but typically
approximates the federal funds rate plus 40 basis points. This debt is secured
by the Company's U.S. government sponsored agency securities. The Company
utilizes these lines to cover short term financing needs for loan fundings or
security purchases. At December 31, 1996, the Company had $40.0 million in
borrowing availability under its broker lines.
At December 31, 1996, Pacific Crest Investment had borrowing lines of $6.7
million available through the Federal Reserve Bank's discount window. Pacific
Crest Investment has never had to utilize its line of credit at the Federal
Reserve Bank.
ITEM 2. PROPERTIES.
The Company leases all of its offices. Information with respect to such
offices is as follows:
FLOOR SPACE IN ANNUAL LEASE EXPIRATION
LOCATION SQUARE FEET RENT DATE
- --------------------------------------------------------------------------------
PACIFIC CREST INVESTMENT:
Agoura Hills, California (1) 16,361 $ 266,000 1999
Beverly Hills, California 3,104 162,000 2000
Encino, California 3,300 65,000 1998
San Diego, California 4,505 175,000 2000
(1) Office also used by Pacific Crest.
ITEM 3. LEGAL PROCEEDINGS.
There are several lawsuits and claims pending against the Company which
management considers incidental to normal operations, some of which seek
substantial monetary damages. Management, after review, including consultation
with counsel, believes that any ultimate liability which could arise from these
lawsuits and claims would not materially affect the financial position, results
of operations or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
16
<PAGE>
ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT.
The following individuals are executive officers of the Company.
Pertinent information relating to these individuals is set forth below. There
are no family relationships between any of the officers. All of the Company's
officers hold their respective offices at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
GARY L. WEHRLE - CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF PACIFIC
CREST - AGE 54
Mr. Wehrle has served as Chairman of the Board of Pacific Crest since October
20, 1993, and President and Chief Executive Officer of Pacific Crest since
September 10, 1993. Mr. Wehrle has served as President and Chief Executive
Officer of Pacific Crest Investment since 1984.
GONZALO FERNANDEZ - EXECUTIVE VICE PRESIDENT OF PACIFIC CREST - AGE 54
Mr. Fernandez has served as Executive Vice President of Pacific Crest since
June 20, 1994. Mr. Fernandez has served as Executive Vice President of
Pacific Crest Investment since June 20, 1994.
LYLE C. LODWICK - EXECUTIVE VICE PRESIDENT OF PACIFIC CREST - AGE 43
Mr. Lodwick has served as Executive Vice President of Pacific Crest since
September 10, 1993. Mr. Lodwick has served as Executive Vice President of
Pacific Crest Investment since 1992 and, prior to that, served as Senior Vice
President of Pacific Crest Investment from 1988 to 1992.
BARRY L. OTELSBERG - EXECUTIVE VICE PRESIDENT OF PACIFIC CREST - AGE 46
Mr. Otelsberg has served as Executive Vice President of Pacific Crest since
September 10, 1993. Mr. Otelsburg has served as Executive Vice President of
Pacific Crest Investment since 1985.
ROBERT J. DENNEN - VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY OF
PACIFIC CREST - AGE 44
Mr. Dennen has served as Chief Financial Officer and Secretary of Pacific
Crest since September 10, 1993. Mr. Dennen has served as Vice President and
Controller/Treasurer of Pacific Crest Investment since 1986.
JOSEPH FINCI - SENIOR VICE PRESIDENT OF PACIFIC CREST - AGE 39
Mr. Finci has served as Senior Vice President of Pacific Crest since November
1, 1995. Mr. Finci has served as Senior Vice President of Pacific Crest
Investment since November 1, 1995 and, prior to that, served as Vice
President since 1990.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, $0.01 par value (the "Common Stock") is
traded on the Nasdaq National Market under the Nasdaq symbol "PCCI".
The following table presents the high and low sales prices for the Common
Stock during each quarter commencing January 1, 1995. There were
approximately 1,500 holders of the Common Stock as of March 12, 1997:
QUARTER ENDED HIGH LOW
------------------- -------- -------
3/31/95 $5.25 $3.50
6/30/95 $5.75 $4.25
9/30/95 $8.00 $5.50
12/31/95 $7.75 $6.75
3/31/96 $8.25 $7.38
6/30/96 $9.00 $7.50
9/30/96 $9.00 $8.25
12/31/96 $11.75 $8.13
The Company has never paid a cash dividend on its Common Stock and it is
unlikely that it will pay dividends prior to the third quarter of 1997. The
Company's ability to pay dividends is subject to restrictions set forth in
the Delaware General Corporation Law. The Delaware General Corporation Law
provides that a Delaware corporation may pay dividends either (i) out of the
corporation's surplus (as defined by Delaware law), or (ii) if there is no
surplus, out of the corporation's net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year. Furthermore, if
the Company were determined to be a quasi-California corporation, the Company
would have to comply with California law with respect to, among other things,
distributions to stockholders. Under California law, a corporation is
prohibited from paying dividends unless (i) the retained earnings of the
corporation immediately prior to the distribution exceeds the amount of the
distribution, (ii) the assets of the corporation exceed 1-1/4 times its
liabilities; or (iii) the current assets of the corporation exceed its
current liabilities, but if the average pre-tax earnings of the corporation
before interest expense for the two years preceding the distribution was less
than the average interest expense of the corporation for those years, the
current assets of the corporation must exceed 1-1/4 times it current
liabilities. Management believes that the Company is not a quasi-California
corporation by virtue of the Common Stock being listed on the Nasdaq
National Market and the Company having more than 800 holders of its equity
securities. However, no assurances can be given that this will continue to be
the case in the future. The Company's ability to pay cash dividends in the
future will depend in large part on the ability of Pacific Crest Investment
to pay dividends on its capital stock to the Company. The ability of Pacific
Crest Investment to pay dividends to the Company is subject to restrictions
set forth in the California Industrial Loan Law and the provisions of the
California General Corporation Law described above. See "Item 1.
Business - Supervision and Regulation - California Law."
Management is aware of six securities dealers who currently make a market
in the Common Stock: Friedman, Billings, Ramsey & Co. Inc.; Sandler O'Neill &
Partners; Herzog, Heine, Geduld, Inc.; Hill, Thompson, Magid & Co.; Torrey
Pines Securities, Inc. and Sutro & Co., Inc.
RECENT SALES OF UNREGISTERED SECURITIES
On January 23, 1997, in reliance on an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended, the Company issued an
aggregate of 748 shares of Common Stock to its four non-employee directors
pursuant to the Company's 1996 Non-Employee Director's Stock Plan which
provides that such directors may elect to receive all or a portion of their
director fees in shares of Common Stock. The aggregate consideration received
by the Company for such shares was $8,976.
18
<PAGE>
PACIFIC CREST CAPITAL, INC.
- --------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data are derived from the audited
consolidated financial statements of Pacific Crest Capital, Inc. The data
should be read in conjunction with the consolidated financial statements,
related notes, and other financial information included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 2,834 $ 56,167 $ 6,204 $ 26,628 $ 14,480
Investment securities 83,494 -- 55,248 898 1,705
Total loans, net of deferred fees 211,095 196,778 182,461 204,406 218,828
Allowance for loan losses 3,400 4,500 8,075 3,910 3,195
Other real estate owned 3,469 4,355 5,724 9,092 8,065
Other assets 6,593 6,309 6,958 5,329 3,666
Total assets 304,085 259,109 248,520 242,443 243,549
Total deposits 266,695 234,510 226,350 213,162 222,598
Other borrowings 10,000 -- -- -- --
Subordinated debt -- -- -- -- 1,000
Shareholders' equity 24,468 21,952 19,628 27,179 15,830
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
Total interest income $ 26,567 $ 23,799 $ 21,114 $ 21,583 $ 22,814
Total interest expense 13,500 12,084 9,358 9,365 11,229
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 13,067 11,715 11,756 12,218 11,585
Provision for loan losses 1,917 960 8,343 4,398 1,893
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 11,150 10,755 3,413 7,820 9,692
Noninterest income:
Gain (loss) on investment securities 413 851 (780) (277) (71)
Other non interest income (10) 1,068 470 404 375 295
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,481 1,321 (376) 98 224
Noninterest expense:
Valuation adjustment to OREO 155 344 1,719 3,314 1,179
OREO expenses 150 203 850 1,166 375
Other general & administrative expenses 7,818 8,362 8,841 6,794 7,596
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 8,123 8,909 11,410 11,274 9,150
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and
cumulative effect of accounting change 4,508 3,167 (8,373) (3,356) 766
Income tax provision (benefit) 1,505 (77) (1,914) (1,303) 203
Cumulative effect of accounting change(1) -- -- -- (560) --
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) 3,003 3,244 (6,459) (1,493) 563
- ------------------------------------------------------------------------------------------------------------------------------
Preferred dividends declared -- (920) (1,104) -- --
Net income (loss) applicable to common stock $ 3,003 $ 2,324 $ (7,563) $ (1,493) $ 563
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL RATIOS: (2)
Return on average total sales (3) 1.06% 1.34% (2.56)% (0.62)% 0.24%
Return on average shareholders' equity (4) 12.96% 16.02% (24.73)% (8.91)% 3.54%
Net interest rate spread (5) 4.41% 4.60% 4.49% 5.18% 4.74%
Net interest margin (6) 4.76% 4.98% 4.82% 5.33% 5.03%
Ratio of other general & administrative
expenses to average total assets 2.77% 3.46% 3.50% 2.84% 3.23%
Nonperforming assets to total assets at
end of period (7) 1.60% 3.60% 6.24% 6.26% 6.83%
Net loan charge-offs to average loans 1.68% 2.45% 2.14% 1.73% 0.61%
Net loan charge-offs & OREO valuation
adjustments to average loans and OREO 1.73% 2.57% 2.92% 3.16% 1.14%
Allowance for loan losses to total loans
net deferred fees 1.61% 2.29% 4.43% 1.91% 1.46%
Allowance for loan losses and OREO valuation
allowances to nonperforming assets 70.58% 52.68% 61.72% 33.60% 24.04%
Allowance for loan losses to nonaccrual loans 245.31% 90.27% 82.57% 75.40% 46.58%
Total average shareholders' equity to total
average assets 8.20% 8.38% 10.34% 7.01% 6.75%
- ----------------------------------------------------------------------------------------------------
PER SHARE DATA (8) (IN THOUSANDS):
Common shares outstanding 2,960 2,954 1,102 1,099 -
Common stock equivalents of preferred stock (9) - - 1,558 1,558 -
Treasury shares (12) - - - -
Other common stock equivalents 94 - - - -
- ----------------------------------------------------------------------------------------------------
Total common stock equivalents, assuming
full conversion of preferred stock 3,042 2,954 2,660 2,657 -
Book value per common share $8.35 $7.43 $7.38 $10.23
Fully diluted earnings (loss) per common share $1.00 $1.20 ($6.88) - -
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the cumulative effect of implementing Statement of Financial
Accounting Standards No. 109.
(2) Pacific Crest's performance ratios are based on actual daily averages.
(3) Net income (loss) divided by average total assets.
(4) Net income (loss) divided by total average shareholders' equity.
(5) Average yield earned on interest-earning assets less the average rate paid
on interest-bearing liabilities.
(6) Net interest income divided by total average interest-earning assets.
(7) Nonperforming assets include total nonaccrual loans, OREO and nonperforming
investments.
(8) Pacific Crest did not have any assets and did not conduct any significant
business prior to December 23, 1993 when The Foothill Group, Inc.
contributed 100% of the outstanding shares of Pacific Crest Investment
common stock to the Company in exchange for 1,099,490 shares of its common
stock. Upon completion of a preferred stock offering by the Company,
The Foothill Group, Inc. then distributed to its shareholders as a stock
dividend 100% of the outstanding shares of Pacific Crest common stock.
(9) The conversion price of the preferred stock for these calculations is $9.00
per share. The preferred stock was converted into common stock of the
Company in December of 1995.
(10) 1996 includes a $264,000 gain on the sale of $28.2 million in deposits.
20
<PAGE>
PACIFIC CREST CAPITAL, INC.
- -------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Pacific Crest Capital, Inc. ("the Company"), is a Delaware corporation
incorporated as a financial institution holding company to hold 100% of the
stock of Pacific Crest Investment and Loan ("Pacific Crest Investment")
formerly known as Foothill Thrift and Loan.
The consolidated financial statements and financial data as of December
31, 1996, 1995, 1994 and 1993 include the Company and its wholly owned
subsidiary Pacific Crest Investment. The balance sheets as of December 31,
1992 and the statement of operations and cash flows for the year ended
December 31, 1992 represent the financial condition and results of operations
for Pacific Crest Investment. For convenience, these financial statements
are referred to as the financial statements of the Company (Pacific Crest).
RESULTS OF OPERATIONS
EARNINGS PERFORMANCE
The Company's pre-tax income for the year ended December 31, 1996 was
$4.5 million, compared to $3.2 million for the same period in 1995. The
increase of $1.3 million, or 40.6% was due to several factors. Net interest
income for the year ended December 31, 1996 increased by $1.4 million,
noninterest income increased by $160,000, and noninterest expense decreased
by $786,000, when compared to the same period in 1995. Partially offsetting
these changes was an increase of $957,000 in the provision for loan losses.
NET INTEREST INCOME
Net interest income increased by $1.4 million, or 11.5%, to $13.1
million for the year ended December 31, 1996 as compared to the same period
in 1995. This was primarily due to the increase in the Company's average
interest earning assets of $39.2 million during the period ending December
31, 1996.
Interest income and interest expense can fluctuate widely based on
changes in the level of interest rates in the economy. The Company attempts
to minimize the effect of interest rate fluctuations on net interest margin
by matching as nearly as possible interest sensitive assets and interest
sensitive liabilities.
Net interest income can also be affected by a change in the composition
of assets and liabilities; for example, if higher yielding loan assets were
to replace a like amount of lower yielding short-term government securities.
Net interest income is affected by changes in volume and changes in rates.
Volume changes are caused by differences in the level of earning assets and
interest-bearing liabilities. Rate changes result from differences in yields
earned on assets and rates paid on liabilities.
The following table presents the distribution of average assets,
liabilities and shareholders' equity, the total dollar amount of interest
income from average interest-earning assets, the resultant yields and the
interest expense on average interest-bearing liabilities, expressed in both
dollars and rates. All average balances are daily average balances.
Nonaccrual loans and nonperforming assets have been included in the table as
loans and investments, respectively, having a zero yield.
21
<PAGE>
AVERAGE BALANCES, INTEREST INCOME AND EXPENSE, YIELDS AND RATES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------------
1996 1995 1994
----------------------------------------------------------------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/
(DOLLARS IN THOUSANDS) BALANCE PAID RATE BALANCE PAID RATE BALANCE PAID RATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans(1) $190,856 $21,384 11.20% $185,135 $20,773 11.22% $195,239 $18,630 9.54%
Repurchase agreements 42,547 2,255 5.30% 18,325 1,065 5.81% 21,342 854 4.08%
Interest-bearing deposits 286 15 5.24% 331 16 4.83% 316 10 3.15%
Investment securities - - - - - - 711 - -
U.S. government agency securities
Available for sale 23,874 1,632 6.84% - - - - - -
Held to maturity 17,173 1,281 7.46% 31,291 1,945 6.22% 26,271 1,620 6.17%
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets(1) 274,736 26,567 9.57% 235,082 23,399 10.12% 243,879 21,114 8.66%
Other real-estate owned 3,938 4,607 6,560
Other non-interest earning assets 7,980 7,623 6,272
Less allowance for loan(l) losses 4,013 5,753 4,510
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $282,641 $241,559 $252,601
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
Savings accounts 176,742 9,179 5.19% 141,981 7,873 5.55% 79,053 3,247 4.11%
Certificatse of deposit 62,747 3,456 5.51% 76,600 4,196 5.48% 145,569 6,111 4.20%
Money market checking 16,717 822 4.92% - - - - - -
Other borrowings 671 43 6.41% 238 15 6.30% - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 256,877 13,500 5.26% 218,819 12,084 5.52% 224,622 9,358 4.17%
Non interest-bearing liabilities 2,597 2,495 1,861
Shareholders' equity 23,167 20,245 26,118
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $282,641 $241,559 $252,601
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income $13,067 $11,715 $11,756
Net interest rate spread(2) 4.41% 4.60% 4.49%
Net interest-earning assets $ 17,899 $ 16,263 $ 12,257
Net interest margin(3) 4.76% 4.98% 4.82%
Average interest-earning assets to
average interset-bearing liabilities 107.0% 107.0% 109.0%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated net of deferred loan fees. The amount of interest foregone
on nonaccrual loans was $547,000, $803,000 and $972,000 for 1996, 1995
and 1994, respectively.
(2) Net interest rate spread represents the average yield earned on
interest-earning assets less the average rate paid on interest-bearing
liabilities.
(3) Net interest margin is computed by dividing net interest income by total
average earning assets.
The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets
and interest-bearing liabilities due to changes in outstanding balances and
changes in interest rates. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to: (i) changes in volume; (i.e. changes in volume multiplied by old rate)
and (ii) changes in rate (i.e. changes in rate multiplied by old volume).
For purposes of this table, changes attributable to both rate and volume
which cannot be segregated, have been allocated proportionately to changes
due to volume and changes due to rate.
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1996 COMPARED TO 1995 1995 COMPARED TO 1994
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
-----------------------------------------------------------------
DOLALRS IN THOUSANDS VOLUME RATE NET CHANGE VOLUME RATE NET CHANGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans(1) $ 642 $ (31) $ 611 $ (964) $3,107 $2,143
Repurchase agreements 1,407 (217) 1,190 (121) 332 211
Interest-bearing deposits (2) (1) - 6 6
U.S. government agency securities - - - - - -
Available for sale 1,632 - 1,632 - -
Held to maturity (878) 214 (664) 310 15 325
- -------------------------------------------------------------------------------------------------------
Total change in interest income 2,801 (33) 2,768 (775) 3,460 2,685
- -------------------------------------------------------------------------------------------------------
CHANGES IN INTEREST EXPENSE:
Savings accounts 1,929 (623) 1,306 2,585 2,041 4,626
Certificates of deposit (759) 19 (740) (2,895) 980 (1,915)
Money market checking 822 - 822 - - -
Other borrowings 27 1 28 - 15 15
- -------------------------------------------------------------------------------------------------------
Total change in interest expense 2,019 (603) 1,416 (310) 3,036 2,726
- -------------------------------------------------------------------------------------------------------
Net change in net interest income $ 782 $ 570 $1,352 $ (465) $ 424 $ (41)
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include interest income which would have been earned on nonaccrual
loans.
TOTAL INTEREST INCOME
Total interest income increased by $2.8 million or 11.6% to $26.6
million for 1996 compared to 1995, due primarily to an increase in the
average interest earning asset balances of $39.7 million or 16.9%. Partially
offsetting this increase was a decline in the yield on interest earning
assets of 45 basis points. The overall yield on the Company's
interest-earning assets decreased from 10.12% for 1995 to 9.67% for 1996.
The decrease in the yield was primarily the result of the increase in lower
yielding U.S. government sponsored agency securities, compared to the
Company's higher yielding loan assets. The decline in market interest rates
on repurchase agreements was largely offset by increased yields in U.S.
government sponsored agency securities.
Interest income on loans increased $611,000 or 2.9% for 1996 compared to
1995. This increase was attributable to the volume increase of $5.7 million
during 1996 which was partially offset by a 2 basis point decrease in the
yield.
The Company purchased a net of $83.5 million of U.S. government
sponsored agency securities in 1996. The Company recorded $1.6 million in
income on securities classified as available for sale yielding 6.84% for the
year ending December 31, 1996. The Company held no securities within this
category during 1995. The Company recorded $1.3 million in income on U.S.
government sponsored agency securities classified as held to maturity
yielding 7.46% for the year ending December 31, 1996. This represented a
$664,000 or 34.1% decrease in interest earned as compared to the same period
in 1995, due to the smaller balance of securities being held in this category
during 1996. The increase in yield of 124 basis points, was due to the
purchase of higher yielding securities complemented with longer term
maturities during 1996 as compared with 1995.
Interest earned on the Company's securities purchased under resale
agreements increased by $1.2 million or 112% for the year ending December 31,
1996. This was due to an increase of $24.2 million in the average balance of
these securities during 1996. This increase was partially offset by a 51
basis point decrease in the yield during 1996. The decrease in yield
reflects the decline in market interest rates between these periods.
TOTAL INTEREST EXPENSE
Total interest expense for 1996 increased by $1.4 million, or 11.7%, from
$12.1 million in 1995 to $13.5 million in 1996. The primary increase in
interest cost resulted from an increase in the average interest bearing deposits
of $38.1 million, or 17.4%, for the year ending December 31, 1996 as compared to
the same period in 1995. Partially offsetting these increases was a decline in
the rates paid on interest bearing liabilities during this same period. The
rate paid on the Company's interest bearing
23
<PAGE>
liabilities declined from 5.52% to 5.26% or 26 basis points for the year
ending December 31, 1996. The decline in the rates paid on the Company's
interest bearing liabilities reflect the decline in market interest rates
between the 1995 and 1996 periods and the substitution of lower rate money
market checking accounts for higher rate paying certificates of deposit.
Interest expense on certificates of deposit decreased by $740,000, or
17.6%, for 1996 compared to 1995, due primarily to a $13.9 million decline in
the average certificates of deposits outstanding. This decline was partially
offset by an increase in the rates paid on these deposits from 5.48% in 1995
to 5.51% in 1996.
Interest expense on savings accounts increased by $1.3 million, or
16.6%, for 1996 when compared to 1995, due to a $34.8 million increase in
average savings deposits for the year ended December 31, 1996. Partially
offsetting this increase was a 36 basis point decrease in the rate paid on
savings accounts from 5.55% for 1995 to 5.19% for 1996. The decrease in the
rate paid reflects the decline in market interest rates between these periods.
The Company introduced a money market checking product during the first
quarter of 1996. The introduction of this product resulted in attracting
$20.1 million in deposits during 1996. The Company paid 4.92% on this
product for the year ended December 31, 1996.
Interest expense on other borrowings increased by $28,000, or 187% from
$15,000 for the year ended December 31, 1995 to $43,000 for the same period
in 1996. The increase was due primarily to an increase in borrowing by the
Company during 1996.
PROVISION FOR LOAN LOSSES
During 1996, the Company increased its provision for loan losses to $1.9
million from $960,000 for 1995 The increase of $957,000 between 1996 and 1995
in the loan loss provision reflects the additional expense provided in June
of 1996 in connection with the sale of $9.5 million in nonaccrual and TDR
loans.
Although the Company maintains its allowance for loan losses at a level
which it considers to be adequate to provide for potential losses, there can
be no assurance that such losses will not exceed the estimated amounts,
thereby adversely affecting future results of operations. The calculation of
the adequacy of the allowance for loan losses is based on a variety of
factors, including underlying loan collateral values, delinquency trends and
historical loan loss experience. Commercial real estate serves as collateral
for virtually all of the Company's loan portfolio. The ratio of nonaccrual
loans to total loans, net of deferred loan fees was 0.66% at December 31,
1996 and 2.53% at December 31, 1995. The ratio of the allowance for loan
losses to nonaccrual loans increased to 245% at December 31, 1996 from 90% at
December 31, 1995.
NONINTEREST INCOME
Noninterest income for the year ended December 31,1996 increased by
$160,000, or 12.1% over the same period in 1995. The gain of $413,000 on
investment securities for the year ended December 31, 1996 represented the
final recovery on a corporate debt security that had been written off in
1994. This compares with the gain on investment securities for 1995 which
included a gain of $195,000 from the sale of a collateralized mortgage
obligation (CMO residual)and a recovery of $656,000 from the corporate debt
security written off during 1994.
Other noninterest income increased by $334,000, or 71.1%, as a result of
increases in late fees, loan prepayment fees, and rents received on OREO
properties.
In addition, noninterest income included a $264,000 gain recorded on the
sale of $28.2 million of the Company's San Francisco branch deposits in
September of 1996.
24
<PAGE>
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
NONINTEREST EXPENSE ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------
DOLLAR PERCENTAGE DOLLAR PERCENTAGE
YEAR ENDED DECEMBER 31, CHANGE CHANGE +/- CHANGE CHANGE +/-
- ------------------------------------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS 1996 1995 1994 1996/1995 1996/1995 1995/1994 1995/1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Valuation adjustment to $ 155 $ 344 $ 1,719 $ (189) -54.94% $ (1,375) -79.99%
other real estate owned
Other real estate owned expense 150 203 850 (53) -26.11% (647) -76.12%
Salaries and employee benefits 4,664 4,147 3,692 517 12.47% 455 12.32%
Net occupancy expense 1,534 1,470 1,453 64 4.35% 17 1.17%
FDIC insurance premiums 72 337 598 (265) -78.64% (261) -43.65%
Credit and collections expenses 94 485 1,100 (391) -80.62% (615) -95.91%
Communication and data processing 551 467 484 84 17.99% (17) -3.51%
Other expenses 903 1,456 1,514 (553) -37.98% (58) -3.83%
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense $ 8,123 $ 8,909 $ 11,410 $ (786) -8.82% $ (2,501) -21.92%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The valuation adjustment to OREO and other real estate owned expense
during 1996 decreased due, primarily, to the stabilization of commercial real
estate values in California, resulting in a decrease in write downs on
foreclosed real estate property subsequent to its foreclosure.
Salaries and employee benefits during 1996 increased as a result of the
hiring of four individuals to manage the Company's newly established SBA
department during the second quarter of 1996, severance packages paid to
employees of the San Francisco branch which was sold in September of 1996,
and employee bonuses earned in 1996 which were not earned in 1995.
FDIC insurance premiums declined for the year ended December 31, 1996
due to a reduction of the FDIC insurance premium rates in 1996.
Credit and collections costs during 1996 decreased as a result of the
Company having fewer delinquent nonaccrual accounts in 1996 as compared to
1995.
Other expenses during 1996 decreased partially, as a result of a
reduction in the accrual of Delaware franchise taxes in the first quarter of
1996 and legal and consulting fees paid in 1995 in connection with the 1995
exchange offer of the Company's Preferred Stock.
INCOME TAX PROVISION
The Company's income tax provision for the year ended December 31, 1996
was $1.5 million producing an effective tax rate of 33.4%. The difference
between the Company's statutory tax rate of 41.5% and its effective tax rate
for the year ended December 31, 1996 was due to both the reversal of a
portion of the Company's tax valuation reserve of approximately $305,000
against the Company's tax provision, as well as California tax deductions
(credits) generated by the Company on loans made in special tax zones within
California.
The Company's income tax provision for 1995 was reduced by a like
reduction in the Company's tax valuation reserves. The combined statutory
tax provision of approximately $1.4 million representing a combined statutory
tax rate of approximately 41.6% was reduced by a reduction in the Company's
tax valuation reserve of approximately $1.5 million. The Company's tax
valuation reserve established during 1994 was applied to the 1995 tax
provision.
FINANCIAL CONDITION
BALANCE SHEET ANALYSIS
Total assets increased by $45.0 million to $304.1 million at December
31, 1996 from $259.1 million at December 31, 1995. The increase was
partially due to the Company's purchase of U.S. government sponsored agency
securities, net of maturities, totaling $83.5 million at December 31, 1996.
The Company purchased these securities intending to maximize the earnings of
cash held in securities purchased under resale agreements which yielded a
lower return.
Total loans increased by $13.0 million to $211.7 million from $198.7
million at December 31, 1995. The increase in loans was primarily due to
1996 loan originations of $44.4 million and fourth quarter loan purchases of
$20.2 million, reduced by $48.0 million in loan payoffs, loan transfers to
OREO, and loan chargeoffs. Included in
25
<PAGE>
the $48.0 million loan payoff figure was a bulk loan sale of $9.5 million of
nonaccrual and loans classified as troubled debt restructurings. The
increases in investment securities and loans were funded primarily through a
reduction of $53.3 million in cash and cash equivalents, with the remainder
being provided from the increased deposit balances and other borrowings.
Total deposits increased by $32.2 million to $266.7 million at December
31, 1996 from $234.5 million at December 31, 1995. Savings accounts
decreased by $15.9 million to $157.8 million at December 31, 1996. This
decrease was more than offset by the increase of $20.1 million in the
Company's newly introduced money market checking account and the $28.0
million increase in certificates of deposit as of December 31, 1996, when
compared to the same period in 1995, despite the sale of the Company's San
Francisco branch in September 1996, which resulted in the sale of $21.0
million in savings deposits, $7.2 million in time deposits, for a total sale
of $28.2 million in deposit liabilities. The Company sold its San Francisco
branch to reduce expenses associated with deposit gathering.
In 1996, the Company set up borrowing lines with two brokers aggregating
$50 million in availability. As of December 31, 1996, other borrowings
totaled $10 million. The Company uses these lines to cover short term
financing needs for loan fundings or security purchases.
- --------------------------------------------------------------------------------
NONPERFORMING ASSETS
The Company's general policy is to discontinue accrual of interest on a
loan when any installment payment is 61 days or more past due or, when
management otherwise determines the collectibility of principal or interest
is unlikely prior to the loan becoming 61 days past due.
Interest income on nonaccrual loans is subsequently recognized when the
loan becomes contractually current. Accounts which are deemed uncollectible
by management or for which no payment has been received for five months are
charged off for the amount that exceeds the estimated net realizable value of
the underlying real estate collateral.
The Company's general policy is to initiate foreclosure proceedings when
loans are more than 30 days past due. Some loans that are more than 30 days
past due are never actually foreclosed, however, because the borrower brings
the account current either before a formal notice of default is filed or
before the property goes to foreclosure sale.
On loans that are more than 60 days past due, updated third party
appraisals are generally ordered to ascertain the current fair market value
of the loan collateral. Between the time the updated appraisals are ordered
and the time they are received, (normally about a 60 day period), management
evaluates the loan collateral position to ascertain the amount of general
loan loss reserves that should be allocated to the loan. Upon receipt of the
third party appraisal, further general loan loss reserves are allocated, if
necessary based on the estimated net realizable value of the collateral
(which is calculated based on the estimated sales price of the collateral
less all selling costs).
The calculation of the adequacy of the allowance for loan losses is
based on a variety of factors, including loan classifications and underlying
loan collateral values, and not directly tied to the level of nonperforming
loans which are comprised entirely of nonaccrual loans. Therefore, changes
in the amount of nonaccrual loans will not necessarily result in an
associated increase or decrease in the allowance for loan losses. The ratio
of nonaccrual loans to total loans, net of deferred fees was 0.65% at
December 31, 1996 and 2.53% at December 31, 1995.
Total nonperforming assets declined in 1996 from $9.3 million or 3.6% of
total assets at December 31, 1995 to $4.8 million or 1.60% of total assets
at December 31, 1996. The following table sets forth, by accrual status, the
number and remaining balances of commercial real estate loans that were more
than 30 days delinquent at December 31, 1996:
<TABLE>
<CAPTION>
LOANS DELINQUENT AT DECEMBER 31, 1996
-------------------------------------------------------------------------------------------------
30-59 DAYS 60-89 DAYS 90 DAYS AND OVER TOTAL DELINQUENT
-------------------------------------------------------------------------------------------------
NO. % OF NO. % OF NO. % OF NO. % OF
OF LOAN TOTAL OF LOAN TOTAL OF LOAN TOTAL OF LOAN TOTAL
(DOLLARS IN THOUSANDS) LOANS AMOUNT LOANS LOANS AMOUNT LOANS LOANS AMOUNT LOANS LOANS AMOUNT LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial real estate loans:
Nonaccrual loans -- $ -- -- -- -- -- 4 $1,386 0.65% 4 $1,386 0.65%
Loans accruing 2 659 0.31% 1 318 0.15% -- -- -- 3 977 0.46%
- -----------------------------------------------------------------------------------------------------------------------------------
Total delinquent loans 2 $ 659 0.31% 1 $ 318 0.15% 4 $1,386 0.65% 7 $2,363 1.11%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
NONPERFORMING AND RESTRUCTURED ASSETS
The following table sets forth (a) loans accounted for on a nonaccrual
basis, (b) OREO, (c) nonperforming investments and (d) loans that were
"troubled debt restructurings" at the dates indicated:
<TABLE>
<CAPTION>
NONPERFORMING AND TROUBLED DEBT RESTRUCTURING ASSETS DECEMBER 31,
- -------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans/Commercial Real Estate Loans $1,386 $4,985 $ 9,779 $ 5,186 $ 6,859
Other real estate owned 3,469 4,355 5,724 9,092 8,065
- -------------------------------------------------------------------------------------------
Total nonaccrual loans and OREO 4,855 9,340 15,503 14,278 14,924
Nonperforming investments - - - 898 1,705
- -------------------------------------------------------------------------------------------
Total nonperforming assets 4,855 9,340 15,503 15,176 16,629
Troubled debt restructurings(1) 719 8,757 5,039 4,765 -
- -------------------------------------------------------------------------------------------
Total nonaccrual loans and OREO to total assets 1.60% 3.60% 6.24% 5.89% 6.13%
Total nonperforming assets to total assets 1.60% 3.60% 6.24% 6.26% 6.83%
Allowance for loan losses to nonaccrual loans 245.30% 90.30% 82.60% 75.40% 46.60%
- -------------------------------------------------------------------------------------------
(1) All troubled debt restructurings were performing in accordance with their revised terms
at December 31, 1996
</TABLE>
For 1996 and 1995, gross interest income which would have been recorded
had the nonaccrual loans been current in accordance with their original terms
was $614,000 and $803,000, respectively. The amount that was recorded as
interest income on such loans was $67,000 and $344,000 for 1996 and 1995,
respectively.
NONACCRUAL LOANS
Nonaccrual loans are loans, not classified as "troubled debt
restructurings" or OREO, that show little or no current payment ability. These
loans are supported, however, by collateral or cash flow that support the
collectibility of the Company's remaining book balance. Nonaccrual loan
balances are net of any prior write-offs, but any specifically assigned general
allowance for loan losses are not deducted from the nonaccrual loan balances.
The following table represents the major components of the changes in the
nonaccrual loans for the year ending December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
NONACCRUAL LOAN ACTIVITY YEAR ENDING
- -------------------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans at beginning of period $ 4,985 $ 9,779 $ 5,186
Nonaccrual loan additions 4,675 11,835 17,045
Loans returned to accrual status (630) (5,910) (2,342)
Loans transferred to OREO (2,836) (6,790) (5,402)
Loan provision/other - (566) -
Net loan chargeoffs (1,929) (2,014) (4,178)
Loan payments/payoffs (2,879) (1,349) (530)
- -------------------------------------------------------------------------------------------
Nonaccrual loans at end of period 1,386 4,985 9,779
- -------------------------------------------------------------------------------------------
Net change/activity $ (3,599) $ (4,794) $ 4,593
- -------------------------------------------------------------------------------------------
</TABLE>
OTHER REAL ESTATE OWNED
Assets classified as OREO include foreclosed real estate owned by the
Company. The Company had a total of five properties in this category at
December 31, 1996, totaling $3.5 million.
Other real estate owned declined to $3.5 million at December 31, 1996,
from $4.3 million at December 31, 1995, a decline of $886,000 or 20.3%. This
reflects the sale of eight properties with a net balance of $3.5 million
during 1996 versus $8.4 million during 1995. The Company provided loan
financing in the aggregate principal amount of $247,000 for one of the
properties sold during 1996. The Company is currently in sales negotiations on
several of its OREO properties.
The Company makes valuation adjustments to its OREO, based on the most
recent collateral appraisal data and other relevant information which
effectively reduce the book value of such assets to the estimated fair market
value less selling costs of the properties. The fair value of the real estate
takes into account the real estate values net of expenses such as brokerage
commission, past due property taxes, property repair expenses, and other
27
<PAGE>
items. The estimated sale price does not necessarily reflect appraisal values
which management believes, in some cases, may be higher than what could be
realized in a sale of OREO. The $3.5 million balance of OREO at December 31,
1996 reflects reductions of $1.46 million from the original principal
balances of the related loans, through both loan chargeoffs (prior to the
properties becoming OREO) and valuation adjustments (subsequent to the
properties becoming OREO). The $1.46 million of reductions is not included
in the allowance for loan losses.
The following table represents the major components of the changes in
the OREO for the year ending December 31, 1996, 1995 and 1994:
<TABLE>
OTHER REAL ESTATE OWNED ACTIVITY YEAR ENDING
- ------------------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OREO at beginning of period $ 4,355 $ 5,724 $ 9,092
Transfers from loans 2,836 6,790 5,402
OREO write downs (155) (344) (1,719)
Payments/other (86) 581 (51)
Sales of OREO properties (3,481) (8,396) (7,000)
------------ ------------ ------------
OREO balance at end of period 3,469 4,355 5,724
------------ ------------ ------------
Net change/activity $ (886) $ (1,369) $ 3,368
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
TROUBLED DEBT RESTRUCTURINGS (TDR)
A TDR is a loan in which the Company, for reasons related to the
borrower's financial difficulties, grants a permanent concession to the
borrower, such as a reduction in the loan's fully-indexed interest rate, a
reduction in the face amount of the debt, or an extension of the maturity
date of the loan, that the Company would not otherwise consider. At December
31, 1996, the Company had one loan in the aggregate principal amount of
$719,000 that was categorized as a TDR. The TDR balance reflected in the
"Nonperforming and Restructured Asset" table is net of any prior write-offs,
but any specifically assigned general allowance for loan losses are not
deducted from the above TDR loan balances.
The Company recorded a charge of $125,000 in 1995, against interest
income related to the TDR loans, to record the difference between the
contractual rate of interest and the modified rate of interest throughout the
term of the loan modification. The Company's total interest income was
reduced by a net charge of $478,000 for all loans qualifying as TDRs during
the year ending December 31, 1995.
The following table represents the major components of the changes in
the TDRs for the year ending December 31, 1996 and 1995:
TROUBLED DEBT RESTRUCTURING ACTIVITY YEAR ENDING
- ------------------------------------ ---------------------------
DECEMBER 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1996 1995
- ---------------------- ------------ ------------
TDR balance beginning of period $ 8,757 $ 5,039
Transfers from/(to) accruing loans (948) 4,913
Transfers from/(to) nonaccruing loans (156) 2,624
Loan sale/loan payments (5,538) (1,515)
Net loan charge-offs/other (1,396) (2,304)
------------ ------------
TDR balance end of period 719 8,757
------------ ------------
Net change/activity $ 8,038 $ 3,718
------------ ------------
------------ ------------
OTHER LOANS OF CONCERN (POTENTIAL PROBLEM LOANS)
In addition to nonaccrual loans and TDRs, as of December 31, 1996, the
Company had four loans with aggregate outstanding loan balances of $3.6
million with respect to which known information about the possible credit
problems of the borrowers or the cash flows of the properties securing the
loans have caused management concern about the ability of the borrowers to
comply with present loan repayment terms and which may result in the future
inclusion of such loans in the nonperforming loan category. This compares
with eight loans with aggregate outstanding loan balances of $5.0 million at
December 31, 1995.
28
<PAGE>
LIQUIDITY
The Company's primary sources of funds are deposits and payments of
principal and interest on loans. While maturities and scheduled principal
amortization on loans are a reasonably predictable source of funds, deposit
flows and mortgage loan prepayments are greatly influenced by the level of
interest rates, economic conditions, and competition.
The primary lending and investment activities of the Company have
generally been the origination of adjustable rate commercial real estate
loans, the purchase of U.S. government sponsored agency securities, and to a
lesser extent, the purchase of short-term investment securities. The
purchase of U.S. government sponsored agency securities and short-term
investment securities provide a source of long- and short-term liquidity.
The lending and investment activities of the Company are funded primarily by
principal and interest payments on loans and interest-bearing deposit growth.
The Company maintains minimum levels of liquidity as defined by Company
policy. The Company's liquidity ratio at December 31, 1996 was approximately
31%, which exceeded the 10.00% minimum required by policy.
The Company's most liquid assets are cash, cash in banks, and short-term
investments. The levels of these assets depend on the Company's operating,
financing, lending and investing activities during any given period.
Liquidity for the Company is monitored daily and evaluated monthly.
Excess funds are invested in short-term investment securities, generally
repurchase agreements. Additional sources of funds are available by the use
of borrowing against the Company's U.S. government sponsored agency
securities portfolio and secondarily by borrowing from the Federal Reserve
Bank's discount window. At December 31, 1996, Pacific Crest Investment had
$10.0 million in outstanding short term borrowings against its $50 million
borrowing line with brokers which left $40 million in unused borrowing
availability against its U.S. government sponsored agency securities. The
Company had a borrowing line of $6.7 million with the Federal Reserve Bank at
December 31, 1996.
At December 31, 1996, the Company had outstanding commitments to fund
adjustable rate loans of $1.6 million.
There has been a significant decrease in the Company's holdings of cash
and cash equivalents during the period ending December 31, 1996 compared to
1995. Cash and cash equivalents decreased $53.3 million to $2.8 million at
December 31, 1996 from December 31, 1995. The Company experienced a decrease
in savings accounts of $15.9 million, an increase of $20.1 million in money
market checking deposits and an increase of certificates of deposits of $28.0
million during 1996. The Company originated and purchased $64.6 million in
new commercial real estate and business loans during 1996. Off-setting these
originations, the Company experienced $40.8 million in loan payoffs, and $3.8
million in loan transfers to OREO, and $3.5 million in loan chargeoffs during
1996.
The Company on an unconsolidated basis, (the "Parent Company") has
approximately $478,000 in cash and cash equivalents at December 31, 1996,
which will be utilized to pay future operating expenses of the parent and
possibly for future capital infusions into Pacific Crest Investment.
Pacific Crest Investment's ability to pay dividends to the Parent
Company is restricted by California state law, which requires that sufficient
retained earnings are available to pay the dividend. At December 31, 1996
Pacific Crest Investment had deficit retained earnings of $358,000. Under
California state law, this deficit would have to be turned into a positive
figure before dividends could be paid from Pacific Crest Investment to the
Parent Company.
During 1996, 1995 and 1994, the Company originated and purchased loans
of $64.6 million, $42.4 million and $16.0 million, respectively.
CAPITAL RESOURCES
The Company's objective is to maintain a strong level of capital that
will support sustained asset growth, anticipated credit risks and to ensure
that regulatory guidelines and industry standards are met.
Pacific Crest Investment is subject to certain leverage and risk-based
capital adequacy standards applicable to FDIC-insured institutions. At
December 31, 1996, Pacific Crest Investment was in compliance with all such
requirements.
Regulations on capital adequacy guidelines required by the FDIC are as
follows. Risk-based capital consists of a core capital component (Tier I),
essentially common stockholders' equity, less intangible assets and a
supplemental component (Tier II), which includes the allowance for loan
losses up to 1.25% of risk-weighted assets, and a system for assigning assets
and off-balance sheet items to one of four risk-weighted categories. These
29
<PAGE>
capital standards require a minimum Tier I risk-based capital ratio of 4.00%
and total risk-based capital ratio (Tier I plus Tier II) of 8.00%.
In addition to the risked-based guidelines, the FDIC requires banking
organizations to maintain a minimum amount of Tier I Capital to total assets,
referred to as the leverage ratio. For a banking organization rated in the
highest of the five categories used by regulators to rate banking
organizations, the minimum leverage ratio of Tier I Capital to total assets
must be 3%. For all banking organizations not rated in the highest category,
the minimum leverage ratio must be at least 100 to 200 basis points above the
3% minimum, or 4% to 5%.
The following table sets forth Pacific Crest Investment's capital ratios as
of the dates indicated:
<TABLE>
<CAPTION>
At December 31, 1996 At December 31, 1995
---------------------------- --------------------------
PACIFIC CREST INVESTMENT REQUIRED ACTUAL EXCESS REQUIRED ACTUAL EXCESS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leverage Capital ratio 4.00% 7.96% 3.96% 4.00% 7.82% 3.82%
Tier I risk-based capital ratio 4.00% 10.31% 6.31% 4.00% 9.48% 5.48%
Total risk-based captial ratio 8.00% 11.56% 3.56% 8.00% 10.74% 2.74%
- --------------------------------------------------------------------------------------------------
</TABLE>
ASSET/LIABILITY MANAGEMENT
The purpose of asset liability management is to minimize the risk of
loss resulting from changes in interest rates. One method of assessing the
potential risk associated with changes in the interest rates is to examine
the extent to which assets and liabilities are "interest rate sensitive" and
by monitoring the institution's interest rate sensitivity "gap". An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets anticipated, based upon certain assumptions, to
mature or reprice within a specific time period and the amount of
interest-bearing liabilities anticipated, based upon certain assumptions, to
mature and reprice within that same time period. A gap is considered positive
when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities. A gap is considered negative when the
amount of interest rate sensitive liabilities exceeds the amount of interest
rate sensitive assets. During a period of rising interest rates, a negative
gap would generally tend to adversely affect net interest income while a
positive gap would generally tend to result in an increase in net interest
income. During a period of declining interest rates, a negative gap would
generally tend to result in increased net interest income while a positive
gap would generally tend to adversely affect net interest income. At
December 31, 1996, total interest-bearing liabilities maturing or repricing
within one year exceeded total-interest earning assets maturing or repricing
in the same period by $89.0 million, representing a positive cumulative
one-year gap of 30.2%.
To the extent consistent with its interest rate spread objectives, the
Company attempts to reduce its interest rate risk and has taken a number of
steps to match its interest sensitive assets and liabilities to minimize the
potential negative impact of changing interest rates. The Company has
focused on making adjustable rate commercial real estate loans, virtually all
of which adjust quarterly.
While the Company has written many of its loans with interest rate
floors, the fully-indexed rate on the loans at December 31, 1996 were,
generally, in excess (above) or equal to those interest rate floors. It may
be anticipated that loans with interest rate floors will increase net
interest income in a declining interest rate environment because affected
loans do not reprice downward to their fully-indexed rate when interest rates
fall. No assurances can be given that such will be the case, however,
particularly if borrowers are able to refinance or renegotiate their loans
when interest rates fall.
The following table sets forth the interest rate sensitivity of the
Company's assets and liabilities at December 31, 1996 on the basis of certain
assumptions. Except as stated below, the amounts of assets and liabilities
shown which reprice or mature during a particular period were determined in
accordance with the earlier of the repricing timing or contractual term of
the asset or liability. The Company has assumed that its savings accounts,
money market accounts, and other borrowings which totaled $157.8 million,
$20.1 million and $10.0 million, respectively at December 31, 1996, reprice
immediately. Certificates of deposit are included in the table below at
their dates of maturity.
Certain shortcomings are inherent in the method of analysis presented in
the following 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, some adjustable rate loans
have features which restrict changes in
30
<PAGE>
interest rates on a short-term basis and over the life of the asset. Further,
interest rate floors on some adjustable rate loans can have the effect of
increasing the net interest income as interest rates decline or, conversely,
limiting net interest income as interest rates rise. Also, loan prepayments
and early withdrawal of certificates of deposit could cause the interest
sensitivities to vary from what appears in the table. Finally, the ability of
many borrowers to service their adjustable rate debt may be adversely
affected by an interest rate increase.
<TABLE>
<CAPTION>
AFTER AFTER
NEXT DAY AND THREE MONTHS ONE YEAR
WITHIN BUT WITHIN BUT WITHIN AFTER
(DOLLARS IN THOUSANDS) IMMEDIATELY THREE MONTHS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Repurchase agreements $ 262 $ - $ - $ - $ - $ 262
Investment securities-held to maturity - - - 5,000 25,960 30,960
Investment securities-available for sale - - - 12,985 39,549 52,534
Total loans, net of deferred fees 1,386 156,969 6,645 19,955 26,140 211,095
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-earnings assets $ 1,648 $ 156,969 6,645 $ 37,940 $ 91,649 $ 294,851
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Certificates of deposit $ - $ 24,140 $ 42,186 $ 22,500 $ - $ 88,826
Savings account 157,789 - - - - 157,789
Money market checking 20,080 20,080
Other borrowings 10,000 10,000
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 187,869 $ 24,140 $ 42,186 $ 22,500 $ - $ 276,695
- ------------------------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap $ (186,221) $ 132,829 $ (35,541) $ 15,440 $ 91,649
Cumulative interest rate sensitivity gap (186,221) (53,392) (89,933) (73,493) 18,156
Interest rate sensitivity gap ratio (1) -63% 45% -12% 5% 31%
Cumulative interest rate - -18% -30% -25% 6%
sensitivity gap ratio (2)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The interest rate sensitivity gap ratio represents the
interest rate sensitivity gap divided by total interest-earning assets.
(2) The cumulative interest rate sensitivity gap ratio represents the
cumulative interest rate sensitivity gap divided by total interest-earning
assets.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and notes thereto
presented herein have been prepared in accordance with generally accepted
accounting principles ("GAAP") which require the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time
due to inflation. The impact of inflation is reflected in the increased cost
of the Company's operations. Unlike industrial companies, nearly all the
assets and liabilities of the Company are monetary. As a result, interest
rates have a greater impact on the Company's performance than do the effects
of general levels of inflation. Interest rates do not necessarily move in
the same direction or to the same extent as the price of goods and services.
COMPARISONS OF FINANCIAL RESULTS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND 1994
The Company's net income for 1995 was $3.2 million, compared to a net
loss of $6.5 million for 1994. The 1995 increase in net income over 1994 of
$9.7 million was primarily the result from a decrease of $7.4 million in the
provision for loan losses, a decrease of $1.4 million in the valuation
adjustment to other real estate owned, a decrease of $647,000 in other real
estate expense, a $615,000 decrease in credit and collection expense and a
decrease of $261,000 in FDIC insurance premiums. These decreases were
partially offset by an increase in salaries and employee benefits of $455,000
and a decrease of $41,000 to net interest income.
NET INTEREST INCOME
Net interest income for 1995 was $11.7 million, a decrease of $41,000
from the prior year.
31
<PAGE>
TOTAL INTEREST INCOME
Total interest income increased $2.7 million or 12.7% to $23.8 million
for 1995 compared to 1994, due primarily to increased yields on earning
assets, particularly loans, which was offset in part by a reduction in the
volume of loans and repurchase agreements. The yield on the average
interest-earning assets increased from 8.66% for 1994 to 10.12% for 1995.
The increase in the yield was the result of an increase in market interest
rates and the resulting repricing of loans during the last half of 1994.
Interest on loans increased $2.1 million or 11.5% for 1995 compared to
1994. This increase was attributable to a 168 basis point increase in the
yield on the Company's loan portfolio from 9.54% for 1994 to 11.22% for 1995.
The increase in the yield was the result of loans repricing upward during
the third and fourth quarters of 1994 and remaining unchanged during most of
1995.
Interest earned on the U.S. Government sponsored agency securities was
$1.9 million for 1995 compared to $1.6 million in 1994. The purchase of
these securities during the second and third quarters of 1994 provided an
alternative to investing in lower yielding repurchase agreements. The entire
portfolio matured or were called by the issuing agencies during the second,
third and fourth quarters of 1995. The increase in interest in the U.S.
agency securities portfolio was primarily a result of maintaining
approximately $5 million more in average outstandings in these securities
during 1995 as compared to 1994. The yield on these securities increased
from 6.17% in 1994 to 6.22% in 1995.
Interest earned on the Company's repurchase agreement securities
increased by $211,000 or 24.7% for 1995 compared to 1994. This increase was
the result of the yield on these securities increasing from 4.05% in 1994 to
5.81% in 1995.
TOTAL INTEREST EXPENSE
Total interest expense for 1995 increased $2.7 million from 9.4 million
in 1994 to $12.1 million in 1995. The increase in total interest expense in
1995 was primarily attributable to an increase in market interest rates and
the upward repricing of deposits that began in the third and fourth quarters
of 1994. Deposit rates remained relatively constant through most of 1995,
until the fourth quarter of 1995 when market rates began to decline and
deposits began to reprice downward.
Interest on certificates of deposit decreased $1.9 million or 31.3% for
1995 compared to 1994, due primarily from a $69.0 million decline in the
average certificates of deposits outstanding. This decline was partially
offset by an increase in the rates paid on these deposits from 4.20% in 1994
to 5.48% in 1995. The Company did not aggressively marketed its certificate
of deposit accounts and, as a result, had been able to lag interest rate
increases in this product during both 1995 and 1994 which resulted in a
runoff of certificates of deposits.
Interest on savings accounts increased $4.6 million or 142.5% for 1995
when compared to 1994, due to a $62.9 million increase in average savings
deposits for 1995. Also contributing to this increase was a 144 basis point
increase in the average rates paid on savings accounts from 4.11% for 1994 to
5.55% for 1995.
The Company recorded interest expense of $15,000 on other borrowings
during 1995. The Company had no other borrowings during 1994.
PROVISION FOR LOAN LOSSES
During 1995, the Company decreased its provision for loan losses to
$960,000 from $8.3 million for 1994 The decrease of $7.4 million between 1995
and 1994 in the loan provision reflects a stabilization in the collateral
values supporting loans due to the improvement in the regional economy in
Southern California. The erosion of collateral value, along with recession
related loan defaults, resulted in the increased level of loan loss
provisions during 1994. Total nonperforming assets declined in 1995 from
$15.5 million or 6.2% of total assets at December 31, 1994 to $9.3 million or
3.6% of total assets at December 31, 1995.
NONINTEREST INCOME
Noninterest income for 1995 increased $1.7 million over 1994.
Noninterest income for 1995 included a gain of $195,000 from the sale and
receipt of payments on a collateralized mortgage obligation (CMO residual).
The Company sold its remaining interest in its CMO residual during 1995. In
addition, the Company recorded a partial recovery of $656,000 based on the
cash receipts on a corporate debt security that had been written off during
1994. This compares to writedowns of $780,000 during 1994 on the Company's
remaining investment securities.
32
<PAGE>
Other noninterest income increased by $66,000 compared to 1994.
Increases in late fees and loan prepayment fees accounted for these increases.
NONINTEREST EXPENSE
The decrease of $2.5 million in noninterest expenses during 1995 reflect
an overall decrease in most of the Company's expense categories. The
decreases in valuation adjustments to other real estate owned, other real
estate owned expenses and credit and collection expenses are the result of
the improvement in the reduction of the Company's nonearning assets and the
costs associated with the collection of these accounts. The stabilization of
commercial real estate values in California during 1995 resulted in the
Company not having to writedown these OREO properties as aggressively in 1995
as compared to 1994. Several of the OREO properties owned during 1994
required repairs to bring them to a marketable condition. The decline in
these costs also reflect the reduction in delinquent property taxes paid on
OREO accounts during 1995 as compared to 1994.
The increase in salaries and employee benefits expense resulted
primarily from an increase in Company staffing in its commercial real estate
marketing and operations areas due to an anticipated increases in commercial
real estate lending. Also reflected in this increase were general salary
increases for 1995 in addition to amount relating to severance packages paid
to employees of the residential real estate lending department as a result of
discontinuing the residential lending programs. The net occupancy increase
includes rental increases as well as additional costs associated with the
rental of space for the residential real estate department.
Partially offsetting these increases were reductions in FDIC insurance
premiums, communications and data processing expenses and other expenses.
The decrease in FDIC expense reflects the refund of insurance premiums made
by the FDIC in the third quarter of 1995 due to a change in the insurance
rate charged for insured deposits. The FDIC reduced insurance premiums for
all FDIC insured institutions effective May 1, 1995.
INCOME TAX BENEFIT
The Company's income tax provision for 1995 was reduced by a like
reduction in the Company's tax valuation reserves. The combined statutory
tax provision of approximately $1.4 million representing a combined statutory
tax rate of approximately 41.6% was reduced by a reduction in the Company's
tax valuation reserve of approximately $1.5 million. The Company's tax
valuation reserve established during 1994 was applied to the 1995 tax
provision.
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
BALANCE SHEET ANALYSIS
Total assets increased $10.6 million to $259.1 million at December 31,
1995, from $248.5 million at December 31, 1994. Loans net of deferred fees
increased $14.3 million to $196.8 million at December 31, 1995 from $182.5
million at December 31, 1994. The increase in net loans reflects loan
originations in excess of loan transfers to OREO and loan repayments. The
Company purchased U.S. government sponsored agency securities during June
1994 building this securities portfolio to $55.2 million at December 31,
1994. During 1995, these securities matured or were called by the issuing
agency with the funds reinvested primarily in repurchase agreements and loan
fundings.
Total cash and cash equivalents increased by $50.0 million to $56.2
million at December 31, 1995 from $6.2 million at December 31, 1994 primarily
as a result of the liquidation of the Company's investment in U.S. sponsored
agency issued securities.
Total deposits increased by $8.1 million to $234.5 million at December
31, 1995 from $226.4 million at December 31, 1994. The Company shifted its
deposit strategy during 1994, with the introduction of a competitive money
market savings account that was designed to compete with higher yielding
certificates of deposits. Total savings accounts increased $33.7 million to
$173.7 million at December 31, 1995. Certificate of deposits decreased $25.5
million to $60.8 million at December 31, 1995.
33
<PAGE>
Pacific Crest Capital, Inc.
- --------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1996 and 1995 . . . . . . 35
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . 36
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996 and 1995. . . . . . . . . . . . . . . 37
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . 38
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . 39-51
Report of Deloitte & Touche LLP, Independent Auditors . . . . . . . . 52
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . 53
34
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Pacific Crest Capital, Inc.
- -----------------------------------------------------------------------------------------
December 31
--------------------
(DOLLARS IN THOUSANDS) 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 2,572 $ 2,118
Certificates of deposit -- 300
Securities purchased under resale agreements 262 53,749
- -----------------------------------------------------------------------------------------
Cash and cash equivalents 2,834 56,167
- -----------------------------------------------------------------------------------------
U.S. Government sponsored agency securities (Note 4)
Held to maturity, at amortized cost 30,960 --
Available for sale, at market 52,534 --
Loans (Note 5)
Commercial mortgage 206,172 193,332
Residential mortgage 1,596 3,169
Commercial business/other 3,944 2,242
- -----------------------------------------------------------------------------------------
Total Loans 211,712 198,743
Deduct:
Deferred loan fees 617 1,965
Allowance for loan losses 3,400 4,500
- -----------------------------------------------------------------------------------------
4,017 6,465
- -----------------------------------------------------------------------------------------
Net loans 207,695 192,278
Accrued interest receivable 1,966 1,547
Prepaid expenses and other assets 772 219
Deferred income taxes, net (Note 10) 3,302 3,979
Other real estate owned (Note 6) 3,469 4,355
Premises and equipment, at cost, net of accumulated
depreciation and amortization (Note 7) 553 564
- -----------------------------------------------------------------------------------------
Total assets $304,085 $259,109
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits (Note 8):
Saving accounts $157,789 $173,725
Money market checking 20,080 --
Certificates of deposit 88,826 60,785
- -----------------------------------------------------------------------------------------
Total deposits 266,695 234,510
Other borrowings (Note 9) 10,000 --
Accrued interest and other liabilities 2,922 2,647
- -----------------------------------------------------------------------------------------
Total liabilities 279,617 237,157
- -----------------------------------------------------------------------------------------
Commitments and contingencies (Notes 14 and 17)
Shareholders' equity (Notes 11, 12, 13, 15 and 16):
Common stock, $.01 par value, 10,000,000 shares authorized,
2,959,698 shares issued and outstanding at December 31, 1996,
2,953,748 shares issued and outstanding at December 31, 1995 27,838 27,813
Accumulated deficit (2,858) (5,861)
Net unrealized loss on available for sale securities (257) --
Common stock in treasury, at cost, 30,000 shares (Note 11) (255) --
- -----------------------------------------------------------------------------------------
Total shareholders' equity 24,468 21,952
- -----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $304,085 $259,109
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Book value per common share (Note 15) $ 8.35 $ 7.43
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
35
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Pacific Crest Capital, Inc.
- ------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
-----------------------------
(DOLLARS IN THOUSANDS) 1996 1955 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest on loans, including fees $21,384 $20,773 $18,630
Securities purchased under resale agreements 2,255 1,065 854
Certificates of deposit 15 16 10
U.S. government sponsored agency securities
Held to maturity 1,281 1,945 1,620
Available for sale 1,632 -- --
- ------------------------------------------------------------------------------------------------------
Total interest income 26,567 23,799 21,114
- ------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Savings accounts 9,179 7,873 3,247
Money market checking 822 -- --
Certificates of deposit 3,456 4,196 6,111
Reverse repurchase agreements 43 15 --
- ------------------------------------------------------------------------------------------------------
Total interest expense 13,500 12,084 9,358
- ------------------------------------------------------------------------------------------------------
Net interest income 13,067 11,715 11,756
Provision for loan losses (Note 2) 1,917 960 8,343
- ------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 11,150 10,755 3,413
NONINTEREST INCOME:
Gain (loss) on investment securities 413 851 (780)
Gain on sale of deposits 264 -- --
Other noninterest income 804 470 404
- ------------------------------------------------------------------------------------------------------
Total noninterest income 1,481 1,321 (376)
- ------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Valuation adjustments to other real estate owned (Note 6) 155 344 1,719
Other real estate owned expenses 150 203 850
Salaries and employee benefits (Note 17) 4,664 4,147 3,692
Net occupancy expenses 1,534 1,470 1,453
FDIC insurance premiums 72 337 598
Credit and collection expenses 94 485 1,100
Communication and data processing 551 467 484
Other expenses 903 1,456 1,514
- ------------------------------------------------------------------------------------------------------
Total noninterest expense 8,123 8,909 11,410
- ------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 4,508 3,167 (8,373)
Income tax provision (benefit) (Note 9) 1,505 (77) (1,914)
- ------------------------------------------------------------------------------------------------------
Net income (loss) 3,003 3,244 (6,459)
Preferred dividends declared -- (920) (1,104)
- ------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 3,003 $ 2,324 $(7,563)
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Per Share Data (Note 15)
Primary earnings (loss) per common share $ 1.00 $ 2.01 $ (6.88)
- ------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding (in thousands) 3,004 1,158 1,100
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Fully diluted earnings (loss) per common share $ 1.00 $ 1.20 $ (6.88)
- ------------------------------------------------------------------------------------------------------
Weighted average fully diluted common shares outstanding (in thousands) 3,042 2,697 --
- ------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
36
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Pacific Crest Capital, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
NET
UNREALIZED
GAIN (LOSS) ON
PREFERRED STOCK COMMON STOCK ACCUM- SECURITIES TREASURY STOCK
(DOLLARS AND SHARES --------------- ------------ ULATED AVAILABLE ----------------
IN THOUSANDS) SHARES AMOUNT SHARES AMOUNT DEFICIT FOR SALE SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 561 $ 12,843 1,099 $ 14,958 $ (622) $ - $ - $ -
Purchase of stock under employee
stock purchase plan (Note 12) - - 3 12 - - - -
Dividends on preferred stock - - - - (1,104) - - -
Net loss - - - - (6,459) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1994 561 $ 12,843 1,102 $ 14,970 $ (8,185) $ - - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends on preferred stock - - - - (920) - - -
Conversion of preferred stock (561) (12,843) 1,852 12,843 - - - -
Net income 3,244 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1995 - $ - 2,954 $ 27,813 $ (5,861) $ - - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of stock under employee
stock purchase plan (Note 12) - - 6 $ 25 - - - -
Unrealized loss on securities
available for sale, net of taxes - - - - - (257) - -
Purchase of treasury shares - - - - - - (30) (255)
Net income - - - - 3,003 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1996 - - 2,960 27,838 $ (2,858) $ (257) (30) $ (255)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Pacific Crest Capital, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 3,003 $ 3,244 $ (6,459)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Recovery on investment securities (413) (851) 780
Provision for loan loss 1,917 960 8,343
Valuation adjustment to OREO 155 344 1,719
Depreciation and amortization 233 248 232
Amortization of deferred loan fees (907) (588) (853)
Amortization/accretion of securities (37) (67) (114)
Changes in operating assets and liabilities:
Accrued interest receivable (419) 285 (201)
Prepaid expenses and other assets (520) 254 341
Deferred income taxes 863 (79) (1,766)
Accrued interest and other liabilities 275 105 440
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,150 3,855 2,462
- ------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of U.S. government sponsored securities available for sale (106,859) - -
Purchase of U.S. government sponsored securities held to maturity (57,471) - (55,133)
Proceeds from U.S. government sponsored securities available for sale 53,900 - -
Proceeds from U.S. government sponsored securities held to maturity 26,531 55,315
Proceeds from recovery on corporate bond securities 380 851 118
Net (increase)/decrease in loans (8,096) (25,054) 13,217
Purchase of loans (20,200) - -
Proceeds from loan sales 9,032 - -
Purchases of equipment and leasehold improvements, net (222) (59) (235)
Proceeds from sale of other real estate owned 3,567 7,815 7,051
- ------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (99,438) 38,868 (34,982)
- ------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Preferred stock cash dividends - (920) (1,104)
Sale of savings deposits in connection with branch sale (20,989) - -
Sale of time deposits in connection with branch sale (7,202) - -
Net increase in money market checking 20,080 - -
Net increase in savings accounts 5,053 33,693 110,388
Net increase/decrease in CDs 35,243 (25,533) (97,200)
Net increase in other borrowings 10,000 - -
Proceeds from issuance of common stock 25 - 12
Purchase of treasury stock, at cost (255) - -
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 41,955 7,240 12,096
- ------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in cash and cash equivalents (53,333) 49,963 (20,424)
Cash and cash equivalents at beginning of period 56,167 6,204 26,628
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,834 $ 56,167 $ 6,204
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 13,428 $ 12,165 $ 9,499
Income taxes $ 745 $ 2 $ 2
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Transfers of net loans to other real estate owned $ 2,836 $ 6,790 $ 5,402
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 PACIFIC CREST CAPITAL, INC.
- --------------------------------------------------------------------------------
1. ORGANIZATION
Pacific Crest Capital, Inc. ("the Company"), a Delaware corporation, is
incorporated as a financial institution holding company and holds 100% of the
stock of Pacific Crest Investment and Loan ("Pacific Crest Investment")
Pacific Crest Investment conducts an industrial loan business in the state
of California. Pacific Crest Investment is subject to regulation and supervision
by the Department of Corporations of the state of California as specified in the
California Industrial Loan Law, and by the Federal Deposit Insurance Corporation
(FDIC). Deposits are insured up to $100,000 for each depositor by the FDIC.
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the Company and its wholly
owned subsidiary Pacific Crest Investment. All significant intercompany
transactions have been eliminated.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the 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 balance
sheets and revenues and expenses for the year. Actual results in future years
could differ from those estimates by management in the current year. Material
estimates that are particularly susceptible to significant change relate to the
determination of the allowance for loan losses and the valuation allowance for
other real estate owned.
LOAN INCOME
Interest income includes interest on loans, which is recognized as earned,
and amortization of loan fees. Loan fees, net of incremental direct costs are
deferred and recognized by the interest method over the term of the loan.
CASH EQUIVALENTS
Securities purchased under resale agreements and interest earning
certificates of deposit are classified as cash equivalents and are carried at
cost. The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
SECURITIES PURCHASED UNDER RESALE AGREEMENTS
The Company invests in securities purchased under resale agreements to
optimize its returns on liquid assets. The Company obtains collateral for these
agreements which normally consist of U.S. Government Agency and U.S. Government
sponsored agency backed securities. The duration of the agreement is typically
from one to 14 days, during which the collateral is held by a third-party
trustee for the Company. The Company has, on occasion, purchased securities
under resale agreements with maturities of up to 90 days.
INVESTMENT SECURITIES
The Company invests in U.S. government sponsored agency issued securities.
At the date of purchase, the Company elects to segregate the security into
either the held to maturity portfolio or the available for sale portfolio,
depending upon management's ability and intent to hold such securities to
maturity. Unrealized gains or losses on securities available for sale are
reflected in a separate component of stockholders equity, net of tax effect.
Income on investments is recognized using the level yield method.
Realized gains or losses on sales are recorded on a specific identification
basis.
ALLOWANCE FOR LOAN LOSSES
The Company charges current income in amounts necessary to maintain a
general allowance for loan losses deemed adequate to cover potential losses on
loans. The amount of the allowance is based on management's evaluation of
numerous factors including adequacy of collateral, delinquency trends and
historical loss experience.
Activity in the allowance for loan losses is as follows:
39
<PAGE>
YEAR ENDED DECEMBER 31
---------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ----------------------------------------------------------------------------
Balance at beginning of period $ 4,500 $ 8,075 $ 3,910
Provision for loan losses 1,917 960 8,343
Purchased loan reserve 191 - -
Loans charged off, net (3,208) (4,535) (4,178)
- ----------------------------------------------------------------------------
Balance at end of period $ 3,400 $ 4,500 $ 8,075
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Accounts which are deemed uncollectible by management or for
which no payment has been received for five consecutive months are charged
off for the amount that is not collateralized by the estimated fair value
less selling costs of the underlying real estate collateral.
INCOME ON DELINQUENT LOANS
It is the Company's policy to suspend the recognition of income on any loan
which is 61 days or more contractually delinquent. Recognition of income is
generally resumed and suspended income is recognized, when the loan becomes
contractually current. At December 31, 1996, 1995 and 1994, income recognition
was suspended on loan balances of $1,386,000, $4,985,000 and $9,779,000,
respectively.
The amounts of contractual interest, interest recognized and
interest foregone on nonaccrual loans for the years ended December 31, 1996,
1995 and 1994 are as follows:
(DOLLARS IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Contractual interest $ 614 $ 1,147 $ 1,489
Interest recognized 67 344 517
- --------------------------------------------------------------------------------
Interest foregone $ 547 $ 803 $ 972
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are principally provided on the straight-line
method over the following estimated useful lives:
- --------------------------------------------------------------------------------
Office furniture, fixtures and equipment 3 - 8 years
Leasehold improvements Life of Lease
- --------------------------------------------------------------------------------
INCOME TAXES
Deferred tax assets and liabilities recognize the future tax consequences
of differences between the financial statement amounts of assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
CURRENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
statement provides accounting and reporting standards for transfers of financial
assets and servicing of financial assets and extinguishments of liabilities.
Those standards are based on consistent application of a financial components
approach that focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
This statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.
This statement was adopted as of January 1, 1997, and is not expected to have a
material effect on the Company's financial statements.
Statement of Financial Accounting Standards No 123, Accounting for Stock-
Based Compensation," (SFAS 123) was issued by the Financial Accounting Standards
Board in October 1995. SFAS 123 provides for companies to recognize
compensation expense associated with stock-based compensation plans over the
anticipated service period based on the fair value of the award on the date of
grant. However, SFAS 123 allows for companies to continue to measure
compensation costs as prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25). Companies electing to continue accounting for
stock-based compensation plans under ABP 25 must make pro forma disclosures of
net income and earnings per share in the notes to the consolidated financial
40
<PAGE>
statements, as if SFAS 123 had been adopted. SFAS 123 is effective for
fiscal years beginning after December 15, 1995, see note 12, "Stock Purchase
and Option Plans."
3. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimates are required under Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments." These estimates may not represent values which would be
received should these financial instruments be sold, liquidated or otherwise
terminated.
The carrying amounts and estimated fair values for certain of the
Company's financial instruments at December 31, 1996 and 1995 are summarized
in the following table:
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
(DOLLARS IN THOUSANDS) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
- ------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 2,834 $ 2,834 $ 56,167 $ 56,167
Investment securities 83,494 83,460 - -
Loans, net 207,695 209,235 192,278 192,168
Accrued interest receivable 1,966 1,966 1,547 1,547
Liabilities
Savings accounts 157,789 157,789 173,725 173,725
Money market checking 20,080 20,080
Certificates of deposit 88,826 88,826 60,785 60,785
Other borrowings 10,000 10,000 - -
Accrued interest payable 275 275 204 204
- ------------------------------------------------------------------------------
The fair value information for financial instruments shown in the
Company's balance sheet was calculated as follows:
CASH AND CASH EQUIVALENTS:
The carrying amounts of cash and cash equivalents approximates their fair
value.
INVESTMENT SECURITIES:
Fair value is based on the quoted market price of these securities by brokers
making a market for these securities.
LOANS:
The Company established the fair market value of the loan portfolio by
segregating the loan portfolio into categories by utilizing selected factors
(i.e., payment history, collateral values, risk classification, cash flows)
and then forecasting an estimated fair market value sale price for each of
the established loan categories.
The estimated market value of the loan portfolio includes categories of
loans the Company believes would sell at par and categories of loans that
would sell at a discount (0% - 60% discount).
A significant number of the Company's variable rate loans contain "floors"
or minimum interest rates. The Company's variable rate loans generally
reprice on a quarterly basis. Many of these same loans also contain
covenants requiring penalties for early repayment. The Company believes that
loans with these characteristics, as well as being well collateralized, with
no history of delinquencies, would sell at a premium. On the other hand,
loans on a nonaccrual basis, or loans that have been classified due to an
identified weakness even though fully secured, could normally only be sold
for a discount depending on the anticipated level of ultimate recovery or the
liquidation of the collateral.
Fair value then, is based upon the estimated sales prices of these loans.
DEPOSITS:
Fair value and carrying value are assumed to be identical due to the
relatively short maturity and repricing of the savings accounts, money market
checking accounts and certificates of deposit maturing within one year.
Certificates of deposit maturing in excess of one year were issued at current
market rates of interest rate and fair value and carrying value are assumed
to be approximately identical.
ACCRUED INTEREST:
The carrying amounts of accrued interest approximates their fair value.
41
<PAGE>
OTHER BORROWINGS:
The carrying amounts of other borrowings approximates their fair value.
Because no conventional market exists for a significant portion of the
Company's financial instruments, and because of the inherent imprecision of
estimating fair values for financial instruments for which no conventional
trading market exists, management believes that the fair market value
estimates utilized under SFAS No. 107 should be viewed as only approximate
values that the Company would receive if the Company's assets and liabilities
were sold.
- -------------------------------------------------------------------------------
4. INVESTMENT SECURITIES
U.S. government sponsored agency securities have been classified in the
consolidated balance sheets according to management's intent. The carrying
amount of securities and their approximate fair values at December 31, 1996
were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AMORTIZED GROSS UNREALIZED ESTIMATED
(DOLLARS IN THOUSANDS) COST GAINS LOSSES FAIR VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government sponsored agency issued securities
Held to maturity $30,960 $21 $ 55 $30,926
Available for sale 52,975 11 452 52,534
- --------------------------------------------------------------------------------------------------
Total investment securities $83,935 $32 $507 $83,460
- --------------------------------------------------------------------------------------------------
</TABLE>
The following table reflects the scheduled maturities of securities in
both the held-to-maturity portfolio and the available-for-sale portfolio at
December 31, 1996:
HELD-TO-MATURITY
SECURITIES:
--------------------
AMORTIZED FAIR AVERAGE
COST VALUE YIELD LIFE
- ------------------------------------------------------------------------------
Due from one to five years $ 5,000 $ 5,014 7.11% 4.3 years
Due from five to ten years 14,995 14,954 7.66% 9.9 years
Due after ten years 10,965 10,958 7.75% 15.0 years
-----------------------------------------------
$30,960 $30,926 7.60% 10.8 years
-----------------------------------------------
-----------------------------------------------
AVAILABLE-FOR-SALE
SECURITIES:
--------------------
AMORTIZED FAIR AVERAGE
COST VALUE YIELD LIFE
- ------------------------------------------------------------------------------
Due from one to five years $13,000 $12,985 6.76% 4.3 years
Due from five to ten years 39,975 39,549 6.97% 7.6 years
-----------------------------------------------
$52,975 $52,534 6.92% 6.7 years
-----------------------------------------------
-----------------------------------------------
$83,935 $83,460 7.17% 8.2 years
-----------------------------------------------
U.S. government sponsored agency securities carried at $11.5 million
were pledged to secure other borrowings aggregating $10 million at December
31, 1996.
Included in the financial statements for the year ending December 31,
1996 and 1995, are gross realized gains of $413,000 and $851,000,
respectively, resulting from collections of the Company's previously written
off corporate bond security and collateralized mortgage obligation residual,
(CMO Residual) for 1995.
- ------------------------------------------------------------------------------
5. LOANS
The Company is engaged primarily in commercial real estate term lending
in the state of California. Loans are principally secured by commercial real
estate and are generally contractually due over periods of up to ten years.
The maximum loan to one borrower secured by improved real property
cannot exceed 20% of Pacific Crest Investment's shareholders equity at the
time of funding which was $4,833,000 at December 31, 1996. Pacific Crest
Investment's largest loan at December 31, 1996 was $2,992,000 which, at the
time of funding, was in compliance with this regulation.
42
<PAGE>
Loans earned interest during the years ended December 31, 1996, 1995 and
1994 at rates ranging from 7.63% to 13.63%, 4.64% to 13.50% and 4.64% to
13.50%, respectively.
The following table reflects loans classified as trouble debt
restructurings (TDR) that are not accounted for or classified as a nonaccrual:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans classified as trouble debt restructurings net of loan fees
and specific reserves $ 719 $ 8,757 $ 5,039
Contractual interest on loans classified as TDR 408 1,314 1,011
Interest earned on loans classified as TDR 300 961 711
Interest foregone $ 105 $ 353 $ 300
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Financial Accounting Standards Board Statement No. 114, "Accounting by
Creditors for Impairment of a Loan" addresses the accounting by creditors for
impairment of certain loans. It requires that impaired loans generally be
measured based on the present value of expected future cash flows discounted
at the loan's effective rate unless the loan is fully collateralized. This
Statement was implemented by the Company during the first quarter of 1995.
The implementation of the standard had no significant impact on the financial
condition or results of operations of the Company during the year implemented.
The recorded investment in loans considered impaired at December 31,
1996 and 1995 was $2.4 million and $13.7 million, respectively. The
valuation reserve on impaired loans at December 31, 1996 and 1995 was
$337,000 and $960,000, respectively. For the year ended December 31, 1996 and
1995, the average recorded investment in impaired loans was approximately
$7.9 million and $13.5 million, respectively. Cash basis interest income
recognized on those loans was immaterial.
- --------------------------------------------------------------------------------
6. OTHER REAL ESTATE OWNED
Other real estate owned is included in the financial statements at the
lower of cost or fair value less estimated selling costs and is presented net
of a valuation allowance as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other real estate owned $ 3,559 $ 5,243 $ 7,218
Less valuation allowance (90) (888) (1,494)
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 3,469 $ 4,355 $ 5,724
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in valuation allowance are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 888 $ 1,494 $ 1,791
Valuation adjustments 155 344 1,719
Net chargeoffs (953) (950) (2,016)
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 90 $ 888 $ 1,494
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
7. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Office furniture, fixtures and equipment $ 1,369 $ 1,484
Leasehold improvements 426 480
- -----------------------------------------------------------------------------------------------------------------
1,995 1,964
Less accumulated depreciation and amortization (1,442) (1,400)
- -----------------------------------------------------------------------------------------------------------------
Net premises and equipment $ 553 $ 564
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
December 31, 1996 Pacific Crest Capital, Inc.
- --------------------------------------------------------------------------------
8. INTEREST BEARING DEPOSITS
Saving accounts include Liquidity Plus and Rate Plus accounts, which
have no contractual maturity and for the years 1996, 1995 and 1994 earned
interest at rates ranging from 2.48% to 5.08% per annum, 2.52% to 5.89% per
annum and 2.52% to 5.13%, respectively. Certificates of deposit have maturities
ranging from 30 days to five years, and for the years ended December 31, 1996,
1995 and 1994 earned interest at rates ranging from 2.96% to 6.06% per annum,
2.0% to 6.95% per annum and 2.0% to 6.78% per annum, respectively. Certificates
of deposit of $100,000 or more at December 31, 1996, 1995 and 1994 were
approximately $3,933,000, $1,608,000, and $2,349,000, respectively.
The approximate contractual maturities of certificates of deposit as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CERTIFICATES OF CERTIFICATES OF TOTAL
DEPOSIT LESS THAN DEPOSIT OF $100,000 CERTIFICATES OF
(DOLLARS IN THOUSANDS) $100,000 OR MORE DEPOSIT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three months or less $ 23,030 $ 1,110 $ 24,140
Over three months through twelve months 40,681 1,505 42,186
Over one year through five years 21,182 1,318 22,500
- --------------------------------------------------------------------------------------------------------------
Total maturities $ 84,893 $ 3,933 $ 88,826
- --------------------------------------------------------------------------------------------------------------
</TABLE>
9. OTHER BORROWINGS
The Company has set up borrowing lines with two brokers aggregating $50
million in availability. The repayment terms on this short term debt range
from one day to two weeks. The interest rate paid can vary daily, but typically
approximates the federal funds rate plus 40 basis points. This debt is secured
by the Company's U.S. government sponsored agency securities. The Company
utilizes these lines to cover short term financing needs for loan fundings or
security purchases. The balance outstanding as of December 31, 1996 was $10
million.
The Company also maintains a line of credit with the Federal Reserve
Bank with approximately $6.7 million available for borrowing at December 31,
1996. At December 31, 1996 there were no borrowings under this line of credit.
This agreement is secured by approximately $12.5 million in commercial real
estate loans at December 31, 1996.
- --------------------------------------------------------------------------------
10. INCOME TAXES
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
-------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 593 $ (250) $ (805)
State 49 (123) -
- -------------------------------------------------------------------------------------------------------------------
642 (373) (805)
- -------------------------------------------------------------------------------------------------------------------
Deferred:
Federal 573 293 (766)
State 290 3 (343)
- -------------------------------------------------------------------------------------------------------------------
863 296 (1,019)
- -------------------------------------------------------------------------------------------------------------------
$ 1,505 $ (77) $(1,914)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996 and
1995 are as follows:
44
<PAGE> DECEMBER 31,
-----------------
(DOLLARS IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $2,706 $3,193
Other real estate owned 41 59
Prepaid taxes 493 -
Unrealized loss on securities available for sale 186 -
Reserve and accruals 390 1,261
------ ------
Total deferred tax assets 3,816 4,713
Less valuation allowance (386) (512)
------ ------
Deferred tax liabilities:
Deferred state taxes (128) (222)
------ ------
Net deferred tax asset $3,302 $3,979
------ ------
------ ------
A reconciliation of the provision for income taxes for 1996, 1995 and
1994 at the federal tax rate of 35% to the effective tax rate is as follows:
1996 1995 1994
----- ------ ------
Tax based on statutory tax rate 35.0% 35.0% 35.0%
State franchise tax expense, net of federal benefit 7.3% 7.3% -
Valuation allowance -8.0% -43.8% 12.1%
Other, net -0.9% -0.9% -
----- ------ ------
Effective tax rate 33.4% -2.4% -22.9%
----- ------ ------
----- ------ ------
- --------------------------------------------------------------------------------
11. CAPITAL STOCK
On December 18, 1995, all 561,000 shares (100%) of the 8.75% Series A
Noncumulative Convertible Preferred Stock $.01 par value was converted into
Common Stock of the Company in an exchange offer initiated by the Company.
Based on the exchange offer price of $7.58 per share, the 561,000 shares of
Preferred Stock were converted into 1,851,300 shares of Common Stock.
The exchange offer was made to preserve the current cash position of the
Company, provide the Convertible Preferred Shareholders an incentive to
exchange their shares of Convertible Preferred Stock and strengthen the
Company's capital structure by reducing the number of shares of Convertible
Preferred Stock outstanding.
The Company made three scheduled Preferred Stock dividend payments of
$920,000 or $1.64 per share in 1995 and $1,104,000 or $1.97 per share in 1994.
At December 31, 1996, 10,000,000 shares of $0.01 par value Common Stock
were authorized of which 2,959,698 shares were issued and outstanding.
The Company purchased 30,000 shares of its common stock, in the open
market, on July 29, 1996 at a purchase price of $8.50 per share. These shares
are to be held by the Company at cost, as treasury stock. The 30,000 shares
were purchased using excess cash of the Parent Company.
- --------------------------------------------------------------------------------
12. STOCK PURCHASE AND OPTION PLANS
The 1993 Equity Incentive Plan (the "Plan") is designed to promote and
advance the interests of the Company and its shareholders by enabling the
Company to attract, retain and reward key employees. The Plan offers stock
and cash incentive awards, as well as stock options. The maximum number of
shares of common stock with respect to which awards may be granted under the
Plan, were initially 150,000 shares, as of December 1993. The number of
shares under the Plan are to be increased by two percent (2%) of the total
issued and outstanding shares of the Company's Common Stock as of the first
day of each year, beginning on January 1, 1995. The 2% per year increase of
shares available under the Plan continues through the term of the Plan which
expires on December 31, 2002. The maximum number of shares of Common Stock
to which awards may be granted under the Plan at December 31, 1996 is
231,124, of which 222,663 stock options have been issued and were outstanding
as of December 31, 1996. The number of common shares added, under the Plan,
on January 1, 1997 was 59,194, increasing the cumulative number of shares
that may be awarded under the Plan to 290,318 after January 1, 1997.
45
<PAGE>
The following is a summary of the activity in and outstanding employee
stock options during the year ended December 31, 1996 and 1995:
WEIGHTED
AVERAGE
PRICE EXERCISE
SHARES RANGE PRICE
- --------------------------------------------------------------------------------
Outstanding at December 31, 1993
Stock options granted 143,426 $6.00-$7.00 6.14
Stock options cancelled (1,000) - 6.00
- --------------------------------------------------------------------------------
Outstanding at December 31, 1994 142,426 $6.00-$7.00 6.14
- --------------------------------------------------------------------------------
Stock options granted 28,470 $3.50-$5.50 4.61
Stock options cancelled (10,933) - 6.00
- --------------------------------------------------------------------------------
Outstanding at December 31, 1995 159,963 $3.50-$7.00 5.90
- --------------------------------------------------------------------------------
Stock options granted 64,500 $7.50-$8.25 7.58
Stock options cancelled (1,800) - 6.00
- --------------------------------------------------------------------------------
Outstanding at December 31, 1996 222,663 $3.50-$8.25 6.37
- --------------------------------------------------------------------------------
The Employee Stock Purchase Plan allows employees to purchase shares of
the Company's Common Stock at the lower of fair market value at the beginning
of the Plan year or 90% of fair market value at the end of the Plan year.
Employees' purchases may not exceed the lesser of $25,000 or 15% of their
annual base compensation. Shares of Common Stock purchased under the Plan
are not issuable until the end of the year. The maximum number of shares of
Common Stock which may be issued under this plan is 33,330 shares, of which
5,950 were issued in January of 1996. The Company issued 6,921 shares of
common stock on January 2, 1997 for employees participating in the Plan
during the year ended December 31, 1996. There were 17,501 shares available
for issuance under the plan for 1997.
The Non-Employee Directors' Stock Purchase plan, approved by the
Company's stockholders at the 1996 annual meeting will be effectively
implemented by the Company in 1997. This plan allows the directors to
purchase stock of the Company from proceeds of their Directors' fees.
The following table summarizes information concerning currently
outstanding and exercisable options:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- ---------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
ESTIMATED PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------------------------------------------------------------------------
$3.50-$5.50 26,470 8.3 years 4.61 875 4.54
$6.00-$7.00 131,693 7.2 years 6.13 44,846 6.15
$7.50-$8.25 64,500 9.1 years 7.58 - -
----------- ----------- -------- ----------- --------
222,663 7.9 years 6.37 45,721 6.12
----------- ----------- -------- ----------- --------
The estimated fair value of options granted during 1996 and 1995 was
$3.28 and $2.00 per share, respectively. The Company applies Accounting
Principles Board Opinion No. 25 and related Interpretations in accounting for
its stock option and purchase plans. Accordingly, no compensation cost has
been recognized for its stock option plan. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the
grant dates for awards under the plan consistent with the method prescribed
by SFAS No. 123, the Company's net income and earnings per share for the year
ended December 31, 1996 and 1995 and would have been reduced to the pro forma
amounts indicated below:
46
<PAGE>
YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------
1996 1995
------------------------
Net Income to Common Shareholders
As reported $ 3,003 $ 3,244
Pro forma $ 2,957 $ 3,239
Fully diluted earnings per common share
As reported $ 1.00 $ 1.20
Pro forma $ 0.97 $ 1.20
Weighted average fully diluted common shares
outstanding (in thousands) 3,042 2,697
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The fair value of options granted under the Company's stock option
plan during 1996 and 1995 were estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used:
1996 1995
- ------------------------------------------------------------------------------
Dividend yield N/A N/A
Expected volatility 25% 45%
Risk free interest rate 6.25% 6.25%
Expected life 7 years 7 years
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
13. DIVIDENDS
As a Delaware corporation, Pacific Crest Capital, Inc., ("the
parent"), may pay common dividends or, if applicable, preferred dividends out
of surplus or, if there is no surplus, from net profits for the current and
preceding fiscal year. The parent has approximately $478,000 in cash and
repurchase agreements at December 31, 1996, however these funds are also
necessary to pay future operating expenses of the parent and possibly for
future capital infusions into Pacific Crest Investment. Pacific Crest
Investment currently does not have the ability, under California state law,
to pay dividends to the parent. Without dividends from Pacific Crest
Investment, the parent must rely solely on existing cash and investments.
Pacific Crest Investment's ability to pay dividends to the parent is
restricted by California state law, which requires that retained earnings be
available to pay the dividend. At December 31, 1996, Pacific Crest
Investment had deficit retained earnings of $358,000. Under California state
law, this deficit would have to be turned into a positive figure before
dividends could be paid from Pacific Crest Investment to the parent. It is
unlikely that Pacific Crest Investment will pay dividends to its parent prior
to the third quarter of 1997.
- ------------------------------------------------------------------------------
14. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases its office facilities. Future minimum rental
payments required under operating leases that have initial and remaining
noncancelable terms in excess of one year are approximately as follows as of
December 31, 1996:
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------
1997 $ 668
1998 643
1999 453
2000 193
Thereafter 75
- ------------------------------------------------------------------------------
TOTAL LEASE COMMITMENTS $ 2,032
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Certain leases contain rental escalation clauses based on increases
in the Consumer Price Index and renewal options which may be exercised by the
Company. Rent expense for the years ended December 31, 1996, 1995 and 1994
totaled $754,000, $757,000 and $686,000, respectively.
47
<PAGE>
UNFUNDED COMMITMENTS
Pacific Crest Investment makes unfunded commitments with its real
estate term lending activities for building and seismic improvements to
property. As of December 31, 1996, Pacific Crest Investment had unfunded
commitments in the real estate term loan portfolio of $1.6 million.
LITIGATION
There are several lawsuits and claims pending against the Company
which management considers incidental to normal operation. Management, after
review, including consultation with counsel, believes that the ultimate
liability, if any, which could arise from these lawsuits and claims would not
materially affect the financial position, results of operations or liquidity
of the Company.
- ------------------------------------------------------------------------------
15. COMPUTATION OF BOOK VALUE AND EARNINGS PER COMMON SHARE
Book value per common share was calculated by dividing total
shareholders' equity by the number of common shares less treasury shares
outstanding at December 31, 1996 and December 31, 1995. The number of common
shares outstanding was 2,929,698 at December 31, 1996 and 2,953,748 at
December 31, 1995.
The primary earnings of $1.00 and fully diluted earnings per common
share of $1.00 for the year ending December 31, 1996 were determined by
dividing net income for the year ending December 31, 1996 of $3,003,000 by
the weighted average common shares outstanding of 3,004,000 and the weighted
average fully diluted common shares outstanding of 3,042,000.
The primary earnings per common share of $2.01 for the year ending
December 31, 1995 was determined by decreasing the net income of $3,244,000
by the amount of preferred dividends declared for the year ending December
31, 1995 of $920,000, resulting in net income applicable to common stock of
$2,324,000 for the year ending December 31, 1995. This amount was then
divided by the weighted average common shares outstanding of 1,158,000 for
the year ended December 31, 1995.
The fully diluted earnings per common share of $1.20 for the year
ending December 31, 1995 was determined by dividing the net income for the
year ending December 31, 1995 of $3,244,000 by the weighted average fully
diluted common shares outstanding of 2,697,000 for the year ended December
31, 1995.
- ------------------------------------------------------------------------------
16. REGULATORY MATTERS AND RESTRICTIONS ON SHAREHOLDERS' EQUITY
Pacific Crest Investment is subject to legal and regulatory
requirements of the California Industrial Loan Law and the FDIC. These legal
and regulatory requirements specify certain minimum capital ratios and place
limits on the size and type of loans Pacific Crest Investment may make.
The aggregate amount of thrift deposits outstanding is restricted
under the California Industrial Loan Law. Industrial loan companies may be
authorized to accept thrift deposits in amounts ranging from three to twenty
times their restricted equity. Pacific Crest Investment has been authorized
by the California Department of Corporations (DOC) to accept thrift deposits
of up to 18.5 times its restricted shareholder's equity.
Pacific Crest Investment is subject to various regulatory capital
requirements administered by the FDIC. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by the FDIC that, if undertaken, could have a direct
material effect on Pacific Crest Investment's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, Pacific Crest Investment must meet specific capital
guidelines that involve quantitative measures of Pacific Crest Investment's
assets, liabilities and certain off balance sheet items as calculated under
regulatory accounting practices. Pacific Crest Investment's capital amounts
and classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require Pacific Crest Investment to maintain minimum amounts and
ratios as set forth in the table below of total and Tier 1 capital to
risk-weighted assets of $236.8 million and $212.0 million at December 31,
1996 and 1995, respectively, and of Tier 1 capital to average quarterly
assets of $283.9 million and $244.5 million at December 31, 1996 and 1995,
respectively. Management believes as of December 31, 1996, that Pacific
Crest Investment meets all capital adequacy requirements to which it is
subject.
As of December 31, 1996, the most recent notification from the FDIC
categorized Pacific Crest Investment as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, Pacific Crest Investment must maintain minimum total risk-based,
Tier 1 risk-based and Tier 1
48
<PAGE>
leverage ratios as set forth in the table below. There are no conditions or
events since that notification that management believes have changed the
institution's category.
Pacific Crest Investment's actual capital amounts and ratios are
also presented in the table. No amounts were deducted from capital for
interest-rate risk.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
---------------- -------------------------------------- --------------------------------------
(DOLLARS IN THOUSANDS) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital
(to risk weighted assests) $ 27,389 11.56% $ 18,947 Greater than or equal to 8% $ 23,683 Greater than or equal to 10%
Tier 1 Capital
(to risk weighted assets) $ 24,423 10.31% $ 9,475 Greater than or equal to 4% $ 14,210 Greater than or equal to 6%
Tier 1 Capital
(to average quarterly assets) $ 24,423 8.60% $ 11,357 Greater than or equal to 4% $ 14,196 Greater than or equal to 5%
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995
Total Capital
(to risk weighted assets) $ 22,764 10.74% $ 16,958 Greater than or equal to 8% $ 21,198 Greater than or equal to 10%
Tier 1 Capital
(to risk weighted assets) $ 20,091 9.48% $ 8,479 Greater than or equal to 4% $ 12,719 Greater than or equal to 6%
Tier 1 Capital
(to average quarterly assets) $ 20,091 8.22% $ 9,779 Greater than or equal to 4% $ 12,224 Greater than or equal to 5%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
During 1996, Pacific Crest Investment was subject to a Memorandum of
Understanding ("MOU") with the FDIC and the Commissioner, which imposed
various covenants and restrictions on the Company. The Company's management
believes it was in compliance with the MOU during 1995 and 1996. The MOU was
terminated on February 5, 1997, following regulatory examinations by the FDIC
and the Commission that were completed during the fourth quarter of 1996.
17. RETIREMENT SAVINGS AND SUPPLEMENTAL BENEFIT PLANS
Employees of Pacific Crest Investment participate in the Company's
401(k) Plan (the "Retirement Plan"). The Retirement Plan covers
substantially all employees. Employees may contribute up to 15% of their
salary up to a maximum of $9,240 for calendar 1994 and 1995, and $9,500 for
1996. Pacific Crest Investment matches employee contribution amounts equal to
100% of the first 6% of compensation contributed by each participant.
Amounts charged to expense under the Retirement Plan for these matching
contributions were $167,000, $141,000 and $120,000 for the years ended
December 31, 1996, 1995 and 1994.
The top four executive officers of Pacific Crest Investment
participated in The Company's Supplemental Executive Retirement Plan (the
"Supplemental Plan"). This plan provides for annual retirement benefits that
would be payable to the executives under the plan on their normal retirement
date. The plan provides for the offset for social security benefits and
matching 401(k) contributions made under the Pacific Crest Capital, Inc.
Retirement Plan. Offsets for social security and 401(k) matching
contributions may be substantial. Amounts charged to expense under the
Supplemental Plan were $94,000, $80,000 and ($3,000) for the years ended
December 31, 1996, 1995 and 1994.
49
<PAGE>
18. PARENT COMPANY
The following represents the financial statements of Pacific
Crest Capital, Inc. (parent company only) as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 216 $ 80
Repurchase agreements 262 786
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 478 866
Other assets 56 -
Investment in Pacific Crest Investment 24,165 21,291
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 24,699 $ 22,157
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued expenses and other liabilities $ 231 $ 205
Common stock 27,583 27,813
Accumulated deficit (2,858) (5,861)
Net unrealized loss on available for sale securities (257) -
- ----------------------------------------------------------------------------------------------------------------------
Shareholders' equity 24,468 21,952
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 24,699 $ 22,157
- ----------------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
Interest income $ 26 $ 70
Income from subsidiary 3,132 3,672
General and administrative expenses 246 496
- ----------------------------------------------------------------------------------------------------------------------
Net income before taxes 2,912 3,246
Income tax benefit 91 2
- ----------------------------------------------------------------------------------------------------------------------
Net income 3,003 3,244
Preferred dividends declared - (920)
- ----------------------------------------------------------------------------------------------------------------------
Net income applicable to common stock $ 3,003 $ 2,324
- ----------------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 3,003 $ 3,244
Adjustments to reconcile net income to net cash used by operating activities:
Net change to other assets and accrued expenses (29) 29
Equity in (income) from subsidiary (3,132) (3,672)
- ----------------------------------------------------------------------------------------------------------------------
Net cash (used by) operating activities (158) (399)
- ----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from maturities of U.S. government sponsored agency securities - 323
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities - 323
- ----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Preferred stock cash dividends - (920)
Proceeds from issuance of common stock 25 -
Purchase of treasury stock, at cost (255) -
- ----------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (230) (920)
- ----------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (388) (996)
Cash and cash equivalents at beginning of period 866 1,862
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 478 $ 866
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
Unaudited quarterly financial data for 1996 and 1995 is as follows:
THREE MONTHS ENDED
------------------
(DOLLARS IN THOUSANDS) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ------------------------------------------------------------------------------------------------------------------------
1996:
<S> <C> <C> <C> <C>
Total interest income $ 6,667 $ 6,563 $ 6,582 $ 6,755
Total interest expense 3,357 3,376 3,324 3,443
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 3,310 3,187 3,258 3,312
Provision for loan losses 525 575 550 267
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provisions for loan losses 2,785 2,612 2,708 3,045
Noninterest income 163 531 669 118
Valuation adjustment to other real estate owned 65 5 - 85
Other real estate owned expense 8 15 72 55
General and administrative expenses 1,714 1,917 2,072 2,116
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,161 1,206 1,233 907
Income tax provision 450 460 471 124
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 711 $ 746 $ 762 $ 783
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Primary earnings per common share $ 0.24 $ 0.25 $ 0.25 $ 0.26
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Fully diluted earnings per common share $ 0.24 $ 0.25 $ 0.25 $ 0.26
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
(DOLLARS IN THOUSANDS) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ------------------------------------------------------------------------------------------------------------------------
1995:
<S> <C> <C> <C> <C>
Total interest income $ 5,864 $ 5,704 $ 5,948 $ 6,284
Total interest expense 2,983 2,991 2,958 3,153
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 2,881 2,713 2,990 3,131
Provision for loan losses 171 (64) 797 56
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provisions for loan losses 2,710 2,777 2,193 3,075
Noninterest income 125 257 817 122
Valuation adjustment to other real estate owned 26 140 85 95
Other real estate owned expense 45 50 38 70
General and administrative expenses 2,175 2,156 1,967 2,065
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes 589 688 920 969
Income tax provision (benefit) 1 - (78) -
- ------------------------------------------------------------------------------------------------------------------------
Net income 588 688 998 969
Preferred dividends declared 307 307 306 -
- ------------------------------------------------------------------------------------------------------------------------
Net income applicable to common stock $ 281 $ 381 $ 692 $ 696
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Primary earnings per common share $ 0.25 $ 0.35 $ 0.63 $ 0.73
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Fully diluted earnings per common share $ 0.22 $ 0.26 $ 0.38 $ 0.36
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PACIFIC CREST CAPITAL, INC.
We have audited the accompanying consolidated balance sheet of Pacific Crest
Capital, Inc. and subsidiary (the "Company") as of December 31, 1996 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pacific Crest
Capital, Inc. and subsidiary at December 31, 1996 and the consolidated
results of their operations and their cash flows for the year ended December
31, 1996, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
February 5, 1997
52
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PACIFIC CREST CAPITAL, INC.
We have audited the accompanying consolidated balance sheet of Pacific Crest
Capital, Inc. and subsidiary as of December 31, 1995 and the related
consolidated statements of operations, shareholders' equity and cash flows
for the years ended December 31, 1995 and 1994. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pacific Crest
Capital, Inc. and subsidiary at December 31, 1995 and the consolidated
results of their operations and their cash flows for the years ended December
31, 1995 and 1994, in conformity with generally accepted accounting
principles.
As discussed in the Notes to Consolidated Financial Statements, in 1994 the
Company changed its method of accounting for investment securities.
ERNST & YOUNG LLP
Los Angeles, California
February 1, 1996
53
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
In March 1996, the Company terminated its engagement of Ernst & Young
LLP, and retained Deloitte & Touche LLP, as its independent public
accountants to audit its financial statements for the year ended December 31,
1996. The decision to terminate the Company's engagement of Ernst & Young
LLP and select Deloitte & Touche LLP was unanimously recommended by the
Company's Audit Committee and approved by the Company's Board of Directors.
The Company has selected Deloitte & Touche LLP to serve as its independent
accountants for the 1997 fiscal year.
During the two most recent fiscal years of the Company, there were no
adverse opinions, disclaimers of opinion or qualifications or modifications
as to uncertainty, audit scope or accounting principles regarding the reports
of Ernst & Young LLP on the Company's financial statements. There were no
reportable disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
54
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference is the information from the section
entitled "Election of Directors" from the Company's definitive Proxy
Statement, to be filed with the Securities and Exchange Commission within 120
days after December 31, 1996. Reference is also made in connection with the
list of Executive Officers, which is provided under Section 4(a), "Executive
Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference is the information from the sections
entitled "Election of Directors - Compensation of Board of Directors" and
"Executive Compensation" from the Company's definitive Proxy Statement, to be
filed with the Securities and Exchange Commission within 120 days after
December 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference is the information from the section
entitled "Beneficial Ownership of Principal Stockholders and Management" from
the Company's definitive Proxy Statement, to be filed with the Securities and
Exchange Commission within 120 days after December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference is the information from the section
entitled "Election of Directors - Executive Compensation -Compensation
Committee Interlocks and Insider Participation" and the information from the
section entitled "Certain Transactions" from the Company's definitive Proxy
Statement, to be filed with the Securities and Exchange Commission within 120
days after December 31, 1996.
55
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1 AND 2. FINANCIAL STATEMENTS
The financial statements listed on the Index to Financial Statements
included under "Item 8. Financial Statements and Supplemental
Data." are filed as part of this Form 10-K. All schedules have
been omitted since the required information is not present or is
not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
Consolidated Financial Statements and related notes.
3. LIST OF EXHIBITS.
NUMBER DESCRIPTION
- ------ -----------
3(i).1 Amended and restated Certificate of Incorporation (3)
3(ii).1 Amended and restated Bylaws of Pacific Crest Capital, Inc. (3)
10.1 Form of Indemnification Agreement (4) *
10.2 Pacific Crest Capital, Inc. 1993 Equity Incentive Plan (6) (7) *
10.3 Pacific Crest Capital, Inc. Retirement Plan and Trust (4) *
10.4 1993 Employee Stock Purchase Plan (4) (8) *
10.5 Form of Split Dollar Agreement (4) *
10.6 Pacific Crest Capital, Inc. Supplemental Executive Retirement
Plan (4) *
10.7 Form of Distribution Agreement (3)
10.8 Form of Tax Sharing Agreement between Pacific Crest Capital, Inc. and
The Foothill Group, Inc. (4)
10.9 Office Lease by and between Wilshire Masterpiece, Inc. and Pacific
Crest Investment and Loan, dated October 31, 1990 (Beverly Hills
Branch) (5)
10.10 Office Lease between Fifth and Beech Associates and Pacific Crest
Investment and Loan (San Diego Branch) (5)
10.11 Shopping Center Lease dated April 18, 1978, between Frances Sarno and
Robert Sarno, as Trustees, and Le Chateau Boutiques, Inc. (Encino
Branch) (5)
10.11.1 Assignment, Assumption and Consent to Assignment of Lease dated October
16, 1980, between Pacific Crest Investment and Loan, Frances Sarno and
Robert Sarno, as Trustees, and Le Chateau Boutiques, Inc. (5)
10.11.2 Exercise of Option to Renew Lease dated January 23, 1990 (5)
10.12 Lease dated April 22, 1992, between The Klussman Family Trust and
Pacific Crest Investment and Loan (Agoura Hills office) (5)
10.14.1 Employment Agreement between the Company and Gary Wehrle (6) *
10.14.2 Employment Agreement between the Company and Barry Otelsberg (6) *
10.14.3 Employment Agreement between the Company and Lyle Lodwick (6) *
10.14.4 Employment Agreement between the Company and Robert J. Dennen (6) *
10.14.5 Employment Agreement between the Company and Gonzalo Fernandez (9) *
10.15 1996 Non-Employee Directors' Stock Plan (10) *
21.1 Subsidiary of the Registrant (9)
23.1 Consent of Independent Auditors (1)
23.2 Consent of Independent Auditors (1)
27 Financial Data Schedule (1)
______________
* Management contracts and compensatory plan or arrangements.
(1) Filed herewith
(2) Reserved
(3) Incorporated herein by reference from Registrant's Amendment No. 2 to Form
S-1 Registration Statement No. 33-68718, filed December 3, 1993.
(4) Incorporated herein by reference from Registrant's Amendment No. 1 to Form
S-1 Registration Statement No. 33-68718, filed October 28, 1993.
(5) Incorporated herein by reference from Registrant's Form S-1 Registration
Statement No. 33-68717, filed September 13, 1993.
(6) Incorporated herein by reference from Registrant's Annual Report on Form
10-K dated December 31, 1993, filed March 31, 1994.
(7) Incorporated herein by reference from Registrant's Form S-8 Registration
Statement No. 33-87990 filed December 27, 1994. Pacific Crest Capital,
Inc. 1993 Equity Incentive Plan.
(8) Incorporated herein by reference from Registrant's Form S-8 Registration
Statement No. 33-87988 filed December 27, 1994. Pacific Crest Capital,
Inc. 1995 Employee Stock Purchase Plan.
(9) Incorporated herein by reference from Registrant's Annual Report on Form
10K dated December 31, 1994 filed March 30, 1995.
(10) Incorporated herein by reference from Registrant's Form S-8 Registration
Statement No. 333-23849, filed March 23, 1997. Pacific Crest Capital,
Inc. 1996 Non-Employee Directors' Stock Plan.
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
See Item 14(a)(3).
56
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------ ------
Commission file number 0-22732
PACIFIC CREST CAPTIAL, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4437818
- -------------------------------- --------------------------------
(State of other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
30343 Canwood Street
Agoura Hills, California 91301
- -------------------------------- --------------------------------
(Address of principal executive (Zip Code)
offices)
(818)865-3300
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
-- --
Number of shares outstanding of each of the issuer's classes of common stock,
as of August 13, 1997.
Title of Each Class Number of Shares Outstanding
------------------- ----------------------------
Common Stock, $.01 par value 2,968,449
<PAGE>
PACIFIC CREST CAPITAL, INC.
FORM 10-Q
INDEX
Page No.
Part I - FINANCIAL INFORMATION........................................... 1
Item I: Financial Statements........................................... 1
Consolidated Balance Sheets.................................... 1
Consolidated Statements of Operations.......................... 2
Consolidated Statements of Shareholders' Equity................ 3
Consolidated Statements of Cash Flows.......................... 4
Notes to Consolidated Financial Statements..................... 5
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 8
Part II - OTHER INFORMATION.............................................. 24
SIGNATURES............................................................... 25
<PAGE>
<TABLE>
<CAPTION>
PACIFIC CREST CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
- -------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 1,683 $ 2,572
Securities purchased under resale agreements 221 262
- -------------------------------------------------------------------------------
Cash and cash equivalents 1,904 2,834
- -------------------------------------------------------------------------------
U.S. government sponsored agency securities (Note 5):
Held to maturity, at amortized cost 40,962 30,960
Available for sale, at market 95,368 52,534
Loans
Commercial mortgage 221,149 206,172
Business Loans - SBA 4,289 2,363
Residential mortgage 1,595 1,596
Commercial business/other 633 1,581
- -------------------------------------------------------------------------------
Total loans 227,666 211,712
Deferred loan fees 603 617
Allowance for loan losses 3,795 3,400
- -------------------------------------------------------------------------------
Net loans 223,268 207,695
Accrued interest receivable 2,958 1,966
Prepaid expenses and other assets 914 772
Investment in joint venture 95 -
Deferred income taxes 3,197 3,302
Other real estate owned 1,914 3,469
Premises and equipment 546 553
- -------------------------------------------------------------------------------
Total assets $ 371,126 $ 304,085
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
Savings accounts $ 181,657 $ 157,789
Certificates of deposit 105,020 88,826
Money market checking 18,277 20,080
- -------------------------------------------------------------------------------
Total deposits 304,954 266,695
Other borrowings 36,900 10,000
Accrued interest and other liabilities 2,984 2,922
- -------------------------------------------------------------------------------
Total liabilities 344,838 279,617
- -------------------------------------------------------------------------------
Shareholders' equity (Notes 6 and 7):
Preferred stock $.01 par value 2,000,000
shares authorized, no shares issued and
oustanding at June 30, 1997 and December 31, 1996
Common stock, $.01 par value, 10,000,000
shares authorized 2,968,449 shares issued and
outstanding at June 30, 1997, 2,959,698 shares
issued and outstanding at December 31, 1996 27,910 27,838
Accumulated deficit (1,129) (2,859)
Unrealized loss on securities available for sale, net (238) (256)
Common stock in treasury, at cost 30,000 shares (255) (255)
- -------------------------------------------------------------------------------
Total shareholders' equity 26,288 24,468
- -------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 371,126 $ 304,085
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Book value per common share (Note 3) $ 8.95 $ 8.35
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
1
<PAGE>
PACIFIC CREST CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans, including fees $ 5,960 $ 5,240 $ 11,700 $ 10,922
Securities purchased under resale agreements 23 725 27 1,672
Certificates of deposit - 4 - 8
U.S. government sponsored agency securities
Available for sale 1,307 301 2,426 301
Held to maturity 873 293 1,687 327
- ------------------------------------------------------------------------------------------------------------
Total interest income 8,163 6,563 15,840 13,230
Interest expense:
Savings accounts 2,325 2,343 4,434 4,807
Certificates of deposit 1,488 806 2,854 1,636
Money market checking accounts 221 227 451 290
Other borrowings 355 - 604 -
- ------------------------------------------------------------------------------------------------------------
Total interest expense 4,389 3,376 8,343 6,733
- ------------------------------------------------------------------------------------------------------------
Net interest income 3,774 3,187 7,497 6,497
Provision for loan losses 300 575 530 1,100
- ------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,474 2,612 6,967 5,397
Noninterest income:
Gain on investment securities - 350 - 350
Other noninterest income 349 181 450 344
- ------------------------------------------------------------------------------------------------------------
Total noninterest income 349 531 450 694
- ------------------------------------------------------------------------------------------------------------
Noninterest expense:
Valuation adjustments to other real estate owned 210 5 340 70
Other real estate owned expenses 4 15 18 23
Salaries and employee benefits 1,276 1,042 2,522 2,105
Net occupancy expenses 393 431 754 782
FDIC insurance premiums 29 17 54 33
Credit and collection expenses 12 13 12 25
Communication and data processing 157 137 322 256
Other expenses 237 277 519 430
- ------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,318 1,937 4,541 3,724
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 1,505 1,206 2,876 2,367
Income tax provision (Note 2) 599 460 1,146 910
- ------------------------------------------------------------------------------------------------------------
Net income $ 906 $ 746 $ 1,730 $ 1,457
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Per share data (Note 3):
Primary earnings per common share $ 0.30 $ 0.25 $ 0.57 $ 0.49
- ------------------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding (in thousands) 3,049 3,005 3,044 3,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Fully diluted earnings per common share $ 0.30 $ 0.25 $ 0.57 $ 0.49
- ------------------------------------------------------------------------------------------------------------
Weighted average fully diluted common shares
outstanding (in thousands) 3,057 3,024 3,051 3,015
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES.
</TABLE>
2
<PAGE>
PACIFIC CREST CAPITAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NET
UNREALIZED
LOSS ON
COMMON STOCK TREASURY STOCK SECURITIES
---------------- ----------------- AVAILABLE ACCUMULATED
(DOLLARS AND SHARES IN THOUSANDS) SHARES AMOUNT SHARES AMOUNT FOR SALE DEFICIT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 2,954 $27,813 - $ - $ - $ (5,862)
- -----------------------------------------------------------------------------------------------------------------
Issuance of stock under employee stock
purchase plan 6 25 - - - -
Net changes in unrealized loss on
securities available for sale, net of
taxes - - - - (256) -
Purchase of treasury shares - - (30) (255) - -
Net income - - - - - 3,003
- -----------------------------------------------------------------------------------------------------------------
Balances at December 31, 1996 2,960 $27,838 (30) $(255) $ (256) $ (2,859)
- -----------------------------------------------------------------------------------------------------------------
Issuance of stock under employeee stock
purchase plan 6 52 - - - -
Issuance of stock under non-employee
directors' stock purchase plan 2 20 - - - -
Net changes in unrealized loss on
securities available for sale, net of
taxes - - - - 18 -
Net income - - - - - 1,730
- -----------------------------------------------------------------------------------------------------------------
Balances at June 30, 1997 2,968 $27,910 (30) $(255) $ (238) $ (1,129)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
PACIFIC CREST CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
(DOLLARS IN THOUSANDS) 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,730 $ 1,457
Adjustments to reconcile net income
to net cash (used in) provided by operating activities:
Provision for loan losses 530 1,100
Valuation adjustments to OREO 340 70
Loss on investment in joint venture 5 -
Depreciation and amortization 126 115
Amortization of deferred loan fees (172) (677)
Amortization/accretion of securities (8) 47
Changes in operating assets and liabilities:
Accrued interest receivable (992) (247)
Prepaid expenses and other assets (142) (816)
Deferred income taxes 91 415
Accrued interest and other liabilities 62 (406)
- ------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,570 1,058
INVESTING ACTIVITIES:
Purchase of U.S. government sponsored agency securities:
Held to maturity (14,997) (33,900)
Available for sale (55,799) (54,590)
Proceeds from U.S. government sponsored agency securities:
Held to maturity 5,000 8,000
Available for sale 13,000 16,031
Net (increase)/decrease in loans (17,315) 5,483
Proceeds from sale of loans - 7,141
Proceeds from sale of notes 600 -
Investment in joint venture (100) -
Purchases of equipment and leasehold improvements, net (119) (80)
Proceeds from sale of other real estate owned 1,999 2,420
- ------------------------------------------------------------------------------------------
Net cash used in investing activities (67,731) (49,495)
FINANCING ACTIVITIES:
Net increase/(decrease) in certificates of deposit 16,194 (2,308)
Net (decrease)/increase in money market checking (1,803) 21,154
Net increase in savings accounts 23,868 11,424
Net increase in other borrowings 26,900 -
Proceeds from the issuance of common stock 72 25
- ------------------------------------------------------------------------------------------
Net cash provided by financing activities 65,231 30,295
Net decrease in cash and cash equivalents (930) (18,142)
Cash and cash equivalents at beginning of period 2,834 56,167
- ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,904 $ 38,025
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 8,220 $ 6,745
Income taxes $ 965 $ 670
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Transfers from loans to other real estate owned $ 657 $ 1,179
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
SEE ACCCOMPANYING NOTES.
4
<PAGE>
PACIFIC CREST CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1997
- --------------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
The interim financial statements included herein have been prepared by
Pacific Crest Capital, Inc. ("Pacific Crest"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC").
Pacific Crest together with its subsidiaries is referred to as the "Company".
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to SEC rules and
regulations; nevertheless, the Company believes that the disclosures and
information presented are adequate and, therefore, not misleading. These
financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
latest Annual Report. In the opinion of management, all adjustments,
including normal recurring adjustments necessary to present fairly the
financial position of the Company with respect to the interim financial
statements, and the results of its operations for the interim period ended
June 30, 1997, have been included. Certain reclassifications have been made
to prior year amounts to conform to the 1997 presentation. The results of
operations for interim periods are not necessarily indicative of results for
the full year.
Effective August 1, 1997, the Company's wholly owned subsidiary changed
its name from Pacific Crest Investment and Loan to Pacific Crest Bank. The
change is a change in name only with no changes in the charter or powers.
- --------------------------------------------------------------------------------
NOTE 2. INCOME TAXES
- --------------------------------------------------------------------------------
For the quarters ended June 30, 1997 and 1996, the Company's provision
for income taxes was $599,000 and $460,000, or 39.8% and 38.1%, respectively.
For the six months ended June 30, 1997 and 1996, the Company's provision for
income taxes was $1,146,000 and $910,000, or 39.8% and 38.4%, respectively.
The difference between the Company's statutory tax rate of 41.5% and its
effective rate for these periods is primarily due to California tax
deductions (credits) generated by the Company on loans made in special tax
zones within California.
- --------------------------------------------------------------------------------
NOTE 3. COMPUTATION OF BOOK VALUE AND EARNINGS PER COMMON SHARE
- --------------------------------------------------------------------------------
Book value per common share was calculated by dividing total
shareholders' equity by the number of common shares outstanding at June 30,
1997 and December 31, 1996. The number of common shares outstanding was
2,968,449 at June 30, 1997 and 2,959,698 at December 31, 1996.
The primary earnings per common share for the quarter and six months
ended June 30, 1997 were determined by dividing net income of $906,000 and
$1,730,000, respectively, by the weighted average common shares outstanding
of 3,049,000 and 3,044,000, respectively. The fully diluted earnings per
common share for the quarter and six months ended June 30, 1997, was
determined by dividing net income of $906,000 and $1,730,000, respectively,
by the weighted average fully diluted common shares outstanding of 3,057,000
and 3,051,000, respectively. The common shares outstanding were adjusted to
reflect the number of common stock equivalents outstanding based on the
number of outstanding stock options issued by the Company utilizing the
treasury stock method.
The primary earnings per common share for the quarter and six months
ended June 30, 1996 were determined by dividing net income of $746,000 and
$1,457,000, respectively, by the weighted average common shares outstanding
of 3,005,000 and 3,000,000, respectively. The fully diluted earnings per
common share for the quarter and six months ended June 30, 1996, was
determined by dividing net income of $746,000 and $1,457,000, respectively,
by the weighted average fully diluted common shares outstanding of 3,024,000
and 3,015,000, respectively. The common shares outstanding were adjusted to
reflect the number of common stock equivalents outstanding based on the
number of outstanding stock options issued by the Company utilizing the
treasury stock method.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
Per Share" which specified this computation, presentation, and disclosure
requirements for earnings per share ("EPS") for entities with publicly held
common stock or
5
<PAGE>
potential common stock. The objective of SFAS No. 128 is to simplify the
computation of EPS and to make the U.S. standard for computing EPS more
compatible with the standards of other countries. SFAS No. 128 eliminated
both the "primary" and "fully diluted" EPS and required the computation and
disclosures of "basic" EPS and "diluted" EPS. SFAS No. 128 should be
effective for financial statements for both interim and annual periods ending
after December 15, 1997, and earlier application is not permitted. The
Company's analysis of SFAS No. 128 concluded that it would have no impact on
the EPS disclosures contained herein.
- --------------------------------------------------------------------------------
NOTE 4. CONTINGENCIES
- --------------------------------------------------------------------------------
LITIGATION
As an incident to normal operations, the Company is, from time to
time, named as a defendant in lawsuits, some of which seek monetary damages.
Management, after review, including consultation with counsel, believes that
any ultimate liability which could arise from these lawsuits and claims would
not materially affect the consolidated financial position or results of
operations of the Company.
- --------------------------------------------------------------------------------
NOTE 5. INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
U.S. government sponsored agency securities have been classified in the
consolidated balance sheets according to management's intent. The carrying
amount of securities and their approximate fair values at June 30, 1997 were
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AMORTIZED GROSS UNREALIZED ESTIMATED
(DOLLARS IN THOUSANDS) COST GAINS LOSSES FAIR VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. governmental sponsored agency securities
Held to maturity $ 40,962 $ 25 $ (152) $ 40,835
Available for sale 95,778 5 (415) 95,368
- --------------------------------------------------------------------------------------------------
Total investment securities $ 136,740 $ 30 $ (567) $ 136,203
- --------------------------------------------------------------------------------------------------
</TABLE>
The Company's security portfolio consists of Federal Home Loan Bank (FHLB)
and Federal National Mortgage Association (FNMA) securities. These securities
have call features that allow the issuing agency to retire (call) the
security prior to its stated maturity date. The Company's security portfolio
has call dates ranging between three months and four years. The Company
believes that the majority of its securities will be called by the issuing
agency before the final maturity date. The following table reflects the
scheduled maturities of securities in both the held-to-maturity portfolio and
the available-for-sale portfolio at June 30, 1997:
<TABLE>
<CAPTION>
AMORTIZED FAIR AVERAGE
(DOLLARS IN THOUSANDS) COST VALUE YIELD LIFE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES:
Due from five to ten years $ 19,997 $ 19,959 7.60% 8.7 years
Due after ten years 20,965 20,876 7.88% 14.5 years
-------------------------------------------------------
Total held-to-maturity securities: $ 40,962 $ 40,835 7.75% 11.7 years
-------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
Due from one to five years $ 15,000 $ 14,930 6.74% 4.8 years
Due from five to ten years 80,778 80,438 7.13% 7.6 years
-------------------------------------------------------
Total available-for-sale securities: $ 95,778 $ 95,368 7.07% 7.2 years
-------------------------------------------------------
-------------------------------------------------------
Total investment securities $ 136,740 $ 136,203 7.27 8.5 years
-------------------------------------------------------
</TABLE>
U.S. government sponsored agency securities carried at $38.8 million
were pledged to secure other borrowings aggregating $36.9 million at June 30,
1997.
6
<PAGE>
- --------------------------------------------------------------------------------
NOTE 6. CAPITAL
- --------------------------------------------------------------------------------
At June 30, 1997, 10,000,000 shares of $0.01 par value common stock were
authorized of which, 2,968,449 shares were issued and outstanding. The
Company issued 6,921 shares of common stock on January 2, 1997 for employees
participating in the Employee Stock Purchase Plan. The Company also issued
748 shares of common stock on January 23, 1997 and 782 shares of common stock
on May 8, 1997, for the non-employee directors participating in the
Non-Employee Directors' Stock Purchase Plan. The Company issued 300 shares of
common stock under the Equity Incentive Plan for the six months ended June
30, 1997.
Pacific Crest Bank is required to maintain certain minimum capital
levels under federal banking law. The following table sets forth Pacific
Crest Bank's regulatory capital ratios at June 30, 1997, and December 31,
1996:
<TABLE>
<CAPTION>
REGULATORY CAPITAL RATIOS(1) AT JUNE 30, 1997 AT DECEMBER 31, 1996
---------------------------- ----------------------------
---------------------------- ----------------------------
Minimum Minimum
Required Actual Excess Required Actual Excess
---------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Leverage capital ratio(2) 4.00% 7.07% 3.07% 4.00% 7.96% 3.96%
Tier 1 risk-based capital ratio 4.00% 10.00% 6.00% 4.00% 10.31% 6.31%
Total risk-based capital ratio 8.00% 11.25% 3.25% 8.00% 11.56% 3.56%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Capital ratios of Pacific Crest Bank only.
(2) Calculation based on quarter end asset balances of Pacific Crest Bank.
- --------------------------------------------------------------------------------
NOTE 7. DIVIDENDS
- --------------------------------------------------------------------------------
As a Delaware corporation, Pacific Crest may pay common dividends out
of surplus or, if there is no surplus, from net profits for the current and
preceding fiscal year. Pacific Crest has approximately $233,000 in cash plus
investments less current liabilities at June 30, 1997. Without dividends from
Pacific Crest Bank, Pacific Crest must rely solely on existing cash and
investments which total $243,000 at June 30, 1997. This amount is also
necessary to pay future operating expenses and existing current liabilities
of Pacific Crest, and for the future possible infusion of capital into
Pacific Crest Bank.
Pacific Crest Bank's ability to pay dividends to Pacific Crest is
restricted by California state law, which requires that retained earnings are
available to pay such dividends. Pacific Crest Bank had retained earnings of
$1.5 million at June 30, 1997. The total amount of retained earnings is
unrestricted and available for dividend payments.
7
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of the major
factors that influenced the consolidated financial performance of the Company
for the quarter and six months ended June 30, 1997. This analysis should be
read in conjunction with the Company's 1996 Annual Report on Form 10-K and
with the unaudited financial statements and notes as set forth on pages 1
through 7 of this report.
The following table sets forth certain selected financial data
concerning the Company for the periods indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED
---------------------------------------------------------
(DOLLARS IN THOUSANDS) 6/30/97 3/31/97 12/31/96 9/30/96 6/30/96
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCES
Average loans $ 221,270 $ 210,606 $ 195,691 $ 183,738 $ 189,004
Average earning assets 342,090 316,846 276,083 273,636 279,720
Average assets 348,968 325,690 282,341 282,184 287,411
Average deposits 297,936 280,133 254,264 256,359 262,243
Average equity 25,423 24,739 24,108 23,483 22,894
PERFORMANCE RATIOS
Return on average assets(1) 1.04% 1.02% 1.11% 1.08% 1.04%
Return on average common equity(1) 14.25% 13.32% 12.99% 12.98% 15.03%
Net interest margin(2) 4.42% 4.77% 4.77% 4.74% 4.58%
CAPITAL AND LEVERAGE RATIOS(3)
Risk-based capital ratios:
Tier one 10.00% 10.23% 10.31% 11.33% 10.90%
Total 11.25% 11.48% 11.56% 12.59% 12.16%
Leverage capital ratio(4) 7.07% 7.36% 7.96% 8.92% 7.87%
ASSET QUALITY RATIOS
Allowance for loan losses to total loans 1.67% 1.62% 1.61% 1.69% 1.82%
Allowance for loan losses to nonaccrual loans 176.10% 506.98% 245.31% 192.09% 77.57%
Total nonperforming assets to total assets(5) 1.10% 1.02% 1.60% 1.97% 2.51%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculations based on annualized net income.
(2) Net interest margin is calculated by dividing annualized net interest
income by average earning assets.
(3) Capital ratios of Pacific Crest Bank only.
(4) Calculation based on quarter end asset balances of Pacific Crest Bank.
(5) Nonperforming assets include nonaccrual loans and other real estate loans
("OREO") and exclude performing troubled debt restructurings.
8
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME ANALYSIS
The following tables, for the quarter and six months ended June 30, 1997
and 1996, present the distribution of average assets, liabilities and
shareholders' equity, the total dollar amount of interest income from average
interest-earning assets, the resultant yields and the interest expense on
average interest-bearing liabilities, expressed in both dollars and rates.
All average balances are daily average balances. Nonaccrual loans have been
included in the table as loans having a zero yield.
<TABLE>
<CAPTION>
Quarter Ended June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Interest Average Interest Average
Average Earned/ Yield/ Average Earned/ Yield/
(DOLLARS IN THOUSANDS) Balance Paid Rate Balance Paid Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $ 221,270 $ 5,960 10.80% $ 189,004 $ 5,240 11.15%
Repurchase agreements 1,694 23 5.45% 55,453 729 5.29%
U.S. government sponsored
agency securities:
Available for sale 73,769 1,307 7.11% 19,306 301 6.27%
Held to maturity 45,357 873 7.72% 15,957 293 7.39%
- ------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 342,090 8,163 9.57% 279,720 6,563 9.44%
OREO 2,316 4,391
Other noninterest-earning assets 8,175 8,033
Less allowance for loan losses 3,613 4,733
- ------------------------------------------------------------------------------------------------------------------
Total assets $ 348,968 $ 287,411
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES:
Savings accounts $ 177,041 $ 2,325 5.27% $ 183,568 $ 2,343 5.13%
Certificates of deposit 102,597 1,488 5.82% 60,158 806 5.39%
Money market checking 18,298 221 4.84% 18,517 227 4.93%
Other borrowings 24,685 355 5.77% - - -
- ------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 322,621 4,389 5.46% 262,243 3,376 5.18%
Non interest-bearing liabilities 924 2,274
Shareholders' equity 25,423 22,894
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 348,968 $ 287,411
- ------------------------------------------------------------------------------------------------------------------
Net interest income $ 3,774 $ 3,187
Net interest rate spread 4.11% 4.26%
Net interest-earning assets $ 19,469 $ 17,477
Net interest margin 4.42% 4.58%
Average interest-earning assets to
average interest-bearing liabilities 106.0% 106.7%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Interest Average Interest Average
Average Earned/ Yield/ Average Earned/ Yield/
(DOLLARS IN THOUSANDS) Balance Paid Rate Balance Paid Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $ 215,968 $ 11,700 10.92% $ 192,010 $ 10,922 11.44%
Repurchase agreements 1,019 27 5.34% 63,670 1,680 5.31%
U.S. government sponsored
agency securities:
Available for sale 68,746 2,426 7.12% 9,653 301 6.27%
Held to maturity 43,805 1,687 7.77% 9,279 327 7.09%
- ------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 329,538 15,840 9.69% 274,612 13,230 9.69%
OREO 2,847 4,380
Other noninterest-earning assets 9,318 7,912
Less allowance for loan losses 3,569 4,808
- ------------------------------------------------------------------------------------------------------------------
Total assets $ 338,134 $ 282,096
- ------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES:
Savings accounts $ 170,686 $ 4,434 5.24% $ 185,194 $ 4,807 5.22%
Certificates of deposit 99,643 2,854 5.78% 60,070 1,636 5.48%
Money market checking 18,755 451 4.85% 11,845 290 4.92%
Other borrowings 21,437 604 5.68% - - -
- ------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 310,521 8,343 5.42% 257,109 6,733 5.27%
Non interest-bearing liabilities 2,530 2,454
Shareholders' equity 25,083 22,533
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 338,134 $ 282,096
- ------------------------------------------------------------------------------------------------------------------
Net interest income $ 7,497 $ 6,497
Net interest rate spread 4.27% 4.42%
Net interest-earning assets $ 19,017 $ 17,503
Net interest margin 4.59% 4.76%
Average interest-earning assets to
average interest-bearing liabilities 106.1% 106.8%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME AND EXPENSE
The following tables present the dollar amount of changes in
interest income and interest expense of major components of interest-earning
assets and interest-bearing liabilities due to changes in outstanding
balances and changes in interest rates. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes
attributable to: (i) changes in volume (i.e., changes in volume multiplied by
old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old
volume). For purposes of this table, changes attributable to both rate and
volume which cannot be segregated have been allocated proportionately to
changes due to volume and changes due to rate.
10
<PAGE>
<TABLE>
<CAPTION>
-------------------------- --------------------------
For the Quarter Ended For the Six Months Ended
June 30, 1997 June 30, 1997
-------------------------- --------------------------
1997 compared to 1996 1997 compared to 1996
Increase (decrease) due to Increase (decrease) due to
-------------------------- --------------------------
Net Net
(DOLLARS IN THOUSANDS) Volume Rate Change Volume Rate Change
- ---------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans $ 873 $(153) $ 720 $ 1,314 $(536) $ 778
Repurchase agreements (730) 24 (706) (1,639) 6 (1,653)
U.S. government agency securities:
Available for sale 960 46 1,006 2,081 44 2,125
Held to maturity 565 15 580 1,327 33 1,360
- ---------------------------------------------------------------- --------------------------
Total change in interest income 1,668 (68) 1,600 3,063 (453) 2,610
- ---------------------------------------------------------------- --------------------------
CHANGES IN INTEREST EXPENSE:
Savings accounts (84) 66 (18) (376) 3 (373)
Certificates of deposit 611 71 682 1,129 89 1,218
Money market checking (3) (3) (6) 166 (5) 161
Other borrowings 355 - 355 604 - 604
- ---------------------------------------------------------------- --------------------------
Total change in interest expense 879 134 1,013 1,523 87 1,610
- ---------------------------------------------------------------- --------------------------
Changes in net interest income $ 789 $(202) $ 587 $ 1,540 $(540) $ 1,000
- ---------------------------------------------------------------- --------------------------
</TABLE>
DETAILED COMPARISON OF FINANCIAL RESULTS
EARNINGS PERFORMANCE
Net income was $906,000 (or $0.30 per common share on a fully diluted
basis) for the quarter ended June 30, 1997, compared to $746,000 (or $0.25 per
common share on a fully diluted basis) for the corresponding period in 1996.
Net income for the six months ended June 30, 1997 was $1.7 million (or $0.57
per common share on a fully diluted basis) compared to $1.5 million (or $0.49
per common share on a fully diluted basis) for the corresponding period in
1996. The increase in net income during the quarter and six months ended June
30, 1997, was primarily the result of an increase in average interest-earning
assets, and the reduced provision for loan losses, between the 1997 and 1996
periods.
NET INTEREST INCOME
Net interest income increased by $587,000, or 18.4%, to $3.8 million for
the quarter ended June 30, 1997, compared to the same period of 1996. Net
interest income increased by $1.0 million, or 15.4%, to $7.5 million for the
six months ended June 30, 1997, compared to the same period in 1996. The
increase in net interest income during the quarter and six months ended June
30, 1997 was primarily the result of an increase of $62.4 million and $54.9
million, respectively, in the Company's average balance of interest-earning
assets, between the 1997 and 1996 periods.
The net interest rate spread is defined as the yield on interest-earning
assets less the rates paid on interest-bearing liabilities. The net interest
rate spread for the quarter ended June 30, 1997 and 1996 was 4.11% and 4.26%,
respectively, and for the six months ended June 30, 1997 and 1996, 4.27% and
4.42%, respectively. The decline in the spread between the 1996 and 1997
periods is the result of an increase in the rates paid on interest-bearing
liabilities that exceeds the increase on yields received on interest-earning
assets.
The net interest margin is defined as the difference between interest
income and interest expense divided by average interest-earning assets. The
net interest margin for the quarter ended June 30, 1997 and 1996, was 4.42%
and 4.58%, respectively, and for the six months ended June 30, 1997 and 1996,
4.59% and 4.76%, respectively. The decline in the margin is the result of
the reduced net interest rate spread, and the change in the composition of
the balance sheet. Loans, the highest yielding asset, have decreased as a
percentage of average interest-earning assets while the Company's holdings in
the lower yielding U.S. government sponsored agency securities have increased
as a percentage of average interest-earning assets. Additionally, the
Company has financed a portion of these security purchases with other
borrowings which, on average, cost the Company more than deposits.
11
<PAGE>
TOTAL INTEREST INCOME
Total interest income increased by $1.6 million, or 24.4%, to $8.2
million for the quarter ended June 30, 1997, and increased by $2.6 million,
or 19.7%, to $15.8 million for the six months ended June 30, 1997, compared
to the same periods in 1996. These increases were primarily due to increases
in the average balance of interest-earning assets of $62.4 million and $54.9
million, respectively, for the quarter and six months ended June 30, 1997,
over the comparable periods in 1996. The overall yields on the Company's
interest-earning assets increased by 13 basis points, to 9.57% from 9.44%,
for the quarter ended June 30, 1997, compared to the same period of 1996. For
the six months ended June 30, 1997, the yield remained at the June 30, 1996
level of 9.69%.
Interest income on loans increased by $720,000 to $6.0 million, a 13.7%
increase for the quarter ended June 30, 1997, compared to the same period in
1996. Interest income on loans increased by $778,000 to $11.7 million, a 7.1%
increase for the six months ended June 30, 1997, compared to the same period
in 1996. Contributing to the increase in loan interest income was an increase
of $32.3 million in average loan balances for the second quarter of 1997
compared to the second quarter of 1996, and an increase of $24.0 million in
average loan balances for the six months ended June 30, 1997 compared to the
first six months of 1996. Partially offsetting these increases were declines
in the average yields of 35 basis points for the quarter ended June 30, 1997
and 52 basis points for the six months ended June 30, 1997, compared to the
same periods in 1996. The primary reason for the decline in the overall loan
portfolio yield is due to lower yielding loans being added to the portfolio
subsequent to June 30, 1996. The decline in yields on new loans reflects
increased competitive rate pressure in the marketplace.
Interest earned on the Company's securities purchased under resale
agreements decreased by $706,000 and $1.7 million, respectively, for the
quarter and six months ended June 30, 1997, when compared to the same periods
in 1996. These decreases were primarily attributable to decreases of $53.8
million and $62.7 million, respectively, in the average balances during the
quarter and six months ended June 30, 1997 compared to 1996. The decline in
the average balance of repurchase agreements during 1997 as compared to 1996,
reflects the shift in the Company's investments to U.S. government sponsored
agency securities from the lower yielding securities purchased under resale
agreements. These decreases were partially offset by increases in the yield
of 16 basis points for the quarter and three basis points for the six months
ended June 30, 1997. These increases reflect the change in market interest
rates between these periods.
Interest income on U.S. government sponsored agency securities
classified as available-for-sale increased by $1.0 million to $1.3 million
for the quarter ended June 30, 1997, compared to the same period in 1996.
Interest income on securities classified as available-for-sale increased by
$2.1 million to $2.4 million for the six months ended June 30, 1997, compared
to the same period in 1996.
Interest income on U.S. government sponsored agency securities
classified as held-to-maturity increased by $580,000 to $873,000 for the
quarter ended June 30, 1997, compared to the same period in 1996. Interest
income on securities classified as held-to-maturity increased by $1.4 million
to $1.7 million for the six months ended June 30, 1997, compared to the same
period in 1996.
The increased interest income on U.S. government sponsored agency
securities for the quarter and six months ended June 30, 1997, was primarily
the result of the increase in the average balances of securities classified
as available-for-sale and those classified as held-to-maturity, over the same
periods in 1996 and, to a lesser extent, due to improved security yields as
illustrated in the preceding table. The increased average balances reflect
the Company's effort to optimize earnings by more effectively leveraging
capital, with the purchase of U.S. government sponsored agency securities,
and an investment shift from securities purchased under resale agreements, to
the higher yielding agency securities.
TOTAL INTEREST EXPENSE
Total interest expense for the quarter and six months ended June 30,
1997 increased by $1.0 million and $1.6 million, or 30.0% and 23.9%,
respectively, compared to the same periods of 1996. The increase in interest
expense resulted from an increase in the average balance of interest-bearing
deposits of $60.4 million and $53.4 million, respectively, for the quarter
and six months ended June 30, 1997, as compared to the same periods of 1996.
Contributing to these increases, were increases in the rates paid on
interest-bearing liabilities during 1997. The rates paid on the Company's
interest-bearing liabilities increased from 5.18% to 5.46%, or 28 basis
points, during the quarter ended June 30, 1997, and increased from 5.27% to
5.42%, or 15 basis points, for the six months
12
<PAGE>
ended June 30, 1997, compared to the same periods in 1996. The increases in
the rates paid on the Company's interest-bearing liabilities reflect the
change in market interest rates between the 1997 and 1996 periods.
Interest expense on savings accounts decreased by $18,000 to $2.3
million for the quarter ended June 30, 1997, when compared to the same period
in 1996, due to a decrease in the average balance of savings deposits.
Average outstanding savings deposit balances decreased by $6.5 million for
the quarter ended June 30, 1997, compared to the same period in 1996.
Partially offsetting this decrease was a savings deposit rate increase of 14
basis points from 5.13% for the quarter ended June 30, 1996 to 5.27% for the
quarter ended June 30, 1997.
Interest expense on savings accounts decreased by $373,000 to $4.4
million for the six months ended June 30, 1997 when compared to the same
period in 1996, due to a decrease in the average balance of savings deposits.
Average outstanding savings deposit balances decreased by $14.5 million for
the six months ended June 30, 1997, compared to the same period in 1996.
Partially offsetting this decrease was a savings deposit rate increase of two
basis points from 5.22% for the six months ended June 30, 1996 to 5.24% for
the six months ended June 30, 1997.
Interest expense on certificates of deposit increased by $682,000, or
84.6%, for the quarter ended June 30, 1997, compared to the same period in
1996, due to an increase of $42.4 million in the average balance of
certificates of deposit for the quarter ended June 30, 1997, compared to the
same period in 1996. Also contributing to this increase in interest expense
was a 43 basis point increase on rates paid on certificates of deposit from
5.39% for the quarter ended June 30, 1996 to 5.82% for the quarter ended June
30, 1997. The increase in rates paid reflects the change in market interest
rates for certificates of deposit between the 1997 and 1996 periods.
Interest expense on certificates of deposit increased by $1.2 million,
or 74.4%, for the six months ended June 30, 1997, compared to the same period
in 1996, due to an increase of $39.6 million in the average balance of
certificates of deposit for the six months ended June 30, 1997, compared to
the same period in 1996. Contributing to this increase in interest expense
was a 30 basis point increase in rates paid on certificates of deposit from
5.48% for the six months ended June 30, 1996, to 5.78% for the six months
ended June 30, 1997. The increase in rates paid reflects the change in market
interest rates for certificates of deposit between the 1997 and 1996 periods.
Interest expense on money market checking decreased by $6,000 to
$221,000 for the quarter ended June 30, 1997, when compared to the same
period in 1996, due to a decrease in the average balance of money market
checking deposits. Average outstanding money market checking balances
decreased by $219,000 for the quarter ended June 30, 1997. Also, contributing
to this decrease was a decrease of nine basis points in the money market
checking rate.
Interest expense on money market checking increased by $161,000 to
$451,000 for the six months ended June 30, 1997, when compared to the same
period in 1996, due to an increase in the average balance of money market
checking deposits. Average outstanding balances increased by $6.9 million for
the six months ended June 30, 1997, as compared to 1996. Partially offsetting
this increase was a seven basis point decrease in the rate paid on these
deposits. The Company introduced the money market checking product during the
first quarter of 1996 and attracted $21 million by June 30, 1996.
The Company posted interest expense of $355,000 and $604,000,
respectively, on other borrowings during the quarter and six months ended
June 30, 1997. The Company's borrowings in reverse repurchase agreements
during the quarter and six months ended June 30, 1997, financed the purchase
of investment securities. The Company did not utilize other borrowings during
the quarter or the six months ended June 30, 1996.
PROVISION FOR LOAN LOSSES
During the quarter ended June 30, 1997, the Company's provision for loan
loss declined by $275,000 to $300,000, compared to the same period in 1996.
For the six months ended June 30, 1997, the provision for loan losses
declined by $570,000 to $530,000, compared to the same period in 1996. The
decline in the provision is the result of management's evaluation of current
portfolio loan loss exposure. Contributing to the decline in the provision
was the decline in nonaccrual loans between June 30, 1996 and June 30, 1997,
from $4.2 million to $2.2 million. Although the Company maintains its
allowance for loan losses at a level which it considers to be adequate to
provide for potential losses, there can be no assurance that such losses will
not exceed the estimated amounts, thereby adversely affecting future results
of operations. The calculation of the adequacy of the allowance for loan
losses is based on several factors, including underlying loan collateral
values, delinquency trends and historical loan loss experience. The ratio of
nonaccrual loans to total loans was 0.95% at June 30, 1997 and 0.66% at
December 31, 1996. The ratio of the allowance for loan losses to nonaccrual
loans was 176% at June 30, 1997 and 245% at December 31, 1996. The allowance
for loan losses as a percentage of loans stood at 1.67% at June 30, 1997,
compared to 1.61% at December 31, 1996.
13
<PAGE>
NONINTEREST INCOME
Noninterest income for the quarter and six months ended June 30, 1997
decreased by $182,000 and $244,000, respectively, compared to the same
periods in 1996. The major components of noninterest income include late fees
and loan prepayment fees. The decrease for the quarter and six months ended
June 30, 1997, is due to a recovery of $350,000, during the second quarter of
1996, on a corporate debt security that had been written off during 1994.
NONINTEREST EXPENSE
The following table sets forth certain information with respect to the
Company's noninterest expenses for the quarter and six months ended June 30,
1997 and 1996:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------------------------------------------------------
AMOUNTS CHANGE AMOUNTS CHANGE
DOLLARS IN THOUSANDS 1997 1996 $ % 1997 1996 $ %
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Valuation adjustments to OREO $ 210 $ 5 $205 4100% $ 340 $ 70 $270 386%
Other real estate owned expense 4 15 (11) -73% 18 23 (5) -22%
Salaries and employee benefits 1,276 1,042 234 22% 2,522 2,105 417 20%
Net occupancy expenses 393 431 (38) -9% 754 782 (28) -4%
FDIC insurance premiums 29 17 12 71% 54 33 21 64%
Credit and collections expenses 12 13 (1) -8% 12 25 (13) -52%
Communication and data processing 157 137 20 15% 322 256 66 26%
Other expenses 237 277 (40) -14% 519 430 89 21%
- ------------------------------------------------------------------------------------------------------------
Total noninterest expense $2,318 $1,937 $381 20% $4,541 $3,724 $817 22%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Noninterest expense for the quarter and six months ended June 30, 1997
increased by $381,000 and $817,000, respectively, compared to the same
periods in 1996. These changes are detailed on the table above and
significant changes in noninterest expense are described below.
The valuation adjustment to OREO for the quarter and six months ended
June 30, 1997, increased by $205,000 and $270,000, respectively, compared to
the same periods in 1996. The increases were the result of the Company
recording partial write downs on two OREO properties during 1997.
Salaries and employee benefits for the quarter and six months ended June
30, 1997 increased by $234,000 and $417,000, respectively, compared to the
same periods in 1996. These increases were primarily the result of marketing
and administrative bonus accruals of $164,000 and $284,000 for the quarter
and six months ended June 30, 1997, compared to $15,000 and $64,000,
respectively, during the same periods in 1996. In addition, the Company
established a SBA lending department during the second and third quarters of
1996, which was fully staffed for all of 1997. The Company also provided an
approximate 4% salary increase to most employee base salaries in January of
1997.
Communication and data processing expense for the quarter and six months
ended June 30, 1997, increased by $20,000 and $66,000, respectively, compared
to the same periods in 1996. These increases were primarily the result of the
Company's establishment of the SBA lending department during the second and
third quarters of 1996, which increased communication and telephone usage.
Other expenses for the quarter ended June 30, 1997, decreased by $40,000
compared to the same period in 1996, due to a recovery of loan servicing
expenses during the second quarter of 1997. Other expenses for the six months
ended June 30, 1997, increased by $89,000 compared to the same period in
1996, due to an increase in advertising expense during 1997 and a reduction
in the accrual for Delaware franchise taxes, which occurred in the second
quarter of 1996.
INCOME TAX PROVISION
For the quarters ended June 30, 1997 and 1996, the Company's provision
for income taxes was $599,000 and $460,000, or 39.8% and 38.1%, respectively.
For the six months ended June 30, 1997 and 1996, the Company's provision for
income taxes was $1,146,000 and $910,000, or 39.8% and 38.4%, respectively.
The difference between the Company's statutory tax rate of 41.5% and its
effective rate for these periods is primarily due to California tax
deductions (credits) generated by the Company on loans made in special tax
zones within California.
14
<PAGE>
FINANCIAL CONDITION
Total assets of the Company increased to $371.1 million at June 30, 1997
from $304.1 million at December 31, 1996, a $67.0 million increase. This
increase reflects the purchase of approximately $52.8 million of investment
securities, net of maturities, sales and calls, and $15.9 million of loan
originations, net of loan maturities and payoffs, during the first six months
of 1997. The Company funded this asset growth by increasing its
interest-bearing liabilities by $65.2 million to $341.9 million at June 30,
1997 from $276.7 million at December 31, 1996. The increase in
interest-bearing liabilities reflects an increase in deposits of $38.3
million, primarily due to the growth in the Company's savings account
balances that grew $23.9 million and certificates of deposit balances that
grew $16.2 million during the six months ended June 30, 1997. Other
borrowings were increased by $26.9 million to $36.9 million during the six
months ended June 30, 1997.
Loans, net of deferred fees and the allowance for loan losses, increased
by $15.6 million to $223.3 million at June 30, 1997, from $207.7 million at
December 31, 1996. The Company originated $29.0 million in new real estate
and business loans during the first six months ended June 30, 1997.
Off-setting these originations, the Company experienced $12.8 million in loan
payoffs, $1.1 million in gross loan transfers prior to write-offs to OREO and
$152,000 in actual loan write-offs during the six months ended June 30, 1997.
15
<PAGE>
LOAN PORTFOLIO
Pacific Crest Bank focuses its lending activities on commercial real
estate loans to individuals and small businesses. At June 30, 1997, $221.1
million, or 97.1%, of Pacific Crest Bank's loans consisted of loans secured
by commercial real estate. Commercial real estate loans are generally made
for terms between one to ten years at adjustable rates of interest, with
interest floors. Virtually all of Pacific Crest Bank's adjustable rate
commercial real estate loans adjust quarterly. The following table sets forth
certain information regarding the real property collateral securing Pacific
Crest Bank's commercial real estate loans at June 30, 1997:
At June 30, 1997
--------------------------------
Average Percent
Number Loan of
(DOLLARS IN THOUSANDS) of Loans Amount Size Total
- -------------------------------------------------------------------------------
Industrial-manufacturing 19 $ 11,411 $601 5.16%
Industrial-warehouse 35 19,216 549 8.69%
Industrial-multi-use 20 12,365 618 5.59%
--------------------------------
Total loans secured by industrial buildings 74 42,992 581 19.44%
--------------------------------
Medical-other 1 794 794 0.36%
Medical-office buildings 13 8,633 664 3.90%
--------------------------------
Total loans secured by medical buildings 14 9,427 673 4.26%
--------------------------------
Retail-strip centers 85 67,402 793 30.48%
Auto repair facilities 25 10,727 429 4.85%
Motel and hotel 16 11,397 712 5.15%
Retail and office use 33 24,514 743 11.08%
Restaurants 25 12,272 491 5.55%
Grocery and supermarket 4 1,751 438 0.79%
Recording studio 3 1,791 597 0.81%
Self storage 1 840 840 0.38%
Single retail properties 16 7,940 496 3.59%
Retail and office units 15 9,057 604 4.10%
Retail and residential 6 3,577 596 1.62%
Retail and industrial 3 2,171 724 0.98%
Land 2 409 205 0.18%
Construction strip center 1 725 725 0.33%
Other miscellaneous 29 14,157 488 6.41%
--------------------------------
Total retail and other collateral 264 168,730 639 76.30%
--------------------------------
--------------------------------
Total commercial real estate mortgage loans 352 221,149 $628 100.00%
--------------------------------
16
<PAGE>
As of June 30, 1997, Pacific Crest Bank's real estate commercial loans
were geographically distributed as follows:
At June 30, 1997
---------------------------------
NUMBER OUTSTANDING % TO
OF BALANCES AT TOTAL
(DOLLARS IN THOUSANDS) LOANS JUNE 30, 1997 OUTSTANDING
- -------------------------------------------------------------------------------
SOUTHERN CALIFORNIA COUNTIES
Los Angeles 184 $ 108,474 49.05%
Orange 48 35,378 16.00%
San Diego 23 16,294 7.37%
Ventura 11 5,550 2.51%
Riverside 9 4,701 2.13%
San Bernadino 7 4,439 2.01%
Kern 3 1,689 0.76%
Santa Barbara 1 96 0.04%
---- ---------- --------
Total Southern California Counties 286 $ 176,621 79.87%
---- ---------- --------
NORTHER CALIFORNIA COUNTIES
Santa Clara 12 $ 8,408 3.80%
Sacramento 8 6,108 2.76%
Contra Costa 7 4,204 1.90%
Alameda 6 3,087 1.40%
San Francisco 6 6,312 2.85%
San Mateo 6 3,160 1.43%
Fresno 3 3,467 1.57%
Monterey 2 1,332 0.60%
Merced 2 477 0.21%
Other 9 5,960 2.70%
---- ---------- --------
Total Northern California Counties 61 $ 42,515 19.22%
---- ---------- --------
Washington 3 371 0.17%
Oregon 2 1,642 0.74%
---- ---------- --------
Total commercial real estate mortgage loans 352 $ 221,149 100.00%
---- ---------- --------
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at June 30, 1997 increased by $395,000
from the level at December 31, 1996, and represents 1.67% of outstanding
loans at June 30, 1997. The slight increase in the general loan loss
allowance from $3.4 million at year end 1996 to $3.8 million at June 30, 1997
reflects net charge-offs of $135,000 offset by the addition of $530,000 in
loan loss provision. Management believes that the allowance for loan losses
at June 30, 1997 was adequate to absorb known and inherent risks in the loan
portfolio.
Management reviews the adequacy of the allowance for loan losses on a
quarterly basis. Management utilizes its best judgement in providing for
possible loan losses and establishing the allowance for loan losses. However,
the allowance is an estimate which is inherently uncertain and depends on the
outcome of future events. In addition, regulatory agencies as an integral
part of their examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the Company to recognize
additions to the allowance based upon their judgement of the information
available to them at the time of their examination.
Adverse economic conditions or a declining real estate market in
California could adversely affect Pacific Crest Bank's borrowers' abilities
to contractually repay their loans. A decline in the California economy could
result in deterioration in the quality of the loan portfolio and could result
in high levels of nonperforming assets and charge-offs, which would adversely
affect the financial condition and results of operations of the Company.
17
<PAGE>
The following table sets forth certain information with
respect to the Company's allowance for loan losses and valuation adjustment to
OREO as of the dates or for the periods indicated:
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS
ENDED JUNE 30,
(DOLLARS IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period: $ 3,400 $ 4,500
Commercial real estate mortgages:
Charge-offs (152) (2,466)
Recoveries 17 158
Provision for loan losses: 530 1,100
- ----------------------------------------------------------------------------------------------
Balance at end of period: $ 3,795 $ 3,292
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Allowance for loan losses as a % of loans 1.67% 1.82%
Net loan charge-offs $ 135 $ 2,308
Valuation adjustment to OREO 340 70
- ----------------------------------------------------------------------------------------------
Total net loan charge-offs & OREO valuation adjustment $ 475 $ 2,378
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
NONPERFORMING AND RESTRUCTURED ASSETS
The following table sets forth loans accounted for on a nonaccrual basis,
OREO and loans that were impaired due to the loans being restructured at the
dates indicated:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans $ 2,155 $ 1,386
OREO 1,914 3,469
- ----------------------------------------------------------------------------------------------
Total nonaccrual loans and OREO $ 4,069 $ 4,855
- ----------------------------------------------------------------------------------------------
Total nonperforming assets to total loans and OREO 1.78% 2.26%
- ----------------------------------------------------------------------------------------------
Total nonperforming assets to total assets 1.10% 1.60%
- ----------------------------------------------------------------------------------------------
Troubled debt restructurings $ 719 $ 719
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
NONACCRUAL LOANS
Nonaccrual loans are loans, not classified as troubled debt
restructurings or OREO, that show little or no current payment ability. These
loans are supported, however, by collateral or cash flow that support the
collectibility of the Company's remaining book balance, after consideration
of the allowance for loan losses. The Company had three nonaccrual loans at
June 30, 1997, totaling $2,155,000. During the six months ended June 30,
1997, the Company transferred four loans from accrual to nonaccrual status
totaling $2,774,000, transferred one loan of $269,000 from nonaccrual to
accrual status, transferred two loans totaling $657,000 from nonaccrual to
OREO status, had two nonaccrual loans totaling $916,000 in payoffs, and had
charge-offs totaling $152,000 related to nonaccrual loans. Nonaccrual loan
balances are net of any prior write-offs, but any specifically assigned
portions of the general allowance for loan losses are not deducted from the
nonaccrual loan balances above.
OTHER REAL ESTATE OWNED
Assets classified as OREO include foreclosed real estate owned by the
Company. The Company had three properties in this category at June 30, 1997,
totaling $1,914,000. The Company had one property with $1,086,000 in net book
value, or 56.7% of the Company's OREO balance. The remaining $828,000 in OREO
balances consisted of two properties.
The Company's OREO balance declined to $1,914,000 at June 30, 1997, from
$3,469,000 at December 31, 1996, a decline of $1,555,000 or 44.8%. This reflects
the sale of four properties with a combined net balance of $1,793,000 during the
six months ended June 30, 1997. The Company transferred two nonaccrual loans
with a combined fair value of $657,000 into OREO for the six months ended
June 30, 1997. The Company recorded partial write downs on two OREO properties
of $340,000 for the six months ended June 30, 1997, as compared to $70,000 for
the same period in 1996. The increase in the OREO valuation adjustment
between the two periods reflects a downward revision in the estimated
liquidation value of two OREO properties.
18
<PAGE>
TROUBLED DEBT RESTRUCTURINGS
A troubled debt restructuring ("TDR") is a loan in which the Company,
for reasons related to the borrowers financial difficulties, grants a
permanent concession to the borrower, such as a reduction in the loan's
fully-indexed interest rate, a reduction in the face amount of the debt, or
an extension of the maturity date of the loan, that the Company would not
otherwise consider. At June 30, 1997, the Company had one loan with a
principal balance of $719,000 that was categorized as a TDR. TDR balances are
net of any prior write-offs, but any specifically assigned portions of the
allowance for loan losses are not deducted from the TDR loan balance.
INVESTMENT SECURITIES
The Company's investment portfolio is used for both liquidity purposes
and for investment income. For additional information on the composition of
the investment portfolio and the scheduled maturities of securities in both
the held-to-maturity portfolio and available-for-sale portfolio at June 30,
1997, see Note 5 of Notes to Consolidated Financial Statements (Unaudited) in
this Quarterly Report on Form 10-Q.
SOURCES OF FUNDS
DEPOSITS
The Company's major sources of funds is FDIC-insured deposits, raised
through its subsidiary, Pacific Crest Bank. At June 30, 1997, the Company had
total deposits of $305.0 million, compared to $266.7 million at December 31,
1996. The Company offers money market checking accounts, money market savings
accounts and term certificates of deposit, with maturities ranging from 30
days to five years. The Company attracts the depositors by offering rates
that are generally higher than rates offered by independent commercial banks
that offer a broader array of services. The Company also conducts a wholesale
deposit operation through which deposits from other financial institutions
located throughout the United States are solicited. Information concerning
the composition of the Company's deposit mix at June 30, 1997 and December
31, 1996 are set forth on the Consolidated Balance Sheets included in this
Quarterly Report on Form 10-Q.
The following table sets forth maturities of certificates of deposit at
June 30, 1997:
<TABLE>
<CAPTION>
3 MONTHS OVER 3 TO OVER 6 TO OVER 12
DOLLARS IN THOUSANDS OR LESS 6 MONTHS 12 MONTHS MONTHS TOTAL
- --------------------------------------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000 $ 22,556 $ 21,510 $ 40,706 $ 10,542 $ 95,314
Certificates of deposit $100,000 or more 2,267 1,647 4,706 1,086 9,706
- --------------------------------------------- ------------ ------------ ------------ ------------ -----------
Total certificates of deposit $ 24,823 $ 23,157 $ 45,412 $ 11,628 $ 105,020
- --------------------------------------------- ------------ ------------ ------------ ------------ -----------
</TABLE>
OTHER BORROWINGS
The Company had $36.9 million in short term borrowings at June 30, 1997,
compared to $10.0 million at December 31, 1996. The rates paid during 1997 on
the Company's short term borrowings ranged from 5.65% to 6.80%. The repayment
terms on this short-term debt ranged from one day to four weeks. The interest
rate paid can vary daily, but typically approximates the federal fund rates
plus 50 basis points. This debt is secured by the Company's U.S. government
sponsored agency securities. The Company utilizes these lines to cover
short-term financing needs for loan fundings or security purchases.
CAPITAL RESOURCES
The Company's objective is to maintain a strong level of capital to
support consistent and sustained asset growth, to anticipate credit risks,
and to ensure that regulatory and industry capital guidelines and standards
are maintained. Pacific Crest Bank is subject to leverage and risk-based
capital adequacy standards applicable to FDIC-insured institutions. At June
30, 1997, Pacific Crest Bank was in compliance with all such capital
requirements.
19
<PAGE>
Shareholders' equity increased by $1.8 million to $26.3 million during
the six months ended June 30, 1997. This increase reflects the increase to
shareholders' equity by the six months of net income of $1.7 million and a
$72,000 increase resulting from the purchase of stock under the employee and
directors' stock purchase plans. Also, contributing to this increase was an
$18,000 decrease to the unrealized loss on securities available-for-sale.
Pacific Crest Bank is required to maintain certain minimum capital levels
under federal banking law. The following table sets forth Pacific Crest
Bank's regulatory capital ratios at June 30, 1997, and December 31, 1996:
<TABLE>
<CAPTION>
REGULATORY CAPITAL RATIOS (1) AT JUNE 30, 1997 AT DECEMBER 31, 1996
-------------------------------- --------------------------------
-------------------------------- --------------------------------
Minimum Minimum
Required Actual Excess Required Actual Excess
---------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Leverage capital ratio(2) 4.00% 7.07% 3.07% 4.00% 7.96% 3.96%
Tier 1 risk-based capital ratio 4.00% 10.00% 6.00% 4.00% 10.31% 6.31%
Total risk-based capital ratio 8.00% 11.25% 3.25% 8.00% 11.56% 3.56%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Capital ratios of Pacific Crest Bank only.
(2) Calculation based on quarter end asset balances of Pacific Coast Bank.
LIQUIDITY
The Company's primary sources of funds are deposits and payments of
principal and interest on loans. While maturities and scheduled principal
amortization on loans are a reasonable predictable source of funds, deposit
flows and mortgage loan prepayments are greatly influenced by the level of
interest rates, economic conditions, and competition.
The Company's holdings of cash and cash equivalents during the six
months ended June 30, 1997 decreased by $930,000 to $1.9 million at June 30,
1997 from $2.8 million at December 31, 1996. The Company purchased $52.8
million, net of maturities, calls and sales, of U.S. government sponsored
agency securities during the six months ended June 30, 1997. The Company
funded both the growth in securities and the net increase in the loan
portfolio, of $15.6 million, by raising $38.3 million of interest-bearing
deposits, and by borrowing an additional $26.9 million under reverse
repurchase agreements.
Loans, net of deferred fees and the allowance for loan losses,
increased by $15.6 million to $223.3 million at June 30, 1997, from $207.7
million at December 31, 1996. The Company originated $29.0 million in real
estate and business loans during the six months ended June 30, 1997.
Off-setting these originations, the Company experienced $12.8 million in loan
payoffs, $1.1 million in gross loan transfers prior to write-offs to OREO and
$152,000 in actual loan write-offs during the six months ended June 30, 1997.
The liquidity of the parent company, Pacific Crest, is primarily
dependent on the payment of cash dividends by its subsidiary, Pacific Crest
Bank. Without dividends from Pacific Crest Bank, Pacific Crest must rely
solely on existing cash and investments which total $243,000 at June 30,
1997. This amount is also necessary to pay future operating expenses and
existing current liabilities, and for the possible infusion of capital into
Pacific Crest Bank.
Pacific Crest Bank's ability to pay dividends to Pacific Crest is
restricted by California state law, which requires that sufficient retained
earnings are available to pay the dividend. Pacific Crest Bank had retained
earnings of $1.5 million at June 30, 1997. The total amount of retained
earnings is unrestricted and available for dividend payments.
ASSET/LIABILITY MANAGEMENT
The purpose of asset liability management is to minimize the risk of
loss resulting from changes in interest rates. One method of assessing the
potential risk associated with changes in the interest rates is to examine
the extent to which assets and liabilities are "interest rate sensitive" and
by monitoring the institution's interest rate sensitivity "gap". An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets anticipated, based upon certain assumptions, to
mature or reprice within a
20
<PAGE>
specific time period and the amount of interest-bearing liabilities
anticipated, based upon certain assumptions, to mature and reprice within
that same time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds the amount of interest rate sensitive assets.
During a period of rising interest rates, a negative gap would generally tend
to adversely affect net interest income while a positive gap would generally
tend to result in an increase in net interest income. During a period of
declining interest rates, a negative gap would generally tend to result in
increased net interest income while a positive gap would generally tend to
adversely affect net interest income. At June 30, 1997, total
interest-bearing liabilities maturing or repricing within one year exceeded
total interest-earning assets repricing or maturing in the same period by
$123.0 million, representing a negative cumulative one-year gap of 33.1%. The
shortcomings associated with using a static gap analysis to evaluate interest
rate risk are described below.
To the extent consistent with its interest rate spread objectives, the
Company attempts to reduce its interest rate risk and has taken actions to
minimize the potential negative impact of changing interest rates. In
addition to focusing on making commercial real estate loans which provide for
quarterly repricing, the Company has written most of its loans with interest
rate floors. The fully indexed rate on these loans were, generally, equal to
or in excess of the interest rate floors. It may be anticipated that loans
with interest rate floors will increase the net interest income in a
declining interest rate environment as affected loans do not reprice downward
to their fully indexed rate when interest rates fall. No assurances can be
given that such will be the case, however, particularly if borrowers are able
to refinance or renegotiate their loans when interest rates decline.
The following table sets forth the interest rate sensitivity of the
Company's assets and liabilities at June 30, 1997, based on certain
assumptions. Except as stated below, the amount of assets and liabilities
shown which reprice or mature during a particular period were determined in
accordance with the earlier of the repricing timing or maturity date of the
asset or liability. The Company has assumed, for purposes of this table only,
that its savings accounts, money market accounts, and other borrowings, which
totaled $181.7 million, $18.3 million and $36.9 million, respectively at June
30, 1997, reprice immediately.
Certain shortcomings are inherent in the method of using static
gap analysis to evaluate interest rate risk as presented in the following
table. For example, static gap analysis assumes that when interest rates
change, all rates change by the same amount and at the same time. Although
certain assets and liabilities may be available for repricing at the same
time, assets and liabilities often react independently to market interest
rate changes, resulting in variable degrees of change dependent on the type
of asset or liability. 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 changes in market rates.
Additionally, some adjustable rate loans have features, which restrict
changes in interest rates on a short-term basis and over the life of the
asset. Loan prepayments and early withdrawal of certificates of deposit could
also cause the interest sensitivities to vary from those reflected in the
table. Due to these factors, the interest rate sensitivity static gap report
may not provide a complete or accurate assessment of the Company's exposure
to changes in interest rates.
In response to the limitations inherent with static gap analysis, the
impact of fluctuations in interest rates on the Company's net interest income
has been evaluated through an interest rate shock analysis. This analysis
applies "change ratios" to assets and liabilities based upon various
assumptions regarding their repricing characteristics. This enhanced interest
rate risk management tool is used by the Company to more accurately evaluate
and manage the degree of interest rate risk. As of June 30, 1997,
management's analysis indicates that the Company's net interest income would
decrease a maximum of 5% if rates rose 200 basis points.
21
<PAGE>
<TABLE>
<CAPTION>
At June 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
Immediate Over One
Through Year Through Over
(DOLLARS IN THOUSANDS) One Year Five Years Five Years Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS SUBJECT TO INTEREST RATE ADJUSTMENT:
Repurchase agreements $ 221 $ - $ - $ 221
Investment securities - held to maturity - - 40,962 40,962
Investment securities - available for sale - 14,930 80,438 95,368
Total loans, net of deferred fees 207,019 18,775 1,269 227,063
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 207,240 $ 33,705 $ 122,669 $ 363,614
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES SUBJECT TO INTEREST RATE ADJUSTMENT:
Certificates of deposit $ 93,392 $ 11,628 - $ 105,020
Savings accounts 181,657 - - 181,657
Money market checking 18,277 - - 18,277
Other Borrowings 36,900 - - 36,900
- ---------------------------------------------------------------------------------------------------------------------------------
Total $330,226 $ 11,628 - $ 341,854
- ---------------------------------------------------------------------------------------------------------------------------------
Excess (deficiency) of rate-sensitive
assets over rate-sensitive liabilities ($122,986) $22,077 $122,669 $21,760
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative excess (deficiency) of
rate-sensitive assets over rate-sensitive liabilities ($122,986) ($100,909) $21,760
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
As a percent of total assets (33.1%) (27.2%) 5.9%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain matters discussed in this Quarterly Report on Form 10-Q may
constitute forward-looking statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 which are
not historical facts. The Company cautions readers that the following
important factors could affect the Company's business and cause actual
results to differ materially from those expressed in forward-looking
statements made by, on or behalf of, the Company.
ECONOMIC CONDITIONS AND GEOGRAPHIC CONCENTRATION
The Company's operations are primarily located in California and
concentrated primarily in Southern California. As a result of the geographic
concentration, the Company's results depend largely upon economic conditions
in this area. A deterioration in economic conditions in the Company's market
areas, particularly in the real estate industry, could have a material
adverse impact on the quality of the Company's loan portfolio and the demand
for its products and services, and accordingly, its results of operations.
LENDING CONCENTRATION
Pacific Crest Bank currently engages in commercial real estate lending,
including loans secured by multi-family residential property, primarily in
California. At June 30, 1997, $221.1 million (or 97.1%) of Pacific Crest
Bank's loans consisted of loans secured by commercial real estate. Collateral
for Pacific Crest Bank's loans includes retail strip centers, industrial
income-producing and owner/user properties, small office buildings, mixed-use
retail/office and retail/residential buildings, and special purpose
properties such as auto repair facilities, restaurants and motels.
Commercial real estate loans generally present a higher level of risk
than do loans secured by one-to-four family residences. This greater risk is
due to several factors, including the concentration of principal in a limited
number of loans and borrowers, the effects of general economic conditions on
commercial properties and the increased difficulty of evaluating and
monitoring these types of loans. Furthermore, the repayment of loans secured
by commercial real estate is typically dependent upon the successful
operation of the related real estate project. If the cash flow from the
project is reduced (for example, if leases are not obtained or renewed or, in
the case of owner-occupied real estate property, if the business of the
borrower deteriorates), the borrower's ability to repay the loan may be
impaired.
22
<PAGE>
CREDIT QUALITY
A significant source of risk for the Company arises from the possibility
that losses will be sustained because borrower's guarantors and related
parties may fail to perform in accordance with the terms of their loans. The
Company has adopted underwriting and credit monitoring procedures and credit
policies, including the establishment and review of the allowance for credit
losses, that management believes are appropriate to minimize this risk by
assessing the likelihood of nonperformance, tracking loan performance and
diversifying the Company's credit portfolio. Such policies and procedures,
however, may not prevent unexpected losses that could materially adversely
affect the Company's results of operations.
INTEREST RATE RISK
Banking companies' earnings depend largely on the relationship between
the cost of funds, primarily deposits, and the yield on earning assets. This
relationship, known as the interest rate spread, is subject to fluctuation
and is affected by economic and competitive factors which influence interest
rates, the volume and mix of interest-earning assets and interest-bearing
liabilities, and the level of nonperforming assets. Fluctuations in interest
rates affect the demand of customers for the Company's products and services.
The Company is subject to interest rate risk to the degree that its
interest-bearing liabilities reprice or mature more slowly or more rapidly or
on a different basis than its interest-earning assets. Although the Company
believes its current level of interest rate sensitivity is reasonable,
significant fluctuations in interest rates may have an adverse affect on the
Company's results of operations.
GOVERNMENT REGULATION AND MONETARY POLICY
The banking industry is subject to extensive federal and state
supervision and regulation. Such regulation limits the manner in which the
Company conducts its business, undertakes new investments and activities and
obtains financing. This regulation is designed primarily for the protection
of the deposit insurance funds and consumers, and not to benefit holders of
the Company's securities. Financial institution regulation has been the
subject of significant legislation in recent years, and may be the subject of
further significant legislation in the future, none of which is in the
control of the Company. Significant new laws or changes in, or repeals of,
existing laws may cause the Company's results to differ materially. Further,
federal monetary policy, particularly as implemented through the Federal
Reserve System, significantly affects credit conditions for the Company,
primarily through open market operations in United States government
securities, the discount rate for bank borrowings and bank reserve
requirements, and a material change in these conditions would be likely to
have a material impact on the Company's results of operations.
COMPETITION
The banking and financial services business in California generally, and
in Pacific Crest Bank's market areas specifically, is highly competitive. The
increasingly competitive environment is a result primarily of changes in
regulation, changes in technology and product delivery systems, and the
accelerating pace of consolidation among financial services providers.
Pacific Crest Bank competes for loans, deposits and customers for financial
services with other commercial banks, thrift and loans, savings and loan
associations, securities and brokerage companies, mortgage companies,
insurance companies, finance companies, money market funds, credit unions,
and other nonbank financial service providers. Many of these competitors are
much larger in total assets and capitalization, have greater access to
capital markets and offer a broader array of financial services than Pacific
Crest Bank. There can be no assurance that Pacific Crest Bank will be able to
compete effectively in its markets and the results of operations of the
Company could be adversely affected if circumstances affecting the nature or
level of competition change.
While management believes that its assumptions regarding these and other
factors on which forward-looking statements are based are reasonable, such
assumptions are necessarily speculative in nature, and actual outcomes can be
expected to differ to some degree. Consequently, there can be no assurance
that the results described in such forward-looking statements will, in fact,
be achieved.
23
<PAGE>
Part II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 8, 1997, the Annual Meeting of Shareholders of the Company was
held for the purpose of electing one person to the Board of Directors
for a term of three years and to serve until his or her successor is
elected and qualified. The nominee was Rudolph I. Estrada. A total of
2,819,477 shares were represented at the Meeting. 2,816,884 shares were
cast "For" the election of Mr. Estrada, and 2,593 shares were
"WITHHELD" from voting for the nominee.
In addition, a proposal to re-approve the 1993 Equity Incentive Plan
("Plan") was voted on. 2,680,322 shares were cast "For" the approval of
the Plan, 32,057 shares were cast "Against" the Plan. There was a total
of 2,483 shares that "ABSTAINED" from casting a vote on the Plan.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) FINANCIAL DATA SCHEDULES.
(B) REPORTS ON FORM 8-K:
The Company filed no reports on Form 8-K during the quarter ended
June 30, 1997.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACIFIC CREST CAPITAL, INC.
Date: August 13, 1997 /s/ Gary Wehrle
--------------- -------------------------------
Gary Wehrle
President and Chief Executive Officer
Date: August 13, 1997 /s/ Robert J. Dennen
--------------- -------------------------------
Vice President, Chief Financial Officer
Corporate Secretary
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders
Pacific Crest Capital, Inc.
We consent to the use in this Registration Statement of Pacific Crest Capital,
Inc. (the "Company" and registrant), and PCC Capital I (the co-registrant), on
Form S-2 of our report dated February 5, 1997 included in the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996, incorporated by
reference in the Prospectus, which is a part of this Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
August 22, 1997
Los Angeles, California
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-2 No. 333- ) and related Prospectus of
Pacific Crest Capital, Inc. for the registration of 1,725,000 shares of trust
preferred securities and to the incorporation by reference therein of our report
dated February 1, 1996, with respect to the consolidated financial statements of
Pacific Crest Capital, Inc. included in its Form 10-K for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Los Angeles, California
August 19, 1997
<PAGE>
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
PACIFIC CREST CAPITAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 95-4437818
(State of incorporation) (I.R.S. employer identification no.)
30343 Canwood Street
Agoura Hills, California 91301
(Address of principal executive offices) (Zip Code)
Junior Subordinated Deferrable Interest Debentures of
Pacific Crest Capital, Inc.
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 15th day
of August, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Christopher L. Kaiser By:/s/ Emmett R. Harmon
------------------------- ---------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
of
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Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
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There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: August 15, 1997 By: /s/ Emmett R. Harmon
---------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------- -------------------
Name of Bank City
in the State of DELAWARE, at the close of business on March 31, 1997.
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . 181,744
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,954
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767,337
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . 86,900
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . . . . 3,685,616
LESS: Allowance for loan and lease losses. . . . . . . . . 52,478
LESS: Allocated transfer risk reserve. . . . . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve. . . . . . . . . . .3,633,138
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . 94,513
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,702
Investments in unconsolidated subsidiaries and associated companies. . . . . . . . . . . . . .. 20
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,012
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,524
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,320,844
CONTINUED ON NEXT PAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,618,174
Noninterest-bearing . . . . . . . . 784,267
Interest-bearing. . . . . . . . . . 2,833,907
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . 293,862
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,550
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less. . . . . . . . . . . . . . . . . . . . . . 774,000
With original maturity of more than one year. . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,672
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,889,258
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371,107
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . (2,139)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431,586
Total liabilities, limited-life preferred stock, and equity capital. . . . . . . . . . . . . . 5,320,844
Thousands of dollars
</TABLE>
2
<PAGE>
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service
PACIFIC CREST CAPITAL, INC.
PCC CAPITAL I
(Exact name of obligor as specified in its charter)
Delaware 95-4437818
Delaware To be applied for
(State of incorporation) (I.R.S. employer identification no.)
30343 Canwood Street
Agoura Hills, California 91301
(Address of principal executive offices) (Zip Code)
___ % Cumulative Trust Preferred Securities of PCC Capital I
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 15th day
of August, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
-------------------------- ---------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
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receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
of
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<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: August 15, 1997 By: /s/ Emmett R. Harmon
----------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE, at the close of business on March 31, 1997.
--------
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . 181,744
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,954
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767,337
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . 86,900
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . . . . 3,685,616
LESS: Allowance for loan and lease losses. . . . . . . . . 52,478
LESS: Allocated transfer risk reserve. . . . . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve. . . . . . . . . . . 3,633,138
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . 94,513
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,702
Investments in unconsolidated subsidiaries and associated companies. . . . . . . . . . . . . .. 20
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,012
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,524
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,320,844
CONTINUED ON NEXT PAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,618,174
Noninterest-bearing . . . . . . . . 784,267
Interest-bearing. . . . . . . . . . 2,833,907
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . 293,862
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,550
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less. . . . . . . . . . . . . . . . . . . . . . 774,000
With original maturity of more than one year. . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,672
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,889,258
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371,107
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . (2,139)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431,586
Total liabilities, limited-life preferred stock, and equity capital. . . . . . . . . . . . . . 5,320,844
Thousands of dollars
</TABLE>
2
<PAGE>
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
PACIFIC CREST CAPITAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 95-4437818
(State of incorporation) (I.R.S. employer identification no.)
30343 Canwood Street
Agoura Hills, California 91301
(Address of principal executive offices) (Zip Code)
Pacific Crest Capital, Inc. Guarantee with respect to ___%
Cumulative Trust Preferred Securities
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington
Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 15th day
of August, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
-------------------------- ------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
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receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article FIFTEENTH
shall mean any transaction which is referred to any one or more of
clauses (A) through (E) of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
of
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Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: August 15, 1997 By: /s/ Emmett R. Harmon
----------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks
with state publication requirements. It has not been approved by any state
banking authorities. Refer to your appropriate state banking authorities
for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . . . . . . 181,744
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,954
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767,337
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . . . . 86,900
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . . . . . . 3,685,616
LESS: Allowance for loan and lease losses. . . . . . . . . . . 52,478
LESS: Allocated transfer risk reserve. . . . . . . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve. . . . . . . . . . . . . . . .3,633,138
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . 94,513
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,702
Investments in unconsolidated subsidiaries and associated companies. . . . . . . . . . . . . . . . . . . 20
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,012
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,524
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,320,844
CONTINUED ON NEXT PAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,618,174
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . 784,267
Interest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . 2,833,907
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . . . 293,862
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,550
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less. . . . . . . . . . . . . . . . . . . . . . . . 774,000
With original maturity of more than one year. . . . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,672
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,889,258
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371,107
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . (2,139)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431,586
Total liabilities, limited-life preferred stock, and equity capital. . . . . . . . . . . . . . . . 5,320,844
Thousands of dollars
</TABLE>
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
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<NAME> PACIFIC CREST CAPITAL, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,904
<SECURITIES> 136,330
<RECEIVABLES> 227,063
<ALLOWANCES> 3,795
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 546
<DEPRECIATION> 0
<TOTAL-ASSETS> 371,126
<CURRENT-LIABILITIES> 304,954
<BONDS> 36,900
0
0
<COMMON> 26,288
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 371,126
<SALES> 15,840
<TOTAL-REVENUES> 16,290
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,541
<LOSS-PROVISION> 530
<INTEREST-EXPENSE> 8,343
<INCOME-PRETAX> 2,876
<INCOME-TAX> 1,146
<INCOME-CONTINUING> 1,730
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,730
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
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<PAGE>
<ARTICLE> 5
<CIK> 0001044770
<NAME> PCC CAPITOL I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
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0
0
<COMMON> 0
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<INCOME-PRETAX> 0
<INCOME-TAX> 0
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