<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1998
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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, 1997
[ ] 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
9.375% CUMULATIVE TRUST PREFERRED SECURITIES OF PCC CAPITAL I
GUARANTEE OF PACIFIC CREST CAPITAL, INC. WITH RESPECT TO THE
9.375% CUMULATIVE TRUST PREFERRED SECURITIES OF PCC CAPITAL I
(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 16, 1998, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT, AS REPORTED ON THE NASDAQ NATIONAL MARKET,
WAS $50,377,000.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT INCORPORATED PART OF FORM 10-K INTO WHICH INCORPORATED
-------------------------- -----------------------------------------
DEFINITIVE PROXY STATEMENT PART III
FOR THE 1998 ANNUAL
MEETING OF STOCKHOLDERS
AT MARCH 16, 1998, REGISTRANT HAD 2,981,807 SHARES OF COMMON STOCK, $.01
PAR VALUE, OUTSTANDING.
<PAGE>
INDEX
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PART I
PAGE
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Item 1. Business................................................................ 1-13
Item 2. Properties.............................................................. 14
Item 3. Legal Proceedings....................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders..................... 14
Item 4 (a). Executive Officers of the Registrant.................................. 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters... 15
Item 6. Selected Financial Data................................................. 16-17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 18-27
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............. 27
Item 8. Financial Statements and Supplementary Data............................. 29-44
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................. 44
PART III
Item 10. Directors and Executive Officers of the Registrant...................... 47
Item 11. Executive Compensation.................................................. 47
Item 12. Security Ownership of Certain Beneficial Owners and Management.......... 47
Item 13. Certain Relationships and Related Transactions.......................... 47
PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K.................. 47-48
</TABLE>
<PAGE>
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 Bank
("Pacific Crest Bank"). Unless the context otherwise indicates, the "Company"
refers to Pacific Crest and its wholly owned subsidiary, Pacific Crest Bank.
Certain matters discussed in this Annual Report on Form 10-K may constitute
forward-looking statements under Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). These statements may involve risks and
uncertainties. These forward-looking statements relate to, among other things,
expectations of the business environment in which the Company operates in,
projections of future performance, perceived opportunities in the market and
statements regarding the Company's mission and vision. The Company's actual
results, performance, or achievements may differ significantly from the results,
performance, or achievements expressed or implied in such forward-looking
statements. For discussion of the factors that might cause such a difference,
see "Item 1. Business - Business Considerations and Certain Factors that May
Affect Future Results of Operations and Stock Price."
PACIFIC CREST BANK
Pacific Crest Bank, formerly known as Pacific Crest Investment and
Loan, is a California licensed industrial loan company that commenced business
in 1974 and is supervised and regulated by the California Department of
Financial Institutions (the "Department" or "DFI") and the Federal Deposit
Insurance Corporation ("FDIC"). The deposits of Pacific Crest Bank are insured
by the FDIC up to applicable limits.
Pacific Crest Bank concentrates on marketing to and serving the
needs of individuals and small and medium sized businesses in California.
Pacific Crest Bank conducts its deposit operations through three branch offices,
located in Beverly Hills, Encino and San Diego, California. Pacific Crest Bank
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 Bank offers VISA and MasterCard credit cards on an agency basis and is a
member of Cirrus, Star and Explore ATM networks. Pacific Crest Bank has focused
its lending activities on real estate loans secured by commercial real estate
and small business loans under the federal Small Business Administration ("SBA")
program. Pacific Crest Bank conducts its lending operations through its three
deposit branches and its loan production offices, located in Agoura Hills,
Orange County, Oakland and Sacramento, California, Portland, Oregon and Seattle,
Washington.
COMPETITION
Pacific Crest Bank faces significant competition in California for
new loans from industrial loan companies, commercial banks, savings and loan
associations, credit unions, credit companies, Wall Street lending conduits,
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 Bank does not have. Large banks and savings and loans frequently
also enjoy a lower cost of funds than Pacific Crest Bank and can therefore
charge less than Pacific Crest Bank for loans. In addition, the competition in
lending increased significantly during 1997, with the increase and expansion of
conduit lending and the securitization of commercial real estate loans by
investment banking firms. Pacific Crest Bank 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. With the increase in competition within the lending area, the
Company has experienced a decline in the yield within its commercial real estate
lending portfolio. The primary reason for the decline in the overall loan
portfolio yield is due to lower yielding loans being added to the loan portfolio
during 1997, reflecting the increased competitive rate pressure in the
marketplace. In addition, higher yielding loans have been paying off during
1997, adding to the overall yield decline.
Pacific Crest Bank 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 Bank's competitors offer a greater array of
products to customers than Pacific Crest Bank. Pacific Crest Bank 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 Bank 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 Bank's loans have been 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 Bank currently employs eight 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 Pacific Crest's Credit
Committee for approval. Pacific Crest Bank's senior management is actively
involved in its commercial lending activities and collateral valuation process.
Pacific Crest Bank obtains independent third party appraisals of all properties
securing its loans. In addition, Pacific Crest Bank employs individuals which
serve as internal property analysts to inspect properties and review the third
party appraisals for the benefit of the Credit Committee.
At December 31, 1997, the maximum amount that Pacific Crest Bank
could loan to one borrower was approximately $6.9 million. It is anticipated by
management that Pacific Crest Bank's Board of Directors will periodically adjust
and modify its underwriting criteria in response to economic conditions and
business opportunities.
<PAGE>
LENDING
Pacific Crest Bank's primary focus in lending activities is the
origination of adjustable rate and fixed rate commercial real estate loans and
SBA loans in California, Washington and Oregon. Loans are generally made for
terms of one to ten years. At December 31, 1997, 82.6% of Pacific Crest Bank's
loans were priced at a margin over either Bank of America's prime lending rate,
or the published WALL STREET JOURNAL prime lending rate, 12.3% were priced at a
margin over the Federal Home Loan Bank Board's 11th District Cost of Funds
Index, 1.1% were priced at a margin over either the 6-month or 1-year Treasury
bill rate, 1.8% were priced at a margin over the 6 month LIBOR rate and 2.2%
represented fixed rate loans. A significant number of Pacific Crest Bank's
adjustable rate loans adjust quarterly. In addition, a fair number of prime rate
loans may not initially reprice for up to five years and are fixed during the
first several years and most have interest rate floors and ceilings which limit
the interest rate repricing of the loans. As of December 31, 1997, 96% of the
loan portfolio was comprised of commercial real estate loans with an average
loan balance of $620,000.
ECONOMIC CONDITIONS, GOVERNMENT POLICIES, LEGISLATION, AND REGULATION
The Company's profitability, like most financial institutions, is
primarily dependent on interest rate differentials. In general, the difference
between the interest rates paid by Pacific Crest Bank on interest-bearing
liabilities, such as deposits and other borrowings, and the interest rates
received by Pacific Crest Bank on its interest-earning assets, such as loans
extended to its clients and securities held in its investment portfolio,
comprise the major portion of the Company's earnings. These rates are highly
sensitive to many factors that are beyond the control of the Company, such as
inflation, recession and unemployment, and the impact which future changes in
domestic and foreign economic conditions might have on the Company cannot be
predicted.
Monetary and fiscal policies of the federal government and the
policies of regulatory agencies also influence the business of Pacific Crest
Bank, particularly the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"). The Federal Reserve Board implements national monetary
policies (with objectives such as curbing inflation and combating recession)
through its open-market operations in U.S. Government securities by adjusting
the required level of reserves for depository institutions subject to its
reserve requirements and by varying the target federal funds and 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 earned on interest-earning assets and
paid on interest-bearing liabilities. The nature and impact on the Company of
any future changes in monetary and fiscal policies cannot be predicted.
From time to time, legislative acts, as well as regulations, are
enacted which have the effect of increasing the cost of doing business, limiting
or expanding permissible activities, or affecting the competitive balance
between banks and other financial services providers. Proposals to change the
laws and regulations governing the operations and taxation of banks, bank
holding companies and other financial institutions are frequently made in the
U.S. Congress, in the state legislatures and before various bank regulatory
agencies. See "Item 1. Business - Supervision and Regulation."
SUPERVISION AND REGULATION
Pacific Crest Bank is subject to regulation, supervision and
examination under both California and federal law. Pacific Crest Bank is subject
to supervision and regulation by the Commissioner of Financial Institutions of
the State of California (the "Commissioner") through the Department and, as a
nonmember bank, by the FDIC. Pacific Crest Bank is not regulated or supervised
by the Office of Thrift Supervision which regulates savings and loan
institutions.
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 Bank, 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 Bank.
Set forth below is a summary description of certain laws and
regulations which relate to the operations of Pacific Crest and Pacific Crest
Bank. The description does not purport to be complete and is qualified in its
entirety by reference to the applicable laws and regulations.
CALIFORNIA LAW
The industrial loan business conducted by Pacific Crest Bank 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.
Subject to restrictions imposed by applicable California law,
Pacific Crest Bank 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. Secured loans may generally be
repayable in unequal periodic payments as long as their terms do not exceed 10
years. However, 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 (i) real property or (ii) real and
personal property combined having a 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 personal and/or real
property. This requirement does not apply to loans to facilitate the sale of
other real estate owned ("OREO"), renewals or modifications pursuant to
workouts, or any loans saleable in the secondary market. 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
<PAGE>
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 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 Bank's portfolio at
December 31, 1997, 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, 1997, Pacific Crest Bank 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 of 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 stock and surplus not available for
dividends. 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 company to increase its deposits to in excess of 15 times the
aggregate amount of its paid-up and unimpaired capital stock and unimpaired
surplus not available for dividends, the industrial loan company must, among
other things, maintain a liquidity reserve in cash or cash equivalent equal to
1 1/2 % of its total investment certificates outstanding and maintain a special
allowance for losses as required by the Commissioner. Pacific Crest Bank
satisfied all of these standards at December 31, 1997. As approved by the
Commissioner, Pacific Crest Bank can currently operate with an investment
certificate to unimpaired capital and unimpaired surplus ratio of 18.5 to 1. At
December 31, 1997, Pacific Crest Bank's investment certificate to capital ratio
was approximately 11.7 to 1. Limitations have also been imposed with respect to
a depository institution's authority to accept, renew or rollover brokered
deposits. Pacific Crest Bank had no brokered deposits as of December 31, 1997.
Industrial loan companies are not permitted to borrow, except from
the Federal Home Loan Bank and 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-up 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 Bank had no subordinated debentures outstanding at
December 31, 1997.
Although investment authority and other activities that may be
engaged in by Pacific Crest Bank 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
Bank's ability to engage in certain activities that otherwise are authorized
under the California Industrial Loan Law.
FEDERAL LAW
Pacific Crest Bank'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.
<PAGE>
Pacific Crest Bank 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 Bank. This supervision and regulation is intended
primarily for the protection of the deposit insurance funds. If, as a result of
an examination of Pacific Crest Bank, the FDIC should determine that the
financial condition, capital resources, asset quality, earnings prospects,
management, liquidity, or other aspects of Pacific Crest Bank's operations are
unsatisfactory or that Pacific Crest Bank or its management is violating or has
violated any law or regulation, various remedies are available to the FDIC. Such
remedies include the power to enjoin "unsafe or unsound" practices, to require
affirmative action to correct any conditions resulting from any violation or
practice, to issue an administrative order that can be judicially enforced, to
direct an increase in capital, to restrict the growth of Pacific Crest Bank, to
assess civil monetary penalties, to remove officers and directors and ultimately
to terminate Pacific Crest Bank's deposit insurance.
Pacific Crest's securities are registered with the Securities and
Exchange Commission (the "SEC") under the Exchange Act. As such, Pacific
Crest is subject to information, proxy solicitation, insider trading, and
other requirements and restrictions of the Exchange Act.
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 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.
The FDIC requires 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%. 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 -
Economic Conditions, Government Policies, Legislation, and Regulation." Pacific
Crest, unlike Pacific Crest Bank, is not subject to any minimum capital
requirement. The following table sets forth Pacific Crest Bank's regulatory
capital ratios at December 31, 1997 and 1996:
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REGULATORY CAPITAL RATIOS AT DECEMBER 31, 1997 AT DECEMBER 31, 1996
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PACIFIC CREST BANK REQUIRED ACTUAL EXCESS REQUIRED ACTUAL EXCESS
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Leverage capital ratio 4.00% 7.53% 3.53% 4.00% 8.60% 4.60%
Tier 1 risk-based capital ratio 4.00% 12.02% 8.02% 4.00% 10.31% 6.31%
Total risk-based capital ratio 8.00% 13.27% 5.27% 8.00% 11.56% 3.56%
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PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS
Federal banking agencies possess broad powers to take corrective and
other supervisory action to resolve the problems of insured depository
institutions, including but not limited to those institutions that fall below
one or more prescribed minimum capital ratios. Each federal banking agency has
promulgated regulations defining the following five categories in which an
insured depository institution will be placed, based on its capital ratios: (i)
well capitalized, (ii) adequately capitalized, (iii) undercapitalized, (iv)
significantly undercapitalized, and (v) critically undercapitalized. At December
31, 1997, Pacific Crest Bank exceeded the required ratios for classification as
"well capitalized."
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.
A bank may fall into the critically undercapitalized category if its
"tangible equity" does not exceed two-percent of the bank's total assets.
Federal guidelines generally define "tangible equity" as a bank's tangible
assets less liabilities. Federal regulators may, among other alternatives,
require the appointment of a conservator or a receiver for a critically
undercapitalized bank. In California, the Commissioner may require the
appointment of a conservator or receiver for an industrial loan company if its
capital is impaired or reduced below the amount required by the Industrial Loan
Law. In the event Pacific Crest Bank is placed in conservatorship or
receivership; the Company's ability to perform its obligations would be
adversely impacted.
In addition to measures taken under the prompt corrective action
provisions, 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.
During 1996, Pacific Crest Bank was subject to a Memorandum of
Understanding ("MOU") with the FDIC and the Commissioner which required Pacific
Crest Bank 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 FDIC
<PAGE>
terminated the MOU on February 5, 1997 following regulatory examinations by
the FDIC and the Department completed during the fourth quarter of 1996.
SAFETY AND SOUNDNESS STANDARDS
The federal banking agencies have adopted guidelines designed to
assist them in identifying and addressing potential safety and soundness
concerns before capital becomes impaired. The guidelines set forth operational
and managerial standards relating 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. In
addition, the federal banking agencies have also adopted safety and soundness
guidelines with respect to asset quality and earnings standards. These
guidelines provide six standards for establishing and maintaining a system to
identify problem assets and prevent those assets from deteriorating. Under these
standards, an insured depository institution should: (i) conduct periodic asset
quality reviews to identify problem assets, (ii) estimate the inherent losses in
problem 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 quality
reports with adequate information for management and the board of directors to
assess the level of asset risk. These new 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.
PREMIUMS FOR DEPOSIT INSURANCE
Pacific Crest Bank's deposit accounts are insured by the Bank
Insurance Fund ("BIF"), as administered by the FDIC, up to the maximum permitted
by law. Insurance of deposits may be terminated by the FDIC upon a finding that
the institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC or the institution's
primary regulator.
The FDIC charges an annual assessment for the insurance of deposits
which as of December 31, 1997, ranged from 0 to 27 basis points per $100 of
insured deposits, based on the risk a particular institution poses to its
deposit insurance fund. The risk classification is based on an institution's
capital group and supervisory subgroup assignment. Pursuant to the Economic
Growth and Paperwork Reduction Act of 1996 ("EGRPRA"), at January 1, 1997,
Pacific Crest Bank began paying, in addition to its normal deposit insurance
premium as a member of the BIF, an amount equal to approximately 1.3 basis
points per $100 of insured deposits toward the retirement of the Financing
Corporation bonds ("Fico Bonds") issued in the 1980s to assist in the recovery
of the savings and loan industry. Members of the Savings Association Insurance
Fund ("SAIF"), by contrast, pay, in addition to their normal deposit insurance
premium, approximately 6.4 basis points. Under EGRPRA, the FDIC is not permitted
to establish SAIF assessment rates that are lower than comparable BIF assessment
rates. Beginning no later than January 1, 2000, the rate paid to retire the Fico
Bonds will be equal for members of the BIF and the SAIF. EGRPRA also provides
for the merging of the BIF and the SAIF by January 1, 1999 provided there are no
financial institutions still chartered as savings associations at that time.
Should the insurance funds be merged before January 1, 2000, the rate paid by
all members of this new fund to retire the Fico Bonds would be equal.
INTERSTATE BANKING AND BRANCHING
The Bank Holding Company Act of 1956, as amended (the "BHCA")
currently permits bank holding companies from any state to acquire banks and
bank holding companies located in any other state, subject to certain
conditions, including certain nationwide- and state-imposed concentration
limits. Pacific Crest Bank has the ability, subject to certain restrictions, to
acquire by acquisition or merger branches outside its home state. The
establishment of new interstate branches is also possible in those states with
laws that expressly permit it. Interstate branches are subject to certain laws
of the states in which they are located. Competition may increase further as
banks branch across state lines and enter new markets.
COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS
Pacific Crest Bank is subject to certain fair lending requirements
and reporting obligations involving home mortgage lending operations and CRA
activities. The CRA generally requires the federal banking agencies to evaluate
the record of a financial institution in meeting the credit needs of its local
communities, including low- and moderate-income neighborhoods. A bank may be
subject to substantial penalties and corrective measures for a violation of
certain fair lending laws. The federal banking agencies may take compliance with
such laws and CRA obligations into account when regulating and supervising other
activities.
A bank's compliance with its CRA obligations is based on a
performance-based evaluation system which bases CRA ratings on an institution's
lending service and investment performance. When a bank holding company applies
for approval to acquire a bank or other bank holding company, the Federal
Reserve Board will review the assessment of each subsidiary bank of the
applicant bank holding company, and such records may be the basis for denying
the application. Based on an examination conducted November 3, 1995, Pacific
Crest Bank was rated "satisfactory" in complying with its CRA obligations.
YEAR 2000 COMPLIANCE
In May 1997, the Federal Financial Institutions Examination Council
issued an interagency statement to the chief executive officers of all federally
supervised financial institutions regarding Year 2000 project management
awareness. It is expected that unless financial institutions address the
technology issues relating to the coming of the year 2000, there will be major
disruptions in the operations of financial institutions. The statement provides
guidance to financial institutions, providers of data services, and all
examining personnel of the federal banking agencies regarding the year 2000
problem. The federal banking agencies intend to conduct year 2000 compliance
examinations, and the failure to implement a year 2000 program may be seen by
the federal banking agencies as an unsafe and unsound banking practice. In
addition, federal banking agencies will be taking into account year 2000
compliance programs when analyzing applications and may deny an application
based on year 2000 related issues.
<PAGE>
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the year 2000 issue
and has implemented a plan to resolve the issue. The year 2000 issue is the
result of computer programs being written using two, rather than four, digits
to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900
instead of the year 2000. This could result in major system failure or
miscalculations. The Company presently believes that, with modifications to
some of the existing software and possible conversions to new software, the
year 2000 problem will not pose significant operational problems for the
Company's computer systems as so modified and converted. Even if such
modifications and conversions are not completed timely, the year 2000 problem
is not expected to have a material impact on the operations of the Company.
The total cost estimated to correct the new computer software systems, or to
have existing systems modified, is not expected to exceed $200,000 over the
next two years.
RESTRICTIONS ON TRANSFERS OF FUNDS TO PACIFIC CREST BY PACIFIC CREST BANK
Pacific Crest is a legal entity separate and distinct from
Pacific Crest Bank. Pacific Crest's ability to pay cash dividends is limited
by Delaware state law. At present, substantially all of 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 Bank.
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).
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. The amount
of unrestricted capital available for dividend payment by Pacific Crest Bank
was $3.6 million at December 31, 1997.
The FDIC also has authority to prohibit Pacific Crest Bank from
engaging in activities that, in the FDIC's opinion, constitute unsafe or
unsound practices in conducting its business. It is possible, depending upon
the financial condition of the bank in question and other factors, that the
FDIC could assert that the payment of dividends or other payments might,
under some circumstances, be such an unsafe or unsound practice. Further, the
FDIC has established guidelines with respect to the maintenance of
appropriate levels of capital by banks under their jurisdiction. Compliance
with the standards set forth in such guidelines and the restrictions that are
or may be imposed under the prompt corrective action provisions of federal
law could limit the amount of dividends which Pacific Crest Bank may pay. An
insured depository institution is prohibited 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. See "Item 1. Business -Supervision and Regulation - Prompt
Corrective Action and Other Enforcement Mechanisms" and "- Capital Standards"
for a discussion of these additional restrictions on capital distributions.
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. At December 31, 1997, Pacific
Crest Bank had positive retained earnings of $3.63 million.
Pacific Crest Bank is subject to certain restrictions imposed by
federal law on any extensions of credit to, or the issuance of a guarantee or
letter of credit on behalf of, Pacific Crest or other affiliates, the
purchase of, 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 Bank unless the
loans are secured by marketable obligations of designated amounts. Further,
such secured loans and investments by Pacific Crest Bank to or in Pacific
Crest or to or in any other affiliate are limited, individually, to 10.0% of
Pacific Crest Bank's capital and surplus (as defined by federal regulations),
and such secured loans and investments are limited, in the aggregate, to
20.0% of Pacific Crest Bank's capital and surplus (as defined by federal
regulations). California law also imposes certain restrictions with respect
to transactions involving Pacific Crest and other controlling persons of
Pacific Crest Bank. See "Item 1. Business - Supervision and Regulation -
California Law." Additional restrictions on transactions with affiliates may
be imposed on Pacific Crest Bank under the prompt corrective action
provisions of federal law. See "Item 1. Business -Supervision and Regulation
- - Prompt Corrective Action and Other Enforcement Mechanisms."
ACCOUNTING CHANGES
In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 establishes financial
accounting and reporting standards for stock-based compensation plans,
including employee stock purchase plans, stock options and restricted stock.
SFAS No. 123 encourages all entities to adopt a fair value method of
accounting for stock-based compensation plans, whereby compensation cost is
measured at the grant date based on the fair value of the award and is
realized as an expense over the service or vesting period. However, SFAS No.
123 also allows an entity to continue to measure compensation cost for these
plans using the intrinsic value method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Under the intrinsic value method, compensation cost is generally the excess,
if any, of the quoted market price of the stock at grant date or other
measurement date over the amount which must be paid to acquire the stock. The
Company adopted SFAS No. 123 effective January 1, 1996. The adoption of this
pronouncement did not have a material impact on the Company's consolidated
financial position or results of operations for the year ended December 31,
1997.
In June 1996, the FASB issued SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." This statement provides standards for distinguishing transfers
of financial assets that are sales from
<PAGE>
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 the exchange. This statement requires
that liabilities and derivative securities incurred or obtained by
transferors as part of a transfer of financial assets be initially valued at
fair value, if practicable. It also requires that servicing rights 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 values at the date of
transfer. Furthermore, SFAS No. 125 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. Finally, SFAS No.
125 requires that a liability be eliminated 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 No. 125
supersedes SFAS No. 122, "Accounting for Mortgage Servicing Rights," which
was adopted by the Company on January 1, 1997 and which management of the
Company determined had no material impact on the Company's results of
operations or financial position. In December 1996, the FASB issued SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125." SFAS No. 127 defers for one year the effective date of SFAS No. 125
as it relates to transactions involving secured borrowings and collateral and
transfers and servicing of financial assets. This Statement also provides
additional guidance on these types of transactions. The Company adopted this
statement for the year ended December 31, 1997, and is reflected in the
Company's consolidated financial statements. The adoption of this statement
did not have a material impact on the Company's consolidated financial
statements, for the year ended December 31, 1997.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per
Share." This statement replaces the presentation of primary earnings per
share with a presentation of basic earnings per share. The statement also
requires dual presentation of basic and diluted earnings per share by
entities with complex capital structures and requires a reconciliation of the
numerators and denominators between the two calculations. SFAS No. 128 is
effective for financial statements issued for periods ended after December
15, 1997, including interim periods. The Company adopted this statement for
the year ended December 31, 1997, and is reflected in the Company's
consolidated financial statements. The adoption of this statement did not
have a material impact on the Company's consolidated financial statements,
for the year ended December 31, 1997.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure." This statement establishes standards
for disclosing information about capital structure, including pertinent
rights and privileges of various securities outstanding. SFAS No. 129 is
effective for financial statements for periods ended after December 15, 1997.
The Company adopted this statement for the year ended December 31, 1997, and
is reflected in the Company's consolidated financial statements. The adoption
of this statement did not have a material impact on the Company's
consolidated financial statements, for the year ended December 31, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." This Statement establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements.
This statement requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. This statement requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial statement
and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. This statement
was adopted by the Company as of January 1, 1998. Management of the Company
does not believe this statement will have a material impact on the Company's
consolidated results of operations or financial position.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
establishes standards for the way that public business enterprises report
information about operating segments in both annual financial statements and
interim financial reports issued to shareholders. The statement also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. This Statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," but retains the
requirement to report information about major customers. It amends SFAS No.
94, "Consolidation of All Majority-Owned Subsidiaries," to remove the special
disclosure requirements for previously unconsolidated subsidiaries. SFAS No.
131 is effective for financial statements for periods beginning after
December 15, 1997. This statement was adopted by the Company as of January 1,
1998. Management of the Company does not believe this statement will have a
material impact on the Company's consolidated results of operations or
financial position.
EMPLOYEES
As of December 31, 1997, the Company employed 67 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 Bank focuses its lending activities on commercial
real estate loans to investors and small and medium sized businesses. At
December 31, 1997, approximately 96% of the loan portfolio were secured by
commercial real property. The following table presents the categories of
Pacific Crest Bank's loans at the dates indicated:
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
(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 loans $ 223,902 96% $ 206,172 97% $ 193,332 97% $ 183,173 98% $ 206,256 100%
Residential mortgage loans 1,593 1% 1,596 1% 3,169 2% 1,336 1% - -
Business loans-SBA/commercial/other 6,401 3% 3,944 2% 2,242 1% 1,133 1% 77 -
- -----------------------------------------------------------------------------------------------------------------------------------
Gross loans 231,896 100% 211,712 100% 198,743 100% 185,642 100% 206,333 100%
Less deferred loan fees 763 617 1,965 3,181 1,927
Less allowance for loan losses 4,100 3,400 4,500 8,075 3,910
- -----------------------------------------------------------------------------------------------------------------------------------
Net loans $ 227,033 $ 207,695 $ 192,278 $ 174,386 $ 200,496
- -----------------------------------------------------------------------------------------------------------------------------------
</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.
MATURITIES AND INTEREST SENSITIVITIES OF LOAN PORTFOLIO
The first table below sets forth the contractual maturities of
Pacific Crest Bank's loan portfolio at December 31, 1997. 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 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 $ 15,089 $ 73,910 $ 93,287 $ 41,616 $ 223,902
Residential mortgage loans - 1,019 - 574 1,593
Commercial business/other loans 99 592 554 5,156 6,401
- ----------------------------------------------------------------------------------------------------------------------
Total loans, gross $ 15,188 $ 75,521 $ 93,841 $ 47,346 $ 231,896
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MATURITY DISTRIBUTION OF LOAN BY
INTEREST RATE TYPE:
Loans with fixed interest rates $ 368 $ 3,825 $ 17,495 $ 6,605 $ 28,293
Loans with variable interest rates 14,820 71,696 76,346 40,741 203,603
- ----------------------------------------------------------------------------------------------------------------------
Total loans, gross $ 15,188 $ 75,521 $ 93,841 $ 47,346 $ 231,896
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
CLASSIFIED ASSETS
In connection with examinations of insured institutions, the FDIC
and the DFI 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
classification 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.
NONPERFORMING ASSETS
The Company's general policy is to discontinue the 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
<PAGE>
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 0.10% at December 31, 1997 and 0.66% at December 31, 1996.
Total nonperforming assets declined in 1997 from $4.8 million or
1.60% of total assets at December 31, 1996 to $2.3 million or 0.49% of total
assets at December 31, 1997. 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, 1997:
<TABLE>
<CAPTION>
LOANS DELINQUENT AT DECEMBER 31, 1997
---------------------------------------------------------------------------------------------------
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 AMT. LOANS LOANS AMT. LOANS LOANS AMT. LOANS LOANS AMT. LOANS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL REAL
ESTATE LOANS:
Nonaccrual loans - $ - - - - - 1 $228 0.10% 1 $ 228 0.10%
Loans accruing 1 2,564 1.13% - - - - - - 1 2,564 1.13%
- --------------------------------------------------------------------------------------------------------------------------
Total delinquent loans 1 $2,564 1.13% - $ - 0.00% 1 $228 0.10% 2 $2,792 1.23%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans/Commercial Real Estate Loans $ 228 $ 1,386 $ 4,985 $ 9,779 $ 5,186
Other real estate owned 2,064 3,469 4,355 5,724 9,092
- ------------------------------------------------------------------------------------------------------
Total nonaccrual loans and OREO 2,292 4,855 9,340 15,503 14,278
Nonperforming investments - - - - 898
- ------------------------------------------------------------------------------------------------------
Total nonperforming assets 2,292 4,855 9,340 15,503 15,176
Troubled debt restructurings(1) 899 719 8,757 5,039 4,765
- ------------------------------------------------------------------------------------------------------
Total nonaccrual loans and OREO to total assets 0.49% 1.60% 3.60% 6.24% 5.89%
Total nonperforming assets to total assets 0.49% 1.60% 3.60% 6.24% 6.26%
Allowance for loan losses to nonaccrual loans 1798.20% 245.30% 90.30% 82.60% 75.40%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) All troubled debt restructurings were performing in accordance with their
revised terms at December 31, 1996 and 1997.
For 1997, gross interest income which would have been recorded
had the nonaccrual loans been current in accordance with their original terms
was $390,000, and the amount that was recorded as interest income on such
loans was $141,000.
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 ended December 31, 1997, 1996
and 1995:
<TABLE>
<CAPTION>
NONACCRUAL LOAN ACTIVITY YEAR ENDING DECEMBER 31
- ----------------------------------------------------------------------------------------------
(DOLLAR IN THOUSANDS) 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans at beginning of period $ 1,386 $ 4,985 $ 9,779
Nonaccrual loan additions 3,325 4,675 11,835
Loans returned to accrual status (269) (630) (5,910)
Loans transferred to OREO (1,376) (2,836) (6,790)
Loan chargeoffs (468) (1,929) (2,014)
Loan payments/payoffs/other (2,370) (2,879) (1,915)
- -----------------------------------------------------------------------------------------------
Net change/activity (1,158) (3,599) (4,794)
- -----------------------------------------------------------------------------------------------
Nonaccrual loans at end of period $ 228 $ 1,386 $ 4,985
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
OTHER REAL ESTATE OWNED
Assets classified as OREO include foreclosed real estate owned by
the Company. The Company had a total of four properties in this category at
December 31, 1997, totaling $2.1 million.
<PAGE>
Other real estate owned declined to $2.1 million at December 31,
1997, from $3.5 million at December 31, 1996, a decline of $1.4 million or
40.5%. This reflects the sale of five properties with a net balance of $2.3
million during 1997 versus $3.5 during 1996. The Company provided loan
financing in the aggregate principal amount of $915,000 for two properties
sold during 1997.
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
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 $2.1 million balance of OREO at December 31,
1997 reflects reductions of $0.9 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 $0.9 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 ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
OTHER REAL ESTATE OWNED ACTIVITY YEAR ENDING DECEMBER 31
- ------------------------------------------------------------------------------------
(DOLLAR IN THOUSANDS) 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
OREO at beginning of period $ 3,469 $ 4,355 $ 5,724
Transfers from loans 1,376 2,836 6,790
OREO write downs (370) (155) (344)
Payments/other (136) (86) 581
Sales of OREO properties (2,275) (3,481) (8,396)
- -------------------------------------------------------------------------------------
Net change/activity (1,405) (886) (1,369)
- -------------------------------------------------------------------------------------
OREO balance at end of period $ 2,064 $ 3,469 $ 4,355
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</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, 1997, the Company had one loan in the aggregate principal amount of
$899,000 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 is not
deducted from the above TDR loan balances.
The following table represents the major components of the
changes in the TDRs for the year ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
TROUBLED DEBT RESTRUCTURING ACTIVITY YEAR ENDING DECEMBER 31
- -----------------------------------------------------------------------------------
(DOLLAR IN THOUSANDS) 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
TDR balance beginning of period $ 719 $ 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 180 (1,396) (2,304)
- ------------------------------------------------------------------------------------
Net change/activity 180 (8,038) 3,718
- ------------------------------------------------------------------------------------
TDR balance end of period $ 899 $ 719 $ 8,757
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
OTHER LOANS OF CONCERN (POTENTIAL PROBLEM LOANS)
In addition to nonaccrual loans and TDRs, as of December 31,
1997, the Company had three loans with aggregate outstanding loan balances of
$3.2 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 four loans with aggregate outstanding loan balances of $3.6
million at December 31, 1996.
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 1.8% at December
31, 1997, 1.6% at December 31, 1996, 2.3% at December 31, 1995, and 4.4% at
December 31, 1994.
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
<PAGE>
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
could adversely affect certain Pacific Crest Bank borrowers' abilities to
contractually repay their loans. A decline in the 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 tables set 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) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of period $ 3,400 $ 4,500 $ 8,075 $3,910 $ 3,195
Chargeoffs: Commercial real estate mortgage 468 3,452 4,757 4,278 3,683
Recoveries: Commercial real estate mortgage 33 244 222 100 -
- --------------------------------------------------------------------------------------------------
Net loan charge-offs 435 3,208 4,535 4,178 3,683
Purchased loan reserve - 191 - - -
Provision for loan losses 1,135 1,917 960 8,343 4,398
- --------------------------------------------------------------------------------------------------
Balance at end of period $ 4,100 $ 3,400 $ 4,500 $8,075 $ 3,910
Net loan charge-offs $ 435 $ 3,208 $ 4,535 $4,178 $ 3,683
Valuation adjustments to OREO 370 155 344 1,719 3,314
- --------------------------------------------------------------------------------------------------
Total net loan charge-offs &
OREO valuation adjustments $ 805 $ 3,363 $ 4,879 $5,897 $ 6,997
- --------------------------------------------------------------------------------------------------
Net loan charge-offs to average loans 0.20% 1.68% 2.45% 2.14% 1.73%
Net loan charge-offs & OREO valuation
adjustments to average loans and OREO 0.36% 1.73% 2.57% 2.92% 3.16%
Allowance for loan losses to total loans,
net of deferred fees 1.77% 1.61% 2.29% 4.43% 1.91%
Allowance for loan losses
to nonaccrual loans 1798% 245% 90% 83% 75%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
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
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 $ 3,936 96% $ 3,172 93% $ 4,365 97% $ 7,913 98% $ 3,910 100%
Residential mortgage 41 1% 155 5% 90 2% 81 1% - -
Commercial business loans 123 3% 73 2% 45 1% 81 1% - -
- --------------------------------------------------------------------------------------------------------------------------------
Total $ 4,100 100% $ 3,400 100% $ 4,500 100% $ 8,075 100% $ 3,910 100%
- --------------------------------------------------------------------------------------------------------------------------------
</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:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Book % of Book % of Book % of
Balance Total Balance Total Balance Total
----------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SPONSORED AGENCY SECURITIES:
Available for sale $217,738 98% $52,534 63% - -
Held to maturity 4,998 2% 30,960 37% - -
- -------------------------------------------------------------------------------------------------------------------
Total investment securities $222,736 100% $83,494 100% - -
- -------------------------------------------------------------------------------------------------------------------
OTHER INTEREST EARNING ASSETS:
Interest earning deposits $ - - $ - - $ 300 1%
Repurchase agreements 426 100% 262 100% 53,749 99%
- -------------------------------------------------------------------------------------------------------------------
Total other interest-earning assets $ 426 100% $ 262 100% $54,049 100%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the maturity distribution of the
investment portfolio at December 31, 1997:
<PAGE>
<TABLE>
<CAPTION>
AMORTIZED FAIR AVERAGE
HELD-TO-MATURITY COST VALUE YIELD LIFE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due from five to ten years $ 4,998 $ 5,055 7.60% 8.9 years
AVAILABLE-FOR-SALE
Due from one to five years 5,000 5,031 6.40% 3.9 years
Due from five to ten years 210,710 212,707 7.00% 8.6 years
- -----------------------------------------------------------------------------------
215,710 217,738 7.00% 8.5 years
- -----------------------------------------------------------------------------------
Total investment securities $220,708 $222,793 7.00% 8.5 years
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</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 primary source of funds is FDIC-insured deposits,
raised through its subsidiary Pacific Crest Bank which consists of limited
draft money market checking accounts, money market savings accounts, and term
certificates of deposit. At December 31, 1997, the Company had total deposits
of $348.2 million with 9,801 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's deposit products are limited to limited draft money market checking
accounts, money market savings accounts and term certificates of deposit. The
Company offers term certificates of deposits with 30-day to five-year
maturities. The Company attracts depositors by offering rates that are
generally higher than rates offered by independent commercial banks and
savings and loans and 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>
1997 1996 1995
-------------------------------------------------------------------
(DOLLARS IN THOUSANDS) Average Rate Average Rate Average Rate
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DEPOSIT CATEGORIES:
Money market savings $181,303 5.30% $176,742 5.19% $141,981 5.55%
Certificates of deposit 110,829 5.84% 62,747 5.51% 76,600 5.48%
Money market checking 18,054 4.94% 16,717 4.92% - -
- --------------------------------------------------------------------------------------------------
Total deposits $310,186 5.47% $256,206 5.25% $218,581 5.52%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
The remaining maturities of the certificates of deposit at December
31, 1997 are set forth in the following table:
<TABLE>
<CAPTION>
3 MONTHS OVER 3 TO OVER 6 TO OVER
(DOLLARS IN THOUSANDS) OR LESS 6 MONTHS 12 MONTHS 12 MONTHS TOTAL
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000 $28,128 $37,212 $40,798 $6,383 $112,521
Certificates of deposit of $100,000 or more 4,224 4,865 8,422 1,180 18,691
- ----------------------------------------------------------------------------------------------------------------
Total certificates of deposit $32,352 $42,077 $49,220 $7,563 $131,212
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
REVERSE REPURCHASE AGREEMENTS
A secondary source of funds for the Company consists of
short-term borrowings in the form of reverse repurchase agreements. The
Company has set up short-term borrowing lines with five brokers/dealers
aggregating $105 million in availability. The repayment terms on this
short-term debt range from one day up to three months. The interest rate paid
can vary daily, but typically approximates the federal funds rate plus 25
basis points. These borrowings are secured by pledging specific amounts of
specific securities of the Company's U.S. government sponsored agency
securities portfolio. The Company utilizes these borrowing lines to cover
short-term financing needs for loan fundings or investment security
purchases. The balance outstanding as of December 31, 1997 was $21.5 million.
The Company had $10.0 million in reverse repurchase agreements outstanding at
December 31, 1996. The Company had no reverse repurchase agreements
outstanding at December 31, 1995. At December 31, 1996 and 1995, the Company
had $50.0 million in borrowing availability with two broker dealers.
The Company also maintains a line of credit with the Federal
Reserve Bank with approximately $4.1 million available for borrowing at
December 31, 1997. At December 31, 1997 there were no borrowings under this
line of credit. This agreement is secured by approximately $8.1 million in
commercial real estate loans at December 31, 1997.
TERM BORROWINGS
A third source of funds for the Company consists of medium term
borrowings. In 1997, the Company arranged for a term borrowing line of $85
million through a broker dealer. In 1997, the Company had borrowed $45
million against this line. This debt
<PAGE>
is secured by pledging specific amounts of specific securities of the
Company's U.S. government sponsored agency securities portfolio. These fixed
rate secured borrowings have a five-year maturity with a two-year, one time,
call option. The call options are exercisable by the lender (broker/dealer),
at the end of the second year as indicated within the table. The Company had
no term borrowing credit lines available to it as of December 31, 1996 and
1995. The following table describes the attributes of the Company's term
borrowing obligations as of December 31, 1997:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) CALL DATE MATURITY DATE AMOUNT
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
5.82% five-year term borrowings 09/99 09/02 $25,000
5.78% five-year term borrowings 10/99 10/02 10,000
5.63% five-year term borrowings 12/99 12/02 10,000
- ------------------------------------------------------------------------------------
Total term borrowings $45,000
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
On January 7, 1998, the Company borrowed an additional $10 million
at a rate of 5.48% with a one-time call date of January 2000, and a maturity
date of January 2003.
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITY OF SUBSIDIARY OF
TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES
On September 22, 1997, PCC Capital I, ("PCC Capital"), a wholly
owned subsidiary of Pacific Crest, issued $17.25 million of 9.375% Cumulative
Trust Preferred Securities, (the "Trust Preferred Securities"). PCC Capital
invested the gross proceeds of $17.25 million from the offering in the junior
subordinated debentures, issued by Pacific Crest. The junior subordinated
debentures were issued concurrent with the issuance of the Trust Preferred
Securities. The interest on the junior subordinated debentures will be paid
by Pacific Crest to PCC Capital and represents the sole revenues of PCC
Capital and the sole source of dividend distributions, to the holders of the
Trust Preferred Securities. The undertakings of Pacific Crest with regard to
this public offering constitute a full and unconditional guarantee by Pacific
Crest, of PCC Capital's obligations under the Trust Preferred Securities.
Pacific Crest has the right, assuming no default has occurred, to defer
payments of interest on the junior subordinated debentures at any time for a
period not to exceed 20 consecutive quarters. The Trust Preferred Securities
will mature on October 1, 2027, but can be called after October 1, 2002 by
PCC Capital.
BUSINESS CONSIDERATIONS AND CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS AND STOCK PRICE
Certain matters discussed in this Annual Report on Form 10-K may
constitute forward-looking statements under Section 27A of the Securities Act
and Section 21E of the Securities Exchange Act. These statements may involve
risks and uncertainties. These forward-looking statements relate to, among other
things, expectations of the business environment in which the Company operates
in, projections of future performance, perceived opportunities in the market and
statements regarding the Company's mission and vision. The Company's actual
results, performance, or achievements may differ significantly from the results,
performance, or achievements expressed or implied in such forward-looking
statements. The following is a summary of some of the important factors that
could affect the Company's future results of operations and/or stock price, and
should be considered carefully.
(1) ECONOMIC CONDITIONS. The Company's results are strongly influenced by
general economic conditions in its market area. Accordingly, a deterioration
in these conditions could have a material adverse impact on the quality of
the Company's loan portfolio and the demand for its products and services.
In particular, changes in economic conditions in the real estate industry may
affect its performance. See "Item 1. Business - Economic Conditions,
Government Policies, Legislation, and Regulation."
(2) INTEREST RATES. The Company anticipates that interest rate levels will
remain generally constant in 1998, but if interest rates vary substantially
from present levels, the Company's results may differ materially from the
results currently anticipated. See "Item 1. Business - Economic Conditions,
Government Policies, Legislation, and Regulation."
(3) GOVERNMENT REGULATION AND MONETARY POLICY. All forward-looking
statements presume a continuation of the existing regulatory environment and
United States government monetary policies. The banking industry is subject
to extensive federal and state regulations, and significant new laws or
changes in, or repeals of, existing laws may cause results to differ
materially. See "Item 1. Business - Economic Conditions, Government
Policies, Legislation, and Regulation," and "- Supervision and Regulation."
(4) COMPETITION. The Company competes with numerous other domestic and
foreign financial institutions and non-depository financial intermediaries.
Results of the Company may differ if circumstances affecting the nature or
level of competition change, such as the merger of competing financial
institutions or the acquisition of California institutions by out-of-state
companies. See "Item 1. Business - Competition."
(5) CREDIT QUALITY. A significant source of risk arises from the possibility
that losses will be sustained because borrowers, 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 its management believes are appropriate to minimize this risk by
assessing the likelihood of nonperformance, tracking loan performance and
diversifying credit portfolios, but such policies and procedures may not
prevent unexpected losses that could materially adversely affect the
Company's results. See "Item 1. Business - Loan Origination and Underwriting."
(6) OTHER RISKS. From time to time, the Company details other risks with
respect to its businesses and/or its financial results in its filings with
the SEC, the FDIC and the DFI respectively.
The Company 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.
<PAGE>
ITEM 2. PROPERTIES.
The Company's principal executive offices are located at 30343
Canwood Street, Agoura Hills, California 91301. Pacific Crest Bank conducts
its deposit operations through three branch offices located in Beverly Hills,
Encino and San Diego, California, and conducts its lending operations through
the above three branch offices in addition to its loan production offices,
located in Agoura Hills, Orange County, Oakland and Sacramento, California,
Portland, Oregon and Seattle, Washington. The Company leases all of its
offices. Information with respect to the Company's principal executive and
branch offices is as follows:
<TABLE>
<CAPTION>
FLOOR SPACE IN ANNUAL LEASE EXPIRATION
LOCATION SQUARE FEET RENT DATE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PACIFIC CREST BANK:
Agoura Hills, California (1) 16,361 $266,000 1999
Beverly Hills, California 3,104 164,000 2000
Encino, California 3,310 66,400 1998
San Diego, California 4,505 175,000 2000
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Office also used by Pacific Crest.
The loan production offices currently leased by the Company are
generally between 200 and 600 square feet and are leased either on a
month-to-month basis or for a lease commitment term not to exceed one year.
The annual rent expense for a loan production office generally does not
exceed $20,000.
ITEM 3. LEGAL PROCEEDINGS.
There is one lawsuit and claim pending against the Company which
management considers incidental to normal operations. Management, after review,
including consultation with counsel, believes that any ultimate liability which
could arise from this lawsuit and claim, 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.
ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT.
The following individuals are executive officers of the Company as
of December 31, 1997. 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 WEHRLE - CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF PACIFIC
CREST - AGE 55
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 Bank since 1984. Mr.
Wehrle served as Executive Vice President of the Foothill Group, Inc.
from 1980 to 1993.
GONZALO FERNANDEZ - EXECUTIVE VICE PRESIDENT OF PACIFIC CREST - AGE 55
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 Bank since June 20, 1994. From May 1988 to
June 1994, he served as Senior Vice President of City National Bank.
LYLE C. LODWICK - EXECUTIVE VICE PRESIDENT OF PACIFIC CREST - AGE 44
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 Bank since 1992 and, prior to that, served as
Senior Vice President of Pacific Crest Bank from 1988 to 1992.
BARRY L. OTELSBERG - EXECUTIVE VICE PRESIDENT OF PACIFIC CREST - AGE 47
Mr. Otelsberg has served as Executive Vice President of Pacific Crest
since September 10, 1993. Mr. Otelsberg has served as Executive Vice
President of Pacific Crest Bank since 1985.
ROBERT J. DENNEN - VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY OF
PACIFIC CREST - AGE 45
Mr. Dennen has served as Vice President, Chief Financial Officer and
Secretary of Pacific Crest since September 10, 1993. Mr. Dennen has
served as Vice President and Chief Financial Officer of Pacific Crest
Bank since 1993 and, prior to that, served as Vice President and
Controller/Treasurer of Pacific Crest Bank from 1986 to 1993.
JOSEPH FINCI - SENIOR VICE PRESIDENT OF PACIFIC CREST - AGE 40
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 Bank since November 1, 1995 and, prior to that, served as
Vice President of Pacific Crest Bank from 1990 to 1995.
CAROLYN REINHART - SENIOR VICE PRESIDENT OF PACIFIC CREST - AGE 38
Ms. Reinhart has served as Senior Vice President of Pacific Crest since
January 1, 1998 and, prior to that, served as Vice President of Pacific
Crest from 1993 to 1997. Ms. Reinhart has served as Senior Vice
President of Pacific Crest Bank since January 1, 1998 and, prior to
that, served as Vice President of Pacific Crest Bank from 1989 to 1997.
<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, 1996. There were
approximately 1,500 beneficial owners of the Common Stock as of March 16,
1998.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- ------------------------- ------------ ------------
<S> <C> <C>
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
3/31/97 $13.75 $11.00
6/30/97 $13.50 $12.00
9/30/97 $17.75 $12.75
12/31/97 $18.75 $15.63
</TABLE>
The Company has never paid a cash dividend on its Common Stock
and does not anticipate paying dividends during 1998. 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 net 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 Bank to pay dividends on
its capital stock to the Company. The ability of Pacific Crest Bank 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 nine securities dealers who currently make
a market in the Common Stock: Friedman, Billings, Ramsey & Co. Inc.; Sandler
O'Neill & Partners; Herzog, Heine, Geduld, Inc.; Fahestock & Co., Inc.; Hill,
Thompson, Magid & Co.; Torrey Pines Securities, Inc.; Capital Resources,
Inc.; William R. Hough & Co.; and Sutro & Co., Inc.
RECENT SALES OF UNREGISTERED SECURITIES
None.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following summary consolidated financial information of the
Company and its subsidiaries as of and for the years ended December 31, 1997,
1996, 1995, 1994 and 1993 has been derived from the Company's audited
consolidated financial statements. The summary consolidated financial
information should be read in conjunction with the Company's consolidated
financial statements and related notes incorporated herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 2,392 $ 2,834 $ 56,167 $ 6,204 $ 26,628
Investment securities 222,736 83,494 - 55,248 898
Total loans, net of deferred fees 231,133 211,095 196,778 182,461 204,406
Allowance for loan losses 4,100 3,400 4,500 8,075 3,910
Other real estate owned 2,064 3,469 4,355 5,724 9,092
Other assets 10,084 6,593 6,309 6,958 5,329
Total assets 464,309 304,085 259,109 248,520 242,443
- ---------------------------------------------------------------------------------------------------------
Total deposits 348,171 266,695 234,510 226,350 213,162
Reverse repurchase agreements 21,500 10,000 - - -
Term borrowings 45,000 - - - -
Trust preferred securities 17,250 - - - -
Shareholders' equity 28,808 24,468 21,952 19,628 27,179
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
Total interest income $ 35,346 $ 26,567 $ 23,799 $ 21,114 $ 21,583
Total interest expense 19,611 13,500 12,084 9,358 9,365
- ---------------------------------------------------------------------------------------------------------
Net interest income 15,735 13,067 11,715 11,756 12,218
Provision for loan losses 1,135 1,917 960 8,343 4,398
- ---------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 14,600 11,150 10,755 3,413 7,820
Noninterest income:
Gain (loss) on investment securities - 413 851 (780) (277)
Other non interest income (1) 748 1,068 470 404 375
- ---------------------------------------------------------------------------------------------------------
Total noninterest income 748 1,481 1,321 (376) 98
Noninterest expense:
Valuation adjustment to OREO 370 155 344 1,719 3,314
OREO expenses 114 150 203 850 1,166
Other general & administrative expenses 8,780 7,818 8,362 8,841 6,794
- ---------------------------------------------------------------------------------------------------------
Total noninterest expense 9,264 8,123 8,909 11,410 11,274
- ---------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and
cumulative effect of accounting change 6,084 4,508 3,167 (8,373) (3,356)
Income tax provision (benefit) 2,377 1,505 (77) (1,914) (1,303)
Cumulative effect of accounting change (2) - - - - (560)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) 3,707 3,003 3,244 (6,459) (1,493)
- ---------------------------------------------------------------------------------------------------------
Preferred dividends declared - - (920) (1,104) -
Net income (loss) applicable to
common stock $ 3,707 $ 3,003 $ 2,324 $ (7,563) $ (1,493)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL RATIOS: (3)
Return on average total assets (4) 0.97% 1.06% 1.34% (2.56)% (0.62)%
Return on average shareholders' equity (5) 14.06% 12.96% 16.02% (24.73)% (8.91)%
Net interest rate spread (6) 3.89% 4.41% 4.60% 4.49% 5.18%
Net interest margin (7) 4.20% 4.76% 4.98% 4.82% 5.33%
Ratio of other general & administrative
expenses to average total assets 2.29% 2.77% 3.46% 3.50% 2.84%
Nonperforming assets to total assets at
end of period (8) 0.49% 1.60% 3.60% 6.24% 6.26%
Net loan charge-offs to average loans 0.20% 1.68% 2.45% 2.14% 1.73%
Net loan charge-offs & OREO valuation
adjustments to average loans and OREO 0.36% 1.73% 2.57% 2.92% 3.16%
Allowance for loan losses to total loans,
net of deferred fees 1.77% 1.61% 2.29% 4.43% 1.91%
Allowance for loan losses and OREO valuation
allowance to nonperforming assets 165.70% 70.58% 52.68% 61.72% 33.60%
Allowance for loans losses to nonaccrual loans 1798.20% 245.30% 90.30% 82.60% 75.40%
Total average shareholders' equity to total
average assets 6.89% 8.20% 8.38% 10.34% 7.01%
- -------------------------------------------------------------------------------------------------------
PER SHARE DATA (9) (IN THOUSANDS):
Weighted average basic common shares
outstanding 2,936 2,947 1,173 1,102 1,099
Weighted average diluted common shares
outstanding (10) 3,070 3,004 2,954 2,660 2,657
- -------------------------------------------------------------------------------------------------------
Book value per common share $9.97 $8.35 $7.43 $7.38 $10.23
Diluted earnings (loss) per common share $1.21 $1.00 $1.10 ($6.88) -
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</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) Pacific Crest's performance ratios are based on actual daily averages.
(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) 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
Bank 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.
(10) 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.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Pacific Crest Capital, Inc. (the "Company"), a Delaware
corporation, is a financial services holding company and holds 100% of the
stock of Pacific Crest Bank, formerly known as Pacific Crest Investment and
Loan, and 100% of the common stock of PCC Capital I ("PCC Capital").
The consolidated financial statements and financial data as of
December 31, 1997, 1996, 1995 and 1994 include the Company and its wholly
owned subsidiaries. The balance sheets as of December 31, 1993 and the
statement of operations and cash flows for the year ended December 31, 1993
represent the financial condition and results of operations for Pacific Crest
Bank. For convenience, these financial statements are referred to as the
financial statements of the Company (Pacific Crest).
The following discussion should be read in conjunction with the
information under "Item 6. Selected Financial Data" and the Company's
consolidated financial statements and related notes contained elsewhere
herein. Certain statements under this caption constitute "forward-looking
statements" under Section 27A of the Securities Act and Section 21E of the
Exchange Act which involve risks and uncertainties. The Company's actual
results may differ significantly from the results discussed in these
forward-looking statements. Factors that might cause such a difference,
include but are not limited to, credit quality, economic conditions,
competition in the geographic and business areas in which the Company
conducts its operations, fluctuations in interest rates and government
regulation. For additional information concerning these factors, see "Item 1.
Business - Business Considerations and Certain Factors that May Affect Future
Results of Operations and Stock Price."
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
EARNINGS PERFORMANCE
The Company's pretax income for the year ended December 31, 1997
was $6.1 million, compared to $4.5 million for the same period in 1996. The
increase of $1.6 million, or 35.0%, was due to several factors. These factors
include a $2.7 million increase in net interest income and a $782,000 decline
in the provision for loan losses. These factors were partially offset by a
decrease in noninterest income of $733,000 and an increase in noninterest
expense of $1.1 million.
NET INTEREST INCOME
Net interest income increased by $2.7 million, or 20.4%, to $15.7
million for the year ended December 31, 1997 as compared to the same period
in 1996. This was primarily due to the increase in the Company's average
interest earning assets of $99.8 million during the period ended December 31,
1997.
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 a portion of the Company's 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. Changes in volume and changes in rates also affect net interest
income. 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 have been included in the table as loans, having a zero
yield.
<PAGE>
AVERAGE BALANCES, INTEREST INCOME AND EXPENSE, YIELDS AND RATES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------------------
1997 1996 1995
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) $ 222,833 $ 24,475 10.98% $ 190,856 $ 21,384 11.20% $ 185,135 $ 20,773 11.22%
Repurchase agreements 2,056 112 5.45% 42,547 2,255 5.30% 18,325 1,065 5.81%
Certificates of deposit - - - 286 15 5.24% 331 16 4.83%
U.S. government agency securities
Available for sale 114,635 8,045 7.02% 23,874 1,632 6.84% - - -
Held to maturity 35,032 2,714 7.75% 17,173 1,281 7.46% 31,291 1,945 6.22%
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets (1) 374,556 35,346 9.44% 274,736 26,567 9.67% 235,082 23,799 10.12%
Other real-estate owned 2,355 3,938 4,607
Other non-interest earning assets 9,746 7,980 7,623
Less allowance for loan (1) losses 3,744 4,013 5,753
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 382,913 $ 282,641 $ 241,559
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES:
Savings accounts 181,303 9,603 5.30% 176,742 9,179 5.19% 141,981 7,873 5.55%
Certificates of deposit 110,829 6,467 5.84% 62,747 3,456 5.51% 76,600 4,196 5.48%
Money market checking 18,054 892 4.94% 16,717 822 4.92% - - -
Reverse repurchase agreements 28,493 1,638 5.75% 671 43 6.41% 238 15 6.30%
Term borrowings 9,685 562 5.80% - - - - - -
Trust preferred securities 4,789 449 9.38% - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 353,153 19,611 5.55% 256,877 13,500 5.26% 218,819 12,084 5.52%
Non interest-bearing liabilities 3,393 2,597 2,495
Shareholders' equity 26,367 23,167 20,245
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 382,913 $ 282,641 $ 241,559
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 15,735 $ 13,067 $ 11,715
Net interest rate spread (2) 3.89% 4.41% 4.60%
Net interest-earning assets $ 21,403 $ 17,859 $ 16,263
Net interest margin (3) 4.20% 4.76% 4.98%
Average interest-earning assets to
average interest-bearing liabilities 106.1% 107.0% 107.4%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated net of deferred loan fees. The amount of interest foregone on
nonaccrual loans was $249,000, $547,000 and $803,000 for 1997, 1996 and
1995, respectively.
(3) 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
--------------------------------------------------------------------
1997 COMPARED TO 1996 1996 COMPARED TO 1995
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
--------------------------------------------------------------------
(DOLLARS IN THOUSANDS) VOLUME RATE NET CHANGE VOLUME RATE NET CHANGE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans (1) $ 3,518 $ (427) $ 3,091 $ 642 $ (31) $ 611
Repurchase agreements (2,205) 62 (2,143) 1,407 (217) 1,190
Certificates of deposit (8) (7) (15) (2) 1 (1)
U.S. government agency securities
Available for sale 6,370 43 6,413 1,632 - 1,632
Held to maturity 1,382 51 1,433 (878) 214 (664)
- ------------------------------------------------------------------------ ----------------------------------
Total change in interest income 9,057 (278) 8,779 2,801 (33) 2,768
- ------------------------------------------------------------------------------------------------------------
CHANGES IN INTEREST EXPENSE:
Savings accounts 240 184 424 1,929 (623) 1,306
Certificates of deposit 2,796 215 3,011 (759) 19 (740)
Money market checking 66 4 70 822 - 822
Reverse repurchase agreements 1,600 (5) 1,595 27 1 28
Term borrowings 562 - 562 - - -
Trust preferred securities 449 - 449 - - -
- --------------------------------------------------------------------------------------------------------------
Total change in interest expense 5,713 398 6,111 2,019 (603) 1,416
- --------------------------------------------------------------------------------------------------------------
Net change in net interest income $ 3,344 $ (676) $ 2,668 $ 782 $ 570 $ 1,352
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include interest income that would have been earned on nonaccrual
loans.
NET INTEREST INCOME (CONTINUED)
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 years ended December 31, 1997 and 1996
was 3.89% and 4.41%, respectively. The decline in the spread between the 1997
and 1996 periods was the result of both an increase in the rates paid on
interest-bearing liabilities and a decrease on the yields earned on
interest-earning assets.
The net interest margin is defined as the difference between
interest income and interest expense divided by the average interest-earning
assets. The net interest margin for the years ended December 31, 1997 and
1996, was 4.20% and 4.76%, respectively. The decline in the margin was 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 borrowings, including the issuance of the trust preferred securities
which on average, cost the Company more than deposits.
The following table sets forth the composition of average
interest-earning assets and average interest-bearing liabilities by category
and by the percentage of each category to the total for the years ended
December 31, 1997 and 1996, including the change in average balance and
yield/rate between these respective periods:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996 Change
----------------------------------------------------------------------------------------
% Avg. % Avg.
Average Compo- Yield/ Average Compo- Yield/ Yield/
(DOLLARS IN THOUSANDS) Balance sition Rate Balance sition Rate $ % Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans $ 222,833 59.5% 10.98% $ 190,856 69.5% 11.20% $ 31,977 -10.0% -0.22%
Repurchase agreements 2,056 0.5% 5.45% 42,547 15.5% 5.30% (40,491) -15.0% 0.15%
Certificates of deposits - - - 286 0.1% 5.24% (286) -0.1% -5.24%
U.S. government agency securities 149,667 40.0% 7.19% 41,047 14.9% 7.10% 108,620 25.1% 0.09%
- -------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 374,556 100.0% 9.44% 274,736 100.0% 9.67% 99,820 0.0% -0.23%
- -------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
Deposits 310,186 87.8% 5.47% 256,206 99.7% 5.25% 53,980 -11.9% 0.22%
Borrowings 38,178 10.8% 5.76% 671 0.3% 6.41% 37,507 10.5% -0.65%
Trust preferred securities 4,789 1.4% 9.38% - - - 4,789 1.4% 9.38%
- -------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities $ 353,153 100.0% 5.55% $ 256,877 100.0% 5.26% $ 96,276 0.0% 0.29%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL INTEREST INCOME
Total interest income increased by $8.8 million, or 33.0%, to
$35.3 million for the year ended December 31, 1997, compared to the same
period in 1996. This increase was primarily due to an increase in the average
balance of interest-earning assets of $99.8 million to $374.6 million, a
36.3% increase, for the year ended December 31, 1997, over the comparable
period in 1996. The growth in interest-earning assets has been concentrated
in U.S. government sponsored agency securities and commercial loans.
Partially offsetting these increases, the overall yields on the Company's
interest-earning assets decreased by 23 basis points for the year ended
December 31, 1997 from the comparable period in 1996. This decline is due to
the change in the composition of
<PAGE>
interest-earning assets which is detailed above, and the reduced yields
earned on commercial loans. The primary reason for the decline in the overall
loan portfolio yield is due to lower yielding loans being added to the loan
portfolio during 1997, reflecting the increased competitive rate pressure in
the marketplace. In addition, higher yielding loans have been paying off
during 1997, adding to the overall yield decline.
The substantial increase in the average balances of the Company's
U.S. government sponsored agency securities for the year ended December 31,
1997, reflects the Company's effort to optimize earnings by more effectively
leveraging capital with the purchase of these securities. The purchase of
U.S. government agency securities reflects a shift by the Company to maintain
lower balances within the lower yielding repurchase agreements portfolio,
while reinvesting in the higher yielding U.S. government agency securities
portfolio.
TOTAL INTEREST EXPENSE
Total interest expense increased by $6.1 million, or 45.3%, to
$19.6 million for the year ended December 31, 1997, compared to the same
period of 1996. The increase in interest expense resulted from an increase in
the average balance of interest-bearing liabilities of $96.3 million to
$353.2 million, a 37.5% increase, for the year ended December 31, 1997, as
compared to the same period of 1996. Average interest-bearing liabilities
continue to rise to fund the growth of the Company. The growth has been
primarily in certificates of deposit, and savings accounts, but also includes
growth in reverse repurchase agreements, term borrowings, and trust preferred
securities. 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 5.26% to 5.55%, or 29 basis
points, during the year ended December 31, 1997, compared to the same period
in 1996. The increases in the rates paid on the Company's interest-bearing
liabilities reflect the change in the composition of interest bearing
liabilities as detailed above, and the change in market interest rates
between the 1997 and 1996 periods. The change in the composition of the
interest-bearing liabilities for the year ended December 31, 1997, reflects a
shift in the Company's strategy to fund a portion of the growth in assets
from sources other than deposit liabilities. This shift is reflected in the
growth in reverse repurchase agreements, term borrowings, and the issuance of
the trust preferred securities.
PROVISION FOR LOAN LOSSES
During 1997, the Company decreased its provision for loan losses
to $1.1 million from $1.9 million for 1996. The decrease of $782,000 between
1997 and 1996 in the loan loss provision primarily 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 the Company's entire loan portfolio. The ratio of
nonaccrual loans to total loans, net of deferred loan fees was 0.10% at
December 31, 1997 and 0.66% at December 31, 1996. The ratio of the allowance
for loan losses to nonaccrual loans increased to 1798% at December 31, 1997
from 245% at December 31, 1996.
NONINTEREST INCOME
Noninterest income for the year ended December 31, 1997 decreased
by $733,000, or 49.5%, over the same period in 1996. This decrease is
primarily due to several nonrecurring income items that occurred in 1996.
During 1996, the Company recorded a $413,000 recovery on a corporate debt
security that had been written off in 1994. Additionally, 1996 noninterest
income included a $264,000 gain recorded on the sale of $28.2 million of the
Company's San Francisco branch deposits. A further decrease occurred in 1997
as a result of other noninterest income declining by $272,000, or 33.8%, due
to decreased late fees, loan prepayment fees, and rents received on OREO
properties. These decreases were partially offset by a $216,000 increase in
the gain on sale of OREO properties during 1997, compared to 1996.
NONINTEREST EXPENSE
The following table reflects the major components of noninterest
expense for the years ended December 31, 1997, 1996 and 1995 and the dollar
and percentage change between the periods of 1997/1996 and 1996/1995.
<TABLE>
<CAPTION>
NONINTEREST EXPENSE ANALYSIS YEAR ENDED DECEMBER 31 $ CHANGE % CHANGE +/- $ CHANGE % CHANGE +/-
- ---------------------------------------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS 1997 1996 1995 1997/1996 1997/1996 1996/1995 1996/1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Valuation adjustments to other real estate owned $ 370 $ 155 $ 344 $ 215 138.7% $ (189) -54.9%
Other real estate owned expense 114 150 203 (36) -24.0% (53) -26.1%
Salaries and employee benefits 5,009 4,664 4,147 345 7.4% 517 12.5%
Net occupancy expense 1,658 1,534 1,470 124 8.1% 64 4.4%
FDIC insurance premiums 73 72 337 1 1.4% (265) -78.6%
Credit and collections expenses 127 94 485 33 35.1% (391) -80.6%
Communication and data processing 659 551 467 108 19.6% 84 18.0%
Other expenses 1,254 903 1,456 351 38.9% (553) -38.0%
- --------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense $ 9,264 $ 8,123 $ 8,909 $ 1,141 14.0% $ (786) -8.8%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Noninterest expense for the year ended December 31, 1997
increased by $1.1 million or 14.1%, compared to the same period in 1996.
The valuation adjustment to OREO for the year December 31, 1997,
increased by $215,000, compared to the same period in 1996. The increase was
the result of the Company recording partial write downs on two OREO
properties during 1997.
<PAGE>
Salaries and employee benefits for the year ended December 31, 1997
increased by $345,000 compared to the same period in 1996. This increase was
primarily the result of marketing and administrative bonus accruals recorded
during 1997, which exceeded those of 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. The Company
hired additional loan marketing staff during 1997, increasing its marketing
representative count from five employees at the beginning of 1996 to eight at
year end 1997.
Net occupancy expense increased $124,000 during 1997, as a result of
the opening of loan production offices in Portland, Oregon and Orange County,
California.
Communication and data processing expense for the year December 31,
1997, increased by $108,000, compared to the same period 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 for 1997.
Other expenses for the year ended December 31, 1997, increased by
$351,000 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
The Company's income tax provision for the year ended December 31,
1997 was $2.4 million producing an effective tax rate of 39.1%. The difference
between the Company's statutory tax rate of 41.1% and its effective tax rate for
the year ended December 31, 1997 was due to both the reversal of a portion of
the Company's tax valuation reserve of approximately $386,000 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 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.
<TABLE>
<CAPTION>
FINANCIAL CONDITION
BALANCE SHEET ANALYSIS
YEAR ENDED DECEMBER 31 $ CHANGE % CHANGE +/-
----------------------------------------------------------------------
----------------------------------------------------------------------
1997 1996 1997/1996 1997/1996
----------------------------------------------------------------------
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,392 $ 2,834 $ (442) -15.60%
U.S. government sponsored agency securities 222,736 83,494 139,242 166.77%
Net loans 227,033 207,695 19,338 9.31%
Other assets 12,148 10,062 2,086 20.73%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 464,309 304,085 160,224 52.69%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Total deposits 348,171 266,695 81,476 30.55%
Reverse repurchase agreements/term borrowings 66,500 10,000 56,500 565.00%
Trust preferred securities 17,250 - 17,250 100.00%
Other liabilities 3,580 2,922 658 22.52%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 435,501 279,617 155,884 55.75%
SHAREHOLDERS' EQUITY 28,808 24,468 4,340 17.74%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 464,309 $ 304,085 $ 160,224 52.69%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total assets increased by $160.2 million for the year ended December
31, 1997, compared to 1996. Changes in assets, liabilities, and shareholders'
equity are detailed above, and significant changes are described below.
The increase in the balance of U.S. government sponsored agency
securities for the year ended December 31, 1997 reflects the Company's effort to
optimize earnings by more effectively leveraging capital with the purchase of
these securities. The increase in net loans primarily reflects new loan
originations of $50.7 million, reduced by $28.6 million in loan payoffs, loan
transfers to OREO, and loan chargeoffs. The increase in other assets is
primarily due to the increase in accrued interest receivable for the year ended
December 31, 1997, over the comparable period in 1996. This increase is due to
the larger portfolio of U.S. government sponsored agency securities and net
loans.
Total liabilities have increased in response to the need to fund the
growth in assets for the year ended December 31, 1997, compared to 1996. The
growth in deposits included $42.5 million in savings deposits, and $42.4 million
in certificates of deposit, partially offset by a $3.4 million decrease in money
market checking. Borrowings have also grown with a $45.0 million increase in
term borrowings and an $11.5 million increase in reverse repurchase agreements.
During the third quarter of 1997, the Company also raised $17.25 million in
trust preferred securities. The net proceeds were primarily used by the Company
for general corporate purposes and for a $5.0 million capital infusion into the
Company's wholly owned subsidiary, Pacific Crest Bank.
Shareholders' equity has risen for the year ended December 31, 1997,
primarily due to the current year net income of $3.7 million, and the current
year change in the unrealized gain on securities available for sale component of
equity of $1.4 million.
<PAGE>
NONPERFORMING ASSETS
Total nonperforming assets declined 52.7% during 1997, to $2.3
million, or 0.49% of total assets at December 31, 1997, compared with $4.8
million, or 1.60% of total assets at December 31, 1996, due to decreases in the
level of both nonaccrual loans and OREO. New nonaccrual loan additions during
1997 decreased 28.8% to $3.3 million. Loan sales and loans transferred to OREO
were $3.7 million, resulting in a balance of $228,000 of nonaccrual loans at
December 31, 1997. In addition, loan chargeoffs decreased $2.98 million during
1997. At December 31, 1997, nonaccrual loans of $228,000 consisted of one loan
secured by commercial real estate. OREO at December 31, 1997 consisted of four
properties. In addition, the Company had one loan in the aggregate principal
amount of $899,000 that was categorized as a "troubled debt restructuring,"
which was current in accordance with its restructured terms, and three loans
with aggregate outstanding loan balances of $3.2 million which management
considered to be potential problem loans due to possible credit problems of the
borrowers or cash flows of the properties securing the loans. The reduction in
nonperforming assets was largely due to continued emphasis by management on
problem credits, as well as continued favorable economic conditions in the
Company's market areas.
LIQUIDITY
The Company's primary sources of funds are deposits, borrowings and
payments of principal and interest on loans and investment securities. 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 and fixed rate commercial real
estate loans, the purchase of U.S. government sponsored agency securities, and
to a lesser extent, the purchase of short-term repurchase agreements. The
purchase of U.S. government sponsored agency securities and short-term
repurchase agreements 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, interest-bearing deposit growth,
borrowing of reverse repurchase agreements, term borrowings and long term
borrowings through the issue of trust preferred securities.
The Company's most liquid assets are cash, cash in banks, and
repurchase agreements. 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 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, 1997, the Company had $21.5 million outstanding in short-term
reverse repurchase borrowings against a $105.0 million short-term borrowing line
with five broker dealers, which left $83.5 million in unused short-term
borrowing availability against the U.S. government sponsored agency securities
portfolio. In 1997, the Company arranged for a term borrowing line of $85
million through a broker dealer. In 1997, the Company had borrowed $45 million
from this broker dealer. This debt is secured by pledging specific amounts of
specific securities of the Company's U.S. government sponsored agency securities
portfolio. These secured borrowings have a five-year maturity with a two-year,
one time, call option. On January 7, 1998, the Company borrowed an additional
$10 million against this line. This is reflective of management's intent to
finance a portion of the Company's operations, using instruments other than
deposits. Additionally, the Company had a borrowing line of $4.1 million with
the Federal Reserve Bank, of which there was no borrowings against it at
December 31, 1997. At December 31, 1997, the Company had outstanding legal
commitments to fund adjustable rate loans of $603,000.
There has been a decrease in the Company's holdings of cash and cash
equivalents during the period ended December 31, 1997 compared to 1996. Cash and
cash equivalents decreased by $442,000 to $2.4 million at December 31, 1997 from
$2.8 million at December 31, 1996. The Company raised $42.5 million in savings
accounts and $42.4 million in certificates of deposits during 1997 due, in part,
to changes in rates offered for such products. The Company experienced a small
runoff in its money market checking deposits of $3.4 million. The Company
originated and purchased $50.7 million in new commercial real estate and
business loans during 1997. Off-setting these originations, the Company
experienced $25.9 million in loan payoffs, and $2.1 million in loan transfers to
OREO, and $468,000 in loan chargeoffs during 1997.
The Company on an unconsolidated basis, (the "Parent Company") has
approximately $9.9 million in cash and investments less current liabilities and
short-term debt at December 31, 1997. These funds are necessary to pay future
operating expenses of the parent, service all outstanding debt, and possibly for
future capital infusions into Pacific Crest Bank. Without dividends from Pacific
Crest Bank, the parent must rely solely on existing cash investments and
borrowing.
Pacific Crest Bank'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, 1997, Pacific Crest
Bank had retained earnings of $3.6 million.
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 Bank is subject to certain leverage and risk-based
capital adequacy standards applicable to FDIC-insured institutions. 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 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%.
<PAGE>
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%.
At December 31, 1997, Pacific Crest Bank was in compliance with all
such requirements. The following table sets forth Pacific Crest Bank's
regulatory capital ratios as of the dates indicated:
<TABLE>
<CAPTION>
REGULATORY CAPITAL RATIOS AT DECEMBER 31, 1997 AT DECEMBER 31, 1996
----------------------------------- ------------------------------------
PACIFIC CREST BANK REQUIRED ACTUAL EXCESS REQUIRED ACTUAL EXCESS
- ------------------------------------------------------------------------------------------ --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leverage capital ratio 4.00% 7.53% 3.53% 4.00% 8.60% 4.60%
Tier 1 risk-based capital ratio 4.00% 12.02% 8.02% 4.00% 10.31% 6.31%
Total risk-based capital ratio 8.00% 13.27% 5.27% 8.00% 11.56% 3.56%
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</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, 1997, total interest-bearing liabilities maturing or
repricing within one year exceeded total interest-earning assets repricing or
maturing in the same period by $156.9 million, representing a negative
cumulative one-year gap of 33.8%. 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 generally provide for
quarterly repricing, the Company has written a significant amount of its loans
with interest rate floors. At December 31, 1997, 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 December 31, 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. For assets with call features, repricing is determined using the
estimated duration of the instrument. The Company has assumed, for purposes of
this table only, that its savings accounts, money market checking accounts, and
reverse repurchase agreements, which totaled $200.3 million, $16.7 million and
$21.5 million, respectively at December 31, 1997, reprice immediately. The
Company has assumed, for purposes of the static gap tables, that its investment
securities mature/reprice after the initial call date, but prior to its maturity
date, based upon a duration model that factors the probability of the securities
being called relative to changes in interest rates.
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 behind 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 by the Company using an interest rate shock analysis.
This analysis applies "change ratios" to assets and liabilities based upon
various assumptions regarding their repricing characteristics under various
hypothetical market interest rate fluctuations. 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 December 31, 1997, management's analysis
indicates that the Company's net interest income would decrease by no more than
10% if rates rose 200 basis points over one year.
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 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 $ 426 $ - $ - $ 426
Investment securities - held to maturity - 4,998 - 4,998
Investment securities - available for sale - 93,418 124,320 217,738
Total loans, gross 204,738 24,111 3,047 231,896
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- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 205,164 $ 122,527 $ 127,367 $ 455,058
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- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES SUBJECT TO INTEREST RATE ADJUSTMENT:
Certificates of deposit $ 123,650 $ 7,563 - $ 131,213
Savings accounts 200,255 - - 200,255
Money market checking 16,703 - - 16,703
Reverse repurchase agreements 21,500 - - 21,500
Term borrowings - 45,000 - 45,000
Trust preferred security - - 17,250 17,250
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 362,108 $ 52,563 $ 17,250 $ 431,921
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Excess (deficiency) of rate-sensitive
assets over rate-sensitive liabilities $ (156,944) $ 69,964 $ 110,117 $ 23,137
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative excess (deficiency) of
rate-sensitive assets over rate-sensitive liabilities $ (156,944) $ (86,980) $ 23,137 $ 23,137
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
As a percent of total assets (33.8%) (18.7%) 5.0% 5.0%
- -----------------------------------------------------------------------------------------------------------------------------------
</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.
YEAR 2000 COMPLIANCE
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the year 2000 issue
and has implemented a plan to resolve the issue. The year 2000 issue is the
result of computer programs being written using two, rather than four, digits to
define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 instead
of the year 2000. This could result in major system failure or miscalculations.
The Company presently believes that, with modifications to some of the existing
software and possible conversions to new software, the year 2000 problem will
not pose significant operational problems for the Company's computer systems as
so modified and converted. Even if such modifications and conversions are not
completed timely, the year 2000 problem is not expected to have a material
impact on the operations of the Company. The total cost estimated to connect the
new computer software systems, or to have existing systems modified, is not
expected to exceed $200,000 over the next two years.
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 may 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, 1996 AND 1995
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.
<PAGE>
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 ended December 31, 1996.
The table on page 19 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 for the years ended December 31, 1996 and 1995.
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 two 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 ended
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
ended 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 ended 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 ended 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 liabilities declined from 5.52% to 5.26%
or 26 basis points for the year ended 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 reverse repurchase agreements 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.
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.
<PAGE>
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.
NONINTEREST EXPENSE
The following noninterest expense analysis is based on the
noninterest expense table on page 21. This table provides a breakdown of the
major components of noninterest expense as well as the dollar and percentage
change for the years ended December 31, 1996 and 1995.
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.
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 intended 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 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 funded by the increase in 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 short-term borrowing lines with two
broker/dealers aggregating $50 million in availability. As of December 31, 1996,
reverse repurchase agreements totaled $10 million. The Company uses these lines
to cover short-term financing needs for loan fundings or security purchases.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
A derivative financial instrument includes futures, forwards,
interest rate swaps, option contracts, and other financial instruments with
similar characteristics. The Company currently does not enter into derivative
financial instruments. The Company's primary market risk is interest rate risk.
Interest rate risk is the potential of economic losses due to future interest
rate changes. These economic losses can be reflected as a loss of future net
interest income and/or a loss of current fair market values. The objective is to
measure the effect on net interest income and to adjust the balance sheet to
minimize the inherent risk while at the same time to maximize income. Management
realizes certain risks are inherent and that the goal is to identify and
minimize the risks. Pacific Crest's exposure to market risk is reviewed on a
regular basis by the Asset/Liability committee. Tools used by
<PAGE>
management include the standard GAP report. The Company has no market risk
sensitive instruments held for trading purposes. Management believes that the
Company's market risk is reasonable at this time.
See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Asset/Liability Management" and "Item
1. Business Investment Activities," and "- Source of Funds."
The table below provides information about the Company's balance
sheet non-derivative financial instruments that are sensitive to changes in
interest rates. For all outstanding financial instruments, the table presents
the principal outstanding balance at December 31, 1997 and the weighted average
interest yield/rate of the instruments by either the date the instrument can be
repriced for variable rate financial instruments or the expected maturity date
for fixed rate financial instruments.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
EXPECTED MATURITY DATES OR REPRICING DATE BY YEAR
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
FAIR
VALUE AT
(DOLLARS IN THOUSANDS) 1998 1999 2000 2001 2002 THEREAFTER TOTAL 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET FINANCIAL INSTRUMENTS:
ASSETS:
Repurchase agreements (1) $ 426 $ - $ - $ - $ - $ - $ 426 $ 426
average yield (variable rate) 5.45% - - - - - 5.45% -
Investment securities, held to maturity (2) - - - - 4,998 - 4,998 5,055
average yield (fixed rate) - - - - 7.60% - 7.60% -
Investment securities, available for sale (2) - - 20,041 53,302 20,075 124,320 217,738 217,738
average yield (fixed rate) - - 6.59% 7.06% 7.31% 7.05% 7.00% -
Total loans gross (3) 204,738 10,430 10,214 2,174 1,243 3,047 231,896 234,429
average yield 10.86% 10.05% 10.03% 9.08% 10.02% 10.31% 10.76% -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Savings accounts (1) 200,255 - - - - - 200,255 200,255
average rates (variable rate) 5.38% - - - - - 5.38% -
Money market checking (1) 16,703 - - - - - 16,703 16,703
average rates (variable rate) 5.08% - - - - - 5.08% -
Certificates of deposit (4) 123,650 7,563 - - - - 131,213 128,589
average rates (fixed rate) 5.87% 5.90% - - - - 5.88% -
Reverse repurchase agreements (1) 21,500 - - - - - 21,500 21,500
average rates (variable rate) 5.92% - - - - - 5.92% -
Term borrowings (5) - 45,000 - - - - 45,000 45,507
average rates (fixed rate) - 5.77% - - - - 5.77% -
Trust preferred securities (2) - - - - - 17,250 17,250 17,034
average rates (fixed rate) - - - - - 9.38% 9.38% -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The fair value balances reflected in the table were derived as
follows:
(1) For financial instruments that mature or reprice
within 90 days, the carrying amounts and the fair
value are considered identical, due to the short
term repricing of the financial instruments.
(2) For investment securities, and the trust preferred
securities, fair value is based on the quoted
market price of these securities by broker
dealers making a market for these securities.
(3) Fair value of loans is based on the value the
Company could receive on the loans in a loan sale.
The Company estimates that it could sell a
majority of its loans at a premium of between 0.0%
and 2.5%.
(4) Fair value of the Company's fixed maturity
deposits are estimate using rates currently
offered for deposits of similar remaining
maturities.
(5) Fair value of term borrowings is estimated using
discounted cash floor analysis based on the
Company's current incremental borrowing rates for
similar types of borrowing arrangements.
<PAGE>
Pacific Crest Capital, Inc.
- ------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1997 and 1996..................................................... 30
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996, and 1995......................................................................... 31
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995.......................................................................... 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................................................................... 33
Notes to Consolidated Financial Statements.................................................................... 34-44
Report of Deloitte & Touche LLP, Independent Auditors......................................................... 45
Report of Ernst & Young LLP, Independent Auditors............................................................. 46
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
Pacific Crest Capital, Inc.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 1,966 $ 2,572
Securities purchased under resale agreements 426 262
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 2,392 2,834
- ---------------------------------------------------------------------------------------------------------------
U.S. government sponsored agency securities (Note 4)
Held to maturity, at amortized cost 4,998 30,960
Available for sale, at market 217,738 52,534
Loans (Note 5):
Commercial mortgage 223,902 206,172
Business loans - SBA 5,711 2,363
Residential mortgage 1,593 1,596
Commercial business/other 690 1,581
- --------------------------------------------------------------------------------------------------------------
Total loans 231,896 211,712
Deferred loan fees 763 617
Allowance for loan losses 4,100 3,400
- --------------------------------------------------------------------------------------------------------------
Net loans 227,033 207,695
Accrued interest receivable 5,367 1,966
Prepaid expenses and other assets 1,478 772
Deferred income taxes, net (Note 12) 2,622 3,302
Other real estate owned (Note 6) 2,064 3,469
Premises and equipment, net (Note 7) 617 553
- --------------------------------------------------------------------------------------------------------------
Total assets $ 464,309 $ 304,085
- --------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits (Note 8):
Savings accounts $ 200,255 $ 157,789
Certificates of deposit 131,213 88,826
Money market checking 16,703 20,080
- --------------------------------------------------------------------------------------------------------------
Total deposits 348,171 266,695
Reverse repurchase agreements (Note 9) 21,500 10,000
Term borrowings (Note 10) 45,000 -
Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Solely Junior Subordinated Debentures (Note 11) 17,250 -
- --------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 431,921 276,695
Accrued interest and other liabilities 3,580 2,922
- --------------------------------------------------------------------------------------------------------------
Total liabilities 435,501 279,617
- --------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 15) - -
Shareholders' equity (Notes 13, 14, 16 and 17):
Preferred stock, $.01 par value, 2,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, $.01 par value, 10,000,000 shares authorized,
2,971,946 shares issued and outstanding at December 31, 1997,
2,959,698 shares issued and outstanding at December 31, 1996. 27,944 27,838
Retained earnings/(accumulated deficit) 849 (2,858)
Net unrealized gain/(loss) on available for sale securities 1,189 (257)
Common stock in treasury, at cost, 85,000 shares at December 31, 1997
30,000 shares at December 31, 1996 (1,174) (255)
Total shareholders' equity 28,808 24,468
- --------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 464,309 $ 304,085
- --------------------------------------------------------------------------------------------------------------
Book value per common share (Note 16) $ 9.97 $ 8.35
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Pacific Crest Capital, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest on loans, including fees (Note 5) $ 24,475 $ 21,384 $ 20,773
Securities purchased under resale agreements 112 2,255 1,065
Certificates of deposit - 15 16
U.S. government sponsored agency securities (Note 4)
Held to maturity 2,714 1,281 1,945
Available for sale 8,045 1,632 -
- -----------------------------------------------------------------------------------------------------------------
Total interest income 35,346 26,567 23,799
- -----------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest expense on interest-bearing deposits (Note 8)
Savings accounts 9,603 9,179 7,873
Certificates of deposit 6,467 3,456 4,196
Money market checking 892 822 -
- -----------------------------------------------------------------------------------------------------------------
Total interest expense on deposits 16,962 13,457 12,069
Reverse repurchase agreements (Note 9) 1,638 43 15
Term borrowings (Note 10) 562 - -
Trust preferred securities (Note 11) 449 - -
- -----------------------------------------------------------------------------------------------------------------
Total interest expense 19,611 13,500 12,084
- -----------------------------------------------------------------------------------------------------------------
Net interest income 15,735 13,067 11,715
Provision for loan losses (Note 5) 1,135 1,917 960
- -----------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 14,600 11,150 10,755
NONINTEREST INCOME:
Gain on sale of other real estate owned 216 - -
Gain on investment securities - 413 851
Gain on sale of deposits - 264 -
Other noninterest income 532 804 470
- -----------------------------------------------------------------------------------------------------------------
Total noninterest income 748 1,481 1,321
- -----------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Valuation adjustments to other real estate owned (Note 6) 370 155 344
Other real estate owned expenses 114 150 203
Salaries and employee benefits (Note 18) 5,009 4,664 4,147
Net occupancy expenses (Note 15) 1,658 1,534 1,470
FDIC insurance premiums 73 72 337
Credit and collection expenses 127 94 485
Communication and data processing 659 551 467
Other expenses 1,254 903 1,456
- -----------------------------------------------------------------------------------------------------------------
Total noninterest expense 9,264 8,123 8,909
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 6,084 4,508 3,167
Income tax provision (benefit) (Note 12) 2,377 1,505 (77)
- -----------------------------------------------------------------------------------------------------------------
Net income 3,707 3,003 3,244
Preferred dividends declared - - (920)
- -----------------------------------------------------------------------------------------------------------------
Net income applicable to common stock $ 3,707 $ 3,003 $ 2,324
- -----------------------------------------------------------------------------------------------------------------
Per Share Data (Note 16)
Basic earnings per common share $ 1.26 $ 1.02 $ 1.98
- -----------------------------------------------------------------------------------------------------------------
Weighted average basic common shares outstanding (in thousands) 2,936 2,947 1,173
- -----------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 1.21 $ 1.00 $ 1.10
- -----------------------------------------------------------------------------------------------------------------
Weighted average diluted common shares outstanding (in thousands) 3,070 3,004 2,954
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Pacific Crest Capital, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETAINED
PREFERRED STOCK COMMON STOCK TREASURY STOCK EARNINGS/
(DOLLARS AND SHARES IN ------------------------ ---------------------- -------------------------- (ACCUMULATE
THOUSANDS) SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT DEFICIT)
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Balances at January 1, 1995 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 13) - - 6 25 - - -
Unrealized loss on
securities available for
sale, net of taxes - - - - - - -
Purchase of treasury shares - - - - (30) (255) -
Net income - - - - - - 3,003
- ---------------------------------------------------------------------------------------------------------------------------
Balances at December 31,
1996 - - 2,960 27,838 (30) (255) (2,858)
- ---------------------------------------------------------------------------------------------------------------------------
Issuance of stock under
employee stock purchase
plan (Note 13) - - 7 52 - - -
Issuance of stock under
non-employee directors'
stock purchase plan (Note
13) - - 3 39 - - -
Issuance of stock under the
employee stock option plan
(Note 13) - - 2 15 - - -
Unrealized gain on
securities available for
sale, net of taxes - - - - - - -
Purchase of treasury shares - - - - (55) (919) -
Net income - - - - - - 3,707
- ---------------------------------------------------------------------------------------------------------------------------
Balances at December 31,
1997 - $ - 2,972 $ 27,944 (85) $ (1,174) $ 849
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NET UNREALIZED
GAIN/(LOSS) ON
SECURITIES
(DOLLARS AND SHARES IN AVAILABLE
THOUSANDS) FOR SALE
<S> <C>
- -------------------------------------------
Balances at January 1, 1995 $ -
Dividends on preferred stock -
Conversion of preferred
stock -
Net income
- -------------------------------------------
Balances at December 31,
1995 -
- -------------------------------------------
Issuance of stock under
employee stock purchase
plan (Note 13) -
Unrealized loss on
securities available for
sale, net of taxes (257)
Purchase of treasury shares -
Net income -
- -------------------------------------------
Balances at December 31,
1996 (257)
- -------------------------------------------
Issuance of stock under
employee stock purchase
plan (Note 13) -
Issuance of stock under
non-employee directors'
stock purchase plan (Note
13) -
Issuance of stock under the
employee stock option plan
(Note 13) -
Unrealized gain on
securities available for
sale, net of taxes 1,446
Purchase of treasury shares -
Net income -
- -------------------------------------------
Balances at December 31,
1997 $ 1,189
- -------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS Pacific Crest Capital, Inc.
- ------------------------------------------------ -------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,707 $ 3,003 $ 3,244
Adjustments to reconcile net income
to net cash provided by operating activities:
Recovery on investment securities - (413) (851)
Provision for loan loss 1,135 1,917 960
Valuation adjustment to OREO 370 155 344
Depreciation and amortization 251 233 248
Amortization of deferred loan fees (379) (907) (588)
Amortization/accretion of securities (5) (37) (67)
Changes in operating assets and liabilities:
Accrued interest receivable (3,401) (419) 285
Prepaid expenses and other assets (706) (520) 254
Deferred income taxes (366) 863 (79)
Accrued interest and other liabilities 658 275 105
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,264 4,150 3,855
- -----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of U.S. government sponsored securities:
Held to maturity (15,000) (57,471) -
Available for sale (213,510) (106,859) -
Proceeds from U.S. government sponsored securities:
Held to maturity 40,965 26,531 55,315
Available for sale 50,800 53,900 -
Proceeds from recovery on corporate bond securities - 380 851
Net increase in loans (24,454) (8,096) (25,054)
Proceeds from sale of loans 2,884 9,032 -
Purchase of loans - (20,200) -
Purchases of equipment and leasehold improvements, net (315) (222) (59)
Proceeds from sale of other real estate owned 2,511 3,567 7,815
- -----------------------------------------------------------------------------------------------------------------------------
Net cash (used in)/provided by investing activities (156,119) (99,438) 38,868
- -----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Reduction of savings deposits from branch sale - (20,989) -
Reduction of time deposits from branch sale - (7,202) -
Net increase in savings accounts 42,466 5,053 33,693
Net increase/(decrease) in CDs 42,387 35,243 (25,533)
Net (decrease)/increase in money market checking (3,377) 20,080 -
Net increase in reverse repurchase agreements 11,500 10,000 -
Net increase in term borrowings 45,000 - -
Proceeds from issuance of trust preferred securities 17,250 - -
Preferred stock cash dividends - - (920)
Proceeds from issuance of common stock 106 25 -
Purchase of treasury stock, at cost (919) (255) -
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 154,413 41,955 7,240
- -----------------------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in cash and cash equivalents (442) (53,333) 49,963
Cash and cash equivalents at beginning of period 2,834 56,167 6,204
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,392 $ 2,834 $56,167
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 19,068 $ 13,428 $12,165
Income taxes $ 2,725 $ 745 $ 2
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Transfers of net loans to other real estate owned $ 1,376 $ 2,836 $ 6,790
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 Pacific Crest Capital, Inc.
- --------------------------------------------------------------------------------
1. ORGANIZATION
Pacific Crest Capital, Inc. ("the Company"), a Delaware
corporation, is incorporated as a financial services holding company and
holds 100% of the stock of Pacific Crest Bank (formerly Pacific Crest
Investment and Loan) and 100% of the common stock of PCC Capital I ("PCC
Capital").
Pacific Crest Bank conducts an industrial loan business in the
state of California. Pacific Crest Bank is subject to regulation and
supervision by the Department of Financial Institutions of the State of
California ("DFI") as specified in the California Industrial Loan Law, and by
the Federal Deposit Insurance Corporation ("FDIC"). The FDIC insures deposits
up to $100,000 for each depositor.
PCC Capital is a statutory business trust, created under Delaware
law, for the exclusive purpose of issuing and selling $17.25 million of the
9.375% Cumulative Trust Preferred Securities, (the "Trust Preferred
Securities") and using the proceeds to acquire the junior subordinated
debentures issued by the parent holding company.
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Pacific Crest Bank and PCC
Capital. 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 mortgage-backed securities. The
duration of the agreement is typically from one to 60 days, during which a
third-party trustee for the Company holds the collateral. 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 shareholders' 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.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are principally provided on the
straight-line method over the estimated useful lives of the property. Office
furniture, fixtures and equipment are generally estimated to have useful
lives of between three and eight years. Leasehold improvements are amortized
over either the useful life or the life of the lease, whichever is shorter.
ACCOUNTING FOR PCC CAPITAL
For financial reporting purposes, PCC Capital is treated as a
subsidiary of the Company and, accordingly, the accounts are included in the
consolidated financial statements of the Company. The Trust Preferred
Securities are presented as a separate line item in the consolidated balance
sheet under the caption "Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely Junior Subordinated
Debentures." For financial reporting purposes, the Company records the
dividend distributions payable on the Trust Preferred Securities as interest
expense in the consolidated statement of operations.
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.
<PAGE>
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 Financial 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 of financial assets and servicing of
financial assets and extinguishments of liabilities. These standards are
based on consistent application of a financial component approach which
focuses on control. Under this 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 is 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 did not have a material
effect on the Company's financial statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings per
Share." This statement establishes standards for computing and presenting
earnings per share ("EPS") and applies to all entities with publicly held
common stock or potential common stock. This statement replaces the
presentation of primary EPS and fully diluted EPS with a presentation of
basic EPS and diluted EPS, respectively. Basic EPS excludes dilution and is
computed by dividing net income applicable to common stockholders by the
weighted-average number of common shares outstanding for the period. Similar
to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings. Restatement of all prior period
EPS data presented is required. This statement was adopted for the year ended
December 31, 1997, and is reflected in the Company's consolidated financial
statements. The adoption of this statement did not have a material impact on
the Company's consolidated financial statements for the year ended December
31 ,1997.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure." This statement establishes standards
for disclosing information about capital structure, including pertinent
rights and privileges of various securities outstanding. SFAS No. 129 is
effective for financial statements for periods ending after December 15,
1997. The Company adopted this statement for the year ended December 31,
1997, and is reflected in the Company's consolidated financial statements.
The adoption of this statement did not have a material impact on the
Company's consolidated financial statements for the year ended December 31,
1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," effective for the fiscal years beginning after
December 15, 1997. This Statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. This Statement further requires
that an entity display an amount representing total comprehensive income for
the period in that financial statement. This Statement also requires that an
entity classify items of other comprehensive income by their nature in a
financial statement. For example, other comprehensive income may include
foreign currency items, minimum pension liability adjustments, and unrealized
gains and losses on certain investments in debt and equity securities.
Reclassification of financial statements for earlier periods, provided for
comparative purposes, is required. Based on current accounting standards,
this Statement is not expected to have a material impact on the Company's
consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," effective for financial
statements for periods beginning after December 15, 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires that enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This statement
is not expected to have a material impact on the Company's consolidated
financial statements.
- -------------------------------------------------------------------------------
3. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimates of the fair value of financial instruments are required
under SFAS 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 Company
utilizes a number of different methodologies in calculating and measuring the
fair value of financial instruments. Fair value information for financial
instruments reflected in the table within this footnote 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
broker dealers making a market for these securities on a national exchange.
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 a
premium between 0% and 2.5%, and categories of loans that would sell at a
discount between 0% and 25%. 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
<PAGE>
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 upon liquidation of the collateral.
Fair value then, is based upon the estimated sales prices of these loans.
DEPOSITS:
Fair value of the Company's fixed maturity deposits are estimated using rates
currently offered for deposits of similar remaining maturities. In accordance
with SFAS No. 107, the fair value of deposits with no stated maturity such as
savings accounts and money market checking accounts are disclosed as the
amount payable on demand.
REVERSE REPURCHASE AGREEMENTS:
The carrying amounts of reverse repurchase agreements approximate their
fair value due to the short maturity of these borrowings.
TERM BORROWINGS:
The fair values of the Company's debt are estimated using discounted cash
flow analysis based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
TRUST PREFERRED SECURITY:
Fair value is based on the quoted market price of these securities by broker
dealers making a market for these securities on a national exchange.
ACCRUED INTEREST:
The carrying amounts of accrued interest approximate 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. The carrying amounts and estimated fair values for certain of the
Company's financial instruments at December 31, 1997 and 1996 are summarized
in the following table:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------------------------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
(DOLLARS IN THOUSANDS) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,392 $ 2,392 $ 2,834 $ 2,834
Investment securities 222,736 222,793 83,494 83,460
Loans, net 227,033 234,429 207,695 209,235
Accrued interest receivable 5,367 5,367 1,966 1,966
LIABILITIES
Savings accounts 200,255 200,255 157,789 157,789
Money market checking 16,703 16,703 20,080 20,080
Certificates of deposit 131,213 128,589 88,826 88,826
Reverse repurchase agreements 21,500 21,500 10,000 10,000
Term borrowings 45,000 45,507 - -
Trust preferred security 17,250 17,034 - -
Accrued interest payable 818 818 275 275
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996
------------------------------------------------ ------------------------------------------------
AMORTIZED GROSS UNREALIZED ESTIMATED AMORTIZED GROSS UNREALIZED ESTIMATED
(DOLLARS IN THOUSANDS) COST GAINS LOSSES FAIR VALUE COST GAINS LOSSES FAIR VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government agency securities
Held to maturity $ 4,998 $ 57 $ - $ 5,055 $ 30,960 $ 21 $ 55 $ 30,926
Available for sale 215,710 2,050 (22) 217,738 52,975 11 452 52,534
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment securities $220,708 $ 2,107 $ (22) $ 222,793 $ 83,935 $ 32 $ 507 $ 83,460
- ---------------------------------------------------------------------------------------------------------------------------------
</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 from three months through four years. The
Company believes that the majority of its securities will be called by the
issuing agency prior to their final maturity date. The table reflects the
scheduled maturities in the Company's investment securities portfolio.
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------
AMORTIZED FAIR AVERAGE
(DOLLARS IN THOUSANDS) COST VALUE YIELD LIFE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
Due from five to ten years $ 4,998 $ 5,055 7.60% 8.9 years
AVAILABLE-FOR-SALE
Due from one to five years 5,000 5,031 6.40% 3.9 years
Due from five to ten years 210,710 212,707 7.00% 8.6 years
- -------------------------------------------------------------------------------------
215,710 217,738 7.00% 8.5 years
- -------------------------------------------------------------------------------------
Total investment securities $ 220,708 $ 222,793 7.00% 8.5 years
- -------------------------------------------------------------------------------------
</TABLE>
U.S. government sponsored agency securities carried at $72.2
million were pledged to secure borrowings aggregating $66.5 million at
December 31, 1997.
Included in the financial statements for the year ended December
31, 1996 are gross realized gains of $413,000 resulting from collections of
the Company's previously written off corporate bond security.
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 Bank's shareholders equity at the
time of funding which was $6.9 million at December 31, 1997. Pacific Crest
Bank's largest loan at December 31, 1997 was $3.0 million which, at the time
of funding, was in compliance with this regulation.
Loans earned interest during the years ended December 31, 1997,
1996 and 1995 at rates ranging from 7.63% to 13.63%, 7.63% to 13.63% and
4.64% to 13.50%, respectively. The activity in the allowance for loan losses
is as indicated in the table.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 3,400 $ 4,500 $ 8,075
Provision for loan losses 1,135 1,917 960
Purchased loan reserve - 191 -
Loans charged off, net (435) (3,208) (4,535)
- ---------------------------------------------------------------------------------------
Balance at end of period $ 4,100 $ 3,400 $ 4,500
- ---------------------------------------------------------------------------------------
</TABLE>
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, 1997, 1996 and 1995, income
recognition was suspended on loan balances of $228,000, $1,386,000 and
$4,985,000, respectively. The amounts of contractual interest, interest
recognized and interest foregone on nonaccrual loans for the years ended
December 31, 1997, 1996 and 1995 are as indicated in the table.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans classified as troubled debt
restructurings (TDR), net of loan
fees and specific reserves $ 899 $ 719 $ 8,757
Contractual interest 390 614 1,147
Interest recognized 141 67 344
- ---------------------------------------------------------------------------------------
Interest foregone $ 249 $ 547 $ 803
- ---------------------------------------------------------------------------------------
</TABLE>
This table also reflects loans classified as trouble debt
restructurings (TDR) that are not accounted for or classified as nonaccrual.
The Company classifies certain loans as impaired. Impaired loans
are generally measured by the Company based on the present value of expected
future cash flows discounted at the loan's effective rate unless the loan is
fully collateralized.
The recorded investment in loans considered impaired at December
31, 1997 and 1996 was $1.6 million and $2.4 million, respectively. The
valuation reserve on impaired loans at December 31, 1997 and 1996 was
$221,000 and $337,000, respectively.
For the years ended December 31, 1997 and 1996, the average
recorded investment in impaired loans was approximately $3.5 million and $7.9
million, respectively.
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 the
associated valuation allowance. The OREO and allowance for OREO tables
reflect the balance of the Company's OREO, as well as changes in the
valuation allowance for OREOs for the dates indicated.
37
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Other real estate owned $ 2,524 $ 3,559 $ 5,243
Less valuation allowance (460) (90) (888)
- --------------------------------------------------------------------------------
Balance at end of period 2,064 3,469 4,355
- --------------------------------------------------------------------------------
Allowance for OREO
Balance at beginning of period 90 888 1,494
Valuation adjustments 370 155 344
Net chargeoffs - (953) (950)
- --------------------------------------------------------------------------------
Balance at end of period $ 460 $ 90 $ 888
- --------------------------------------------------------------------------------
</TABLE>
7. PREMISES AND EQUIPMENT
Premises and equipment of the Company is as indicated in the
table.
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Office furniture, fixtures and equipment $ 1,838 $ 1,569
Leasehold improvements 452 426
- ---------------------------------------------------------------------------------------------------
2,290 1,995
Less accumulated depreciation
and amortization (1,673) (1,442)
- ---------------------------------------------------------------------------------------------------
Net premises and equipment $ 617 $ 553
- ---------------------------------------------------------------------------------------------------
</TABLE>
8. INTEREST BEARING DEPOSITS
Savings accounts have no contractual maturity and for the years
1997, 1996 and 1995 earned interest at rates ranging from 2.52% to 6.03% per
annum, 2.48% to 5.08% per annum and 2.52% to 5.89%, respectively.
Certificates of deposit have maturities ranging from 30 days to five years,
and for the years ended December 31, 1997, 1996 and 1995 earned interest at
rates ranging from 2.00% to 6.95% per annum, 2.96% to 6.06% per annum and
2.00% to 6.95% per annum, respectively. Certificates of deposit of $100,000
or more at December 31, 1997, 1996 and 1995 were approximately $18,692,000,
$3,933,000, and $1,608,000, respectively.
The approximate contractual maturities of certificates of deposit
as of December 31, 1997 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 $ 28,128 $ 4,224 $ 32,352
Over three months through twelve months 78,010 13,288 91,298
Over one year through five years 6,383 1,180 7,563
- ---------------------------------------------------------------------------------------------------------
Total maturities $ 112,521 $ 18,692 $ 131,213
- ---------------------------------------------------------------------------------------------------------
</TABLE>
9. REVERSE REPURCHASE AGREEMENTS
The Company has short term borrowing lines with five brokers
aggregating $105 million in availability. The repayment terms on this
short-term debt range from one day to three months. The interest rate paid
can vary daily, but typically approximates the federal funds rate plus 25
basis points. These borrowings are secured by pledging specific amounts of
specific securities of the Company's U.S. government sponsored agency
securities portfolio. The Company utilizes these borrowing lines to cover
short-term financing needs for loan fundings or investment security
purchases. At December 31, 1997, the Company had $21.5 million outstanding in
short-term reverse repurchase agreements, which left $83.5 million in unused
short-term borrowing availability against its $105.0 million short-term
borrowing line.
The Company also maintains a line of credit with the Federal
Reserve Bank with approximately $4.1 million available for borrowing at
December 31, 1997. At December 31, 1997 there were no borrowings under this
line of credit. This agreement is secured by approximately $8.1 million in
commercial real estate loans at December 31, 1997.
10. TERM BORROWINGS
In 1997, the Company arranged for a term borrowing line of $85
million through a broker dealer. In 1997, the Company had borrowed $45
million from this broker dealer. This debt is secured by pledging specific
amounts of specific securities of the Company's U.S. government sponsored
agency securities portfolio. These secured borrowings have a five-year
maturity with a two-year, one time, call option. On January 7, 1998, the
Company borrowed an additional $10 million at a rate of 5.48% with a one-time
call date of January 2000, and a maturity date of January 2003. The table
describes the attributes of the Company's term borrowings.
<TABLE>
<CAPTION>
CALL MATURITY
(DOLLARS IN THOUSANDS) DATE DATE AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
5.82% five-year term borrowings 09/99 09/02 $ 25,000
5.78% five-year term borrowings 10/99 10/02 10,000
5.63% five-year term borrowings 12/99 12/02 10,000
- ----------------------------------------------------------------------------
Total term borrowings $ 45,000
- ----------------------------------------------------------------------------
</TABLE>
38
<PAGE>
11. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITY OF SUBSIDIARY
OF TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES
On September 22, 1997, PCC Capital, a wholly owned subsidiary of
Pacific Crest, issued $17.25 million of 9.375% Cumulative Trust Preferred
Securities. PCC Capital invested the gross proceeds of the $17.25 million
from the offering in the junior subordinated debentures issued by Pacific
Crest. The subordinated debentures were issued concurrent with the issuance
of the Trust Preferred Securities. The interest on the junior subordinated
debentures will be paid by Pacific Crest to PCC Capital and represents the
sole revenues and the sole source of dividend distributions by PCC Capital to
the holders of the Trust Preferred Securities. The undertakings of Pacific
Crest with regard to this public offering constitute a full and unconditional
guarantee by Pacific Crest of PCC Capital's obligations under the Trust
Preferred Securities. Pacific Crest has the right, assuming no default has
occurred, to defer payments of interest on the junior subordinated debentures
at any time for a period not to exceed 20 consecutive quarters. The Trust
Preferred Securities will mature on October 1, 2027, but can be called after
October 1, 2002.
12. INCOME TAXES
The income tax provision (benefit) is as indicated in the table:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 2,013 $ 593 $ (250)
State 730 49 (123)
- ---------------------------------------------------------------------------------------------
Current tax provision (benefit) 2,743 642 (373)
- ---------------------------------------------------------------------------------------------
Deferred:
Federal (167) 573 293
State (199) 290 3
- ---------------------------------------------------------------------------------------------
Deferred tax provision (benefit) (366) 863 296
- ---------------------------------------------------------------------------------------------
Income tax provision (benefit) $ 2,377 $ 1,505 $ (77)
- ---------------------------------------------------------------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at December
31, 1997 and 1996 are as indicated in the table:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 3,036 $ 2,706
Other real estate owned 208 41
Prepaid taxes - 493
Unrealized loss on securities available for sale - 186
Reserve, accruals and state taxes 514 390
- ---------------------------------------------------------------------------------------
Total deferred tax assets 3,758 3,816
- ---------------------------------------------------------------------------------------
Less valuation allowance - (386)
Deferred tax liabilities:
Unrealized gain on securities available for sale (861) -
State taxes and other (275) (128)
- ---------------------------------------------------------------------------------------
Total deferred tax liablities (1,136) (128)
- ---------------------------------------------------------------------------------------
Net deferred tax asset $ 2,622 $ 3,302
- ---------------------------------------------------------------------------------------
</TABLE>
A reconciliation of the provision for income taxes for 1997, 1996
and 1995 at the federal tax rate of 35% to the effective tax rate is as
indicated in the table:
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax based on statutory tax rate 35.00% 35.00% 35.00%
State franchise tax expense,
net of federal benefit 5.76% 6.00% 7.30%
Valuation allowance -6.34% -2.80% -43.80%
Other, net 4.65% -4.80% -0.90%
- ----------------------------------------------------------------------------------------
Effective tax rate 39.07% 33.40% -2.40%
- ----------------------------------------------------------------------------------------
</TABLE>
13. 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, 1997 is 290,318, of which 285,643
stock options have been issued and were outstanding as of December 31, 1997.
The number of common shares added under the Plan on January 1, 1998 was
59,439, increasing the cumulative number of shares that may be
39
<PAGE>
awarded under the Plan to 349,757 after January 1, 1998. There were 2,197
common shares issued through the exercise of stock options for the year ended
December 31, 1997. The stock option table is a detail summary of the activity
of the stock options granted, cancelled and exercised during the years ended
December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
STOCK OPTIONS PRICE WEIGHTED AVERAGE
OUTSTANDING AT SHARES RANGE EXERCISE PRICE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1994 142,246 $6.00-7.00 $6.14
Options granted 28,470 3.50-5.50 4.61
Options cancelled (10,933) - 6.00
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1995 159,963 3.50-7.00 5.90
- -------------------------------------------------------------------------------------------------------------------------
Options granted 64,500 7.50-8.25 7.58
Options cancelled (1,800) - 6.00
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1996 222,663 3.50-8.25 6.37
- -------------------------------------------------------------------------------------------------------------------------
Options granted 65,577 11.38-12.50 11.99
Options cancelled (400) 6.00 6.00
Options exercised (2,197) 6.00 6.00
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1997 285,643 $3.50-12.50 $7.66
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information concerning outstanding
and exercisable options at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------ ------------------------------------
WEIGHTED
RANGE OF NUMBER AVERAGE REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
ESTIMATED PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.50 - $5.50 26,470 7.3 years $4.61 9,397 $4.61
$6.00 - $7.00 129,096 6.2 years 6.13 85,472 6.14
$7.50 - $8.25 64,500 8.1 years 7.58 500 7.50
$11.00-$12.50 65,577 9.1 years 11.99 - -
----------------------------------------------------------- -------------------------------------
285,643 7.4 years $7.66 95,369 $6.00
----------------------------------------------------------- -------------------------------------
</TABLE>
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 6,921 shares, for
a value of $52,323, were issued in January of 1997. The Company issued 5,608
shares of common stock for a value of $63,090 on January 2, 1998 for employees
participating in the Plan during the year ended December 31, 1997. There are
11,893 shares available for issuance under the plan for 1998.
The Company implemented a Non-Employee Directors' Stock Purchase
plan. This plan allows the directors to purchase stock of the Company from
proceeds of their Directors' fees. The Directors purchased 2,830 of common stock
for a value of $39,613 during the year ended December 31, 1997 under this plan.
The estimated fair value of options granted during 1997 and 1996 was
$4.17 and $3.28 per share, respectively. The Company applies Accounting
Principles Board Opinion No. 25 and related Interpretations in accounting for
its stock option plan. 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, 1997 and 1996 and
would have been reduced to the pro forma amounts indicated in the table.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income to common shareholders
As reported $ 3,707 $ 3,003 $ 3,244
Pro forma $ 3,631 $ 2,957 $ 3,239
Diluted earnings per common share
As reported $ 1.21 $ 1.00 $ 1.10
Pro forma $ 1.18 $ 0.97 $ 1.10
Weighted average diluted common shares outstanding (in thousands) 3,070 3,004 2,954
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
ASSUMPTIONS:
Dividend yield N/A N/A N/A
Expected volatility 20% 25% 45%
Risk free interest rate 5.60% 6.25% 6.25%
Expected life 7 years 7 years 7 years
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
14. DIVIDENDS
As a Delaware corporation, Pacific Crest Capital, Inc., ("the
parent"), may pay common dividends out of surplus or, if there is no surplus,
from net profits for the current and preceding fiscal year. The parent has
approximately $9.9 million in cash and investments less current liabilities and
short-term debt at December 31, 1997. However, these funds are also necessary to
pay future operating expenses of the parent company, interest expense on the
$17.3 million subordinated debentures, and possibly future
40
<PAGE>
capital infusions into Pacific Crest Bank. Without dividends from Pacific
Crest Bank, the parent must rely solely on existing cash, investments and
borrowings.
Pacific Crest Bank'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, 1997, Pacific Crest Bank had
unrestricted retained earnings of $3.6 million available for dividend payments.
15. 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 indicated in the
table as of December 31, 1997.
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, 1997, 1996 and 1995
totaled $773,000, $754,000 and $757,000, respectively.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<S> <C>
1998 $ 660
1999 545
2000 172
2001 85
Thereafter 531
- -------------------------------------------------------------------------------
Total Lease Commitments $ 1,993
- -------------------------------------------------------------------------------
</TABLE>
UNFUNDED COMMITMENTS
Pacific Crest Bank makes unfunded commitments with its real estate
term lending activities for building improvements to property. As of December
31, 1997, Pacific Crest Bank had unfunded commitments in the real estate term
loan portfolio of $603,000.
LITIGATION
There is one lawsuit and claim 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 this lawsuit and claim would not materially affect
the financial position, results of operations or liquidity of the Company.
16. 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, 1997 and December 31, 1996. The number of common
shares outstanding was 2,971,946, less 85,000 of treasury shares at December 31,
1997, and 2,959,698, less 30,000 of treasury shares at December 31, 1996.
Basic and diluted earnings per common share for the year ended
December 31, 1997 and 1996, were determined by dividing net income by the
weighted average common shares outstanding. For the diluted earnings per share
computation, 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. See table
below for the diluted earnings per share computations:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA) YEAR ENDED 12/31/97 YEAR ENDED 12/31/96 YEAR ENDED 12/31/95
- -------------------------------------------------------------------- ---------------------------- -----------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE PER SHARE PER SHARE
NET INCOME SHARES AMOUNT NET INCOME SHARES AMOUNT NET INCOME SHARES AMOUNT
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
common stockholders $3,707 2,936 $1.26 $3,003 2,947 $1.02 $2,324 1,173 $1.98
---------------------------- ---------------------------- -----------------------------
Effect of Dilutive Securities
Stock Options - 134 (0.05) - 57 (0.02) - - -
Convertible Preferred Stock - - - - - - 920 1,781 (0.88)
Diluted EPS
Income available to common
---------------------------- ---------------------------- -----------------------------
stockholders plus assumed conversions $3,707 3,070 $ 1.21 $3,003 3,004 $1.00 $3,244 2,954 $1.10
---------------------------- ---------------------------- -----------------------------
</TABLE>
17. REGULATORY MATTERS AND RESTRICTIONS ON SHAREHOLDERS' EQUITY
Pacific Crest Bank 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 Bank may make.
41
<PAGE>
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 Bank has been authorized by the
Department of Financial Institutions to accept thrift deposits of up to 18.5
times its restricted shareholder's equity.
Pacific Crest Bank 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 Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
Pacific Crest Bank must meet specific capital guidelines that involve
quantitative measures of Pacific Crest Bank's assets, liabilities and certain
off balance sheet items as calculated under regulatory accounting practices.
Pacific Crest Bank'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 Bank to maintain minimum amounts and ratios as
set forth in the table below of total and Tier 1 capital to risk-weighted assets
of $278.7 million and $236.8 million at December 31, 1997 and 1996,
respectively, and of Tier 1 capital to average quarterly assets of $443.6
million and $283.9 million at December 31, 1997 and 1996, respectively.
Management believes that Pacific Crest Bank meets all capital adequacy
requirements to which it is subject as of December 31, 1997.
As of December 31, 1997 and 1996, the most recent notification from
the FDIC categorized Pacific Crest Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well-capitalized,
Pacific Crest Bank must maintain minimum total risk-based, Tier 1 risk-based and
Tier 1 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 Bank'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, 1997
Total Capital (to risk weighted assets) $36,900 13.27% $22,296 greater than 8% $27,870 greater than 10%
Tier 1 Capital (to risk weighted assets) $33,416 12.02% $11,148 greater than 4% $16,722 greater than 6%
Tier 1 Capital (to average quarterly assets) $33,416 7.53% $17,746 greater than 4% $22,183 greater than 5%
- ---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1996
Total Capital (to risk weighted assets) $27,389 11.56% $18,947 greater than 8% $23,683 greater than 10%
Tier 1 Capital (to risk weighted assets) $24,423 10.31% $9,473 greater than 4% $14,210 greater than 6%
Tier 1 Capital (to average quarterly assets) $24,423 8.60% $11,357 greater than 4% $14,196 greater than 5%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
During 1996, Pacific Crest Bank was subject to a Memorandum of
Understanding ("MOU") with the FDIC and the DFI 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 DFI that were
completed during the fourth quarter of 1996.
18. RETIREMENT SAVINGS AND SUPPLEMENTAL BENEFIT PLANS
Employees of Pacific Crest Bank 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 1995 and $9,500 for 1996 and 1997. Pacific Crest Bank 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 $191,000, $167,000 and $141,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.
The top four executive officers of Pacific Crest Bank participated
in The Company's Supplemental Executive Retirement Plan (the Executive
Retirement 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 Executive Retirement Plan were
$102,000, $94,000 and $80,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
42
<PAGE>
19. PARENT COMPANY
The following represents the financial statements of Pacific Crest
Capital, Inc. (parent company only) as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED
CONDENSED BALANCE SHEETS DECEMBER 31
- ----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 32 $ 216
Repurchase agreements 426 262
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 458 478
Securities available for sale 30,037 -
Other assets 1,518 56
Investment in Pacific Crest Bank 33,416 24,422
Investment in PCC Capital I 534 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 65,963 $ 24,956
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Reverse repurchase agreements $ 20,000 $ -
Subordinated debentures 17,784 -
Accrued expenses and other liabilities 538 231
Common stock 27,944 27,838
Retained earnings/(accumulated deficit) 849 (2,858)
Common stock in treasury, at cost (1,174) (255)
Net unrealized gain on securities available for sale 22 -
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 27,641 24,725
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders equity $ 65,963 $ 24,956
- ----------------------------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income/expense $ (194) $ 26
Income from subsidiaries 3,984 3,132
General and administrative expenses 356 246
- ----------------------------------------------------------------------------------------------------------------------------------
Net income before taxes 3,434 2,912
Income tax benefit 273 91
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 3,707 $ 3,003
- ----------------------------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 3,707 $ 3,003
Adjustments to reconcile income to net cash used by operating activities:
Net change to other assets and accrued expenses (1,143) (29)
Equity income from subsidiaries (3,984) (3,132)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used by operating activities (1,420) (158)
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of U.S. government sponsored agency securities (30,037) -
Capital infusion into Pacific Crest Bank (5,000) -
Capital infusion into PCC Capital I (534) -
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (35,571) -
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from subordinated debentures 17,784 -
Proceeds from reverse repurchase agreements 20,000 -
Proceeds from issuance of common stock 106 25
Purchase of treasury stock, at cost (919) (255)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by/(used in) financing activities 36,971 (230)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (20) (388)
Cash and cash equivalents at beginning of period 478 866
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 458 $ 478
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited quarterly financial data for 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------
(DOLLARS IN THOUSANDS) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997:
Total interest income $ 7,677 $ 8,163 $ 8,847 $ 10,659
Total interest expense 3,954 4,389 4,896 6,372
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 3,723 3,774 3,951 4,287
Provision for loan losses 230 300 280 325
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,493 3,474 3,671 3,962
Noninterest income 101 349 167 131
Valuation adjustment to other real estate owned 130 210 30 -
Other real estate owned expense 14 4 31 65
General and administrative expenses 2,079 2,104 2,181 2,416
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,371 1,505 1,596 1,612
Income tax provision 547 599 637 594
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 824 $ 906 $ 959 $ 1,018
- -----------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.28 $ 0.31 $ 0.33 $ 0.34
- -----------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.27 $ 0.30 $ 0.31 $ 0.33
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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 provision 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
- ---------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.24 $ 0.25 $ 0.26 $ 0.27
- ---------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.24 $ 0.25 $ 0.25 $ 0.26
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by this Item 9 was previously reported in the
Company's Report on Form 8-K, filed with the Securities and Exchange
Commission during the first quarter of 1996.
44
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PACIFIC CREST CAPITAL, INC.
We have audited the accompanying consolidated balance sheets of Pacific Crest
Capital, Inc. and subsidiaries (the "Company") as of December 31, 1997 and
1996 and the related consolidated statements of operations, shareholders'
equity and cash flows for the two years ended December 31, 1997. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits 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, 1997 and 1996 and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
/s/ DELOITTE & TOUCHE LLP
- ---------------------------------
Los Angeles, California
February 5, 1998
45
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PACIFIC CREST CAPITAL, INC.
We have audited the consolidated statements of operations, shareholders'
equity and cash flows for the year ended December 31, 1995 of Pacific Crest
Capital, Inc. and subsidiary (the "Company"). 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 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 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 results of their operations and their
cash flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP ERNST & YOUNG LLP
- -----------------------------
Los Angeles, California
February 1, 1996
46
<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 SEC within 120 days after December 31, 1997.
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," "Executive Compensation" and "Compensation Committee Interlocks
and Insider Participation" from the Company's definitive Proxy Statement, to
be filed with the SEC within 120 days after December 31, 1997.
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 SEC within 120 days after December 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference is the information from the
section entitled "Certain Transactions" from the Company's definitive Proxy
Statement, to be filed with the SEC within 120 days after December 31, 1997.
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 (1)
3(ii).1 Amended and restated Bylaws of Pacific Crest Capital, Inc. (1)
4.1 Subordinated Indenture dated as of September 22, 1997, by and
between Pacific Crest Capital and Wilmington Trust Company, as
indenture trustee (2)
4.2 Officers' Certificate and Company Order dated September 22, 1997 (2)
4.3 Certificate of Trust of PCC Trust I dated August 18, 1997 (2)
4.4 Trust Agreement of PCC Trust I dated as of August 18, 1997 (2)
4.5 Certificate of Amendment to Certificate of Trust of PCC Trust I
dated August 20, 1997 (2)
4.6 Amended and Restated Trust Agreement of PCC Capital I, dated as of
September 22, 1997 (2)
4.7 Form of Trust Preferred Certificate of PCC Capital I (included as
an exhibit to exhibit 4.6) (2)
4.8 Form of Common Securities Certificate of PCC Capital I (included
as an exhibit to exhibit 4.6) (2)
4.9 Guarantee Agreement dated as of September 22, 1997 (2)
4.10 Agreement as to Expenses and Liabilities (2)
10.1 Form of Indemnification Agreement (3) *
10.2 Pacific Crest Capital, Inc. 1993 Equity Incentive Plan (4) (5) *
10.3 Pacific Crest Capital, Inc. Retirement Plan and Trust (3) *
10.4 1993 Employee Stock Purchase Plan (3) (6) *
10.5 Form of Split Dollar Agreement (3) *
10.6 Pacific Crest Capital, Inc. Supplemental Executive Retirement Plan
(3) *
10.7 Form of Distribution Agreement (1)
10.8 Form of Tax Sharing Agreement between Pacific Crest Capital, Inc.
and The Foothill Group, Inc. (3)
10.9 Office Lease by and between Wilshire Masterpiece, Inc. and Pacific
Crest Bank, dated October 31, 1990 (Beverly Hills Branch)(7)
10.10 Office Lease between Fifth and Beech Associates and Pacific Crest
Bank (San Diego Branch) (7)
10.11 Shopping Center Lease dated April 18, 1978, between Frances Robert
Sarno, as Trustees, and Le Chateau Boutiques, Inc. (Encino Branch)
(7)
10.11.1 Assignment, Assumption and Consent to Assignment of Lease dated
October 16, 1980, between Pacific Crest Bank, Frances Sarno and
Robert Sarno, as Trustees, and Le Chateau Boutiques, Inc. (7)
47
<PAGE>
10.11.2 Exercise of Option to Renew Lease dated January 23, 1990 (7)
10.12 Lease dated April 22, 1992, between The Klussman Family Trust and
Pacific Crest Bank (Agoura Hills office) (7)
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 (8)*
10.14.6 Employment Agreement between the Company and Joseph Finci (2)*
10.14.7 Employment Agreement between the Company and M. Carolyn Reinhart (2)*
10.15 1996 Non-Employee Directors' Stock Plan (9)*
21.1 Subsidiaries of the Registrant (2)
23.1 Consent of Independent Auditors (2)
23.2 Consent of Independent Auditors (2)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Trustee under the Subordinated Indenture (10)
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Trustee under the Amended and Restated Trust Agreement (10)
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Trustee under the Trust Preferred Securities Guarantee
Agreements (10)
27.1 Financial Data Schedule - Fiscal Year end December 31, 1997 (2)
27.2 Financial Data Schedule - Fiscal Year end December 31, 1996
Quarters 2, 3 of 1996 (2)
27.3 Financial Data Schedule - Quarters 1, 2, 3 of 1997 (2)
- --------------
* 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) Filed herewith.
(3) Incorporated herein by reference from Registrant's Amendment No. 1 to
Form S-1 Registration Statement No. 33-68718, filed October 28, 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 Form S-1
Registration Statement No. 33-68717, filed September 13, 1993.
(8) Incorporated herein by reference from Registrant's Annual Report on
Form 10-K dated December 31, 1994 filed March 30, 1995.
(9) 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.
(10) Incorporated herein by reference from Registrant's Form S-2
Registration Statement No. 333-34257, filed August 22, 1997.
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
See Item 14(a)(3).
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
PACIFIC CREST CAPITAL, INC.
BY: /S/ GARY WEHRLE
--------------------------------
GARY WEHRLE
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
DATE: MARCH 25, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ GARY WEHRLE Chairman of the Board, President March 25, 1998
------------------------- and Chief Executive Officer
Gary Wehrle (Principal Executive Officer)
/s/ ROBERT J. DENNEN Vice President, Chief Financial March 25, 1998
------------------------- Officer and Secretary
Robert J. Dennen (Principal Financial and
Accounting Officer)
/s/ RUDOLPH I. ESTRADA Director March 25, 1998
-------------------------
Rudolph I. Estrada
/s/ MARTIN J. FRANK Director March 25, 1998
-------------------------
Martin J. Frank
/s/ RICHARD S. ORFALEA Director March 25, 1998
-------------------------
Richard S. Orfalea
/s/ STEVEN J. ORLANDO Director March 25, 1998
-------------------------
Steven J. Orlando
51
<PAGE>
Exhibit 4.1
- ------------------------------------------------------------------------------
PACIFIC CREST CAPITAL, INC.
TO
WILMINGTON TRUST COMPANY
TRUSTEE
----------------------------------
JUNIOR SUBORDINATED INDENTURE
DATED AS OF SEPTEMBER 22, 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 September 22, 1997.
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
<S> <C>
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>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
<S> <C>
. . . . . . . . . . . . . . . . . . . . . . . . 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
</TABLE>
______________
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 September 22, 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
<PAGE>
such accounting principles which are generally accepted at the date or time
of such computation; provided, that when two or more principles are so
generally accepted, it shall mean that set of principles consistent with
those in use by the 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
2
<PAGE>
Debt or otherwise) but for the fact that such Senior and Subordinated Debt is
subordinate 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.
"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."
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"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.
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"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
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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).
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"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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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.
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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 without regard to conflicts
of laws principles thereof, 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),
(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 declaration of a dividend in
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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 (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 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.
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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 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.]
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[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 of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the Indenture.]
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[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.
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
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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 6.2. 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 Sof 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 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
(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 IV
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 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,
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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.
Section 11.4. NOTICE OF REDEMPTION.
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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
71
<PAGE>
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: /s/ Robert J. Dennen
---------------------------------
Robert J. Dennen
Its Chief Financial Officer
Attest:
By /s/ Sean A. Sievers
------------------------------
Sean A. Sievers
Its Vice President, Controller
WILMINGTON TRUST COMPANY
as Trustee
By /s/ Debra Eberly
----------------------------------
Its Administrative Account Manager
Attest:
By /s/ [Signature Illegible]
-------------------------------------
Its Senior Financial Services Officer
74
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On the 18th day of September, 1997 before me personally came Robert J.
Dennen to me known, who, being by me duly sworn, did depose and say that he
is CFO 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] /s/ Patricia C. Boules
---------------------------
Notary Public
STATE OF DELAWARE )
) SS.
COUNTY OF NEW CASTLE )
On the 18th day of September, 1997 before me personally came
______________ to me known, who, being by me duly sworn, did depose and say
that he is the Administrative Account Manager 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] /s/ Paula M. Sulecki
-------------------------------
Notary Public
75
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
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. NON-BUSINESS 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
i
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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 SET-OFF.. . . . . . . . . . . . . . . . . . . . . .32
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
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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
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
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<PAGE>
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. . . . . . . . . . . . . . .61
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 . . . . . . . . . . . . . . . . . . .62
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
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
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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
</TABLE>
v
<PAGE>
EXHIBIT 4.2
PACIFIC CREST CAPITAL, INC.
9.375% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE OCTOBER 1, 2027
OFFICERS' CERTIFICATE AND COMPANY ORDER
Pursuant to the Indenture dated as of September 22, 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 September 16, 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 "9.375%
Junior Subordinated Deferrable Interest Debentures Due October 1, 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 $17,783,510 (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 October 1, 2027.
<PAGE>
D. The Securities shall bear interest at the rate of 9.375% 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
December 15, 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 9.375% 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 9.375%, 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
October 1, 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 $17,783,510 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 September 22, 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 September 16, 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
22nd day of September 1997.
PACIFIC CREST CAPITAL, INC.
By: /s/ ROBERT J. DENNEN
------------------------------
Name: Robert J. Dennen
Title: Chief Financial Officer
By /s/ GARY WEHRLE
------------------------------
Name: Gary Wehrle
Title: President, CEO
6
<PAGE>
EXHIBIT 4.3
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/ W. CHRIS SPONENBERG
------------------------------------
Name: W. Chris Sponenberg
Title: Senior Financial Services Officer
/s/ GARY L. WEHRLE
---------------------------------------
Gary L. Wehrle,
Administrative Trustee
/s/ ROBERT J. DENNEN
---------------------------------------
Robert J. Dennen,
Administrative Truste
/s/ LYLE C. LODWICK
---------------------------------------
Lyle C. Lodwick,
Administrative Trustee
<PAGE>
EXHIBIT 4.4
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: /s/ Robert J. Dennen
---------------------------------------
Name: Robert J. Dennen
Title: Chief Financial Officer
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ James P. Lawler
---------------------------------------
Name: James P. Lawler
Title: Vice President
By: /s/ Gary L. Wehrle
---------------------------------------
Gary L. Wehrle, as Administrative Trustee
By: /s/ Lyle C. Lodwick
---------------------------------------
Lyle C. Lodwick, as Administrative Trustee
By: /s/ Robert J. Dennen
---------------------------------------
Robert J. Dennen, as Administrative Trustee
3
<PAGE>
EXHIBIT 4.5
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/ Donald G. MacKelcan
---------------------------
Name: Donald G. MacKelcan
Title: Assistant Vice
President
<PAGE>
EXHIBIT 4.6
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 September 22, 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:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
--------------- ---------------
<S> <C> <C>
(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
</TABLE>
- ---------------
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
September 22, 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, as amended; 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 created 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
9.375% 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 created and continued
4
<PAGE>
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 September
22, 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.
"OPTION CLOSING DATE" means the date of payment and delivery for any
Preferred Securities issued pursuant to the exercise by Sandler O'Neill and
Partners, L.P. and Sutro and Co. Incorporated of the over-allotment option
granted to such Persons by the Underwriting Agrement.
"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
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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 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 "9.375% 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 created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"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
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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.
"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) any cash on deposit in, or
owing to, the Payment Account and (c) all proceeds and rights in respect of the
foregoing and any other property
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and assets for the time being held or deemed to be held by the Property
Trustee pursuant to the trusts of this Trust Agreement.
"TRUST SECURITY" means any one of the Common Securities or the Preferred
Securities.
"TRUST SECURITIES CERTIFICATE" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"TRUSTEES" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.
"UNDERWRITING AGREEMENT" means that certain Underwriting Agreement dated
as of September 16, 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.
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SECTION 2.4. ISSUANCE OF THE PREFERRED SECURITIES.
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 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, plus on either of the Closing Date or the Option Closing Date, up
to an additional 225,000 Preferred Securities having an aggregate Liquidation
Amount of $2,250,000 solely to cover over-allotments, as provided for in the
Underwriting Agreement (the "Additional Preferred Securities"), against receipt
of such aggregate purchase price of such Preferred Securities of $15,000,000
(or, in the event that Additional Preferred Securities are issued, up to
$17,783,510), 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, plus on
either of the Closing Date or the Option Closing Date, up to an additional
6,959 Common Securities having an aggregate Liquidation Amount of $69,590 (the
"Additional Common Securities") to meet the capital requirements of the Trust
in the event that Additional Preferred Securities are issued, 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 (or, in the event that
Additional Preferred Securities and Additional Common Securities are issued, up
to $17,783,510), 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 (or, in the event that Additional Preferred
Securities and Additional Common Securities are issued, up to $17,783,510),
such amount 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
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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 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
Exchange Act, and the preparation and filing of all periodic and
other reports and other documents pursuant to the foregoing;
(E) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities;
(F) 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;
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(G) the appointment of a Paying Agent, authenticating agent and
Securities Registrar in accordance with this Trust Agreement;
(H) registering transfer of the Trust Securities in accordance
with this Trust Agreement;
(I) 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;
(J) 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
(K) the taking of any action incidental to the foregoing as the
Trustees may from time to time determine is necessary or
advisable to give effect to the terms of this Trust Agreement for
the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the power,
duty and authority to act on behalf of the Trust with respect to the
following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal 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;
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(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);
(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).
(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
and the execution by the Trust 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
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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; and
(v) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust 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
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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.
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 December 15, 1997. If any date on which a
Distribution is otherwise payable on the Trust Securities is not a
Business Day, then the payment of such Distribution shall be made on the
next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) 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
9.375% 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.
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(iii) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on
hand and available in the Payment Account for the payment of such
Distributions.
(b) Distributions on the Trust Securities with respect to a Distribution Date
shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
one Business Day prior to such Distribution Date; PROVIDED, HOWEVER, that in
the event that the Preferred Securities do not remain in book-entry-only form,
the relevant record date shall be the date 15 days prior to the relevant
Distribution Date.
SECTION 4.2. REDEMPTION.
(a) On 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
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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 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.
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SECTION 4.3. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 4.2(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities; PROVIDED, HOWEVER, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of
Default shall have occurred and be continuing, no payment of any Distribution
(including Additional Amounts, if applicable) on, or Redemption Price of, any
Common Security, and no other payment on account of the redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions (including Additional
Amounts, if applicable) on all Outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all
Outstanding Preferred Securities, shall have been made 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
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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.
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 shall
be reduced by the amount of any corresponding payment such Holder (and any
Owner with respect thereto) 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.
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SECTION 5.3. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
At the Closing Date or the Option Closing Date, if applicable, 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 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.
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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.
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
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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.
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.
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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 Person, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN THE TRUST
AGREEMENT".
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.
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(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 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
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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 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.
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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; 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
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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 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.
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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, 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 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
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than 90 days prior to the date of any meeting of Securityholders or the
payment of a Distribution or other action, as the case may be, as a record
date for the determination of the identity of the Securityholders of record
for such purposes.
SECTION 6.8. ACTS OF SECURITYHOLDERS.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Trust Agreement to be given, made or
taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective 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
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or Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
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;
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(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 (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
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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 extent that, at law or in equity,
a Trustee has duties (including fiduciary duties) and liabilities relating
thereto to the Trust or to the Securityholders, such 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 Trustees otherwise existing at law or in equity, are agreed by the
Depositor and the Securityholders to replace such other duties and
liabilities of the Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by its acceptance of a Trust Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in
respect of any Trust Security or for any other liability in respect of any
Trust Security. This Section 8.1(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.
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, except as provided in the definition of the term "Outstanding"
in Article I 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 (subject to Section 8.8) 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 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
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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 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
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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 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.
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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 dissolve,
terminate or 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.
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
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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," upon the occurrence of which the Trust shall dissolve:
(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.
SECTION 9.3. TERMINATION.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the
Trust Securities; (b) the payment of any expenses owed by the Trust; and (c)
the discharge of all administrative duties of the Administrative Trustees,
including the performance of any tax reporting obligations with respect to the
Trust or the
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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 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.
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(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
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 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 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 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 or Section 9.4. 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 which
the Preferred Securities are then listed or traded, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose substantially
identical to that of the Trust, (vii) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Depositor has
received an Opinion of Counsel to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights,
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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 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 such 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
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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.
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.
48
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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 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. 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
49
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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.
(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.
50
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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: /s/ Robert J. Dennen
------------------------------
Name: Robert J. Dennen
Title: Chief Financial Officer
WILMINGTON TRUST COMPANY,
as Property Trustee
By: /s/ Debra Eberly
------------------------------
Name: Debra Eberly
Title: Administrative Account Manager
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: /s/ Debra Eberly
------------------------------
Name: Debra Eberly
Title: Administrative Account Manager
/s/ Gary L. Wehrle
------------------------------
Gary L. Wehrle,
as Administrative Trustee
/s/ Robert J. Dennen
------------------------------
Robert J. Dennen,
as Administrative Trustee
51
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/s/ Lyle C. Lodwick
------------------------------
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"),
created pursuant to an Amended and Restated Trust Agreement between Pacific
Crest Capital, Inc. ("Pacific Crest") and 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 Trust. 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
54
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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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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:
56
<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:
ADMINISTRATIVE TRUSTEE
WILMINGTON TRUST COMPANY,
as Trustee, Paying Agent and Registrar
By:
---------------------------
Name:
Title:
RECEIVED AND ACCEPTED:
THE DEPOSITORY TRUST COMPANY
By:
-----------------------
AUTHORIZED OFFICER
58
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EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS SET FORTH IN THE TRUST AGREEMENT
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"). Except to the extent set forth in 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
59
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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 CALIFORNIA (WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES).
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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 Securities Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date: ________________
Signature:
___________________________________________________________________
(Sign exactly as your name appears on the other side of this Preferred
Securities Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
SEC Rule 17Ad-15.
66
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
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 . . . . . . . . . . 11
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 . . . . 12
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 . . . . . . . . . . . 19
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. 21
Section 5.4. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES. . . . . . . . . . . . . . . . . 21
i
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<CAPTION>
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<S> <C>
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
Section 5.9. APPOINTMENT OF PAYING AGENT. . . . . . . . . . . . . . . 23
Section 5.10. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. . . . . . . 24
Section 5.11. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE . . . . . . . . . . . . . . . . . 24
Section 5.12. NOTICES TO CLEARING AGENCY . . . . . . . . . . . . . . . 25
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
ii
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<CAPTION>
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<S> <C>
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
Section 8.18. DELEGATION OF POWER. . . . . . . . . . . . . . . . . . . 43
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. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 44
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. . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.3. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.4. SEPARABILITY . . . . . . . . . . . . . . . . . . . . . . 48
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. . . . . . . . . . . . . . . . . . . . . . . . 50
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
EXHIBIT C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
EXHIBIT D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
EXHIBIT E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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<PAGE>
EXHIBIT 4.9
----------------------------------------------------------
GUARANTEE AGREEMENT
BETWEEN
PACIFIC CREST CAPITAL, INC.
(AS GUARANTOR)
AND
WILMINGTON TRUST COMPANY
(AS TRUSTEE)
DATED AS OF
SEPTEMBER 22, 1997
----------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of Trust Section of
Indenture Act of 1939, as amended Guarantee Agreement
--------------------------------- -------------------
<S> <C>
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)
</TABLE>
- ----------------
* 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>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of September 22, 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 September 22, 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 9.375% 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
1
<PAGE>
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.
"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 90 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,
2
<PAGE>
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.
"INDENTURE" means the Junior Subordinated Indenture dated as of
September 22, 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 any PCC Trust (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
3
<PAGE>
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.
"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
4
<PAGE>
Trust Indenture Act. The Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.
The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders such documents, reports and information,
if any, as required by Section 314 of the Trust Indenture Act and the
compliance certificate required by Section 314 of the Trust Indenture Act, in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
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.
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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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(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.
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(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 such
other action until such instructions are received, and (C) shall be
protected in acting in accordance with such instructions.
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(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.
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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 otherwise. 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
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against the Guarantor, protest, notice of nonpayment, notice of dishonor,
notice of redemption and all other notices and demands.
SECTION 5.3. OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the 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.
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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 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.
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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).
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
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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 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
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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:
(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.
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All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no
notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 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.
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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.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
PACIFIC CREST CAPITAL, INC.
By: /s/ Robert J. Dennen
-----------------------------------
Name: Robert J. Dennen
Title: Chief Financial Officer
Wilmington Trust Company
as Guarantee Trustee
By: /s/ Debra Eberly
-----------------------------------
Name: Debra Eberly
Title: Administrative Account Manager
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
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.. . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.5. GUARANTEE OF PAYMENT. . . . . . . . . . . . . . . . . . . . 12
SECTION 5.6. SUBROGATION.. . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.7. INDEPENDENT OBLIGATIONS.. . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE VI. COVENANTS AND SUBORDINATION . . . . . . . . . . . . . . . . . . . 13
SECTION 6.1. SUBORDINATION.. . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.2. PARI PASSU GUARANTEES.. . . . . . . . . . . . . . . . . . . 13
ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 13 . . . 13
SECTION 7.1. GUARANTOR MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. . . 13
SECTION 7.2. SUCCESSOR GUARANTOR SUBSTITUTED.. . . . . . . . . . . . . . 14
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.. . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 9.4. BENEFIT.. . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 9.5. INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 9.6. GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE>
EXHIBIT 4.10
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement"), dated as of
September 22, 1997, between Pacific Crest Capital, Inc., a Delaware corporation
(the "Company"), 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 Junior Subordinated Deferrable Interest Debentures
(the "Debentures") from the Company and to issue and sell 9.375% 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 September 22, 1997 as the
same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Company 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 the Company hereby agrees shall
benefit the Company and which purchase the Company acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Company and the
Trust hereby agree as follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY THE COMPANY.
Subject to the terms and conditions hereof, the Company 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 by the Company
and Wilmington Trust Company, a Delaware banking corporation, as guarantee
trustee or
<PAGE>
under this Agreement for any reason whatsoever. This Agreement is
continuing, irrevocable, unconditional and absolute.
SECTION 1.3. WAIVER OF NOTICE.
The Company hereby waives notice of acceptance of this Agreement and of
any Obligation to which it applies or may apply, and the Company hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 1.4. NO IMPAIRMENT.
The obligations, covenants, agreements and duties of the Company under
this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of the
Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind;
or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Company with respect to the happening of any of the
foregoing.
SECTION 1.5. ENFORCEMENT.
A Beneficiary may enforce this Agreement directly against the Company and
the Company waives any right or remedy to require that any action be brought
against the Trust or any other person or entity before proceeding against the
Company.
SECTION 1.6. SUBROGATION.
The Company shall be subrogated to all (if any) rights of the Trust in
respect of any amounts paid to the Beneficiaries by the Company under this
Agreement; PROVIDED, HOWEVER, that the Company shall not (except to the extent
required by mandatory provisions of law) be entitled to
2
<PAGE>
enforce or exercise any rights which it may acquire by way of subrogation or
any indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Agreement, if, at the time of any such payment, any
amounts are due and unpaid under this Agreement.
ARTICLE II
SECTION 2.1. BINDING EFFECT.
All guarantees and agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives of the Company 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
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
30343 Canwood Street
Agoura Hills, California 91301
Facsimile No.: (818) 865-3261
Attention: Gary L. Wehrle
PACIFIC CREST CAPITAL
30343 Canwood Street
Agoura Hills, California 91301
Facsimile No.: (818) 865-3261
Attention: Gary L. Wehrle
SECTION 2.4. CHOICE OF LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES).
3
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
PACIFIC CREST CAPITAL, INC.
By: /s/ Robert J. Dennen
-------------------------------
Name: Robert J. Dennen
Title: Chief Financial Officer
PCC CAPITAL I
By: /s/ Robert J. Dennen
-------------------------------
Name: Robert J. Dennen
ADMINISTRATIVE TRUSTEE
4
<PAGE>
5
<PAGE>
EXHIBIT 10.14.6
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of January 1,
1998, by and between PACIFIC CREST CAPITAL, INC., a Delaware corporation
(hereinafter referred to as "EMPLOYER") and JOSEPH FINCI (hereinafter
referred to as "EMPLOYEE"), on the following terms and conditions:
1. TERM OF AGREEMENT; DUTIES
(a) TERM. EMPLOYER hereby agrees to employ EMPLOYEE as the Senior
Vice President of EMPLOYER for a two year period, commencing on the date
hereof, and EMPLOYEE hereby agrees to accept such employment for such period,
subject to earlier termination under the circumstances provided herein. The
term of this Agreement shall be extended automatically to cover successive
periods of one year each unless, at least one year prior to the end of the
original or any renewal term hereof, EMPLOYEE gives written notice to the
President of EMPLOYER, or EMPLOYER gives written notice to EMPLOYEE, of an
intent to terminate this Agreement at the end of such term.
(b) DUTIES. EMPLOYEE, subject to the direction and control of the
Board of Directors, shall devote all of EMPLOYEE'S productive time, attention
and energies to discharging, and shall perform, such executive duties and
managerial responsibilities as may from time to time be specified by
EMPLOYER, and will use EMPLOYEE'S best efforts to promote the interest of
EMPLOYER and its subsidiaries and affiliates and the performance of such
duties and responsibilities shall be EMPLOYEE'S exclusive employment for
compensation; provided, however, that nothing herein contained shall be
deemed to limit EMPLOYEE'S right to make passive investments in
non-affiliated companies.
1
<PAGE>
(c) EXTENSION OF TERM OF EMPLOYMENT UPON CERTAIN CORPORATE CHANGES.
For purposes of this paragraph (c), "Extension Date" shall mean the effective
date of a transaction pursuant to which (i) EMPLOYER ceases to be an
independent publicly owned corporation, (ii) all or substantially all of the
assets of EMPLOYER (including by not limited to the stock of EMPLOYER'S
subsidiaries)are sold, (iii) all or substantially all of the assets, or a
majority of the outstanding capital stock, of Pacific Crest Bank are sold to
a purchaser which is not controlled by EMPLOYER, (iv) EMPLOYER is merged with
or into another corporation which is to be the surviving corporation, or (v)
a majority of the outstanding capital stock of EMPLOYER becomes owned or
held, directly or indirectly, in such transaction or series of transactions
by a person or entity other than EMPLOYER, its subsidiary or affiliate, or by
a "group" as such term is defined in Rule 13 d-1 of the Securities and
Exchange Act of 1934, which prior to such transaction or series of
transactions did not include EMPLOYER, its subsidiaries or affiliates.
Notwithstanding paragraph (a) of this Section 1, the term of employment
hereunder shall automatically be extended on the first to occur of any
Extension Date. On such Extension Date, the term of employment hereunder
shall be extended to cover the two-year period commencing on such Extension
Date.
2. COMPENSATION. EMPLOYER shall compensate EMPLOYEE for the services to
be rendered by EMPLOYEE hereunder during the term of EMPLOYEE'S employment,
including all services to be rendered as an officer and executive of
EMPLOYER, its subsidiaries and affiliates, at an annual base rate to be
determined from time to time, and in no event less frequently than annually,
during the term of this Agreement as follows (the "Base Rate"):
(a) The Base Rate shall be $97,344 per year during the period from
the date hereof through December 31, 1998; and
2
<PAGE>
(b) The Base Rate for each subsequent calendar year or portion
thereof during which this Agreement is in effect shall be no less than the
Base Rate for the prior calendar year and may be increased at the sole
discretion of the Board of Directors of EMPLOYER based on the performance of
EMPLOYER and the individual merit of EMPLOYEE.
The applicable Base Rate shall be payable not less frequently than
monthly in accordance with the regular salary procedure from time to time
adopted by EMPLOYER. There shall be deducted from all compensation paid to
EMPLOYEE such sums, including but not limited to Social Security, income tax
withholding, employment insurance, and any and all other such deductions as
EMPLOYER is by law obligated to withhold. Notwithstanding anything to the
contrary contained herein, the salary of EMPLOYEE may be increased by the
Board of Directors of EMPLOYER but shall, for any employment year covered by
this Agreement, be at least at a Base Rate herein above set forth, plus any
incentive arrangements to be determined by the Board of Directors.
EMPLOYEE shall be reimbursed for EMPLOYEE'S reasonable and actual
out-of-pocket expenses incurred by EMPLOYEE in performance of EMPLOYEE'S
duties and responsibilities hereunder, provided EMPLOYEE shall first furnish
proper vouchers and expense accounts setting for the information required by
the United States Treasury Department for deductible business expenses.
EMPLOYEE shall be entitled to participate in and shall be included
in such insurance, pension, profit sharing, stock options, stock purchase and
other employee benefit plans ("Benefit Plans") of EMPLOYER as are in effect
from time to time during the term of this Agreement for other employees of
EMPLOYER who are employed by EMPLOYER in similar executive capacities as
EMPLOYEE; provided, however, that nothing in this Agreement shall in any way
require EMPLOYEE to be covered by any Benefit Plan if EMPLOYEE'S
participation is not required by the terms of the Benefit Plan.
3
<PAGE>
3. DISABILITY. If, on account of any physical or mental disability,
EMPLOYEE shall fail or be unable to perform under this Agreement for any
period of one hundred twenty (120) consecutive days or for an aggregate
period of one hundred twenty (120) or more days during any consecutive
twelve-month period, then and in that event EMPLOYER may, at its option, at
any time thereafter, upon written notice to EMPLOYEE, terminate the employment
relationship provided for in this Agreement. In such event, EMPLOYEE'S
requirement to render services hereunder and EMPLOYER'S requirement to
compensate EMPLOYEE hereunder shall terminate and come to an end upon the
date such notice is given as if such date were the termination of this
Agreement; provided, however, that if EMPLOYER terminates the employment
relationship as a result of EMPLOYEE'S disability, then EMPLOYEE shall be
entitled to receive, as disability compensation, payments at the Base Rate
previously set forth for the remaining term of this Agreement payable not
less frequently than monthly. The option to terminate the employment in the
event of a disability herein provided is separate, distinct and additional
to any right on the part of EMPLOYER to terminate this Agreement, as provided
in Section 6 hereof. EMPLOYER may, at its option, apply for disability income
insurance and, if so, any obligation on the part of EMPLOYER to pay EMPLOYEE
any payments on account of any physical or mental disability of EMPLOYEE as
specified above, shall be credited with the amount of any payments to
EMPLOYEE under any such disability income policy but not any payments to
EMPLOYEE under any state disability insurance.
4. DEATH. In the event that EMPLOYEE should die during the term hereof,
this Agreement will terminate. In such event, EMPLOYEE'S personal
representative shall be entitled to receive, as a death benefit, in addition
any other payments which EMPLOYEE'S
4
<PAGE>
personal representative may be entitled to receive under any Benefit Plans,
payments for a period of 12 months at the Base Rate that would have then been
payable to EMPLOYEE under this AGreement payable not less frequently than
monthly.
EMPLOYER may maintain life insurance on the life of EMPLOYEE, in favor
of the EMPLOYER. EMPLOYEE shall have no interest whatsoever in any such
policy or policies, except as otherwise provided in any split dollar life
insurance agreements, but EMPLOYEE shall at the request of EMPLOYER submit to
such medical examinations, supply such information, consent to such blood
tests and execute such documents as may be required by the insurance company
or companies to whom EMPLOYER has applied for such insurance.
5. VACATION. EMPLOYEE shall be entitled to vacation time for each
calendar year during the term of this Agreement in accordance with EMPLOYER'S
vacation policy for senior management executives from time to time in effect.
6. TERMINATION FOR CAUSE. The EMPLOYER shall have the unrestricted
right to discharge the EMPLOYEE at any time for cause. Cause for discharge,
to be determined in the EMPLOYER'S sole discretion, shall include, but shall
not be limited to, theft or embezzlement by the EMPLOYEE from the EMPLOYER or
its affiliates; fraud or other acts of dishonesty by the EMPLOYEE in the
conduct of the EMPLOYER'S business or the fulfillment of EMPLOYEE'S assigned
responsibilities hereunder; gross neglect by the EMPLOYEE of EMPLOYEE'S
duties hereunder; the EMPLOYEE'S conviction of, or plea of NOLO CONTENDERE
to, any felony or any crime involving moral turpitude; the EMPLOYEE'S failure
to follow the lawful and reasonable instructions of the Board of Directors of
EMPLOYER or the President; or any material breach by the EMPLOYEE of any term,
provision or covenant of this Agreement. The occurrence of any event
constituting cause for discharge shall permit but not require the
5
<PAGE>
EMPLOYER to terminate the EMPLOYEE for cause; provided, however, that the
EMPLOYER'S decision not to terminate the EMPLOYEE upon the occurrence of an
event constituting cause for discharge shall not operate as a waiver of its
rights provided in this Section 6 or otherwise. The decision to so terminate
the EMPLOYEE, to impose lesser discipline, to take other action, or to take no
action in response to any such occurrence shall be in the EMPLOYER'S sole and
exclusive discretion.
If the EMPLOYER terminates the EMPLOYEE for cause, the EMPLOYER shall be
obligated to provide to the EMPLOYEE only the Base Rate salary provided for
in Section 2 through the date of termination of the EMPLOYEE at the rate in
effect on the date of such termination of the EMPLOYEE.
7. CONFIDENTIAL INFORMATION; COMPETITION
(a) EMPLOYEE acknowledges that, in the course of employment
hereunder, EMPLOYEE has and will become acquainted with confidential
information belonging to EMPLOYER. This information may relate to persons,
firms and corporations which are or become customers or accounts of EMPLOYER
or of a subsidiary or affiliate of EMPLOYER during the term of this
Agreement. None of the confidential information which EMPLOYEE may have or
may obtain prior to the termination of this Agreement shall be disclosed to
any other person either before or after the termination of the Agreement
without the prior written permission of EMPLOYER, except such disclosures as
may be necessary to the performance by EMPLOYEE of EMPLOYEE'S duties
hereunder or unless such information is a part of the public domain, is
within the prior knowledge of any such other person or is published anywhere
without EMPLOYEE'S fault.EMPLOYEE shall return all tangible evidence of all
such confidential information to EMPLOYER prior to or at the termination of
EMPLOYEE'S employment.
6
<PAGE>
(b) EMPLOYEE expressly covenants and agrees that for a period of
two years after the date of termination of EMPLOYEE'S employment with
EMPLOYER, EMPLOYEE will not, acting alone or in conjunction with others,
directly or indirectly, solicit business of any type engaged in by EMPLOYER
(or any subsidiary or affiliate of EMPLOYER) from any person or business
which is an account, customer of client of EMPLOYER (or any subsidiary or
affiliate of EMPLOYER), or induce or attempt to influence any such account,
customer or client to curtail or cancel its business with EMPLOYER (or any
subsidiary or affiliate of EMPLOYER).
(c) Because the remedy at law for any breach of the provisions of
this Section 7 would be inadequate, EMPLOYEE hereby consents to the granting,
by any court having jurisdiction and without the necessity of providing
actual monetary loss, of an injunction or other equitable relief enjoining
any breach of such provisions.
(d) EMPLOYEE and EMPLOYER recognize that the laws and public
policies of the various states of the United States may differ as to the
validity and enforceability of covenants and undertakings similar to those
set forth in paragraph (b) of Section 7. It is the intention of EMPLOYER and
EMPLOYEE that the provisions of paragraph (b) of Section 7 shall be enforced
to the fullest extent permissible under the laws and public policies of each
state and jurisdiction in which such enforcement is sought, and the
unenforceability (or the modification to conform to such laws or public
policies) of any provisions of such paragraph shall not render unenforceable,
or impair, the remainder of the provisions of such paragraph. Accordingly, if
any provisions of such paragraph shall be determined to be invalid or
unenforceable, either in whole or in part, under the laws or public policies
of any state or jurisdiction in which enforcement is sought, as to such state
or jurisdiction the provisions of such paragraph shall be deemed amended to
delete or modify, as necessary, the offending provision
7
<PAGE>
and to alter the balance hereof in order to render it valid and enforceable
in such state or jurisdiction.
(e) Notwithstanding any termination of EMPLOYEE'S employment, all
of the covenants and agreements of EMPLOYEE under this Section 7 shall
continue in full force and effect in accordance with the terms hereof, even
if such termination is for cause pursuant to Section 6.
8. NOTICES. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be deemed to have
been given at the time delivered, if personally delivered, or twenty-four
hours after deposit thereof for mailing at any general or branch United
States Post Office enclosed in a registered or certified postpaid envelope
and addressed to either EMPLOYER or EMPLOYEE as the case may be, at 30343
Canwood Street, Agoura Hills, California 91301. The parties hereto may
designate a different place at which notice shall be given provided, however,
that any such notice of change of address shall be effective only upon
receipt.
9. ENTIRE UNDERSTANDING. This Agreement sets forth the entire
understanding of the parities hereto with respect to the subject matter
hereof and no other representations, warranties or agreements whatsoever have
been made to EMPLOYEE, except any such incentive arrangements as may be set
forth in a written Bonus Plan applicable to EMPLOYEE. This agreement shall
not be modified, amended, or terminated except by another instrument in
writing executed by the parties hereto.
8
<PAGE>
10. GOVERNING LAW. This Agreement and all rights, obligations and
liabilities arising hereunder shall be construed and enforced in accordance
with the laws of the State of California.
11. ATTORNEY'S FEES. In the event it becomes necessary to commence any
proceeding or action to enforce the provisions of this Agreement, the Court
before whom the same shall be tried may award to the prevailing party all
costs and expenses thereof, including but not limited to reasonable attorney
fees, the usual, customary and lawfully recoverable Court costs, and all
other expenses in connection therewith.
The parities hereto have executed this Agreement on the day and year
first above written.
"EMPLOYEE"
/s/ Joseph Finci
------------------------------------
JOSEPH FINCI
"EMPLOYER"
PACIFIC CREST CAPITAL, INC.
By: /s/ Gary Wehrle
---------------------------------
GARY WEHRLE
Title: Chairman of the Board
9
<PAGE>
EXHIBIT 10.14.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of January 1,
1998, by and between PACIFIC CREST CAPITAL, INC., a Delaware corporation
(herein after referred to as "EMPLOYER") and M. CAROLYN REINHART (hereinafter
referred to as "EMPLOYEE"), on the following terms and conditions:
1. TERM OF AGREEMENT; DUTIES
(a) TERM. EMPLOYER hereby agrees to employ EMPLOYEE as the Senior
Vice President of EMPLOYER for a two year period, commencing on the date
hereof, and EMPLOYEE hereby agrees to accept such employment for such period,
subject to earlier termination under the circumstances provided herein. The
term of this Agreement shall be extended automatically to cover successive
periods of one year each unless, at least one year prior to the end of the
original or any renewal term hereof, EMPLOYEE gives written notice to the
President of EMPLOYER, or EMPLOYER gives written notice to EMPLOYEE, of an
intent to terminate this Agreement at the end of such term.
(b) DUTIES. EMPLOYEE, subject to the direction and control of the
Board of Directors, shall devote all of EMPLOYEE'S productive time, attention
and energies to discharging, and shall perform, such executive duties and
managerial responsibilities as may from time to time be specified by
EMPLOYER, and will use EMPLOYEE'S best efforts to promote the interest of
EMPLOYER and its subsidiaries and affiliates and the performance of such
duties and responsibilities shall be EMPLOYEE's exclusive employment for
compensation; provided, however, that nothing herein contained shall be
deemed to limit EMPLOYEE'S right to make passive investments in
non-affiliated companies.
1
<PAGE>
(c) EXTENSION OF TERM OF EMPLOYMENT UPON CERTAIN CORPORATE CHANGES.
For purposes of this paragraph (c), "Extension Date" shall mean the effective
date of a transaction pursuant to which (i) EMPLOYER ceases to be an
independent publicly owned corporation, (ii) all or substantially all of the
assets of EMPLOYER (including but not limited to the stock of EMPLOYER'S
subsidiaries) are sold, (iii) all or substantially all of the assets, or a
majority of the outstanding capital stock, of Pacific Crest Bank are sold to
a purchaser which is not controlled by EMPLOYER, (iv) EMPLOYER is merged with
or into another corporation which is to be the surviving corporation, or (v)
a majority of the outstanding capital stock of EMPLOYER becomes owned or
held, directly or indirectly, in such transaction or series of transactions
by a person or entity other than EMPLOYER, its subsidiary or affiliate, or by
a "group" as such term is defined in Rule 13 d-1 of the Securities and
Exchange Act of 1934, which prior to such transaction or series of
transactions did not include EMPLOYER, its subsidiaries or affiliates.
Notwithstanding paragraph (a) of this Section 1, the term of employment
hereunder shall automatically be extended on the first to occur of any
Extension Date. On such Extension Date, the term of employment hereunder
shall be extended to cover the two-year period commencing on such Extension
Date.
2. COMPENSATION. EMPLOYER shall compensate EMPLOYEE for the services to
be rendered by EMPLOYEE hereunder during the term of EMPLOYEE'S employment,
including all services to be rendered as an officer and executive of
EMPLOYER, its subsidiaries and affiliates, at an annual base rate to be
determined from time to time, and in no event less frequently than annually,
during the term of this Agreement as follows (the "Base Rate"):
(a) The Base Rate shall be $82,008 per year during the period from
the date hereof through December 31, 1998; and
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(b) The Base Rate for each subsequent calendar year or portion
thereof during which this Agreement is in effect shall be no less than the
Base Rate for the prior calendar year and may be increased at the sole
discretion of the Board of Directors of EMPLOYER based on the performance of
EMPLOYER and the individual merit of EMPLOYEE.
The applicable Base Rate shall be payable not less frequently than
monthly in accordance with the regular salary procedure from time to time
adopted by EMPLOYER. There shall be deducted from all compensation paid to
EMPLOYEE, such sums, including, but not limited to Social Security, income
tax withholding, employment insurance, and any and all other such deductions
as EMPLOYER is by law obligated to withhold. Notwithstanding anything to the
contrary contained herein, the salary of EMPLOYEE may be increased by the
Board of Directors of EMPLOYER but shall, for any employment year covered by
this Agreement, be at least at a Base Rate herein above set forth, plus any
incentive arrangements to be determined by the Board of Directors.
EMPLOYEE shall be reimbursed for EMPLOYEE'S reasonable and actual
out-of-pocket expenses incurred by EMPLOYEE in performance of EMPLOYEE'S
duties and responsibilities hereunder, provided EMPLOYEE shall first furnish
proper vouchers and expense accounts setting forth the information required
by the United States Treasury Department for deductible business expenses.
EMPLOYEE shall be entitled to participate in and shall be included in
such insurance, pension, profit sharing, stock options, stock purchase and
other employee benefit plans ("Benefit Plans") of EMPLOYER as are in effect
from time to time during the term of this Agreement for other employees of
EMPLOYER who are employed by EMPLOYER in similar executive capacities as
EMPLOYEE; provided, however, that nothing in this Agreement shall in any way
require EMPLOYEE to be covered by any Benefit Plan is EMPLOYEE'S
participation is not required by the terms of the Benefit Plan.
3
<PAGE>
3. DISABILITY. If, on account of any physical or mental disability,
EMPLOYEE shall fail or be unable to perform under this Agreement for any
period of one hundred twenty (120) consecutive days or for an aggregate
period of one hundred twenty (120) or more days during any consecutive
twelve-month period, then and in that event EMPLOYER may, at its option, at
any time thereafter, upon written notice to EMPLOYEE, terminate the
employment relationship provided for in this Agreement. In such event,
EMPLOYEE'S requirement to render services hereunder and EMPLOYER'S
requirement to compensate EMPLOYEE hereunder shall terminate and come to an
end upon the date such notice is given as if such date were the termination
of this Agreement; provided, however, that if EMPLOYER terminates the
employment relationship as a result of EMPLOYEE'S disability, than EMPLOYEE
shall be entitled to receive, as disability compensation, payments at the
Base Rate previously set forth for the remaining term of this agreement
payable not less frequently than monthly. The option to terminate employment
in the event of a disability herein provided is separate, distinct and
additional to any right on the part of EMPLOYER to terminate this Agreement,
as provided in Section 6 hereof. EMPLOYER may, at its option, apply for
disability insurance and, if so, any obligation on the part of EMPLOYER to
pay EMPLOYEE any payments on account of any physical or mental disability of
EMPLOYEE as specified above, shall be credited with the amount of any
payments to EMPLOYEE under any such disability income policy but not any
payments to EMPLOYEE under any state disability insurance.
4. DEATH. In the event that EMPLOYEE should die during the term hereof,
this Agreement will terminate. In such event, EMPLOYEE'S personal
representative shall be entitled to receive, as a death benefit, in addition
to any other payments which EMPLOYEE'S
4
<PAGE>
personal representative may be entitled to receive under any Benefit Plans,
payments for a period of 12 months at the Base Rate that would have then been
payable to EMPLOYEE under this Agreement payable not less frequently than
monthly.
EMPLOYER may maintain a life insurance policy on the life of EMPLOYEE,
in favor of the EMPLOYER. EMPLOYEE shall have no interest whatsoever in any
such policy or policies, except as otherwise provided in any split dollar
life insurance agreements, but EMPLOYEE shall at the request of EMPLOYER
submit to such medical examinations, supply such information, consent to such
blood tests and execute such documents as may be required by the insurance
company or companies to whom EMPLOYER has applied for such insurance.
5. VACATION. EMPLOYEE shall be entitled to vacation time for each
calendar year during the term of this Agreement in accordance with
EMPLOYER'S vacation policy for senior management executive from time to time
in effect.
6. TERMINATION FOR CAUSE. The EMPLOYER shall have the unrestricted right to
discharge the EMPLOYEE at any time for cause. Cause for discharge, to be
determined in the EMPLOYER'S sole discretion, shall include, but shall not be
limited to, theft or embezzlement by the EMPLOYEE from the EMPLOYER or its
affiliates; fraud or other acts of dishonesty by the EMPLOYEE in the conduct
of the EMPLOYER'S business or the fulfillment of EMPLOYEE'S assigned
responsibilities hereunder, gross neglect by the EMPLOYEE of the EMPLOYEE'S
duties hereunder, the EMPLOYEE'S conviction of, or plea of NOLO CONTENDRE to,
any felony or any crime involving moral turpitude; the EMPLOYEE'S
failure to follow the lawful and reasonable instructions of the Board of
Directors of EMPLOYER or the President; or any material breach by the
EMPLOYEE of any term, provision or covenant of this Agreement. The occurrence
of any event constituting cause for discharge shall permit but not require
the
5
<PAGE>
EMPLOYER to terminate the EMPLOYEE for cause; provided however, that the
EMPLOYER'S decision not to terminate the EMPLOYEE upon occurrence of an event
constituting cause for discharge shall not operate as a waiver of its rights
provided in this Section 6 or otherwise. The decision to terminate the
EMPLOYEE, to impose lesser discipline, to take other action or to take no
action in response to any such occurrence shall be in the EMPLOYER'S sole and
exclusive discretion.
If the EMPLOYER terminates the EMPLOYEE for cause, the EMPLOYER
shall be obligated to provide to the EMPLOYEE only the base salary provided
for in Section 2 through the date of termination of the EMPLOYEE at the rate
in effect on the date of such termination of the EMPLOYEE.
7. CONFIDENTIAL INFORMATION; COMPETITION
(a) EMPLOYEE acknowledges that, in the course of employment
hereunder, EMPLOYEE has and will become acquainted with confidential
information belonging to the EMPLOYER. This information may relate to
persons, firms and corporations which are or become customers or accounts of
EMPLOYER or of a subsidiary or affiliate of EMPLOYER during the term of this
Agreement. None of the confidential information which EMPLOYEE may have or
may obtain prior to the termination of this Agreement shall be disclosed to
any other person either before or after the termination of the Agreement
without the prior written permission of EMPLOYER, except such disclosures as
may be necessary to the performance by EMPLOYEE of EMPLOYEE'S duties
hereunder or unless such information is part of the public domain, is within
the prior knowledge of any such other person or is published anywhere without
EMPLOYEE'S fault. EMPLOYEE shall return all tangible evidence of all such
confidential information to EMPLOYER prior to or at the termination of
EMPLOYEES employment.
6
<PAGE>
(b) EMPLOYEE expressly covenants and agrees that for a period of two
years after the date of termination of EMPLOYEE'S employment with EMPLOYER,
EMPLOYEE will not, acting alone or in conjunction with others, directly or
indirectly, solicit business of any type engaged in by EMPLOYER (or any
subsidiary or affiliate of EMPLOYER) from any person or business which is an
account, customer or client of EMPLOYER (or any subsidiary or affiliate of
EMPLOYER) or induce or attempt to influence any such account, customer or
client to curtail or cancel its business with EMPLOYER (or any subsidiary or
affiliate of EMPLOYER).
(c) Because the remedy at law for any breach of the provisions of
this Section 7 would be inadequate, EMPLOYEE hereby consents to the granting,
by any court having jurisdiction and without the necessity of providing
actual monetary loss, of an injunction or other equitable relief enjoining
any breach of such provisions.
(d) EMPLOYEE and EMPLOYER recognize that the laws and public policies
of the various states of the United States may differ as to the validity and
enforceability of covenants and undertakings similar to those set forth in
paragraph (b) of Section 7. It is the intention of EMPLOYER and EMPLOYEE that
the provisions of paragraph (6) of Section 7 shall be enforced to the fullest
extent permissible under the laws and public policies of each state and
jurisdiction in which such enforcement is sought, and the unenforceability
(or the modification to conform to such laws or public policies) of any
provision of such paragraph shall not render unenforceable, or impair, the
remainder of the provisions of such paragraph. Accordingly, if any provisions
of such paragraph shall be determined to be invalid or unenforceable, either
in whole or in part, under the laws or public policies of any state or
jurisdiction in which enforcement is sought, as to such state or jurisdiction
the provisions of such paragraph shall be deemed amended to delete or modify,
as necessary, the offending provision
7
<PAGE>
and to alter the balance hereof in order to render it valid and enforceable
in such state or jurisdiction.
(e) Notwithstanding any termination of EMPLOYEE'S employment, all of
the covenants and agreements of EMPLOYEE under this Section 7 shall continue
in full force and effect in accordance with the terms hereof, even if such
termination is for cause pursuant to Section 6.
8. NOTICES. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be deemed to
have been given at the time delivered, if personally delivered, or
twenty-four hours after deposit thereof for mailing at any general or branch
United States Post Office enclosed in a registered or certified postpaid
envelope and addressed to either EMPLOYER or EMPLOYEE as the case may be, at
30343 Canwood Street, Agoura Hills, California 91301. The parties hereto may
designate a different place at which notice shall be given, provided,
however, that any such notice of change of address shall be effective only
upon receipt.
9. ENTIRE UNDERSTANDING. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and no other representations, warranties or agreements whatsoever have been
made to EMPLOYEE, except any such incentive arrangements as may be set forth
in a written Bonus Plan applicable to EMPLOYEE. This Agreement shall not be
modified, amended, or terminated except by another instrument in writing
executed by the parties hereto.
8
<PAGE>
10. GOVERNING LAW. This Agreement and all rights, obligations and
liabilities arising hereunder shall be construed and enforced in accordance
with the laws of the State of California.
11. ATTORNEY'S FEES. In the event it becomes necessary to commence any
proceeding or action to enforce the provisions of this Agreement, the Court
before whom the same shall be tried may award to the prevailing party all
costs and expenses thereof, including but not limited to reasonable attorney
fees, the usual, customary and lawfully recoverable Court costs, and all
other expenses in connection herewith.
The parties hereto have executed this Agreement on the day and year
first above written.
"EMPLOYEE"
/s/ M. Carolyn Reinhart
------------------------------------
M. CAROLYN REINHART
"EMPLOYER"
PACIFIC CREST CAPITAL, INC.
By: /s/ Gary Wehrle
---------------------------------
GARY WEHRLE
Title: Chairman of the Board
9
<PAGE>
EXHIBIT 21.1
PACIFIC CREST CAPITAL, INC.
SUBSIDIARIES OF THE REGISTRANT
Name State of Incorporation Type
---- ---------------------- ----
Pacific Crest Bank California Industrial Loan Company
PCC Capital I Delaware Statutory Business Trust
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-23849, 33-87988 and 33-87990) pertaining to the 1996
Non-Employee Directors' Stock Plan, the 1994 Employee Stock Purchase Plan and
the 1993 Equity Incentive Plan of Pacific Crest Capital, Inc. of our report
dated February 1, 1996, with respect to the 1995 consolidated statements of
operations, shareholders' equity and cash flows of Pacific Crest Capital,
Inc. included in its Annual Report (Form 10-K) for the year ended December
31, 1997.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
- -----------------------------
Los Angeles, California
March 17, 1998
49
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
No. 333-23849, 33-87988 and 33-87990 of Pacific Crest Capital, Inc. on Forms
S-8 of our report dated February 5, 1998, appearing in this Annual Report on
Form 10-K of Pacific Crest Capital, Inc. for the year ended December 31, 1997.
/s/ DELOITTE & TOUCHE LLP
- ------------------------------
Los Angeles, California
March 25, 1998
50
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,966
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 426
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 217,738
<INVESTMENTS-CARRYING> 4,998
<INVESTMENTS-MARKET> 5,055
<LOANS> 231,133
<ALLOWANCE> 4,100
<TOTAL-ASSETS> 464,309
<DEPOSITS> 348,171
<SHORT-TERM> 21,500
<LIABILITIES-OTHER> 3,580
<LONG-TERM> 62,250
0
0
<COMMON> 28,808
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 464,309
<INTEREST-LOAN> 24,475
<INTEREST-INVEST> 10,759
<INTEREST-OTHER> 112
<INTEREST-TOTAL> 35,346
<INTEREST-DEPOSIT> 16,962
<INTEREST-EXPENSE> 19,611
<INTEREST-INCOME-NET> 15,735
<LOAN-LOSSES> 1,135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,264
<INCOME-PRETAX> 6,084
<INCOME-PRE-EXTRAORDINARY> 3,707
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,707
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.21
<YIELD-ACTUAL> 4.20
<LOANS-NON> 228
<LOANS-PAST> 2,564
<LOANS-TROUBLED> 899
<LOANS-PROBLEM> 3,200
<ALLOWANCE-OPEN> 3,400
<CHARGE-OFFS> (468)
<RECOVERIES> 33
<ALLOWANCE-CLOSE> 4,100
<ALLOWANCE-DOMESTIC> 4,100
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JUL-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 1,280 2,530 2,572
<INT-BEARING-DEPOSITS> 300 300 0
<FED-FUNDS-SOLD> 36,445 8,394 262
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 38,492 33,037 52,534
<INVESTMENTS-CARRYING> 25,900 25,900 30,960
<INVESTMENTS-MARKET> 25,855 25,903 30,926
<LOANS> 181,344 187,227 211,095
<ALLOWANCE> 3,292 3,158 3,400
<TOTAL-ASSETS> 290,443 265,125 304,085
<DEPOSITS> 264,780 238,308 266,695
<SHORT-TERM> 0 0 10,000
<LIABILITIES-OTHER> 2,241 2,855 2,922
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 23,422 23,962 24,468
<OTHER-SE> 0 0 0
<TOTAL-LIABILITIES-AND-EQUITY> 290,443 265,125 304,085
<INTEREST-LOAN> 5,240 5,086 21,384
<INTEREST-INVEST> 594 1,136 2,913
<INTEREST-OTHER> 729 360 2,270
<INTEREST-TOTAL> 6,563 6,582 26,567
<INTEREST-DEPOSIT> 3,376 3,324 13,457
<INTEREST-EXPENSE> 3,376 3,324 13,500
<INTEREST-INCOME-NET> 3,187 3,258 13,067
<LOAN-LOSSES> 575 550 1,917
<SECURITIES-GAINS> 350 75 413
<EXPENSE-OTHER> 1,961 2,144 8,123
<INCOME-PRETAX> 1,206 1,233 4,508
<INCOME-PRE-EXTRAORDINARY> 746 762 3,003
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 746 762 3,003
<EPS-PRIMARY> 0.25 0.26 1.02
<EPS-DILUTED> 0.25 0.25 1.00
<YIELD-ACTUAL> 4.76 4.74 4.76
<LOANS-NON> 4,244 1,644 1,386
<LOANS-PAST> 1,835 1,835 977
<LOANS-TROUBLED> 719 719 719
<LOANS-PROBLEM> 3,600 3,600 3,600
<ALLOWANCE-OPEN> 4,850 3,292 4,500
<CHARGE-OFFS> (2,291) (736) (3,452)
<RECOVERIES> 158 52 244
<ALLOWANCE-CLOSE> 3,292 3,158 3,400
<ALLOWANCE-DOMESTIC> 3,292 3,158 3,400
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 APR-01-1997 JUL-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 634 1,683 3,255
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 416 221 11,573
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 72,293 95,368 131,210
<INVESTMENTS-CARRYING> 45,960 40,962 25,963
<INVESTMENTS-MARKET> 45,156 40,835 26,005
<LOANS> 215,839 227,063 230,618
<ALLOWANCE> 3,488 3,795 3,866
<TOTAL-ASSETS> 342,750 371,126 409,198
<DEPOSITS> 285,802 304,954 334,057
<SHORT-TERM> 30,000 36,900 1,000
<LIABILITIES-OTHER> 2,200 2,984 4,058
<LONG-TERM> 0 0 42,250
0 0 0
0 0 0
<COMMON> 24,748 26,288 27,833
<OTHER-SE> 0 0 0
<TOTAL-LIABILITIES-AND-EQUITY> 342,750 371,126 409,198
<INTEREST-LOAN> 5,740 5,960 6,205
<INTEREST-INVEST> 1,933 2,180 2,595
<INTEREST-OTHER> 4 23 47
<INTEREST-TOTAL> 7,677 8,163 8,847
<INTEREST-DEPOSIT> 3,705 4,034 4,387
<INTEREST-EXPENSE> 3,954 4,389 4,896
<INTEREST-INCOME-NET> 3,723 3,774 3,951
<LOAN-LOSSES> 230 300 280
<SECURITIES-GAINS> 0 0 0
<EXPENSE-OTHER> 2,223 2,318 2,242
<INCOME-PRETAX> 1,371 1,505 1,596
<INCOME-PRE-EXTRAORDINARY> 1,371 1,505 1,596
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 824 906 959
<EPS-PRIMARY> 0.28 0.31 0.33
<EPS-DILUTED> 0.27 0.30 0.31
<YIELD-ACTUAL> 4.77 4.42 4.19
<LOANS-NON> 688 2,155 2,064
<LOANS-PAST> 3,776 269 269
<LOANS-TROUBLED> 719 719 719
<LOANS-PROBLEM> 3,200 3,200 3,200
<ALLOWANCE-OPEN> 3,400 3,488 3,795
<CHARGE-OFFS> (152) 0 (216)
<RECOVERIES> 10 7 7
<ALLOWANCE-CLOSE> 3,488 3,795 3,866
<ALLOWANCE-DOMESTIC> 3,488 3,795 3,866
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
