<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 13D
UNDER THE EXCHANGE ACT OF 1934
(Amendment No. 1 )*
-------
SOUTHERN FINANCIAL BANCORP, INC.
--------------------------------
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title and Class of Securities)
842870107
---------
(CUSIP Number)
Richard J. Perry, Jr., Esquire
Perry & Associates, P.C.
1826 Jefferson Place, N.W.
Washington, D. C. 20036
(202) 775-8109
--------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
September 15, 1998
------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
* Final Amendment
Page 1 of 26 Exhibit Index at page 13
<PAGE> 2
- -------------------------------------------------------------------------------
CUSIP NUMBER 84287017 PAGE 2 OF 26 PAGES
-------- ---------
- -------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON / S.S. OR I.R.S. IDENTIFICATION OF ABOVE
PERSON
Financial Institution Partners II, L.P. / 36-4131559
- -------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b)
- -------------------------------------------------------------------------------
3. SOURCE OF FUNDS
WC OO
- -------------------------------------------------------------------------------
4. IS DISCLOSURE OF LEGAL PROCEEDING REQUIRED PURSUANT TO ITEMS 2(d)
AND 2(e)
NO
- -------------------------------------------------------------------------------
5. CITIZENSHIP OR PLACE OF ORIGIN
Organized: State of Delaware
- -------------------------------------------------------------------------------
NUMBER OF 6. SOLE VOTING POWER
SHARES
OWNED BY ----------------------------------------------------------------
EACH 7. SHARED VOTING POWER
REPORTING 45,800 SHARES
PERSON WITH ----------------------------------------------------------------
8. SOLE DISPOSITIVE POWER
----------------------------------------------------------------
9. SHARED DISPOSTIVE POWER
45,800 SHARES
- -------------------------------------------------------------------------------
10. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
45,800 SHARES
- -------------------------------------------------------------------------------
11. DOES THE AGGREGATE AMOUNT IN BOX 10 EXCLUDE CERTAIN SHARES?
NO
- -------------------------------------------------------------------------------
12. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (10)
2.86%
- -------------------------------------------------------------------------------
13. TYPE OF REPORTING PERSON
PN
- -------------------------------------------------------------------------------
Page 2 of 26
<PAGE> 3
- -------------------------------------------------------------------------------
CUSIP NUMBER 064446107 PAGE 3 OF 26 PAGES
-------- ---------
- -------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON / S.S. OR I.R.S. IDENTIFICATION OF ABOVE
PERSON
Hovde Capital, L.L.C. / 91-1825712
- -------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b)
- -------------------------------------------------------------------------------
3. SOURCE OF FUNDS
AF
- -------------------------------------------------------------------------------
4. IS DISCLOSURE OF LEGAL PROCEEDING REQUIRED PURSUANT TO ITEMS 2(d)
AND 2(e)
NO
- -------------------------------------------------------------------------------
5. CITIZENSHIP OR PLACE OF ORIGIN
Organized: State of Nevada
- -------------------------------------------------------------------------------
NUMBER OF 6. SOLE VOTING POWER
SHARES
OWNED BY ----------------------------------------------------------------
EACH 7. SHARED VOTING POWER
REPORTING 45,800 SHARES
PERSON WITH ----------------------------------------------------------------
8. SOLE DISPOSITIVE POWER
----------------------------------------------------------------
9. SHARED DISPOSTIVE POWER
45,800 SHARES
- -------------------------------------------------------------------------------
10. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
45,800 SHARES
- -------------------------------------------------------------------------------
11. DOES THE AGGREGATE AMOUNT IN BOX 10 EXCLUDE CERTAIN SHARES?
NO
- -------------------------------------------------------------------------------
12. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (10)
2.86%
- -------------------------------------------------------------------------------
13. TYPE OF REPORTING PERSON
CO
- -------------------------------------------------------------------------------
Page 3 of 26
<PAGE> 4
ITEM 1. SECURITY AND BANK
The class of security to which this statement relates is the common
stock, par value $.01 per share (the "Shares"), of Southern Financial Bancorp,
Inc. (the "Issuer"). The address of the principal executive offices of the
Issuer is 37 East Main Street, Warrenton, VA 20186.
ITEM 2. IDENTITY AND BACKGROUND
The persons filing this statement are Financial Institution Partners II,
L.P. (the "Limited Partnership") and Hovde Capital, L.L.C. (the "General
Partner"), who are collectively referred to herein as the "Reporting Persons."
The Limited Partnership is a Delaware limited partnership formed for the purpose
of investing in, among other things, the equity securities of various financial
institutions. Hovde Capital, L.L.C., a Nevada limited liability company, is the
general partner of the Limited Partnership.
Attached as Schedule 1 hereto and incorporated by reference herein is a
list containing the principal business and the address of its principal business
and office for the Limited Partnership and the General Partner, as well as
information required by (a) through (f) of this Item as to each executive
officer, director and/or controlling person of the General Partner who are
Reporting Persons. The General Partner controls the Limited Partnership.
None of the Reporting Persons or executive officers, directors or
controlling persons of the General Partner have, during the last five years,
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding of any violation with respect to such laws.
The Reporting Persons do not believe that they constitute a "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended. Nevertheless, the Reporting Persons are making this filing because
of the possibility that they may be deemed a group, although each of the
Reporting Persons disclaims any membership in, and the existence of, such a
group. Neither the making of this filing nor any statement contained herein
shall be deemed to be an admission by any of the Reporting Persons that a group
exists.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Information regarding the source and amount of funds used by the
Reporting Persons in acquiring beneficial ownership of their Shares is set forth
in Schedule 2 attached hereto and incorporated herein by reference.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Persons have acquired the Shares for investment purposes
and as set forth below:
(a) Each of the Reporting Persons may independently acquire additional
Shares or dispose of some or all of its Shares.
Page 4 of 26
<PAGE> 5
(b) None.
(c) None.
(d) None.
(e) None.
(f) None.
(g) None.
(h) None.
(i) None.
(j) None.
ITEM 5. INTEREST IN SECURITIES OF THE COMPANY
(a), (b) Schedule 3 hereto, which is incorporated by reference herein,
sets forth, as of November 25, 1998, information relating to the aggregate
number of Shares of the Issuer and the percentage of the outstanding Shares of
the Issuer as of such date (based upon information provided by the Issuer, there
are 1,603,220 Shares outstanding as of that date) as to each of the Reporting
Persons.
(c) Schedule 4 hereto, which is incorporated by reference herein,
describes, as of November 25, 1998, transactions in the Shares effected during
the past sixty (60) days by the Reporting Persons. Furthermore, Schedule 4
describes transactions in the shares effected in the sixty (60) days prior to
September 15, 1998.
(d) None.
(e) The Reporting Persons ceased beneficial ownership of more than five
percent of the Shares on September 15, 1998.
Each of the Reporting Persons disclaims beneficial ownership of Shares
beneficially owned by any of the other Reporting Persons.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE COMPANY
None.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
Exhibit A - Consent Agreement pursuant to 17 C.F.R. Section 13d-1(f)(1)
Exhibit B- [OMITTED - - FILED PURSUANT TO REQUEST FOR CONFIDENTIAL
TREATMENT]
Exhibit C - Customer Agreement between NationsBanc Montgomery Securities
and Financial Institution Partners II, L.P.
Page 5 of 26
<PAGE> 6
Exhibit D - Prime Broker Agreement between NationsBanc Montgomery
Securities and Financial Institution Partners II, L.P.
Exhibit E - Partnership Agreement between NationsBanc Montgomery
Securities and Financial Institution Partners II, L.P.
Page 6 of 26
<PAGE> 7
Signatures
After reasonable inquiry and to the best of his/its knowledge and belief,
each of the undersigned Reporting Persons certifies that the information set
forth in this statement with respect to him/it is true, complete and correct.
FINANCIAL INSTITUTION PARTNERS II, L.P., by its
General Partner, HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
---------------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
---------------------------------------
Eric D. Hovde
Its: Managing Member
Eric D. Hovde
Its: Managing Member
Dated: 11/25/98
---------------------
Page 7 of 26
<PAGE> 8
SCHEDULE 1
INFORMATION RELATING TO REPORTING PERSONS
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS AND
ADDRESS OF PRINCIPAL BUSINESS
NAME OR PRINCIPAL OFFICE
---- ------------------------------
<S> <C>
Financial Institution Partners II, L.P. Limited partnership formed to make investments primarily in equity
securities of financial institutions and financial services companies.
1629 Colonial Parkway
Inverness, Illinois 60067
Organized: State of Delaware
Hovde Capital, L.L.C. Limited liability company formed to serve as the general partner of
Financial Institution Partners II, L.P.
1629 Colonial Parkway
Inverness, Illinois 60067
Organized: State of Nevada
</TABLE>
Page 8 of 26
<PAGE> 9
INFORMATION RELATING TO EXECUTIVE OFFICERS, DIRECTORS
AND/OR CONTROLLING PERSONS
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
ADDRESS BUSINESS ADDRESS CITIZENSHIP
- ------- ---------------- -----------
<S> <C> <C>
Steven D. Hovde(1) Investment banker U.S.
1629 Colonial Parkway Hovde Financial, Inc.
Inverness, Illinois 60067 1629 Colonial Parkway
Inverness, Illinois 60067
Investment banking firm
Eric D. Hovde(2) Investment banker U.S.
1826 Jefferson Place, NW Hovde Financial, Inc.
Washington, D.C. 20036 1826 Jefferson Place, NW
Washington, D.C. 20036
Investment banking firm
</TABLE>
- ------------------
(1) Steven D. Hovde is affiliated with the following Reporting Person:
President, Treasurer of Hovde Capital, L.L.C.
(2) Eric D. Hovde is affiliated with the following Reporting Persons: Chairman
and CEO of Hovde Capital, L.L.C.
Page 9 of 26
<PAGE> 10
SCHEDULE 2
The following table sets forth the amount and source of funds used by
each Reporting Person in acquiring the Shares beneficially owned by it.
<TABLE>
<CAPTION>
AMOUNT
ORIGINALLY
TOTAL FINANCED/ SOURCE OF
NAME CONSIDERATION CURRENT BALANCE FUNDS*
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial $938,900.00 $469,450.00/ Working Capital/
Institution $469,450.00 Line of Credit
Partners II, L.P.
Hovde Capital, $938,900.00 $469,450.00/ Working Capital/
L.L.C. $469,450.00 Line of Credit of Affiliate
</TABLE>
- ----------------------------
* $469,450.00 was financed though a line of credit with NationsBanc Montgomery
Securities at Federal Funds rate +5/8.
Page 10 of 26
<PAGE> 11
SCHEDULE 3
The following table sets forth the number and approximate percentage of
Shares beneficially owned by each of the Reporting Persons. Each of the
Reporting Persons has shared power to vote or to direct the vote and to dispose
or to direct the disposition of the Shares of which each of them, respectively,
possesses beneficial ownership.
<TABLE>
<CAPTION>
APPROXIMATE
NAME NUMBER OF SHARES PERCENTAGE
- ---- ---------------- ----------
<S> <C> <C>
Financial Institution 45,800 2.86%
Partners II, L.P.
Hovde Capital, L.L.C. 45,800 2.86%
- --------------------------------------------------------------------------------
Aggregate Shares Held by 45,800 2.86%
Reporting Persons
</TABLE>
Page 11 of 26
<PAGE> 12
SCHEDULE 4
DESCRIPTION OF TRANSACTIONS IN SHARES EFFECTED WITHIN 60 DAYS
The reporting persons effected the following transactions in the Shares within
sixty (60) days of November 25, 1998:
<TABLE>
<CAPTION>
TRANSACTION AMOUNT OF TRANSACTION TRANSACTION
DATE SHARES PRICE BROKER TYPE
- ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
10/27/98 400 $24.25 Bloomberg Sell
Tradebook
10/13/98 300 $24.00 Bloomberg Sell
Tradebook
10/2/98 1,000 $24.00 Bloomberg Sell
Tradebook
</TABLE>
The reporting persons effected the following transactions in the Shares within
sixty (60) days of September 15, 1998:
<TABLE>
<CAPTION>
TRANSACTION AMOUNT OF TRANSACTION TRANSACTION
DATE SHARES PRICE BROKER TYPE
- ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
9/15/98 40,000 $24.875 Friedman, Billings, Sell
Ramsey & Co.
8/31/98 2,500 $25.50 Friedman, Billings, Sell
Ramsey & Co.
8/28/98 10,000 $25.50 Friedman, Billings, Sell
Ramsey & Co.
</TABLE>
Page 12 of 26
<PAGE> 13
EXHIBIT INDEX
Page
Exhibit A Consent Agreement to 17 C.F.R. Section 13d-1(f)(1) 14
Exhibit B [OMITTED - - FILED PURSUANT TO REQUEST 16(3)
FOR CONFIDENTIAL TREATMENT]
Exhibit C - Customer Agreement between NationsBanc Montgomery 17
Securities and Financial Institution Partners II, L.P.
Exhibit D - Prime Broker Agreement between NationsBanc 21
Montgomery Securities and Financial Institution
Partners II, L.P.
Exhibit E - Partnership Agreement between NationsBanc 25
Montgomery Securities and Financial Institution
Partners II, L.P.
- ----------------
(3) Portions of Exhibit B have been omitted pursuant to a request for
confidential treatment of information in accordance with Rule 24b-2 of the
Securities Exchange Act of 1934.
Page 13 of 26
<PAGE> 14
EXHIBIT A
Consent Agreement Pursuant to 17 C.F.R. Section 13d-1(f)(1)
Each of the undersigned hereby consents and agrees to the filing on
behalf of each of them of the foregoing joint statement on Schedule 13D pursuant
to 17 C.F.R. 13d-1(f)(1) with respect to his/its beneficial ownership of the
shares of the Issuer.
FINANCIAL INSTITUTION PARTNERS II, L.P., by its General
Partner, HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
----------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
----------------------------------
Eric D. Hovde
Its: Managing Member
Page 14 of 26
<PAGE> 15
BRACKETS USED TO DENOTE LOCATION OF PORTIONS
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
Page 15 of 26
<PAGE> 16
EXHIBIT B
[OMITTED]
Page 16 of 26
<PAGE> 17
EXHIBIT C
CUSTOMER AGREEMENT
This agreement sets forth the terms and conditions pursuant to which we,
NationsBanc Montgomery Securities LLC, and our successors and assigns, will
maintain your account for purchases and sales of "securities and other
property," which means, but is not limited to securities, financial instruments,
commodities and money of every kind and nature and related contracts and
options. This definition includes securities or other property currently or
hereafter held, carried or maintained by, or in the possession or control of, us
or any of our related entities for any purpose in and for any account now or
hereafter opened by you. You understand that, if your account is a cash account,
the provisions of paragraphs 18 & 19 are not binding upon you unless you enter
into a margin transaction and, if your account is a commodities account, the
provisions of paragraph 14 shall not be applicable.
1. APPLICABLE LAW AND REGULATIONS. All transactions in your account shall be
subject to all applicable laws and the rules and regulations of all
federal, state and self-regulatory agencies, including, but not limited to,
the Board of Governors of the Federal Reserve System and the constitution,
rules, customs and usages of the exchange or market (and its clearing
house) where the transactions are executed.
2. SECURITY INTEREST AND LIEN. All securities or other property which we may
at any time be carrying or maintaining for you or which may at any time be
in our possession or control for any purpose, including safekeeping, shall
be subject to a general lien for the discharge of all of your obligations
to us, irrespective of whether or not we have made advances in connection
with such securities or other property, and irrespective of the number of
accounts you may have with us.
3. DEPOSITS ON CASH TRANSACTIONS. If at any time NationsBanc Montgomery
Securities LLC considers it necessary for its protection, it may in its
discretion require you to deposit cash or collateral in your account to
assure due performance by you of your open contractual commitments.
4. BREACH OR DEFAULT. In the event of any breach by you of any agreement
with us, or any default by you in any obligation to us, or should you die
or file a petition in bankruptcy or for the appointment of a receiver by
or against you, or should we for any reason whatsoever deem it necessary
for our protection, we are hereby authorized, at our discretion, to sell
any or all of the securities and other property in any of your accounts
which may be in our possession or control, or which we may be carrying or
maintaining for you (either individually or jointly with others), or to
buy-in any securities or other property of which your account or accounts
may be short, or to cancel any other standing orders, to close out your
account or accounts in whole or in part or in order to close out any
commitment made on your behalf. Any such sale, purchase or cancellation
may be made according to our judgment and may be made, at our discretion,
on the exchange or other market where such business is then usually
transacted, or at public auction or at private sale, without advertising
the same and without notice to you or to your personal representative,
and without prior tender, demand or call of any kind upon you, or upon
your personal representative (each of which is expressly waived by you),
and we may purchase the whole or any part thereof free from any right of
redemption, and you shall remain liable for any deficiency; it being
understood that a prior tender, demand, call or notice of any kind shall
not be considered a waiver of our right to sell or buy any securities
and/or other property held by us, or owed us by you, at any time as
hereinbefore provided. Nothing in this agreement shall be construed as
relieving you of any obligations imposed by law.
5. FINALITY OF REPORTS. Reports of execution of orders and statements of your
accounts shall become conclusive if not objected to in writing, the former
within five days, and the latter within ten days, after forwarding by us to
you by mail or otherwise.
6. RECEIPT OF TRUTH-IN-LENDING. You hereby acknowledge receipt and review of
NationsBanc Montgomery Securities LLC's Truth-In-Lending disclosure
statement contained here within. You understand that interest will be
charged on any debit balances in accordance with the methods described in
that statement or in any amendment or revision thereto which may be
provided to you. It is understood and agreed that the interest charge made
to your account at the close of one charge period will be compounded,
unless paid; that is, the unpaid interest charge for previous periods will
be added to the opening balance for the next charge period, thereby
becoming part of the principal amount due and bearing like interest.
7. TRANSFERS BETWEEN ACCOUNTS. At any time and from time to time, at our
discretion, we may without notice to you apply and/or transfer any or all
securities and/or other property of yours interchangeably between any of
your accounts.
Page 17 of 26
<PAGE> 18
8. SELL ORDERS. It is understood and agreed that you will designate any sell
order for a short account which you place with us as a "short sale" and
hereby authorize us to mark such order as being "short," and when placing
with us any order for a long account, will designate it as such and hereby
authorize us to mark such order as being "long." Any sell order which you
shall designate as being for long account as above provided is for
securities then owned by you and, if such securities are not then
deliverable by us from any of your accounts, the placing of such order
shall constitute a representation by you that it is impracticable for you
to then deliver such securities to us but that you will deliver them as
soon as it is possible for you to do so without undue inconvenience or
expense.
9. AGE, BENEFICIAL INTEREST. If you are an individual, you represent that you
are of full legal age, and, in any event not less than eighteen years of
age. You further represent that no one except you has an interest in your
account with us.
10. OPERATIONAL MATTERS. NationsBanc Montgomery Securities LLC primarily uses
banks located in California and New York to issue checks. Also, when we
hold securities for your account, dividends and interest are credited on or
about the payable date as received. Most of our customers prefer to have
these funds held in their accounts, and this will be the procedure which we
will follow with your account unless you advise us of an alternative
procedure which you would prefer. For example, we could arrange for checks
to be sent to you monthly. If you require special arrangements, please
bring the matter to our attention. NationsBanc Montgomery Securities LLC's
policy is not to receive remuneration for directing orders to particular
brokers/dealers or market centers for execution. Notwithstanding this
policy, should NationsBanc Montgomery Securities LLC receive such
remuneration on any transaction, appropriate disclosure will be made.
11. CREDIT REPORT. NationsBanc Montgomery Securities LLC may, in its
discretion, request an investigative consumer report on you as a credit
reference, which report may include information with respect to character,
general reputation, personal characteristics and mode of living. In
accordance with the Fair Credit Reporting Act, a copy of any such report,
if obtained, will be made available to you upon written request.
12. CLEARANCE ACCOUNTS. If NationsBanc Montgomery Securities LLC carries your
account as clearing broker by arrangement with another broker through whose
courtesy your account has been introduced, then unless NationsBanc
Montgomery Securities LLC receives from you a written notice to the
contrary, NationsBanc Montgomery Securities LLC shall accept from such
other broker, without any inquiry or investigation by us, (i) orders for
the purchase and sale of securities and other property on margin or
otherwise, and (ii) any other instructions concerning said account. You
understand NationsBanc Montgomery Securities LLC shall have no
responsibility or liability to you for any acts or omissions of such other
broker, its officers, employees or agents.
13. WAIVER, ASSIGNMENT AND NOTICES. No term or provision of this Agreement may
be waived or modified unless in writing and signed by the party against
whom such waiver or modification is sought to be enforced. NationsBanc
Montgomery Securities LLC's failure to insist at any time upon strict
compliance with this Agreement or with any of the terms hereunder or any
continued course of such conduct on its part shall in no event constitute
or be considered a waiver by NationsBanc Montgomery Securities LLC of any
of its rights or privileges. This Agreement contains the entire
understanding between you and NationsBanc Montgomery Securities LLC
concerning the subject matter of this Agreement. You may not assign your
rights or obligations hereunder without first obtaining the prior written
consent of NationsBanc Montgomery Securities LLC. Notice or other
communications, including margin calls, delivered or mailed to the address
given below shall, until NationsBanc Montgomery Securities LLC has received
notice in writing of a different address, be deemed to have been personally
delivered to you.
14. ARBITRATION.
- - ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- - THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL.
- - PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
- - THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION
OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
- - THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
Page 18 of 26
<PAGE> 19
YOU AGREE, AND BY CARRYING AN ACCOUNT FOR YOU, WE AGREE, THAT ALL CONTROVERSIES
WHICH MAY ARISE BETWEEN US CONCERNING ANY TRANSACTION OR THE CONSTRUCTION,
PERFORMANCE OR BREACH OF THIS OR ANY OTHER AGREEMENT BETWEEN US, WHETHER ENTERED
INTO PRIOR, ON, OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY
ARBITRATION. ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED ONLY IN THE
FORUMS PROVIDED BY THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR THE
BOARD OF GOVERNORS OF THE NEW YORK STOCK EXCHANGE, INC., AS YOU MAY ELECT. IF
YOU DO NOT MAKE SUCH ELECTION BY REGISTERED MAIL ADDRESSED TO NATIONSBANC
MONTGOMERY SECURITIES LLC, 600 MONTGOMERY STREET, SAN FRANCISCO, CA 94111,
ATTENTION: LEGAL DEPARTMENT, AND RECEIVED WITHIN FIVE DAYS AFTER DEMAND BY US
THAT YOU MAKE SUCH ELECTION, THEN NATIONSBANC MONTGOMERY SECURITIES LLC MAY MAKE
SUCH ELECTION. THE AWARD OF THE ARBITRATORS, OR OF THE MAJORITY OF THEM, SHALL
BE FINAL, AND JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATORS MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION THEREOF.
No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any pre-dispute arbitration agreement against any person who has
initiated in court a putative class action or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until:
(i) the class certification is denied;
(ii) the class is decertified; or
(iii) the customer is excluded from the class by the court.
Such forbearance to enforce an agreement to arbitrate shall not constitute a
waiver of any rights under this agreement except to the extent stated herein.
15. NEW YORK LAW TO GOVERN. This Agreement and its enforcement shall be
governed by the laws of the State of New York (without regard to any
principles of conflicts of law) and its provisions shall be continuous;
shall cover individually and collectively all accounts which you may open
or reopen with us, and shall inure to the benefit of our present
organization, and any successor organization, irrespective of any change or
changes at any time in the personnel thereof, for any cause whatsoever, and
of the assigns of our present organization or any successor organization,
and shall be binding upon you, and/or your estate, executors,
administrators, heirs and assigns.
16. PARTIAL UNENFORCEABILITY. If any provision herein is or should become
inconsistent with any present or future law, rule or regulation of any
sovereign government or a regulatory body having jurisdiction over the
subject matter of this Agreement or is held to be invalid, void or
unenforceable by reason of any law, rule, administrative order or judicial
decision, such provision shall be deemed to be rescinded or modified in
accordance with any such law, rule, regulation, order or decision. In all
other respects, this Agreement shall continue and remain in full force and
effect.
17. LIMIT ORDERS. NationsBanc Montgomery Securities LLC reserves the right to
not accept from customers limit orders in NASDAQ or over-the-counter
securities in which it acts as a market maker.
18. MARGIN IN MARGIN ACCOUNTS (NOT APPLICABLE TO CASH ACCOUNTS). You hereby
agree to maintain such margin in your margin account as NationsBanc
Montgomery Securities LLC may in its discretion require and you agree to
pay forthwith on demand any debit balance owing with respect to any of your
margin accounts, and if not paid this shall be a breach of this Agreement
and NationsBanc Montgomery Securities LLC may take such action as it
considers necessary for its protection in accordance with this Agreement.
You understand that, even if NationsBanc Montgomery Securities LLC has a
policy of giving customers notice of a margin deficiency, NationsBanc
Montgomery Securities LLC is not obligated to request additional margin
from you, and there may be circumstances where NationsBanc Montgomery
Securities LLC will liquidate securities and/or other property in your
account without notice to you. You will be charged interest on your debit
balance which if not paid at the close of an interest period will be added
to the opening balance for the next interest period. Please consult the
attached disclosure statement for an outline of NationsBanc Montgomery
Securities LLC's interest policies.
Page 19 of 26
<PAGE> 20
CASH/MARGIN
19. CUSTOMER'S CONSENT TO LOAN OR PLEDGE OF SECURITIES AND OTHER PROPERTY (NOT
APPLICABLE TO CASH ACCOUNTS). You hereby authorize NationsBanc Montgomery
Securities LLC to lend either to itself or to others any securities and
other property held by NationsBanc Montgomery Securities LLC in your margin
account and to carry all such property in its general loans and such
property may be pledged, repledged, hypothecated or rehypothecated, without
notice to you, either separately or in common with other such property for
any amounts due to NationsBanc Montgomery Securities LLC thereon or for a
greater sum, and NationsBanc Montgomery Securities LLC shall have no
obligation to retain a like amount of similar property in its possession
and control.
BY SIGNING THIS AGREEMENT YOU ACKNOWLEDGE THAT THE SECURITIES IN YOUR
MARGIN ACCOUNT MAY BE LOANED TO NATIONSBANC MONTGOMERY SECURITIES LLC OR LOANED
OUT TO OTHERS AND THAT YOU HAVE RECEIVED AND REVIEWED A COPY OF THIS AGREEMENT.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE AT PAGES 2-3 AT
PARAGRAPH 14.
IF JOINT ACCOUNT BOTH PARTIES MUST SIGN. PERSONS SIGNING ON BEHALF OF
OTHERS PLEASE INDICATE TITLE OR CAPACITY IN WHICH YOU HAVE SIGNED.
Financial Institution Partners II, L.P.
- ----------------------------------------------------------
(TYPED OR PRINTED NAME)
By: Hovde Capital, L.L.C., general partner
By: Richard J. Perry, Jr., Secretary
- ----------------------------------------------------------
(SIGNATURE)
/s/ Richard J. Perry, Jr.
- ----------------------------------------------------------
(SIGNATURE)
1824 Jefferson Place, N.W.
- ----------------------------------------------------------
(MAILING ADDRESS)
Washington DC 20036
- ----------------------------------------------------------
(CITY) (STATE) (ZIP)
2/4/98
- ----------------------------------------------------------
(DATE)
Acct.
No:
-------------------------------------------
Page 20 of 26
<PAGE> 21
EXHIBIT D
NationsBanc Montgomery Securities LLC
PRIME BROKER AGREEMENT
In accordance with the requirements set forth in the January 25, 1994 No-Action
Letter of the Division of Market Regulation of the Securities and Exchange
Commission (the "No-Action Letter"), NationsBanc Montgomery Securities LLC
("NMS"), a North Carolina corporation, and each Customer on whose behalf this
agreement has been executed ("Customer"), hereby agree as follows.
1. As of October 3, 1994 or such later date when the No-Action Letter shall
become effective, this Agreement shall apply to all transactions in which
NMS is given up as the prime broker for Customer; i.e. transactions
executed for Customer by one or more executing brokers (each, an
"Executing Broker"), which transactions are submitted to NMS for
clearance and settlement.
2. If Customer is the beneficial owner of an account managed by an
Investment Advisor registered with the Securities and Exchange Commission
under the Investment Advisors Act of 1940 or such other authorized agent,
attorney-in-fact or third party ("Investment Advisor"), then this
Agreement has been executed on Customer's behalf by such Investment
Advisor. Each Customer on whose behalf this Agreement has been executed
is named on Schedule A hereto, as such Schedule may be modified from time
to time. Investment Advisor represents and warrants that it has on file
written authorization to execute agreements on behalf of each Customer
named on Schedule A and shall indemnify and hold NMS harmless from any
claim or claims arising from Investment Advisor's unauthorized execution
of this Agreement on any such Customer's behalf.
3. All Executing Brokers through whom Customer or Investment Advisor, as the
case may be, is initially authorized to execute prime brokerage
transactions are identified on Schedule B hereto. Prior to entering into
a prime brokerage transaction with an Executing Broker not identified on
Schedule B. Customer or Investment Advisor shall state in a writing sent
via facsimile to NMS that it desires to do so and confirm with NMS that a
prime brokerage agreement has been executed- between NMS and such
Executing Broker. Upon execution of a prime brokerage agreement between
NMS and such Executing Broker, Schedule B hereto shall be deemed
automatically amended to include such Executing Broker and, only
thereafter, may Customer execute prime brokerage transactions with such
Executing Broker pursuant to this Agreement.
4. Customer or Investment Advisor, as the case may be, will promptly notify
NMS of each transaction executed by an Executing Broker on Customer's
behalf, no later than the close of business on trade date. At a minimum,
such notice will include the security involved, the number of shares or
units, the price per share or unit, whether the transaction was a long or
short sale or a purchase, the Executing Broker and the Executing Broker's
commission.
Page 21 of 26
<PAGE> 22
5. On the next business day following trade date, NMS will send to Customer,
or if requested in writing, to Investment Advisor, notification
confirming the details of each transaction executed by Executing Broker
on Customer's behalf, based upon the information provided to NMS by
Customer or Investment Advisor. Such notification will include all
information required for a confirmation pursuant to Rule 10b-10 under the
Securities Exchange Act of 1934 ("Rule 10b-10"), except the capacity of
the executing broker, an average price designation, and, in principal
trades, the reported trade price and the difference between that price
and the net price to Customer, if this information has not been provided
to NMS by Customer or Investment Advisor. In addition, the notification
will disclose any transaction-based charges imposed by NMS and any
commission charged by Executing Broker.
6. NMS will settle transactions on Customer's behalf, unless, during the
time permitted for disaffirmations under the agreement then in effect
between NMS and Executing Broker, NMS disaffirms all unsettled
transactions of Customer that NMS determines to disaffirm in good faith
and in accordance with reasonable commercial standards. NMS will promptly
send to Customer or Investment Advisor, as applicable, a notice of
cancellation of all disaffirmed transactions to offset any notifications
sent previously. NMS shall not be responsible for the clearance and
settlement of transactions that it disaffirms. Rather, Customer shall be
responsible and liable solely to Executing Broker(s) for the clearance
and settlement of such transactions.
7. Without limiting the generality of the foregoing, if Customer is the
beneficial owner of an account managed by an Investment Advisor
registered under the Investment Advisor's Act of 1940, NMS, in its sole
and absolute discretion, may elect not to settle prime brokerage
transactions on behalf of Customer if Customer fails to maintain in its
account with NMS minimum net equity of at least $250,000 in cash or
securities with a ready market as defined in Rule 15c3-l(c)(11) under the
Securities Exchange Act of 1934. Otherwise, if Customer is not the
beneficial owner of an account managed by an Investment Advisor
registered under the Investment Advisor's Act of 1940, NMS, in its sole
and absolute discretion, may elect not to settle prime brokerage
transactions on behalf of Customer if Customer fails to maintain in its
account with NMS minimum net equity of at least $1,000,000 in cash or
securities with a ready market as defined in Rule 15c3-l(c)(11) under the
Securities Exchange Act of 1934.
8. Furthermore, in the event net equity in Customer's account with NMS falls
below the minimum amount set forth in the No-Action Letter, Customer
shall have until 12:00 noon of the fifth business day following the date
on which net equity fell below the minimum amount to restore net equity
to the level required in the No-Action Letter. If Customer fails to
restore net equity to the required level, NMS shall notify each Executing
Broker, by the same day's close of business, that NMS is no longer acting
as Prime Broker for Customer. As of the day following such notice, NMS
may not accept any prime brokerage transactions commenced on behalf of
Customer.
Page 22 of 26
<PAGE> 23
9. So long as this Agreement is in effect, NMS will be responsible to ensure
that all transactions which it has affirmed and not subsequently
disaffirmed, and is obligated to clear, are cleared between NMS and
Customer, and accordingly, appear on NMS's books in either a cash or
margin account for Customer and conform to Regulation T promulgated by the
Board of Governors of the Federal Reserve System and applicable
self-regulatory organization margin requirements.
10. Customer may instruct, in a writing separate from the prime brokerage
agreement between Customer and Executing Broker, Executing Broker to send
confirmations of transactions, as required by Rule l0b-10, to Customer in
care of NMS. Confirmations received by NMS on Customer's behalf are
available to Customer without charge, promptly upon request. The parties
acknowledge that providing such an instruction is not a condition to
entering into this Agreement, nor shall Customer be charged differential
fees or otherwise receive incentives for providing such an instruction.
11. NMS is hereby authorized to disclose Customer's name and address to each
Executing Broker identified on Schedule B. as such Schedule may be
modified from time to time, to enable such Executing Broker to establish
on its books an account for Customer to be used in the event transactions
are disaffirmed by NMS.
12. NMS will issue to Customer a statement of account at least on a quarterly
basis. The statement will include all transactions that occurred during
the statement period and the resultant security positions and money
balances.
13. Customer represents and warrants that it is currently in compliance, and
during the term of this Agreement will remain in compliance, with all
applicable requirements of the No-Action Letter, and any supplements or
amendments thereto; including, in particular, the requirement that it
execute an agreement similar to this Agreement with each Executing Broker
at any point in time identified on Schedule B.
14. In the event of an inconsistency between any term or terms of this
Agreement and those of any Cash Account Agreement, Margin Agreement or
Clearing Agreement between the parties, this Agreement shall control to
the extent of such inconsistency.
15. This Agreement may be amended or modified only by NMS upon prior written
notice to Investment Advisor or Customer. Such amendment or modification
shall become effective immediately in the event Customer continues to
accept prime brokerage services from NMS after the date on which such
notice is given.
16. This Agreement may be terminated by either party hereto upon prior written
notice. Any such termination shall not affect Customer's liabilities and
obligations to NMS with respect to transactions executed prior to such
termination.
17. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to the conflict of
law principles thereof.
Page 23 of 26
<PAGE> 24
18. (a) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(b) THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO A JURY TRIAL.
(c) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND
DIFFERENT FROM COURT PROCEEDINGS.
(d) THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR
SEEK MODIFICATIONS OR RULINGS BY THE ARBITRATORS IS STRICTLY
LIMITED.
(e) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES
INDUSTRY.
ANY CONTROVERSY BETWEEN NMS OR ANY OF ITS AFFILIATES OR ANY OF ITS OR THEIR
PARTNERS, OFFICERS, DIRECTORS OR EMPLOYEES ON THE ONE HAND, AND CUSTOMER AND/OR
INVESTMENT ADVISOR ON THE OTHER HAND, ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACCOUNTS ESTABLISHED HEREUNDER, SHALL BE SETTLED BY
ARBITRATION, IN ACCORDANCE WITH THE RULES THEN OBTAINING OF THE NEW YORK STOCK
EXCHANGE, INC. (OR SUCH OTHER ARBITRATION PANEL OR BOARD AS MAY BE REQUIRED BY
LAW). ANY AWARD OF THE ARBITRATORS SHALL BE FINAL, AND JUDGMENT UPON THE AWARD
RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement, WHICH IS
ACKNOWLEDGED TO CONTAIN A PRE-DISPUTE ARBITRATION CLAUSE, to be duly executed
and delivered as of the date set forth below.
<TABLE>
<S> <C>
Financial Institution Partners II, L.P.
- -------------------------------------------------------
CUSTOMER OR INVESTMENT ADVISOR ACCEPTED AND AGREED TO:
NATIONSBANC MONTGOMERY
By: HOVDE CAPITAL, L.L.C., general partner SECURITIES LLC AS PRIME BROKER
By: /s/ Richard J. Perry, Jr. By: /s/ Glenn Dailey
---------------------------------------------------- ------------------------------------
Richard J. Perry, Jr., Secretary Senior Managing Director
- ------------------------------------------------------- ---------------------------------------
Print Name and Title Print Name and Title
Date: 2/4/98 Date: 2/5/98
-------------------------------------------- -------------------------
</TABLE>
Page 24 of 26
<PAGE> 25
EXHIBIT E
NationsBanc Montgomery Securities LLC
--------------------------------
ACCOUNT NUMBER
--------------------------------
ACCOUNT NAME
PARTNERSHIP AGREEMENT
Ladies and Gentlemen:
In consideration of your opening and carrying a partnership account in the name
of Financial Institution Partners II, L.P. a duly organized partnership (the
"Partnership") of which each of the undersigned is a general partner, the
undersigned jointly and severally agree that each of the following persons, to
wit:
Eric D. Hovde Steven D. Hovde
- ---------------------------------- --------------------------------
Richard J. Perry, Jr.
- ---------------------------------- --------------------------------
are hereby appointed the authorized agents and attorneys-in-fact of the
Partnership (the "Authorized Agents"), and shall have authority on behalf of the
Partnership, and for its account and risk, to buy, sell (including short sales),
tender, convert, exchange, trade and otherwise deal in, through you as brokers,
stocks, bonds, options and any other securities (on margin or otherwise) in
accordance with your terms and conditions for the Partnership account.
You are authorized to follow the instructions of the Authorized Agents in every
respect concerning said account, and to deliver to them on behalf of the
Partnership account all demands, notices, confirmations, reports, statements of
accounts, and communications of every kind; to deliver to them on behalf of the
Partnership account money, securities and property of every kind, and to follow
the orders of said Authorized Agents regarding the same. The Authorized Agents
are hereby authorized to execute and deliver on behalf of the Partnership
account agreements relating to any of the foregoing matters and to terminate or
modify same or waive any of the provisions thereof; and generally to deal with
you on behalf of the Partnership account as fully and completely as if each
alone were interested in said accounts, all without notice to the other or
others interested in said account.
This Authorization and indemnity is in addition to, and in no way limits or
restricts, any rights which you have under any other agreement or agreements
between you and the undersigned, or any of them, now existing or hereafter
entered into, and is binding on the Partnership and its legal representatives,
successors and assigns. This authorization and indemnity is also a continuing
one and shall remain in full force and effect until revoked by a written notice,
addressed to you and delivered to you at your principal office in San Francisco.
No such revocation shall affect any liability arising out of any transaction
initiated prior to such revocation. The undersigned, jointly and severally agree
to indemnify and hold you harmless from and to pay you promptly on demand any
debit balance in said account, including any loss or debit balance resulting
from transactions initiated prior to receipt of such revocation.
The undersigned hereby certify that the general and/or limited partners of said
Partnership are as follows:*
Name N/A Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
*or attach signature page(s) of partnership
Page 25 of 26
<PAGE> 26
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
Name Occupation
------------------------------------ ------------------------
The undersigned further authorizes you, in the event of death or retirement of
any of the general and/or limited partners of said Partnership, to take such
proceedings, require such papers, retain such portions or restrict transactions
in said account as you may deem advisable to protect you against any liability,
penalty or loss under any present or future laws or otherwise. It is further
agreed that in the event of the death or retirement of any member of the said
Partnership the remaining members will immediately cause you to be notified of
such fact.
This Authorization and indemnity and its enforcement shall be governed by the
laws of the State of New York, shall cover individually and collectively all
accounts covered by this agreement and authorization which the undersigned may
open or reopen with you, and shall inure to the benefit of your present
organization, and any successor organization, irrespective of any change or
changes of any kind of the personnel thereof for any cause whatsoever, and of
the assigns of your present organization or any successor organization.
CUSTOMER CONSENT TO LOAN OR PLEDGE OF SECURITIES AND OTHER PROPERTY (NOT
APPLICABLE TO CASH ACCOUNTS): each of the undersigned has signed the enclosed
Customer's Agreement and Customer's Loan Consent which are intended to cover, in
addition to the provisions hereof, the terms upon which the Partnership is to be
carried.
Very truly yours,
HOVDE CAPITAL, L.L.C.
Dated: 2/4/98 By: /s/ Richard J. Perry, Jr.
---------------------- -----------------------------------
General Partner(s)
-----------------------------------
-----------------------------------
Page 26 of 26
